Transcripts For CNBC Squawk Alley 20171128 : vimarsana.com

Specifically about individual meetings, because thats why we have the meeting were all supposed to hold back on that final decision and then go in and listen carefully to each others views, all the reserve Bank President s, all the governors. Thats how we do it out of respect for each other i will say, senator, i think the case for, you know, for raising Interest Rates at our next meeting is coming together do you anticipate we will be raising rates in december . Well, to repeat myself, senator, i am not going to give you a really specific answer i dont know what coming together means thats why i asked the question again. I think the conditions are supportive of doing that, but we need to go ahead and have the meeting and listen to each other. Before the 2008 crisis, the fed had a lot of authority to regulate and supervise the biggest banks in the country, but failed to use that authority. When times were good, looked like maybe we didnt need strong rules to protect the Financial System, and then when things went south, the feds failure to put strong rules in place ended up costing millions of people their jobs, millions of people their homes, and millions of people their savings under chair yellens leadership for the last four years, the fed has adopted a number of rules to reduce the risk of another financial crisis, and you have supported those rules and helped implement them i understand that now if you are confirmed you intend to take another look at those rules. In your written testimony, you say that you will, and ill quote you, continue to consider appropriate ways to ease Regulatory Burdens. So let me ask this, you specifically say that youll look for ways to roll the rules back are there any rules you believe should be made stronger . I do, yes, i would say if you think of the four principle pillars of reform, i think they can all be made stronger and all be made more transparent, clearer, more efficient. I also said there are a number of things i wouldnt roll back so what are the rules you said you would make stronger well, i think about resolution we will expect firms to continue to make progress on resolvability. On stress testing. So you would want to see rules that are more aggressive on the living wills, for example . Not so much thinking of more aggressive rules as our expectation. But thats the question im asking about if youre going to revisit the rules for roll back purposes, which is what you said in your testimony, the question im asking is the reverse. I dont want to see a oneway street here where its all about rolling back rules and its not considering the places where the rules need to be stronger. Okay. I get your question. I would say that there are a lot of problems that we need to address in the Banking System. I do think weve had eight years now of writing new rules, and honestly, i cant really think of a place where we are lacking an important rule. I think we filled out the rules that we need, and its really a question now of dealing with things from a supervisory standpoint so of all the rules the fed has issued during your time there, youve been there for five years, on capital, on leverage, on liquidity, on stress tests, you dont think a single one should be made tougher . Honestly, senator, i think they are tough enough. Well, okay. Got to say this worries me, but let me take a look for just a minute here then at the rules you say you want to really back. A few years ago the fed and other agencies finalized the volcker rule with your support on that. It prohibits banks from trading on their own account, unless it is directly related to customer service. And this addresses one of the main ways that banks got into trouble during the build up of the financial crisis that sent them to congress for a bailout do you support significant changes in the volcker rule that apply to big banks for example, by exempting additional forms of trading . I do support a rewrite of the volcker rule i do believe we can do that in a way thats faithful to both the language and intent of the law so you would favor exempting more trading, for example . I would favor tailoring the application i would call that weakening the rule, but tell you what, my time is nearly up, but im going to follow up with questions for the record here. But i am deeply concerned that you believe that the biggest regulatory problem in the country right now is that the rules are too hard on wall street banks that kind of mindset led the fed to ignore the Financial System risks before 2008. It helped lead to the financial crisis, and it helped lead to the recession that followed it so, im worried that we not go down this path again, because if we do, its going to be the same thing. And that is that millions of families are going to pay the price while the banks end up once again getting bailed out and with record profits. So ill submit additional questions for the record, mr. Chairman, on this line thank you. Thank you i note you had 15 seconds credit, but it only lasts for this hearing but we do have a second round. Maybe, maybe. Senator scott. Thank you thank you, mr. Chairman. Governor, good to see you again. Thank you for your availability in the recent past we have talked about these issues before, and very much like mr. Kennedy, ive had some concerns related to past performances but i do want to talk about specifically the Interest Rate environment that we have currently. Senator heller asked a couple specific questions as it relates to increasing the Interest Rate in the next meeting. As opposed to asking that specific question, i want to paint a story, paint a picture, then ask a question about the Interest Rate environment overall. If youre a retiree in south carolina, by the way, a great place to retire whenever that time comes, it certainly has high quality of life, good economy, wonderful places to live, but if youre on a fixed income in saluda, south carolina, and youre retired, the current Interest Rate environment cuts really into your ability to live off of your interest income. As an example, someone with a 10,000 cd, 12month cd today, earns about. 25 interest. If you extend that for five years, its still less than 1 said differently, if your nest egg is a half a Million Dollars or a Million Dollars and youre earning 1 or 2 , youre living off of 220,000 a year, so the Significant Impact of the artificially, in my estimation, low Interest Rate environment has a negative unintended consequence, i assume, in the current marketplace. I do realize that the advantage of a low Interest Rate environment helps spur Economic Activity, folks are more likely to buy homes, but that knife cuts both ways id love foryou to talk to me about the principles of the characteristics of an economy that would require or encourage a more normalization of an Interest Rate environment. Thank you, senator. So, i think we have that economy right now, and that is we have low unemployment, 4. 1 unemployment, weve got strong growth the very low settings of Interest Rates that were appropriate during the crisis and after to support Economic Activity are no longer appropriate, and thats why were raising Interest Rates now on a gradual path, and i expect that will continue but i agree as we discussed i guess yesterday or the day before, the Interest Rates are a blunt instrument that we have, and so while Interest Rates, low Interest Rates support Economic Activity, they lower peoples interest bills, they support investment by businesses it generally has supported a pretty strong recovery, particularly in the labor market if you really are dependent on fixed income and Bank Deposits and, you know, shortterm Interest Rates, than its been a burden for you, and, unfortunately, but i think overwhelmingly people are helped by lower Interest Rates and has been i would just say help is on the way. I do expect rates will continue to go up, and that will feed through into the Interest Rates that your constituent is having. Thank you as relates to the Balance Sheet of the fed over the last decade weve seen that Balance Sheet balloon, and i know we talked a lot about starting creating a new starting place for a conversation about unwinding that Balance Sheet and then getting to a number that would be perhaps our new normal. Not necessarily the 1 trillion i believe it was beforehand, but can you walk me through what you see as a snapshot in about 30 seconds or less, since my time is running out, of what you see happening with that Balance Sheet . Sure. As weve announced, we are allowing as bonds mature were allowing them to just give the money back to treasury, so the market hasnt reacted to that, and on that path in about three or four years well be down to a new normal what will that new normal be it will be much smaller than the Balance Sheet today, much bigger than the Balance Sheet of ten years ago, and ultimately that level will depend on two things. It will depend on the publics demand for cash, which for them is a liability, us an asset, and banks demand for reserves, which is going to be much higher than it was before the crisis. Demand for crash more than doubled in ten years so those two things will be why the Balance Sheet will be bigger i said earlier my guess is that it will be somewhere in the 2. 