It is 2 and a half hours. The committee will come to order. Today, we will receive testimony from janet yellen regarding the feds semiannual report to congress on Monetary Policy and the state of the economy. It will come as no surprise to you that improving Economic Growth is a key priority for congress this year. Was the 11th Consecutive Year that the u. S. Economy failed to grow by more than 3 . One way to improve our Economic Growth is it to study and address areas where regulations can be improved. Since the financial crisis regulators have imposed thousands of new pages of regulations. We all need to better understand the combined impact of these rules on lending, liquidity, cost for small Financial Institutions, and broader Economic Growth. It is time to reassess what is working and what is not. Im encouraged by President Trumps executive order on Core Principles for regulating the Financial System. Directing the treasury secretary in consultation with the heads of the other member agencies of asoc including you to report on how well existing laws and regulations promote or inhibit Economic Growth will be a helpful step as we move forward. Financial regulations should strike the proper balance between the need for safe and sound Financial System and the need to promote a vibrant growing economy. I expect the vice chairman for supervision once confirmed will play an Important Role in striking this balance. We want our nations banks to be well capitalized and well regulated without being drowned by unnecessary compliance costs. Be wellcapitalized and wellregulated without being drowned by unnecessary compliance costs. This is especially important for the Community Banks and Credit Unions in america. Which lack the personnel and infrastructure to handle the infrastructure and Regulatory Burden of the past few years. Yet in many ways, are treated the same as the worlds biggest institutions. At the last humphrey ayou stated that simplifying regulations for the Community Banks continues to be a focus for the fed and i hope that remains the case. Our Regulatory Regime should be properly tailored and avoid a onesizefitsall approach. The fed recently took an encouraging step in that direction when it finalized changes to exempt certain banks and the qualitative portion and i appreciate that. Another area i would like to just as the 50 billion threshold for regional banks. In prior hearings we discussed whether 50 billion is the appropriate threshold. I hope we can Work Together to craft a more appropriate standard. My goal is to work with senators of the committee and financial regulators to better strike the balance between smart thoughtful regulations and promoting Economic Growth. It is also been nearly a decade since fannie mae and freddie mac were put into conservatorship. Housing finance reform remains the most significant piece of Unfinished Business following the crisis. And it is important to build bipartisan support for a pathway forward. For many years the fed express concerns about fannie mae and freddie mac. And i encourage you chair yellen to work with us to solution. In the fall of 2007. In response to the emerging financial crisis. Today the fed still holds close to 4. 5 trillion in assets on its Balance Sheet. Which includes approximately 35 percent of the Outstanding AgencyMortgage Backed security market. I look forward to hearing from you on how the fed plans to normalize Monetary Policy and wind down its Balance Sheet. The Banking Committee has a lot of work to do this congress. My goal is to work with Ranking Member brown and other members of the committee to identify bipartisan approaches that we can quickly get signed into law. At the same time we plan to start working on Housing Finance reform. Flood insurance tensions and legislation to boost Economic Growth in the country. I look forward to working with you chair yellen, the Federal Reserve and other members of the committee to tackle some of these Critical Issues i mentioned this morning as well as a number of others. With that metal chair we look forward to your comments today. But first i turned to Ranking Member brown. Senator brown. Thank you. I appreciate the hearing today and chair yellen, thank you. It is an honor to always have you here and a pleasure and your insight is always helpful to all of us. Thank you for that. Since your appearance madam chair last june the economy has improved enough as we know that the fed raised the rates in september for the second time since the financial crisis. Businesses continue to create jobs, on a slow but steady pace some 70 months in a row. And there finally is some wage growth. Yet they are concerned. Too Many Americans who want fulltime work still cannot find it. Many workers have left the labor force, the games have been not large enough and uneven. Foreclosures and job losses had africanamerican and latino communities particularly hard during the crisis. One study found that the average well ahas grown three times faster as the rate for African Americans and families and 1. 