Is authorized to declare recess of the committee at any time come in all members will have five legislative days within which to his extraneous materials for inclusion in the record. The hearing is for the purpose of receiving the semiannual testimony of the chair of the board of governorboard of govere Federal Reserve system. On the conduct of Monetary Policy and the state of the economy i now recognize myself for three minutes to give an opening statement. After eight years in the largest Monetary Policy stimulus in the history and the most unconventional Monetary Policy in our history, americans recently received disappointing Economic News yet again. It is official, the economy grew at a measly 1. 6 in 201 2,016thn our historic norm is twice that. That takes eight years of subpar growth in eight years of stagnant paychecks and eight years of him replenish savings. Notwithstandinnotwithstanding tn that the fed to come and notwithstanding the personnel. After eight years, there is a zero evidence that a zero Interest Rate and in the wouldve the federal Balance Sheet beats to a healthy economy. What also hasnt changed in eight years as the fed continues to unlawfully paid above market Interest Rates to some of the nations largest banks in order to prop up the select credit markets. This very well could be fueling asset bubbles and is harming the ability of the Market Participants to accurately price risk. The foray into the fiscal policy clearly threatens the federal Monetary Policy independence which should be preserved. What also hasnt changed in eight years ag years is on the y side, the federal figuratively if not literally has taken up the seats in the bank borders. This means the unelected washington bureaucrats can literally direct gets credit in our society as opposed to the competitive markets. I will continue to say it, we must be vigilant to ensure the central bankers do not want them to become the central planners. Fortunately, theres Something Big that has changed in the last eight years, and that is an intervening election and the prospect of three new members of the board of governors. The National Federation of independent business reports that optimism on mainstream sport in the wake of the election and the optimism index jumping up off your high. Likewise, the number of americans that say the nation is on the right track has risen by 15 since the election. Clearly americans have a newfound expectation that our economy will gro would grow hear with different policies coming out of chicken. And i believe the last eight years have shown that no amount of Monetary Policy stimulus can make up for the fiscal policy had friends of a cumbersome field of regulatory state and uncompetitive tax code of obamacare and dodd frank. All of these must be remedied and changed if we will have a healthy economy for all in the Bank Bailouts for non. Building the healthy economy for all requires changes at the fed. We must have a more predictable, discipline and transparent Monetary Policy. Policy. Policy. The socalled speed on Monetary Policy of today says nothing about which data matters but alone how they matter. This compromises the kind of policy transparency and predictability is necessary for the Household Wealth to grow and American Companies to create jobs. Something else thats changed in the last eight years as the introduction of the reforms included in the financial choice act which again is to restore the independence and promote Economic Growth. The nobel prizewinning economist former treasury secretarys and former senior Economic Policy officeholders have said when they endorsed the financial choice act of the bute reforms ensure a Monetary Policy framework that is david attended the consistent and predictable. The financial choice act will help consumers and investors a better decisions in the present and form expectations about the future and i look forward to the passage and bracket is the Ranking Member performance for an opening statement. Thank you mr. Chairman and chair yellen for testifying today. Each day is a new side to the co episode at the white house working families across the country are reminded that our hardfought games to create more than 16 million private sector jobs come up with wages come to stabilize the Housing Markets, raise wall streets peer to practices and make Affordable Health care accessible are in jeopardy. Trump has already shown america that what he is all about has taken steps to roll back the reform based on the false premise that they do not have the ability to ignore the National Federation of independent businesses serving and shoving back. 96 of the Small Businesses said they are borrowing needs are satisfied. In addition to rolling back the financial projections, they moved to eliminate safeguards that protect americans planning for retirement from being ripped off by financial advisors. Repealing the plan to cut the mortgage insurance premiums that would have saved homeowners 500 a year called the tax cuts for the rich at the expense of the poor for 28 Million People. With the Republican Leaders in congress and cutting the Social Security medicare threatened a trade war with two of the largest trading partners adopting an agenda taken altogether these policies will shrink our economy can worsen inequality, left inflation, reduce exports of eliminate jobs, exclude federal budget deficits and ultimately steer us in the direction of another great depression. To attack the policies reflecting from their own failure to provide a fiscal stimulus. To reject the partisan politics and bad decisionmaking in deed republicans in this committee have sought to weaken the independence and have called for changing the policy decisions to a mathematical formula that would harbor the ability amid the persistent shock. Three of the 9 million americans lost their jobs and find the Unemployment Rate hit 10 while the economy has made significant gains, hardworking American Families simply cannot afford another great procession despite the progress that we hav have te to come in many communities across america continue to struggle particularly the minority communities that are disproportionately hit by the crisis lost 52 of their wealth to made for the vulnerable communities your state leadership and independent data that advocates for the interest of all americans is now more important than ever. I yield back the balance of my time. Been gentle man from kentucky of the Monetary Policy and the trade subcommittee for two minutes. Thank you mr. Chairman in november the American People delivered a loud and clear message that they want major changes in washington with the governors resignation to president will have an opportunity to make major changes at the fed filling in for vacancies on the board of governor including the vice chair of supervision. Many Financial Institutions in my district and around the country are concerned that they may cram through the regulations before the governors are confirmed. Given the avalanche of red tape produced and the disproportionate costs imposed on the Small Community banks, it is imperative the Federal Reserve refrain from issuing any regulations until the governors are confirmed. As important, they need a new opportunity to examine the unconventional monetary policies since the beginning of the recovery in 2009, the improvisational policies including the near zero Interest Rates and the quantitative easing and befor before and afte had our Balance Sheet failed to deliver the predicted results. The gdp growth in the Obama Administration averaged 1. 8 well below the growth forecast by the fed and not even close to the 4 growth average in the previous recoveries. The American People are ready for a change from the unconventional unpredictable policies and a change from the inaccurate projections of growth from disappointing economic results. Its time to begin shrinking the Balance Sheet and easy money policies that fueled and shift to a firmly ground policy that will share price stability and conditions for growth to paraphrase Milton Friedman its time we have a larger role that can perform asking you to accomplish the tasks that cannot achieve and as a result preventing you from making the contribution that it is capable of making. Thank you mr. Chairman and madame Ranking Member. Welcome. The new administration enters with a tailwind of Economic Growth that is packed with 83 months of continuous private sector job growth and an unemployment level. We do have a strong economic condition to build upon. And the legislative framework that has protected the consumers and strengthened that has protected the consumers including the regular progress and allow for the growth in areas such as the workers wages that have been swif slowed recoy and in particular to address the nature of growth the United States still has pockets of poverty in urban and Rural Communities and i look forward to hearing your comments and appreciate your attendance at the kennedy. Welcome back and with that i will yield back. Today w we welcomed the testimony of the honorable janet yellen. Other members of the committee im pleased to present the semiannual Monetary Policy report to the congress. I will briefly discuss the current Economic Situation and outlook. The economy has continued to make progress. The job gains averaged 90,000 per month over the second half of 2016. Those bring the employment since the trough in early 2010 to nearly 16 million the Unemployment Rate stood at 4. 8 in january. They had the peak in 2010 and its now in line with the median of the federal open Market Committee participants estimate. The broadest measure of the utilization which includes those attached in the labor force and people that are working part time but would like a fulltime job is also to continue to improve over the past year. In addition its picked up relative to its pace years ago. A further indication that the job market is tightening and importantly improvements in labor markethelabor market in rs have been widespread for all major Demographic Groups including africanamericans and hispanics. Even so it is discouraging the rate for those minorities remaining significantly higher than the rates for the nation overall. Ongoing gains have been accompanied by the expansion and economic opportunity. Theres 1. 