Yes, im sorry i did not mean to say that it would create a problem. We want to allow it that process to occur in a gradual and orderly way. It wasnt just allowing them to mature. When they mature they roll off. Yes, it is orderly, and thats why we intend to do it that way. But you have not started yet . Youre reinvesting now. Im just curious why it doesnt seem to i agree it is orderly and that is our dire to have to be an orderly process which is why we intend to allow those assets to run off as principal matures. We recognize that allowing that process to occur results in some tightening of financial conditions. And so before we turn that process on, and start it, we want to make sure that we have adequate ability through our normal overnight Interest Rate moves to meet the needs of the economy, particularly if it were to weaken some, which would be a long process if it is running off we want to make sure we have enough scope and the economy is Strong Enough that runoff would not create a problem for the economy. I just want to close with a statement. I know when you were coming in and interviewing for this post, you mentioned to me that when times called for it, you would allow Interest Rates to rise and youre known as being a dove, but in fact you are, i know, some people are criticized the rate at which the rises have taken place, probably me included, but i want to thank you for allowing that to happen, hoping it will continue as we return to more normal circumstances. Hopefully the Balance Sheet will roll off, and i hope you will continue to criticize us if deficit spending continues. Thank you, senator, i think allowing that process to take place is something that will show that the economy is doing well, and the increases have been a reflection of the strength of the economy. Thank you for your leadership at the Federal Reserve. Of course that is fed chair janet yellen testifying in front of the Senate Banking committee. The reinvestment strategy, the Balance Sheet, the relationship between wages and inflation opinion the fact that she will finish her term that ends in 2018. Were at post nine. Equities in a tight range, but yields have crept up and the dollar is at a threeweek high. Steve leisman has been listening to all of it. First it was putting march back on the table saying it will be discussed at upcoming meetings as sarah underscored earlier. Also i opponent out the issue of whether or not she agrees with President Trump on a variety of things including, by the way, regulatory reform. She said she supports the principals laid out as well as the idea of reducing regulation, carl . Steve, what is interesting is the equity market response. That is the center of the action right now. With stocks, discretionaries are higher. And then we have a classic split, which is why the push and pull bringing the dow to the flat line. Jp morgan, Goldman Sachs driving up the dow, and then you have some pulling that yield lower. That bodes well for financials and not so much for the high dividend payers. Gold lost its gains of the morning. Crossing into the red. Does it fit, we talked about this at the outset of the system, but is the net effect net hawkish . Does it justify the yields . I maintained that the market was under pricing the of the heavy hitters. I think you need to look at the february employment report that comes out in early mark, and ta march, and whether or not the wages in january, causing them to price out, if that was an anomaly. A lot of economists thought it picked up the trend of higher wages out there. Janet yellen talked about it a little in her testimony today. So i think you want to be closer to 40 or 50 , not down to the 20 20 or the 25 where it has been. I think yellens test today, and well see if she end tup there, and tomorrow, she doesnt want a front Runner Committee on this or the data. Sounds light a tight rope walk, and that there is not much of a shift here. Maybe more of a likelihood for march f is there i just like to think like a longterm sane investor. The idea that the fed moves a quarter in march and not in june will not manage very much. There is a lot of folks on the street, a lot of folks in the pits of those markets, and frankly using a little bit of money, the really overriding question becomes if they go in march, that gives them the hik. But youre right, the average person, the average investor, should count on the idea that at the end of this year were going to be 50 or 75 basis points higher on the fed funds rate. As you know the feds independence is critical, it is something they hold on to. Theyre trying to stay out of the politics. What will it be, the financial reform . I dont think she can stay out of politics on the financial reform. There was a comment that maybe some folks missed that she made earlier on. She was asked about the affect of putting the new vice chair of spf supervision on the board. That is janet yellin saying you can put one, two, or three folks on the board, but it takes the full board to vote on the regulations. The vice chair has more authority, more things they can do to put things on the agenda, but that person alone is not enough to change. That someone thing that janet yellen was very strong about. We should mention financials leading whatever action there is in the dow. Goldman is 2 away from the lifetime high set back in 07. I think it is important to under score that she said she agrees with the core principals of Donald Trumps executive order. You note those core principals were different from his rhetoric calling for drastic cuts, but she said she agrees with the core principals. That means a possibility that some reform of dodd frank could take place under janet yellen. Well get back to senator menendez and the fed chair. Not one of those 134 m president s has been africanamerican or latino. That is outrageous. It is my hope that we begin to change the reality. These are two communities that have