Transcripts For CNBC Squawk On The Street 20160621 : vimarsa

Addressing his departure on twitter this morning. And brexit polls from the uk cant seem to lock down which way thursday will go. And then theres George Sorros issuing a major warning against a departure, even David Beckham is weighing in. But first up in about an hour from now on capitol hill fed chair yellen will kick off two days of semiannual testimony on Monetary Policy and the economy. Today its before the Senate Banking committee which is expected to grill her on everything from rates to brexit. Of course well bring you live coverage once the fed chair begins her remarks followed by the q a session with lawmakers. Some discussion it might be more contentious than usual even with her recent comments in the meeting last week. On both sides a lot of people saying get it over with. Admit things are weak and what are you going to do about it. What is she going to do about it . Its not up to her. Look at germany last quarter very interesting what the finance minister say. Look, we had these immigrants come in and weve had to build, weve had to start spending money to make it so they have new lives. And thats how our gdp is moving up. Now, this is something i thought would happen because i think germany is trying very hard to accommodate as many people, trying to do the right thing. In our country she goes to the hill shes looking at the people who could possibly do something because this new economy is not something she can deal with. People getting laid off every day by your cell phone. I mean theyre literally ged e getting laid off. Now looking at retailers that are struggling. Well see if discussion gets her to a new lower rate. I wish they did. I wish they get into the idea that the people in our district complaining theyve lost our jobs to technology, digitization, its not just lost jobs to china, but look, brexit, i mean, i dont think, its up in the air like everybody, bring wilfred, only on for 17 hours last night. I know. To your point about job losses as a result of advances in technology, thats not the feds problem, right . Thats a political problem. Train the vast force of American Work force for the current environment or be marketable to it or keep Interest Rates more or less zero forever, but meanwhile weve got less than 5 unemployment. So what gives . Theres a shift economy out there, theres people we dont know theres not people still left the work force, but im talking future layoffs and people taking good clerical jobs at a bank where the millennials 20 Million People, bank of america they use handheld, online banking. All im saying is she should kick it back to them. In germany you think these people that have come from syria have jobs . They create jobs. They create jobs for them. They do something for them. Its time that we did something for our own people. We spent a lot of money on foreign aid. I dont mean to sound like well, listen, theres been attempt to spend more money on infrastructure for many years and its gone nowhere. Repeatedly. It hassed unwillingness of congress to vote it. Nobody wants to spend money, right . No gasoline, caterpillar, no deere machines, theyre big machines, its up more to congress is what im saying. Im saying kick it back. Yellens half of the story today, brexit is the other half. And this sor ros commentary in the guardian sees a decline in the pound worse than when he broke the bank of england. What do you think . If i was soros i would say just that. If they stay, if they remeain, then hes off the hook. Youre saying this is a big cya . Why not . I would do exactly what hes doing. Hes probably short, gets the cover very quickly, maybe hes not short. Who knows. But would we be sitting here if they dont remain, if they exit . Will we be sitting here questioning whether it was only down 2 and that soros not going to do that. Thats not the way its played in the journalism business. Soros had a big hit in 92. Thats all. Sports, you know, youre only as good as your last. Don schulo ends up being a steakhouse guy. Remember tom landry, a great band, and then loses a lot of games were going to think about him. Soros we found out he was actively involved other than you everyone thought he was actively involved in those calls. Every time soros made those calls, david saying you know thats not really soros. Why didnt you go along with everybody else . Why did you have to spoil the party . I knew it wasnt him. He wasnt involved. Its so much easier to be like everybody else. It is. It is. What is it with you . I dont know. I try not to say very much. Did you go to new journalism school, 2. 0 . What is that school . Says as were talking sanofi bid for striker. I heard from absolutely nowhere twitter gets a 22 bid tonight from microsoft. Oh, my god, theres people out there who dont understand sarca sarcasm. Right. Thats sarcastic. Im just saying soros is making the right call. No one will punish him if hes wrong. Its an asymmetrical business to make these calls. I think we have to own thats the case. Right. That journalism is not able to be set up to critique a man like soros. Business journalism cant. Espn, yes. As for betting markets still sees 75 chance of remain. Its 48 hours from voting. Other polls 42 right. I like yours. I think thats great. How about the systematic are they calling people . Are they doing it online . What are they doing little online stuff . It seems like the polling there, maybe were polling, whos polling . Polls are fascinating in the sense of how their done, how theyre conducted and whether or not theyre accurate. Once again there will be no look at all the polling that was so wrong in the Republican Party in our country . Or how about the fact when bernie wins california its an open convention. Although to be fair trump was ahead in the polls from the earliest days. The pundits were wrong. Again, strikers not getting a bid and twitter will not get a bid tomorrow, im saying journalism is not set up to critique a soros because he was so much right in 92. This is not sports. If youre right in 92, youre right now. Even if youre Proven Guilty were not going to come here monday and say, boy, soros was wrong. Thats not the way its done in our business. I wish it were. I wish everyone were like you. Well, thank you, jim. Youve said a lot of nice things. How many more piens do you have to throw . I got like a thousand of those. Move onto some news this morning. Real news . No, real news. Softbank stepping down as president had been hand picked success successor, ran softbank and ran it going to remain ceo longer than originally planned. That will be effective july 1st. Interesting story softbank been in the news in part because of that sale of over 10 billion worth of its alibaba stock. It still owns a lot more than that. Also, today in the news because of a sale of its stake along with some others who own that same stake in a video game company, theyve been monetizing some of their investments there. Arora of course famously came from google with a lot of fanfare. And very interestingly last august bought 483 million of stock to show people he was in it, going to be the ceo. Apparently son who turns 60 in a year or two decided that really is not a good age to retire. I havent spoken to him in a while, hope to. Perhaps hell come back and sit down for an interview. That seems to be one of the keys as to why mr. Aroras decided now is the time after only two years at the company to seek other opportunities. I thought it was an extraordinary story. By the way he sold that stock back. Get out. That was my question this morning. He borrowed money to buy that, almost half a billion worth of stock last august. He sold it back at what im told is a minimal loss for mr. Nikesh arora. I remember when google got hit, hes really good. Hes a really smart guy. One of the very early guys at google. Had one of the more significant jobs in opening their business around the world. Id say so. But he runs softbank. Are you going to turn to Sumner Redstone now . No. That would make sense. Hes 58 years old. Im saying when you think about longterm guys. Although it would be nice for every executive departure to be as transparent as he has on twitter today, i mean answering questions just flat out, yeah, masa wanted five to ten more years, i wasnt having it. Learned a lot. Good to take narrative in your own hands. Yeah. Theres a look at masa. Theres the man were talking about of course who runs softbank, controls sprint as well and still huge stake of alibaba. Yahoo japan they may figure a way to try to get some of that back from yahoo as it takes itself apart. This is when he sat with us during the alibaba ipo. One of my favorite moments. Yeah. Alibaba is moving up. Nikesh is the guy, my travel trust own google, wow, that was one of the reasons you wanted to own it. Oh, come on, the guy was really good. You always wonder about these guys how good they really are. When borat moved over from morgan stanley. We do have some of his tweets though carl was talking about. All good, masa wanted to be ceo for longer, i did as promised, time to move on. Masa and i are still in love with each other. I will support everyone i invested in, and they know that. That means the investments hes made, some of which hes taken criticism particularly large investment made in a singapore Ecommerce Company that had a significant loss perhaps far beyond what people had imagine softbank. Interesting people are willing to limit their whole raise on life to 140 characters, right . Big shot guy and decided twitter is the way to do it. He may join us at some point. Yeah. We hope so. We let you answer more than 140 characters. Right. Better venue. United technologies didnt go onto kill the honeywell bid on twitter. Came here. Right . When we come back marc benioff came here. Yep. Facebooks head of advertising with news on instagram this morning. Kayla tausche is live in france. Take another look at the premarket. Going to be another interesting one as brexit polls get digested and yellen takes the hill in about 45 minutes. Dont go away. Todd spaletto, president of the north face, we are working on the prototype to match customers to gear. Watson, lets give it a try. Say its midjune and im backpacking in yosemite. Of our 353 jackets, i can recommend nine. Watson, what if it rains . There is just a 3 chance of rain, so i recommend the breathable stretch fleece fuse form dolomiti jacket. A Perfect Choice watson. No wonder our Customer Loyalty numbers keep climbing. I believe we can do even better. I like the way you think. I believe we can do even better. Atand that in a new house,tee a fyou probably dont sharece, the same tastes as the previous owner. [ dolphin chatters ] so when you need a little house painting or a complete remodel, well help you get the job done right, guaranteed. Get started today at angies list, because your home is where our heart is. Got some news coming out of instagram. Lets get over to Kayla Tausche whos at cannes lion with a very special guest. Good morning, kayla. Reporter good morning, carl. Well, instagram announcing just moments ago it has surpassed 500 million monthly active users. The last time we heard this metric was last fall, 400 million monthly active users. So quite a bit of growth for instagram. And we are joined here in cannes by facebooks global head of advertising. Caroline, what an honor it is to have you on a day when we have so much news to talk about. Well, thank you for having me. So the growth weve seen since last fall to now, 25 user growth, is that organic or something deliberate youre doing with the product . Well, the growth on instagram has been tremendous. If you think about instagram it was started five and a half years ago, 300 Million People per day, 100 million in the u. S. That are coming on a monthly basis. And the exciting thing is that this last 100 million have joined faster than the prior 100 million, so were seeing tremendous momentum around the world and enthusiasm for a platform that is all about visual communications and discovery. So the question that all of our viewers are wondering is what is Revenue Growth look like . Is it tracking the user growth . Is it growing as fast . Well, the way we think about Revenue Growth is we think about the pool of advertisers that we can be working with. And there are 50 million businesses that have a presence on facebook. Of those 50 million, 3 million actually advertise on facebook. Instagram has 200,000 advertisers. So from our perspective its very early days, but were really excited about the opportunity and certainly this week in cannes instagram is a topic of discussion in every meeting. So when wha are those conversations looking like. What do advertisers want to know . How are they actually building content . Advertisers are most interested in understanding how to be mobile best marketers. They have had years, decades in some cases of experience in building wonderful tv creative and print creative, and now theyve recognized that the consumer has shifted so rapidly to mobile, spending 25 of their time. In the u. S. Alone consumers are spending over three hours on their mobile device, checking their phone 30 times or more per day. So if youre a marketer, you have to build this mobile first creative capability. But if youre a marketer, do you choose to advertise on instagram instead of facebook . Most of what were seeing is theyre actually youtuutilizing platforms. Its excellent for brand