for post-graduate and graduate work. and also, too, the kind of concerning legislation that's been coming out of the trump administration in regards to just secondary ed and k through 12. devos hasn't really done a lot of good for teachers as a teacher i've seen it and for me, education is number one and that's why i'm voting. >> voices from the road, on c-span. >> federal reserve chair jerome powell reported to congress as required on the u.s. economic outlook and told the house financial services committee he's optimistic but some threats are causing concerns and he takes questions from committee members. the hearing is three hours.

order. without objection, the chair is authorized to declare a recess of the committee at any time. this hearing is entitled monetary policy and the state of the economy. i now recognize myself for four minutes to give an opening statement. i'd like to welcome back chairman powell. as i discussed earlier, and at our last hearing with you, i remain very concerned about the president's efforts to interfere with the fed's independent monetary policy. a recent news story noted that trump has tweeted over 100 times about the fed since your

nomination. many of those tweets appear to be attempting to exercise pressure on the fed. chairman powell, you and the fed board of governors must not be swayed by these aggressive tactics in upholding the fed's independence you should be mindful of public perception. of course, trump continues to try to claim credit for economic growth that was put in motion by the policies of president obama congressional democrats and the federal reserve, irresponsible trade war and the gop tax scam have blown up the national debt slowed our economic growth and harmed hard-working american families. trump continues to squander this inherited economy. let me note that i am, however, disappointed in the fed's efforts to deregulate mega banks

most recently by proposing the roll back the volcker rule. the dodd-frank act made our financial system safer, but it depends on agencies like the fed to potentially use the tools available to monitor and mitigate threats to our economy. the committee is carefully monitoring the developments in the repo market and the fed's response. the feds should not arbitrarily reduce liquidity requirements in response to the repo market, disruption, as some on wall street have asked for. instead, the fed should make appropriate adjustments to promote a well functioned repo market while ensuring we have strong capital rules that can't be gamed three window dressing. a practice where banks alter their balance sheet to appear less risky and reduce their capital levels. in addition, the riskiness of various financial assets is increasing as climate change

poses a more serious risk to our economy. the fed and other regulators should utilize financial stability tools under dodd-frank such as incorporating climate related losses into supervisory stress tests of big banks to address this growing risk. i would also like to discuss recent developments involving the community reinvestment act. that is cra. we've had a series of hearings on this issue and i am very concerned about occ, comptroller audits, harmful proposal to turn cra into the community disinvestment act and allow banks to escape their obligation to make responsible investments in the communities where they are chartered. i urge the fed to take a careful, deliberate approach to any changes to the implementation of the cra and to not join comptroller's misguided

efforts. governor brayden's statement, i'll quote, it's more important to get reforms done right than to do them quickly. quote, unquote. this is absolutely correct. the occ and fdic should heed that advice as well and extend the public comment period as community banks, state regulators, community and civil rights groups as well as committee democrats have called for so that all stakeholders have an opportunity to voice their concerns. i encourage the fed to keep a watchful eye on facebook's efforts to launch a crypto currency and digital wallet we discussed at our last hearing could compete with our own u.s. dollar in light of the many risks baseless plans to create i and other democrats have called on facebook to halt their plans until congress can examine the issues associated with the big tech company developing these digital products and take action. i look forward to your testimony

today, chairman powell, in discussing these matters and i now recognize the ranking member of the committee, the gentleman from north carolina, mr. machenry for four minutes for an opening statement. >> thank you chairman powell for appearing before us once again. under the trump administration we have the best economy we've had in decades. the numbers are irrefutable. we added 225,000 new jobs in january and unemployment rate is essentially at its lowest level in half a century. this prosperity is being shared by all americans, from african-americans and hispanics, where their unemployment rate has reached record lows last year. the prime age labor force participation has reached 2.2 million people. they were previously out of the work force. not surprisingly, consumer confidence increased dramatically since the month

before the president's election. every member of congress should celebrate these remarkable outcomes, which have resulted from republican leadership on pro birth policies like tax reform and regulatory right sizing. but sustaining our economic prosperity also hinges on the federal reserve having good policy. the central bank has currently undertaken a framework to determine the tools they may need in the future. chairman powell, i raise the concern that we have regulatory policy that is impinging upon your capacity to make proper monetary policy and that is why i think it's important that you have a regulatory review of the limitations that those regulations can put on your broader monetary policy decisions. that includes systemic risk concerns that i have raised as well as the open market operations, well, especially the open market operations in the repo market. i thank you for your prompt

response to my questions about the repo market operations, but i'm not sure there has been a satisfactory answer to what caused the market spike in the first place and that's troubling. i'ves also voiced my concerns with the transition from the live reference rate. we have nine months later, i'm still concerned consumers will be impacted by the transition. we still have contracts written to the libor reference rate and i think given the recent volatility in the repo markets, i'm concerned about the subsequent volatility and consumer facing products, including mortgages, auto loans, business loans and other consumer loans as this new reference raised derived from secured overnight financing. at previous hearings, i've spoken about the cyber threats posed to our financial institutions and your institution. and china in particular. yesterday's news about the equifax data breach is deeply

troubling and is at a wakeup call to every single policy maker that we need to take the threat of china and the chinese communist regime quite seriously. if we're not taking them seriously, have no fear, they are taking us very seriously. now they have basically all of our data, too. so the spillover effects of this question of chinese policy is significant. not just for cyber security, but what we are seeing with the coronavirus and the destabilizing effect it has on global health. i know you are not a global health expert but you can give us some sense your measurement techniques in response to these economic changes that are being driven out of the coronavirus challenge in china and a spillover effect it has to its neighbors and the supply chain as well, that's derived through china. the nature of china's regime may not fit neatly into the fed's risk assessments. the fed has acknowledged in its

financial stability report that cyber risks don't fit neatly either. but the risks are real. even though our data is limited coming out of china and the limited data we have we question still. we should reflect appropriately upon what we know and how we respond as an american government and to the western world in response to these threats, both cyber and health risks. and the spillover effect it has on our economy. so again, chairman powell, thank you for being here. thank you for your openness. thank you for your approach as chair of the federal reserve to be in the language of the people rather than simply the language of the ph.d.s. with that, i yield back. >> i now recognize the chair of the subcommittee on national security international development and monetary policy, mr. cleaver, for one minute.

>> thank you, madam chair. mr. chairman, first of all, i appreciate very much your willingness to travel around the country to do 14 of those fed listen sessions and one you did in kansas city at the fed building and i think it's a rare opportunity for most people to get a chance to sit down in a room and discuss economics with the chairman, so thank you very much. when you came today, people were sitting around the table with you and giving you a picture of their struggles and strives and trying to make it in the economy and people are also concerned about inflation. they believe it's like toothpaste, once it gets out, it's hard to get back in. so we are concerned about it and also appreciative of your work

and i look forward to getting a little further into this as we proceed with the hearing. >> thank you, madam chair. >> i now recognize the subcommittee ranking member, mr. hill for one munts. -- minute. >> thank you, madam chair, chair powell, thank you for being here today. we appreciate your willingness to come and field our questions and glad to provide your insights. i want to take just a moment and echo the comments of the ranking member on the community reinvestment act. i know this received pa lot of attention.a lot of attention. i read governor brainard's very comprehensive views on the topic and we recently to discuss the oc's point of view, as a former community banker, it's my view we really should have ultimately one approach to cra among the financial services regulatory agencies. i've had 40 years of dealing with inconsistency and delivery of regulatory proposals. so i do think, ultimately, it would be productive for us to

have one approach to that regulation and modernize it for the digital world that we live in today. i look forward to your presentation today, and madam chair, i yield back. >> thank you. i want to welcome to the committee our distinguished witness jerome powell. chairman of the board of governors of the federal reserve system. he has served on the board of governors since 2012 and as its chair since 2017. mr. powell has testified before the committee and i believe he does not need any further introduction. without objection, your written testimony will be made a part of the record. mr. powell, you are now recognized to present your oral testimony. >> thank you very much, chairman waters, ranking member mchenry and other members of the committee, i am pleased to present the federal reserve's semiannual monetary report. my colleagues and i strongly support the goals of maximum employment and price stability that 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 it an obligation to explain clearly how we pursue our goals. today i will review the current economic situation before returning -- before turning to monetary policy. the economic expansion is well into its 11th year and it is the longest on record. over the second half of last year, economic activity increased at a moderate pace and the labor market strengthened further as the economy appeared resilient to the global head winds that intensified last summer. inflation has been low and stable but has continued to run below the symmetric 2% objective. job gains averaged 200,000 per month in the second half of last year and an additional 225,000 jobs were added in january. the pace of job gains has remained above what is needed to provide jobs for new workers who

enter 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 in and work in low and middle income communities are finding new opportunities. employment gains have been broad based across all racial and ethnic groups and levels of education. wages have been rising particularly for lower paying jobs. gdp rose at a moderate rate over the second half of last year. growth in consumer spending moderated toward 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 business

investment and exports were weak, largely 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 february 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 disruptions in china that spill over to the rest of the global economy. inflation ran below the fomc symmetric 2% objective throughout 2019. over the 12 months through december, overall inflation based on the price index for personal consumption expenditures was 1.6%. core inflation, which excludes volatile food and energy prices was also 1.6%. over the next few months, we expect inflation to move over 2%

as unusually low readings from early 2019 drop out of the 12-month calculation. the nation faces important longer-run challenges. labor force participation by individuals in their prime working years is at its highest rate in more than a decade. however, it remains lower than in most other advanced economies and there are troubling labor market disparities across racial and ethnic groups and regions of the country. in addition, although it is encouraging that productivity growth, the main engine for raising wages and living standards over the longer term has moved up recently, productivity gains have been subpar throughout this long economic expansion. finding ways to boost labor force participation and productivity growth should benefit maeshs and -- americans and remain a national priority. i will turn now to monetary policy. over the second half of 2019,

the fomc shifted to a more accommodative stance of monetary policy to cushion the economy from weaker global growth and trade developments and promote a faster return of inflation to our symmetric 2% objective. we lowered the target range at our july and september and october meeting itself bringing the total target range to 1.5%. amid the signs the global rate may be stabilizing the committee left the global rate unchanged. the fomc believes it will support continued economic growth, a strong labor market, and inflation returning to the committee's symmetric 2% objective. as long as incoming information about the economy remains broadly consistent with this outlook, the current stance of monetary policy will likely remain appropriate. of course, policy is not on a

preset course. if developments emerge that cause a material reassessment of our outlook, we would respond accordingly. taking a longer view there has been a decline in the last quarter century in the level of interest rates consistent with stable prices in the economy operating at its full potential. this low interest rate environment may limit the ability of central banks to reduce policy interest rates to support the economy during a downturn. with this concern in mind, we have been conducting a review of our monetary policy strategy, tools and communication practices. public engagement is at the heart of this effort through our fed listens events, we have been hearing from representatives of consumer, labor, business community and other groups. the february monetary policy report shares some of what we've learned. the insights we have gained from these events have informed our framework discussions as reported in the minutes of our meetings. we will share our conclusions when we finish the review, likely around the middle of this year.

the current low interest rate environment also means that it would be important for fiscal policy to help support the economy if it weakens. putting the federal budget on a sustainable path when the economy is strong would help ensure policy makers have the spa is to use fiscal policy to assist in stabilizing the economy during a downturn. a more sustainable federal budget could support the growth over the long term. finally, i will briefly review our planned technical operations to implement monetary policy. the february monetary report provides details of our operations to date. last october, the fomc announced a plan to purchase treasury bills and conduct repo operations. these actions have been successful in providing an ample supply of reserves to the banking system and effective control of the federal funds rate. as our bill purchases continue to build reserves towards levels that maintain ample conditions,

we intend to gradually transition away from the active use of repo operations. also, as reserves reach durbly ample levels, we intend to slow our purchases to a pace that will allow our balance sheet to grow in line for trend demand for our liabilities. all of these technical measures support the efficient and effective implementation of monetary policy. they are not intended to represent a chance, sorry, a change in the stance of monetary policy. as always, we stand ready to adjust the technical operations as conditions warrant. thank you. i look forward to discussion. >> thank you. i now recognize myself for five minutes for questions. in december 2019 when the occ and fdic issued a notice of proposed rule making on the comptroller proposal, the federal reserve did not join in this proposal. an fdic member voted against it

describing it as, quote, a deeply misconceived proposal that would fundamentally undermine and weaken the community reinvestment act quote/unquote. in remarks last month, federal reserve board governor brainard said that, quote, given that reforms to the cra regulations, are likely to set expectations for a few decades, it is more important to get the reforms done right than to do them quickly. that requires giving external stakeholders sufficient time and analysis to provide meaningful feedback on a range of options for modernizing the regulations, unquote. chair powell, governor brainard also suggested in a speech last month that the federal reserve created a database of 6,000 public cra evaluations. looking at how barriers cra investments support low and moderate income communities. has the fed used this database

to evaluate how bank activities would be assessed under the occ's and the fdic's proposal, the cra? >> if i understood your question, whether we've used our database to evaluate their proposal? >> that's right. >> i'm not totally sure we have. maybe i can provide a little context, if that's appropriate. if i may. which is just that we do agree that this is a good time to update cra in light of changing technology and demographics and we agree on the goals. we put a lot of work into this we tried to get on the same page. we weren't able to do that. we have some different ideas. >> does the fed intend to do this assessment? >> excuse me? >> do you intend to do the assessment that i referenced regarding the database to

evaluate bank activities? and how they would be assessed under the occ's and fdic's proposal for cra? so the real point of that database was for us to create our own set of metrics. we want to be very, very sure that what comes out of this is a proposal that from us that will leave all you know major participants in cra better off. so we think it's important that each metric and each change that we make is grounded in data and that was the purpose, was for -- to help us develop our thinking and our proposals and that's essentially what we have been using it for. >> so given the magnitude of reform and cra regulations, do you think the comment period should be extended to allow the public to weigh in on such an important undertaking? >> that's really a decision for the occ and the fdic.

