Transcripts For CSPAN3 Federal 20240703

I welcome back, chair paul, it is nice to see you at least hoist a year, for the economy to truly deliver security opportunity for American Workers, we need plentiful job opportunities, we need high wages, we need low prices. Prices are the current problem that has been decades since workers had all three at once. No matter what goes wrong in the economy whether, its a faction crisis or bank failure, whether its supply chain turmoil or other market Chain Disruption working people always pay the price. Corporations, somehow, reach the process. Financial profits go up. Mass unemployment, profits go. Up global pandemic, profits go. Up war in europe, profits go up. Increasing energy, profits go up. When supply chains ground to a halt when russia invaded ukraine and the economy reopened, demand surged everywhere at once. The rest of us saw problems to solve. But in many corporate boardrooms, executives instead saw an opportunity. For the largest multinational corporations, inflation has been a perfect excuse to increase profits by raising prices far beyond the cost of their input. The main tool looks forward to rescue us from inflation, high Interest Rates, which can do little to our problems. It is Little Wonder than that one workers see high prices at the grocery store, or the gas, pump along with rising borrowing paused from car and loans, they remain skeptical of governments willingness to address the challenges that people face. Inflation, of course, is a complex problem, the feds have been fighting it with a blunt tool. And weve made progress. Over the last two years, giving hope at the price of consumer goods will continue to decline, and despite the experts prediction, job growth remains strong. The country added 339,000 jobs in may, the 3. 6 is the states lowest in 20 years. Unemployment for black and brown americans remain near historic lows. Think about what it actually means for workers in alabama and ohio in north dakota and louisiana and minnesota and with south carolina. What it means for workers all over the country. It means americans have more opportunity and choice in their lives, even in places they havent seen a lot of options in recent years. It means that the power has the power to demand races, and paid sick days, and control over their schedule. It means that more americans have the dignity of work that can provide for their families. And look where that kind of power for workers is taking us last month, wage growth outpaced inflation. That is the way it should be. Todays hearing should be at a critical time, last, week the fed decided to pause Interest Rate hikes after ten consecutive increases, and to maintain the rate of its current level. For the many of us who are concerned that further rate hikes could do more harm than good, it is welcome news. The challenge you face is important for us to continue to see higher wages will also continue to rein in inflation. In previous hearings, youve noted, with justifiable pride, how careful management of the economy it held millions of workers helped them to return to the job market. It is those workers that stand to lose the most if the fed over does its rate hikes, loses sight of the dual mandate and drives Unemployment Rate back up. Youve also noted, mister chair, increasing Interest Rates is not the only tool we have to fight inflation, the fed is not the only one with the role to play. Everyone in government and corporate boardrooms must do their part. There is no reason we cannot continue coming together to bring prices down, more policy makers are finally recognizing what those of us in ohio have known for years, that outsourcing the production of pretty much everything, they mean higher products in the short term, but it wont mean to a resilient economy with a strong middle class in the long term. Weve taken steps to strengthen our supply chains, and hiring and bringing critical manufacturing back to the u. S. With bipartisan infrastructure law, and a number of things. We must continue that process instead of lowering that man, which is just economic textbook jargon for making people pour, laying off workers, denying raises, we can produce, more we can build, more and we can build the economy from middle out. It is also our first semi annual report from the feds since the string of Bank Failures this spring. Those failures were caused by the same issue at the heart of so many of our economic problems. It is the wall street Business Model. Executives lay off workers, they put short term increases in quarterly process and their own compensation above everything and everyone else. And, a Silicon Valley bank, and signature bank, those in charge push their banks to grow too big too fast. They make risky bets, they got massive profits, executives were paying themselves bonuses right up until the moment that at least one of these banks crashed. To most americans, that is not surprising. People have gotten all too used to big bankers treating the industry more like a game, or maybe more precisely, endless atm for themselves, securing the knowledge that they wont pay any real price if things go wrong. Mr. Powell, mr. Chairman, senators got 19 back with a 21 to 2 vote yesterday, those days for Bank Executives are over. Chair powell, i look forward to hearing today how the federal protect American Workers in the fight against inflation and promote an economy with a strong growing middle class. Sarah scott . Thank, you chairman. Tara powell, thank you for joining us today. Such an important time. Your last appearance before this committee was about four months ago, just days before the collapse of two banks, and what we continue to investigate those Bank Failures, it is important to begin with the macro factor such as rising Interest Rates that continue and contributed to the Bank Failures in the current economic stresses for American Families face every single day. Looking through the lens, i want to turn to you in your roles in Federal Reserve, your role that continues to require constant scrutiny, because the American Population reserves nothing less than what they need. The opportunities to succeed, and the strongest tools to pay their own path. Unfortunately, the Bank Failures earlier this year should Show Confidence in our finances. But thankfully, are healthy and well managed institutions stepped up, and we have been able to weather the storm. However, i have been consistently disappointed in your deputy vice chair of supervision, michael barr. Just yesterday, this committee passed, as chairman brown just said, near unanimous legislation to encourage good corporate governance. But not just that. Weve also wanted to focus on the supervisory failure, that was a part of the legislation. Those are not the same actions taken by michael barr. I asked him twice when he was here, before the committee, if he would fire bad Bank Supervisors for the supervisory neglect that contributed to the epic failures of svb, and signature. He would not commit to doing anything. I would ask you in your role, as the active executive officer if you would take some action firing those responsible for missing what was clearly obvious, known to all of america certainly should have been obvious to the supervisors. Ive said from the beginning that this has been a failure in three parts, svb signature, it was a failure of the Bank Executives in the action that we took 21 to 2 yesterday reinforces congress is willing to take the lead and hold Bank Executives accountable. Second failure was the supervisory failure, and that requires the fed to hold folks accountable, Just Like Congress did, and third, the biden inflationary economy that has drove prices really high and resulted in ten rate increases from you all. In the wake of Silicon Valleys banks downfall, as the vice chair released his report on the failures, we heard directly from you that your role was to announce it, to get briefed on it, but not necessarily to be involved in the work of it. So my question is, as you watch vice chair barr roll out higher capital standards, it seems like you have very clear statements that you will be supporting as well as working to implement vice chair bars recommendations. But as you know that the other members of the board and government open have recently said, mr. Barr reported on Silicon Valley banks filler that provided his conclusions, and went on to state that the report should be used to help guide discussions among policy makers not necessarily just a rush towards implementation of vice chair barrs recommendations. I would love to hear your thoughts on that path forward, if, in fact, your job is to rubberstamp the decisions of vice chair barr, or is your responsibility to take into consideration the vice chairs recommendations, and then chart a path that seems to be consistent with what is in the best interest of our nation. And frankly, of our Financial Institutions. I do not believe that increasing significantly the capital standards is in the best interest of Small Businesses or people looking for loans. The more capital we put on the sidelines, the less capital there is for us to see our Financial Institutions along the money out. Im looking forward to continuing to answering the questions in the answer time. Thanks, mr. Scott. Today, we will hear from the chair of the Federal Reserve, jerome powell, in Monetary Policy in the seat of our economy. Thank you for your public service, chair powell, and please present your testimony, thank you. Think, you Ranking Member scott, for the opportunity to present the Federal Reserve semiannual planetary policy report. We, at the fed, remain squarely focused on our mandate to provide maximum clemmons double prices for the American People. My colleagues and i understand the hardship that high inflation is causing, and we remain strongly committed to bring inflation back down to our 2 goal. Priceability is the responsibility of the Federal Reserve, and without, it the economy does not work for anyone. In particular, without priced ability, it will not receive a sustained period that benefit all. I will review the current economic situation, and then turn to Monetary Policy. The u. S. Economy slowed significant last, year in recent indicators suggests that it has continued to expand at a modest pace, although growth in Consumer Spending has picked up this year, activity in the housing sector remains weak, largely reflecting higher mortgage rates. Higher Interest Rates and lower output growth also appear to be weighing on business fixed investments. The labor market remains very tight over the first five months of the year, job gains averaged a robust 314,000 jobs per month, the Unemployment Rate moved up, and it remained low in may at 3. 7 . There are some signs that supply and demand in the labor market are coming into better balance. The Labor Force Participation rate has moved up in recent months, especially with individuals age 25 to 24. Now nominal wage growth has shown some signs of easing, and Job Vacancies have declined so far this year. While the jobs to workers gap has narrowed, labor demand still substantially exceeds the supply of available workers. Inflation remains well above our long around goal of 2 , over the 12 months ending in april, total personal consumption, or pce prices, rose 4. 3 , excluding the volatile food and Energy Categories core pce prices rose 4. 7 . In may, the 12 month change in the Consumer Price index, or cpi, came in at 4. 0 , and the change in the core cpi was 5. 