objectives and were utilizing d. R. Objectives across both platforms as well. We have the same infrastructure on the back end and the algorithm optimizes to give the marketer the best value. So the Company Bought it for 736 million, or thereabout, and it had 1 16 of the users. Is it worth more than that . The way we look is portfolio of family ops and services. We want to make people more connected and give the power to share. Instagram is incredible part of our portfolio because of the explosion of video communication. Video alone is up 150 in the last six months. The last time we updated that stat was in february. Again, its early days. With 200 million advertisers and 50 million on facebook, we have a lot of work to do. How long do you have him at your disposal to run this business . Kevin has been a fantastic founder and ceo. He sits within our Management Team and is absolutely super engaged on both the consumer side of the platform as well as the monetization and how we build products and solutions that deliver for marketers. Hes a great partner. Facebook live huge part of the discussion here, advertisers are talking about it like its an experiment. When do you monetize that . The way we think of that is broader level video message. On facebook we have over 100 million hours occurring every single day, which is an extraordinary number. Every time we estimate video we continue to underestimate it. Live is a relatively new product we launch launched and certainly very excited about what we see. People can comment ten x more than they do on regular videos. Carolyn, thank you so much for making time to come on cnbc to talk about this. Major milestone for the company, we appreciate it. Thank you, kayla. Carolyn everson, back to you guys at post nine. Kayla tausche in cannes lion. Worth every penny. You go buy it off of that stock, sold to you 114, thats whats happening right now. Incredible how sellers heavy they are. Cramers mad dash and one more look at the premarket. Janet yellen in about 40 minutes. Dont go away. Before the cmo thought to himself, yeah, i can do that. And then thought to himself, no, i shouldnt have done that. [ crash ] and doctors with Realtime Data at their fingertips asked, how a man your age could do this to himself . Before any of this, cdw orchestrated a point of care solution using the lenovo x1 carbon yoga with intel core processors. Connected health care by lenovo. Orchestration by cdw. Its how you stay connected. With centurylink as your trusted technology partner, you get an industry leading Broadband Network and cloud and hosting services. Centurylink. Your link to whats next. With usaa is awesome. Homeowners insurance Life Insurance automobile insurance i spent 20 years active duty they still refer to me as Gunnery Sergeant when i call being a usaa member because of my service in the military to pass that on to my kids something that makes me happy my name is roger zapata and im a usaa member for life. Usaa. We know what it means to serve. Get an insurance quote and see why 92 of our members plan to stay for life. All right. Lets get to it, a mad dash for this tuesday. We got about seven minutes or so before we start trading here at the nyse. Where are we going . Housing is so crucial to this market. Lennar, this is a good number they reported this morning. New orders are really strong. David, this is the kind of thing that you could get a serious rally in starts with housing and autos. Now, autos we know are challenged because of a variety of secular concerns, but lennar is the bellwether in this group. And the fact Stewart Miller could tell a good story, kb holmes reports after the close, but i think this is literally the only thing ive seen could justify a second day rally. Really . Yeah. Its the only thing because its substantive, its a much better number. I know the Gross Margins werent expanding, but this is a gigantic nationwide home builder. When they say good things, then good things tend to happen to a lot of companies within the area. I mean, even a home depot and lowes have rallied off a big lennar number. Only 10 of the country but punches well above its weight. It does. Thank you, john stumpf. Im taking that forever. Going to have an impact on toll brothers. I think k. B. , got to watch the report, but i think horton and all the conversation invo e involviinvolv involving pulte. Yeah. Suboptimal deal, david. Right. Ill a e advised by then, but i think watching housing is something that is substantive and can make sense if you believe that the feds on hold and janet yellen says nothing controversial and no talk about a july rate hike, this could be a leader in the market. All right. Theres a little bullishness for you. Got it. A bullishness. Thank you. Stay right here on squawk on the street. Man 1 youre new. Man 2 i am. Woman exmilitary . Man 2 four tours. Woman you worked with computers . Man 2 thats classified, maam. Man 1 but youre job was George Sorros<\/a> issuing a major warning against a departure, even David Beckham<\/a> is weighing in. But first up in about an hour from now on capitol hill fed chair yellen will kick off two days of semiannual testimony on Monetary Policy<\/a> and the economy. Today its before the Senate Banking<\/a> committee which is expected to grill her on everything from rates to brexit. Of course well bring you live coverage once the fed chair begins her remarks followed by the q a session with lawmakers. Some discussion it might be more contentious than usual even with her recent comments in the meeting last week. On both sides a lot of people saying get it over with. Admit things are weak and what are you going to do about it. What is she going to do about it . Its not up to her. Look at germany last quarter very interesting what the finance minister say. Look, we had these immigrants come in and weve had to build, weve had to start spending money to make it so they have new lives. And thats how our gdp is moving up. Now, this is something i thought would happen because i think germany is trying very hard to accommodate as many people, trying to do the right thing. In our country she goes to the hill shes looking at the people who could possibly do something because this new economy is not something she can deal with. People getting laid off every day by your cell phone. I mean theyre literally ged e getting laid off. Now looking at retailers that are struggling. Well see if discussion gets her to a new lower rate. I wish they did. I wish they get into the idea that the people in our district complaining theyve lost our jobs to technology, digitization, its not just lost jobs to china, but look, brexit, i mean, i dont think, its up in the air like everybody, bring wilfred, only on for 17 hours last night. I know. To your point about job losses as a result of advances in technology, thats not the feds problem, right . Thats a political problem. Train the vast force of American Work<\/a> force for the current environment or be marketable to it or keep Interest Rates<\/a> more or less zero forever, but meanwhile weve got less than 5 unemployment. So what gives . Theres a shift economy out there, theres people we dont know theres not people still left the work force, but im talking future layoffs and people taking good clerical jobs at a bank where the millennials 20 Million People<\/a>, bank of america they use handheld, online banking. All im saying is she should kick it back to them. In germany you think these people that have come from syria have jobs . They create jobs. They create jobs for them. They do something for them. Its time that we did something for our own people. We spent a lot of money on foreign aid. I dont mean to sound like well, listen, theres been attempt to spend more money on infrastructure for many years and its gone nowhere. Repeatedly. It hassed unwillingness of congress to vote it. Nobody wants to spend money, right . No gasoline, caterpillar, no deere machines, theyre big machines, its up more to congress is what im saying. Im saying kick it back. Yellens half of the story today, brexit is the other half. And this sor ros commentary in the guardian sees a decline in the pound worse than when he broke the bank of england. What do you think . If i was soros i would say just that. If they stay, if they remeain, then hes off the hook. Youre saying this is a big cya . Why not . I would do exactly what hes doing. Hes probably short, gets the cover very quickly, maybe hes not short. Who knows. But would we be sitting here if they dont remain, if they exit . Will we be sitting here questioning whether it was only down 2 and that soros not going to do that. Thats not the way its played in the journalism business. Soros had a big hit in 92. Thats all. Sports, you know, youre only as good as your last. Don schulo ends up being a steakhouse guy. Remember tom landry, a great band, and then loses a lot of games were going to think about him. Soros we found out he was actively involved other than you everyone thought he was actively involved in those calls. Every time soros made those calls, david saying you know thats not really soros. Why didnt you go along with everybody else . Why did you have to spoil the party . I knew it wasnt him. He wasnt involved. Its so much easier to be like everybody else. It is. It is. What is it with you . I dont know. I try not to say very much. Did you go to new journalism school, 2. 0 . What is that school . Says as were talking sanofi bid for striker. I heard from absolutely nowhere twitter gets a 22 bid tonight from microsoft. Oh, my god, theres people out there who dont understand sarca sarcasm. Right. Thats sarcastic. Im just saying soros is making the right call. No one will punish him if hes wrong. Its an asymmetrical business to make these calls. I think we have to own thats the case. Right. That journalism is not able to be set up to critique a man like soros. Business journalism cant. Espn, yes. As for betting markets still sees 75 chance of remain. Its 48 hours from voting. Other polls 42 right. I like yours. I think thats great. How about the systematic are they calling people . Are they doing it online . What are they doing little online stuff . It seems like the polling there, maybe were polling, whos polling . Polls are fascinating in the sense of how their done, how theyre conducted and whether or not theyre accurate. Once again there will be no look at all the polling that was so wrong in the Republican Party<\/a> in our country . Or how about the fact when bernie wins california its an open convention. Although to be fair trump was ahead in the polls from the earliest days. The pundits were wrong. Again, strikers not getting a bid and twitter will not get a bid tomorrow, im saying journalism is not set up to critique a soros because he was so much right in 92. This is not sports. If youre right in 92, youre right now. Even if youre Proven Guilty<\/a> were not going to come here monday and say, boy, soros was wrong. Thats not the way its done in our business. I wish it were. I wish everyone were like you. Well, thank you, jim. Youve said a lot of nice things. How many more piens do you have to throw . I got like a thousand of those. Move onto some news this morning. Real news . No, real news. Softbank stepping down as president had been hand picked success successor, ran softbank and ran it going to remain ceo longer than originally planned. That will be effective july 1st. Interesting story softbank been in the news in part because of that sale of over 10 billion worth of its alibaba stock. It still owns a lot more than that. Also, today in the news because of a sale of its stake along with some others who own that same stake in a video game company, theyve been monetizing some of their investments there. Arora of course famously came from google with a lot of fanfare. And very interestingly last august bought 483 million of stock to show people he was in it, going to be the ceo. Apparently son who turns 60 in a year or two decided that really is not a good age to retire. I havent spoken to him in a while, hope to. Perhaps hell come back and sit down for an interview. That seems to be one of the keys as to why mr. Aroras decided now is the time after only two years at the company to seek other opportunities. I thought it was an extraordinary story. By the way he sold that stock back. Get out. That was my question this morning. He borrowed money to buy that, almost half a billion worth of stock last august. He sold it back at what im told is a minimal loss for mr. Nikesh arora. I remember when google got hit, hes really good. Hes a really smart guy. One of the very early guys at google. Had one of the more significant jobs in opening their business around the world. Id say so. But he runs softbank. Are you going to turn to Sumner Redstone<\/a> now . No. That would make sense. Hes 58 years old. Im saying when you think about longterm guys. Although it would be nice for every executive departure to be as transparent as he has on twitter today, i mean answering questions just flat out, yeah, masa wanted five to ten more years, i wasnt having it. Learned a lot. Good to take narrative in your own hands. Yeah. Theres a look at masa. Theres the man were talking about of course who runs softbank, controls sprint as well and still huge stake of alibaba. Yahoo japan they may figure a way to try to get some of that back from yahoo as it takes itself apart. This is when he sat with us during the alibaba ipo. One of my favorite