9 last year. The Consumer Spending has continued to rise at a healthy pace supported by steady income gains. This sentiment in the lower Interest Rates in last years sales had the highest annual total on record. In contrast, business was soft for much of last year but posted some larger games at the end of the year in part reflecting an apparent end to sharp declines in spending and drilling and structures. Moreover the Business Sentiment has improved in the last few months and in addition the dollar over the past two years have restrained manufacturing output. Its continued to trend up aguayo and the ongoing labor market gains should provide some support to the Housing Construction goin going going fe recent increases in Mortgage Rates may have some restraint. Inflammation moved up over the past year mainly because the diminishing effect of the earlier declines and total Consumer Prices as measured. Its up one percentage point from its pace in 2015. The inflation that excludes the ball the whole energy food prices moved up. My colleagues and i continue to expand at a moderate pace with the job market is strengthening somewhat or other and inflation rising to 2 this reflects the views that the u. S. Monetary policy remains accommodated at the pace of the Global Economic activity should pick up over time supported by the accommodated policies abroad. Of course the inflation outlook depends importantly on the assessments but one. Its during the latter part of 2015 in the first half of 2016. Meanwhile most surveyed measures of the longterm Inflation Expectations have changed little on balance in recent months. As always, considerable uncertainty attends the Economic Outlook among the sources of uncertainty are possible changes in the fiscal and other policies and the future path of productivity growth. Turning to Monetary Policy for the fomc is committed to promoting maximum employment and price stability as mandated by congress against the backdrop playinofweighing on the economye past year including Financial Market stresses that emanated from the developments abroad the committee maintains an unchanged target rate for the federal funds rate for most of the year in order to support improvement in the labor market and increase inflation towards 2 . At its december meeting of the committee raised the target rate for the federal funds where he by one quarter percentage point from one half to three quarter quarters . In doing so they recognized the progress they made in the objectives. The committee judged that even after this increase in the federal target the Monetary Policy remains accommodated and thereby supporting the labor Market Conditions and a return to the 2 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 economy to warrant further gradual increases in the federal fund rate to achieve and maintain its inflation objectives. As i noted on previous occasions, waiting too long to remove accommodations would be unwise potentially requiring the fomc to eventually raise the rates rapidly which could risk disrupting the Financial Markets and push the economy into recession. Incoming data suggests labor Market Conditions continue to strengthen and inflation is moving up to 2 consistent in the expectations. At the upcoming meetings the committee will evaluate whether employment and inflation are continuing to evolve in line with these expectations in which case a further adjustment would likely be appropriate. The committees view of the gradual increases in the federal funds rate would likely be appropriate to reflect the expectation that the federal funds rate tha is the interest e that is neither expansionary or contractionary and keeps the economy operating on an even keel would rise some overtime. Current estimates are well below pre crisis levels a phenomenon that may reflect the low productivity growth become a subdued Economic Growth abroad, Strong Demand for the longterm assets and other factors. The committee anticipates the depressing effect of these factors will diminish somewhat over time raising the nature of funding rate albeit to the levels that are still low by historical standards. That said the Economic Outlook is uncertain and Monetary Policy is not on the course. Participants will adjust their assessments over the appropriate path to the federal funds rate to the Economic Outlook and associated risks. Also, changes in the fiscal policy or other economic policies could potentially affect the Economic Outlook. Of course it is too early to know what policy changes will be put into place or how the economic effects will unfold. Whilwhywhile it is not my atteno opine on the spending proposals, i would point to the importance of improving the pace of the longer run Economic Growth and raising the standards with policies aimed at improving productivity and i would hope that the changes would be consistent with putting u. S. Fiscal accounts on a sustainable trajectory. In any event it is important to remember that fiscal policy is only one of the main factors that can influence the Economic Outlook in the appropriate course of Monetary Policy. Overall, the fomc Monetary Policy decisions will be directed to the attainment of its congressionally mandated objectives of maximum employment and price stability. Finally, the committee has continued its policy of reinvesting proceeds from the churning the treasury securities and principal payments from the agency that and mortgagebacked securities. This policy by keeping the holdings of longerterm securities ac at sizable levelss helped maintain the accommodated financial conditions. Thank you and i would be pleased to take your questions. The chair yields himself to five minutes for questions. As i knew you were aware on february 3, president of trump issued an executive order of Core Principles to regulate the United States Financial System. Section number one, paragraph c. This foster Economic Growth and vibrant markets through more rigorous Regulatory Impact analysis. You were quoted yesterday in the Senate Testimony saying you agree with these principles where you quoted accurately. I agree with the Core Principles the president a nauseated. As you probably know to date could be promulgated at least 22,000 pages of regulations as part of the 400 rules and i think roughly three quarters of which have been finalized. Its one of the headwinds we are facing now. I know as an independent agency you are not subject to the jurisdiction of the executive ee order that weve had testimony in this committee for years about the challenges of the poker rule and its impact on the market illiquidity. Just weeks ago the Federal Reserve released a staff paper and abstrac abstracted widgets e document the stress bonds is increased in the rule and since then theyve been the main liquidity providers and affected that they are less liquid during times of stress and goes on to say it may have serious consequences for the corporate on the market functioning. Then i guess i assume theres no particular action the board intends it to take quick. There is no action. Madam chair in the wall street journal i a assume the director of the Financial Stability division , that you know, her, in this article she said mac, version provide clarity how to balance the safety of the Financial System with Economic Growth so please note that congress does not believe you have found the proper brought balance in the volcker rule has an incredibly important channel to find jobs for america i know how much more balance and has to be but it has been struck. J. Gary 12, 2017, Financial Stability board release the recommendations for structural vulnerability is. And the governor was quoted as saying so my first question is are you aware of any betty to negotiate with the Financial Stability board on asset regulation greg. Is not with financial board so that is put into effect in the United States has to go through. And stan but my question is any contact with the News Administration to carry on any negotiations with respect to the Asset Management question quick. Weve participate as part of the established responsibilities. But the governor was never confirmed are you aware of any specific Statutory Authority he has to negotiate on the matter of Asset Management . It all think it is a negotiation the treasury takes part of those discussions. And should have a of the ability to nominate for position and confirmed quick. Will look forward to a nomination for the opposition. Dont we all. My time has expired. Madam chair we have frequently heard from members opposite sides of the aisle that there has been an adverse impact please provide a brief response to the following questions has business lending by commercial banks expanded or contract did a quick. Expanded. , a private sector jobs roughly have been added to our economy quick. 60 million since early 2010. Cad of wages increased or decreased in the past year quick. Increased by most measures. As the trend in aggregate Network Household positive for negative . Positive stuff those deficits resin or fallen . And without financial crisis of the aftermath have they increase stored decrease in recent years quick. I believe decreasing. Given your view what are the key factors of policies contributed to the positive trends in the economy . It is recovering from a very severe crisis with a stronger financial reagan nations with fourstar banks to build up the Capital Buffers to strengthen themselves to the point they could support Economic Growth and recovery in our e economy. The u. S. Economy has recovered more quickly for example, and the area of the economys with the aftermath of the crisis. It to put them plays highly monetary policies to spur the economy and restore low unemployment with the goal of maximum employment as i indicated in my remarks i believe we are coming very close to those objectives and Monetary Policy is still accommodative. As the nations leading economist with the social safety net with access to Affordable Health care with the earned income tax credit cutting and insurance Employment Benefits it could impact the shortterm and longterm health of the workforce and the economy. Could this do permanent damage . How do these to escape poverty quite. I dont want to give Detailed Congress on these programs but the trend is rising and although low income households are well over the last couple of years it states the severe problems that leave household struggle lings theyre helpful to deal with distress. On the earned incometax credit deal think that is important . It is important to support the income of the lower income families. What about the Child Tax Credit . To make that works in the same direction. You dont wish to Tell Congress what to do but would you include cutting the employment Insurance Benefits . I faint unemployment Insurance Benefits are important for families to face