The job creations . Chair, yellen, i dont think your microphone is on. Can you see if its on, and if it is, please pull it closer to you. I apologize. I think certainly regulation has an impact on the economy, on Economic Growth. And there are many economic studies that have tried to document what it is. I think in the case of the Affordable Care act, cbo has done important analysis and probably will continue to look at it, i think theyve recognized that the impact of the act is likely to be come flex. I think theyre still attempting to figure out what all of the different channels are by which it will affect the economy, and, you know, well look at that and try to look at their assessments Going Forward. You know, we had to pass it to find out what was in it. And so now thats all coming together. Has the fed done any estimates on how many jobs the implementation of the doddfrank and the effect of the obama administrations regulatory policies are expected to cause the economy, or is it the feds not interested in that question because, you know, we feel doddfrank is going to have just as much impact on the job market as the Affordable Care act did. Well, you know, we lived through a financial crisis that has taken a huge toll on the economy, incruluding creating a period with very high unemployment. And most of the studies that have been done, for example, the Basil Committee in the United States participated in these assessments, as this is only one piece of doddfrank, but in deciding to raise capital standards on Financial Institutions, try to assess what would be the net effect on the econo economy, the overall impact that the study found is reducing the odds of a financial crisis would be the most important benefit, and when we see what a negative effect that has on jobs for such a prolonged period of time to my mind the regulatory agenda of trying to strengthen the Financial System which were trying to put into place to make it more resilient and reduce Systemic Risk will bring important longterm benefits to the economy. When you say longterm, what are you talking about . We always hear long term. What is longterm. When does longterm start . You know, weve been supposedly in a recovery now for a period of time. And we keep hearing that doddfrank and some of these other things that have gone in will have longterm pluses. When does longterm start . Is four years not long term . When are we planning on this kicking in . Five years, 20 years . I think it is kicking in in the sense that were building a more resilient Financial System and substantially mitigating the odds of another financial crisis that will take this kind of toll on households in the economy. Okay, and one other question quickly. Do you feel theres enough separation between the Federal Reserve and this administration in the fact that i know you meet with the secretary once a week, once a month. Its been tradition to meet almost once a week. There are many overlapping areas of interest between the Federal Reserve and the treasury that makes it desirable to have ongoing communication. Its completely independent in conducting Monetary Policy. Time has expired. The chair now recognizes mr. Meeks. Thank you, mr. Chairman. Its with great pleasure that i welcome you this morning, madame chair. Your historic position speaks volume, i believe for our nation and the continued progress our nation is making in the inclusion of women and minorities to positions of leadership and will be another source of inspiration for young women, like my three daughters. Especially those looking for career in the finance and banking industry. Let me just say im pleeased tht you have the job. Not just because youre the rig a woman. Because youre the right person for the job. Thank you, congressman. I appreciate that. Let me ask you something. I know mr. Clay touched on this. This thing about the wealth gap and when you look at what that 95 of the income gain system recovery have gone to the top 1 , you know, theres always been a big question between the relationship between main street and wall street. For me its been difficult, especially sitting on the committee to try to explain wall street to main street when you have this kind of inequality. Today, for example, on average, there is the africanamerican household is 20 times less than the white household. The median net income of white households stands at 110,000 versus 6,000 for blacks and 7,000 for hispanics. Largely because most peoples wealth was in their homes. And when you have the crisis because people were scared in the minority communities, they lost the closing. Now it has gone to a tremendous level. So given that we know that there is no loans and its staring into this community and has caused this disparity in wealth, is there anything the fed can do that will help middle class and more specifically, these individuals who were impacted at a great extent because of the inequality of what was going on in the system. Is there something that we can do to help them get back on their feet . Well, i think, congressman, the most important thing to do, which has been absolutely our focus is to promote a stronger recovery. That these same households that were hit so hard by what happened in the housing sector and by the subprime debacle, we want to see those households get jobs so that they can rebuild wealth and have the income that they need to support their families. Need to support their families. The problem, though, that were having is that many have referred to this recovery as a jobless recovery. And when you look at Technology Today and you see that technology is, you know, a lot of business folks are saying its for efficiency, et cetera, and thereby a lot of jobs that would have been gone to people, you know, are losing. I look at new york city. If you were a teller in a bank, atms have replaced you. Bridge tolls, you have easy pass. You know, all of these jobs that used to be manual