moments. Yeah. Alibaba is moving up. Nikesh is the guy, my travel trust own google, wow, that was one of the reasons you wanted to own it. Oh, come on, the guy was really good. You always wonder about these guys how good they really are. When borat moved over from morgan stanley. We do have some of his tweets though carl was talking about. All good, masa wanted to be ceo for longer, i did as promised, time to move on. Masa and i are still in love with each other. I will support everyone i invested in, and they know that. That means the investments hes made, some of which hes taken criticism particularly large investment made in a singapore Ecommerce Company<\/a> that had a significant loss perhaps far beyond what people had imagine softbank. Interesting people are willing to limit their whole raise on life to 140 characters, right . Big shot guy and decided twitter is the way to do it. He may join us at some point. Yeah. We hope so. We let you answer more than 140 characters. Right. Better venue. United technologies didnt go onto kill the honeywell bid on twitter. Came here. Right . When we come back marc benioff came here. Yep. Facebooks head of advertising with news on instagram this morning. Kayla tausche is live in france. Take another look at the premarket. Going to be another interesting one as brexit polls get digested and yellen takes the hill in about 45 minutes. Dont go away. Todd spaletto, president of the north face, we are working on the prototype to match customers to gear. Watson, lets give it a try. Say its midjune and im backpacking in yosemite. Of our 353 jackets, i can recommend nine. Watson, what if it rains . There is just a 3 chance of rain, so i recommend the breathable stretch fleece fuse form dolomiti jacket. A Perfect Choice<\/a> watson. No wonder our Customer Loyalty<\/a> numbers keep climbing. I believe we can do even better. I like the way you think. I believe we can do even better. Atand that in a new house,tee a fyou probably dont sharece, the same tastes as the previous owner. [ dolphin chatters ] so when you need a little house painting or a complete remodel, well help you get the job done right, guaranteed. Get started today at angies list, because your home is where our heart is. Got some news coming out of instagram. Lets get over to Kayla Tausche<\/a> whos at cannes lion with a very special guest. Good morning, kayla. Reporter good morning, carl. Well, instagram announcing just moments ago it has surpassed 500 million monthly active users. The last time we heard this metric was last fall, 400 million monthly active users. So quite a bit of growth for instagram. And we are joined here in cannes by facebooks global head of advertising. Caroline, what an honor it is to have you on a day when we have so much news to talk about. Well, thank you for having me. So the growth weve seen since last fall to now, 25 user growth, is that organic or something deliberate youre doing with the product . Well, the growth on instagram has been tremendous. If you think about instagram it was started five and a half years ago, 300 Million People<\/a> per day, 100 million in the u. S. That are coming on a monthly basis. And the exciting thing is that this last 100 million have joined faster than the prior 100 million, so were seeing tremendous momentum around the world and enthusiasm for a platform that is all about visual communications and discovery. So the question that all of our viewers are wondering is what is Revenue Growth<\/a> look like . Is it tracking the user growth . Is it growing as fast . Well, the way we think about Revenue Growth<\/a> is we think about the pool of advertisers that we can be working with. And there are 50 million businesses that have a presence on facebook. Of those 50 million, 3 million actually advertise on facebook. Instagram has 200,000 advertisers. So from our perspective its very early days, but were really excited about the opportunity and certainly this week in cannes instagram is a topic of discussion in every meeting. So when wha are those conversations looking like. What do advertisers want to know . How are they actually building content . Advertisers are most interested in understanding how to be mobile best marketers. They have had years, decades in some cases of experience in building wonderful tv creative and print creative, and now theyve recognized that the consumer has shifted so rapidly to mobile, spending 25 of their time. In the u. S. Alone consumers are spending over three hours on their mobile device, checking their phone 30 times or more per day. So if youre a marketer, you have to build this mobile first creative capability. But if youre a marketer, do you choose to advertise on instagram instead of facebook . Most of what were seeing is theyre actually youtuutilizing platforms. Its excellent for brand objectives and were utilizing d. R. Objectives across both platforms as well. We have the same infrastructure on the back end and the algorithm optimizes to give the marketer the best value. So the Company Bought<\/a> it for 736 million, or thereabout, and it had 1 16 of the users. Is it worth more than that . The way we look is portfolio of family ops and services. We want to make people more connected and give the power to share. Instagram is incredible part of our portfolio because of the explosion of video communication. Video alone is up 150 in the last six months. The last time we updated that stat was in february. Again, its early days. With 200 million advertisers and 50 million on facebook, we have a lot of work to do. How long do you have him at your disposal to run this business . Kevin has been a fantastic founder and ceo. He sits within our Management Team<\/a> and is absolutely super engaged on both the consumer side of the platform as well as the monetization and how we build products and solutions that deliver for marketers. Hes a great partner. Facebook live huge part of the discussion here, advertisers are talking about it like its an experiment. When do you monetize that . The way we think of that is broader level video message. On facebook we have over 100 million hours occurring every single day, which is an extraordinary number. Every time we estimate video we continue to underestimate it. Live is a relatively new product we launch launched and certainly very excited about what we see. People can comment ten x more than they do on regular videos. Carolyn, thank you so much for making time to come on cnbc to talk about this. Major milestone for the company, we appreciate it. Thank you, kayla. Carolyn everson, back to you guys at post nine. Kayla tausche in cannes lion. Worth every penny. You go buy it off of that stock, sold to you 114, thats whats happening right now. Incredible how sellers heavy they are. Cramers mad dash and one more look at the premarket. Janet yellen in about 40 minutes. Dont go away. Before the cmo thought to himself, yeah, i can do that. And then thought to himself, no, i shouldnt have done that. [ crash ] and doctors with Realtime Data<\/a> at their fingertips asked, how a man your age could do this to himself . Before any of this, cdw orchestrated a point of care solution using the lenovo x1 carbon yoga with intel core processors. Connected health care by lenovo. Orchestration by cdw. Its how you stay connected. With centurylink as your trusted technology partner, you get an industry leading Broadband Network<\/a> and cloud and hosting services. Centurylink. Your link to whats next. With usaa is awesome. Homeowners insurance Life Insurance<\/a> automobile insurance i spent 20 years active duty they still refer to me as Gunnery Sergeant<\/a> when i call being a usaa member because of my service in the military to pass that on to my kids something that makes me happy my name is roger zapata and im a usaa member for life. Usaa. We know what it means to serve. Get an insurance quote and see why 92 of our members plan to stay for life. All right. Lets get to it, a mad dash for this tuesday. We got about seven minutes or so before we start trading here at the nyse. Where are we going . Housing is so crucial to this market. Lennar, this is a good number they reported this morning. New orders are really strong. David, this is the kind of thing that you could get a serious rally in starts with housing and autos. Now, autos we know are challenged because of a variety of secular concerns, but lennar is the bellwether in this group. And the fact Stewart Miller<\/a> could tell a good story, kb holmes reports after the close, but i think this is literally the only thing ive seen could justify a second day rally. Really . Yeah. Its the only thing because its substantive, its a much better number. I know the Gross Margins<\/a> werent expanding, but this is a gigantic nationwide home builder. When they say good things, then good things tend to happen to a lot of companies within the area. I mean, even a home depot and lowes have rallied off a big lennar number. Only 10 of the country but punches well above its weight. It does. Thank you, john stumpf. Im taking that forever. Going to have an impact on toll brothers. I think k. B. , got to watch the report, but i think horton and all the conversation invo e involviinvolv involving pulte. Yeah. Suboptimal deal, david. Right. Ill a e advised by then, but i think watching housing is something that is substantive and can make sense if you believe that the feds on hold and janet yellen says nothing controversial and no talk about a july rate hike, this could be a leader in the market. All right. Theres a little bullishness for you. Got it. A bullishness. Thank you. Stay right here on squawk on the street. Man 1 youre new. Man 2 i am. Woman exmilitary . Man 2 four tours. Woman you worked with computers . Man 2 thats classified, maam. Man 1 but youre job was Network Security<\/a> . Man 2 thats classified, sir. Woman lets cut to the chase, here. Man 1 whats youre assessment of our security . Man 2 [ gasps ] porous. Woman porous . Man 2 the Old Solutions<\/a> arent working. Man 2 the world has changed. Man 1 meaning . Man 2 its not just security. Its defense. Its not just security. Its defense. Bae systems. Mary buys a little lamb. One of millions of orders on this companys servers. Accessible by thousands of suppliers and employees globally. But with Cyber Threats<\/a> on the rise, marys data could be under attack. With the help of at t, and security that senses and mitigates Cyber Threats<\/a>, their Critical Data<\/a> is safer than ever. Giving them the agility to be open secure. Because no one knows like at t. Youre watching cnbc squawk on the street live from the Financial Capital<\/a> of the world. The opening bell in about a minute and a half, yellen on the hill, brexit polls, the pound highest. Wow. Carmax this morning, not great. Youre seei inin ining wernor f talking about sluggishness, United Airlines<\/a> announcing cost savings and saying things may not be as horrible as people think. All over the map stuff today. All over the map. And no clear direction. Im not allowed to be facetious, but apple doesnt have lift anymore either. Close to Opening Doors<\/a> in india, basically opening the flood gates of lawsuits in china at the i. P. Races contests are going to get fiercer over there. Oh, we have oil down but the oil stocks being pushed. Marathon being pushed aggressively. You dont buy those stocks on a down oil day. That has always been a suckers bet. A lot of people like yesterday when a lot of people came on the market was up big, its like no. Lets get to the opening bell here at the nyse and get a look at the s p at the bottom of your screen. On the big board today its jack daniels celebrating its 150th anniversary. Over at the nasdaq 8. 3 energy partners, operator of solo Energy Generation<\/a> projects. Yeah. Dont forget jim beam got the gigantic big. Always been very independent doing what it wants, excellent company. Liquor just works. The people who brush their teeth with a bottle of jack. And she has a dollar sign in her name which ive always wanted but i dont have an s in my name. James. James i could put the dollar sign. I guess i could. My father called me james. Kesha, what game, huh . If you put kesha on twitter as a stock, shes dollar sign ke dollar sign . Speaking of twitter, adam bain, head of sales for twitter tweets, news, big video project expansion, longer video, new ways to consume and launch twitter engaged for creators. This video war between twitter and facebook. Wow. Just heard from instagram moments ago. I like adam bain. Adam bains a guy, a twitter guy, always optimistic. Dave, im talking to you. Sorry, im listening to you. Im listening, i can type and listen, you know that. Were all capable of doing that. I am telling you twitter is doing things notice the stock stopped going down . Adam bain, listen to me, your stock stopped going down and dont get down. Dont get down. Guys attack you, guys say bad things, dont get down. Especially when i say things and dont get down. Cable vision you wont see it anymore. What . No, now part of the French Company<\/a> altese controlled by Patrick Drahi<\/a> expanded around the world and in the u. S. With the purchase some time back and now closing on its deal to acquire cable vision. Price tag was 34. 