3 . Inflation has moderated somewhat since the middle of last year, nonetheless, inflation pressures continue to run high, and the process of getting inflation back down to 2 has a long way to go. Despite elevated inflation, the longer term inflation is up here and appears to warrant well anchored and reflects a broad range of service to households, businesses, and forecasters, as well as measures from financial markets. With inflation remaining well above our long run goal of 2 , and with a labor Market Conditions remain tight, the fomc as significantly tightened the stance of Monetary Policy. We have raised our policy Interest Rate by five Percentage Points since early last year, and we have continued to reduce our Security Holdings at a brisk pace. Weve been seeing the effects of our policy tightening on demand in the most Interest Rate sensitive sectors of the economy, it will take time, however, for the full effects of monetary restraint to be realized, especially on inflation. The economy is facing headwinds from tighter Credit Conditions and household and businesses that are likely to weigh on Economic Activity, hiring an inflation, the extent of these effects remains uncertain. In light of how far we have come, in tightening policy, beyond certain lags with which Monetary Policy affects the economy, in the potential headwinds for credit tightening, the fomc decided last week to maintain the target range for the federal funds rate 5 to 500 a quarter percent, and to continue the process of significantly reducing our securities. Nearly all fomc predicts that we expected to raise somewhat further by the end of the year. But, at last weeks considering how far and how fast we moved, we judged prudent to hold the target steady to reserve the committee to assess its implications for Monetary Policy. In determining the extent of additional policy firming that may be appropriate to return inflation to 2 overtime, we will take into account the cumulative tightening of Monetary Policy the lag with Monetary Policy affects Economic Activity and inflation, and economic and financial developments. We will continue to make our decisions meaning by meeting based on the totality of incoming data and their implications for the outlook for Economic Activity and inflation, as well as the balance of risks, we will remain committed to bringing inflation back down to our 2 goal into keeping longer term Inflation Expectations well anchored. Reducing inflations likely to require a period of below trend growth and some softening of labor Market Conditions. Strong priced abilities essential to set the stage for achieving maximum employment and stable prices over the long run, before concluding let me briefly address the condition of the Banking Sector, the u. S. Banking system is sound and resilient, as detailed in the box on Financial Stability in the june Monetary Policy report Federal Reserve, together with the Treasury Department and the fdic took Decisive Action in march to protect the u. S. Economy and to strengthen Public Confidence in our Banking System, the reason Bank Failures including the failure of Silicon Valley bank and the resulting bank stress have highlighted the importance of ensuring that we have the appropriate roles and supervisory practices for banks of this size, we are committed to addressing these vulnerabilities to make for a stronger and more resilient Banking System. To conclude, we understand that our actions affect communities families and businesses across the country everything we do is in service to our Public Mission we have the fed will do everything we can to achieve our maximum unemployment and price stability goals. Thank you. Think you, chair powell. Paul donovan uv us as discuss the role that corporate profiteering plays in inflation while inflation has risen from 9 , as you know, prices continue climb because of supply shortages in corporate profiteering what we are starting to see greek felicia, given that rising Interest Rates certainly wont solve reinflation, why maintain Interest Rates at the current level or even consider, as you suggested, raising them, given the risk of harming the livelihoods of more than 1 million a half workers and their families . Mister chairman, the committee broadly feels that mall Monetary Policy has gotten to appropriately restrictive level, if the economy performs about as it is expected, then it will be appropriate to raise hikes again this year, and perhaps twice. The Strong Majority of the committee feels it will be appropriate again, assuming that the economy performs is expected to times before the end of this year. It would come very far, and the reason why we maintained our rate at the last meeting is to give ourselves more time to stretch out the time for making these decisions. We move very quickly at the beginning, and we gradually slow down. This is just a continuation of that, but we are committed to getting inflation under control, and the Strong Majority of the committee feels that we are close, but there is a little further to go with rate hikes. Thank you for that answer, but, mister chair, what fed governors call cooling down regular people, where i live call them layoffs. I mean, the question is why should working families continue to bear the cost of fighting inflation and why should they lose their jobs or that corporate profits can continue to balloon. Let me move to the next question. Our economy has created 30, excuse me, has created 13 million new jobs in the last two and a half years, black and latino workers work with the lowest incomes and seek the greatest gains in job opportunity and wage growth, what the fed considers to high an economy is giving these workers their first leg up in decades, if ever. We know that the job losses will hurt those same workers the most, how are higher Interest Rates involving job losses disproportionately impact black and latino and low income workers . We have quite an unusual situation in the labor market where weve had consistently much higher demand for workers than the available supply of workers, so some of the process of getting a demand and supply back into and lineman has been taking place through declining drop openings, and through lower quit rates, and through wages that are still very high but are moving into more sustainable levels of increase, so actually there hasnt been a meaningful increase in unemployment the Unemployment Rate has bounced around a historically low levels and that is fine that would be the perfect way for us to continue to happen there is no guarantee that it would happen and i would just say that it is working families who suffer most directly and quickly from high inflation, and it is for the benefit of those people, and all other people, that we need to restore 2 inflation this country on a sustained basis. Thank, you but in the dual mandate suggest that those workers, that obviously you look out for those jobs and those workers but we also know that those workers are the first to be laid off, and i would hope, that in your next meeting the fed recognizes those disparities and gives them real weight as you make a decision that will likely, at some point, resolve in more layoffs probably my lay first question, when i testified for this committee weve had the three of the largest Bank Failures in u. S. History youve noted to explore that a bit at the end of your testimony because the executives of those banks failed in banking 101, regulators took swift and Decisive Actions to protect the Banking System and depositors thank you for that that is in stark contrast the way that supervisors failed to see failures in the u. S. Financial situation. Were you doing to make sure the banks do real Risk Management and address liquidity in other basic risks, and you may in part want to answer he can do it himself but Ranking Member scotts comments on vice chair bar and where that takes us, but what do you do to make sure the banks do real Risk Management and express liquidity and other basic risks. I would say that we are committed, and i am personally committed, to learning the right lessons from what happened in Silicon Valley bank, and the other two failures, and implementing vigorously implementing appropriately, i think there is a clear need to strengthen both supervision and regulation of banks of that size and i can be going to more specifics in the course of the hearing, but i do think we need to learn those lessons, and i think weve started to do that. And it is something, what we saw was an unexpected bank value or overnight, which led to contagion and threaten to the broader Banking System, and that is not supposed to happen. We are going to take appropriate measures to reduce the chances that some like that would happen let me follow briefly, they try to existing bank Capital Requirements. So weve got a Banking Sector which is increasing requirements for banks 100 billion dollars with foreign assets to prevent future Bank Failures, is that a strategy the fed plans to and is willing to deploy and promote Financial Stability . There has not been a final proposal, there has been a draft of a proposal that has been circulated but it is my understanding that it is not final and i know things are still moving around a little bit, so utterly have a final proposal that i can comment on i do think that the Capital Increases, that are getting so much notice are really on the larger banks, there maybe also some Capital Increases in the proposal for banks to extend 100 billion but not below that. So and yesterday you said, we want, in particular the g subs, the largest banks to have had very high levels of capital and liquidity, you stand by that statement . I did, and i said of course, we did spend years raising liquidity standards a great deal in this institutions, and i supported all of, that and that i concluded by saying that further increases, if they are proposed we need to be justified, as any change in what would be. Senator scott . Chairman, lets stay with the Capital Requirements, as you and the chairman were talking about on the larger of constituents, but thankfully throughout the entire Banking System, pre financial crisis capital levels were in the Single Digits. The last decade, it seems that capital is continually being raised. My question is, how much is too much, and when is enough enough, we are going down a path when something happens or something goes wrong, the only default solution seems to be to raise the capital standards or the capital on the sidelines, the formulas values are really simple formulas that higher the capital standards to lower the capital for the private sector means fewer loans, and less capital for those who actually were creating jobs and so when you have too much capital on the sidelines, you have two little capital for actually creating and producing a vibrant economy, at some point if you raised it from Single Digits just a decade ago to this two now frankly, rumors are as high as 20 for rj zips and the possible outcome, how much is too much . I do not exactly the right question, as you point, out there is a tradeoff between making the banks safer and more secure, more resilient, we want them to be very strong, particularly the largest banks, so that they can continue to intermediate and land money and things lth continue to function during even stressful situations, but it is within capital it is always going to be a tradeoff between the availability and cost of credit and how much safety, i think that is the question were going to be addressing in answering as part of this process. As you continue to work on fighting inflation, using another simple formula for those of us in the real world of a business, we hear a lot of celebration around the jobs that are being created in the wage growth, but the way i look at it is, a wage increase, minus inflation has led to less spending power do you disagree with that . No, i think thats right. In the, and as we celebrate what seems to be a healthy economy, the truth of the matter is the average person in our nations today struggles to make their ends meet because of inflationary impact on their bottom impact, and what that means for them is that there is a crisis for a single mother like the one raised me or seniors on fixed incomes and we have yet to as a nation, adjust for the 500 basis point increases and how we service our debts and it differently the more money we have to use for servicing our debt, the less money we have for meeting the needs of the American People therefore, sprinting printing and spending four trillion dollars after covid was over has led to the inflation that we are seeing. And that, as a result, led to the ten rate increases. So how do you, as chairman of the Federal Reserve, talk to the policy about the importance of being responsible from a monetary perspective i, know ive seen and heard your comments that is not your lane but certainly the actions that we take here impacts, frankly, significantly where youve had to do, in order to slow down bidens absolutely explosive inflation. Let me start by saying, you are talking about real wages a moment ago, real wages actually did go up at the lower end of