labor now are replaced because of technology. So now, im a big believer in International Trade because that should create jobs. My question to you is, though, can we identify the jobs that will be created so that we can then pinpoint where we should be training individuals so that they can get the jobs that are going to be created and not just randomly creating jobs, but creating jobs and then we can go back into the communities and train people specifically for the jobs that we feel will be created as a result of the current economy. Well, a stronger economy is going to create jobs in virtually every sector of the economy. But a longerterm trend that ties in with the concerns that you have expressed is a growing skills gap, a growing wage inequality between more and less educated workers. Technological trends that have reduced what used to be an important class of good, highpaying wage jobs. Those jobs are being competed away because of technological change and to some extent shifts in global competition. I think every economist that i know believes that we need to address that skill gap in order to make sure that we reduce inequality. But is there anything the fed can do specifically to help in that what we can do is to try to promote stronger demand, a stronger job market generally. We have seen that a lowerincome individuals have been disproportionately harmed by the downturn and as the economy recovers. Im by no means saying that this is a panacea, not by any stretch of the imagination for inequality, but i think we will see gains broadly shared throughout the economy. Time of the gentleman has expired. The chair now recognizes the gentleman from north carolina, mr. Mchenry, the chair of our oversight and nvgts subcommittee. Chair, yellen, congratulations on your appointment and being an important mark in the history books as well. Thank you. I have a question. In 2010 you spoke that banks may be required in their debt stack, in their capital to use a convertible instrument that in good times has a debt nature and in bad times converts to equity. You said that they may be required to do this. Is this your intention to use this instrument . So i think when i gave the speech at that time, i was broadly considering possible regulations or shifts in the focus of supervision that might be helpful. I think there still is focus on Something Like that. I think to improve the resolvability of a large banking organization, something that the Federal Reserve and other regulators are contemplating, is a requirement that Bank Holding Companies hold a sufficient amount of longterm debt. It would play a role similar to the contingent capital instruments youve described. You mentioned that in your opening statement, about this requirement on longterm debt. Would it be your intention to have this contingent convertible capital as a part of that longterm debt requirement . Well, i think it bears this type of this type of debt would bear some similarities. Its not exactly the same, but it bears some similarities to contingent debt in that it is a source of gone concern of value that would be there if an organization got in trouble that would serve to recapitalize it. In the existence of such a class of debt, i think would give proper incentives to monitor risk taking in these organizations. So are you still broadly favorable towards these contingent convertible . I mean, there are a number of issues associated with that kind of debt, what would trigger it and so forth. But i think it remains an interesting possibility in this proposal an interesting possibility. Well, thats a fair admission from a chair of the Federal Reserve. So ill take that as somewhat favorable, if i may. And i was reading yesterday in the Financial Times. We have this discussion about the volcker rule and the exception the volcker rule provides for sovereign debt, visavis corporate debt in the United States. I read in the Financial Times yesterday that danielle nuey, whos the head of the Bank Supervisory agency in the european union, she said that theyre really going in a different direction in the eu. And in light of, you know, their recent crises with sovereign debt, she said, one of the biggest lessons of the Current Crisis is there is no riskfree assets. Sovereigns are not riskfree assets. That has been demonstrated. So we now have to react. In essence, the eu is going a different direction when it comes to sovereign debt than we are in the United States. How would you react to that . I believe the exemption for u. S. Debt markets was built into doddfrank. That was explicit in doddfrank. Okay. So what is your reaction to that . Were policymakers. We could remedy that if you think that is a flaw. You know, we have tried to write a rule that is consistent with doddfrank as it was legislated. So if we would you look favorably upon us saying that sovereign debt should not be exempt or should comparable to corporate debt . Thats something i would have to look at more carefully. But did you not look more carefully at this subject matter when you wrote the volcker rule . Well, we put into effect the allowance that congress included in doddfrank to exempt treasury securities. Well, no, thats treasury securities. Im asking about sovereign debt, which was excluded from the volcker rule. Written into the language of doddfrank is exclusion of u. S. Sovereign debt, not the exclusion of other sovereign debt. I would call this a lack of enthusiasm from you. Time of the gentleman has expired. The chair now recognizes the gentleman from massachusetts, mr. Capuano, for five minutes. Thank you, chair. Thank you for being with us today. I have a couple different areas id like to pursue. In your confirmation hearing, you made a comment, at least its reported you made a comment, addressing too big to fail is among the most important goals of the postcrisis period, which on some levels i would agree. Though i happen to think we did address a fair