an enormous part of contributing to the nations gdp. For them to not have any representation whatsoever, in the process of these banks, is not acceptable. I hope that we can begin to change the reality. Increasing diversity is a critical priority, and i share your hope. Senatoor toomey. Thank you for joining us madame chair, yet again. I want to briefly ask you about the fmoc forecast for growth at the december meeting. As we all know, we had an election in november in which a president and a congress were elected, and a very, very central part of the message of both the president and the congress included a commitment to tax reform, a commitment to a very different regulatory approa approach, including a lighter regulatory touch and roll back of existing regulation, and there was considerable discussion about a stimulus in the form of a infrastructure bill. I dont think anyone disputes that the president campaigned on tax reform and lighter regulation. It seems that most of the world responded to the view that increases the likelihood, no certainty here, but increases the likelihood that we would have Stronger Economic growth. They respond made it suggests that tax reform alone would a add. 8 . But the members had no challenge in their opinion at all about the prospect for Economic Growth. The upper bound, the highest estimate decreased. So just looks on the surface like the fmoc members either believe it is unlikely that any of those things will likely happen, or they think that they are not progrowth. We dont yet have clarity out what Economic Policy change i understand there is no sere serety certainty, this is about likelihoods. Most colleagues said they would not speculate on what policy changes would be put into effect and what theyre consequences would be. A few of my colleagues mentioned that in writing down those frac forecasts, they assumed there would be a middle fiscal stimulus. But most of them have taken the view that we want greater clarity about the size, timing, and competition of changes to fiscal and other policies before trying to incorporate those into our forecast. Okay. Thats what i expected. Let me move on to the c car. I sent you some of the concerns last week. Ill touch on a few of them briefly. Compliance is enormously expensive. They suggest that the c car models ployed by the fed and testing procedures are not transparent. I think that is generally acknowledged. The fed does not engage in sufficient Risk Management of the models it uses. The g. O. A. Reports that they have not assessed if they are procyclical. Im concerned that c car might actually increase Systematic Risk in one important respect by behavior of bank behavior. And the come police sit risk weighting, that we have to confer, are verying with very different from those of the banks. They are not required by stat e statute. And you mentioned earlier there was a huge increase in the capitalization of american banks post crisis. And the fed already has other ways of boosting Capital Requirements like the Counter Cyclical buffer and the s surcharge. Isnt it dupliclitive . It is a key part of our regulatory process. It is detailed and institution specific and a forward looking assessment of the risks and the firms Balance Sheet. And i think it has been a corner stone of our efforts to improve supervision especially if the largest Banking Institutions that whose stability is critical to overall u. S. Financial stability, the gao and theyre assessment found that the stress tests have been useful and played a useful role. They did not recommend that we end them. They made a number of specific recommendations which we agree with and are working on. And we will of course continue to review our practices as we recently changed c car to exempt most of the institutions under 250 billion from the qualitative part of the c car review. But i do think that stress testing has greatly strengthennstrengthen strengthened our process. In the absence of c car, that doesnt mean the end of stress testing. Mr. Chairman, if i could make one quick closing comment, that is that as we all know, we have had a de facto acting vice chair of supouupersupervision that ne through the process and exercised the powers of that position. It is my hope that the president will soon be able to nominate individuals to complete the board of governors including a vice chair for supervision who will go through the process, be vetted by the committee, and until such time i hope the fed will refrain from issuing major new regulations that would benefit from the input of the new people. Senator shelby had one quick question. Ill be quick. We have not talked about this madame chair, but the current account, our trade imbalance, what would you would you share with us and you share this with person people, the longterm danger of an imbalance in trade that we have been running for years and years as opposed to shortterm and so forth. Where are we and youre an economics professor, but we were taught thats not a good thing in the long run. So we have a current account deficit that is tell the people what that is. Most of the people here know, but you have a nationwide audience here this morning. It is, the difference between the amount that we spend on goods and services, that we import from abroad import versus export, isnt it . Correct, of goods and services. So we have a current account deficit. It increased in size. And ultimately it leads to a build up of our indebtedness to foreigners, and so it can be a longterm concern if its not on a sustainable course. What is it roughly now . I believe its just roughly. I believe in 2016 it amounted to about 2. 