the income spectrum and now they are not as positive as we would like to see, so, but to your real question you know i would just say this that the u. S. Federal budget is on an unsustainable path it has been so for a long time, we need to deal with that sooner rather later and sooner is better than later but that is what i can say. And that is essentially what all of my predecessors have said. We are not charged with supervising fiscal policy anyway, but as a high level matter from the same point of the economy, that is what i can say. Heres another analogy that works for me as a former football player, running back. If my line isnt blocking, and i keep getting my head hammered, im gonna Say Something to the line. At some point, i think it is your responsibility to talk about the importance of fiscal responsibility, then to the side, my last, not question for you, is that svb suffered because their bond portfolio ended up carrying water. In a negative way. You have an eight trillion dollar balance and beyond, every report that ive read is that your bond portfolio in our bond portfolio the fed is underwater as well. Can you talk to me about the losses that you were experiencing at the fed . Remember that the way it works at the fed is when we buy this we pay for them with overnight Interest Rates reserves, and we, for many many years during the queue of the year weve earned it, have a spread, and weve been sending money to the treasury, way over a trillion dollars since q east art it. So now the rates have gone back up to 5 , that process has reversed, and these are paper losses. They have absolutely no effect on our ability to conduct Monetary Policy or really on the economy, its in a caught affective we retained capital and that would be a different way completely but we give all of our profits to the treasury. So youre giving profits to the treasury, and now youre not, whats the actual fact . Because if im giving another, not there is an effect. The treasury will then have to borrow money that it doesnt get or raise taxes just to carry up the spending that congress authorizes. That is not going to affect Interest Rates for things like that much. To me, i have the holistic view of our economy, where if, in fact we have more fewer dollars coming in this requires us to raise taxes which in the end as a real impact on taxpayers but thank you. Senator scott, senator menendez from new jersey. Thank, you chairman. After announcing the rate hike caused last week, you said that inflation has not reacted much to the feds passed hikes, and i will admit im a bit puzzled by that statement. The feds first rate hike was in march of last year, when non core inflation was at a 0. 6 . It is now 4 , and core inflation has fallen as well, so that sounds like progress to me, especially when you consider that according to the San Francisco Federal Reserve it can take more than a year for tax rate hikes to take full effect which means that so far only three of the ten rate hikes since last year are in full effect. So can you expand a bit on that statement from last week what progress do you expect to see that you currently arent seeing . Sure, youre absolutely right headline inflation has come down by essentially half, but that is largely due to Energy Prices coming down and Commodity Prices that go into food coming down and i wont say that those arent affected at all by Monetary Policy but they are principally affected by other things in the economy, the war in ukraine drove Energy Prices up quite a bit, and also food prices. That is not really, those things are not principally a function of Monetary Policy, although we do have some effect at the margin. So we look at core inflation, and we look at how tight the economy is. We are seeing progress, for example, in supply chains, anything better that, again is not really a function of Monetary Policy. Really, Monetary Policy takes effect is in the Service Sector, and that is where we have not seen much progress. So we are seeing progress in other places as you point out inflation, broadly is coming down but as i said in my remarks we have a long way to go. Inflation still running between four and five numbers. Do you think that the lag period for rate hikes to affect inflation has lengthened, for our rate hikes as a Monetary Policy tool kind of less effective. I dont think theyre becoming us effective, but these are real questions and the thing with lags is this day and age, financial conditions react before react. So markets already pricing, that is quicker. But the effect of those financial predictions on the economy still takes time. It works very quickly on housing for example, but less on the Service Sector which is not very interest sensitive. So i dont think that has changed, others have a different view, and Different Directions in which it has changed there is not a consensus agreement on how long Monetary Policy takes to affect the economy. So some people think a very long time, some people think right, away so i tend to think, lets look at the middle of that, in a year and change. That is not a bad way to look at. It policy actually started tightening well before that, before we didnt raise rates until march, but policy had already tight substantially before the first rate hike in march. I will say, i know the of a dual mandate, you know that as well the jaw last job report says the job employment was going up for women and african americans, so i hope that the cure is not more consequential than what we are trying to achieve. Recent reports reported that there is almost 1. 5 trillion dollars in commercial mortgages that will come through in the next two years. Many of them held by a small and regional vendors where Property Value is declining in Interest Rates rising. These mortgages could be serious liabilities for many banks. Do you think that we may see some banks fail as these mortgages come to, and if so, what can we do ahead of time to prevent that scenario . We are, of course, spending a lot of time on these issues than we have been for quite some time. And, again, i think you put your finger on. It is really which banks have concentrations, high concentrations in real estate. And that is not seen in the large banks. It is seen in some of the Smaller Banks. So weve identified those banks, and there is a supervisory tool kit where we work with banks to try to help them resolve those issues by raising capital, or dealing with what is happening and, of course, what is happening in the office space nationally, there is an issue with people working from home with just less demand. There is a onetime adjustment going on. There are also some other pockets of commercial real estate where there is some softness so we are working with banks to work our way through this, and we are very aware and very focused on the problem. Im concerned that it is a ticking time bomb. And, let me just say, that last week, you said that commercial real estate risks are unlikely to pose a Systemic Risk because the loans are broadly spread and mostly held by smaller bands but how can we ensure that the potential losses in the commercial real estate dont lead to the draining of assets from smaller and mid sized banks . And then, to create further consolidation of the Banking Sector that bring us back to, i dont to be back to 2008 when i was here and was asked to do extraordinary things. We certainly dont wanna be there either, so we are being pretty proactive about reaching out to these institutions and trying to help them get through these significant issues. Again, it is not all Smaller Banks, it is just some of them that have high concentrations in real estate, and it is not in the large banks which of course was in the problem was in 2008 and nine. Thank, you mister chair. Thank you, senator kennedy of louisiana is recognized for five minutes. Thank, you mister chairman. Thank you for being here, mister chairman, and to your colleagues. Thanks to all of you. Thank you for giving so much to our country. As you, know our fiscal year, are meeting for federal governments fiscal year begins october one, we are in the process of putting together a budget, and if we pass a budget, we meaning Congress Passes a budget that increases spending by lets say, 10 , roughly 650 billion dollars, what will be the impact on inflation . So, if it depends on, of course, if it were funded by tax increases or other spending cuts, i guess, in your hypothetical it is not. So i think deficit spending at the margins stimulates the economy at the margin. It is a big economy though. And what will be the impact on inflation . It would probably have a small effect on inflation, ultimately, but there would be in effect through stimulation in the economy between this. It would be more demand, which would just, in general, im not commenting on. I am sort of commenting on fiscal policy here. But nonetheless, it would be effect on it for sure. Im just asking you about basic economics. Yeah. I just read a piece by one of your economists from these San Francisco fitted, mr. Shapiro who is arguing that labor costs had virtually nothing to do with service inflation, and a negligible is an eligible factor in broader inflation and i read this stuff from some of your people and i just wonder what parachuted you in from. If Congress Passes a budget and my prior example that reduces spending by 10 , roughly 650 billion dollars. What impact will that have on inflation . You would have less stimulus for demand, and youll be cutting programs if you did that and therefore you would be slowing the economy down and the impact would be less demanding. Neither of these ideas affect the supply side also. Less demand would mean less Economic Activity less spending and if that would have a negative effect on inflation. More stimulus, by federal spending, is inflation. Is that right . We have been in this situation where inflation was so stable for 25 years if you remember and almost nothing that we did mattered for inflation. And its the socalled flat phillips, whether just was not a connection between how tight the economy is and inflation. That does not appear to be the case right now i think many peoples would say that the phillips curve is not so flat and there is an interaction between that. Thats a yes . I think thats a yes, yeah. Its economics. And less spending by governments means less stimulus which tends to be disinflationary, is that fair . Yes. Okay. Let me ask you about the basil three in the gang, do you know im talking about . I do. There has been some reporting, and of course, not everybody has to not every country has to file the basil recommendations. The European Union is not filing that, they are going their own way, and we are going our own way, in america. Using the they sold directives as a diagnosis. But it has been directed that it is going to raise Capital Requirements by as much as 20 . Or, excuse, me it is going to raise Capital Requirements to 20 . Is that right . No, the idea would be to raise it by 20 . In other words, if 20 of whatever current Capital Requirements are, you would raise it by 20 of the total existing amount. Okay. So, if jpmorgans Capital Requirement right now was 13 , it would go to 53 . Something like that, if we were to be what happens . And this will be for banks, hundred Million Dollars or more . No, there is not a final proposal. And i know it is still in motion, i know things are still changing but but you folks are talking about, it and youre going to have a lot of input. Thats right, thats right. So, but i will say, sorry, what was your question . Are you going to raise Capital Requirements for banks that have 100 billion dollars or more are you going to affect committees of the banks as well . No, the Capital Requirements will be very, very skewed to the large banks the g sips. There may be some Capital Increases for the other banks, and none of this should affect banks under 100 billion. The really big banks you are talking about . Are they the ones at risk right now . They were a sort of strength in a place of strength. Yes, they are doing pretty well. What we have gone from too big to fail to dam happy they are big. Heavenly . Well, i would say that, as i mentioned, we spent a lot of time and a lot of effort raising the capital standards ten years ago and more recently and i supported all of that and was