amount of it. I also accept chairman bernanke once said, which is reality is in perception. The perception is we havent done enough. Therefore we have to do more. Im just wondering if you have any thoughts on how to do that. Particularly with relation to either reinstituting some form of glass stooeg l or instituting some sort of marketdriven attempt to reduce the size of some of these too big to fail programs. So i think we have a broad agenda that is intended to address too big to fail, and we are putting it into effect and i think have made meaningful progress. We have do you think it would be worth us considering reinstituting some form of glass stooeg l . I think if we continue on the path were on of completing the doddfrank rule makings beyond that of putting in place a rule that would enable a resolution by through orderly liquidation by requiring so you think we wont need it when youre all done . I think we have to keep watching whether or not weve succeeded in addressing this, but i believe weve fair enough. I would ask you also take a look at hr2266, which is a marketdriven attempt to reduce the size of some of these institutions. I also want to talk about an editorial i read in american banker last week that basically n my opinion, coined a new phrase but one thats accurate. Too big to jail. And it was about the concern that not enough of these people that have foisted their inappropriate activities on us in 08 have paid a penalty on a personal basis. Some of these biggest corporations simply write a check to stay out of jail free. Because its not even their money. Its corporate money. And when i read it in american banker it kind of puts a big underscore to me. Im just wondering, do you have any concerns about the lack of personal accountability in some of the largest institutions in this world when it comes to some of the activities they participated in, not just before 2008 but after 2008 as well. Well, i do have concerns about those activities, and the Federal Reserve cooperates with the department of justice as appropriate when they take actions that are criminal in nature. The Federal Reserves focus is on safety and soundness. Were but isnt the safety and soundness of the entire economy based on trust and good activity . And my concern, to be perfectly honest, if people are not held personally accountable when theyre allowed to write corporate checks, not personal checks, to just push away their illgotten gains and they get to keep that money and continue on and actually get raises and bonuses from those institutions, the moral hazard says to the next guy coming down the street, the people you have to regulate, its okay. Dont worry about it. Do anything you want, and all we have to do is the corporation, not you, will pay a few hundred Million Dollars of shareholder money, by the way, not your money. You dont have a concern with that, with the Federal Reserve by not having not you, but by not having other entities holding the personal account that it will make your job tougher Going Forward . Well, i a gree with you there certainly should be accountability within these organizations. Thank you. I appreciate that. And the last point, i want to talk about fannie and freddie. I have always wanted to amend and reform them. However, ive also thought its wrong. Fannie and freddie has now pretty much paid back the money theyve borrowed from the taxpayer. I dont know if theyre exactly there, but theyre close to it and on their way. Yet, at the moment, they have been allowed by our own laws to pay one penny towards the payment of that principal. There are lawsuits going on, as im sure youre aware. Im just curious. Do you think that it is fair or wise or equitable to keep any entity in a de facto bankruptcy state once theyve paid back their debt . I think you know, with respect to gses i think it is really very important for congress to put in place a new system to address gse reform. I think we still have a system that has Systemic Risk, that government funding remains critical to the mortgage sector. And i think to really get housing back on its feet, its important for congress to put in place a new system and to explicitly decide what the role of the government should be in helping the housing sector. Time of the gentleman has expired. The chair now recognizes the gentleman from new jersey, mr. Garrett, chairman of our Capital Markets subcommittee. I thank the chair, and i thank chair yellen. Congratulations on your position. Welcome to the committee. Thank you also. I understand the rules here that you are waiving a little bit and staying a little longer, since there are a whole host of members on congress on both sides who would like to dig in. We do very much appreciate that. Im going to step aside from some of the monetary discussions some people have made and otherwise get into, to start off with, your prudential supervision role, which of course under doddfrank and others have been expanded greatly. Im not going to run through the list of all the expansions. You know well what they are. Let me just begin to go back, reference a letter you may a report back in november 2011. President gao came up with a report on doddfrank regulation and implementation of cost benefit and analysis. And in that report, just to brief you, fed reserve General Council responded to it with a letter. That was Scott Alvarez and james lyon responding to that. What they said, what the fed response was, that the Federal Reserve will consider appropriate ways to incorporate these recommendations into rule making procedure. I have the letter. They even go further. To seek, to follow the spirit of benefitcost requirements. Costbenefit analysis, basically. My first question to you is, you know, what progress are you all making . This is two years ago this letter was written. What progress are you making on completing and complying with more than the spirit of costbenefit analysis and rule making . Well,