90 a share. And dexter goya will actually join us a little later in the show, hes the man going to be running the u. S. Assets. There he is, right there, yeah, you see him . They had him in the corner of the screen. You told people that was going to happen. Told people what was going to happen . Cable vision was in play. Oh. Good call by you. I mean, whats interesting of course the decision made by cable visions founder, the patriarch of the family, just dolan, to sell the company. Msg is still a control of this company, amc, you got to remember when you look at cable vision and try and figure out the total value that they return to shareholders not just 34. 90 cash to altice, but the things that have been spun off actually adds up to a decent nurnl despite whats been some criticism through the years. Perhaps not as warranted, but this deal cements altices position as a major cable business here in the United States<\/a>. Question is whats next for them. Remember they had tried and failed to acquire Time Warner Cable<\/a> or at least thought about it going in there after the deal when comcasts deal to acquire it collapsed. And before charter cemented that deal to acquire Time Warner Cable<\/a>, but theyre aggressive, altice, and theyre talking some very large synergy numbers for this acquisition. But well get into all of that. We hear twitter and video and facebook, i always think wifi, i always think wifi, people say why are these Cable Companies<\/a> go on . Geez, you got to have it. Broadband is the prize. You cannot do without broadband. You have to have broadband. I was backing up my pictures yesterday on my iphone, you cant do it. You think uploading 140second video to twitter part of this new product is going to be easy to do without wifi . No, you got to have wifi. I think wifi keeps coming up and people dont relate wifi to altice. Altice probably interesting stock there. Listen, they have an enormous amount of debt because he followed john malones school even levered up more than a Malone Company<\/a> would be, borrow when its cheap and dont be afraid to lever up, theyve done that. Now they have to prove they can operate these assets and deliver on some of the promises theyve made financially, which many in the industry believe are quite aggressive. Right. I have cable vision. Now you have altice. They could do a little upgrade there. Yeah. And videos still important. We talk so often about broadband the key product, but video is important. They do believe they can improve the video product of cable vision. They do. Im a big believer in cable stocks. Just because video is so consuming, and i just think its so much of the web, and i need my wifi. And, you know, i just need it. I wish i didnt because its another bill i got to pay. Yep. You mentioned ual earlier, they see q2 unit revenue down 2. 5 to 6. 5, not as bad as they saw earlier. I looked at that release and i said someones going to like this. The airlines have been down so much they look up to me, they look so bad in terms of numbers that being not as bad as really bad is not bad. Right. And how about this slim line seats, adding slim line they dont explain what that is. Doesnt sound good. No, no. Sounds a little less roomy. Yeah. How is that possible . Watch them make us pay for the cookies. 7 for those cookies, they smell so good. Got to buy a cookie. I know. Im aware. I just flew back and forth with the family coach. Did you eat the cookie . No, we buy everything ahead of time. All our provisions for the flight. Virgin america gave us one little bottle of water. All you got on a fivehour flight. We used to buy kraft cheeses and wonder bread. Its like going on an adventure trip, an Outward Bound<\/a> can you survive in your tiny little spot when youve got one thing of water. Can you make it . Dows up about eight points. We want to get to kate kelly with breaking news. Hey, carl. Some somber news this morning, Portfolio Manager<\/a> at visium fund manager found dead what dow jones reporting to be apparent suicide found by his wife slashes to the neck. Found in connection with allegedly receiving profitable tips on fda approvals of generic drug e drugs while at visium. His lawyer at the time saying valvani was an innocent man looking forward to his day in court, but apparently that moment will not come at least for him, guys. Thats the developing story we have. Were awaiting some comment from the authorities as well. Thank you for that. That is a tough story. Yeah, visium itself of course its founder deciding to shutter the firm in a variety of ways selling some of the business to sanford bernstein, he was a big player. Obviously very tragic news after the indictment that kate described just now. With all that, dows up 15. Obviously everybodys in a waiting period ahead of yellen in about 20 minutes. Marys on the floor for us today. Hey, carl. As you say investors are awaiting yellens testimony which begins in a little less than half an hour, 23 minutes from now at 10 00 eastern. And of course the shifting polls on brexit also keeping investors on edge today. The Dow Jones Industrial<\/a> average again up 17 points, well off its highs of the day which was about 49. Investors again want to see what yellen has to say about Interest Rates<\/a> and of course the economy as well at 10 00 eastern. What were also seeing is a little bit of a rebound in the dollar index, were seeing a pullback in bonds. So were seeing slightly actually, bond yields are flatd right now. Scratch that. Seeing a pullback in commodities. Transportation stocks lower as well despite weaker energy. Todays gains, modest gains in the markets coming off the back of gains that were seeing in europe today, although those gains too have come off their best levels of the day. Of course the european markets responding yesterday and today to some polls of course suggesting that britain will vote to stay in the eu. Right now though we can see that the ftse is pulled back. There was a recent poll just a couple minutes ago that suggested the mood is shifting once again. So thats one of the reasons, again, the markets are on edge because these polls are continuously shifting. Take a look at the financials, they were among the big gainers yesterday again on expectations that the uk would stay within the eu. Well, todays a different story. Well see how the bank stocks react. Other thing you have to note is what yellen says ant Interest Rates<\/a>. These are stocks very sensitive to the fact we remain in a low rate environment, all would benefit from higher rates. Well see whether or not yellen indicates that the fed may again continue on a pace to increase rates as they have said previously by a couple of rate increases this year. The most recent data throwing cold water on that. Commodities fading today, gold pulling back and crude oil as well. Thats actually not helping the airlines or at least the transportation stocks i should say right now off 76 points. Airlines of course a different story because you had United Continental<\/a> holding an investor call today. And actually giving an improving outlook for revenue which is still expected to decline but not as mumch. Railroads are under pressure today putting pressure on the transport stocks. Dow up 20 points, were all in waiting mode. Back to you. Mary thompson on the floor. Lets get to the bond pits as well. Rick santelli in chicago, good morning, rick. Good morning, carl. You know, on this Trading Floor<\/a> its all about brexit, obviously. Markets are moving about brexit. But the conversation is are you really trading brexit . Im not sure what were trading but it seems awfully algorit algorithmic, fundamentals havent changed though questions do arise as to remain, leave and the dynamics there, but most traders down here just think its an algo trade, certain expressions, certain words, betting sites, everything is moving as one. Look at oneweek chart across the board, oneweek of our tenyear, obviously yesterday and the remaining days of last week we did see a rise in rates. Now that has reversed a little bit, but exactly the same with bund yields, exactly the same with gilds, the tenyear in the uk, and with Foreign Exchange<\/a> really no different. Lets start out with the dollar index on a fiveday chart, lost ground. Exactly the same relationship as the fixed income markets together. So if we pull out the two that are being most watched, dollar yen, look at the dollar over five days. Pound versus dollar, switch it around. Look at the pounds assent. Nobody knows remain, leave, exactly whats going to happen, most in power are status, so of course theyre saying if you leave the sky will fall. But no matter how you slice it, this is big time for alleghegorc trading, speculating and large market moves. Carl, back to you. Rick santelli in chicago. When we return, the Senate Banking<\/a> committee will have plenty of questions for janet yellen as the fed chair gets ready to testify on the economy. Of course were going to bring that to you live in about 17 minutes. But first, an exclusive with the ceo of altice usa, the Company Closing<\/a> its acquisition of cable vision. Markets in a holding pattern, dow up 15. Altice closing its deal for cable vision this morning, as we discussed, creating the fourth largest cable operator in the United States<\/a>. Joining me is dexter goie, congrats on closing the deal. Thank you very much. Extremely excited. Perhaps to become more of a household name here in the u. S. We hope so. Now you own cable vision, theres been a lot made and im one of the people doing it about the 900 million synergy target you have or cost saving target you have for this acquisition, which is far larger than for example even charter put out there when it was requiring tom warner cable, off a much larger cost base. What gives you the confidence you can deliver those kinds of numbers when many people say i dont see how they can do it. Listen, we feel as if we bring a new way of thinking to the business here. Weve experienced quite a lot of changes in Competitive Pressures<\/a> in the european markets, and we think weve got a good steady view of what we can deliver for the next four to five years. I think its time to let us work, help us focus and well talk about it as we go along and we feel really good about the markets. What does it mean when you say approach people say what does a French Company<\/a> know that we dont know here in the u. S. Tom didnt run cablevision for a while, but the people run cablevision through the years. I talk to rutledge, and he said to me back in november having run that business i dont know how hes going to do it, that means deliver the 900 million, but maybe he knows something i dont know. What do you know . Well, maybe we do know something they dont know. I dont know. I think its fair to say give us the space to operate here. I think theres something to be said about the fact that as you comp up different markets around the world, and even here in the u. S. There are certain operators that have run their businesses better than others, at least from a margin standpoint. Jerry being best in class. Jerry who ran sudden link before it was sold to you. And as youve seen weve looked to improve on the performance there with a hawk like focus on top line growth. And so First Quarter<\/a> results were good. We expect Second Quarter<\/a> and Third Quarter<\/a> to continue on those trends. So all i can say is we feel good about medium term targets. Do you think you can get Revenue Growth<\/a> moving at a higher rate at cablevision as well . I think cablevision being in a more mature highly penetrated market is not going to see the same growth as sudden link, but we think we can do other things on the revenue side by looking at revenue streams, looking at trying to monetize our existing bait more efficiently. Were going to focus on the top line and continue to grow the business. Your Controlling Shareholder<\/a> on 60 of altice, when i saw him the only time really was atd a goldman conference, you were there as well, on the day you announced the deal. And he was talking about firing people and we dont like anybody over 30 years old to be running this company. I mean, he said some things that struck people as a little aggressive and a little out of sort of maybe youd get from a founder type, but are you guys really following through on all of those things . No, and i think a lot of what patrick has been said has been a little misinterpreted. You know, we are not focused on a salary level, and thats a level at which this point were not interested in having someone stay. Were very focused on aligning employees with their shareholders. So weve just changed the Compensation Structure<\/a> for the senior Management Team<\/a>. The existing Management Team<\/a> is a very unified cable dlnz vision and sudden link team here Going Forward<\/a>. And i think everyone is really excited about this. Wholesale changes employees is a complete misnomer, were focused on integration and focus on customer approach. You looked at Time Warner Cable<\/a>, but there doesnt seem to be much out there anymore. Are you kind of done in the u. S. . Have you tapped out in terms of what you can do from an acquisition standpoint . Well, were very focused on 2016 as weve told the markets on integrating and operating our existing platforms both in europe and here in the u. S. Weve got quite a lot of work ahead of us. Were focusing on our Balance Sheet<\/a> and make sure we deleverage appropriately and quickly and 2017 will be a new year for us. And well see what happens. Yes, clearly there is consolidation thats been occurring in the cable industry. Thats allowed for less and less players being out there. But that doesnt really change our approach for long