>> well, i know it's a decision, but what do you think? >> i think it's not our role to comment on their proposal. we have our own work and our own ideas that we'd be happy to share, but it's really up to them to make that decision. >> so are you completing your assessment or are you continuing to look until you come to a final decision? >> we are. we are -- >> don't you think the public should have more opportunity to have more time to do that also? >> and they will. when the time comes. i mean i think for the time being, what we are doing is we are looking forward to reading the comments on the proposal. i think we'll all learn quite a lot from those comments and we'll be able to incorporate that thinking and whatever changes are made to the proposal. there may be substantial changes to the existing proposal coming out of the comments. so i think we're -- our view is that we want something that will leave everybody better off and will have broad support and that's what we're going to be working on. >> well, as you may be aware of, the democrats on this committee

urge regulators to provide a public comment period of at least 120 days on any major cra reform instead of the 60 days occ and fdic has provided, community banks, state regulators, community groups have called on these agencies to extend the comment period and even though you said it is not your place to comment on whether or not they should be extended, i wish you would think about this. and i wish you would as you are doing the assessment and as you have said it's important for the public to be able to comment, review what you are thinking and if you change your mind, let us know about commenting on whether or not we should extend the comment period. you don't have to respond to that. thank you very much. the gentleman from north carolina ranking member mr. mchenry is recognized for five minutes.

>> so it's always rich. right. when somebody else has a negative comment about the federal reserve, that's bad. but when i as a policy maker on the hill have a negative comment about the fed, it's good. right. so it's all about the eyes of the beholder when it comes to the political debate here in washington. congress made a decision over 100 years ago to outsource monetary policy to the federal reserve. you're a construct of law. you are given independent operation and you have a set term of office and so the independents of the fed for monetary policy is appropriate and is long standing. every president in the last 100 years has had some private criticism and we found out at some point about that criticism. either through press reports at the time or later or some biographer's work about the president.

but here on the hill we can make negative comments about the fed and attack the president for having negative comments about the fed. right. so all this stuff is just rich politics. let's get down to the essence of this. you are the biggest regulator in town when it comes to the financial world. i have concerns i want to address that are regulatory in any -- nature that i think impinge on monetary policy. the repo market, for instance. these operations you said are temporary in nature. is that still true? >> yes. our expectation is that we will continue our bill purchases at least through -- at least into the second quarter and continue repo operations at least through into april. >> into april. >> the sense of that is, though, we are building up a level of reserves to a level that will mean we don't have to be involved in open market operations on an ongoing basis and that's going to take that

period of time. as the underlying level of reserves rises due to our bill purchases, the need for repo will decline and some time around the middle of the year we'll reach that level of ample reserves and from that point forward, the balance sheet will grow at trend demand for our liabilities. we'll continue to expand with the economy and -- >> are you doing a review on your capital requirements for financial institutions that should be participating in the repo market? >> i think we've reviewed supervisory and regulatory practices that may be affecting the flow of liquidity. our main focus of course is the federal funds market and our ability to, you know, transmit our policy decisions smoothly into the money market through the federal funds rate. what happened in last september, early september was that there was unusual tightness in volatility and we attribute that to the fact that what appeared to be ample levels of liquidity didn't flow where they might have and so we're really doing

two things, one, we're raising the underlying level of liquidity to raising reserves to a level that's higher than we had thought we needed in that process as i mentioned will take to the middle of the year. >> part of that is the supervisory assessment as well to make sure the policy is being driven in terms of the institutions? >> that's right. >> so we have been doing that since september. >> so, i raised this in my opening statement about china. now, you've spoken publicly about your assessment, your thinking as you see what is happening with china's response to the coronavirus. we wish them well and we have high hopes that they're going to be able to tackle this crisis, this public health crisis they're facing. but walk me through your thinking and assessing the situation in china now in terms

of the economics and that potential spillover effect? >> i'll just quickly start by saying again that we find the u.s. economy in a very good place, performing well. we see signs of global growth bottoming out. we see reduced trade policy uncertainty. overall background we see strong job creation, all of those things, all of this happens in the context of a good, strong u.s. economy. and into that picture comes the coronavirus. and so the question is, how do we think about that? of course, first we observe the human tragedy, which is terrible to watch. the question for us really is what will be the effects on the u.s. economy? will it be persistent? will it be material? that's really the question. i think we know there will be effects on china through some part of the first half of the year and china's close neighbors and major trading partners in europe as well as asia and we know that there will be some,

very likely some effects on the united states. i think it's just too early to say. we have to resist the temptation to speculate on this. and so we'll be watching that carefully again. the question will be asking is will these be persistent effects that could lead to a material rereassessment. >> so a question of length of time and whether or not this is a temporary disruption? >> yes. >> thank you. the gentlewoman from new york, miss velazquez is recognized for five minutes. >> thank you, chairwoman. chairman powell, i would like to follow up on miss water's question on cra. what aspects of the proposed changes to the cra do you find most troubling? so again, what i would like to do, if i may, is not so much comment directly on the other proposal, but talk about how we are looking at this and again, we think -- and i will mention the areas in which we -- >> okay. >> have differences.

>> okay. i hear that. i hear you and i respect it. i just would like to ask you if the fed is unable to reach an agreement with the occ and the fdic on a joint rule, do you expect the fed to issue its own proposal? >> we haven't made a decision on that yet. right now, our focus is on -- our focus has been on trying to get on the same page. we haven't been able to do that. now our focus is learning from the process. i think we will learn a lot. >> are you meeting regularly with the occ and fdic on this issue? >> we did for a long time. we are not currently meeting with them on this. >> would you agree with governor brainard's comment that it's more important to get the rule right than to do it quickly? >> yes, i mean i think that has been our approach and will continue to be. >> thank you. chairman powell, as you know, representative porter and i have been concerned by banks growing reliance on cloud-based service providers for the storage needs.

does the fed have all the access authority it needs, or are there any contractual or legal limitations restricts the fed's ability to obtain the data held by third parties that it needs to properly understand and manage this growing reliance? >> i think we do have the legal authority that we need. we are able to look into third-party service providers and we are doing that more and more because as you mentioned the prominence and size of these growing importance of these cloud service providers. >> thank you. i yield back. >> the gentle woman from missouri, miss wagner, is recognized for five minutes. i thank the chairwoman and thank you for being here, chairman powell. we're all very interested

january 29th, despite the repo spike. i know that ranking member mentioned it and you're in the middle of your review and such. could this -- i have a little more specific queson deeper difficulties for the financial system. >> i would -- really, it doesn't appear to be at all. since we took the measures we took in early september, repo markets and money markets have been functioning very smoothly. there hasn't been a turn in the volatility. they are functioning normal without including over year end. so we haven't had any return to that. it's pretty clear the measures that we took directly address the problem. you know, you know when the medicine is to be working well here. >> we had a confluence of things happening i know at that time with the quarterly federal taxes due along with the treasury auction of debt, upwards of $78

billion. wasn't it? >> yes. >> you think that was a function of perhaps this fluke, would you call it? >> we knew all that. the thing is we knew that. and what we have done, what we had done is we had asked banks to tell us what is your lowest comfortable level of reserves. we got that numbers, added them up. put a buffer on top of it and it still suggested there were plenty of reserves in this system. then this happened. i think that makes us think. because we knew about those big -- >> right. those are definitely on the horizon. that you will find that there isn't anything symptomatic of deeper difficulties and we look forward to that. turning the page, chairman powell in december of last year i asked the vice chairman for an update on the status of updating the surcharge and plans for finalizing the stress capital buffer proposal which i understand will be -- will require a reproposal with the comment period. in january, vice chairman

quarless delivered a speech where he spoke about bringing quote reasonable transparency to several aspects of the federal reserve's supervisory and regulatory framework. last week, the fed released the c-car stress test scenarios. to my knowledge, there has been no progress or update on the status of the stress capital buffer, apart from continued assertions by you and vice chair quarless, the aspects will be incorporated in the 2020 c-cars. given the acknowledgement by principals at the fed of the importance of transparency, i lack of transparency in this process. when can we expect progress on this proposal that has, gosh, it has been in process now i think since april of 2018.

>> we do continue to expect and intend that the core of the stress capital buffer will be included in for the 2020 stress test. we feel we are on track. >> you do feel on track to do that. committee republicans have underlines the importance of cyber threats as a potential systematic risk. we have recently seen malware attacks undermine government infrastructure. according to research last month by economists at the new york fed, a simulated cyber attack on just one major u.s. bank could have spillover effects impacting 38% of the wholesale payments' network. what can the u.s. do better, chairman powell, in order to prioritize these constant flow of cyber risks and strengthen the resilience of our financial sector?

>> i think we can keep to and have to keep doing what we are doing, which is to make this really a top, if not the top supervisory priority not just for the banks but for the fed and for institutions across the american landscape. we have very high expectations, particularly of the largest banks on their ability to fend off cyber attacks, we are constantly meeting inside the government to make sure that our system is resilient and redundant and strong against cyber attacks. but there is never a feeling that you have gotten to a place of comfort on that we just have to keep working and it's staying in the minute, learning what the new attacks are. making sure the banks are doing the basic housekeeping and all of that is very much entrained and we'll just have to keep at it for a long time. >> i thank you, my time is expired. thank you so much for being here

again chairman powell, and i yield back. >> gentleman from california, mr. sherman who is also the share on investment protection entrepreneurship and capital markets is now recognized for five minutes. >> a couple of responses to what the ranking member had to say. yeah, the stock market is way up. wages are up a bit more than 1% in real terms after inflation. wages at the bottom have risen. chiefly in those states where we raised the minimum wage and when we have a democratic majority in both houses we will raise the minimum wage nationwide and deal effectively with those states that have not seen such an expansion of wages at the bottom. i've grown not quite old, but i have spent many decades in this room. i have seen your predecessors,

predecessor's predecessor. every time they come in and the republicans attack them, for expansionary monetary policy, both traditional and newfangled and now we have a new president and all of a sudden they're pushing on the other side. all i'll say is i have consistently from the days of mr. greenspan been pushing for somewhat lower interest rates and an expansionary policy, particularly quantitative easing because you returned 55 trillion or billion dollars to the treasury last year and that's i know not your purpose but think of the kids that will get an education because we could fund aid to local education. think of the medical research and the lives that will be saved because we were able to fund medical research. i don't think the $55 billion should be regarded as an irrelevancy or an embarrassment.

and finally as to the jobs growth we have seen recently, i do need to point out, the jobs grew much faster in the last three years of the obama administration than the first three years of the trump administration. it is as if trump inherited a plane as he inherited so much else, the plane was on automatic pilot and it was going in the right direction and he hasn't managed to completely screw it up. we have got an issue that i think is -- ought to be completely partisan. that is libor. it's going to hit us in a couple of years. chairman powell, should congress simply give the fed the right to prescribe back-up rates when the debt instruments do not do so? or should we explicitly adopt so or what can we do and hopefully do this year and actually solve a problem 12

months in advance? >> on libor, as you know, our process is ongoing and we are really committed to having the banks ready by the end of next year to switch over away from libor in case it is no longer published. that date is -- >> well, they need to know legally what to switch over to and we want to avoid the multi-billion dollar lawsuits when somebody can say it should be this instead of that. they not only have to have the technology to make the switch, they have to know legally what they are supposed to do. >> if we need a federal law change, we will let you know. i think right now -- >> well, you've got less than two years, have you figured out whether you need a federal law change? >> i don't think we think we do need a federal law changed. >> well, if you can get us an answer, because there are people who want to wait around until two or three months before things blow up and then come to congress and say now fix it. two years is actually too short a time. because we're impairing the

economy today because you and i are talking about this. there is a slight risk out there of litigation and uncertainty with regard to legacy libor and we ought to take that off. that's one of the things we can do to help the economy. so i hope that you would act within a month to let us know what you propose rather than wait until next year. another area we've talked about before is the wire transfer system. we've seen 150 million lost to scams and those scams arise chiefly because when you wire money, do you so to a number but there is no payee identified. the british have gone to a confirmation payee system. the international standards organization has prescribed changes that would require at least identification of payee.