happy to do so. Senator kennedy, time is expired. I yield back. As you always do on schedule time. Thank, you mister chair and Ranking Member. And chair powell, welcome back to the committee. I have a slightly different perspective than senator kennedy does on this question of inflation, and, i dont think that Discretionary Spending is the problem when it comes to our federal budget. If you look at it, military and nondefense Discretionary Spending has hovered at about 3 of gdp for the last 30 years. And, in fact, Discretionary Spending has decreased over the last 30 years, so clearly that is not the problem with what is going on with our debt. It is not what is driving debt growth the big changes and revenues. So the National Debt has increased to nearly 100 of gdp because of the bush and the trump tax cuts. And without those tax cuts, in other words, if wed left our tax levels at roughly what they were in the clinton administration, which, in no way restrained economic growth, the budget would only have been significantly out of balance during the Great Recession and during covid. So, chair powell, im going to ask you im not going to ask you to comment on that because i know you like to comment on fiscal policy, but i think its important context for the committee to have as we think about what is driving inflation and what we are doing about it, i have been really struck about how remarkably resilient the label market has been over the last 16 months or so. Which is a good thing as we do the work we want to do to grow the middle class, and create more opportunity, and more Financial Security for people. And so, rates have risen ten times, yet unemployment has still narrowed a story lows, and wages are growing now, as you, and others have pointed out real wage growth has been clearly impacted by inflation, which is a real challenge for especially middle class families, working families. Although, i believe, as you said chair powell let me just check this, that real wage growth has ticked off in the last couple of months, is that right . Do i have that right . At the beginning, it was high positive real wage work at the bottom of the income spectrum, i believe now, on a 12 month basis, that overall wages are moving up faster than inflation just recently. Right, clearly were not there yet, clearly we have more work to do im encouraged by the project weve made so far, but also just want to point out that the significant investments that we have been making in domestic manufacturing and creating supply chains, supporting prevailing wage jobs i think are an important part of the success story, this economic success story. Not mitigating the impact and the need to continue to bring inflation back down. So, chair powell, my question for you is, you said last week and youre saying today that while the labor market remains tight you are seeing signs that labor supply and demand are falling back into sync. Do you think or see a path forward to inflation to continue slowing without us seeing significant job losses and doing harm to middle class families and working families . I do continue to see that path. And you are right it you are right that the labor market is really the strength of the economy is whats driving the economy, it is very Strong Demand for workers and workers are getting jobs, and they are getting paid, and they are spending money, and that is driving to manned. And of the whole thing. It is gradually cooling, and that is what we would want to see. So, i think there is a path, and, ideally, the means by which demand and supply get back into alignment will involve things like the job openings right coming down as opposed to the Unemployment Rate going up although if you look at our forecast, we do it is not a desired objective but we do expect, on this path, that the Unemployment Rate will go up a little further because it is historically low, even a 3. 7 you, know, until this last few years we really havent seen that for 50 years. So we do think it will come up a little bit, but ideally, most of the loosening will come in the form of other ways. Right, and so to the extent that we are able to pursue policies that strengthen the labor market, that contribute to the resiliency of the labor market, it seems as if that should help to mitigate the negative impacts on the labor market that rising rates would would have, because in effect, what rising rates do is it slows growth and potentially has layoffs. So are part of it is to try to get inflation under control and that is what were doing and ideally we will do that with as little as possible. Damage to the economy and the labor market. Right. Thank you very much, thank you mister chair. Senator smith, senator gilles of North Carolina is recognized. Thank you, mister chair. Chair, powell thank you for being here. Ive got a quick question. Yesterday, governor cook said in his committee that as far as an endgame proposal from vice chair she has not had an opportunity to look at it, now we hear reports that i think that it is 1000 pages long, probably with a lot of technical information, how much time are the voting principles going to have to fully review and that this proposal. And is there any expectation that that review would result in any changes, or is it just a matter of them either saying that they agree with the recommendations . I would say that we will make sure, i will make sure, that there is enough time for governors to review the final proposal. We have been briefed on the contents of it, and it is still in motion, there will build a proposal that comes to the board for approval. And it will be something that is subject to discussion and is possible that there will be further changes before the voter as a result of the vote, but we will make sure that people have time to review it. As youre going through the review process do you believe that it would be appropriate to go to members of this committee or members of Congress Give a roadmap to what the recommendations entail prior to moving forward . I think that will happen, i think itll happen because vice chair barr would probably be giving public remarks at some point before the meeting and i guess i understand now that the fdic cash to give a speech this morning, i did see. It by no he gave a speech about this subject. Can you explain why comments from mr. Barr about having a safe and sound Banking System square with the Banking System the needs additional for capital . So the question is, of course, we spent all of those years raising capital for the largest banks. And i think, increases will have to be justified, and we have always known that the basel three and game was going to bring Capital Increases, and bring a discussion about the tradeoffs and our tradeoffs and our capital that is, the discussion we are going to be happening. And, we have not had it yet, but we will. I watched your opening testimony, and gus was there, he says hello, tara powells office dog. Hello back to gus, tell him i said he was a good boy. Mister chair, youve got me. I am kind of curious about Silicon Valley bank now. Yesterday, at appropriate hearing in a markup on executive compensation, i voted against it for a couple of reasons i think we need to work on more tailoring and i hope as it more through it we can work in good faith to address some things that would get me to a yes, but another reason why and one of the concerns i had about that meeting is i think we can pass an executive top bill and think that we are done with the root causes of Silicon Valley bank. I, for, one think that it was equal parts of management malpractice and supervisory malpractice. So, the question i have is who in the fed is ultimately going to give me a straight answer on what the breakdowns were, and what the supervisory functions. Who those people were, and to the extent that weve found less than adequate supervision, what is the disposition of their jobs. Who is that person . Because i asked everybody, and they say it is not in their lane, so who is the person that owns it, in the same way that we mapped the ceo and various members of the bank having made agree just decisions that they should have their competition clawed back, who can i talk to that says weve looked at the supervisory process here are some lapses, they didnt use the optionality of 20 1 55 we now are seeing increased reports of mris an mri as, and i think of our supervisors out there, they are now supervising senate bill 20 1 55 better. But who can answer that question for me . This comes down to a handle of human beings were responsible for the supervisory functions best three be. For me to say that something is not my lane, and i also think that tough question for barr but it is our lane. So if i can address what it is here that you are asking about, it is, i would say, clearly supervisory failures and lets not just say supervisory failures, is very much important that we are accountable to delegate function and it is definitely important. The buck stops at the board on supervision, not of the San Francisco reserve bank, although they are reserved. So we need to learn a lessons, and we need to implement changes. It is not supervision though we need to fix liquidity regulation, because of the speed of it. It is just a different world and the regulation for liquidity the lcr inning nsf are are just not adequate to what our people are moving on around their phones like that so, you know we are doing all of that and i think we are doing it very transparently and rapidly now the piece of it that you wont be satisfied with is, in public service, people if, they engage in malfeasance if they conduct criminal behavior if they break rules and things like that they get fired, nothing like that happened here. The San Francisco fed where they had identified the issues they had, notified the Management Team that they needed, it just was not forceful enough and thats a problem with our system i think and the way that Bank Regulation is a very kind of procedural oriented thing where you are raising things like that and we, need to be able to be nimble and more forceful we are appropriate that every day on every decision but on where its appropriate, so thats why think we are working on now. Thank you, and you have been very successful. Im going to try and request the recess sometime this summer, i would like to get back with you, and we will be submitting questions for the record. Thank, you mister chair. Thank you, senator tillis. I dont think that congress in 20 1 55 and barrs predecessor, mr. Corals, we king the rules even more, and frankly, all of you at the fed, in those earlier days, in the congress, and the administration and those earlier days are off the hook either for Silicon Valley bank. Senator is recognized. Thank you, mister chairman. Thank, you chairman powell. I just want to make sure that i have a couple observations straight in looking at the most recent report. Beginning with wage growth, because throughout the last couple years, we have seen rising wages. We have also seen, of course, rising prices. But it has been my observation that, for lower wage workers the people who are working paycheck to paycheck, real wages are up and in other words the increase in their wages outpace the increase in prices they were facing. Near latest report seems to indicate that that trend is actually even more broad based right now. Could you speak to that . That is exactly right. At the beginning of the pandemic, wages went up a great deal for people in those public facing service jobs that are relatively low paid, because that is where the shortages were, and they got positive real wages. But that has now spread i think overall, on a 12 month basis. You now have a wage growth by most measures that is higher than inflation, so real wages are going up. That is obviously a good news story for the economy. Let me ask you about Labor Force Participation, because we have also seen where people reentering the labor force, and, obviously, that helps with inflation, wage inflation. And i understand that immigration actually has been an important part of that. Could you speak to the role of immigration in that sense . Sure, so participation has moved up i think more than we had expected. It did not move up last year. We are very disappointed, and now it has moved up. So that is more people in the labor