Do you feel like youve got the visibility and transparency and tools to address it. It makes me nervous because this has echoes of 20082009 when vacancy rates were declined rapidly. How do you feel . Does that risk continue to be manageable . Chr. Powell i would say yes to that. I think it is manageable and weve been working hard for some time now really and what it really is is its a lot of downtown real estate where theres too much officesupply because of work from home and also the Downtown Retail that is no longer as profitable. Things like that are at the heart of it. So what we have done is weve looked at banks that have significant concentrations and weve been in touch with them to make sure they have a plan to deal with that. There will be losses by some banks. Its really medium and small sized banks that have these higher concentrations. Its good to be this problem we work through for several years and the idea is you have to have enough capital and liquidity and a plan to take the losses you are probably going to take. So thats what we are doing we are very active in this space. Sorry to interrupt but let me ask you about that. Silicon valley bank with responsibility inside the bank agreed his errors on the part of corporate treasurers, the fed also had some selfexamination to do because the examiners and supervisors of the bank were not doing what they should have been so we might be forgiven for being skeptical of claims being on this. What has changed in the context of Silicon Valley bank gives you the confidence that they will be on top of this . Chr. Powell i see it with my own eyes. Frankly theres a risk that we would overreact to something as significant as that. Its not like we wouldnt have reacted strongly to what happened Silicon Valley bank and we have. So i know our supervisors are out there we are hearing back from media reports that we have been engaged with medium and small sized banks principally on this so im confident we are doing the right things there. And i do believe it is a manageable problem if that changes i will say so. Thank you mr. Chairman, i yield back. Thank you for being here today. I would like to associate mayor marx with the remarks earlier with regards to the fbi see proposal on longterm debt requirements based on assets. Its a thought out proposal and hopefully the position you be able to advise them and guide them that this will be held up until we get a rule. In october of 23, the board issued a proposal on the debit interchange fee cap and regulation. This is very concerning given the data with the own study shane saying there was significant harm access to other services for countries poor citizens. It would perhaps a rulemaking until the fed and among other things for the impact of the proposed rule completes a quantitative Impact Analysis as it relates to Affordable Banking Services for low income americans and reports those findings to congress. You feel you are facing i urge the board to proceed with extreme caution with any type of price control proposals especially since the first iteration was harmful. Knowing of the hardship caused by this on low income consumers does it give you pause to continue down this road . Chr. Powell as you know this rule is up for comment. We accepted extended the Comment Period, we will evaluate them carefully. And make an assessment. The law does a sinus a specific job which is to assess whether that received by large debit issuer for processing transaction is reasonable and proportional. This is the obligation congress has bestowed upon us not something we thought we sought but thats our obligation under the law. Thats all we think we are doing and i think the concerns that have been raised will be things that we hopefully you will study this and i understand from the previous types of rules along this line they were very detrimental to a lot of lower income folks. As you know the Price Reductions promised, prophets actually went to the largest retailers rather than the consumers as they were talked about. 98 was one of the studies showing to cap their money instead of lowering prices as they were telling us what happened. So im very concerned about that. What is the legal basis for upending regulation . You believe there something in the law which says you need to be doing this or should you be studying before you propose a rule . Again i think our reading of the law is its not something you do once and leave it there. Its supposed to be reasonable and proportional to the certain issue of cost implication if those costs change then this should change. Thats our reading. I think we do a lot of work, we waited a long time to change it. We do quite a bit of work on this assessment and we will review the comments in the data we get. Even though it is supposed to be on 10 million and up it rolls downhill and is the last study showed the Smaller Banks, Community Banks are feeling the effects of this so consider that when you think about this. I appreciate that. One of the things yesterday i had two different bankers ceos and they just won the brought the subject to me which is concerning with a gross Artificial Intelligence been able to impact Financial Institutions in this country and our banking system. I tell people i said think about this for a second. You find some individual who is a wellknown individual perhaps a larry kudlow or dave ramsey, someone with credibility and you see an artificially produced advertisement or facebook focused post and this person says look here we have a problem today. That individual did not do this. Ive seen a commercial already where you could not tell the difference between the individual and the real thing. Weve just come through the Silicon Valley situation. If you have realtime