distress also in the downturn and was subject to that fluctuation in the business cycle. Mr. Chairman welcome back to the committee this is the first five like a visit with you and i look forward to visiting with you on a more informal basis and your supervisory responsibility. And to encourage differing viewpoints. But i will ask tough questions. But the fomc said with the appropriate policy accommodation Economic Activity would was stay and holding the fed funds rate and growing the Balance Sheet, one quarter size of the economy. You noted the conditions are strengthening with the target of 2 percent but despite these measures Economic Activity has fallen short of the fomc expectations and has done so of throughout the recovery. What does the feds forecasts tell us of the efficacy of the ballooning Balance Sheet . Congresss direction is to achieve maximum employment and price stability to focus on those objectives not Economic Growth persuade her say but it has been falling short of expectations and we are quite close to achieving the labor market objective the reason for this in is productivity growth than the u. S. Economy that determines the pace of growth has been very disappointing. I understand and recognize to see a repetitive failure to achieve the expected growth rate. My question is doesnt that underscore to deliver the expected results . If you are reasonable maybe we shed not be expecting so much . With a trillion dollar Balance Sheet . Look those policies have been able us to allow 60 million jobs to the u. S. Economy and died knowledge that. That we have to recognize the most 15 Million People are unemployed or underemployed after the recession belabor Participation Rate is the lowest since 1978 obama is the only president since hoover to not preside over a single year of 3 percent growth in media and Household Income remains 1,000 lower than the prerecession levels. We have a different pinpointed the recognize you believe the unconventional strategy has worked but if it has worked so well the white are we still reinvesting in not shrinking the Balance Sheet . We are beginning to remove Foreign Policy accommodation in respect to continue to do so. N. V. Have decided the best way to do that is by raising shortterm Interest Rates or the fed funds rate target. We are committed to shrinking the Balance Sheet but considering from the standpoint of sustaining a. I recognize that yesterday said u. N. Not start to shrink and tell the fed funds rate was high enough to be reduced again with turbulence so what is high even of . Did depends there is no unique level on the strength of the recovery or how worried we are about the Downside Risk of the economy. The fomc meetings will be discussing reinvestment policy in greater detail. With that uncertainty is creating. Your time has expired now the gentlemen from california. Mr. Chairman obviously i did not attend for my picture to be on the board. [laughter] i will last them to take this down. I always and be the majority with their National Debt clock the gentlemen from kentucky tells us he wants to blame the fed for the low Interest Rates and that is why we have National Debt. We although the amount of the deficit is set by spending and congress by the texas set by congress and the pitiful attempt to reflect what responsibility we have a large National Debt we youre told the blame goes to the fed because you have not charged just enough for the cost of borrowing. That it would be higher if our cost of financing the National Debt or hire. We also told to blame obama for the fact the catastrophe he inherited has not been rebounded enough like blaming the firefighter for the fire. The country was in free fall now were in the upswing and those who were here at the time of the policies say why isnt it bigger . Finally thanks for your large Balance Sheet. That goes to the general fund so your low interestrate tenure Balance Sheet are keeping that National Debt clock from turning much faster. And now the next meeting will have the trade deficit clock that over 11 trillion of accumulated trade debt since 1980 including goods and services to be higher if just goods that clock is turning faster and as a result of the terrible trade policies embraced by both sides of pennsylvania avenue. Eric colder pointed out he hesitated to engage in criminal prosecutions of the biggest banks because they were so large chief feared he feared for the economy. So ken you assure the current attorney general we can enforce the criminal law and let the chips fall where they may and the economy will be just fine now matter how big the institution that faces criminal prosecution and no matter how big the figures are. Can you tell us as of today nobody is too big to jail . I agree with the Justice Department to pursue any criminal indictments. Would the downfall of anyone or two institutions have an adverse effect on our economy to give reasonable attorney general pause before taking action . The process in place is the strengthening of the capital liquidity positions. Can we be certain . Yes or no can we feel free to engage in criminal prosecution without the adverse economic effect . There is a reasonable chance. One last question and the battle of dodd frank is to reduce the capital did banks have to face. To liberate 100 billion of dividends of buybacks. Would increase soared decrease the of risk the institution would need a bailout if we told them to have less capital on hand but to pay that out . We believe very strongly with the largest and most system institutions into supply the credit to households in that scenario to strengthen the resilience and reduce the odds of failing. Time has expired. Now legend to man from new mexico. Thanks for being here i always appreciate your viewpoint. As i read your report that you just gave to us on page numberone talk about the progress of maximum of placement just trying to get the flow in my mind correct commis made, progress but then you say the fomc believes that unemployment is that the normal level and where it needs to be. Under utilization is a little bit of the concern bid is marginal is that more or less the summary . We think the economy. Denounced about the economy. I asked about the employment of where it should be. In essentially. I understand that basically you are giving a fairly gloaming stable report. But me be clear i am not saying that all individuals. We have pockets we do have large to clients from major Demographic Groups but also discouraging jobless i will give you your balancing statement but my point is that will we have done pretty bill with those pockets is highly discouraging because four other 10 people went in for the 60 percent that are tells us the highest economic body in the country says it is okay that we dont draw attention coughed to the 62 percent liberal force participation and things are fairly stable so yesterday in the New York Times article said that ms. Yellen and other fed officials would seek to offset those meserve measures it is growing roughly sustainable we did is accurate . I have urged congress and the administration to focus on measures to. So you do not believe quite. That is not accurate i dont believe that accurately reflects. I think there are policy measures that could boost the capacity of the u. S. Economy. I think faster Economic Growth is supported by a faster Labor Force Growth. Is there a maximum . Is there a position is there a number that you get uncomfortable . No. We would like to see faster growth but we have to control. Q redo that to offset that fast Economic Growth . Only if we think and write is the inflation objective. Let me wrap up because looking at employment figures of 60 million to indicate all jobs are created equal frankly a retail job will not play it pay as well as the refinery job when the president talks about expanding the economy and they see the comments that you could do to sidetrack that grew 38 when he will increase infrastructure i worry about that Small Business growth is not as good or even equivalent as the Economic Growth noir. Madam chair it is good to see right cannot believe my ears. So i wonder about my colleagues to claim they are worried but i was elected 1998 added that time talking about balanced budgets and we had a republican majority in the house similar to what we have right now. And now all the sudden were not talking about balanced budgets but rising deficits. We had biocontrol and remove for word to end up in the greatest recession since the great depression. These are alternative fax but when barack obama became president we were losing. 700,000 jobs per month brought caboclo was not the president so to establish the economy that was for being. I remember the secretary of treasury coming to the house banking democrats to do something because even republicans would that do anything asking for our help. To save this economy. And under barack obama we have made tremendous progress as opposed to losing jobs now we have gained 16 million that must be something americans should be applauding because we have come along way from the economy and the tank to do something we dont want to go back there again. To put the American People to work we want people to be plant in that position again and we sought a stabilization to move forward and create jobs and here we are now creating that same type of uncertainty. But with that uncertainty whether or not dealing with immigration or trade that causes problems in the economy. For many years that has made them reluctant to make commitments. Wind of the things that i do know it is certainly there is nothing with a Current Administration every day that we wake up this something new and uncertain to deal with this administration. Every day. I dont know one day we have now woken up to read the papers and it has been something new bill we have had anything but a certainty over the last 14 days in the United States of america. Into had the effect on the average everyday worker. And even our credibility. In the Current Administration the president boris said get rid of that one then the president do this then they resign by themselves. Uncertainty. Our country is in the uncertain position right now. I am hoping something to changes immediately to go back to where we were. My time is up. I yield back. The vice chairmen the committee. I thank you for being here today. I support the Federal Reserve function as the independent policy maker when it comes to Monetary Policy. For the purposes of Monetary Policy is very important. As i asked before in terms of regulation it is appropriate for the rulemaking