force. The other thing that has happened though is immigration went to zero during the pandemic, and has been quite a strong rebound in immigration. And that is creating more people in the workforce. So we think one of the reasons why businesses are reporting that labor supply and demand are getting into better balance is because of both participation and immigration. Thank you. I am still hearing, and i know you are, it is still a real phenomenon that there are huge workforce shortages, especially in health care, nursing, all sorts of areas. I look forward to identifying ways to deal with those issues. So, just a broad question on how you approach decisions regarding Interest Rates, and i very much support the decision that you and your colleagues made to pause the increase in Interest Rates. I understand you are going to continue to monitor the situation. I understand the signaling you have already given regarding the future. You obviously have a dual mandate, you have mandates to maximize employment, you also have a price stability mandate. But then you also have this other responsibility regarding potential regulator overseeing the banks, including Silicon Valley bank. So my question is this. To what extent did the crash that Silicon Valley bank, and to what extent is continuing concerns about stability in the banking area impact the decisions that you made Going Forward with respect to Interest Rates, how is that factoring in . There is pretty substantial research so mean that when you have a shock to banking like we had in march to the sector of the banking industry, that you come back in six, months you will see lower lending, and it does not appear immediately and it is strong in the data, so when we have been saying, we have been waiting to see, but that does play a part, at least, in my thinking that there may be a bit more tightening in the pipeline than their other ways would have been. And we dont really see evidence of it yet, but then again, but it all points to me in the same direction. It moves very very quickly, when we have to move quickly, we have been slowing down since last december, from 75 to 50, to 25, and every meeting. And now, we are getting very close, or at least close to where we think our destination is. Where we think, is an only makes common sense to move at a careful pace. We dont want to do more than we have, to but we do think, overwhelmingly, people in the committee do think there is more rate hikes coming but we want to make them at a pace that allows us to see them coming in. So we make good decisions thank. You. Thanks, chairman haaland. Thank you, mister chair. Thank you for being here, good to see you. I want to pick up on some of the questions that senator tillis was asking about basal three particular, some of the Capital Requirements and how they affect the regional baking ecosystem in particular and maybe we can start with some background on the Silicon Valley Bank Situation just to ensure were on the same page, i suspect that were Silicon Valley bank, we can broadly agree that the reason the bank ultimately collapse was because they were a long term exposed to Interest Rates. Their Balance Sheet deteriorated, that led to a liquidity crisis, and they won think that ive heard a lot of folks talk about, this is in the context the basil through, but another context as well, is the idea that we need to increase Capital Requirements, in particular, and some of the small and medium sized banks. If we adopt basal three, that would happen. As i understand it, if Silicon Valley banks in the years leading up to the crisis were exposed to higher Capital Requirements, isnt it plausible that they wouldve satisfy those higher Capital Requirements by buying more long term treasuries . Well, it doesnt matter what the assets were, you just have to have capital is a difference between your assets and liabilities. If theyd had more assets of whatever character, including treasuries, and they wouldve had more capital. Exactly. So i want to be clear here. They had bought long term treasuries, not say they wouldve done, a better than a higher Capital Requirements and they bought long term treasuries, additional long term treasuries, that wouldve been facts satisfied the Capital Requirement. In other words treasuries couldve been used. Well there are an asset. Treasuries are an asset. You have to find that somehow. The, then the followup question is given how poor of a job they did at hedging against long term interest risk, if they had bought more long term treasuries, do we think their Balance Sheet wouldve been in a better or worse shape . They wouldve had a better loss in more to the point, they wouldve had overwhelmingly deposits. Exactly, of course. I want to kind, of the point im making, which im sure you can kind of understand here is that Capital Requirements im not a panacea to the type of banking from that we saw the Silicon Valley bank case. Theres a good argument that higher Capital Requirements on Silicon Valley bank wouldve made the bank run wars, or even, you know, kind of made it more catastrophic, or a quicker failure. At the very least, i dont think it wouldve helped. Do you agree with that . I think there is a lot to unpack with Silicon Valley bank. If you, and the thing, is remember, it was a capital issue. They were trying to raise capital. Thats what was going on. The market was very focused on portfolio losses worse for highlighted by the fact that they try to raise capital. There was a capital issue there. Youre right,. If you would fill the capital hold by, retaining earnings, or getting some new, equity if you just use that to buy treasuries than, yeah i wouldnt make things better. Appreciate that. So one final question that i have is really about the operation of the fed here. You know, weve talked about this privately, a touch about this a lot of this committee, and of the chairman shares this concern. We have a lot of mid tier banks in the state of ohio, and i think that mid tier, the three t are banking ecosystem is really important. Huntington bacon Columbus Ohio is the single largest lender. If you look at the commercial and Small Business, flooding a lot of it is being done by mature banks. They are facing a lot of pressure from regulators and just in their Business Model because you may have seen some deposits, away from them, towards a larger banks. I really worry about the potential problems that were creating for these banks, both of regulatory, and a Business Model perspective. I wonder, do you guys have anyone at the Federal Reserve, do you have a standardizing approach where you try to understand the capital costs of each tier of our Banking System . Is that something you concern yourself with . No, we definitely concern ourselves with that. Ill just speak for myself, we really believe that were lucky to have such a Diverse Group of institutions from the Community Banks, through the small originals, big regionals. Thats a great feature of america, then our economy. Theyre just important in their own ways. We try hard not to do one size fits all. If i can, one more final question, here do you have a good sense of what the capital cost is for the biggest banks, systematically important banks, versus the mid tier banks . What are the capital cost difference, broadly speaking . Maybe were follow up on this question. Im very curious about how you think about the capital costs because it informs a lot of policy. Thank you. What we have it at the conversation. Appreciate it. Senator veteran of pennsylvania. Thank you mister chairman. Chairman powell, sincerely, thank you for being here today. And first and foremost, i believe that the fed would make sure that we have an economy that truly works for working families. I suspect you would agree. The reality is that the tool of cooling the economy with interest hikes can push people out of jobs. And you want to drive down inflation, of course, that makes sense. We dont want to hurt working people to suffer. How do you kind of square that together . Its quite a paradox. Its working people who are the most hurt by inflation. It is a bit of a paradox. I would agree. If you are living in quite the paradox, exactly. If you are living on a fixed income, and your spending every dollar on this sats, transportation, fuel, food, clothing, and inflation goes up, you dont have a safety net, upper class, wealthier person. It is for those people that we need to get inflation under control. It is also the case that, and we are the organization charged with priced ability, is to cool off demand, so demand and supply get into better alignment overtime. We have course would love to do that in the Current Situation with as little effect on the labor market as we can. There is much cooling that can take that doesnt involve higher unemployment. However, i cant guarantee that restoring the price stability wouldnt have some implications of a higher unemployment. You have to think that restoring price stability, the pay benefits to everyone, especially low and moderate income people for decades. Thank you. I agree. Its just such a paradox. You have a dual mandate, and now were going to change the gears. Its clear that inflation over the last years, there are many causes. This includes ramp up corporate price gouging and monopolies. Well americans have gotten ripped, off executives and shareholders have break in record profits. Its deeply immoral. I understand it is not the price gouging in the but you might look at smart ways to fight inflation. Is it fair to say that they have been jacking up their prices, and way more than their cost increase . I think whats happened during the pandemic was supply was constrained. Cars is a good example. The demand for cars went through the roof because people didnt take public transportation. Rates were very low. The demands was very high. Be couldnt make cars. Literally, the production of cars went down because there werent enough semiconductors. I personally didnt realize that you need a lot of semiconductor in a car, now everyone knows that. What happened is how do you decide who gets the car . The prices were a lot. Carper says one up. When there is a lot of demand, in supply is restricted, allotted minutes restricted supply, you get higher prices. As the economy returns to normal functioning, we have more semiconductors now, supply chains are getting better, thats happening is corporate Profit Margins are coming back down, as you would expect. So thats just the way the economy is working. Is it fair to say that you dont believe that price gouging was a factor . No, i think the collision between very Strong Demands, unlimited supply was a big factor. Particularly as it relates to goods inflation. Its not much of a factor as a release to Housing Services and inflation, our service inflation, which account for about three quarters of inflation. Think you. Sending the chair back to the chairman. Chairman, thank you. Mr. Powell, good to have you here this morning. In montana, as well as the mountain west, inflation remains about 5 . In fact, its higher than any other region in the nation. Whether its gas stations, grocery stores, increasing prices, those real life impacts remain topoftheline adair elie issue for montana. With inflation remains stubbornly high, i cant help but reflect on the warning signs that were ignored by my colleagues across the aisle while they raced to push through trillions of dollars in partisan spending disguised as covid relief. Now the American People are bearing the brunt of this reckless spending. In fact, for the average american, unless you receive nearly a 16 pay raise over the last two years, youve effectively received a pay cut. Chief powell, i urge you in the fed to remain vigilant and steadfast in your effort to for the sake of all americans. Unfortunately, record high inflation is not the only crisis the fed is having to navigate. While Bank Regulators were focused on Climate Change then regulating the big side of supervision, several coastal banks collapse, cause panic across the Banking Sector. Before the dust settled, so if we will of my colleagues immediately called for regulation for hikes, with little appreciation for the impacts these changes would have on small and mid sized banks across the country. Ive heard from Community Banks across montana, more justifiably concerned