payments where they can transfer money and you have people scared to death by some wellknown individual through the Artificial Intelligence situation. China is watching this like a hawk. They are ready to pounce on the situation. Do you think theres some issues here worth taking a look at . I think we are very focused on aai like many Government Agencies and Law Enforcement agencies in particular. Its very challenging. The gentlemans time is expired. Thank you. We will now go to the gentlewoman from texas for five minutes. Thank you mr. Chairman and chairman powell thank you for being with us this morning. Chair powell the february congressional report estimated the u. S. Economy will grow an estimated 7 trillion over the next decade thanks to in large part to the surge in immigration creating a larger labor force. Immigration also increases demand for goods and services. I know you mentioned in your report that the growth during covid was held down due to some restrictions in Covid Research is in immigration, and you detail have immigrants have been fueling our National Growth and did you consider this report from the cbo in this current report . Chr. Powell i am familiar with the cbo report. I read that demographic projections and Economic Projections. So you agree with the 7 trillion growth in the next decade . Chr. Powell i have no judgment on that. I am familiar with the assessment. What they are doing is saying more people working, bigger economy. And it makes the economy bigger. Its just arithmetic if you say a couple Million People to economy and a them will work and there will be more output. I just want to be very clear that we do not make immigration policy, we do not comment on immigration policy indirectly or directly. Im not asking you to do that im asking if you agree that the immigration surge has added to a strong labor force which is necessary. We expect it continued growth at a solid pace so to be able to continue at a solid pace we need that labor force wouldnt you agree . Chr. Powell last year we got big increase in workers and it came from two sources. One was participation increase for people who are already here and in addition we got a significant increase in immigration. Many of those people take part in the working economy so there was a big increase in labor supply that will have increased output. It will have made more people and all kinds of economic effects. Im not an essay anything is needed for the future or what policy indirectly or directly. Its a reporting of facts to say immigration and Labor Force Participation contributed to the strong you cannot output growth. Is it possible for the fed to conduct a formal assessment into the positive impact immigrants have on the economy and report back to congress . Chr. Powell not really, no. I think thats a job for the cbo. Thats precisely what the congressional does now. The other question youve not addressed is did you consider the cbos assessment that the growth in the next 10 years would be 7 trillion at about one trillion in added revenue sprayed was that considered in this report . That was the february report. This is from february 29. The answer to your question is tenure growth projections by the cbo dont have a big implication for the current stance of Monetary Policy. I will say the immigration that we saw was a notable factor of the 2023 and 2024 economic outcomes. Of course we are aware of that and it plays a role in thinking about appropriate policy and the path of the economy. Thank you for that. I know the last time you were here you and i talked about Diversity Inclusion efforts both at the fed and i applaud you and the president for his appointment, i expect to visit with her this week. What strategies and programs are you using in the fed not only in here but in all the branches to ensure that there is Diversity Inclusion . Chr. Powell in terms of intake of people when we go to hire, when the reserve banks go to hire a new president those processes are focused on a diverse applicant pool and we see the results of that over the years. We do not have any rule in appointments of governors so thats not our job, the administration does that. Internally we are focused on having an open and inclusive place to work and also in hiring we work hard to have diversity. Thank you mr. Chairman. Mr. Isaiah is now recognized. Good to see you in person. Ive got to make a comment here. It is stunning to me that equating an underground economy which is very different and not a healthy alternative to the regular economy and basing that on any legal workforce thats not legally able to work ultimately will fail. That is not a strategy to my colleagues on the others. Just ask any farmer who has a regulator come in and find them for employing people who are not legally allowed to be here in the country. Thats one of their greatest fears. Thats a fallacy of growth within this economy that is not sustainable. Chair powell, last fall i sent vice chairman bar a concern on the cumulative impact on consumers. This morning theres been a fair amount of time spent on basel three but among the agencies here including the fed, fdic and the number of pending or final rules is frankly just staggering. Regulators finalized rules for Community Reinvestment act, the fed is also looking at what would unintentionally undermine recent significant progress in bringing low and moderate income consumers into the mainstream banking system. Just yesterday the cfpb unveiled a rule that would cap late fees for banks and i walked out of a meeting with my Credit Unions who are concerned about those things that may be in their future as well. I think its critical we do not look at any of these rules in a vacuum and we need to consider the total impact and