we don't -- i know you have raised issues of state law. i've analyzed it and i can't see what would prevens the fed from prescribing what the wire transfer system would be. and it looks like i'll have to ask you to get back promptly for the record on that question. >> the witness is requested to provide an answer for the record. >> thank you, madam chair. chairman powell, during your testimony before the joint economic committee last year, you were asked about what steps the federal reserve is taking to assess the impacts of climate change on our financial system. in your testimony you made the distinction between the purely informative stress test for climate risk that bank of england does and what the u.s. stress it testing regime under c-car does, which is impact and inform requirements for capital distributions. my understanding is the bank of england is conducting research and asking financial institutions to think through

their portfolios and how they can be impacted. but they're not currently integrating those measures in the capital requirements. would you outline some of what the fed is doing in terms of research and engagement on global climate risk? >> sure. i should begin by saying that climate risk is a very important climate change is a very important issue that congress is largely assigned to other agencies. it does play into our work, however, as it relates to the public's very reasonable expectation we would make sure the financial sector of the banks an utility that we supervise are resilient against the longer-term risks and climate change. we're in very early days of understanding what all that means. so there is work going on around the world on the central banks to try to figure that out. you talked about the central bank of england stress tests. you know, those are not intended to inform current capital

requirements, but more informed to understand what might be the effects on banks from climate change. >> are you planning on joining the network for greening the financial system? >> we haven't made a decision about that. we've always attended their meetings. i guess my theory is when you join an organization like that, there isn't, you are not necessarily, you know, signing up for everything that everybody there believes you can benefit from the work that's being done. we are kind of doing that now. we have not made a decision about membership. >> vice chairman quarless recently outlined changes that would increase transparency and accountability. i was encouraged by those comments and we will be following this closely, of course. one change the vice chairman outlined is that the federal reserve should restore supervisory observations, which will allow notice of a supervisory concern without it rising to the level of a matter requiring attention. can you tell us what the time line is that you see on those proposals to improve

supervision? >> timeline is hard to say. i would just say what the vice chair did was he pointed to this tension that exists between, you know, of due process, transparency and fairness around everything the government does and should, should to be associated with that, but also with supervision which is confidential really. so he pointed out that tension and the need to shed more light on that and to ask whether there are places where supervision needs to incorporate more of that due process thinking. i think that's a very healthy thing to think about and it's something we will be working on. >> in light of the coronavirus, chairman, i can't help but think about as a young man as a boy i spent a lot of time around my parents, my grandparents i should say and my great aunts and uncles. they were born just before the previous century, so their tales

of the firsthand experience of the pandemic of europe and 1919 were very graphic as it rolled through western oklahoma. the reason i bring this up is their description of that particular virus at that particular time in that particular rural society was literally it brought everything to a stop for weeks in rural western oklahoma city. my mother's family and father's family were very fortunate, no one died from what was called the spanish flu. but it brought society to a stop. the reason i ask that is with 43,000 cases worldwide and the critical impact in china, could you describe for a moment how china and its neighboring countries are responding to the economic impact of coronovirus in general and from the perspective of your fellow central bankers in those countries? >> i think they're really responding now to the outbreak and containing it and the chinese government has obviously taken strong measures on that you see businesses closing down in the affected areas and that sort of thing.

in terms of the economy as you asked, the people's bank of china has done a number of things to support economic activity and i think you can expect the chinese government to do lots of things to support economic activity. and they've said that they're open to cushioning the economic effects. we're not seeing -- we're not able yet to estimate the size of the economic effects. there are many estimates out there. i think you'll see government is acting in asia, particularly in china, to offset those. >> thank you, mr. chairman. yield back, madam chair. >> the gentleman from new york, mr. makes, who is also the chair for the subcommittee on consumer protection and financial institutions, is recognized for five minutes. >> thank you, madam chair. welcome, mr. chairman. let me touch quick initially on asymmetrical growth. it's been discussed at length in my community and others that 40% of americans don't have adequate

savings for a $400 emergency and similarly one in five americans skip essential health care or fail to pay important monthly bills due to the lack of funds. so, finally, a large share of the population is also under banked or unbanked. we talked about that a lot in the -- on the committee which i chair, the subcommittee i chair. my first question to you then is, why haven't circumstances improved for low and moderate income americans more rapidly in the past few years, given the so-called -- you know, the state of the economy? >> well, the pattern was at the beginning it was more high -- people who had just left the labor force, perhaps made it right back in, what we have really seen the last two or three years has been wages moving up the most at the bottom end of the

wage scale. so we do see, you know, during this very long expansion significant effects now in low and moderate income communities and it's great to see. as i mentioned, with our fed listens events we've been hearing a lot about that. that's very positive. more to your point, though, you know, waiting for the ninth, tenth and 11th year of expansion isn't really a strategy. we do see those things now because the labor market is strong, but really we need -- really other programs to address the longer-run needs of those communities other than the business cycle and monetary policy. >> also during this period of time, would you say that a number of us have been arguing and finally we're moving toward a $15 an hour minimum wage for individuals on the bottom? would you think that that has something to do with helping them also, the fact that many states have adopted a $15 minimum wage put in place?

>> i'll answer your question directly. first of all, we don't take a position on minimum wage. that's a trade-off that the -- >> i understand. >> the research on what's driving up wages at the lower end does suggest there's a role there for the minimum wage increases states that have had minimum wage increases have seen -- there's a noticeably higher increase, but really it's much broader than that and the factor is a really low unemployment and job creation. that's the main driver. >> the other concern that i have because it also seems as though unemployment goes lower, et cetera, still when you look at black unemployment, it still remains nearly double that of white unemployment. and it seems to stay that way whether the cycle is a down cycle or an upcycle. so, are there any signs of how we close those gaps?

i mean, there's always these gaps that seem to happen between the african-american community and whites, where even though it's good economy, that gap stays the same. >> there are persistent gaps and they're very troubling. and they're not, in the long run, something that monetary policy can address. it really is up to other policies, state and local governments, the federal government and frankly businesses, too, to do what they can to close that gap. we have an interest rate tool and what we can do is support the goals you've given us, maximum employment and stable prices. we see positive effects from that. over the longer run it really needs broader policies of education and other things that would help with that issue. >> let me ask -- i know chairwoman waters asked some questions on cra. there was some questions that came up that maybe you can answer. you know, the framework put

forward by governor brainard not too long ago, is that the same framework of the federal reserve board? is it just -- some say it's just her opinion and not that of the board. so maybe you can clear it up. does the board see it similarly as governor brainard? >> we haven't taken a proposal to the board yet. no, that represents the thinking of the -- she has been working on this. i asked her to lead this effort for us. she's the head of that committee for some time. i'm very comfortable with the thinking that's in that speech and, you know, support that set of ideas and that approach, but it's not at a place where we can say this is a proposal from the fed because we haven't taken it to the board yet. >> thank you. >> the gentleman from florida, mr. posey, is recognized for five minutes. >> thank you, madam chair. mr. chairman, the world is

experiencing a dramatic growth in the space economy and many are marveling, actually, at the expansion of civilian space launches. i represent the kennedy space center and, obviously, we're really excited about all of that. really excited about all of that. now, several estimates put the current level of global space economy at well over $400 billion a year with a growth rate of 8% from 2018 to 2019. in december, the bureau of economic analysis announced creation of a space economy satellite account, a new collaborative act to measure the relative importance of the space sector on the u.s. economy with a special emphasis on the growing commercial space segment. this effort will use input from industry experts and multiple government agencies, obviously. i recall over the years at the atlanta fed has applied its expertise to report on the economy of the space district.

first question, can you work with me to ensure that the federal reserve joins this multiagency effort with an eye to avoiding financial bottle necks and keeping this important space energy on path to a healthy growth rate? >> that's the first i'm hearing about it but i'm happy to assure you we'll take a close look at that and if it's something that would be productive, we'll take part. >> great. over the years we have developed federal reserve independence. and i believe in assuring the freedom of the fed to act independently on a day to day basis to help manage our economy and the critical payment system. i would not expect a member of congress or other officer of government to insert himself or herself into a decision of the federal reserve chair, the board, the open market committee or the fed monetary policy. congress does not direct day-to-day monetary policy and

congress also does not direct generals on battlefields, nor should we. however, the gao routinely conducts policy audits of the defense policy and strategy, yet the gao is restricted from conducting policy audits on the federal reserve. i'm challenged to understand how policy of critical national defense strategy is okay but policy to the fed are off limits. the defense industry is surely at least as sensitive as the monetary policy. and i'd like your thoughts on that. >> sure. gao doesn't do policy edits on the fed constantly all over the place at the fed with one exception, and that is with specific monetary policy function. congress chose long ago to create a one step of distance away from the gao in order to underline our independence.

i think that was a wise move. i think changing that would clearly be seen by the publish as a diminution of our independence. we look to this committee and the committee on the senate side for oversight on the monetary policy. our system of government, our road to oversight and transparency runs right through this committee and the senate banking committee as well. so, anyway that's what i would tell you about the gao. >> what do you think makes the fed more immune to review than the defense? what's the rationale behind it do you think? >> well, again, everything we do, every single thing we do is subject to gao audits. these are policy audits. it's not like a financial audit. the public should understand we are audited. our business model is about as simple as that, as a very small

thing. it's not complicated and we're constantly audited. what this exception does is prevents the gao from coming in looking at and assess ing individual monetary policy decisions, which congress saw fit, you saw fit, congress saw fit to carve out of the law. again i think it was an appropriate thing to do. and i think it would be unwise to take a step back from that. i don't see any harm that it's doing. >> well, the former chairpersons of the fed have indicated they simply did not want to be second guessing their decisions, that the public really doesn't have a right to know. i find that ideological, quite frankly, and that's why i asked you these questions. >> i mean, we're very transparent. we publish minutes. we publish transcripts. >> i know. we publish everything but -- and i'm just -- i think the "but" exception is overdue.

>> the gentleman from missouri, mr. clay who is also the chair for the subcommittee on housing community development and insurance is recognized for five minutes. >> thank you madam chair and thank you chairman powell for being here today. for most of the constituents in my congressional district, they are not focused on the dial maintaining a 30,000 level but simply trying to make ends meet. in fact, the st. louis fed in an essay, as part of its "demographics of wealth" series examined the connection between race or ethnicity and wealth accumulation. over the past quarter century, it was the result of an analysis of data collected between 1989

and 2013. through the federal reserve survey of consumer finances, more than 40,000 heads of house holds were interviewed over those years. median hispanic and black levels of wealth are about 90% lower than the median white wealth level, yet medium income levels of hispanics and blacks are only 40% lower. the larger ratio wealth gap could be due to hispanics and blacks investing in low return assets like housing as well as they're borrowing at higher interest rates. hispanics and blacks could also feel less of a need to save for the future because society's progressive old age safety net programs will replace a relatively larger share of the normal incomes they earn during their working years.

could you comment on why many communities continue to lag and how the fed, via its monetary policy, might seek to address some of the underlying factors that have led to gross inequality? >> what the we can do and have been doing is to take seriously your order to us to seek maximum employment. and that's what we've been doing. we just learned because we've been watching what's happening, that unemployment can be lower than many had expected without raising inflationary or other concerns. so that's what we can do. and we will continue to do. i think that's showing up in communities everywhere. i think other governmental and other tools are necessary to address longer run problems, though. >> such as how do we address the

pay inequity? how do we impress upon corporate america that it does this country no good to have a persistent pay inequity among its workers, especially when you look at the disparities in the races and the pay inequity. >> i will say i think it's important that those issues be addressed. it's really not for the fed to prescribe the measures to address them. we need to stay in our lane. we do have this independence, including the gao exemption. and i think to keep that, we need to stay with what you've given us to do which is maximum limits, stable prices, supervise the banks, look after financial spaces. >> on another subject, will the federal reserve release its own proposal on the community

reinvestment act, one that takes into account the needs of low and moderate-income communities? >> we haven't made a decision on that yet. i think our focus right now is on the ongoing process of the other agency's proposal and the comments. i think we're going to learn a lot from those comments, and i suspect there will be changes to that prosposal coming out of th comments. so, we haven't made a decision about our own proposal. >> well, traditional monetary policy works through a single economy-wide variable, single interest rate or perhaps the money supply of growth or credit. credit policy by contrast aims at directing credit in specific forms towards specific groups of borrowers. credit policy consists of a

central bank operations targeting specific segments of the private debt and security market. what is your view of shifting from traditional monetary theory to one that involves the use of more tools of borrowing to segments of society? >> i think that has historically not been a function of the fed and of central banks generally. as you pointed out, we have one tool, which is our interest rate policy. when you're talking about affecting different sectors of the business community or the population, that's really -- that really should be another agency or congress itself in fiscal policy rather than -- >> the witness has requested to continue to provide an answer for the record. >> i yield back. thank you. >> the gentleman from missouri is recognized for five minutes. >> thank you, madam chair. welcome, chairman powell. good to see you, sir. i'm sure you saw the speech and probably read or heard the

speech by vice chairman quarrles. one area that needs work is the role of guidance. i push regulators to clarify the use of guidance in 2018, came out with an interagency statement on guidance. vice charmt quarles in his speech urged an additional step doing a role making of guidance. trump administration's recent actions out of the office of management and budget, my question is, do you believe we need an official rule making out of the fed on the role of guidance? >> we have not made a decision on that. like the other agencies, we're evaluating the omb memo. as you know, guidance is not enforceable. it's not -- and so we do understand that guidance is not a rule. >> mr. quarles was here recently and made a comment that he intended to look at all the guidance and separated out what he believed needed to be under rule and the rest that

should be clarified as guidance. that's a great approach but the question is, do you anticipate a rule to be able to do that and enforce that in the future? so you're looking at trying to do that? >> that's something we're looking at. we are looking at our guidance and asking if some of it should be -- is more like a rule. >> okay. mr. quarrles also discussed how regulations have a framework under the administrative procedures act but there's no real framework for supervision and he used lisik as an example of supervision that was conducted without appropriate rover sight and does not have specific guardrails. in fact the gao said this should have been conducted as a rule making. do you believe we need to change lisik, and what should we do with the firms that are already under this regime? >> i would agree that it's appropriate that we draw brighter lines around lisik membership and as vice chair quarrles mentioned in his speech recently that's the path we're on. >> very good. something that is kind of concerning to me is the fact that we have a lot of banks and

non-banks that are in the home mortgage lending space, roughly non-banks in general were roughly $215 billion in 2016, next year is anticipated to triple to 750 billion dollar. in 2019, nonbanks originated 85% of all loans guaranteed by ginnie mae, freddie mac and fannie mae. you're a member of fsoc. would you cow explain that? do you have any concerns of it? >> as you mentioned we have looked at that in fsoc and i believe it was part of the recent annual report. the thought being these are now very, very important channels through which mortgages are

originated. in the case of a downturn, the banks have high capital, they've got lots of regulation, lots of liquidity and that's in a good place, but these institutions are operating sometimes under, you know, funding themselves with credit lines, which might not be available. so there are risks there. we're in the process of assessing that and determining what all to do about it. >> do you have a timetable on that? >> we highlighted it as a risk and we're doing work on it. >> do you have a timetable on when you might come out with a statement that says you will or will not do? >> i can come back to you. the treasury has the lead on this. >> very good. one of the things that concerns me a little bit also with regards to home lending is the stack of forms you have to go through. i mean, we had a gentleman here who represented -- was actually a credit union at the time but the stack was literally this tall. i asked him how many pages are in there and he said congressman, we don't measure by the page. we measure by the pound. this is how off the charts we've gotten when you've got a stack of paper this is tall to do a home loan.