term growth of our business and whether that be through consolidation or organic growth. Now you have to go toetotoe with verizons fios, little more competitive here than perhaps the sudden link markets, what about skinny bundles, introduction of packages that might appeal to people who dont want to be paying for as much that they dont need. Well, were very focused on trying to adapt ourselves to what our customers want, which includes skinny bundles in many r respects. I think you know theres a complexity in this market that wooe just learning about and getting up to speed about when dealing with various content providers. So its something were going to work on over the next six months to really understand how we get to from a to b and relative to responding to some of our customer needs. Its really about structuring. Dont you just become all of you become Big Broadband<\/a> companies eventually . I mean, isnt that sort of we were having this discussion earlier. Isnt that the key product . Charter changed its name to spectrum. I think we are obviously more than a broadband provider. I think really need to think about our Strategic Direction<\/a> Going Forward<\/a>. We are focused on the content world. We believe video is a sustainable business. But it will be delivered perhaps through a streaming service through broadband. Doesnt mean we wont have revenues coming from video subscribers. I think thats all about how we figure out how to work with the content providers in the most efficient and fair way. And thats something were going to be focused on having those discussions with them. Well, well be watching of course as you do that. We certainly appreciate you updating us today. I reel e really appreciate it. Thank you very much. Thank you, david. Dexter goei head of operations for altice. Were going to count down to the fed chairs testimony on capitol hill. Dow up 25. Dont go anywhere. Welcome to the world 2116, you can fly across town in minutes or across the globe in under an hour. Whole communities are living on mars and solar satellites provide earth with unlimited clean power. In less than a century, boeing took the world from seaplanes to space planes, across the universe and beyond. And if you thought that was amazing, you just wait. Experience the thrill of the lexus gs f sport. Because the ultimate expression of power, is control. This is the pursuit of perfection. Its how you stay connected. With centurylink as your trusted technology partner, you get an industry leading Broadband Network<\/a> and cloud and hosting services. Centurylink. Your link to whats next. Thank you. Ordering chinese food is a very predictable experience. I order b14. I get b14. No surprises. Buying business internet, on the other hand, can be a roller coaster White Knuckle<\/a> thrill ride. Youre promised one speed. But do you consistently get it . You do with comcast business. Its reliable. Just like kung pao fish. Thank you, ping. Reliably fast internet starts at 59. 95 a month. Comcast business. Built for business. Time for cramer and stop trading. Weve neglected to talk about canadian pacific, cp, its been down really badly. They do a lot of shipping of ag, talking about potash, csx not really, but be aware this is a gigantic Railroad Company<\/a> and those numbers only some of them are because of the wildfire. So the rails have been like the airlines, bad stocks. I dont want to see them roll over but this is a very bad morning, just like the werner, be aware a lot of weakness in the economy. Whats on mad tonight . Okay, natural gas is 2. 65 right now. Were going to take a look at where natural gas is going to go. I think people are not focused on the fact that this fuel goes up, its been really strong. And yet were supposed to be in glut. Im going to try to solve that issue. Jim, we will see you tonight. Busy day ahead. And adobe and fed ex tonight to talk about. Yes. And then fed ex tonight and dont forget were going to look into these twitter i tell you, were all so jaded. Twitter makes major changes like, what a bunch of jokers. Meanwhile were like doing it, 140 the video im going to put out tonight. Mad money 6 00 p. M. Eastern. When we come back, the fed chair on capitol hill. Dont go away. Every day you read headlines about businesses being hacked and intellectual property being stolen. That is cybercrime. And it affects each and every one of us. Microsoft created the digital crimes unit to fight cybercrime. We use the microsoft cloud to visualize information so we can track down the criminals. When it comes to the cloud, trust and security are paramount. Were building what we learn back into the cloud to make people and organizations safer. Good tuesday morning. Welcome back to squawk on the street. Im Carl Quintanilla<\/a> with simon hobbs and david faber at the new york stock exchange. A day chock full of news. Yellen on the hill beginning in about 30 seconds. Were expecting some information, but of course q a well take live when she appears in front of the Banking Senate<\/a> committee, day one of two days on capitol hill. New polls on brexit of course making news showing continued momentum for the remain camp although it is still obviously very close to call. A lot of corporate news, whether its twitter, facebook, ual, and then adobe and fed ex tonight. Oil is not helping keeping us all on guard. Lets get to simon. Well, lets get to Hampton Pierson<\/a> who has testimony on what janet yellen will say. This is the midyear report to congress, in her prepared remarks fed chair janet yellen prepares to tell the Senate Banking<\/a> committee the economy has made further progress however the rate of the improvement of the labor market has slowed and the feds cautious approach to Monetary Policy<\/a> remains appropriate. High Unemployment Rate<\/a>s for minorities remains troubling, she also says on the job front its important not to overreact to one or two labor reports. And the recent slowing in employment growth in the feds view is transitory. Overall Economic Growth<\/a>, she will say, remains uneven, however indicators point to a noticeable stepup in Second Quarter<\/a> gdp. Consumer spending has picked up. Theres been solid growth in real disposable income and housing, she says, continues to recover gradually. She even says that fiscal policy is now, quote, a small positive for growth. Global Economic Growth<\/a> should pick up over time, her statement says, however there are key vulnerabilities in the Global Economy<\/a>. At the top of the list, quote, a uk vote to exit the eu would have a significant economic repercussions. Also she voices concern that china continues to face considerable challenges ahead. Specifically focusing on Monetary Policy<\/a>, yellen basically defends the feds cautious approach to raising rates. She says caution among other things allows monetary support for growth. The fomc could increase rates if the economy overheats, she points out. The fed funds rate in the final analysis, she says, depends on economic and financial developments and labor market strengthening with a return to the feds goal of 2 inflation. Overall a cautiously optimistic statement from the fed chair to the Senate Banking<\/a> committee. Back to you. Thank you very much, Hampton Pierson<\/a>. As soon as janet yellen starts speaking before that committee, we will take that live. Steve liesman joins us with analysis of what yellen is saying. Steve, where would you take us on this . I think what were looking for here is which janet yellen was going to show up, the janet yellen from june 6th aware of the weak job numbers but overall optimistic on the outlook longterm that suggested perhaps rates could rise, or the janet yellen from the june 15th press conference that kind of embraced this idea of secular stagnation that rates would remain low and that was pessimistic that the economy would bounce back. Im hearing more the janet yellen of june 6th, the one that says longterm these headwinds will abate. I havent read the full testimony, simon, but it sounds more and more like shes back to june 6th kind of cautiously optimistic for the future. And we didnt hear, simon, that optimism on june 15th almost at all. Yes, even the labor market described as transitory, which i guess is important. Sounding like she was really embracing the larry somers argument when i asked her this question, the outlook and she said these headwinds they may be permanent, and thats the reason why the fed stepped down and lowered ilts rates or its outlook for rates in the coming years. Took almost a percentage point off the 2018 forecast and pretty much the same, actually more for 2017. So well see. What im interested to know is whether or not the senators grill janet yellen on this issue of whether or not theres a better way to do this, that a single jobs report shouldnt change the outlook quite so substantially. And maybe this idea of a rules based way to run Monetary Policy<\/a> is a better way to do it. Well, they usually do bring it up. Im sure today will be no exception. Steve, thank you. Sure. Lets throw it to Rick Santelli<\/a> in chicago. Rick, what are you now looking for . Well, i very much agree with steve. You know, do we want to make it up as you go or rules based, what do you think is better for investors in the big picture . And also steves words, after the capitulation of the last statement and fed meeting to be optimistic today, i think senator shelby and the gang are going to have some real big questions. As for the markets right now, theyre not really doing much, which also makes sense even though the trend of the day is somewhat meaningful. As you look at the dollar index, it hasnt moved much since the text was released, but its up a half a cent today. If we look at twoyear note yields, theyre down a whole basis point from where they settled yesterday, but they are a bit, a bit lower in yield than yesterday. And you can see that on tens down about three basis points. What will move the markets . Im sure the question and answers are going to dig down not only as to windows that may have been missed in the past, but really nailing it down exactly what yellen, the fomc committee are thinking of doing predicated on the economy. And hopefully, hopefully shell scold them a little bit too for their lack of good fiscal output. Back to you. Thank you very much, rick. And reminder that we are about to take janet yellen live before the Senate Banking<\/a> committee. As soon as that happens we will bring it to you. Global Market Strategist<\/a> at j. P. Morgan asset management, eric also joins us chief International Economist<\/a> at rbc global asset management. Eric, if you had a question before the committee today, what would you ask janet yellen . Id like to know a lot more about that word transitory. Right. When shes talking about transitory, does she mean were back to 200,000 jobs in a few months time, or did she mean there was a verizon strike, it will be 100,000 and we are still in slow growth mode. To me thats key and ultimate key in figuring out whether indeed this is hawkish janet yellen or whether those questions will reveal sentiment maybe more similar to the june 15th type thoughts we heard. I mean, are you taking things at face value here . Or are you, and rick raises this question of capitulation, are you of the view that maybe james bullet is a lead indicator here and the fact he says there wont be a rate rise for two and a half years on his terms means that potentially there wont be a rate rise for generation. How concerned are you that that is the environment to which were now moving . I dont think thats the right base case assumption, but i have to say when we do the numbers you look and see essentially global developed world Recession Risk<\/a> sitting at 25 if not higher. So that scenario is absolutely one in which you do not get anymore rate hikes and maybe thats it for the cycle and for quite some time. I think maybe brexit goes the safe way, the president ial election goes in a fairly benign way and walk out of this with less policy uncertainty with looser financial conditions and with a fed that still needs to raise rates. I think raising is still default, but certainly scenar scenarioings where they dont. David, does the strength of the economy warrant a rate rise . I think the u. S. Economy can handle a rise in rates. Broadly speaking labor markets they may no longer be strengthening, but theyre still tightening, that should lead to upward pressure on wages, that should lead to inflation. This is a 2 u. S. Economy, like it or not. Its not going to go at 3, but its also not going to decelerate to zero. I think it could warrant a rate rise. David, again and again janet yellen has said expansions dont die of old age, which raises some really interesting questions if she Still Believes<\/a> that at the moment. For you as a strategist, as a stock market guy, if theyre not going to raise rates, then presumably the expansion doesnt end in her terms, and that should have been great for the market, shouldnt it . Exactly. I think she has a good point there that expansions dont die from old age. They die from excess. And right now when i look around the u. S. Economy, i dont see any clear signs of excess. There was some in energy, but thats a very small part of the overall u. S. Economic picture. So i think that this could be a relatively long expansion by historical standards. But what we need to see is the fed begin to raise rates, begin to normalize policy and think a little