full scope on that so i will ask a question ive asked other regulators, how much do u. S. The fed personally consult with other agencies on their own rulemaking agenda. Chr. Powell i dont leave that area of our business but i know theres a lot of talking, a coordination im not sure theres coordination. Were in government theres always a lot of talking. Let me ask you this way. When a rule is finalized under another regulator are you mandated or have any kind of policy to go back and look at your other pending rules under your purview and see if changes need to be made because of these agencies rules . I think where it made sense to do that. There is some sort of review of that . Ive heard repeatedly that elements of this overlap with the feds annual stress tests read what are you going to do to address that overlap . Chr. Powell we are in the middle just the beginning actually of deciding what to do and part of that may be the interaction with stress test so i dont have anything for you on that today but it is an issue. I would like to continue that conversation. I want to touch on the Bank Failures of last year. Do you think the banks that ultimately needed the government bailout lacked sufficient capital or was it more of a management problem . Chr. Powell with Silicon Valley bank could they have use more capital . They were actually raising capital they announced the trigger the run and everything so you could argue it needed more capital but i would not say that was the proximate cause it was a funding structure that was all about too much concentration. Many of us are very concerned that those failures are being used as an excuse to raise capital standards across the board. Because the sec just released its Climate Disclosure rule this morning and touched on the climate related question for you, fsocs chair has said Climate Change is an existential threat. Presumably a threat that is existential effects banks and Financial Institutions of all sizes. Why then have member regulatory agencies including the fed limited their guidance on climaterelated risks only to large Financial Institutions prayed why not everybody . Chr. Powell it is a new thing. We are not Climate Change policy makers. The sec handled by elected representatives so we are starting this very carefully with large institutions who are already doing it. They are doing this because to remain active internationally they have to. We started with them because they understand imposing on Smaller Banks is not something i am for. The gentlemans time is expired. The gentlelady for michigan is recognized for five minutes. Thank you so much chairman. Thank you for being here. Do you agree with the april Federal Reserve report that compensation incentives contributed to Silicon Valleys bank failure . The april Federal Reserve report said that compensation incentives contributed to the Silicon Valley banks failure. Do you agree with that . I would say at best it is a tertiary factor but it probably had something to do with it. Do you agree the appropriate rules on incentive compensation couldve reduced the likelihood of Silicon Valleys failure . I really dont think so. I dont think its a firstorder question for Silicon Valley. A lot went wrong there. They actually blame you guys. They blame the oversight even though they did not respond to your correspondence. Chr. Powell we took our medicine. Do you think it has to do with the facts section 956 of the doddfrank rule hasnt been finalized by you . Chr. Powell i do not. You dont think its because people made money off of the failure . You dont think money drove them to do what they did . Chr. Powell there were lots of they made money from it. It was a lottery fund. Chr. Powell compensation arrangements were at the heart of the Silicon Valley bank failure, no. Do you support robust rulemaking for executive compensation . Do you believe in section 956 . Section 956 is the law. The agencies are looking at doing something. Its been 12 or 13 years. Its been hard to get it done. Do you believe in a robot robust rulemaking process . I do. Thats awesome. Will you commit to helping finalize the doddfrank section this year . Chr. Powell its been 12 years chairman. It played a role in the bank failure. So you dont want to do it this year . Im being serious. You are saying no. If the member will allow the witness to answer the question. Weve had a good day today the gentleman is trying to answer the question. I would like to understand the problem we are solving and then like to see a proposal that addresses that problem. Do you believe people should profit off of bank failure . The executives that made those decisions . Chr. Powell i would say execs who are responsible for a failed bank should not profit from the failure. So they get to walk away with compensation based on their failure. Chr. Powell you are asking me about a different rule that would have clawback and things like that . Thats something i know youve been looking at for a while. That is certainly appropriate to look at. Its just can continue to happen is my opinion. It sure could have helped here if they knew they were going to walk away and could walk away with not the bonuses, the compensation. They made money, a significant amount of money for there failure. Last question chair powell. Do you believe the impacts of Climate Change pose a risk . Have you been talking about that . Chr. Powell i certainly believe Climate Change is real and poses risks over the long term. There have been some that say higher Interest Rates actually makes it more difficult ill doubt the Renewable Energy projects and other investments required to prevent climate impacts . You believe that to be true . I believe that we need to do our job that you have assigned us w