that they will be wrongfully punished for the actions of a few poorly regulated and poorly managed banks. Youve mentioned several times your testimony yesterday that the u. S. Banks remain strong, well capitalized. Sheriff foul, if banks are so well capitalized, why the urgency now to increase Capital Requirements that would really prevent another Silicon Valley bank . Well let me say first that i think we dont have a final proposal to talk about yet. Well be able to talk much more specifically about it. The, for Community Banks, and many things under 100 million, i dont think that theyre going to be part of this proposal, so were really talking about principled the very largest and to a lesser extent, the banks, the regional, some of the banks between 150. You asked the right question. You know, the question is more capital, the answer will be addressing, will be making a proposal, soliciting pot blood comment on that. And well aware that theres a tradeoff here. More capital means more stable banks. Stronger banks. There is also a tradeoff there. In capital, you have to make a judgment of where you draw the line. To that point, increased Capital Requirements could intern decrease london. Would the impact this have on Small Businesses, you may not be able to get a loan, and be taken into account before the final proposal. Yes, i mean capital means banks will be able to continue to laundering difficult times to, right . Thats why we do it. Its for the stressful times. It is a judgment call. A lot of science and arithmetic that goes into it, but ultimately, figuring out how high to go is a challenging question. We are going to be making a proposal, and ill be listening carefully to the comments. You alluded to focus more on the g6 and trying to fare the Smaller Banks from the impacts. I realize the proposal is still being developed, its not finally baked yet. Are you prepared to commit to sparing smaller Community Banks from changes in the Capital Requirements . Let me say, my understanding is that the proposal doesnt affect banks under 100 million. I would have serious questions as to why it would. Particularly, most Community Banks, particularly in your state, theyre much smaller than 100 million. I dont know why would be looking at capitol, there theyre generally quite well capitalized. Thank you. Im going to turn on inflation, back to the earlier statement. I appreciate the ways he approached the toolkit, the most recent meeting. As i noted in my remarks, inflation does remain stubbornly high. Particularly the mountain west, and labor markets remain as tight as weve ever seen. It was noted that the committee is poised to continue raising rates later this year. My final question, could you expand just a bit more on your outlook for the rest of the year . And speak to your continued commitment to do whatever is necessary to bring inflation back to your 2 . Yes, i think if you look at the committees forecast, and mine are very similar, we expect modest growth Going Forward. Growth in below the longer run growth rate of the United States economy which is around 2 or lower. We expect the labor market to continue to gradually cool off. Without, there is an expectation that inflation will continue to move down later this year. If things happen that are wildly keeping with that, the Strong Majority believes that it will be appropriate to raise the federal funds rate again once or twice by the end of the year. A Strong Majority came down on twice, between now and the end of the year. I think the data will tell us what to do. I think the point of our meeting, our last meeting, was really to moderate the pace, decisionmaking on this. Is very important to move quickly last year. Last, year we didnt. Its not so important now because weve come so far, and were relatively close to one we need to get. We will, people should believe, broadly speaking, the data shows that they do believe, that we will do what it takes to get inflation under 2 overtime. Thank you. Senator from tennessee is recognized. Thank you, mister chairman. Happy to see you again. Id like to start with something that has troubled me scents our hearing yesterday regarding this proposal thats coming forward by vice chairman barr. The proposal is going to have far reaching implications. Its rumored to have over 1000 pages annette. When i asked governor cook about the proposal yesterday, she told me she hadnt seen, it has not reviewed it. My understanding is that this is including the vote on this, on the 18th of july. Given the fact that senator warner described it aptly as today the, potential for a perfect storm here. If the rumors are here on capitol increases that are proposed to be true, this may come at a time when banks may be preparing for Capital Increase when we need banks to be lending, not constraining lending by raising capital. I think there are numerous analyses on the impacts of Small Business community, of the Banking System, need to be taken into account. Im very concerned, particularly in light of governor cooks response who has not reviewed it cnet, and didnt seem to have any perspective on it at this point in time. Its a very short window to undertake a decision as complex as we may be talking about with over 4000 pages in this report. My question to viewers how well does this process managed in terms of decisionmaking, and the analysis that lisa take place . Ill make sure that governors have enough time to carefully evaluate this. The staff has been briefing governors for the past few weeks, but the proposal is still, i mean, im hearing even as recently as this morning, things are moving and still. Its not possible. When you say we havent, seen it we have not seen a final proposal. There isnt something to send to the committee. You think you can be briefed on the current state of where things are, and i have been, in detail, but ultimately, when you sit down to read this large document, i mean, were going to wait for the final version to really do that. Youre right to point to the need for time to evaluate. Governor cooks responds to me, she deflected yesterday, this left me very concerned. Im saying, you dont need to rush. Frankly, the other concerns you and i have discussed in terms of towards very deep consideration. Id like to turn to another item that you and i have also discussed in the past, mister chairman. That has to do with bank workers. If you think about a potential bank thats in distress, all things being equal, would we be better off for that bank, that distress bank, to undertake a Merger Acquisition . Or would we be better off to linda into receivership, the former, certainly, i agree with you. Yet we also, in the case of first republican bank, we saw slowmoving train. There are the labs, they were actually, its my understanding, 11 different Financial Institutions that put forth proposals that would have been a rescue package for the bank. None were far enough to achieve an app acquisition in fact they let it go to receivership. You, know my concern is, the administration is created such a negative environment for consolidation that its a real issue. My question to viewers, do you think the current state that we, armed to be a lot more banks to merge . Especially given the stress that were seen in the system. It was every chance given, and much hope bestowed on the idea of having that bank sold before went into receivership. They couldnt make it happen, and thats unfortunate. Everyone wouldve loved to see that outcome rather than receivership. No one wanted that to be the case. My view is that theres an environment right now of uncertainty, as the Banking Community looks at mergers and acquisitions in the guidance that the white house is given about the very negative in terms of mergers and acquisitions against congressman solid asians. I think institutions are reticent to move forward. Thats why im going to introduce the depositor act, which among its many provisions, its going to provide a greenlight to well capitalized banks to merge with institutions that are under distress without having regulatory interference. As the Committee Moves forward, i hope it will have an opportunity to work on this legislation. I hope we can remove d regulatory hurdles, and can encourage mergers and acquisitions that will protect taxpayers. One final point id like to raise with you, mister chair, is something that you identified nearly a decade ago. That point in time, the fed created a purchase facility that was intended to be a tool that would put out Interest Rates. The facility was targeted at investment vehicles like money market funds, which placing figure in the short term funding markets. At that time, you joined other isnt expressing concern about the possible consequences of this facility, particularly in times of market stress. This is when this facility can actually exasperate the flight to safety. Since that time. This facility has grown to over two trillion dollars overnight posits. Id love for you to walk us through, if you, might the potential risks that this facility might pose, take us through how it relates to basically pulling deposits out of the Banking System at a time when we might retain those deposits. The facility really has an increased it shrunk in size and the events of march. Its not on the net accounting from. The decline to deposit, really whats happening there is market rates are higher than deposit rates, and depositors are moving their money. This happens in every cycle. I think v, i raise can interrupt for a moment . Please. Im a numbers and correct that we now have two trillion dollars brought to this facility . We had two and half trillion by. Marches come down in size. Now the treasury is revealing the debt. Not that the debt ceiling is solved, and the refilling the treasury, the facility has been declining. Thats what we wouldve hope to see, rather than taking reserves out of the system. Senator warner thank, you mister chairman. You know the challenge of coming about light, the if asked my question, but chairman, great to see you again. Im going to have a variation of the same question that i think a number of members have asked. I know a lot of us are sometimes getting the act vantage it be monday morning quarterbacks and how you navigate the Monetary Policy. I think youve generally done a very good job, grateful they are on a pause. I hope that pauses data comes through continues. We definitely have some stresses with that Monetary Policy. That you were doing, but again, i think people on both sides of the aisle have called for in terms of qualitative title ix. Again, that doesnt have the immediate effect that Monetary Policy has. As weve discussed, and i think senator parity we have the appropriate review of vice chair, or barr, barr for supervision is doing on capitol cvs. I think senator even use the term that i was going to use, perfect storm, that these three all coming together. Gonna buy your term . Ill call a very stressful situation. You know, you pointed out, you know, the capital will phase in. You can have all three of these events come together. I think youve addressed this already, but i want to add my voice. To that concern. Safety and soundness, we have a lot of, job safety and soundness, inflation control, and full employment, full employment piece. This could be affected by this potential perfect storm. I hope all it raises with other members of the fight yesterday. I hope you will, again, i think you could ask, i dont know if you want to have anything else added to respond. Ill say that youre, right were thinking very much about that. Fortunately its been orderly. The shrinkage of the balance seat have been there still a very high level of cash reserves in the system. We dont think theyll be scarce anytime soon. I think the refilling of the treasury general, account that was, people can focus on that for a couple months. So far, early days, seems to be going. Bob weve been watching it carefully. Sometimes you set up here, all three, these they feel like this moment in time for these factors all come together. They could have a really negative effect. Let me move to something that i think is not often raised. I have huge concerns, weve all litigated back and forth, causation, but one of the things that happened when you get 40 plus billion dollars coming out of an institution at six hours, driven by