bit about where the economy is headed. But were going in the other direction. If the rate rises are less likely, and expansions dont die of old age. Yes. Why is the stock market not roaring ahead . So i actually think the stock market is looking to the fed for a little bit of confirmation that things in the u. S. Are actually okay. I mean, lets not forget a month ago this was the Federal Reserve<\/a> prepping the market to hike rates, then they did a complete 180 at the june meeting. Now theyre leaving rates on hold, lowering longterm forecasts, how are we supposed to read into this . Its very confusing. You know, eric, what david is raising is a very important point that arguably central bankers cannot deal with, and thats the behavioral aspects of what theyre saying. Its not just the pricing of money, its this idea that theyre scaring people or that theyre hitting confidence by not expressing more confidence themselves. Where do you stand on that . I think thats a fair criticism, but all the same i frankly find it refreshing that they are talking in a more probablistic sense recognizing uncertainties, not pretending there is a single view of the world. I think Central Banks<\/a> gotd themselves into a bit of trouble precrisis and post crisis in terms of pretending they had all the answers and turned out they did not. I think its useful if it leaves markets uncertain, thats the reality. We dont know which of several scenarios will play out here. She does say brexit could have significant economic repercussions. What is she supposed to say 48 hours before . Theyre going to be mining her for some insight as to what happens. Weve known brexit is a risk for months at this point. I think whats key is to understand that the Economic Impacts<\/a> are actually relatively limited here in the u. S. The biggest channel for contagion is through the Financial Market<\/a>s. We saw that last week with tenyear yields touching yeartodate lows. I think theres a more risk in volatility, more of a risk on sentiment, but for the u. S. The impact is relatively are you suggesting going through this almost binary results people derisk, raise money for opportunity. As someone said yesterday on the show, you know, if we reprice majorly thursday, friday, thats a huge opportunity weve not had for some time as far as many people are concerned. Exactly. I think were coming back to the central theme of uncertainty. And do you think things are going to go one way . Do you think theyre going to go the other . Right now frankly its too close to call, but with u. S. Economic growth looking decent, i think with europe coming back online there is opportunity out there. So we cant completely shun risk assets. We need to make sure we stay balanced. Thank you both for your analysis, gentlemen. Obviously you can see the fed chair has taken her seat. When the q a begins of course well bring that to you. In the meantime lets actually go to the fed chair as shes making her statement. Current Economic Situation<\/a> and outlook before turning to Monetary Policy<\/a>. Since my last appearance before this committee in february, the economy has made further progress toward the Federal Reserve<\/a>s objective of maximum employment. And while inflation is continued to run below our 2 objective, the federal open Market Committee<\/a> expects inflation to rise to that level over the medium term. However, the pace of improvement in the labor market appears to have slowed more recently, suggesting that our cautious approach to adjusting Monetary Policy<\/a> remains appropriate. In the labor market the accumulative increase in jobs since its trough in 2010 has now topped 14 million. While the Unemployment Rate<\/a> has fallen more than 5 Percentage Points<\/a> from its peak. In addition as we detail in the Monetary Policy<\/a> report, jobless rates have declined for all major demographic groups including for africanamericans and hispanics. Despite these declines, however, its troubling that Unemployment Rate<\/a>s for these minority groups remain higher than for the nation overall and that the annual income of the median africanamerican household is still well below the Median Income<\/a> of other u. S. Households. During the First Quarter<\/a> of this year job gains average 200,000 per month, just a bit slower than last years pace. And while the Unemployment Rate<\/a> held steady at 5 over this period, the Labor Force Participation<\/a> rate moved up noticeably. In april and may, however, the average pace of job gains slowed to only 80,000 per month, or about 100,000 per month after adjustment for the effects of a strike. The Unemployment Rate<\/a> fell to 4. 7 in may, but that decline mainly occurred because fewer people reported that they were actively seeking work. A broader measure of labor markets slack that includes workers marginally attached to the workforce and those working parttime who would prefer fulltime work was unchanged in may and remains above its level prior to the recession. Of course its important not to overreact to one or two reports. And several other timely indicators of labor Market Conditions<\/a> still look favorable. One notable development is that there is some tentative signs that wage growth may finally be picking up. That said, we will be watching the job market carefully to see whether the recent slowing in employment growth is transitory as we believe it is. Economic growth has been uneven over recent quarters. U. S. Inflation adjusted Gross Domestic Product<\/a> is currently estimated to increase at an annual rate of only 0. 75 in the First Quarter<\/a> of this year. Subdued foreign growth and the appreciation of the dollar weighed on exports, while the Energy Sector<\/a> was hard hit by the steep drop in Oil Prices Since<\/a> mid 2014. In addition, Business Investment<\/a> outside of the Energy Sector<\/a> was surprisingly weak. However, the available indicators point to a noticeable step up in gdp growth in the Second Quarter<\/a>. In particular, Consumer Spending<\/a> has picked up smartly in recent months supported by solid growth in real disposable income and the ongoing effects of the increases in household wealth. In housing has continued to recover gradually aided by income gains and the very low level of mortgage rates. The recent pickup in Household Spending<\/a> together with underlying conditions that are favorable for growth lead me to be optimistic that we will see further improvements in the labor market and the economy more broadly over the next few years. Monetary policy remains accommodative. Low oil prices and ongoing job gains should continue to support the growth of incomes and therefore Consumer Spending<\/a>. Fiscal policy is now a small positive for growth. And global Economic Growth<\/a> should pick up over time supported by accommodative monetary policies abroad. As a result, the fomc expects that with gradual increases in the federal funds rate, Economic Activity<\/a> will continue to expand at a moderate pace, and labor market indicators will strengthen further. Turning to inflation, overall Consumer Prices<\/a> as measured by the price index for personal consumption expenditures increased just 1 over the 12 months ending in april. Up noticeably from its pace through much of last year, but still well short of the committees 2 objective. Much ofts shortfall continues to reflect earlier declines in Energy Prices<\/a> and lower prices for imports. Core inflation, which excludes energy and food prices, has been running close to 1. 5 . As the transitory influences holding down inflation fade, and the labor market strengthens further, the committee expects inflation to rise to 2 over the medium term. Nonetheless, in considering future policy decisions, we will continue to carefully monitor actual and expected progress toward our inflation goal. Of course considerable uncertainty about the Economic Outlook<\/a> remains. The latest readings on the labor market and the weak pace of investment illustrate one downside risk, the domestic demand might falter. In addition, although im optimistic about the longer run prospects for the u. S. Economy, we cannot rule out the possibility expressed by some prominent economists that the slow productivity growth seen in recent years will continue into the future. Vulnerabilities in the Global Economy<\/a> also remain, although concerns about slowing growth in china and falling Commodity Prices<\/a> appear to have eased from earlier this year, china continues to face considerable challenges as it rebalances its economy toward domestic demand and consumption and away from exportled growth. More generally, in the current environment of sluggish growth, low inflation and already very accommodative Monetary Policy<\/a> in many advanced economies, Investor Perceptions<\/a> of an appetite for risk can change abru abruptly. One development that could shift Investor Sentiment<\/a> is the upcoming referendum in the United Kingdom<\/a>. A uk vote to exit the European Union<\/a> could have significant economic repercussions. For all of these reasons the committee is closely monitoring Global Economic<\/a> and financial developments and their implications for domestic Economic Activity<\/a>, labor markets and inflation. I will turn next to Monetary Policy<\/a>. The fomc seeks to promote maximum employment and price stability as mandated by congress. Given the Economic Situation<\/a> i just described, Monetary Policy<\/a> is remained accommodative over the first half of this year to support further improvements in the labor market and a return of inflation to our 2 objective. Specifically the fomc has maintained the target range for the federal funds rate at 0. 25 to 0. 50 , and kept longterm securities at an elevated level. The committees actions reflect a careful assessment of the appropriate setting for Monetary Policy<\/a> taking into account continuing below target inflation and the mixed readings on the labor market and Economic Growth<\/a> seen this year. Proceeding cautiously in raising the federal funds rate will allow us to keep the Monetary Policy<\/a> the monetary support to Economic Growth<\/a> in place while we assess whether growth is returning to a moderate pace, whether the labor market will strengthen further and whether inflation will continue to make progress toward our 2 objective. Another factor that supports taking a cautious approach in raising the federal funds rate is that the federal funds rate is still near its effective lower bound. If inflation were to remain persistently low, or the labor market were to weaken, the committee would have only limited room to reduce the target range for the federal funds rate. However, if the economy were to overheat and inflation seemed likely to move significantly or persistently above 2 , the fomc could readily increase the target range for the federal funds rate. The fomc continues to anticipate that Economic Conditions<\/a> will improve further and that the economy will evolve in a manner that will warrant only gradual increases in the federal funds rate. In addition, the committee expects that the federal funds rate is likely to remain for some time below the levels that are expected to prevail in the longer run because headwinds, which include restraints on u. S. Economic activity from economic and financial developments abroad, subdued household formation and meager productivity growth mean that the Interest Rate<\/a> needed to keep the economy operating near its potential is low by historical standards. If these headwinds slowly fade over time, as the committee expects, then gradual increases in the federal funds rate are likely to be needed. In line with that view, most fomc participants based on their projections prepared for the june meet iing anticipate value for the federal funds rate of less than 1 at the end of this year and less than 2 at the end of next year will be consistent with their assessment of appropriate Monetary Policy<\/a>. Of course, the Economic Outlook<\/a> is uncertain, so Monetary Policy<\/a> is by no means on a preset course. And fomc apartments projections for the federal funds rate are not a predetermined plan for future policy. The actual path of the federal funds rate will depend on economic and financial developments and their implications for the outlook and associated risks, stronger growth or more rapid increase in inflation than the committee currently anticipates would likely make it appropriate to raise the federal funds rate more quickly. Conversely, if the economy were to disappoint, a lower path of the federal funds rate would be appropriate. Were committed to our dual objectivities and we will adjust policy as appropriate to foster financial conditions consistent with their attainment over time. The committee is continuing its policy of reinvesting proceeds for maturing treasury securities and principle payments from agency debt and mortgagebacked securities. As highlighted in the Statement Released<\/a> after the june fomc meeting, we anticipate continuing this policy until normalization of the level of the federal funds rate is well underway. Maintaining our sizable holdings of longer term securities should help maintain accommodative financial conditions and should reduce the risk that we might have to lower the federal funds rate to the effective lower bound in the event of of a future large adverse shock. Thank you, i would be pleased to take your questions. Madame chair, in recent years, the fed has increasingly used