2 the times the growth rate the latino families in the last three decades. These rates will take hundreds of years for those families to match where a white family is today. For stock portfolios have recovered nicely but for most ohio and most of the states, the story is very different. The states job growth last year was the lowest since 2009. We actually went backwards by about 12 months. Many places one in four homeowners are still underwater. As you heard me say and as members of this committee has heard me say in the first half of 2007 they were more foreclosures in my zip code than in any liquid of america. For ohio manufacturers and the dollar continued to hurt experts. And much as been injected into the economy by the administration already and by the majority party. Can americans continue to count on having Health Insurance . When us manufacturers and exporters have a continued access to foreign markets . Importers have to pay a 20 percent sales tax. Immigrants in this country have access to jobs and universities and they do not even know what to expect tomorrow let alone to do any kind of longrange planning. All of that, our country and our economy is dependent upon. Americans elected a new president based on his promises to drain the swamp, take on wall street and bring manufacturing jobs back to the industrial lands. We are concerned when you look at some of the nominees confirmed with virtually every republican, virtually every time voting for amazingly ethically challenged nominees. Nominees that would have stepped aside eight years ago or 16 years ago with the president s. We are all concerned about that. Instead of focusing on infrastructure and real job creation and tax cuts for the middle class and education and workforce development, using the new administration target working americans, furthering a billionaire special interest agenda. And threaten wall street reform based on the false promises that banks are not lending. False promises some might call ai think everyone can agree there are parts of wall street reform that can be improved and steps that can be taken to help small banks and Credit Unions. That is an ongoing process for both congress and the regulators. I applaud the fed decision madam chair, the recent decision to remove banks below 250 billion in assets from part of this process. Many of my republican colleagues are looking at going beyond the bipartisan adjustments in seeking to repeal reforms are key to preventing the next devastating financial crisis. Working americans lost trillions of dollars in their Retirement Savings after large wall street firms made risky bets with other peoples money. Either failed or built up during the crisis. That is why congress put in higher Capital Requirements for large banks, mechanisms to identify and regulate risky nonbank companies and tools to make sure Financial Firms can fail without bailouts funded by taxpayers to recent statements by top officials in the white house indicate they are specifically targeting these important safeguards. Even though these parts of the law were supported by both parties back less than a decade ago. Now the initiation is putting wall street bankers in charge. Steve ahe was confirmed by the study athe senate last night. They tried to take their freedom away to make difficult decisions. These priorities are wrong. American voters agree 80 percent of one pole, those republicans and democrats and independents. 80 percent agree we need to have rules and stronger, not weaker penalties for wall street. I want to take a moment to recognize one person in particular was the one of the chief architects of the stronger rules that have been put in place over the past several years to rein in wall street. Misbehavior and access. Last week the governor tarullo announced he is stepping down. I also want to recognize john alvarez who is in his 36. Federal reserve. He is seated right behind. Mr. Alvarez. He is in his 36th year at the fed. He has been general counsel for over a decade. Thank you for your service mr. Alvarez. Madam chair look forward to hearing more from you about the currency of the economy, the importance especially in sports of strong rules to guard against economic calamity. I know youre not going to be there for ever although i wish you were. And the importance of a strong rules that you have put in place and you will continue to put in place over the next dozen months or so. And what congress can do to help the economy create jobs and make it easier for all americans. And io, all americans to accumulate wealth to buy a home, to pay for college and to have a decent honorable dignified retirement. Madam chair. It is a pleasure to see you. Thank you senator brown. Again, madam chair we appreciate you being here. We look forward to your Opening Statement at this point and then we will engage in some important discussion. You may proceed. Thank you. Chairman michael crapo, Ranking Member brown and other members of the committee, i am pleased to present the Federal Reserves semiannual Monetary Policy report of congress. In my remarks today i will briefly discuss the Economic Situation outlook before turning to Monetary Policy. Since my parents are left in the economy has continued to make progress toured our dual mandate objectives of maximum employment and price stability. In the labor market, sharp gains averaged 90,000 per month over the second half of 2016. The number of jobs rose an additional 227,000 in january. Those games bring the total increase in employment since its trough in early 2010 to nearly 16 million. In addition, the Unemployment Rate, which stood at 4. 