5 to 3 trillion range, but the truth is we dont really know. With my last 15 seconds, two points one, im encouraged by your thoughtfulness about taking a look at the asset thresholds that may be a part of senator crapos legislative package and looking for ways for us to perhaps increase the thresholds that have stringent, prudent regulations. The second thing id say is, i would encourage as we look at the designation in the nonbank arena, having spent a quarter of a century in the Insurance Industry, i would suggest that clarity on what makes you gets you designated and clarity on how you lose that designation would be credibly important. Thank you, senator. Thank you, senator shots . Thank you, governor, for your willingness to serve thank you for the conversation we had last week i want to give you some data points according to the fdic, banks had record breaking profits in 2016 and the highest return on equity in years data from 2017 shows that banks are likely to do even better this year across the board. Banks have increased their dividends to shareholders by 17 . Community banks earnings have also been increasingly up almost 10 this quarter compared to last year. Household credits such as home loans, car loans, credit cards, has surpassed prerecession highs, and according to the feds sluggish loan growth in the commercial sector, is due to a lack of demand and so the question follows on senator warrens question, which is what problem are we solving with deregulation . Im not going to characterize what were doing as deregulation i would rather think of it as looking back over eight years of what is very innovative regulation in many cases, things that have never been done, like liquidity requirements, and resolution and stress testing. All of those are brand new and looking back, as i think its our obligation to do, and making sure what we did makes sense but isnt the objective to get all these metrics up, and arent these metrics already up, so doesnt it make sense to err on the side of caution i understand in principle, some people in principle believe that too much regulation is a problem and it ought to be eliminated almost as an ideological precept, but if youre looking at as a practical matter, arent these the data points you want arent we where we want to be . In fact, isnt Bank Profitability not the problem, but to the extent that there was net income among the ten Bank Holding Companies in the United States, 99 of their net income was distributed in the form of dividends and stock buyback, so i ask the question again, what are we fixing and for whom let me agree that the Banking System is healthy. Its great to see. That was not the case a few years ago, and its nice to see banks profitably serving their customers again. So were not looking to change that and i would also agree that we do want to err on the side of caution, and we think were doing that, but, you know, even consistent with that, it doesnt help anyone for banks to waste money, if you will, spend more money than they reasonably need to spend to accomplish these safety and soundness objectives. Those costs will fall on customers and borrowers and such, so its our obligation, among other obligations, to make sure regulation is efficient youre just saying its too much paperwork too much compliance . Yes, you hear that a lot from, you know, from different on different issues Different Things on different issues, but theres certainly just a lot of Regulatory Burden, and a certain amount of it is unavoidable, but our job is to be efficient and effective, as well as protecting safety. I guess my concern is if youre a bank both sort of dispositionally and from the standpoint of wanting to make profits, you want to reduce paperwork burden, and no doubt when you lay down a whole new matrix of regulation, there are going to be instances in which its a pain for a bank, small or large, to comply but again, theyve managed record profitability even despite whatever paperwork and compliance burdens there may be, and there is zero evidence that if we reduce the paperwork burden or the compliance burden, that they will pass on those savings in the form of increased lending or increased renun ration in whatever form to their customers. I only have 50 seconds left, and i just want to follow up on a question that i asked you in private. When the fed formulates Monetary Policy, it takes a broad look at the economy and identifies short and medium run risks and trends. I have a copy from the minutes from the most recent meeting and theres a brief discussion of the Economic Impact of hurricanerelated disruptions, as well as dislocation from wildfires. The minutes indicate that in the past these have only had a temporary impact, so ill take these ill offer the questions and then take the answer for the record. How many events would it take to have a Material Impact on the economy, has the Federal Reserve considered what number that would be in terms of the number of events or the total cost of the damage and have you worked with noaa or other science agencies about the likelihood of the number of Severe Weather events increasing my basic point is, that i understand this is difficult to quantify, but you are in the business of analyzing things that are difficult to quantify, and i think we now believe that this is material, and id like you to consider it, and ill take those for the record. Senator tillis. Thank you, mr. Chairman, mr. Powell, thank you for being here also thank you for being so generous with your time and the meetings that youve had in my office i covered some of this in the meeting that we had in my office, but i want to go back to it again youre going youve been nominated to a position where youre ultimately going to be, i believe when youre confirmed, randy corals boss you also said in our meeting in the office that youre going to rely a lot on him to take a look at Regulatory Reform issues, regulatory right sizing. In that first meeting that any boss has with somebody they are working with, they try to give them some direction, so what are you going to talk about when it comes to recalibration of regs post crisis . Kind of curious your comments on Basel Committee and the socalled basel four, and actually just if we could start with that and a general discussion about how regulations, its not about repealing regulations. Some of them need to exist and if theyd been in place in 2008, we probably wouldnt have had a crisis the magnitude that we had, but now its almost as if we either have too many people regulating the same regulation, or too many organizations, or were not really clean in our executions, which is making it very costly, very difficult for businesses and distracting from what they want to do, which is run their business thats a compound question you can answer any part of it or all of it. Okay, ill start by saying my relationship with randy goes back so far, i cant think of what a first meeting would be like i actually hired him at treasury 25 years ago, and hes been a close friend all that time i think were very well aligned on our approach to the issues that hell face as vice chair for supervision. You asked about basel. My understanding, you know, vice chairman has the lead on this now, but my understanding is that theres significant progress towards an agreement among all the principal participants at basel around uniformed floors, in particular, risk categories, and that would give us a way to wrap up basel three and i think that would be very much in our interest to do so its other countries that have lower floors and lower risk waitings on their assets, so this really helps us i just came from a press Conference Promoting the tax plan that we hope creates Bank President<\/a> s, all the governors. Thats how we do it out of respect for each other i will say, senator, i think the case for, you know, for raising Interest Rates<\/a> at our next meeting is coming together do you anticipate we will be raising rates in december . Well, to repeat myself, senator, i am not going to give you a really specific answer i dont know what coming together means thats why i asked the question again. I think the conditions are supportive of doing that, but we need to go ahead and have the meeting and listen to each other. Before the 2008 crisis, the fed had a lot of authority to regulate and supervise the biggest banks in the country, but