and regulatory policy . Of course,. Should ponder is at oversight with the International Body as well with . Congress is designed it in various regulatory agencies. And i believe we should have discussions with our international colleagues. I will get to that question and i understand because Congress Gives you this authority in directive should they not also have oversight with that authority that we have given you a quick. Of course, congress has oversight. See you agree you should have oversight . So in accordance with that i dont like the content and for you to pause that has a marked the different approach to again the appointees before you finalize. You know, that nothing that is effective in the United States until regulatory agencies have gone through the normal rule making process and there is nothing in these discussions to find these agencies including the fed to carryout agreements. And have no intention. And in other cases we cannot even as surmise if your representative votes in the affirmative for the negative for these agreements with the International Agreement because we cannot surmise if you vote yes or no. What we want is transparency. So when it comes to the package into have an opinion of these matters on the basil for package correct. Is discussions that which u. S. Regulators participate in net thing is effective unless we hope for will making process. So i will summarize that has probably not. You will probably not wait to counteract exactly where you achieve with the International Agreement. So with that regulation what steps are you taking today and americas interest specifically to International Standards . With the International Call insurance regulation in still suitable to be put them place and as those matters discussed to be agreed upon. Unless we have gone through full rulemaking process to comment and respond. And with at Core Principles to empower americans to prevent tax payer funded bailout and restore public accountability everybody agrees but i dont see anything that specifically says did i miss that . With any specific it regulation at any level. Did i miss that if with the Core Principles were quick. You said it is up for review. So we all love this and therefore to be very wonderful and powerful means nothing. To promote the Financial Stability to end it too big to fail to protect consumers from abusive practices and excuse me i am reading the wrong thing. That is the dog franc bill. And that sounds very familiar. Be dead who could oppose any of that . By the way dont you love greg . The ball is still flying over fenway park. But just died of curiosity. And own any banks . Do any of your immediate family members own any banks or stock in any bank . No. Idol this formal or informal those coming into the Federal Reserve. You think it would be unethical with it if any highranking staff were to financially benefit greg. With a conflict of interest. And to me it has been troubling. I wish everyone tried to do that. But that is a discussion for another day. And just sitting there doing nothing to understand those Capital Requirements to deposit 100 in rejecting account but effectively end to put those roughly 6 and if the bank goes belly yep up to say that theyd made bad choices may be as a President Shall all tax cuts aikido may get 6 back. Indeed think that is sufficient . Housing capital . Of the loews liquidity requirements would require them to hold that. We want to make sure. I am not arguing berger you are the professional berger wreathing 6 is sufficient quick. But apparently some people say that is too much. We cannot keep that 6. Your time has expired. Thanks for being here today. If you look at gdp growth every year less than it was the year before. With at negative trendline along that line to paint a rosy picture of landing in the United States with a National Independent of business steady confirms that and had no intention of bar wing borrowing. I think that is a legitimate concern. Of Small Businesses have not seen rapid growth of course, that is a concern. With the regulatory onslaught that banking regulation makes it difficult. And one quick example is to a larger bank and over the last year three loans pat is the kind of activity going on in the real world. When is the last time you talk to a smallbusiness owner quick. We do. What about you personally we have groups that commit regularly to be with me and other Board Members. When was the last time . Day you have a date by. Within the last several weeks. Cat you talk to a formerly the . Not recently. Wind of the other concerns is because of this onslaught of regulation in the Banking Committee issue are a regulator in this is problematic in my home state of missouri, there were 44 banks that were under 50 billion. They service say Small Community. Twentysix of those lost money. Twentysix out of 44 lost money in 2015. Now those are all targets for closure or merger and that is and cuts the ability to have access to credit. So then to my next concern is the Clearing House to come up with the study and it makes the statement. What is your response . It is a highly flied the study and i disagree with the findings. I could go into detail about some of the flaws of the methodology. One flying is that the clearinghouse estimates and not the quality of your or marginal loans because that portfolio. I dont but then you are more than and the industrial loans can you explain that christ images stress testing triacetate the forwardlooking institutions to step back. Igo frame the question again berger if you have a Small Business loan and a Large Industrial loan so where is the most risk. I yield back. Your time has expired now the gentlemen from misery. And also thanks for your appearance. President trumps proposals would have far reaching negative consequences for the economy. These policies comeback to dodd frank reform with the Consumer Protection act and to deport to undocumented the immigrants and and the president but with the plan to the fha the one have saved homeowners 500 per year. That may not be much to some but forward most that means something to them. But the wouldbe catastrophic. But after the recession to bring in regulation over the Financial Institution including creation of this cf p. B. Have we not learned anything since 2008 . Now we have an effort to. When is the impact. So looking back but then this securitization number mortgage lending to the financial crisis and to be part of financial instability if we are not with those potential abuses quick. To you think the and have we done did their job to protect our consumers to get the money back . It is like the backstop for the consumer. Let me hear your opinion about cfp we. To evaluate the agenda to take on those attempts to regulate those areas. Thank you for that response i know that unemployment but however not more work needs to be done to reverse decades long inequality that has left middleclass workers and minority communities behind generational and systematic inequities continue to start progress and opportunity for millions of americans. What can you do to redress that . I agree and i think these ongoing in the quality should focus on with mini Public Policies that are not in the domain of the fed but for starters involved focus on Education Training and other things to improve the chances of success with those serious labor market problems. So congress should be about helping this economy and going about this job creation not looking to roll back. My time is up thanks for your engagement. The gentle man from of michigan. Good to see you in this my first time not engaging in the Monetary Policy of moving on to a number of issues did you have lunch with mr. Mnuchin as much as secretary to . I will look forward to that. We polled your public calendar over the last three years over 34 months 68 official meetings with a prior secretary and 302 with members of congress including eight with the Ranking Member and to with the chairman and wind with myself. That is what i have advocated for you to come more often as part of that for match play in place for times the year rather than two times did thank you think it is burdensome but i think it is good communication. Does the economy still need improving . Ltd. Is a very broad question. Guess or know what. In many dimensions, yes. Rival take that. We have seen scenarios and i will felice and met there is an congruent datapoint and conflicting information that brings the joke to mind heavier seen the onehanded economist . I think we have seen those but i am curious what is the Unemployment Rate . Nine. 4 . Esl and you talk about that on page one not specifically the dimension did is 9. 4. You do use a charming phrase description marginally attached to the labor force to describe you six. Isnt that shapiro isnt that true we are in the most tepid recovery since world war ii . It took a long time for the economy to remove that labor market. That sounds like a yes. Is it not true the Obama Administration is the first that has not made turned the economy to preen recession levels . I would say that it is. Now in terms of the Unemployment Rate and other measures of the labor market is a veteran that there has been 30 quarters, not months, but quarters of recovery . But it is pretty tepid it has taken 30 even if it is close to . Remind there was a very deep downturn. Anderson that labor force Participation Rate is that laugh record lows. It is declining. Old dog. I will throw the flight because the m. I. T. Economist report that recently found young girl workers are not entering the labor force but old their workers are and that is sealed the growth and the only demographic is the older workers. You start to sound flimflam but that is the only demographic entering the workforce. The labor force Participation Rate but they work very much less than previous generations. I am the product of one of those. In my remaining 10 seconds is it not true that we word pro off the shackles of unreasonable regulation we would have a steeper recovery . I would not generally agree with that. So more regulation greg. Cleaning up the Financial Institutions and requiring them to build capital. Time has expired the chair recognizes the gentleman from massachusetts good morning. Well come back talking about the statements coming back from the of whitehouse and the financial choice act that there are extensive complaints that level of regulation created in dodd frank has prevented businesses from getting loans. I am in massachusetts and realized there could be no player and the environment is very robust is there any