i've talked to the fdic and cpp and hopefully we can reduce that down to where it's manageable to where it is still protections for the consumer when he signs for a loan and there's enough information to allow for the bank and the regulators to see it, but this has got to change. this can't continue to grow. this is crazy. do you have an opinion on that? >> to the extent it's not legally mandated a lot of that stuff is legally mandated by federal and state law. >> i realize that. >> to the extent it's not, i mean, we do try to make assessments about what is necessary and what's not. but it is a big challenge, i would agree. >> thank you. i just want to note for the record, i did not ask a question about cecil today. thank you very much. >> the gentleman yields back. the gentleman from georgia, mr. scott, is recognized for five minutes. >> welcome, chairman powell. good to have you. chairman powell, concerning

lieber, the alternative reference rate committee is pursuing in new york legislation to address legacy contracts in new york state. would the fed support federal action in that regard? >> mr. scott, so actually it's some members of the arrc. the committee itself is not seeking legislation but some members have approached the legislature. in terms of need for federal legislation, we've not reached the point where we think it's going to be necessary. we have plans to do that. if we do believe that federal legislation is necessary, we will come tell you and right away we understand that that's not something you can do in 24 hours. so, we know that the time for that is soon. >> very good. let's move over to great britain for a moment. the uk regulators have been very direct with their financial institutions, and they recently

established a goal for their institutions to cease liable-based lending by the third quarter of 2020. so why has the fed not been so direct? and do you have plans to set guidelines for your regulated institutions? >> yes, we will do that at some point. you may have seen that fannie mae and freddie mac said they won't accept libor mortgages at some point this year. that sort of thing will happen well in advance of the deadline which is 2021. >> okay. and chairman powell, your fed board recently finalized the hopes of providing clear, more well-defined risk indicators to determine regulatory

requirements that are placed on firms based on their size and risk. but the board has never disclosed nor provided clear and quantitative criteria under which firms have placed under its enhanced supervisory regime that is called large institutions, supervision coordinating committee. and even your vice chairman mmr mmr mr. quarles recently gave a speech. he said he would like to align their portfolio with the tailoring categories and make the designation and criteria transparent. you recently indicated that you agree on the need for brighter lines. so, could you outline what changes the fed is considering to make in this supervisory framework? >> we're just in the process of

working out the specifics. i would agree we should provide more clarity around the lisic firm and that's going to be the category. >> thank you. let's move to -- you're a great man and awe good man, a good friend. i respect you tremendously. but chairman powell, the fed is the axel of our financial system. you are the most powerful regulator. and i want you to stand back up to mr. arting on this business of him coming with this rule-making change to the community reinvestment act. let him know that you not only have a mandate for inflationary monetary policy, you have a dual

mandate, employment, jobs. and here is the other thing. you need to remind him that this piece of legislation, this law, the community reinvestment act, is precious to the nation, but it's precious to african-americans more than anybody because when the civil rights act, when the voting rights act that dealt with the big issue facing african-americans, financial stability and the two anchors for that is a home, owning a house. and this bill is the one that

outlined redlining that kept african-americans out. he needs to back off of that. you need to assert your power in this and let him know we're serious and to back off this rule change. >> the gentleman from ohio, mr. stivers, is recognized for five minutes. >> thank you, madam chair. appreciate you holding this hearing. good morning, mr. powell. how are you doing today? >> great, thanks. >> thanks for being here. i want to do some yes or no questions. you covered them in your testimony but just to remind everybody. the labor participation rate is now 83.1%, which is increased in the last three years, is that correct? >> i think that's prime age. >> sorry, prime age. that's prime age adults. sorry, yeah. >> has it -- >> has it increased or decreased in the last three years? >> i believe it has, yes. >> wage growth has outpaced inflation for workers in the last three years? >> well, at least is currently

outpacing inflation, correct? >> yes, it is. >> and wage growth has actually gone up the last -- by about 3% the last few quarters on an annualized rate. is that correct? >> over the last few years if you look at a range of measures, then you would see wages moving up at about 3%. >> and we have record low unemployment rates for african-americans and hispanics, is that correct? >> that is correct. >> so, the economy is in -- the fundamentals of the economy are in pretty good shape. would you say that's correct? >> i would and i did. >> and you did. thank you for that testimony. so, your colleague at the atlanta fed stated recently that economic -- an economic expansion does not die of old age. i think that's a great quote, given that the fundamentals of the economy are strong, do you think many businesses and investors are trying to talk themselves into a recession? >> i don't think so. i certainly hope not. there's no reason why the expansion can't continue. there's nothing about this expansion that is unstable or unsustainable. >> great.

and i think the fundamentals are strong but i think a lot of people are worried and, you know, i hope that they don't talk themselves into a recession. i agree with you on that. given that about two-thirds of all lending in capital formation occurs in the capital markets, i'm curious to hear about what the federal reserve is doing to coordinate with the securities and exchange commission and the cftc as prudential regulators for the capital markets to make sure that there is actual coordination on the capital markets. >> well, i mean, the s.e.c. and cftc really have primary regulatory authority and we have supervisory regulatory authority over the banks. we regulate some and the s.e.c. and the cftc regulates some. and we collaborate on all of

that. >> i would urge you to increase that collaboration. because the lines between security, banking and capital markets are blurring more than ever before and i would ask you and vice chairman quarrles to redouble your efforts for that coordination. i hear from some of the firms that are regulated that they feel like it's not coordinated. if you could redouble those efforts, i'd really, really -- i think that would pay dividends to the american investor and the american economy. a couple other quick questions here. what do you think the most significant risk to the financial system is today? >> i have to start by saying i think that the financial system is strong and has been materially strengthened since the financial crisis, particularly the banks. high capital, high liquidity, stress tests keep them on their toes and they have real resolution plans. none of that was in place

before. i think the financial system is generally in a good place. you know, the thing that we worry about a lot is cyber attacks. i think we have a great game plan for traditional, you know, issues like bad loans and things like that. it's more -- cyber attacks is really the frontier where you worry. and we work very, very hard on all of that. that. all the agencies do. we all work together. the institutions themselves work. that, i would say, is a major focus. >> thank you. and an interesting note, mr. chairman, you are in line with the ceos of the biggest institutions. i asked them the same question. and the consensus, although not in complete, unanimous agreement were cyber attacks were the issue. i think congress need needs to focus on it and i think our regulators need to focus on it. two quick things because i'm run ing out of time. i know you're focused on the transition between i hope you'll pay particular attention on both the small businesses and the community banks as we make that transition.

they are particularly vulnerable. with regard to the repo market, i hope you will continue to focus on the origins of the problem that caused it. some are regulatory, some are market based. and i know you're focused on it. you and i have had private discussions about it, but i would like to see that solved in a way that you don't have to provide federal reserve capital at the end of every quarter, at the end of every year. so, if you could stay focused on those things, i'm out of time. thank you, mr. chairman. >> thank you. >> the gentleman from texas, mr. green, who is also the chair for the subcommittee on oversight and investigation, is recognized for five minutes. >> thank you, madam chair. thank you for appearing today, mr. powell. mr. powell, this is an observation, not a criticism. you've indicated that the fundamentals are strong. however, you also indicated that the last fmoc press conference that you were a bit surprised that wages have failed to move up despite being well into an

expanding economy. sustained levels of historically low unemployment and increased labor force participation. fundamentals are strong. strong, yet nearly half, 42.4% of working americans in 2019 made less than $15 an hour. fundamentals are strong. good many of the people in my congressional district, mr. powell, are more concerned about the supermarket prices than the stock market. when they go to the supermarket, they're concerned about the price of procter & gamble products, not the stock market price of procter & gamble itself. the stock market means nothing to them. it's what they have to pay for products in the supermarket. this brings me to my question.

has there been a study to give us some sense of what a $15 an hour wage will do for the economy, a study for what a $15 an hour wage will do for our economy? has the fed done such a study? >> the fed has not. that's not something we would do. >> well, let me just address that if i may. i don't mean to be rude, crude and unrefined. but let me just call to your attention a study i found quite interesting, the carbon disclosure project. good project. based on thousands of disclosures, you've concluded that the 500 largest companies by market capitalize are exposed to $1 trillion in risk. now someone could argue that's probably not something that you ought to do, although i understand that climate change is something that is important to the fed because it will have

an impact, global impact. but i think you can take a closer look at this. you are the ultimate authority on price stability, on wages. let have a study to determine what impact a $15 an hour minimum wage will have on the economy. a wage disclosure project, if you will. give me some thoughts, mr. powell. can you help us, please? >> there's a great deal of research that's been done on minimum wages, and i don't know a particular one, but there has to be somewhere research on what a federal $15 wage increase -- >> i agree with you. i agree. i've read a few. but they don't come from the fed. they don't come from the entity that has the dual mandate, price stability, unemployment or employment.

it would mean something to working people if we could get such a study, notwithstanding what others have done. and these are observations, mr. powell, not criticisms. i've enjoyed visiting with you. notwithstanding what others have done, this would be meaningful to working people. by the way, i think $15 an hour is not enough as a minimum wage. i think it ought to be at least 20 now. but i'll still settle for 15, if we can get that. can we work with you, discuss with you the possibility of a wage project? >> again, i'll go back and talk to our labor people who know this issue very, very well, and many of them have published on these issues. let me come back and -- >> i'm going to thank you for it. i've got 46 seconds and i'm going to applaud you for it. personal applause. madam chair, with that, i will

yield back the balance of my time. >> thank you very much. is the gentleman requesting to have an answer in writing for the record on this question to the chairman? >> yes, madam chair. thank you. >> the witness is requested to provide an answer in writing for the record. thank you. the gentleman from kentucky, mr. barr, is recognized for five minutes. >> thank you, madam chairwoman. chairman powell, welcome back to our committee. i want to first touch on your testimony about the importance of fiscal policy in supporting the economy. in general, what would you say is the lag time associated with a major change in fiscal policy? >> well, it can tend to be long, as you know. with monetary policy, we can go into a room and change interest rates and we do. obviously, fiscal policy tends to take a lot of work and some time. >> let me ask you this. let me ask the question this way. fiscal policy has changed profoundly in the past three years. tax cuts, deregulation, less restrained energy sector, a pullback from dodd/frank.

repeal of the individual mandate, new trade deals. are any of these policy changes impacting current economic conditions? >> i'm sure they are, but, of course, we don't try to assess that. that's not really what we do when we look at the economy. but yes, they would be affected. >> you noted the u.s. economy is presently exceptionally strong. since the 2016 election, 7 million new jobs have been created. unemployment rate is at a 50-year low, more americans are employed today than ever before. wage growth is the highest in the decade and lowest income workers have been seeing the fastest pay increase growing at 16% since the 2016 election. just over the weekend, this was the headline of the "wall street journal" which i'm sure you follow, and the reporting was that a tight u.s. labor market is drawing americans off the sidelines at a record rate. despite this after last week's state of the union speech, speaker pelosi said that it was, quote, appalling to hear the

president, quote, try to take credit, unquote, for an economy he inherited. chairman powell, i'm not going to ask you to weigh in or arbitrate a domestic political dispute, but when the fomc conducts monetary policy, given what you said about the lag time of fiscal policy, is it fair to say that this president's policies are impacting today's economic conditions? >> at a high level, of course they are. >> let me follow up on representative wagner's question about the gsip surcharge. in your response to our letter, you aimed that you maintain to keep the key components unquote, of the buffer finalized in time for the 2020 ccar. can you describe in more detail what the key components are and a more precise timeline given that they announced scenarios for the 2020 ccar? >> i think the timeline is we do believe -- we do intend and will

put into effect the core of the stress capital buffer in time for the 2020 ccar cycle. so, that's coming right up. i prefer to leave the exact details of that to the -- they're still being worked out, but it will happen in a timely way for the 2020 cycle. >> i understand. let me try to get a little more detail. is it still the fed's view that the activation of the counter cyclical buffer is a suitable replacement for the dividend add on in light of the board's financial stability report from november which stated that the vulnerabilities have not significantly changed? >> we haven't made a decision on that, on using the counter click cyclical capital buffer versus the other approach. we've not made a decision on that. >> thank you for that. we're looking forward to that decision. final question, business roundtable, as you probably remember, announced last summer it was redefining a corporate purpose to elevate so-called stake holders ahead of shareholders. a large investment firm recently

announced its intent to divest fossil energy effectively limits investment options for clients that check a social governance box. i am concerned that firms which arbitrarily limit investment offerings based on social and political pressure may choke off capital to perfectly legal, productive, and profitable sectors of our economy and cause retail investors to miss out on returns that they need to fund their futures. as a leading voice on the financial stability oversight council, will you commit to raising this issue with your colleagues at fsoc and urge that body to examine the extent to which a misallocation of resources away from shareholders to serve unrelated political errands might stifle capital formation, compromise investor returns and ultimately undermine financial stability? >> i don't know that i totally understand your concern, but i'll be happy to discuss it with you.