Forward Guidance<\/a> to shape market expectations. How are the feds frequently incorrect predictions of Interest Rate<\/a> increases have caused it to lose some credibility among some quarters. How would you rate the utility of your Forward Guidance<\/a> over the past several months . So in the past several months we have used Forward Guidance<\/a> less than we did in the aftermath of the financial crisis when we named calendar dates or gave explicit Economic Conditions<\/a> that we wouldnt need to see prevailing in the economy before considering an increase in the federal funds rate. We use that Forward Guidance<\/a> in the aftermath of the crisis in order to help Market Participants<\/a> understand how serious the crisis was and how long we thought we would need to maintain the federal funds rate are you saying youre not using Forward Guidance<\/a> now . Or are you not relying on it as much . Were not relying very much on Forward Guidance<\/a>. We do publish every three months participants projections for the paths of the federal funds rate that they believe will be appropriate in light of their expectations about the performance of the economy. And sometimes those paths which participants discuss in their remarks are thought to constitute Forward Guidance<\/a> about policy. I do believe those projections are helpful to the public in understanding the path of the economy that participants think is likely and how if those conditions prevail they would see Monetary Policy<\/a> as evolve i ing, but as i always emp sies on every occasion including in my prepared remarks, those paths while i think theyre helpful are not a preset plan and not in any way a commitment. We are constantly trying to evaluate in light of incoming information the outlook in risks. And you see those paths change over time as we update our evaluation of the Economic Outlook<\/a> and i think thats a critical part of Monetary Policy<\/a>. Has the slowing of the economy in certain areas caused you to kind of hold back a little bit at times the information that you see there . So for quite some time now weve seen mixed developments in the economy. Uhhuh. Some sectors slowing because of the decline in Energy Prices<\/a>, strong dollar foreign growth, others providing an offset throughout until the last couple of months progress in the labor market has held up extremely well. Now, for the last few months as i mention ed job gains averaged 100,000 on a strike adjusted basis. Which is a substantial slowdown from the First Quarter<\/a> and from last year. And it is important for us to see ongoing progress in the labor market, so thats something we want to carefully evaluate and is a focus of our attention. But Economic Growth<\/a> has picked up from a weak pace. And if that slowdown is a reflection of weak growth earlier in the year, im hopeful we will see stronger job gains Going Forward<\/a>. And while it is an important report, i would also emphasize that its important never to overblow the significance of a single report or short a small amount of data. Other information about the labor market suggests it continues to perform well. Do you see a clear path ahead as far as your trajectory Going Forward<\/a> on the economy picking up . Are you not sure yet . So its our expectation that is what you see in all of the projections that were provided in connection last week with our june fomc meeting. But of course there is uncertainty about that. And given that inflation remains low, we have the ability to watch economic developments and try to make sure the economy is on a favorable path before raising rates. Madame chair, the fomcs target for the feds funds rate has been at 1. 5 or lower since december 2008. A report last year from the bank of International Settlements<\/a> found that the prolonged period of low Interest Rates<\/a> may be damaging the u. S. Economy resulting in, and ill quote, too much debt and too little growth. In addition, the report states that low rates may in part have contributed to costly financial booms and busts. Do you agree that persistently low Interest Rates<\/a> can have negative longterm effects on the u. S. Economy . And could you explain . Well, i believe that the persistent low Interest Rates<\/a> weve had have been essential to can have. Achieving the progress. But of course low rates can induce households or banks or firms to reach for yield and can stoke financial instability. And we are very attentive to that possibility. I would not at this time say that the threats from low rates to moderate to Financial Stability<\/a> are elevated. I do not think theyre elevated at this time. But it is of course something that we need to watch because it can have that impact. You mentioned debt, i dont think that were seeing an undue build up of debt throughout the economy. Leverage remains at moderate levels well below where it was prior to the crisis. We are looking at credit growth, which has picked up but is not at worrisome levels. So we are monitoring for potential impacts of low rates on Financial Stability<\/a>, which i think is appropriate. Madame chair, in an interview earlier this month governor turulo stated that the fed is reviewing the application of stress tests to regional banks. And he used the word probably will exempt regional banks from the qualitative portion of ccar. Last december the fed announced it was tailoring ccar, but the tailoring turned out to be just a restatement of existing policy. What assurances can you give that this current review is a meaningful effort to tailor ckrccar in a way that recognizes the different risk profiles of banks . And if so, when do you expect it published such changes for comment . So we are engaging in a fiveyear very serious review thats been informed by consultation with both Financial Sector<\/a> participants and outside economists. And i do think that youll see meaningful changes, the suggestion that governor turulo made that banks between 50 and 250 billion dollars that are subject to the stress test ccar might be left out of the qualifications, still the stress test would be applied but the whole qualitative part of ccar that relates to Capital Planning<\/a> that they might be exempted from th that. I think its likely that we will look at other changes as well as you said are designed to appropriately tailor it so that its impact is most significant for the largest and most systemic firms. It will be a very meaningful review. And i believe we will be proceeding on it shortly. Well, my last observation has to do with you alluded to the fact that come thursday theres a big referendum in the United Kingdom<\/a> onto whether to stay in the european u. Nion or start leaving. Whats the real implication, or can you tell at this point if the british were to leave the Common Market<\/a> on us, could be implications for the Common Market<\/a> and for britain . Well, it is a very important relationsh relationship. It would be significant for the United Kingdom<\/a> and for europe as a whole. I think it would usher in a period of uncertainty. And it is very hard to predict. But there could be a period of Financial Market<\/a> volatility that would negatively effect financial conditions and the u. S. Economic outlook thats by no means certain, but it is something that we will be carefully monitoring. Thank you. Senator brown. Thank you, mr. Chairman. Madame chair, i first thank you for your work on the recent insurance rules. Im pleased that the fed is put out an advanced notice of proposed rule making to implement capital standards for the two large insurance companies, the two sifis and two savings and loan holding companies. I appreciate how youve moved on this with constructive dialogue. I think your response to our efforts here made a huge difference in doing this right. This week the Banking Committee<\/a> will have a hearing, second hearing on capital and liquidity rules. Please discuss for us the feds approach to capital and liquidity rules for the nations largest banks, specifically have these new rules made our Financial System<\/a> stronger . So i do believe that the enhancements that weve put in place to capital and liquidity requirements that are tailored by firms size and systemic importance have made an enormous difference to the safety and soundness of the u. S. Financial system. The quantity of capital at the largest banking organizations is essentially doubled from before at the crisis and quality of that capital is very much higher. In addition to imposing higher static risk based capital and leverage requirements, our stress testing and Capital Planning<\/a> exercises are very detailed forward looking exercises that are working to ensure that the largest firms in extremely stressful conditions would be able to go on supporting the credit needs of the u. S. Economy, of households and businesses. And i think this has been a very significant exercise and has resulted in far superior understanding by the firms themselves of the risks they face and improved management of those risks. Capital isnt sufficient to assure Financial Stability<\/a>. Often liquidity is what disappears in a financial crisis. And weve put in place especially for the largest banking organizations ep ha enhancements to liquidity, and net Stable Funding<\/a> ratio, so i think this also works to enhance Financial Stability<\/a>. So i think we have a much safer and sounder less crisis prone system because of the enhancements that weve put in place. Thank you. Weve talked in the past about how the current labor market data do not reflect whats happened to minorities whose rates of unemployment are still much higher than the average. In your testimony today for the first time, and thank you for that, you talked about minority Unemployment Rate<\/a>s and have included a new section in the semiannual Monetary Policy<\/a> report with this data in a discussion of whether the gains of the economic expansion have been widely enough shared. Discuss why the fed made this addition to the report. Well, the Federal Reserve<\/a>s job is to try to achieve maximum employment and broad gains in the labor market that are as widely distributed as possible. And i believe its very important for us to monitor how different groups in the labor market are doing to see if what we perceive is broad based labor market improvement is being widely shared. And there are very different in the success across labor market groups. I think its important for us to be aware of the differences and focus on them as we think about Monetary Policy<\/a> and the broader work that the Federal Reserve<\/a> does in the area of Community Development<\/a> in trying to make sure Financial Services<\/a> are widely available to those that need it including low and moderate income. Well, that brings to mind a meeting i had just a few minutes ago with three people from my hometown of cleveland, three community leaders, about the lack of diversity in terms of gender and ethnicity and race and the lack of diversity in terms of ideas that are the classc directors in many of your Federal Reserve<\/a>s, your 12 Federal Reserve<\/a>s around the country including in cleveland. I would like to see it more and i think many of us on this panel would like to see a more diverse Federal Reserve<\/a> system including the governors, the reserve Bank President<\/a> s and the 12 regions of the board directors, advisory committees and employees. Discuss what youve done as chair of the fed, what more you can do to better address the financial needs of all americans as you reach into the Community Better<\/a> . I know youve had a goal of doing that. You said maybe our first hearing, certainly one of our first meetings particularly serving those unserved and underserved by the Financial System<\/a>. So i am personally committed and the Federal Reserve<\/a> is an organization committed to diversity within our workforce and leadership at absolutely all levels. I believe we have made progress. Im committed to seeing us make further progress. And in order to make sure that we are taking all of the steps that we possibly can to promote a diversity in economic inclusi inclusion, i have launched an interdisciplinary effort within the Federal Reserve<\/a> to focus on all of our diversity initiate i haves initiatives, both in terms of our hiring throughout the Federal Reserve<\/a> system, our work in Community Development<\/a> to promote access to credit work in the Payment System<\/a> to foster better payments that can promote financial inclusion. I do believe were making some progress, but i want us to make greater progress. If the board minorities currently represent 18 , and women represent 37 of senior leadership, thats relatively common throughout the Federal Reserve<\/a> system you would see similar numbers. And weve worked very hard to increase along with the reserve Bank Directors<\/a> and directors on the Branch Boards<\/a> and made quite a lot of progress. At this point minority representation is about stands at about 24 of reserve bank and branch board directors. About 30 are women. Its a matter that the board focuses on annually in its oversight of the reserve banks that we regularly track our progress in increasing diversity in the boards of directors. And its something we will continue to focus on. Diversity is an extremely important goal and i will do everything i can to further advance it. Thank you. And my last question, i want you to share with us in a continual way the progress youre making there