evidence that pokes are not getting loans . And certainly it has increased in recent years. And the Small Business owners suggests they dont have inadequate access to credit also the most recent survey shows only 4 of Business Owners regard themselves on not having all loans available but they would like. But by borrowin bargaining agaie equity line of credit, i think the decline in Properties Residential property prices may have impaired by Bargaining Group for some businesses. It wouldnt show up in these numbers but generally access to Business Loans looks to be quite adequate. One of the other efforts in that repeal of the act would be the orderly liquidation to preclude taxpayer bailouts. I voted against the bailouts because people in my district that didnt have Bank Accounts were being asked to bail out the banks that put our economy in the toilet. Will you think about removing the liquidation of authority in dodd frank . I wouldnt want to see it removed although i do think bankruptcy should be the main vehicle for resulting the distress. We put in place protections that make it likely that firm would hail and ensured that if it did to be sufficient debt and equi equity. I know that the choice act proposes changes to the Bankruptcy Code that would be helpful in making bankruptcy work as a preferred option but i think it is a backup procedure. We dont know what the circumstances might be and be firms need liquidity and access to the financing. Title to provide this kind of liquidity and puts the burden on the Financial Center if so, not u. S. Taxpayers for any burdens that may be incurred. I do continue to worry with bankruptcy working also closely with firms to make sure they have liquidity plans that would enable a bankruptcy that always concerned. The chair recognizes the gentleman from wisconsin. You have a wonderful poker face. You testify well but i must say the staff behind you, its interesting to watch your staff as the political shots are taking you catakenyou cant seey are behind you but shots taken from both sides of the bible botaisleboth smiles and joy thay take and the grimaces that come from our side i just want to point that out they do not have the poker face that you do. I will just make this point, not a question you dont see regulation as a problem today with regards to Economic Growth however you did the last time note that if they were they wed to Economic Growth so im seeing a difference in your testimony and i dont know if that has anything to do with mr. Trump winding back the overburdened some were not. The size of a bank, is there any correlation with large banks and Systemic Risks or can there be a correlation between the Systemic Risk . Its not the only miniature but its generally true that the largest banks give rise to the greatest Systemic Risk and i would like to clarify i think we should be concerned and i am concerned with Regulatory Burdens and if i havent made that clear, thats an oversight on my part. I didnt agree that regulation was the key factor resulting in slow growth, but we are concerned about Regulatory Burdens and i am committed to doing everything we can to reduce it and i want to make that clear. You well acknowledge it is a fact for related to Systemic Risk. Since dodd frank has passed them have the largest banks in america. In baker were smaller plaques probably bigger. Have we seen an increase in the number of Small Community bank from the parts like where i come from or do we see the smaller Community Banks and Credit Unions . There is a consolidation. So we have seen that big banks get bigger and a consolidation or eradication of Small Community banks and Credit Unions. Question in regards to the crisis. Did mortgages have anything to do with the crisis, mortgagebacked securities . Of course. Was there any reform of fannie mae and freddie mac to address one of the great causes of the crisis did they address this . It remains an open question. One of the main drivers of the crisis were not even addressed. They did nothing on the route driver of throutedriver of the t it alone which is concerning for us. Hopefully in the next year and a half we will be able to address the gsp that the promises were great about all the good that would come from dodd frank dot t we cannot underestimate what happened since the banks have gotten bigger and we see the Community Banks that serve. Its nearly impossible for them to survive and thrive. I want to ask about the labor Participation Rate. Do you have any opinions on the conversation that is taking place in the house and the senate and the white house and what that does to bring jobs back to america . I dont think that its appropriate for me to weigh in on details on the specific measures. Gets 30,000 feet. While over 100 countries have a border adjustment. It is a complicated policy. But many countries have this. Yes. The time of the gentleman has expired and now recognizes the gentleman from georgia. Welcome in the first of all, i want to say thank you for the work the past two years together dealing with and addressing this alarmingly high Unemployment Rate in the Africanamerican Community and that is especially rampant within the Africanamerican Community of young africanamerican and ages 18 to 39. I also appreciate your suggesting to us what we suggested in and what you told me, inflation and unemployment is your dual mission but when it comes to targeted unemployment like this, you only have a [inaudible] we should develop legislation. In response to mr. Clay earlier again and you reiterated that somehow we have done that and we have two very important pieces of legislation that addressed that by myself and my cosponso cosponsors, kevin kramer of north dakota, republican. My good friend, democratic cosponsor of utah, mr. Beatty of ohio and certainly we belong to get to believe along with sessions in the rules committee that hears the issue right now. We need some help in getting a meeting with the president of the United States. This is why. As you know, the job component and training will be attached to his efforts to rebuild the crumbling infrastructure. Second, the administration of this part of the legislation will be through his secretary of labor and then on the education piece, which we are asking for 95 million to help, the struggling hardworking africanamerican 1890s land grant institutions like Tuskegee University in florida amm, prairie view a m and Texas Lincoln University but we have been unable to get a meeting. We ar are at a dead water and i call upon you to ask President Trump if he would be kind enough just to give me and my cosponsors an opportunity to come over to the white house to talk about these bills because it has to be a partnership. He and his administration have two administrate. We can only reduce the policy but if we cant get a chance to talk to the president , how are going to get his body and. And chair yellen, president bush said on numerous occasions he wanted to help the african community. What do you have to lose, he said over and over. Give us the chance. I ask you to put the unemployment side of your mission had on. Nobody, no federal agency has unemployment as a mandate as the fed does. So, you have good credit to be able to go to President Trump and say i am not endorsing any legislation over there, but there is a very good package of Bipartisan Legislation that goes through the heart and the soul of the most devastating issue facing the Africanamerican Community. Tell him that we now have more africanamerican young men ages 18 to 39 in the prisons or on probation or parole with felony convictions. All hope is gone for them but the problem is there is a train leaving more and more of these young men there that if we can get the scholarships into these colleges for these kids, the agricultural business and science and technology is reaching out and i thank you for your efforts in doing that. Thank you mr. Chairman. The time of the gentleman has expired and the chair recognizes the gentle lady ms. Wagner chairman of the oversight and investigations subcommittee. Thank you for joining us today. I also noticed yesterday before the senate Banking Committee that you agreed with the Core Principles that were part of President Trumps executive order calling for the financial Regulatory Framework and i thank you for that. I hope that you will work with the newly confirmed treasury secretary on identifying some of the regulations on the books that conflict with the principles that have a robust discussion. The ceos executive order requires you to control the treasury. What are you doing specifically to identify what inhibits the principles . We look forward to working with the treasury secretary on this project and will cooperate fully. Once it is under way, hes only been in office for a day. The process is not yet established that we look forward to participating. We look forward to hearing about the process and how you will be participating. President trump signed a few other executive orders relating to regulation. Most notably a an executive ordr issuing a regulatory freeze and in order repealing the two regulations for each regulation proposed. I understand that the Federal Reserve as an independent agency is exempt from these orders however do you plan on volunteering to come flying in any capacity with these orders . In the past, when thereve been similar freeze is put in place, the fed has had a rulemaking thats been well telegraphed and underway for a long time. Its continued with the regulatory process, and i would expect theres nothing weve been placed recently that wasnt well understood or are ready with most of what we would be looking at the wiki notices of proposed rulemaking where there would be plenty of opportunity for comment by those that might be appointed to the members of congress and others. I hope that you will be willing to voluntarily convoy with these orders as you go forward when it comes to any additional rule betting. As you know it has been discussed in this hearing and to that point the physician of the heaposition of thehead of superd a game since the passage of dodd frank and i hope our president wilpresident will be nominated tt position. This governor whos been performing many of the regulatory coordination options in the meantime indicated hes going to be resigning in april. What remaining agenda items since we are discussing that are being planned until he leaves . We have a relatively light schedule. We do have one possible rulemaking we dont know what the timetable would be pertains to the stress test and whats called the stress