>> the concern is that if shareholders are not prime -- a prime concern of corporate boards and directors, if stakeholders, who have no ownership interest in the company, are the focus of a corporation, then i would submit that there is a tremendous risk of misallocation of resources away from maximum shareholder returns. and i would like fsoc to take a look at that. >> the gentleman yields back. >> i will bring that to the authorities at the fsoc. >> thank you. i yield back. >> gentleman woman from ohio is also the chair for the subcommittee on diversity and inclusion, is recognized for five minutes. >> thank you to the chair and ranking member, and thank you chairman powell for being here today. let me also acknowledge the advocates in their green t-shirts for being here today and thank you for coming to my office yesterday and sharing what i thought was valuable

information with my team. appreciate you sitting through the hearing. chairman powell, in the latest edition of the federal reserve survey, consumer finances that was published in 2017, and it gave the breakout between whites, blacks and hispanics as it related to their net worth. and we've heard the statistics. i think my colleague, congressman meeks, talked about it, and i'm sure some others, so i'll spare going through all of those details. but what's very interesting to me, while that data seems great for those who are researching the issue, is there any way your office could break it down by regions or cities? because when we go back home, this is one of the number one things that i'm hearing. people are coming into my office

once you get through health care and this couple is in with jobs and education, they're saying we look at the wealth gap that is getting wider. it's not coming in. and while we're talking about unemployment rates being better, many people have to work two and three jobs just to try to survive. someone talked about the minimum wage certainly as we're advocating for a higher number. it's not enough in my district, you would have to make somewhere between $18.70 and $20 to be able to have a liveable wage. so the first question is, can this information be localized to a region or to a city to help us as members of congress when we go back home? the second thing is, i just recently introduced a bill closing the racial wealth gap,

which requires the federal reserve to further break down the data. and this is something that i didn't realize until really studying the federal reserve, listening to some of the individuals, like the folks here today. they have some really good ideas. and so my second question is, could you tell me if you would entertain having your folks look into looking at wage as a measure? because often times when you -- many folks don't work a full-time job but they have a wage. so, could we be a little more creative in looking at the da dadat data based on some of the things i'm hearing from the group that came in? and i'm sure they met with your folks and you know some of their issues. so i'll start with, can it be localized, can we entertain looking at some of the things that they think we should look

at when we calculate or present all the good news that is not the good news for many of the individuals sitting here, or in my district? >> i think you're probably making some of our data people very happy back at the board of governors. >> okay. >> you know, they love to cut the data different ways, and we do learn -- every time we do that, we learn things. i don't actually know the precise answer to your question of whether we can do it regionally or what dimensions we can, but we would be happy to look into that for you. >> and what about some of the individuals' ideas about looking at wages in your calculation? >> yes, i think we can do that. >> your folks would be willing to work with them on some of the ideas to at least start at a starting point of discussing it? >> yes. >> because now we're marrying the people with the power, and what a good win/win that would be for all of us, since we're really talking about all of our lives, and especially those who,

you know, have to work a little harder than some of the rest of us. and so the next thing, will your agency work with my office? i am so excited about this bill. and as i understand it, part of the reason for asking for the data is the federal reserve actually collects the data that sets the policies that then get married with the allocations that come back to the districts. so i want to make sure i'm on the right path when i go back home and i say i have a bill that's asking the federal reserve to collect data that can help us in the end. is this in the ballpark? >> we should actually get the experts to talk directly to you and your staff and tell you what we do and how we do it, and how that might be useful. i don't know that we need legislation at all, but we certainly have excellent sources of data and we do cut them different ways.

why don't we try to follow up with you on that? >> thank you. >> gentleman from colorado, mr. tipton, is recognized for five minutes. >> thank you, madam chair and chairman powell. thanks for taking the time to be able to be here this morning. i did want to follow up a bit on the cra. we've had a fair amount of conversation on that and just want to be able to have the clarity that the fed has been involved with the cra process, with the occ and fdic. is that correct? >> from the very beginning. >> great. and also want to get some clarity. are you comfortable, not only with governor brainard making the speech, but the content of her speech with regards to the cra? >> yes. >> what extent has the fed been doing -- i know you're talking about doing some of the analysis, comments coming in, but to be able to work on cra modernization? >> so, from the very beginning of the process, we said yes, that sounds like a great idea. it's a good time to update cra. let's try to make it more transparent, more objective,

more effective in serving the intended beneficiaries. so we, too, went around the country. i think we had 29 events around the country where we talked to different groups of people about cra, their experience of cra. and it turned us in a particular direction. we had a bunch of ideas. it's unfortunate that we weren't able to get on the same page. we weren't able to agree completely with their approach and they weren't able to completely agree with ours. but we continue to push and we continue to learn. and i would agree with mr. hill's earlier comment that ideally you would have one agreed set of standards. >> i would agree with that as well. i think that's something we certainly ought to strive for. i was really encouraged reading your comments and your statement that people who live and work in low and moderate income communities are finding new opportunities. wages have been rising particularly for lower-paying

jobs. that's a scenario i have a lot of concern on. my state, colorado i represent the rural areas. and we often times had two economies where the metropolitan areas, resort areas have been doing well, rural areas continued to often struggle. we're now starting to actually see some of that real movement. when we're looking at that cra reinvestment back, talking about the community banks, i really would encourage you to be able to look at that occ and fdic proposals. i believe they do reach further into rural america. and you talked about policy. have you done any assessment in terms of the opportunity zones that were included in the tax cut and jobs act? you're certainly seeing some benefits and investments coming into rural areas in my district. are those some of the policies we need to be looking at? >> i'm not aware of any research that we've done on opportunity

zones but, you know, we probably have, truthfully, in the system i would imagine we have done research on that and would be happy to share it with you. >> thank you. fannie mae and freddie mac, and some agencies have been taking this step separately. is there any uniform effort at a high level to be able to coordinate the adoption of it? >> yes, there is, very much so, and we're doing that. we're coordinating with the other agencies and with the market participants as well. and you will see more of that. you will see more instances in which libor will no longer work, no longer be useable in particular context. that's what fannie and freddie did this week or announced this week. >> to follow up on mr. stiver's question in regards to community banks, do you see any pluses/minuses in regard to using sofr over libor for community banks? >> libor itself is really a problem in the sense that the

rate -- there's no guarantee that the rate will continue to be published after the end of 2021. but there's a question about having a credit sensitive rate in addition to sofr. sofr will be the main institute for libor. but we are working with regional and some of the larger banks too about the idea of also having a credit sensitive rate. and that's something that's ongoing. >> okay. and we've had a little conversation about the coronavirus, china, the impacts on the economy. the president just signed into law the usmca. do you see that as creating a runway for further economic expansion in the u.s., job opportunities and wage growth? >> we don't give advice on trade policy, and that -- but i will just say this. the signing and the enactment of an implementation of usmca will be a positive, at least in the sense that it removes uncertainty around trade policy.

and i think that's been part of the issue over the last year or so, has been not knowing what the rules of the game are going to be. getting those rules settled is certainly a positive thing. >> great. thank you. my time has expired. >> thank you. the gentleman from illinois, mr. foster, is recognized for five minutes. >> chairman powell, first off i would like to thank you for facilitating our meeting with governor brainard, representative hill and i, on digital currency. we really enjoyed that, as well as meeting with the staff, who are excellent. it's great to see how plugged in they were to this issue. now, in a speech last week, governor brainard highlighted, quote, the rule of central bank digital currencies in ensuring that sovereign currencies stay at the center of each state's financial system. do you agree with her? in addition do you think that a digital dollar would help to serve as the core of the

u.s. and the world's financial system? >> to take the first part of that, i think having a single government currency at the heart of the financial system is something that has served us well. it's a very, very basic thing that hasn't really been in question. and i think, you know, before we move away from that, we should really understand what we're doing. so, i think preserving the centrality of a central, widely accepted currency that is accepted and trusted is an enormously important thing. whether digital currency moves us along that path or not is an open question. as you know, every major central bank is currently taking a deep look at that, that we feel like that's our obligation. technology has now made this possible. private sector is innovating. they're doing it. it's very much incumbent on us and other central banks to understand the costs and benefits and trade offs

associated with a possible digital currency. >> how would you characterize your state of progress on this compared to other countries, the swedish central bank developing an e-krona, the chinese. the reason -- one of the reasons there was so much concern about the libra project is that they would immediately have scale if they just rolled out the product. another entity to do that is chinese government to roll out at scale their already established payment by cell phone systems. they would immediately have a scale comparable to facebook if they rolled that out. and so how would you characterize our ability to respond to this potentially competitive threat? >> so we're working hard on it. we have a lot of projects and efforts going on on that right now. we haven't had many of the problem -- you mentioned sweden. a lot of northern european economies have mouf addway from

cash to a remarkable reagree. and that has really not happened in the u.s. economy, even though it seems like it must have happened with our kids not using cash very much. nonetheless, the amount of cash in the u.s. economy continues to grow at faster than nominal gdp. >> if you look at the curb of adoption of payment by cell phone, you know, it starts slowly and all of a sudden it just happens. and so that seems like that transition can happen in a period of just a cup ole ouple years. and so we have to be able to respond, you know, if that's the driving factor, we have to be in a position where we can respond by rolling out, for example, a digital dollar on a couple of year time scale. >> i completely agree with that. frankly, libra really lit a fire under that and was a bit of a wake up call that this is coming fast and could come in a way that is quite widespread and systemically important fairly

quickly if you use one of these big tech networks like libra did. we're working hard on it. we fully appreciate the importance of making quick progress. we have not decided to do this though. it is not -- i think there are many questions that need to be answered around digital currency for the united states, including issues of cyber -- you know, cyber issues, privacy issues, many, many operational alternatives present themselves. so we're going to be working through all of that and doing that work thoroughly and responsibly. >> do you feel you have adequate visibility into what the chinese are doing on this? do you have sort of working level contacts of that to give you some idea of what their rollout is likely to do, likely to look like? >> yes. we certainly have that. but they're in completely different institutional context. for example, the idea of having a ledger where you know

everybody's payments, that's not something that would be, you know, particularly attractive in the united states context. it's not a problem in china. but nonetheless -- >> from a competitive point of view they're claiming they're going to roll it out on the belt and road countries some time very quickly, and so this -- i urge you to keep the fire lit. thank you. >> thank you. >> the gentleman from texas is recognized for five minutes. >> thank you for, madam chair. thank you for coming back before our committee, chairman. we appreciate it. with baseball approaching, i want to make one thing clear. you still are on team capitalism? >> oh, yes. >> thank you. appreciate that. experian recently released their 2019 consumer credit review. i want to read a section from the report because i think it accurately depicts the state of

our economy. as you know, i'm a main street business guy and the economy is really good right now. indeed, the u.s. economy exceeded expectations, record job growth caused unemployment rates to drop to historic lows while the stock market flexed throughout the year. consumers in return showed their confidence as they continued to borrow and spend energetically, most recently evidenced by the 2019 holiday shopping season. the report goes on to say consumer credit scores recent all-time high in 2019 at an average of 703. this translates to people being able to get better rates to borrow money, to buy a house, get a small business loan or whatever they need financing for in order to live out their american dream. so, chairman powell, what should we be focusing on in this committee to continue for jobs explosion and new jobs that we have seen the past few years? >> honestly, i think the focus for me really ought to be on things that address our -- what are our longer run issues that can be addressed by legislation.