failed to use that authority. When times were good, looked like maybe we didnt need strong rules to protect the Financial System<\/a>, and then when things went south, the feds failure to put strong rules in place ended up costing millions of people their jobs, millions of people their homes, and millions of people their savings under chair yellens leadership for the last four years, the fed has adopted a number of rules to reduce the risk of another financial crisis, and you have supported those rules and helped implement them i understand that now if you are confirmed you intend to take another look at those rules. In your written testimony, you say that you will, and ill quote you, continue to consider appropriate ways to ease Regulatory Burden<\/a>s. So let me ask this, you specifically say that youll look for ways to roll the rules back are there any rules you believe should be made stronger . I do, yes, i would say if you think of the four principle pillars of reform, i think they can all be made stronger and all be made more transparent, clearer, more efficient. I also said there are a number of things i wouldnt roll back so what are the rules you said you would make stronger well, i think about resolution we will expect firms to continue to make progress on resolvability. On stress testing. So you would want to see rules that are more aggressive on the living wills, for example . Not so much thinking of more aggressive rules as our expectation. But thats the question im asking about if youre going to revisit the rules for roll back purposes, which is what you said in your testimony, the question im asking is the reverse. I dont want to see a oneway street here where its all about rolling back rules and its not considering the places where the rules need to be stronger. Okay. I get your question. I would say that there are a lot of problems that we need to address in the Banking System<\/a>. I do think weve had eight years now of writing new rules, and honestly, i cant really think of a place where we are lacking an important rule. I think we filled out the rules that we need, and its really a question now of dealing with things from a supervisory standpoint so of all the rules the fed has issued during your time there, youve been there for five years, on capital, on leverage, on liquidity, on stress tests, you dont think a single one should be made tougher . Honestly, senator, i think they are tough enough. Well, okay. Got to say this worries me, but let me take a look for just a minute here then at the rules you say you want to really back. A few years ago the fed and other agencies finalized the volcker rule with your support on that. It prohibits banks from trading on their own account, unless it is directly related to customer service. And this addresses one of the main ways that banks got into trouble during the build up of the financial crisis that sent them to congress for a bailout do you support significant changes in the volcker rule that apply to big banks for example, by exempting additional forms of trading . I do support a rewrite of the volcker rule i do believe we can do that in a way thats faithful to both the language and intent of the law so you would favor exempting more trading, for example . I would favor tailoring the application i would call that weakening the rule, but tell you what, my time is nearly up, but im going to follow up with questions for the record here. But i am deeply concerned that you believe that the biggest regulatory problem in the country right now is that the rules are too hard on wall street banks that kind of mindset led the fed to ignore the Financial System<\/a> risks before 2008. It helped lead to the financial crisis, and it helped lead to the recession that followed it so, im worried that we not go down this path again, because if we do, its going to be the same thing. And that is that millions of families are going to pay the price while the banks end up once again getting bailed out and with record profits. So ill submit additional questions for the record, mr. Chairman, on this line thank you. Thank you i note you had 15 seconds credit, but it only lasts for this hearing but we do have a second round. Maybe, maybe. Senator scott. Thank you thank you, mr. Chairman. Governor, good to see you again. Thank you for your availability in the recent past we have talked about these issues before, and very much like mr. Kennedy, ive had some concerns related to past performances but i do want to talk about specifically the Interest Rate<\/a> environment that we have currently. Senator heller asked a couple specific questions as it relates to increasing the Interest Rate<\/a> in the next meeting. As opposed to asking that specific question, i want to paint a story, paint a picture, then ask a question about the Interest Rate<\/a> environment overall. If youre a retiree in south carolina, by the way, a great place to retire whenever that time comes, it certainly has high quality of life, good economy, wonderful places to live, but if youre on a fixed income in saluda, south carolina, and youre retired, the current Interest Rate<\/a> environment cuts really into your ability to live off of your interest income. As an example, someone with a 10,000 cd, 12month cd today, earns about. 25 interest. If you extend that for five years, its still less than 1 said differently, if your nest egg is a half a Million Dollars<\/a> or a Million Dollars<\/a> and youre earning 1 or 2 , youre living off of 220,000 a year, so the Significant Impact<\/a> of the artificially, in my estimation, low Interest Rate<\/a> environment has a negative unintended consequence, i assume, in the current marketplace. I do realize that the advantage of a low Interest Rate<\/a> environment helps spur Economic Activity<\/a>, folks are more likely to buy homes, but that knife cuts both ways id love foryou to talk to me about the principles of the characteristics of an economy that would require or encourage a more normalization of an Interest Rate<\/a> environment. Thank you, senator. So, i think we have that economy right now, and that is we have low unemployment, 4. 1 unemployment, weve got strong growth the very low settings of Interest Rates<\/a> that were appropriate during the crisis and after to support Economic Activity<\/a> are no longer appropriate, and thats why were raising Interest Rates<\/a> now on a gradual path, and i expect that will continue but i agree as we discussed i guess yesterday or the day before, the Interest Rates<\/a> are a blunt instrument that we have, and so while Interest Rates<\/a>, low Interest Rates<\/a> support Economic Activity<\/a>, they lower peoples interest bills, they support investment by businesses it generally has supported a pretty strong recovery, particularly in the labor market if you really are dependent on fixed income and Bank Deposits<\/a> and, you know, shortterm Interest Rates<\/a>, than its been a burden for you, and, unfortunately, but i think overwhelmingly people are helped by lower Interest Rates<\/a> and has been i would just say help is on the way. I do expect rates will continue to go up, and that will feed through into the Interest Rates<\/a> that your constituent is having. Thank you as relates to the Balance Sheet<\/a> of the fed over the last decade weve seen that Balance Sheet<\/a> balloon, and i know we talked a lot about starting creating a new starting place for a conversation about unwinding that Balance Sheet<\/a> and then getting to a number that would be perhaps our new normal. Not necessarily the 1 trillion i believe it was beforehand, but can you walk me through what you see as a snapshot in about 30 seconds or less, since my time is running out, of what you see happening with that Balance Sheet<\/a> . Sure. As weve announced, we are allowing as bonds mature were allowing them to just give the money back to treasury, so the market hasnt reacted to that, and on that path in about three or four years well be down to a new normal what will that new normal be it will be much smaller than the Balance Sheet<\/a> today, much bigger than the Balance Sheet<\/a> of ten years ago, and ultimately that level will depend on two things. It will depend on the publics demand for cash, which for them is a liability, us an asset, and banks demand for reserves, which is going to be much higher than it was before the crisis. Demand for crash more than doubled in ten years so those two things will be why the Balance Sheet<\/a> will be bigger i said earlier my guess is that it will be somewhere in the 2. 