capital buffer that came out of the fiveyear review. I dont know just what the timetable is. Its been in the works for a long time and i think the Financial Community is aware. Is there a benefit of waiting until we are able to nominate and confirm a vice chair for supervision to be able to weigh in the regulatory initiatives . If we would have come out with it it would have been a notice of proposed rulemaking and the new vice chair for supervision would certainly have a chance along with others. In my limited time i applaudi applauded thiapplauded the fedee for some limited relief to the Financial Institutions from the qualitative portions of the stress tests. As you know the gao issued a report late last year with several criticisms and recommendations regarding the stress Testing Process particularly in regards to transparency. What are the plans for configuring and implementing the recommendations . We value and accept the recommendations and intend to implement them thank you. Is there any plan on doing a more comprehensive review on how it conducts stress test the we are completing a review that is comprehensive and the changes that you mentioned that relieve the burden for the large number of the banking organizations, that is one of the outcomes of that. The time of the gentle lady is expired and now the gentleman from texas. Thank you mr. Chairman and madam chair lady is an honor to have you with us youve done an outstanding job in my opinion and tried the best you can to help us meet me to this piece expanding the mandate. President congressman scott mentioned his efforts to bring down unemployment as it relates to africanamericans more specifically africanamerican males. Congressman jim clyburn has a plan he calls 1030. There is a jobs act and we tried to have job Training Programs so thereve been efforts made to try to bring down the high rate of unemployment in the Africanamerican Community as well as other communities. But it seems that some of the obstacles include this process or premise that we can engage in the expansionary fiscal contraction and that eliminates some of the problems as a fiscal austerittheyfiscal austerity prt has been implemented by my colleagues on the other side. And these thing of these thingsy opinion have been a hindrance. So given that congress has not acted appropriately and that there is a high rate of unemployment in the Africanamerican Community, i am calling on the fed to do a little bit more and i ask that you do this because ive received an executive summary i would like to share with you type of experiences and perspectives of Young Workers and this is from december, 2016. It gives me information including the following. The Federal Reserve conducted its first survey of Young Workers over november, december 2013 to develop a deeper understanding of the forces at play meaning of the reasons Young Workers may be having employment problems. In december 201 2015 the Federal Reserve conducted a second survey to further explore the market issues and trends among the population. You go on with this report to indicate some of the output expectations. Young adults what they pay the child are optimistic than those without a paid job. Among the young adults, they the study employment and it remains more important than higher pay and study employment. Imported. You go on to indicate many young adults gain early Work Experience during high school, college or both. Early employment develops a good work ethic and then fulltime employment is also correlated with a positive outlook and job satisfaction. What youve done in this survey is to get some sense of what is happening with young adult. I have not seen a similar report in the Africanamerican Community. Does such a report accessed and if it does i would like to peruse it and if it does not exist, i believe, madam chair, that you have the mandate and the authority to produce such a report. We have to stud had to study ant empirical evidence as to why africanamerican unemployment is almost always place that. Pick any period of time, any president , any administration and this is the consistent number that you will find. Twice as much as white unemployment. We need the empirical evidence so that we can use that here in congress to promote better legislation. We havent given the proper legislative answer. Can they do this and if they have already done and i would like to read the report serious im not aware that weve already done it, but we have a great deal of Research Going on in the fed, and i would encourage people at the fed and we will discuss it with them trying to look more carefully at this. Let me assure you that this will be a quantum leap forward to receive empirical evidence from the fed and its two why we have a constant number of the two times white unemployment. That would be a quantum leap forward. I will bet that he will do what you can to get this done especially when you are back the next time we can discuss some of these issues related to why africanamerican unemployment is so high and i would also add much of what i read here explains some of what is happening in the Africanamerican Community. No jobs early in life, not an opportunity to develop work ethic, these are important and i beg that you help us. The chair recognizes the gentleman from new york mr. Ki mr. King. Im concerned about proposals that would change the composition of the fomc removing the vice chair position. It strikes me as misguided and the responsibilities that go with her District Bank as including the countie counties d countries and monetary policies on behalf of the fomc and the entire Federal Reserve system. The banks involved in the markets for us. Its a Financial Market trends. The decision in the new york fed should serve as the fomc vice chair it reflects the traditional role and its something thats worked well. Do you agree with that . I think we have a structure that works well when i am not seeking changes to that aspect. I will not push my luck and i will accept that answer. The chair recognizes the gentleman from missouri, the Ranking Member of the subcommittee. Thank you mr. Chairman and madam chair. Two saturdays ago in missouri, i held a town hall meeting with about 1100 that showed up the proposed executive order on immigration and people showed up with great fear and this past saturday i was in baltimore saturday evening and all of a sudden my cell phone started ringing one call after another and there was widespread panic in kansas city and the Clergy Community acrosstheboard catholics, protestants were all concerned. People were calling each other that i see wha with pf churchesn the past sunday arresting undocumented immigrants. It was such a big deal that if the staff or any of the colleagues and staff would like to check its a frontpage story in the kansas city star. All three or four networks did stories so they were calling and asking me how many agents are coming in and so forth. It was just an awful kind of thing and i felt terrible because i was in baltimore and was unable to be there. How this connects with you, im just wondering if there is some success at deporting 11 Million Immigrants do you think there will be any kind of impact on the u. S. Economy if we are able to just get rid of all of the undocumented workers by next thursday do you think there would be any impact on this economy . The creation has been an important part of the Labor Force Growth in the United States for some time now. We are in a period in which one factor responsible for slowing growth is slower Labor Force Growth and the radical change in immigration would certainly affect the potential economies of growth. Many of the creatures were concerned because they read about the guy that said i was a stranger and you took me in. Based on that, they thought they had an obligation to respond. The other thing is in 2012, 2011 i would like to share, 2012 the fed did a study on the housing collapse that we experienced that triggered the recession. Over the years for whatever reason, they were blamed for the economic collapse and a basic policies allowed them to give loans. But they were blamed for the economic collapse. Your study says otherwise. Can you shorten that into a paragraph . A wide range of problems in the Mortgage Market i think looked at the crisis and the gses were probably not a critical part of what caused it. I have so many questions. In repealing dodd frank, there is a question the wording is not as strong as im saying that they essentially say we are going to give Oil Companies the right to bribe elected officials or officials in the countries we are removing a section from dodd frank for bribery is now a part of the way in which u. S. Companies operated. My time ran out. I apologize. The time of the gentle man is expired and the gentleman wishes to advise members that i intend to recognize mr. Royce, ms. Beatty, ms. Kissinger and then declare a ten minute recess. The chairman of the House Committee has recognized. Chair yellen, good to see you. I would like to follow up on a question about capital. We know on the one hand that the institutions are vulnerable to the market shocks and we render the consequences. If you look back at the over the approaching of the investment banks 401 if you look at those that were leveraged at the time 1001, that was in the lead up to the financial crisis so we can see the capital standards must play a role in building resilience in the Financial System and on the other hand, raising capital also has a cost to the economy and a cost in terms of what it does to the potential for growth. So what we have is the classic costbenefit test. There is a benefit to the higher capital standards, theyve reduced the risk of a financial crisis and bailout as well as potentially increasing tax revenues. And while the cost would be borne by the borrowers in the higher funding and the economy as a whole with less Capital Formation weve got that on the other side. So as youve said in the past, that costbenefit analysis is difficult work and i agree it is not easy, but its not impossible and it is imported so in 2010, the committee did some work on this subject and also researchers at george mason published a paper on the benefits and costs of a hire Bank Leverage ratio. So how do we get to the right number, should it be 5 , 10 in the choice act, 23. 