an internet that is, you know, i dont know what Regulatory Framework prevents that. While i was glad that the scc put out a commentary saying we do need to take a look at, or more transparency on short selling, we found the path short selling bars dont protect some of this. One of the things that a new york official mentioned is how do we get rid of the stigma of a bank going into, to the, to the window . Rather than the fed being a lender of last resort, if we had that liquidity window, its available. Banks are reluctant to use, it but moving capitol so quickly, having that liquidity tool, and not taken a huge amount of heads for using name, would seem to be something that could at least take on this question of these internet driven runs. So far, ive not heard from anyone of either side of the aisle. A really good suggestion. I thought of a lot of suggestions, and frankly, im not sure they make that much sense. This liquidity tool, is there a way to think about getting rid of the stigma . Maybe the policy makers are to make that point as well. Its critically important that people be able to use, and are willing to, use the discount window, and the Bank Term Funding facility, other facilities that we set up, and that they arent marked down by the markets for doing that. Or markdown by the regulators. The examiners. Yeah. The concern is that markets will see this, and hey, id say the first thing is do no harm. That, is frank provided disclosure for names and things like, that a quicker pace. Thats one of the reasons beings to want to do this. They know theyre names coming. I wouldnt bring that, i think when you look at changing that disclosure around use of these facilities or that, you should be really considering that youre going to make the state wars. I think its great that banks have been willing to use the discount window, and the new facility during this crisis. Its almost like the stigmas a little bit less. I want to think that anyways. Thank, you sir. Senator cortez asked about the two republicans in a row i called on. You will be after senator cortez. Thank, you mister chairman. Chairman powell, its good to see you again. Thank you. I am very glad that yesterday, i think senator warner mentioned that we had hearings for nominees to the Federal Reserve. One of the nominees as the first hispanic to sit on the Federal Reserve. Dr. Adriana do has extensive experience economically as well as professionally confirmed positions. I will be supporting her confirmation as well. Let me talk to you a little bit about tougher london standards that may be affecting inflation, as Interest Rates increase. Yesterday, our rough published a blog post noting that the tightening of Bank Lending Standards that we see or directly due to the Federal Reserves higher Interest Rates. Do you think that the credit tightening we see from regional banks as acting as an effective substitute to an additional Interest Rate hike . It may be. Weve been looking for that. We actually dont see a lot of evidence of additional tightening on top of what we had already been seen. Were keeping our eyes out for that. What are some risks that the fomc continues to raise Interest Rates despite seeing an impact of these increases already resulted in more credit tightening, and higher housing costs. We talked a little about this. You, know the risk is that, the reason we slow down, really, since last december, we slowed from 75 to 50 basis points to 25. Now, as we reach, or as we get closer and closer to what we believe will be our, its uncertain, but our destination, we slow down a little further, we think were trying to avoid the mistake of trying to go too far. Thats all it is. As you can, see overwhelmingly, people on the committee do believe that it will be appropriate to raise hikes water two additional times, a Strong Majority believes two times this year, if the economy performs as expected. Thank you. Im going to jump to employment. This is something ive talked about yesterday as well because nevada has a sort of workforce paradox. The most recent indefatigable, with both the biggest increase in growth, in the highest Unemployment Rate, i want to get your thoughts on moving forward as we address this, this paradox. Let me just give you an example. There is the largest percent increase in employment, which is one point we also the highest employment rate in the nation in april of 5. 4 . Thats two points above the national right. As you consider the Federal Reserves mandate to keep unemployment levels low, how do you consider states like nevada where there is that paradox . We only have the one federal funds, right we have to look at the national level. We do, were well aware of different labor markets in, another interesting characteristics. Weve talked about this because the labor market, particularly in the Service Industry, has been weve seen that in nevada. You and i have talked about this as well. Is that something you consider as you look at the numbers, particularly in the Service Industry, and what do you see . Were seen Service Industry is really where we still see labor shortages. We have a high level of a number of job openings compared to the number of unemployed people. I think even in nevada we have job openings, ratio of 2. 4. That was unheard of before this period of time. That just means theres still tremendous demand, and of course, the nevada, it was largely and travel and entertainment sector. Talk about the has the data if you would. This is another conversation we. Had how much of a drag this is on the economy as well, and what youre seeing. Housing is very interest sensitive spending. Mortgage rates are very sensitive to our policies, and housing construction, and housing, sales and things like, that theyre very sensitive to mortgage rates. You saw housing activity move down pretty significantly when we started raising rates. Youve actually seen a kind ahead a bottom. Now we met with some housing groups, manufacturers, Housing Builders yesterday, and they say business is pretty good. Its largely new entrance. That people, many people have lower mortgage that they are eager to get out of, and the sort of strength you see now is new buyers coming into the market. The market seems to be improving. Again, its the most interest sensitive spending, among the most interest sensitive, so its going to be okay. Thank you. Appreciate you being here. Senator of alabama. Thank, you mister chairman. I want to acknowledge the strength of the u. S. Banking sector. And recent events that unfolded related to a cbp, signature, and first republic, and highlighted the significant consequences that could occur when big exacts prioritize profits over Risk Management. Also, when banking regulators failed to do their job. Regulators love numerous red flags on addressed, which allow the inexcusable Risk Practices to continue for as long as they did. Lets be clear, this inaction played a significant role in these banks will didnt denies. However, the mismanagement and excessive risk taking that occurred within these institutions are not representative of the broader Banking Sector. And fact, i think its quite contrary. Banks across the board have proven to be resilient. Theyre well capitalized, in a source of strength in the global economy. In fact, i think you see that the u. S. Comprised of banks of all sizes, is the worlds most dynamic banking funneled them. Im concerned with impending actions of the Federal Reserve that, in itself, will be jeopardized. If you look, Community Banks, for instance, they have served our individuals, and our small, and Rural Communities across not only my great state of alabama, but across our entire country. This is in ways that have allowed individuals to Small Businesses to actually be able to achieve the american dream, and to thrive. However, over the past decade, weve seen a significant decline in the number of communities banks serving americans the u. S. Has lost 71 of total banks in the last four decades, and unfortunately, Smaller Banks have made up a large portion of this. Just in the last decade, the number of Community Bank struck by nearly 40 . That is completely and totally unacceptable. When we look at the vital role that they play and each and every one of our communities, we have to make sure that that strength is maintained, and not undercut. In the face of these declining numbers, the Federal Reserve is considering proposals that could further contribute to the decrease in small and mid sized banks. Sheriff powell, as the fed is considering changes to the core making of the Regulatory Framework, including stricter Capital Requirements then has been advocated for, how is the Federal Reserve evaluating the downstream impact of these on our smaller Community Banks . I think Community Banks, when you think of Community Banks, we think 10 million under, mainly, and assets. I dont think under 100 million, i dont think theyre under consideration are valid find those banks. I dont think it should be a factor for smaller institutions. As you point, out theyve been declining and 30 years. What we do to support them . From your perspective, what is the fed doing to support Community Banks, world, baines or conditions where they can thrive . There are the Secular Forces that are driving interstate banking and also just population moving. You see rural areas that have lost half the population, things like. That we cant do much about that. The piece event that we can, that we understand the declining number of humidity banks is not a good thing for the country. The country isnt better off of that happening. So we want to be, we dont want to be part of the problem. Part of that can just be ones fits all regulation, high picks cost, it will make a small bank, especially small bag models profitable. We very much try hard to not contribute to the problem. As institutions, we understand how important Community Banks are. Can you speak to that . Can you tell me what wall Community Banks play that maybe other institutions cannot . Community banks are in their communities, they know the community well. They know the people in the community, in the businesses in the community, aunts relationship. Blunders relationship landing. Its not, i told a story yesterday. We were moving to washington, we have this big bank that wanted to make the lawn. They decided not to make a lot of the last minute. I call the local Community Bank. The loan officer was somebody who knew my family, they knew the house. He went to my high school. He was much younger, of course. They made the lawn very quickly. I just understood. It was going to be paid off long ago. I understand personally that there are better at doing certain things. Big thanks to certain things very well, but they dont do that very well. Smaller businesses. Absolutely. I want your committee will continue to take a look, whatever type of additional regulating, or regulation tools that are kind of perceived to be helpful to maybe some of the bigger issues that we take a look at how they affect downstream, how they affect small banks, mid sized banks, and we ensure we create conditions where they can flourish. Yes, very much. Thank you so much. Rest assured, best after yesterday, and maybe not with one of the few things that besides feel strongly and agree on here. Community banks play a major, major role in our financial system, and all of the support of Community Banks, and communities, they know how potent they are. Senator taft, you recognize from your office. Thank you, chairman brown. Thank you sheriff powell for being in front of the committee, appreciate it. When i talk to montana, and so hear about whats everyone in the Committee Hears about we hear about inflation, the high cost of housing. We hear about childcare, and all these are Economic Conditions that impact our families, our Small Businesses and communities across the state. The examples are clear. Hospitals have nurses. School can hire teachers. If they can hire them, they have no place to live even if they can find a place to, live funding childcare is a problem. And paying for that childcare is a problem too. Unfortunately, we havent done much if any of those from a congressional standpoint. I think all these challenges need to be addressed. And talking to the chairman of the fed. I asked the chairman of the, fine we talked about