5 to 3 trillion range, but the truth is we dont really know. With my last 15 seconds, two points one, im encouraged by your thoughtfulness about taking a look at the asset thresholds that may be a part of senator crapos legislative package and looking for ways for us to perhaps increase the thresholds that have stringent, prudent regulations. The second thing id say is, i would encourage as we look at the designation in the nonbank arena, having spent a quarter of a century in the Insurance Industry<\/a>, i would suggest that clarity on what makes you gets you designated and clarity on how you lose that designation would be credibly important. Thank you, senator. Thank you, senator shots . Thank you, governor, for your willingness to serve thank you for the conversation we had last week i want to give you some data points according to the fdic, banks had record breaking profits in 2016 and the highest return on equity in years data from 2017 shows that banks are likely to do even better this year across the board. Banks have increased their dividends to shareholders by 17 . Community banks earnings have also been increasingly up almost 10 this quarter compared to last year. Household credits such as home loans, car loans, credit cards, has surpassed prerecession highs, and according to the feds sluggish loan growth in the commercial sector, is due to a lack of demand and so the question follows on senator warrens question, which is what problem are we solving with deregulation . Im not going to characterize what were doing as deregulation i would rather think of it as looking back over eight years of what is very innovative regulation in many cases, things that have never been done, like liquidity requirements, and resolution and stress testing. All of those are brand new and looking back, as i think its our obligation to do, and making sure what we did makes sense but isnt the objective to get all these metrics up, and arent these metrics already up, so doesnt it make sense to err on the side of caution i understand in principle, some people in principle believe that too much regulation is a problem and it ought to be eliminated almost as an ideological precept, but if youre looking at as a practical matter, arent these the data points you want arent we where we want to be . In fact, isnt Bank Profitability<\/a> not the problem, but to the extent that there was net income among the ten Bank Holding Companies<\/a> in the United States<\/a>, 99 of their net income was distributed in the form of dividends and stock buyback, so i ask the question again, what are we fixing and for whom let me agree that the Banking System<\/a> is healthy. Its great to see. That was not the case a few years ago, and its nice to see banks profitably serving their customers again. So were not looking to change that and i would also agree that we do want to err on the side of caution, and we think were doing that, but, you know, even consistent with that, it doesnt help anyone for banks to waste money, if you will, spend more money than they reasonably need to spend to accomplish these safety and soundness objectives. Those costs will fall on customers and borrowers and such, so its our obligation, among other obligations, to make sure regulation is efficient youre just saying its too much paperwork too much compliance . Yes, you hear that a lot from, you know, from different on different issues Different Things<\/a> on different issues, but theres certainly just a lot of Regulatory Burden<\/a>, and a certain amount of it is unavoidable, but our job is to be efficient and effective, as well as protecting safety. I guess my concern is if youre a bank both sort of dispositionally and from the standpoint of wanting to make profits, you want to reduce paperwork burden, and no doubt when you lay down a whole new matrix of regulation, there are going to be instances in which its a pain for a bank, small or large, to comply but again, theyve managed record profitability even despite whatever paperwork and compliance burdens there may be, and there is zero evidence that if we reduce the paperwork burden or the compliance burden, that they will pass on those savings in the form of increased lending or increased renun ration in whatever form to their customers. I only have 50 seconds left, and i just want to follow up on a question that i asked you in private. When the fed formulates Monetary Policy<\/a>, it takes a broad look at the economy and identifies short and medium run risks and trends. I have a copy from the minutes from the most recent meeting and theres a brief discussion of the Economic Impact<\/a> of hurricanerelated disruptions, as well as dislocation from wildfires. The minutes indicate that in the past these have only had a temporary impact, so ill take these ill offer the questions and then take the answer for the record. How many events would it take to have a Material Impact<\/a> on the economy, has the Federal Reserve<\/a> considered what number that would be in terms of the number of events or the total cost of the damage and have you worked with noaa or other science agencies about the likelihood of the number of Severe Weather<\/a> events increasing my basic point is, that i understand this is difficult to quantify, but you are in the business of analyzing things that are difficult to quantify, and i think we now believe that this is material, and id like you to consider it, and ill take those for the record. Senator tillis. Thank you, mr. Chairman, mr. Powell, thank you for being here also thank you for being so generous with your time and the meetings that youve had in my office i covered some of this in the meeting that we had in my office, but i want to go back to it again youre going youve been nominated to a position where youre ultimately going to be, i believe when youre confirmed, randy corals boss you also said in our meeting in the office that youre going to rely a lot on him to take a look at Regulatory Reform<\/a> issues, regulatory right sizing. In that first meeting that any boss has with somebody they are working with, they try to give them some direction, so what are you going to talk about when it comes to recalibration of regs post crisis . Kind of curious your comments on Basel Committee<\/a> and the socalled basel four, and actually just if we could start with that and a general discussion about how regulations, its not about repealing regulations. Some of them need to exist and if theyd been in place in 2008, we probably wouldnt have had a crisis the magnitude that we had, but now its almost as if we either have too many people regulating the same regulation, or too many organizations, or were not really clean in our executions, which is making it very costly, very difficult for businesses and distracting from what they want to do, which is run their business thats a compound question you can answer any part of it or all of it. Okay, ill start by saying my relationship with randy goes back so far, i cant think of what a first meeting would be like i actually hired him at treasury 25 years ago, and hes been a close friend all that time i think were very well aligned on our approach to the issues that hell face as vice chair for supervision. You asked about basel. My understanding, you know, vice chairman has the lead on this now, but my understanding is that theres significant progress towards an agreement among all the principal participants at basel around uniformed floors, in particular, risk categories, and that would give us a way to wrap up basel three and i think that would be very much in our interest to do so its other countries that have lower floors and lower risk waitings on their assets, so this really helps us i just came from a press Conference Promoting<\/a> the tax plan that we hope creates Economic Activity<\/a>, but in my own personal experience in north carolina, the two things that really combine created great Economic Activity<\/a> were tax reform and Regulatory Reform<\/a>, so im hopeful over the course of this year within your lanes, youre doing everything you can to question how regulations get executed, right sizing them to the point, to the minimum lightest touch necessary so that we are reducing what is an increasing cost in Regulatory Compliance<\/a> and by definition with all due respect to my friends and colleagues at price waterhouse, many of those compliance jobs are by definition nonproductive jobs. All they do is count whether or not all the productive activities were cross tied right. So hopefully we can see some leadership on your part with respect to the fed and the other regulatory agencies about more clarity, and i think more tip of the spear, we had the discussion about tip of the spear, regulators staying within their lanes and relying on other ones to the extent they need the information to complete their responsibilities now, i have a question about the goal of the fed over the last nine years its been increased inflation and not growth, but what has a more corrosive impact on the middle class, low inflation or low growth well, low growth. And so outside of the things that youre directly responsible