and it's really two important things. one is labor first participation. what are the things that you can do that really can't do that will help people stay more attached to the labor market. we still have low labor force participation compared to economic competitors. the other is productivity. what is it that drives productivity? it's a stable ledgislative environment. it's an environment that supports and growth and investment and those sorts of things. >> i know you're aware about the fed's work on international insurance capital standard that is being developed for the world. i've had reservations about entering into agreement that does not conform to state-based approaches. one particular piece of the international standard that i want to ask you about is the flexibility that our government was given to develop an equivalent solvency standard that would fit our insurance

ecosystems. my question to you is how does the fed ensure deemed equivalent by the international group given the resistance you're facing from the europeans? >> i can just say that we will -- we will not be part of approving any international standard that doesn't accommodate our own american insurance regulatory framework. >> that's great. we're leaders, not followers. sochl my colleagues on the other side of the aisle have called for a financial transactions tax. i think this is an extremely short-sided approach to raise revenue that will greatly impact the amount and ways that americans save for the future. the thought that adding an extra lay tore taxation to other assets is redundant since capital gains taxes are in place and they should be lowered that take away money from successful investments. if we want to further expand economic growth, withe need to

lower tax rates so americans can keep incomes and businesses can profit into organizations. can you explain how implementing a financial transaction tax would impact the u.s. economy? >> i think i need to stay in my lane here. you know, we don't do physical policy. if i start commenting on particular taxes, i'm worried about where that might go. so i'll have to -- >> i understand that. i'll tell you from a main street standpoint it will hurt the economy, an extra layer of tax. we need to cut taxes. being in over business for over 50 years like myself, one data point that catches my eye are negative interest rates. can you help me understand the economics behind negative interest rates and talk about the phenomena this poses to financial instability. >> a number of countries around

the world face the problem of what do you do when your policy rate gets to zero. some of them went below zero. the united states chose not to. we chose not to with the fed. we used other tools when we got to the lower bound. those were forward guidance and large scale asset purchases. i think going forward our inclination would be to rely on the tools we did use as opposed to regular rates. that's not a tool we're looking at. the question about intermediate yags is when you have negative rates you wind up -- does it wind up creating downward pressure on bank profitability which limits credit expansion. >> right. >> and there's some evidence of that. so, any case, we're watching other institutions around the world who have done that and we'll be able to see what the results are. >> thank you for being here. >> the gentlemanwoman from michigan is recognized for five minutes. >> thank you, madam chair.

i don't know if you know 2013 chairman filed for chapter nine bankruptcy which was marked as the largest municipal bankruptcy filing in u.s. history. in july when you were here, i asked you why if the federal reserve is willing to backstop or support big banks and corporations during periods of credit market distress that we would want to make equally sure that state and local government also had access to credit as well. and you mentioned you didn't have the authority to lend to local and state governments. madam chair, i would to submit for the record section 14-2b of the federal reserve act asserting that the feds do have the authority to buy municipal debt. >> without objection such is the order. >> so, chairman, given that you do have the authority, can you explain to me why shouldn't the federal reserve ensure that

state and local governments have access to funding during times of stress? >> so, we have, as you know, limited authority. i think it's to buy short term municipal obligations. we did do that in the 1970s briefly and then have not done it since. i think a series of fa afluencies have thought of that as not aappropriate dwrat for us in the sense that it's government financed. that's to be dealt with my fiscal authorities rather than by the monetary authority. we focus on the job you've given us which is maximum employment and stable prices and to some extent we're with other agencies we work on financial stability and bank supervision as opposed to the solvency of state and local government. >> yes or no, the federal reserve retains the ability to open emergency lending facilities? is that accurate in stabilizing the economy? >> well, to -- yes, to financial

institutions we do. >> uh-huh. so, when the feds step in to rescue banks in a crisis, is that because you believe their role in the economy is vital? >> really because we had no choice >>. >> -- we in all it's he see an? . ,.

we be for instance chairman suggested a fiscal program might be helpful during the next recession. do you agree with that? >> i think that's an untested and not widely supported. another spin a group of people that push the idea but i don't think included the former chair. you've seen something out of nothing. >> the federal government is supposed to be about people. i don't see that we're treating pensioners in the city like the

city of detroit which is currently community that has been hit hard by the financial recession. they see a teacher is coming back, if i show you neighborhoods they'll say we don't know you're talking about because poverty has increased, all of those things. >> we reflect and understand that i believe the federal reserve act gives us authority to help and treat, just like we build out big banks that we can do for people for the city of detroit. i thank you for that and again, i will actually asked to look this from a different lens versus the same old process which i believe has not worked for working-class people. >> thank you so much a yield the rest of my time. >> thank you the gentleman from arkansas, mr. hill is recognized for five minutes. >> thank you, chair waters and welcome back to the committee. i want to thank you for your discussion that you had with

doctor foster a few minutes ago, i want to thank you for your work with governor brainard in our discussion on the digital dollar in the work being done at the treasury about that. i want to labor some of the points that representative foster made but some comments on, would you advisor committee or asked the fed to advisor committee what legal authorities considering the digital dollar. >> that is a good question and one we are looking at, longwood depend on the design. >> exactly. one thing we talked about and had a lot of discussions on the task force is about europe's approach true payment provider which is part of their financial services code. part of the open banking

movement and one would have a regulatory, might be in a bank or non-bank. is that the feds looking as well? >> i would not say were specifically focused. but more broadly, we think it's a good idea to look at the whole landscape of oversight over payment you all also your go to that would be a piece of that as governor rainier had talked about it whatever speeches last week. >> thank you for that. >> last month the chinese regulated the bank, it was a 14 billion dollar loan that they arranged through one of their sovereign wealth funds. the chinese banking assets at 41 trillion dollars, now or 47% of world gdp. is instability and chinese banking industries pose a financial threat to the global

financial system? is it a financial virus like they have already contributed a physical virus? >> generally,, as i'm sure you are aware china has had very high debt to gdp for an economy in that stage of development and that includes a banking system. the government, for several years now has been taking measures by the central bank to try and control the growth of that, and they have stuck to that for the last couple of years, even though those were challenging years economically for them. it is something that they are addressing, the other thing to say, they have plenty of fiscal space if you look at it fiscally. they have plenty of power to respond. i wouldn't go so far as to say there that is systemic threat to the world economy, or anything like that. it is something that they need

to address. >> it's something that i think deserves review, mr. barr talked about their misallocation of resources, 40 per 7% seems like an over allocation the banking sector in china. it could pose a threat to our system. in your report on page 24, you talk in like on your financial stability section the decline in the high yield market. the ratings have fallen, and i was looking at a mutual fund and a report today that says a particular concern is that continue-ing rate of the bands, the lowest category of investment rate, if the economy stumbles a creek issues. there could be a flight of fallen angels in this particular mutual funds. he said they are staying away from the lower the high yield market. are you concerned about the high yield market? >>, that's the so-called trouble be clear, and the idea is that there is a very large issue, which they have

downgrade, it would then be not investment grade, and the ideas that some holders are not permitted by the terms of their agreements with their investors to hold a non investment grade, and that would trigger sales. that is something we have been monitoring for sometime. was leverage landing more generally, yes we are monitoring it very carefully. you do see low compensation for risk taken, you see high leverage, you see lack of confidence, you see all of that. it's a complicated picture. that paper is now largely held and mutual funds and exchange funds, rather than on bank balance sheets. those vehicles tend to be stable funded. the liabilities actually longer than the expected. >> a source of financial concern to the f-stop, i think, and therefore.

thank you for you continued attention to. >> i yield back. >> the gentleman from illinois mr. casten is recognized for five years >>. thank you madam chair. trump powell. thank you for being here, first of all kind of wanted hatchback on this. if i get elected eight more times, fingers crossed, i will have much experience in this line of work as they do. so i still come here, primarily as an energy nerd. i have a real concern that we are not dealing with the reality of climate change. we understand what it means, we have not thought about what it means to have an accelerating rate change. we don't think about it as well as we should. the first evidence, the cave is million years old. james invented state engine in

244 years ago, in the industry of his revolution. this massively exhilarating shift, if we went from zero to co2 tomorrow, we are looking at sea level rise incoming. the more realistic trends, at least six feet of sea level coming, and at that level, there is as we head of 23 trillion dollars an economic loss of the system. 900 billion dollars of u.s. property at risk before factoring in debt losses and pulling out of financial insurance, and there are some serious systemic risks to the economy. i just want to understand a little bit of how you and the federal are thinking of those risks. given assets exposed to climate change, and the global financial crisis, how is the fed thinking of climate change is a systematic risk to the

economy? >> climate shades is an important issue, one that's the province of elected representatives and to set the overall direction of society and how we will respond to climate change, and its challenges. nonetheless, we have a job to do and that is to think of the potential implications for the financial system for the economy. and we are at the very early stages of filling in what exactly that means. in terms of things like particular assets, these are longer term considerations. we are essentially mainly concerned the business cycle issues, that is what we are focused on, issues for the medium term. climate change is a much longer cycle. >> part of the concern i have is that the actors in the space do not have planning or isis that much the reality that you

would me do. they are signing 30 year mortgage signed on miami beach, and they may plan resign that mortgage a number of times, but somebody is going to be left holding the paper with that sea level rise coming. insurance industries typically have when you're holding periods, so, even if the u.s. is successful every dusen carbon emissions, there still is a massive reallocation of capital. if you look at the transitional risks, and thinking how that starts liking the economy? >> those are the things that we are looking into, as you obviously know. there is a lot going on in the financial market. there's a lot of disclosure happening and expectations around disclosure are changing significantly for publicly held companies, and that will have an effect. that's not really what we do, we do monetary policy, bank supervision. our banks have to be taken into account of the risks of severe

weather events and potential risking. such as rising water. >> a specific one that has been bugging me lately, if you look at the the fossil fuel industry, the gas companies, goal companies, the debt that they hold a relative to their assets, given that their assets are heavenly dominated by reserves. if they were to extract their fossil fuel reserves, things are going to be way worse than the 23 trillion dollars that i just told you. have you ever considered stress testing to see whether their failure to monetize their reserve and my effectively make them fiscally insolvent? that to me it sounds like a materially adverse event, but i won't bet the economy will commit suicide. if i look at the financial statements of a lot of those companies, it is not clear to me that they could monetize those assets. that is a meaningful effect on the risk of money that is held today, about 700 million

dollars have wanted to philosophy or companies in the last few years. have you consider that a step interest? >> for us, systemic risks in the financial system, we would be stressed testing banks. the bank of england is doing some of that now and we are going to be watching to see what they learn. we have made that decision. >> i yield back my time. thank you chairman. >> gentleman from georgia is recognized for five minutes. >> thank you madam chair. thank you for being here. first of all, i kind of want to touch back on this, i know some have already touched on the subject, and as you know, several weeks ago, the chairman gave a speech where he outline the number of changes that he would like to make to the fed supervisory and regulatory process, he said he intends to bring transparency to the regulatory regime for

designating firms. he also proposed designation. category one firms. my question is, at a press conference after last month's federal will open market committee meeting you said you agree with chairman quarrels, and what he had articulated. i appreciate that can you give us an idea of when you expect the designation be confirmed with new tailoring rules? >> i don't have a sense of where that is in terms of the timing of it. and any given time we have a bunch of things in trying to do, and that is certainly one of them. >> hopefully, sooner rather than later. >> i don't want to commit to something that they're a lot of things we are working on at all times, but the vice chair gave a speech about that. i'm along with it, and i expect we will be moving forward. >> that's good to hear.

real quickly, i would like to touch on the cra, i believe that all three banking agencies need to have a unified framework. i know you are hesitant to speak on behalf of the other agencies, specifically, oh ccf, the icy and their proposals. if you don't want to comment on that and understand it, what are some of your ideas where the feds ideas on the monetization? >> let me talk about the process. we agree on the overall goals. so, our thinking was to try and get to a set of improvements that would lead to more efficient and effective accounts. we are looking at ways to make the assessment test clearer.

are thinking there is something a separate retail level test, a separate test for community development, and for a retail landing. also, that the other thing we are saying, is let's make sure it is all very dated and grounded in data, as the chairman mentioned earlier, 6000 data sets that we look at. i think we really know when we make a change in the metrics, we know what the effects are going to be and we feel good about that. there are a lot of overlaps, but there are just a handful of differences that have prevented us to get to a full agreement. >> and the overall objective, do you believe we can remove some the ambiguity of what projects do and do not qualify? >> absolutely. transparency, more transparency as to what qualifies and where. more objectivity and all of that that should help you to

encourage banks to be more. if the really know it's going to qualifier, what's not, i think that is a very constructive. it is but how you implemented. we want to have a very concentration on it. a high level of confidence that what we change is going to happen in its desired effects. that is what we are doing. >> i like to see is make changes. financial institutions are shaking boxes to get credit, but actually investing in projects that do help revitalize these communities. as you know, the fiscal year 2020 appropriation law directs judiciary department. -- banks regulatory capital getting any requirements that are needed, if the city concludes that that is the case, are you open to modifying regulatory capital requirements accordingly? >> yes, i think we have said that with then we are going to

monetary very carefully. because of some of the concerns have been raised. >> thank you, we don't have time to get into the other questions, so for that, i yield back. that's my time. >> miss porter is recognized for five minutes. >> thank you, gentlemen powell, you spoke about your belief and the importance of maintaining independence of the federal reserve. do you still have that belief? >> i do. >> as unchanged the new year? >> now. >> we don't want the feds to be making decisions about things like where to set interest rates based on any factors other than the best interests of the country. i know you have had experience with the president publicly and aggressively attempting to lean on your to lower interest rates. i appreciate your continuously importance of the independence of the fed. it is not just our president, there are a lot of people out there who would love the

opportunity to weigh in on fed decisions. outside of administration, what kind of people would want to influence you in regards to the feds decision-making? >> what people want to influence us? potentially quite right wing to people. >> investors, financiers? >> i don't know that people are really seeking to influence. you say they might want to influence, the answer is, i don't really know the answer to that. menu follow what we do and respect what we do, people often, when i need them, really shy away from giving advice. they really do. they feel like they don't presume to give advice. >> you don't feel pressure by political or special interest? would you say that someone like jeff bezos, the ceo of amazon, one of the richest man in the world, could benefit from

having influence over the feds decisions? >> i would not know. >> what about jared any bunker trump? they are very wealthy people. do they have savings, and make different amounts of money depend what the fed does with interest rates? >> yes. >> what about kellyanne conway? does she and her role as advisor to the president, he has expressed these public views, does she potentially -- amplifying the president's message is after all her job. >> i suppose,. yeah >> i'm going to project a picture up here, so the audience can see it, but i also want to hold it up for you. is this you, mr. powell? >> it is. >> where are you? >> that's a party after the alfalfa dinner. the party that i want to. >> where is it? held >> jeff bezos's home. >> one was it taken? >> saturday night after the

dinner. >> >> can you imagine how and heading a lavish party at jeff bezos 23 million dollar home along with gerald any blanket trump, jimmy diamond, might give off the sense to the public that you are not immune from external pressures? >> i would certainly hope not. >> what did you talk about the party? people you named it. >> can you tell me who you did talk i mainly escorted my son and his brand-new wife. i actually introduced them to general mass. >> great. >> i would just suggest that this attendance at this kind of event, with these kinds of people, is inconsistent with what i would otherwise commend you on for doing a very good job. of reaffirming to the public, this plans in the public's mind.