these issues of lotion, and housing, and childcare. Does the, i know youre going to think about inflation, but do you think about the other things, and to have tools to address things like how, childcare, or is that simply adding your purview . You know, we enforce some of the Consumer Protection laws. You know, we can have an effect as it relates to fair, london is like that. Ultimately, the bigger question is just the availability of housing, its availability knew what the jobs. Are there arent much, theres nothing that our tools can do. The best thing we can do for those issues as to provide an economy where we have stable places, and maximum employment. There has been a lot of talk, and im sure there are a lot of questions on this committee about Interest Rates. I asked us not to influence you, because i do not believe you should be influenced by political forces. The last thing we need, the worst thing that could happen as the United States senate is dictate Monetary Policy. You can leave that up to the pros like you. Interest rates continue to be an issue. We are fully aware that the debt deal that was struck back him on speck of dollars. Youre familiar that there are some supply chain issues in this country that have impacts on inflation, as i think the covid money will have have some impacts. There are some other things out there that i know youre looking at. And going to ask you a question that im sure youve been asked already. Whats going to be the key determinant as to whether you raise rates, or leave them where, theyre at or if they are appropriate, not of the things youre looking at to make those kinds of decisions. I would say that if we see the economy perform a note about as we expect, then two thirds of the Committee Really thought it would be appropriate to raise rates a couple of times between now and the end of the year. What do we expect . We expect continued modest growth, we expect continued gradual cooling off of the labor market, gradual alignment is supplying demand. We expect inflation. Of all those things happen, we think that war within a couple of rate hikes of the level that we need to get to. We want to get to a level where were confident that inflation is, and will continue to move, is moving, you will continue to move down to 2 overtime. Not a higher level. That level. So thats why weve slowed down here, as we think that were getting close. Lets think past that. What factors are you going to look at that would determine a lowering of Interest Rates . We dont see that happening anytime soon. The test for that is that were confident that inflation is moving back down to 2 goal. We want to have some confidence. No will say, in the summer of economic protections, my participants and i filed last week, i think by the end of next year, by the end of 2024, the medium participant did have some great cuts. Thats going to depend on how the economy performs, and if inflation is consistently proven more persistent than weve expected. And at the forecasters have expected. Its going to have to wait a time when were more confident that inflation is moving down to 2 . So i want to talk about regulation. I know its been touched on. We touched on it a little bit. I dont mind oversees the feds regulation actions, but when we passed 20 1 55, the bill to give rent relief to small banks in particular, there was a sense in there about so even if you had a committee making, if they had a risky portfolio, you could regulate them to match. Bigger banks the same thing. Can you tell me what barr is thinking, and what you are advising him when it comes to, because we think we all agree, the chairman just said, we want to protect our committee banks. Theyre not the problem. In fact theyre the ones who provide access to capital for these communities, where they can grow an economy. It could happen. Can you tell me what your interaction is when it comes to regulation . And where you think hes going . Broadly speaking, when regulations need to be voted on the board of governors, none one of the people who votes. And also share the committee, thats the nature of the interaction. And terms of what youre really talking about with regulation for smaller institutions, i would say that i think its important that regulation be appropriate for and institutions size and risk. So its not a one size fits all approach to regulation. The largest institutions in capital standards, and the most regulation. As you get to community, banks the regulations are provisions so deflect their size. I apologize, mister chairman for going over. Thank, you chairman powell. I think, you senator tester. Senator craig and north dakota is recognized. Thank you. Chairman for being here. I know that several of my colleagues have been asking about basil three. There is potential for some changes Capital Requirements. Part of, im afraid of what theyre trying to do is fix the liquidity crisis. I dont think thats necessarily going handinhand. In fact, it seems to me that while you try to engineer a soft landing, and now have taken certainly not critical of that, i cant fathom why the fed would want to raise Capital Requirements when we could be facing what is a credit crunch. I mean, does that make sense to you . And a potential cries, was some higher rates, obviously some of its by design. It doesnt make sense to increase Capital Requirements for banks. I think thats always a tradeoff, higher capital means more stable, stronger banks that can last a bigger crises and things like that. Its a continuum because it also means slightly less capital being available, higher pricing capital. The thing with Capital Requirements as the answer is zero. Its not 100. You have to find the right place. I would also say that the capital, in the form of the, what ive been briefed on as a proposal where the big Capital Increases over the largest institutions, and much less so for institutions that are not among the a. G. Six. Whats the motivation for that . I mean you just articulated that, challenge, obviously better than i did, but, why the big, for example, the big institutions . Was the situation . To your point, we spent many years raising capital liquidity standards for the largest institutions, and appropriately, so i supportedcocou we now learned, so i think there is regulatory response is going to be appropriate here not just supervisory. In addition you would have thought and we thought and by the way this is every bit the boyjt is every bit as accountable as the San Francisco fed on this. That supervision could have been much more forward leaning on the liquidity issue thannr itu im going to use my soccer referee illustration. One you throw up over andxd ove but never throw up a if one never throw up a card they just offend the next time. The whole issue of the rune1 itself is problematic. While not maybe directly jurisdictional to any one regulator as policy makers and regulators together we should find a better solution. But thank you again for your service and for being here. Thank you, mr. Chairman. Senatore ■ warren from massachusetts is recognized. Thank you, mr. Chairman. I] in 2010 Congress Passed dodd frank to make banking regulations tougher and to avoid future bank collapses. And very soon after that bank ceos started lobbying forww s wr rules. That you intended to, quote, consider appropriate ways to ease regulatory burdens for the banks. When i asked you if there were any rules, any rules at coall, that you thought ought to be made stronger, do you remember what you said . I think iw3 pointed to the n Stable Funding ratio. No actually that is not what you said. You said honestly, senator, i think theyre tough enough. You couldnt point to anything you thought should bet faq toug. You reduced Capital Requirements, weakened liquidit banks with tens of millions of dollars in assets and more. And the result was that the third, and fourth largest Bank Failures in u. S. History which together required 23 billion in bail outni money. You now hold the record. In a single year the fdic has in a single year the fdic has been forced to rescue more gianc watch than any in american history. Sheriff powell, do you agree with vice chair barrs conclusion that the fed bears a big share of the responsibility for the failure of as pv . I certainly think that our supervision has been shown to have been not assertive enough. I think to supervisors are on the right issues, but we werent forceful enough in hindsight. I think, and that certainly a fair conclusion. Okay. So those regulations were weekend, the supervisors were clearly asleep at the switch for more than five years under your watch. Ill say again, this is exactly why i approach nomination in 2017. The decisions that you made, the voids that you talk, and the things that you said, they helped cause this mass. If you were a for reappointment in 2021, i had confirmation that i believed that your continued leadership would be dangerous to our financial system. The feds own reports confirmed that yesterday sheriff powell, this committee voted on a hold ceos accountable, when their actions blow up banks. You are the one who lobbied, drafted, and voted for weaker roles. You ultimately responsible for a team of fed supervisors who fell down on the job. Do you take responsibility for your role in these Bank Failures . I think that we learned some lessons from the Bank Failures. The main responsibility i take us to learn the right lessons from this, and to undertake to address them. Still we dont have a situation like, this with unexpectedly large bank fail, and spread contagion into the Banking System thats not supposed to happen. We have to take appropriate steps to ensure it doesnt happen again. I want to ensure i understand what you mean when you say take responsibility. Take responsibility for your actions that led to the failure of these banks. I think the question of what happens, supervision was at fault. Thats both of the board and at the reserve. Are you ultimately responsible for that . So you take no responsibility for that. Thats what im trying to ask. Im trying to see what you take responsibility for. I think responsibility for addressing the situation. Thats my focus. Going forward. That sounds like not taking responsibility for what youve done in the past. You know, a month ago we had the ceos of the banks that exploit and here. Each of them had huge bonuses, and each of them said they plan to keep every penny of that money. Now we have the chair of the Federal Reserve who led the charge to weaken bank recollections, to oversaw the Bank Supervisors who failed miserably, to hold these banks and line. Again, the accountability is zero. Our Banking System is broken. 23 billion dollars in bailout money, there is no accountability for those of the top. Once again, the people who didnt cause the mass are forced to clean it up. We need significant changes here. Mister chairman, i yield. There are two senators that might be online, senator sinema is recognized, mercenaries online. If, not senator warnock from georgias online. Okay well close the hearing today. We have come together to discuss how the economy ought to be to have a Strong Economy was much trade nor do i believe we much sacrifice a safe and resilient Banking System to raise money from the protecting worker gains by invested in growth right here at home and building a more inclusive economy. Thank you for joining us, sheriff powell. Look forward to working with you to strengthen our economy. If you wish to submit questions, you have one week to today, thursday june 29th. You need responses to the questions, 45 days a day of receiving. Senator scott has some clemency like to make. Thank you mister chairman, just to make a quick comment. Somehow tax cuts lead to the challenges that were facing with our debt. Our debt. I want to clarify the record that revenue in 2022 was more than 30 higher than 2017 revenue at 3. 2 trillion. One of the things we should recognize as a clear fact is that if your revenue goes up and that is what happened after the tcja in 2018 and 2019. We had an increase in revenue not a decrease in revenue. Unfortunately, had an increase in spending that exceeded the increase in revenue. If you spend more than you take in you still end up with a deficit. Thank you. Of course, senator scott recognizes we had a pandemic. The committee is adjourned