for on the supply side, what sorts of things should we be looking at to help stimulate growth let me just amplify our mandate is inflation and maximum employment, stable prices and maximum employment, its not growth so really the things that can increase the stable Sustainable Growth<\/a> rate of the u. S. Economy are things that are in your lane, not so much ours and i would boil that down into, one, labor force participation, and the other is productivity. If you think about it, really the you want as many people as possible taking part in the labor force, not just for, you know, the overall u. S. Economys good, but for their own good people are happier and healthier if they are in the Labor Force Productivity<\/a> is very, very difficult to forecast, and it comes down to, you know, technological advance and its effect on Economic Growth<\/a>. Very hard to forecast. Its also the skills and aptitudes that our labor force brings to the job, and that is something you can effect its policies that promote investment, investment in infrastructure, private investment by companies, and i think all of those policies are really in the hands of congress and i think its important that we have a long run focus on increasing our Sustainable Growth<\/a> rate. So its outside of your lane. Just a quick question, if you reduce the Regulatory Burden<\/a> on businesses, would there be more or less investment and produ productivity i think there are clearly ways in the tax code to support different kinds of activity and certainly investment is one of those. Thank you thank you senator van hollen thank you, mr. Chairman, and to the ranking member. And congratulations, mr. Powell, on your nomination you know, both your immediate predecessors at the fed, chairman yellen and chairman r bernanke repeatedly testified about their concern and the impact of the rising debt, national debt, on the economy. Heres what chairman bernanke said in 2012 he said, large deficits and debt over a long period of time raise Interest Rates<\/a> above levels where they normally would be and crowd out private investment and are bad for growth and productivity they also may involve borrowing from foreign lenders, which is also a drain on current u. S. Income, unquote. Do you agree with chairman bernankes statement yes, i do heres what chairman yellen said this year on july 12th before the House Committee<\/a> on financial services, expressing her concerns about rising debt she said, current spending and taxation decisions will lead to an unsustainable debt situation with rising Interest Rates<\/a> and declining investment in the United States<\/a> that will further harm productivity growth and living standards. Do you agree with that statement . I do. Now, obviously, if we increase the national debt, were going to make those problems even worse. In other words, the longterm debt impact, harming Economic Growth<\/a>, isnt that the case . Yes, i think that the idea would be to get gdp growing faster than the debt over a long, long period of time. Do you have any reason to doubt the congressional budget offices analysis of the debt increase that would result from the bill thats been proposed here in the senate by republican senators to tell you the truth, senator, i havent looked at that its not something that were responsible for. So you have no reason to doubt those numbers, do you . I have no reason to know those numbers, let alone doubt them do you have a concern about what the debt impact of actions the senate and the house take, whether on the tax side or spending side, with respect to the economy . So, its a bit of a fine line that we have to walk on this, and im hoping i can walk it, and that is, you know, clearly the debt needs to be on a sustainable path we all know that i think we all agree on that on the other hand, its not for us to be taking part in the discussion that you and your other elected colleagues are having over this thats not our role, and, you know, there are agencies who have that role its really not for us okay. Both your immediate predecessors commented repeatedly about their concern over the impact of Rising National<\/a> debts, and you just indicated that you shared their concern and agreed with their earlier statements so, putting aside whether or not you think the cbo analysis of 1. 5 trillion Additional Debt<\/a> is correct or not, if there was another 1. 5 trillion addition to the debt, it would make a bad situation worse, would it not . It would. All else equal and as chairman bernanke said a number of years ago, he said, and i quote, so at some Point Congress<\/a> is going to have to make a tradeoff between what its spending programs are and what taxes its willing to he said at that time raise. We are now talking about reducing the amount of revenue coming into the federal treasury, but the basic math remains the same, doesnt it it does so if we want to avoid making the debt even worse, and youre going to add 1. 5 trillion to the debt, the only way to deal with that is to then cut things like social security, medicare, medicaid isnt that the case . You know, there are a lot of moving pieces in it. As i mentioned earlier, what the country really needs is to have debt growing faster than gdp what matters is our debt to gdp ratio. Thats what makes us on an unsustainable path, so growth also enters into the equation. Thats right, and the congressional budget office, they have their own projections, as you do, as was indicated earlier what the projected growth path would be there are things we may or may not be able to do to prove that, but theres no analysis out there, no credible analysis, that suggests that when you have a massive tax cut primarily going to major corporations, that the result is actually going to be a growth that actually makes up for the lost revenue in terms of debt do you know of any credible analysis that shows that senator, honestly, ive not been following the analysis. Do you know of any credible analysis that indicates that this tax cut would, quote, pay for itself i am not an expert what analysis is out there about this tax bill, this proposal. This set of proposals. All right well, i would urge you to follow the tradition of your predecessors, who were very careful not to wade into the specifics of the fiscal decisions made by congress, but did express this concern about rising debts and i thank you for your time. Thank you, mr. Chair thank you senator purdue thank you, mr. Chair, and thank you, governor powell, for being willing to take on this responsibility im encouraged that were having a conversation about our debt. And i appreciate the conversation you and i had privately about it, and i like your considerations on that. Id like to remind the committee, you know, in the last 16 years weve added 14 trillion to a 6 trillion debt, the end of 2000. Four under president bush and ten in the last administration and in that last administration, we had the lowest Economic Growth<\/a> in United States<\/a> history. In the next ten years if we do nothing from today, this federal government will add 11 trillion in current dollars to the current debt, so well end up right now the current projection is if this government doesnt change how it does business, well add 11 trillion to the debt in 2000 the size of the federal government, governor, was 2. 4 trillion in constant dollars last year it was 4 trillion there is our problem we collected more tax last year than any time in our history and the year before that we collected more tax than any other time in our history. Globally, 200 trillion in debt. Of that 60 is sovereign debt. Of that, 20 trillion is u. S. Debt and yet a number of countries have Interest Rates<\/a> in their sovereign debt that actually are put out at negative Interest Rates<\/a>. And i dont think the worlds ever seen a situation where we had the four major Central Banks<\/a> with somewhere around 18 trillion on their Balance Sheet<\/a>s in a situation where we have 200 trillion in debt of which 60 is sovereign and of that a significant number is let out at negative Interest Rates<\/a>. As you think about restructuring your Balance Sheet<\/a>, what concerns you relative to the size of government debt, sovereign debt, around the world and of that the United States<\/a> being onethird of that sovereign debt in terms of how you are going to manage one of the four major Central Banks<\/a> Going Forward<\/a> . Thank you, senator. So i think we have a good plan, and i think the market agrees to shrink our Balance Sheet<\/a> weve laid out very clearly in a series of public minutes over three meetings over the last year i think we were quite careful to socialize the plan and the market has accepted it, and it will lead to a much smaller Balance Sheet<\/a>, and it will do so over, you know, what in these matters is a fairly quick period of time, three, four, five years kind of a range. Sorry to interrupt, are there any assumptions in that calculation, or in that thought process, of the freeing up of capital on the private side in terms of the money thats withheld from being active in the Economy Today<\/a> . Some estimates as high as 6 or 7 trillion, does that weigh into that decision actually, it doesnt. What happens, senator, is that when we allow a security to roll off, treasury will reissue a comparably sized security or in bulk the same amount the u. S. Government debt will remain the same, it will just be issued to the public, rather than being on our Balance Sheet<\/a>. Thats what will happen. So it doesnt add to capital you point to the other Central Banks<\/a> and their big Balance Sheet<\/a>s, but they are some way behind us, and so, you know, ideally over time all of our Balance Sheet<\/a>s can shrink. But all four of the Balance Sheet<\/a>s are around 4. 