6 of gdp. In dollars what is that roughly . Close to 500 billion, the deficit was a little below that. Thats in one year, right . Correct. Whats our total indebtedness. Would that be in the trillions . Yes, im happy to furnish you with that figure. Would you call that a troubling thing . Long term . It depends on what the longterm trend is. It also depends on what we earn on our Foreign Investments versus what with pay and historically we have earned more on our assets that we hold abroad than we have paid to foreigners who hold our assets. But the trend there is important. When is the last time we had a surplus, a small, im sure, in our current account . Roughly . Im not sure. Can you furnish that for the record . Certainly. Has it been a number of years . It has been. Thank you mr. Chairman. Thank you, senator. Senator rounds. Madame chairman, thank you for being here today. You have a difficult and important position. I look forward to working with you in promoting sound Economic Policy in our country. Im sure youre aware of thing a sector of our economy is sufferi suffering. The wall street journal points out there will be 2 million farms in america for the First Time Since the louisiana purchase. Commodity prices are singing, the Ag Department said that those who continue to farm will see their incomes drop by 10 by 2018. Our nations farmers are being left behind. My question to you is, recognizing they need access to capital, they need access to literally being able to borrow money nanny a time in which we made it more difficult to borrow money, a lot of folks are seeing an nend which they, because they work in an industry that is seasonal, some years they make it and some years they dont. Is there something that could you just suggest what you see in terms of economic headwinds for our ag economy, and what we as policy makers should be focusing on if we want to help them make it through the next couple years. In colorado right now theyre setting up an emergency hotline for suicides for the farming and ranching communities. This is not something that will go away quickly. Clearly it is gathering momentum. Could you just talk to us in terms of what you see for things that we can do to perhaps take some of the burden off of these Farming Families . So i cant give you recommendations for what congress should do to address the ag issues. We are focusing on the fact that there is pressure on Commodity Prices and particularly on food prices, and after a number of years in which conditions were really very strong and land prices were pushed up. So in some cases, we are seeing increases in delinquency rates. The dollar increating substantially around mid 20146 at pressured farmers and putting pressure on agriculture as you indicated. I think more specifically farming mauoves year to year. You can have a drought, you can have excess sieve moisturivexce year youre consistently successful. What about their ability to loan or carry debt, shouldnt there be understanding in the policy at the federal level that the ability to survive, not just a 12month cycle, but a 20 month or 36 month cycle. Doesnt that seem like a policy that is worth continuing to explore. Would you see some value in that . Honestly, this is something that is really up to congress to consider and to look into. Its not, you know, its not something that the Federal Reserve has the ability to mandate. But fanl institutiinancial i the source of that ability to borrow money, and in a year when you have a bad year for crops, or Commodity Prices, it may be down for awhile. It seems rather illogical to simply pace the ability to borrow money from a Financial Institution on a 12month cycle. What it seems to do is talk about from the one year to the next, should a loan be extended. Wouldnt it make some economic sense. The segment of the economy, perhaps a different cycle to be considered without having their loans being considered nonperforms assets in the auditing of the Financial Institutions. For more than a oneyear or shortterm period of time. It is something we look at, and Financial Institutions are trying to use safe and sound lending, and we want to be careful to protect them from losses. Thank you, senator. Senator cotton. Thank you mr. Chairman and madame chair. I would like to discussion with you today wage growth. Or maybe i should put it better, lack of wage growth. The Federal Reserve tracks wage growth as an economic problem. They have been largely stagnant. We have seen a few positive trends in the last few months. But i want to look back beyond the last few years. Starting in the 1970s. I think we have a congratulateic to display that. Workers without College Degrees have declined. It has grown by 17 and all inflation adjusted terms. Could you comment on what is driving the recent wage growth, but also what is behind this phenomenon that we see on the chart behind me . Over long periods of time, the general average nationwide trend in individual growth depends on productivity growth and in recent years the growth has been relatively depressed. Incomparison, say, with a very long period. Productivity growth was probably a percentage growth a percent or so higher. For different groups in your economy, as your chart focuses on. Changing in wage growth depend on trends in the labor market and in the economy. And what we have seen, importantly, because of tech technological change that raised the return to skill, raised the demand for skilled workers, and the people able to use technology. I think coupled with globalization that made it easi easier. And they have jobs that outsource work, and place thats are subject to technological change. We have seen different trends for much faster wage growth for higher skilled individuals and which slower wage growth for those less skilled. The gap between the earnings of College Educated and high school educated or less individuals continues to grow. And this has been a major source of the trend thats youre chart. The labor market is pretty tight. And the wage growth picked up, average Hourly Earnings were up 2. 5 in the 12months ending in january and that compares to 2 from 2011 to 2015. Some other measures rising somewhat faster. Theres not a dramatic increase in w