5 as proposed by the Minneapolis Federal president , there is quite a range. And i dont expect you to say a member today. But cant you agree a costbenefit analysis could help us to more effectively acquire that capital . I will start with that question. We do agree deciding on the appropriate level of the capital standards we are waiting out the costs and benefits and the benefit of a lower probability of a financial crisis that has incredibly high cost against the cost of slightly higher intermediation and borrowing costs. As you indicated, it was partly informed by the committees analysis of the costs and benefits into Federal Reserve participated in producing that an analysis. In that study that you mentioned also it contains costbenefit analysis and draws the line. From my standpoint it seems to me the fed would be best suited to conduct the analysis and research on this and as you are explaining, we have such a range of opinion although we agree on the basic concept. So, my question would be short of us mandating that fed to do it with there be a way for you to try to move forward and approximates what the ratio should be . We did to costbenefit analysis, and informed our judgments at the time. You referred several times to the leverage required meant. We determined capital and in particular the leverage required meant treats the risk associated with the u. S. Treasury and the bond identically we think that Capital Requirements need to beo beat risberisk sensitive with ae ratio. It might not be sufficient but in terms of it being a component it seems to me theres another question i wanted to ask and that is yesterday you told senators that the goal of bringing private capital back to the Mortgage Market is important and you hope if there are given keys in the market that they would be recognized as priced appropriately. Its my understanding you believe the model of the private gains and losses didnt price the backdrop appropriately. The time of the gentleman is expired and whasexpired and we e gentle lady from ohio. Thank you mr. Chairman and Ranking Member. In the form of me trying to be consistent with questions, i would like to repeat a question that was asked before. Certainly as you know, i have a strong interest in making sure that we have equality and equity as it relates to employee and women and minorities so i want to start with thanking you for responding in writing and not only in writing that in detail to that question. I know in the senate hearings, senator brown also post questions as we look at the Federal Reserve bank and whats happening. I know we have a couple openings since our last conversation he here. But if theres any additional things hopefully you can share where we are if we are making any headway because also according to the fed campaigning at the center for democracy in states that of the board of directors were 83 white and 70 male. Under the ac act of the board of governors has the authority to appoint class c. Directors. Can you describe that process for appointing a directors or give me a brief update on where we are because im think knighte that was patterned after the rule that if there is an opening all we are asking is you have a pool of candidates. We are focused on achieving diversity in our directors more broadly on both boards of directors of all of the Federal Reserve banks and their branch branches. We engage in ongoing at least yearly evaluations of the progress of the reserve banks in the achieving diversity and we insist on recommendations from the reserve banks that will enhance diversity and make sure their are an adequate there are an adequate representation of women and minorities and that we have diversity as well that the consumers, labor, nonprofits are represented and it is a constant focus and we give feedback to the banks to inform the search for directors. I do believe we have made progress and achieve greater diversity. I will say that it is a very high priority for us. I just learned last month something that seems unique or different the Federal Reserve held a teachers town hall meeting and i thought there was very interesting and pleasing because the Financial Literacy is something that ive dedicated probably the last two decades of my career and im very pleased to say mr. Chairman and Ranking Member that ive been appointed as the new cochair of the Financial Economic letter today to Literature Council with my republican colleague. Is there anything in this town a call you can share as it relates to the Financial Literacy or that relates to some big we should be looking at and maybe this could be a bipartisan thread and we can get the staff to laugh or smile with that because it would be so positive we would have a democrat and republican working together. Perhaps we can give more detailed feedback if that would be helpful. I mainly answered questions with a group of economic educators asking me what they should be teaching their students about the Federal Reserve. I was asked about diversity in the economics profession and what could be done to foster diversity and shared thoughts on that topic and why it is perhaps women and minorities are not attracted into economics even as a major in college in the numbers that one would want and expect. But on Financial Literacy maybe we can give you more detailed feedback. Thank you. The chair recognizes the gentle lady from North Carolina. Thank you mr. Chairman, good afternoon chair yellen. There has been much said today regarding the different economies. I hurt my good friend and his performance as i traveled in a marketdriven economies and the highly regulatory policies in the last administration and in North Carolina we have a way to convey this is like trying to dress up a page and put perfume on it. It doesnt look as good as it is and the outcome reflects something different. You mentioned 60 million jobs created from this economy. When you look at eight years, thats 200,000 jobs a month. So comparing that come at the time i was living in washington back in the 80s, he inherited an economy that was very weak, 20 Interest Rate, high inflation, high unemployment and after two years with an independent fed, reduced Regulatory Burden and tax threshold, the economy began to grow exponentially 300,000, 400,000, 500,000. We were growing 6 growth at one point. We look now at an economy that hasnt reached 3 Economic Growth. The only Administration Since world war ii that hasnt been able to achieve that objective. I would say to you that given that into the number the dominican people that are at the margins just around the Kitchen Table that are struggling, they came out and droves in the last administration because they were upset. Do you think theres different policies that should have been made in hindsight that you missed something quite thin business, we have a way of assessing what we do right and wrong. But have we missed the mark quite as we didnt achieve objectives that were intended and people fronted a Demographic Group that was the least of the economic ladder than any group in the country and that was the focus of the folks here trying to help. I would like to get your analysis of what he missed. Is there something in the policy we could have done different . What would you do different today if given the chance . I think the trends that you describe that have left so Many Americans feeling frustrated in the labor market and economic circumstances and success data back to the financial crisis, probably to the mid to late 80s and we saw the character and composition of jobs changing in the United States. With all due respect, we dont have a lot of time. This recession the president was only in recession two months. He had a chance, his policies have a chance. I would like to ask you a couple other things. Relative to Community Banks, you made the statement that you are concerned about what happened with Community Banks in this country and in North Carolina we lost 40 since 2010. Thats a major impact on our economy and access to capital and credit. Do you believe there should have been daily advisers to reduce the Regulatory Burden on the Community Banks clacks yes. And i think we should be heavily focused on using every tool available to us to reduce the rates of the Regulatory Burden on those things. We ourselves and with other banking agencies have taken a number of important steps and but you didnt ask the congress to be fully engaged. The secretary argued theyd become more adept to communicating the policy path and its analysis of its own economy. That will avoid confusion and instability. Do you agree on that assessment on china . Im not privy to all the detail he may have given. But in the principle. The greater oversight and communicating the policies. I do think it is healthy. Writewritenow would you say t it should be true also for our country that maybe we could be more front understanding the policies we have the act lays out steps to achieve this and i would like to know your perspective on that. Many officers cant hurt and would agree as well. Transparencies and important objective and we are always looking for additional steps. I think its been improved. As you know, im not a supporter of the format that would change to a simple rule. That would result in poor economic performance, and while understandability and predictability are important goals come at the end of the day the time of the ginge gentles expired. I would advised we would anticipate reconvening in ten minutes. We intend on adjourning at approximately 2 00 and anticipate one series and the committee stands in recess. The committee will come to order. Members are requested to take their seats the chair recognizes the gentleman from connecticut. Thank you mr. Chair and ms. Yellen for being with us today. Always appreciate your testimony into the good work that is done. I have a couple questions. I want an opportunity to reflect and maybe ask a question about the economic narrative that we are getting at least on for so long from the majority. I was here eight years ago when the economy lost almost three quarters of a million jobs. We were handed a technical economic term would be a Dumpster Fire of an economy and took a number of measures including the act that had regulatory measures to stabilize the Financial Sector on its knees every single one of the measures of course opposed by my friends on the other side of the aisle. My question though is we are accused and have probably properly accused of not doing enough to spur Economic Growth. The fed certainly is coming and we heard that. We the growth of 2 isnt a 4 promised by President Trump and apparently we could have done better. My question to you if my memory is correct Economic Growth is a function of population growth so my question is and ive looked at other countries and the growth of 1. 