5 to 5 trillion right now its the highest theyve ever been so i applaud your background and i applaud your ability to deal with that. Id like to, in the minute i have left, to talk about Block Chain Technology<\/a> little bit off the wall, but im beginning to be very concerned we have another bubble that is some four or five times the size of the dot com bubble in the late 90s, and that has to do with the crypto currencies like bitcoin. Bitcoins market value now is bigger than all but 29 of the s p 500 corporations in america. You know, assuming that this continues, and talking about that bubble, and the size the growth of the use of these crypto currencies, if that continues to grow, to what extent will that affect your ability to effect results from your typical Monetary Policy<\/a> options that you typically have as a central bank . You know, in the long, long run, things, crypto currencies of that nature could matter. They dont really matter today they are just not big enough not anywhere near close to enough volume to matter. That was the problem with the dot com volume, too, on a different level. There was so few entities and so much money interested in chasing it and thats whats happening right now in the bitcoin area, but the growth of that area was much, much faster than anybody thought at that time, too, in the late 90s. Yes, theres no question the valuations have really gone up quite a lot in the last year or soment so i dont have a view on the appropriate level of the valuation, of course, but from our standpoint, crypto currencies are something we monitor very carefully we actually look at block chain as having significant applications in the wholesale payments in the economy, something we pay close attention to so youre watching what alibaba is doing in asia today, relative to Block Chain Technology<\/a> we are watching all of those technologies its something we have to do, i think, and something thats actually kind of enjoyable and interesting to do. Well, thank you for being willing to do this thank you. Thank you, senator. Senator cortez masto . Thank you, mr. Chairman thank you, governor powell, thank you for taking the time with me. Welcome to your family its great to see you here, as well so im going to start with a topic a little different president messer of the cleveland Federal Reserve<\/a> gave a speech earlier this month where she noted that more immigration is needed to drive the u. S. Economy at a time when the population is aging and productivity is stalling governor powell, do you agree with president messer we need more, not less immigration to help drive our countrys longterm Economic Growth<\/a> . Senator, as i mentioned earlier, the size of the labor force is an important determinant of our potential growth over time Labor Force Growth<\/a> is slow right now, so its a big reason why our economy has slowed down, and immigration has been a real contributor to that. Having said that, immigration is another one of those issues thats really not in our lane, and really those decisions are for you and your elected colleagues no, i appreciate that, but weve been talking about growing the economy and part of your purview is labor, and i appreciate your comments that immigration is an important part of that labor force that grows our economy, so thank you. As chair of the feds committee overseeing the Federal Reserve<\/a> banks operations, including the president ial search process, we have seen board of directors, bank work forces, and better interaction with advocacy groups in the banks communities. If confirmed, what will you do to increase the diversity of the leadership, workforce, and opinions in the Federal Reserve<\/a> system thank you as i mentioned, i am a big supporter of the Federal Reserve<\/a> system and also of diversity i think we make better decisions when we have Diverse Voices<\/a> around the table, and thats something were committed to at the Federal Reserve<\/a>, both at the board of governors and the reserve banks. Thats something ive been deeply involved in during all my time there, and i would say that so ive had a chance to this is something people have been working on for decades now, and you begin to see what works, and so my view of what works is a lot of private companies have been very successful in advancing diversity, and what seems to work is to have wholistic plan that you stick with over a long period of time, and its about recruiting, its about going out of your way to bring people in once they are in, its about giving them paths for success, and its about having an overall culture and company that is very focused on diversity and it sticks with that focus for a long period of time. That works i appreciate that its not something you can do overnight. You mention the reserve Bank President<\/a> searches, thats something i have been responsible for and i assure you we always have a diverse pool of candidates i agree, i appreciate it. Its not just check the box, it is a cultural change that is constant, so thank you for your comments there Congressional Republicans<\/a> are set to pass, as weve discussed today, a tax cut bill geared towards large corporations at the same time, this committee is about to consider legislation to roll back rules for some of the nations largest banks what can you do at the fed to ensure that this tax windfall and this deregulation actually benefits workers and doesnt just translate into more executive bonuses and stock buybacks well, our tools are what they are, so we have Monetary Policy<\/a>, which can shove the economy in the direction of stable prices and maximum employment, and we have regulatory policy, which can ensure safety and soundness of institutions. When institutions become more profitable, it just taking your suggestion, you know, some of that is going to go to shareholders, some is going to go to customers, some is going to employees so but we dont really have tools that affect the distribution of profits. Right and so but you do have a component of Consumer Protection<\/a> we do and you do have concern about the workforce and growing that workforce and making sure theres a strong workforce, correct . Yes so part of the concern that im hearing, and i didnt i really havent heard a lot of that discussion, is what youre going to do to address specifically those Consumer Protection<\/a> issues and particularly also protecting the workers. And that workforce Consumer Protection<\/a>, we havent actually talked much about. So weve been assigned, you know, an Important Role<\/a> in Consumer Protection<\/a>. We take it very seriously. Im committed as chair, as i have been as a governor, that with responsibility for our budgets that Consumer Protection<\/a> will be will have the resources it needs to do its job. Whatever congress assigns us, we will try to do well and aggressively, and thats my undertaking to you i appreciate that and i know my time is running out, and i will submit the rest of my questions for the record, but i like many of my colleagues do have concerns i come from nevada, dodd frank was there for a reason, because we had a horrific crisis as you well know we talked about this and the deregulation of dodd frank and many of these regulations that were put in place to protect individual consumers are so important and im concerned about rolling back any regulations that is going to open that door and lessen any type of Consumer Protection<\/a>, any type of work that we have done, particularly in nevada and across this country to protect individuals so, look forward to having further conversations with you with respect to the idea of tailoring your regulations, as well thank you. Thank you thank you senator shelby governor powell, congratulations. I look forward to voting for you, help in my way i can to get you confirmed. I think you will not be long, hopefully, that youll be over at the fed as the chairman and youll have a full