8 percent in january is more than five Percentage Points lower than where it stood at its peak in 2010. And is now in line with the median of the federal open Market Committee participants estimates of its longer run normal level. A broader measure of labor which includes the marginally attached to the labor force and people working parttime but would like fulltime jobs. It is also continued to improve over the past year. In addition, the pace of wage growth has picked up. Relative to its pace of a few years ago. The further indication that the job market is tightening. Importantly, improvements in the labor market in recent years have been widespread. With large declines in the Unemployment Rates for all major demographic groups. Including africanamericans and hispanics. Even so, it is discouraging the jobless rates for those minorities remained significantly higher than the rate for the nation overall. Ongoing gains in the labor market have been accompanied by a further moderate expansion and economic activity. Us real Gross Domestic Product is estimated to have risen 1. 9 percent last year. The same as in 2015. Consumer spending has continued to rise at a healthy pace. Supported by steady income gains, increases in the value of Household Financial assets and homes, favorable levels of Consumer Sentiment and low Interest Rates. Last years sales of automobiles and trucks were the highest annual total on record. In contrast, Business Investment is relatively soft for much of last year. That would posted some larger gains toward the end of the year, in part, reflecting an apparent and to the sharp decline in spending on drilling and mining structures. Moreover, Business Sentiment has noticeably improved in the past few months. In addition, weak foreign growth and the appreciation of the dollar over the past two years have restrained manufacturing output. Meanwhile, Housing Construction has continued to trend up. At only a modest pace in recent quarters. And while the lean stock of homes for sale and ongoing labor market gains should provide some support to Housing Construction going forward, the recent increases in Mortgage Rates may impart some restraint. Inflation moved up over the past year. Mainly because of the diminishing effects of the earlier declines in Energy Prices and import prices. Total Consumer Prices as measured by the personal Consumption Expenditure. Or pce, race index rose 1. 6 percent in the 12 months ending in december. Still below that fomc is to present objective but up one percentage point permit space in 2015. Core pce inflation which excludes the volatile energy and food prices, moved up to about 1 3 4 percent. My colleagues on the fomc and i expect the economy to continue to expand at a moderate pace, with the job market strengthening somewhat further and inflation gradually rising to two percent. This judgment reflects our view that us Monetary Policy remains accommodative and that the pace of Global Economic activity should pick up over time. Supported by accommodative monetary policies abroad. Of course, our inflation outlook also depends importantly on our assessment that longrun Inflation Expectations will remain reasonably well anchored. It is reassuring that while marketbased measures of inflation compensation remain low, they have risen from the very low levels they reach during the latter part of 2015 and the first half of 2016. Meanwhile, most survey measures of longerterm Inflation Expectations have changed little unbalance in recent months. As always, considerable uncertainty attends to the Economic Outlook. Among the sources of his uncertainty are possible changes in us fiscal and other policies. The future path productivity growth and development abroad. Turning to Monetary Policy, the fomc is committed to promoting maximum employment and price stability as mandated by congress. Against the backdrop of headwinds weighing on the economy over the past year, including Financial Market stresses that emanated from development abroad, the committee maintains an unchanged target for the federal funds rate for most of the year in order to support improvement in the labor market and an increase in inflation towards two percent. At its december meeting, the committee raised the target range for the federal funds rate by one quarter percentage point to one half to three quarters percent. In doing so, the committee recognize the considerable progress the economy had made two of the fomcs dual objectives. The committee judged that even after this increase in the federal funds rate target, Monetary Policy remains accommodative. Thereby supporting some further strengthening labor Market Conditions and a return to two Percent Inflation. At its meeting that concluded early this month, the Committee Left the target range for the federal funds rate unchanged. But reiterated that it expects the evolution of the economy to warrant further gradual increases in the federal funds rate to achieve and maintain its employment a