this counters what you have been doing. if you can name a couple of the biggest writers of economic growth in this country since the recession in the 1970s, what has been making our economy grow? what factors? >> the factors that have been making a grow, the hard work of the american people. you know, i think what you see is tremendous growth in some sectors and other sectors, and of course the big technology companies and what are around. i think we have seen lots of growth in some areas, and some areas much less. so >> would it surprise you if i told you that women are actually in the workforce a bigger driver of economic growth then technology companies? since the 1970s, 38 million women joined the workforce, and without those women, our economy would be 25% smaller. when we talk about the health of our economy, we talk about the gdp growth, what i don't hear a lot about, and i would like to hear more about, is

about the economic effect of things like childcare availability. in those same for decades which women grow the economy 25%, the cost of childcare shot a 2000%. what do you know how much childcare and a merica costs today? >> how much it costs today in america? a lot. >> can you put a firmer number on that? >> i don't, my kids are grown up. >> thank you, i yield back. >> gentleman from ohio's mr. davidson is recognized for five minutes. >> thank you madam chairwoman, chairman powell. thank you for your time here today. thanks for the good work you and so many of your colleagues are doing at the federal reserve. to address comments that came from my colleague recently, is it unprecedented for the chairman of the federal reserve to attend a party or a reception? >> no. >> it's certainly not the first

time a chairman has attended a party, i am certain is not a member of congress has attended a party, so i don't know that we want to say just because you are at an event, this is somehow nefarious. you might have actually talked to a russian on the subway or something. i the way that these things are linked, political motives, is embarrassingly partisan and bad. i just thank you for resisting all of those pressures. many of them are public, of course, but one that i am concerned about right now is the rebel market. back home, a lot of people don't know there is such a thing as repot. but it is such a big factor for our economy, and i think some of the warning signs in it have given rise to the fed in a blend between regulatory action and monetary policy to inject a lot of cash into the market. charming coral spoke recently

about the need for that to continue for some time. can you explain the process of how the fat is going about reviewing the factors that are contributing to this re-post fight, and what you have learned from the review? >> what happened was, in early september, there was a spike in repot rates and our federal funds rates moved slightly outside of our pant. our target range for a day or so, and so, we did not see that coming. market participants did not see it either. we have been asking why is that? one clear reason is that the level of reserves which is cash on the reserve banks, needs to be higher than we have thought. and that string, we have immediately set forth a plan and executed it, and it has worked fine to create it. >> some have called his quantitative easing,

essentially we are artificially interject in cash to produce an outcome that the market is producing its own core. so, i think it's odd that our action is to inject cash from the federal reserve to grow the balance sheet at the fed, instead of looking at the underlying regulatory things. what we have we talked about, what has the four talked about in terms of regulatory factors. instead of injecting cash to fix a problem, treating the root cause of the problem, and changing the regulatory framework? >> we are doing both things. the reason we are injecting the cash is to supply the demands for cash for banks that need to have a certain amount of cash and liquid-y for purposes. we also said that without undermining safety incentives, we will look at ways in which regulations and supervision might have interfered with the otherwise free flow of cash to where it was needed. we have done a lot of work on that, and vice chair corals

head on a broad theme there. the idea of making the treatment, the supervisory treatment of cash the same as that of treasuries, for this purpose. you could achieve a better flow fluidity through the system without it affecting the overall level of liquidity in the system, which is just what we are looking for. he broke some ideas on how to do that. i think that is a very profitable line of inquiry. >> as market forces are coming forward, we are talking about replacing the benchmark rate and of course, it includes 250 entities, there is a concern that as you have done this, that the best rate is not necessarily being provided. is the fed taking the best proposed rate offered in these repot deals, or are we giving it out a special rate to the

top ten banks? >> sorry, i lost track of that. >> when these liquidity's injected. the report right. going into the report right, and i guess -- >> sorry, i missed that. so the rate we have been offering on the repot, they have been settling at a level a couple bases below. that won't be a persistent issue. >> are they settling at a rate, when it is paid out at the high rate, is it paid to the best available offer, are the best available customer? >> we don't distinguish that. anyone who is eligible convicted. we will sell to them. >> my time is expired. >> with the gentleman like to ask the witness to provide more answer and writing for the record? >> i appreciate your suggestion, i would love to see a return answer for how that is actually working. >> the witness has requested to

provide written answer. >> thank you chairman. gentleman from north carolina's recognized for five minutes. >> thank you chairman for convening the hearing today, and chairman powell, thank you for your testimony. he voted against control of the proposal and describing it as a deeply misconceived proposal, and it would fundamentally undermine the community. can you comment on the deficiencies of controlling items miss guiding attempt at the cra, and essential piece of civil rights in banking laws? >> i feel like our role is not to be commenting on the other agencies proposal. the public is doing that now. we look forward to seeing the comments they do make. i can talk about our own thinking of this, but it is not really for us to be publicly commenting on the other agencies proposal.

>> well the federal reserve release its own proposal of the investment act, when that takes into account the needs of low and moderate income communities? >> that of course was why we undertook this work. we have not made a decision yet of whether went to make a proposal. but nonetheless, the whole effort was undertaken with a view to create a modernization proposal for syria. >> as you know, the federal reserve -- maximum employment, so, will the fed set a goal for a wage wealth, and are you considering this approach as part of the framework review? >> i don't see is targeting wage growth as an independent item, it is something we monitor very carefully. our goal, as assigned by congress, is a maximum employment. those are two statutory objectives, and those are the

things that we are targeting. i don't see us targeting a particular level of wage growth. >> have you considered adopting for wage growth, for example, once we set a certain percentage increase in pay wages that the fed may consider switching to percent inflation rate. >> well, we have said that for this project, we want to make the 2% symmetric inflation goal more credible, and we have been missing it and central banks around the world have been missing their objectives for decades, on the low side, and we want to resoundingly achieve 2% inflation. that's really the objective of this review that we are undertaking. >> let me ask a question about the vocal rule, why has the fed decided to support further changes to the vocal rule given that banks enjoy certain benefits including access to the fed discount, and that the

rule was intended to limit banks from engaging in risky investments and activities that contribute to a financial crisis? >> we did just put out a proposal on part of the vocal rule, and of course, we think the proposal is entirely consistent with both the letter and the spirit of the law. we are going to be reading the comments, we just put it out. we are looking forward to reviewing those comments. >> i understand that you collect a large number of daily trading metrics from banks subject to the vocal rule, yet it has never been made clear exactly how these metrics are used to determine whether banks are complying with the rules, nor have any of the metrics been released to the public. is that true? >> i think it is true. we published the first vocal rule about six or seven years ago, and i think very widely, regulators and financial

institutions found it to be a bit and workable. so, we set forth and set out to provide a simpler set of metrics and ways that companies could conduct perfectly legal activities and have more certainty that they were doing so without having to prove every single trade of what was in the mind and heart of every trader. there is going to be trading activities around legal activities that were not covered by the local rule. that is what we are doing. we are trying to make that rule more effective and efficient. we are doing in a way that is consistent with the spirit of the law. >> thank you madam chair, i yield back. >> the gentleman from north carolina, mr. but, is recognized for five minutes. >> thank you madam chair. chairman powell. welcome. i want to thank you for your collaborative work with the u.s. state and insurance

commissioners. i also wanted to thank you for the push back against the european efforts to try and force their system of insurance regulations on to our unique and sound 50 state insurance regulatory regime. notwithstanding the progress, many in the industry are telling me that the europeans are still resisting, and the ultimately seek to change our regulations so that they mirror theirs. given that, here is my question. will you commit to directly reaching out to your peers and europe to tell them explicitly that the u.s. will not be adopting a european centric international capital standard, and that we have our own rules that worked very well? >> i will say clearly that we have a state based insurance regulatory system, and we have the federal role, is what it is, and that is not something we are seeking to change. we are committed to that going forward. >> chairman, they are seeking

to change us. i fear that if we are passive, it will migrate towards them. have you had any conversations with any senior european leaders yet on the international capital standards? >> no, i have not. >> is there any reason why not? or has that been something that is avoided? >> i am not involved directly in the insurance. there are senior people who are, i would encourage you to continue to press that. we have a great system that continues to work well. mister chairman, as part of the finalization efforts, a number of changes to the capital rules will have the effect of raising capital requirements on capital market activities. can you discuss your views on the appropriate levels, of capital market related activities, such as market making or underwriting? >> sure, those are critical activities in the functioning of our financial markets in our economy. they need to be appropriately

capitalized. i would say that overall, i think and that the level of capital in our banking system is about right. i don't see a need to further erase capital, so i know we are pushing forward with the fundamental review of the trading book and game. i don't see them as needed to raise overall levels of capital. >> chairman, can you share how your views on capital requirements and things like market making it underwriting, how they could affect the balance between bank driven and -- in the u.s. system? >> to erase capital requirements, they have become quite binding, the encouraged to move outside of the banking system into less regulated and supervised entities. >> very good. mister chairman there has been a lot of the stuff shun in

recent minds about these things, and others monitoring the market. in fact, we have had a couple of questions on this topic today, we will discuss the issue sometimes, i think they are referencing different things. to help us to get on the same page here, in your opinion, how would you define leverage landings? >> a lot of different ways to think about it, a reasonable ballpark would be something that is rated below triple b. you could also say in an amount of leverage, typically, they would have a leverage of maybe six times cash flow. you know, there are different ways to think about it. i think the best way to think about it is probably non investment grade. >> do you think there is a different and leverage lines in the banking sector in the non banking sector? >> yes, i think before the crisis, there were -- there has been a trend over

time for leverage loans to be held by a longer term holders outside of the banking system. that has accelerated, so there are far fewer of them on the books of banks with deposit insurance and the safety net as opposed to collateral eyes loan obligations. or different kinds of funds. that's whether loans are going, so it is more like a distribution business as opposed to add traditional lending business where banks would make alone and put it on the balance sheet. you have a bank performing and origination function on behalf of a sophisticated investor that stately funded, we hope. in the case of the ceos, it is something that we need to keep monitoring. >> thank you, chairman. >> thank you, the gentleman illinois mr. garcia is recognized for five minutes.