complement over there, which youll need. Youll put your stamp on the fed. I hope it will be in a good way, based on your experience in the past weve talked about a lot of things here, but im going to get back to basic inflation scares, if any, price stability, which is so important as one of your mandates. A lot of economists are puzzled by the outlook of inflation statistics youve mentioned or eluded to that theres not real these are my words, not yours, not real pressure on wages, which is always a big factor. I dont see a lot of, myself, a lot of pressure from nrenergy costs and so forth we are in a different economy than some of us grew up in with the globalization of things. You eluded the fact that you would have an open market meeting soon, and you could bump up the Interest Rate<\/a> some. I hope you will not spook the bond markets, you know, in doing this gradually but certainty is important in the economy and predictability so where do you see the specter of inflation i dont see the psychology of inflation out there, which is dangerous thing. I dont see the wage stuff and other things i already mentioned. What do you see there that maybe we dont, that you can tell us about . Thank you, senator. So, inflation has been below our 2 objective i think every single month or maybe every single month but one since i joined the board of governors in may 2012 and for most of that time its been in the range of 1. 5 . It is actually really important that we achieve our 2 target, because our credibility is important on that front. And lately, inflation was moving up and it got pretty close to 2 the beginning of this year, and then this year came and we have actually stronger growth, we have, you know, a healthy labor market, but to my surprise, to all of our surprise, i believe, inflation readings started to come in weak and that was a surprise. And the question is why. There are multiple possible explanations one is that these are just idiosyncratic factors, like the ones you hear about that was a big drop in pricing for mobile Telephone Services<\/a> because of a price war and also a change in the way they calculate that. In addition, pharmaceutical prices basically, you know, underlying inflation moves according to a slowly changing, evolving trend, but then there are these factors that move around a lot, and we happen to have had a number of factors that push it down, and there are different views. Weve been very public about this debate that weve been having in the fomc and public remarks, as you mentioned, and, you know, one question is, is it transitory, or are there more fundamental things at work here . I think were all watching carefully to see, and well have to be guided by the data as they come in. We really dont know yet, do we no, we dont. Is it transitory, or is it a larger trend but youll be watching it day by day, right we will and thats what will dictate the path of our policy we can afford to go more slowly if we determine inflation is going to perform lower than we thought, and we can move more quickly. Lets talk about the Balance Sheet<\/a> just a minute. You i think youre on the right trajectory, but i think you used the term that you might draw the Balance Sheet<\/a> down to 3. 5 trillion, Something Like<\/a> that, whatever is that the new norm because that was not the norm. Thats still a pretty high threshold, and if you did draw it down to, say, 3. 5 trillion, does that hamper you down the road in case you had some drastic things to do senator, i would say that we dont really know with any certainty what the new normal will be. My own guess would be, and this is depends on a number of things i would mention, but would be more in the range of 2. 5 to 3 trillion, which is 1. 5 to 2 trillion smaller than our current Balance Sheet<\/a>. Ultimately what will dictate the size of the Balance Sheet<\/a> will be the publics demand of our liabilities, particularly cash, which has been growing surprisingly fastly, quickly, in a world where everyone seems to use electronic cash. Nonetheless, people like paper cash a lot, and also demand for reserves, which are going to be higher than they were for requirements for banks to hold the highest quality liquid asset, our reserve so somewhere between 2. 5 to 3 might be the answer, might be a little higher, little lower. In the area, the other mandate youre all involved in is regulatory area is it important when you come through the fed or fdic or anybody comes through with a regulation, proposes a regulation, that they have some type of serious costbenefit analysis before they implement a regulatory change . It is, senator, and, you know, we always try to implement the laws that you pass we try to turn them into regulations as appropriate, and we try to do it in the most efficient, least costly way that we can thats consistent with Congress Intent<\/a> and over the last three or four years weve really raised our game significantly on this, and were doing more of that weve been putting out, for example, white papers in connection with big rules, like the surcharge or others i could mention, and they explicitly solicit comment on costbenefit analysis weve also started a unit of economists and policy makers thats going to focus very particularly on costbenefit analysis, so i think were always trying to be better at that we regard it as a very fundamental part of what we do you also mention the word capital, which is very important to any financial institution, and i think its key to banks survival, financial survival, but liquidity is important, too, isnt it you can have all the capital in the world, if you cant have liquidity, dont they kind of go together to have a Strong Institution<\/a> . They do, and, in fact, liquidity, as you suggested, liquidity runs is really what kills banks. You know, when they die. But having higher capital makes it much less likely there will be a run on the bank in the first place. Thats where i agree with you, they do Work Together<\/a>, they are both important thank you thanks, senator senator tester . Thank you, mr. Chairman and thank you for being here, governor powell. I want to start my comments by echoing the ranking members comments on janet yellen i think shes done an incredible job in a very difficult situation when she came onboard, and she needs to be recognized for that governor powell, i appreciate you being here today i guess the debt is about 20 trillion could you give me any idea on what an additional 2 trillion would impact, how that would impact the economy, another 2 trillion in debt holding all else equal . Yep well, youd have higher interest costs, obviously. If you hold all else equal, you have higher interest costs and either taxes will have to go up to pay for that, or youll have even more debt, and that will crowd out private capital is there any numbers that you have on potential impact to the economy, the higher the debt goes, half a percent, quarter percent, full percent per trillion, do you know . I dont have that handy, no okay. The reason its important is because about a third of our current debt is due to the last tax cut that was done in the bush administration, so i think we need the right information. I dont know theres anybody on this side of the aisle that doesnt want to see a more simplified tax code and tax code that wants to make asked you the reason, i asked the question because theres not a lot of impact, and after its done its too late, and i want to make that point its not in your portfolio, but it will impact your portfolio very significantly moving forward. Theres a bipartisan bailout that were probably going to address later this week or next week called the Economic Growth<\/a> regulatory relief and Consumer Protection<\/a> act have you had a chance to take a look at that bill . Its a bipartisan bill i think theres 20 cosponsors, have you had a chance to look the a it at all . Yes, it yes, i was, sir. I wasnt here earlier and if this was asked before i apologize. As you look at this bill, are we doing anything thats putting our financial since im a cosponsor, i say we, putting our Financial System<\/a> at risk with the regulatory relief thats in that bill . I really dont see anything you know, were looking at it carefully. Well offer technical comments, but i dont see anything, no. Okay. Part of that bill is eliminating the volcker rule compliance for Community Banks<\/a> of less than 10 billion Trading Assets<\/a> and liabilities. Any concerns there none. Okay. Theres a process that the fed completed earlier this year. A portion of that review talks about syncization and streamlining and something that everybody can get behind i think its key that regulators need to Work Together<\/a> so they are not being duplicative, something i hear a lot from Community Banks<\/a>. Do you have any plans as chairman, because i think you will be