especially in the classc directors that they more represent the community not just in diversity of look and background, but diversity of ideas and all that. Last question. There are currently a Record Number<\/a> of job openings, almost 6 million, but the may jobs data show that workers are not being hired for these jobs. What do we do to get americans who want to work into these available jobs . What do we need to do better . So there are an enormous number of job openings. And there is a certain degree of mismatch of workers who are looking for work with the job openings that are available. And within the Federal Reserve<\/a>, and i personally have been looking at Workforce Development<\/a> programs, job Training Programs<\/a>, that some of which i think are doing a very good job of trying to build the skills and that are needed to fill available jobs and work to match workers with jobs. I was recently in philadelphia and visited a very Impressive Program<\/a> thats placing workers who have had trouble in the job market in to real jobs that can lead to upward mobility in career in some of the philadelphia hospitals. Ive seen such programs around the country that i think have been effective, but obviously our job at the fed is to make sure we have a strong job market, that there are enough jobs that are being created. But helping that matching process, looking at Training Programs<\/a> and educational opportunities, i think thats a piece of the puzzle as well. As you have from time to time mentioned exhorted maybe too strong a word that Congress Needs<\/a> to do a better job in terms of investment and public works and infrastructure. Also you have made comments from time to time about job training. Can you give us more instruction . My last minute or so, could you give us more instruction on what we should do here . Well, im not going to give you detailed instruction. I think this is up to congress to decide, but when one looks at either inclusion or inequality or more broadly the fact that were suffering as a country from very low productivity growth, disappointingly low productivity growth, and we think about what the factors are that over time influence productivity growth the things that have long been identified as important are investments both private and public. And we have had private investment really since the financial crisis has been very we weak, but private and public investment, pace of Technological Progress<\/a> influenced by the environment that contributes to innovation, the startup of new firms and research and development and other basic support. So i think all of those areas should be on congresss list to focus on. Thank you. Senator corker. Madame chair, we thank you for being here and thank you for your service. Weve had a number of conversations in this setting with your predecessor about qe2 and qe3 and i know the fed announced in 2014 about the normalization process and both your predecessor and this process announced in 2014 stated that the securities that we had built up on the Balance Sheet<\/a> would be held to maturity. And then they would run off the Balance Sheet<\/a>. Youve basically announced today that were embarking on qe4 by reinvesting the proceeds, have you not, in new securities, which is a major policy change, is it not, from where the fed has been in allowing these securities to run off and allowing maybe im misunderstanding what youre saying. But i thought i heard you say that the fed is now when we reach maturity on the securities going to reinvest them, which is a pretty big policy change, is it not . It is not a policy change thats long been our policy. Ever since when qe3 ended, we made clear that we would continue to reinvest maturing proceeds. Weve been doing that ever since. We did say that as the economy recovers and the fed funds rate rises to a somewhat higher level than it is at present that a day would come when based on economic and financial conditions the committee would begin the process you just described of gradually allowing securities to run off our Balance Sheet<\/a> so that we reduce our holdings to a more normal level. And we fully intend to do that, but i cant give you a precise timetable for when that policy will begin. Its going to depend on how the economy evolves. But a long time ago we put out a set of normalization principles where we made clear that that was how we would proceed, namely continue reinvestment until after we had begun the process of raising the federal funds rate and achieved sufficient progress there that remains our intention. Well, thank you for clearing that up. I appreciate that. I know last time you were here you alluded we alluded to negative rates, and i know thats whats happened in japan and the eu. And you were looking into the legality of whether the staff was looking into whether you felt you had the legal basis to pursue negative rates. Have you come to a conclusion relative to that . I believe we do have the legal basis to pursue negative rates, but i want to emphasize it is not something that we are considering. This is not a matter that we are actively looking at, considering when weve looked at it or looked at that in the past we have identified significant shortcomings of that type of approach. I dont think were going to have to provide accommodation. And if we do, thats not something thats on our list, do, that is not something that is on our list. But i do believe that we have i appreciate you clearing that up, because the japan and the eu have not had good benefit of that, and at least benefit that is not good for them, and i appreciate your clean iing thatp from time to imtime. And i know that we have looked at the taylor rule, but if you are look at it, bloomberg has a chart that tracks it, and basically theed if ra fed rates taylor rule has been in the Feds Fund Rate<\/a> and what they would be if the taylor rule were being employed. Today, 25 to 50 basis points, and under the taylor rule, we would be 3. 7 , which is the target fed rate today, and a big range difference, and is that because of the headwinds that you are alluding to, and what you are generally seeing in the market . Yes, it is because of the headwinds. One of the numbers in the taylor rule reflects professor taylors estimate of what we sometimes refer to as the neutral level of the fed funds rate. It is a level of the federal funds rate that is consistent with the economy operating at full employment. That is something that by our estimates has been very depressed in the aftermath of the financial crisis. And discussions of the secular stagnation is very much about what is the level of Interest Rates<\/a> that is consistent with the economy operating at full employment. Im hopeful that rate will rise over time, although, i am uncertain, but at the moment, most of the divergence between our settings, and what would be the higher levels that would be called for really reflect the headwinds that have been facing the e kconomy since the financi crisis. I only have a little bit of time, and the labor, and the employment rate is misleading, is it not, relative to where we are in the labor market today, meaning that there is at lot of excess capacity, and i know that Ranking Member<\/a> brown was alluding to that, and you, so that equation is late bit off, because you are not feeling the employment levels even though the rate s ths that we show are there, the involvement by the labor market is not what wed like for it to b. And let me ask one last thing briefly, living wills. In section of dodd frank, it is to insure living wills and they are to be resolved in bankruptcy, and i know that we are supposed to go through the last it ration, but i nknow tha governor powell kept saying that if the fed keeps raise ing ting capital level, the that the institutions will own their own, and downsize and become less complex. And so if the institutions can not be resolved in bankruptcy go going to do what section 165 of dodd frank tells them to do, or are you going to be relying on raising capital for the banks to do it themselves . Well, we are insisting that the firms address in some cases deficie deficiencies, and in other cases shortcomings that are we have found and enumerate ed d in the living wills in the last submission. There is a timetable for doing that. If the firms fail to address the deficiencies or if later on by the summer of 2017 they fail to address the shortcomings, we have identified, and then we find them deefficient, dodd frank does say that the fdic and the fed can impose higher capital requirements, liquidity requirements or ultimately structural change, and dont expect to have to go there but we are insisting that the firms have addressed the shortcomings that we have identified. Thank you, madam chairman. Mr. Chairman. Senator reed. Thank you, mr. Chair mman an madam chair. It strikes me that over the last several years, you have had a difficult challenge, and we all had, but we have been operating in some respects with one hand tied behind our back and that is that you are pursuing a expansionary policy and reluctant to raise the rates while we have not had a complimentary fiscal policy to invest in the infrastructure, and other things to allow you the room to raise rates if necessary or to compliment your activity with what we are doing, and the point that you made in response to senator brown is that this productivity gap which is troubling, and some of it is just related to the decrepit infrastructure, and if you have to take two hours to get somewhere, it is two lost hours of delivering a package or soupr highway in productivity decrease. So you are in a position to do all you can, and it is not enough, and we have to step up. Is that something that you would say . Well, in the United States<\/a> and other advanced country where is the Interest Rates<\/a> are very low levels, it is common to know that Central Banks<\/a> and they have been carrying the load in parts of the world, and the fiscal policy because of the concern of the large debt or the deficits not played a supportive role. We have achieved a lot in the United States<\/a>. We have created over 14 million jobs and the Unemployment Rate<\/a> has come down to 4. 7 . Inflation is still under 2 , but i believe movg ing up. So we are making good progress, and if there were to be a negative shock, i mentioned nit in themle the starting with the low levels of Interest Rates<\/a>, we dont have a lot of room using our traditional tried and true method to the respond if fiscal policy were more expansionary, this neutral level of Interest Rates<\/a> that is one of the factors that the stance the of policy that the affects what level of Interest Rates<\/a> is neutral for the economy keeps it on an even keel, and the level would be higher with the different stance of fiscal policy. We have made progress, great. But the sense is not only could we have made more progress, but we are at a point now where you have exhausted most of your leverage in a nonfinancial sense, but your leverage, and if there was a shock, then you have had very little to respond with . El well, we have the same tools that we used earlier, and namely asset purchase, Forward Guidance<\/a>, and the maturity distribution, and the duration of the portfolios and those are the tools we would rely on. And quickly, the other part of this dilemma is this sense that some places that because of the Interest Rates<\/a> so low that there is a possibility of creating a bubble for example driving people into equities because there is no return and the price is driven up not because of the underlying quality of the equity, but simply, that is where they can get some money fast. Are you concerned about that . Well, that is yes, i mean. I said earlier, i dont see extreme threats to Financial Stability<\/a> at this time. It is something that we monitor very closely, but it is something that can happen in a low Interest Rate<\/a> environment. So i dont think that i see any broadbased financial instability concerns, but it is possible. I have less than a minute, and with respect to the Cyber Security<\/a>, we had a discussion the last time you were here s, d it is increasing problem, and in fact, the Federal Reserve<\/a>s in public reports that you have beenbreached in some respect, but do you have the authority to require the deregulated companies to put people on the boards who have Cyber Security<\/a> expertise, and to publicly disclose what their Cyber Security<\/a> general parameters are or something to indicate to the public that they are taking it seriously . Well, it is a focus of the supervision, and we have, pecktation thpec expectations of what the Financial Institutions<\/a> have to make in terms of the complexity and the importance of the firm, and we do regard this as a sig nif cant threat. On your question about broords of directors boards of directors, i dont know that we have looked at that, but i would have to get back to you on that, but we are certainly supervising Financial Institutions<\/a> ability to address Cyber Threats<\/a>. Thank you. Senator vitter. Thank you, madam chair for being here and your service. Thank you. Madam chair in april the fed finally releesased the results 20115 resolution plans of eight systematically important banking institutions, and five of the nations largest banks failed that exercise including Jpmorgan Chase<\/a> and bank of america. I have three questions related to that. 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