>> thank you madam chair, and thank you for being here, chairman. i would like to return to the top of climate change for a bit. extreme weather events have had a great impact on the midwest and working class communities, like those in my chicago district. often enough, they are hardest hit during such disruptions. high climate change is also a risk to the financial sector. the host of bad money on cnbc in a discussion last week said major institutional investors want nothing to do with fossil fuels because of concerns about climate change. to guard against climate change and banks, the bank of england has decided to stress test the uk's capital banks. largest banks, pardon me, and insurance companies against the risks associated with climate change. will the federal reserve follow suits and develop climate related stress tests? >> we are monitoring what the banks are doing, by the way,

those are stress tests that are not like our stress tests in the sense where the have direct effects on the banks ability to distribute and make distributions. they're really trying to make an assessment, so we will be watching that carefully. >> i am encouraged. looking ahead incorporating climate change into economic forecast we become more important climate disasters such as in puerto rico for the wildfires that california last year are currently labeled transitory risks by the federal reserve, but we know extreme weather events will be called more frequent and severe, a corresponding increase in a comic losses and fiscal risks, of which to be felt by communities of color and working class communities. so chairman, when the fed develops its economic forecast, at what point should climate change shift from being considered transitory factor to a structural factor?

you know our forecast both the individual ones that people like me and the staff forecast they are not for longer terms it's really what's important is the next year, two years, three years and climate change is just operating on a likable -- longer cycle than that, and of course as you suggest, a severe weather becomes more common, and that is connected to climate change, you will see those things entering the forecasts period and certainly entering our supervisory practices as, well our economic forecasting. >> in a recent speech at the san francisco feds conference on the economics of climate change a governor. said quote by participating more actively in climate research and practice hits it they can be more effective in supporting a strong economy in a stable system and you agree

with the statement if yes what more will the fed do in the future to identify and mitigate the financial risks of climate change? >> i think it is incumbent on us to do the research and understand the implications of climate change for our supervisory rules and rules and looking after financial stability and that's what we are doing i think it's early days for that but the public will expect that we do that and we take the measures so we need to take to make sure the financial system is resilient. >> do you agree with her statement generally? >> in that agreement yes i do and i'm the big bank mergers and market concentration three months ago the federal reserve approved a merger that created the six largest bank in the u.s. with more than 450 billion in total assets and the federal reserve's own research suggests that the failure of a single

250 billion in the fake will be far worse for the economy than the failure of five separate 50 billion dollar banks furthermore a former chair has warned that it will not be able to wind down a bank, the sign of the combined without imposing significant losses and the deposit insurance fund and potentially destabilizing the financial, system in this light can they justify its conclusion that this transaction will not appear to result in a meaningful greater or more concentrated wrist from the financial system? >> yes i think we can and we did, we evaluate these murders under a very clear statutory framework, we had a number of public hearings on it and looked at all the statutory factors and essentially you have to banks coming together

to perform a regional bank that is akin to or smaller than many of the other ones and it doesn't appear to me to have significant financial stability implications at all. >> thank, you i yield back madam chair. >> the gentleman is, thank you for appearing today, i heard your statements in the opening remarks about the coronavirus since really in regards to some of the questions that you've had today, i noticed this morning in the report that axios listed they quoted from the report tracker and it said that traffic in u.s. sports is expected to climb in february almost 13% in march between nine and 10% year over year. now assuming that those numbers are true and correct, what

impact if any with that have on the retail sector and what impact would any if that have on the overall economy? >> i think there is a lot of uncertainty around what the ultimate economic effects will be outside of china and particularly in the united states, the question will be, we do expect it consistent with the report that there will be some effects, the question will be what is the size and scope and also will they be persistent or will it be something that passes through and ultimately the bottom line question is, does it represent a material change in the outlook, something that we should react to with monetary policy, that's really the question, and it's really too early to say, we will be monitoring it like everyone else will very carefully and that is where we are. >> along those same lines and also from axios they quoted from a bank of america security

support and they said that they surveyed 3000 companies about the global supply chain and that many companies around the world are looking at relocating, they called in the reporting, but take tonic shift in global supply, looking to other areas of southeast, to india, also north america, my question to, you first of all i don't know if you are familiar with the study the bank of america security study, are those numbers, or are those anecdotal statements, isn't consistent with anything that the federal reserve is seeing? >> i'm not familiar with that report and therefore can't comment on it, i would say there are a number of channels in which this could have an effect, first of which is tourism really, the second is that our ability to export to

china is less because there will be, is just less going on, there are so exports could go down, you mentioned supply chain, so many u.s. companies by intermediate goods it's part of creating their final product, so supply chain issues we don't have real evidence on that and i'd say the last channel is financial markets, financial markets can be a channel for the transmission of risk behavior that can affect i cannot behavior, we will be looking at all of, that it's way too early to say whether what it will amount to so we will just have to wait and see, there is no way to be kind of confident than anyone's assessment for the range of assessments. >> based on what you said i know your answers but i will ask anyway. the report mentioned a number of reasons, one is the differences between china and our country, and countries but also on automation and the

increase and automation, does that sound consistent with relocation of the supply chains? >> separate from the questions of the virus there clearly has been on the part of american companies a lot of activity in moving to other jurisdictions like vietnam in particular gets mentioned quite a bit. >> i saw a report a number of countries have had american businesses moving their production activities out of china to other locations, that certainly has happened. >> including the united states? >> yes. >> or relocating back to the united states? >> so i guess along those same lines, i represent part of memphis and west tennessee, in memphis just outside my district there was an announcement made two or three weeks ago that they are locating a new facility there, 1000 jobs, and incidentally questions on the minimum wage

they are going to start their wages at least 15 dollars an hour plus benefits. but talked about these new jobs in combination with automation in terms of packing and shipping. you have talked about your concerns of automation and the effect it will have on employment in the future, can you can say the two cohen system versus this amazon plant. >> well over the last two and a half centuries we have seen advancing technology and there has been a concern that it will replace human labor and that has happened, but what has happened though it has made human labor overtime or productive. there is displacement of current workers overtime advancing technology has led to rising incomes, that doesn't mean that there won't be disruptions in a lot of pain for people in the short term, but nonetheless the process overtime has led to rising incomes. >> the gentleman from florida

is euthanized for five minutes. >> thank you madam chair, and i want to welcome to the committee and i would like for you to explain to me for the past three hours, two hours and maybe 45 minutes when you are talking and on the committee was talking about how well the economy is doing, you know how we have more opportunity for jobs in the economy, when you start speaking the dow is up 120 points, and while you are speaking it went down, can you contribute to tell me why something like this occurs, who is listening to your speech this morning of the financial service committee that were called the dow to go down.

is it because of the cuts in interest rate? how do you explain that? >> i really can't, and i'm not following the market is a city or answering your questions. >> okay well i know the president tweeted out something similar that when you started off the dow was up and then the dow went down, do you react to that or doesn't mean much to you? >> do you react to that, the president's tweet? but also how the dow went down in the cutting of interest rates, do you react to that or is it just something that happens? >> you now my colleagues and i are completely focused on using our tools to support the american people, to support the achievement of our goals and that's all we are focused on. >> explain to me too, from a staff report explain to me that starting in july, july of last

year that for about three different times the interest rate was cut by a quarter percent, you now, how do you make decisions, does that stimulate the economy when you made those through october a quarter percent cut in the interest rate? >> so we were really looking at a few things when we did that and yes the intention was definitely to support the economy, part of it was to offset the effects of global factors in there, i would say just the slowdown in growth just went on and on and we felt the need to offset that and take out some insurance for the effect to might have on trade policy, it was way on the u.s. economy, we try to offset any potential effects, and the third reason is we wanted to do what we good to guard against a shortfall from inflation, so we

supported growth to support inflation moving back of, those are the reasons we did those three things and that is the thinking we had and that we announced. >> okay, could there be a correlation between the student debt crashes and slow down of the housing market that we talked about a great deal in the last couple months, as you know many buyers of student loans are not able to get homes because of the high debt to income ratio, could there be a signal that there is a great need to address first the amount of student debt crisis? >> i would say that the righty -- rising student debt is a concern, it has been rising fast and it's, large there's increasing evidence that shows students who can't service that that have difficulty having

normal economic left and buying homes and things like that, i haven't seen any evidence to suggest that it is an important factor today driving the housing industry, i would say the housing industry is actually, activity and housing has been moving up over the course of the last seven eight months and as the effect of lower rates and just overall good labor market and things like that are showing up in morehouse building and also closing sales. >> my time is about to expire, i have a lot of students in my district and many of them coming out of school one think they are concerned about is the housing issue, now with going into the job market, how can they best share an american dream like their parents without getting the help from their parents, so with that madam chair i yield back.

>> thank you, the chair wishes to remind members that we have a hard stop at 1 pm today, the gentleman would be the final member to ask questions, with that the gentleman from indiana is recognized for five minutes. >> well i appreciate the time and both in private and public have been extremely complementary that the work you have in your colleagues have done not only in calibrating conditions to match the current economy but also the framework which you make money editions and how you present that in public. i can really appreciate, the cornerstone is bring more transparency to the fat and the decision-making and the press conference that you have made have added a lot of transparency to it so it's hard for me to understand some of the challenges in the stress capital buffers and some of the more vague language or and ability to pin down

expectations of changes especially when 2020 has started, i know that many others have asked about this. i think i sent a letter to you and coral signed by every member on this side of the aisle on financial services just trying to get a feel for what are the changes that are gonna be made, what is the timeline for those that are going to undertake these tests? getting those changes are trying to make decisions with multi billion dollar balance sheets, trying to make their plans, this time is now upon us and i feel like we're still being very vague about what's coming down the pike and when we can expect, even whatever is coming down when we can expect that to arrive before us. so i wonder if you might give some more color on that or give some reasons why you and your colleagues have been a little more hesitant to answer that. >> i can't give more clarity than exists, i will say again we do expect that the core of the stress capital buffer will

be incorporated into the stress test and we will do that in a way that's timely. >> and our previous conversations i think we had just kind of a general agreement, don't let me overstate that if it's incorrect, some of the aspects of this need to be calibrated. we put a lot of this in place, we felt like we are doing the right thing in doing so but perhaps we either had unintended effects, maybe they weren't as great as we thought there would be or maybe perhaps this was in the area we needed to focus on. i think we would agree that some of this requires enough can calibration going forward. do you expect that there would be more review to reflect current additions are what we have learned about what works and what doesn't work. maybe adding to significant reserves in many of these institutions. >> my strongest thing is it's about, right there is no reason to raise or to lower them.

>> just out of curiosity, tell me what you look at when you say this means about right. >> well capital levels are much higher, the quality of our capital as much higher. >> that is undoubtedly true but i think we all agree that during the crisis or precrisis capital levels weren't adequate, saying that they are higher isn't definitive, are they too high, are they still too low? like what he used to indicate this is the about right level of capital. >> you look at the stress test and you throw up a scenario that is equivalent or maybe even a little stronger than what happened in the global financial crisis, you see do these institutions have the wherewithal to remain reasonably well capitalized and really well capitalized enough to continue to have the confidence of the markets. that's really the question, it has to be above certain minimums, they do but not by

some giant margin, it doesn't sit is a capitalist too high, it suggests just about right, the stress tests are probably a great test for that. >> i think you can see how it might be concerning for institutions who feel like they are caught in a circular logic. we can try these tests and then if they do in the bar we believe that's right, that's exactly right without going back and changing some of the underlying factors that go into this test. you can i say that, you can only say that as long as they inch in the bar it's always right, no matter what the bar, is they want to go back and look underneath the hood and say gosh are these some chance to correct, the way we have done it, is it the right way to do it? so maybe in a relative sense maybe it is, it's higher than what the stress test have indicated, but is this testing the right thing in are we doing this test correctly and doesn't include o'leary variables? i think that is what they're looking, for further clarification on when we can expect that review comprehensively, that is what he has been talking about all

along. >> the banks. we are doing that all the time, everything is a stress test and transparent and things like th that. >> you are recognized for five minutes. >> i also want to thank the activists in the room that has e been organizing for the more responsive that i know having been raised by a human rights organizer that activism can be a full-time job. the decisions you make to impact everyday working people. your decisions impact how many jobs we have, who has both jobs, how much they are being paid and who is most harmed when unemployment is high. now some said we want this to be

shared and we need policies to make that happen. however, the approach has never succ however the feds approaches never actually ensure that will pay jobs are accessible to people who want to work, even for small, time in the 19 forties the after your wanted a second beloved, writes a right to a useful in financially rewarding job. the marshal argue that the right to a job is secured by the 14th amendment. and march and loosen king, dr. martin look at the king called on the government to guarantee a job to all people who want to work and are able to work, doctor king's legacy is often reduced to one speech and the march on washington often mischaracterize, the march in washington was actually the march for economic justice.

and i take special credit in fact that they met in boston, and i don't think she gets enough oxygen for the role that she played in the movement. so after doctor kings assassination loretta king employed a full mandate and was actually standing behind president carter as he signed the humphrey act into law and that is the reason why you are here today. so in the interest of time if you would indulge me in answer simply as possible, yes or no, chairman can simmering persistent controls about inflation, do you think the federal reserve can achieve full employment? by full payment i mean anyone who wants to work and can work will have a job and can work. >> thank you for the history, it i know that. that circle, that's what we are looking to do at all times. we are never going to say we accomplish that goal but we

certainly have made some common progress. >> i will take that as a. yes >> can a federal jobs guarantee where the federal reserve has not? >> that's a hard one to answer. what do you? mean >> guaranteeing a job, the history that i was providing. anyone who wants to work and able to work. so chairman powell by all indications the u.s. economy has had output well below potential for the last ten years and for most of the decade prior, do you believe that most of that period has seen unemployment well above target? where we have almost never seen inflation above target. >> that is true. >> so meanwhile black unemployment remains double that of white unemployment, the fed began raising rates into this in 16 even though inflation was still below target and when rates go up unemployment tends to as well. did the fed consider how raising rates would

disproportionately impacted those who are already struggling to secure employment. individuals who are former incarcerated, our immigrant neighbors. >> i would say that unemployment has gone down quite significantly since we began to raise rates at the end of 2016, actually the end of 15. >> but again did the fed consider how raising rates would disproportionately impact those who already are struggling to secure employment? >> i think our consideration was really the right thing to do we get monetary policy back towards places that reflected an economy that had recovered create a bit for the benefit of all people, including low and moderate income people. >> so a lot of people are still recovering. an interest of time, given that there had been no signs that the economy was overheating since then and now you are cutting rates, is a possible that you began cutting rates too soon? >> i think history will judge

that, we have to make decisions in realtime, we really have learned something since then and that is unemployment can be lower than most people thought. >> so bearing that in mind, knowing what you know, would you still have supported raising the interests rates when the fed? >> i did supported then and you know i think you have to judge those decisions on what we know at the time. >> would more americans have jobs today if the fed had not increased rates over the past three years? >> i don't know, we are at a 50 year low, it's a fair question. >> thank you. >> i would like to thank chairman powell for his testimony today, without objection, all members have five legislative days in must submit additional written questions for the witnesses to the chair which will be forwarded to the chairman for his response. i ask you to please respond as promptly as you are able. without objection, all members

will have five legislative days in which to submit extraneous materials to the chair for inclusion in the record. thank you all and this hearing is adjourned.