confirmed, but do you have any plans as chairman to update and modernize the examination process between regulators between regulators . Yeah, so that there isnt that duplication. Assuming that if i can assume for a second that i will be confirmed. Yes. That is something that i am committed to trying to do better on were blessed with a, you know, a lot of regulatory agencies. Yeah. In our system, and and some that have is good, but it does lead to overlap and duplication, and ill be committed to improving on that. As you look at your position, and youre no rookie to this youve been around the block a time or two. Would you say that the number one job that you have to do as chairman of the fed is to make sure that consumers arent armed without harming the safety and the soundness of our Financial System<\/a> i cant disagree with that . Okay, good. Just real quick and ive got about 50 seconds here. Senator heller and i introduced the National Standards<\/a> insurance accounting which would ask the Federal Reserve<\/a> to create an Advisory Committee<\/a> requiring more transparency surrounding the process when the standards are being set. As chairman of the fed, how would you work with prudential regulators to understand that the fed successfully fully understands . We have acquired a significant amount of insurance talent at the fed and in the other agencies and on the fsoc and wed be committed to understanding the industry as best we can and for the regulation of the Insurance Industry<\/a> to be as transparent as we can make it. So you would agree the insurance capital standards would be different than the Financial Institutions<\/a> yes the risks of those institutions are quite different. Were aware of that. Thank you very much, thank you, mr. Chairman thank you that concludes a first round there have been several senators who have asked for a second round, and so we will do that. I will forgo, although i reserve the right to jump back in, but im going to go immediately to our ranking member, senator brown. Thank you, mr. Chairman again, thank you for being here, governor i want to follow up somewhat on senator Cortez Mastos<\/a> questions and comments and other senators mentioned this since 2008 bank profits are up, executive compensations have rebounded but wages for working people are stagnant. The wealth gap between whites on the one hand and africanamerican and latinos on the other has narrowed many people in my state have yet to feel the impact of the economic recovery. You know all those things. I hope they are central to your chairmanship past fed chairs cited inequality not just as a as a humanitarian personal problem but also a pressing economic problem. Theres nearly a consensus among economists that are income inequality and wage inequality is a drag on growth. Do you agree with that, and if so what do you do to address income inequality . I do agree with that, senator, and and i would say to me the most compelling factor, i think a number of factors are at work here, but if you look at the flattening out of u. S. Educational attainment in the 70s and 80s and you look at at the rise in inequality, the stagnation of middle class incomes, median incomes. Those two stories fit together so well that i think that, you know, the way for u. S. Workers to compete in the Global Economy<\/a> is to through having skills, the best skills and education in the world and in a cents thats a big part of the story behind inequality. But question is what do you do youre not president what youre not a member of congress that should do more to invest in retraining and education and, you know, earl el childhood education. What do you do to address income inequality you know, we dont have a lot of tools to address inequality we dont have tools to affect distributional effects as all, but i would say that our commitment to the dual mandate and the maximum employment mandate is, to you know, is to make sure that anyone who wants a job, either has one or can find one relatively easily that should help. Does that give you pause when some say you can raise Interest Rates<\/a> because were at full employment knowing full employment may be for people that look like me that get to go to college if full employment is full employment and people that that people of color, people that are that left the workforce, have given up on a job, that its not full employment for them. Doesnt that doesnt that construct give you pause for thinking about increasing Interest Rates<\/a> you know, we yes, of course, and we are very focused on pockets of people and different pockets of people for whom they are discovery is not real yet and people who have groups who have higher unemployment rates than others and higher poverty rates and other sort of things i think we do deal at the aggregate level, an its important to say that, you know, were raising Interest Rates<\/a> now because the economy is strong, and if we wait too long, im not saying were waiting too long, but if we were to wait too long, the economy could overheat, wed have to raise rates and the economy would have a recession and that wont help those people so the best way is to continue on this path of gradual Interest Rate<\/a> increases as i asked you privately about coming to cleveland as your predecessor did and seeing ohio, high tech, good, strong, productive, efficient. Ohio manufacturing, i would echo what pope francis said in exhorting his parish priests when he assumed the papacy and said go out and smell like the flock, and i would ask you to do some of the things that you did, not that you pattern your chairmanship after any one of your predecessors but to really talk to people and see people who still arent in this economy thats been pretty good for People Like Us<\/a> but not others. One other question the financial crisis wasnt the result of a single bad decision. Dozens of small choices, including by regulators, to change the rules and weaken supervision for the big banks. We know that earlier this month the fdic chairman grunberg sailed hes feeling a certain sense of deja vu with bankers and policymakers becoming complacent of the risk in the Financial System<\/a> between this legislation this, committee is set to consider that the chairman that you talked about, and all the deregulation in the works by the administration and regulators, look whom the president has put on some of these boards and regulators were on course to were on course to weaken the rules for large regional banks, were on course to make stress tests and livings wills easier for global banks and were on course to insert yet more exemptions into the volcker rule are you certain that all these changes arent paving the way for the next financial crisis. Certainty is kind of a high standard, but, you know, im confident that were not thats really not the intent i dont think how the kinds of things were talking about doing would push us in that direction particularly. Potentially fewer stress tests dont . Well, thats not something weve decided. I think stress testing is, you know, a really important postcrisis innovation maybe the single most successful and the banks also say that to you privately. I know youve said it and i know the banks have said it. Yeah. So should we be even considering pulling away from stress tests and even the regional sfwhanks. Well, you knyou know, i think to tailoring we want the most stringent things to be happening at the systemically important banks, the most stringent stress tests in particular, and we want to tailor or taper as we go down into the less significant, less systemically important institutions. Werent some institutions like countrywide smaller and i think wash move, am i right, smaller than some of these regional banks in a will have a relaxed stress test or a less than annual stress test . Thats not something you decided. Something you weighed in a moment ago on a bill that congress is looking at. You think youre referring to the idea of having regular stress tests as opposed to annual. Periodic i think is the word which is a very different word from annual. Does that concern you, or does that give you discretion to decide i havent had a chance to to as weve discussed, you know, not something that weve looked at yet. But youre coming to this committee, with all due respect, saying you support this legislation and now youre saying you havent had really time to look at it so i guess that means youre not publicly yet supporting this legislation that you might after digesting it as the chairman decides to support. Its not the legislation. Its its what we do with the legislation after its passed. I think it will be in our discretion, if i understand the legislation correctly, proposed legislation, to decide how frequent stress tests would be they would be pirkd, aeriodic. 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