9 overtime isnt inconsistent with other countries, so i wonder as an economist if you would agree that our growth rate has been in some way artificially held back or if we are operating in the way that we operate growing out of below 2 . So when the economy suffered a deep recession its output is willful of the economys potential and it can grow more rapidly than dictated by the population or labor force and productivity but once the economy is operating at its potential unemployment is in the neighborhood of the full employment as it is now, then i would certainly agree that it is Labor Force Growth and productivity that dictates the pace of growth. Unfortunately, it looks like that is a little bit under 2 for the u. S. Economy and Labor Force Growth has slowed and productivity growth has been very disappointing. To speed that up, we would have to see an improvement in one or both of those things. Ive been reading these reports since ive been here and the reports have always listed factors that have perhaps stand and growth and i remember the housing hangover was cited some years ago with uncertainty and issues of aggregate demand. This report has never highlighted regulation as a material, and i do mean material. I know overregulation can have a result, but the report never cited regulation as a material factor in embedding u. S. Growth. Is it the opinion of the economist were the federal or te that regulation has really been a material breach on the u. S. B. Economy the last eight years . Investment spending has been quite low and we have tried to understand what some of the factors are that are responsible for it. Businesses and surveys to cite regulation taxes and uncertainty as fact is that are holding back investments. So, we understand it could be contributing to slow Growth Investment spending but theres also other fact is overall and sales growth has been slow and thats been important as well. Im a big believer in promoting the independence of the monetary authorities. Youve been vocal on this in your letter in november 2015. In my remaining time can we talk about some of the initiatives. In the format it goes to asking the gao to come in on a realtime basis and make policy judgments that would secondguess the decisions of the fomc. I think that involves very detailed interventions in the Monetary Policymaking that compromises independence and i think the Central Banks all over the world recognized the independent central bank can focus on the longrun health of the economy and maintaining a low and stablthelow and stable d steady employment growth gives rise to a better economic environment and the time of the gentle man is expired and we recognize the gentleman from florida. Its good to see you again and i want to put in a word as ive done in the past concerning the mom and Pop Companies that have suffered a loss in their savings and im hoping the Monetary Policy will be such that they will have an opportunity they can survive again and thought just those on wall street. To follow up on my colleague, in the format of the past the Centennial Monetary Commission acts but im sure you are familiar with. It was the chairman and idea to have the commission overlooks the oversight. In fact the committee would highlight areas for improvement. Given the economy is somewhat unconventional with recovery over the last six years, would you agree that it might be a nice idea to have such a commission as a Centennial Commission for oversight . I dont think such a commission is needed. Its up to congress to decide if you want to look at the structure of the Federal Reserve. But my own assessment is the Federal Reserve has performed well. And if we have, theres nothing to be concerned about in the reviewing. I think that this would just confirm your suspicions tha thar on the right path, would it not . Its a decision thats up to congress if you want to make that i would urge you to decide what the problem is that needs to be addressed, and i believe we have a structure that works well and is one that was decided on by congress and i think that was adopted to changes in the economy over 100 years so our structure is not broken but you dont think that its a good idea to have an extra just to see we have lots of areas to advise and panelists all over who are looking at the structure and its not a topic that has perceived a great deal of attention. Let me move on to another topic with regard to state insurance regulation. Despite the record, the statebased insurance regulatory structure has faced many challenges in recent years especially dealing with International Standards. Today we are faced with more intrusion and Service Regulation by the federal International Financial regulators. With your engagement in the negotiations, i have a few questions. One, would you agree that the statebased form of regulation and Insurance Risk based capital is probably doing its job and is doing a good job . Statebased regulation is very important. Its focus has always been on protecting policyholders, which is an important focus. We have had probably recognized the best system of regulation in the statebased programs would you agree . I think those programs have been successful but we certainly saw in the financial crisis that we had a large Insurance Company that was heavily involved in Capital Market activities. I yield back. The chair recognizes the gentleman from maryland. Thanks for being here Enter Service to the country the first question is with the policy coming out of washington does that fall into the category of protection is by nature . Unpaid tax reductions and Foreign Policy that might cause for investors to reach calibrate their investment in the United States . About longterm Economic Growth. Second the labor market is that implant zero or jobs or pay . And in your opinion with the third question in the fed Balance Sheet with the Mortgage Investments have their ben, discussion has considering other assets classs for the eligible bonds to be created . Those are my three questions. With protectionism and the capital flow of impact of growth and without knowing more details it is difficult for me to render a a judgment we understand many economic policies are under consideration that could affect Economic Growth inflation with repercussions for policies without knowing more about the time being composition there are many different defects positive and negative. With labor i think we have been enough jobs that is the unemployed rate that pay is not rising rapidly in the composition of those jobs over many decades continues to shift in those ways that lead a particular class of workers disadvantaged. So this is my issue we had a pay issue looking at the labor market do you see this issue being persisted. Slowgrowth and in, and of bottom half of pay to see no wage increase for those that the high end of the Income Distribution goes to the trends that they have in terms of pay. Fifth with what we are hearing from dissatisfied americans. You dont really need to shrink and it is youre not a bank but had he thought of other asset classs quick. We are restricted to the agency that. Can you discussed internally and other investments might allow you to pursue your mandate quick they have the Border Authority we are not asking for that authority if congress ever were to consider changing that authority i do want to be clear. Is that is successful policy . I have not seen detailed studies but yes it may have bent. And to be used did exceptionally difficult times in countries like japan in times that call for exceptional Monetary Policy. Your time is expired. Chair yellen would have the dozen of my colleagues going back to the baking of urban Affairs Committee ahead grade glorious discussions. In a did not spirit if you can answer that question turning to the fed role fifth dog for a cad in effect but the Financial Services committee march 1st participants will be required updating those swap agreements for those margins involve a complicated process and it takes a lot of time. Only point 1 6 to meet these requirements with the deadline only a two weeks away. And then legitimately hedge and turning to your roldan this process to institute a relief had a six month period for compliance and must be ready by september wind and in addition to provide a similar grace period and it seems they have stated they are open to similar of google room can you shed in light of day will provide relief under jurisdiction of. We are aware of the problems you have described we are monitoring the trends and compliance very closely we are in touch with the firms that have been involved and will be in discussion with the banking regulators to discuss what response may be needed to. But it will be recognized those circumstances and thank you to see a similar response. I will yield fax. I will yield back. Thanks for being here. Usually is a Housing Market is the big swing of the economy with interestrate with the Building Trades higher up to engage did all of that bid to have that stimulus effect on the economy and certainly compared to the past Housing Starts are the same at the depth of the 2001 recession and the great savings and loan crisis about a quarter of a century ago. So as you raise rates, to worry about choking off the of housing recovery . Than he was is prebubble . Of course, this was a very different cycle to be part and parcel of the crisis. One so we didnt get the usual response to the rate cuts. As the initiative my testimony of higher Interest Rates they have gone up over the last several months to may play a retarding role to restrict but that other Positive Side is with the deployment growth with Consumer Spending is solid and all of those are positives so to see a very slow but continued recovery and i would expect that to continue in the context of rising Mortgage Rates by historic standards. You mention wages in passing bill me at 2. 5 last recovery they were 4 letting americans want to know when they are getting a raise. But what i find confusing is prices seem to be racing rising over the country and the chairs homes state following inflation reno c. Significant increases would and dave more prickly balance supply and demand as the prices keep rising . The task force will look did this more closely i interested in your perspective. The basic question is why . With weak Home Construction despite the fact we are raising prices greg. That is the surprise as well. The answer . We do have robust growth with multifamily and many millenials are delaying buying homes with the singlefamily construction with household formation with remarkably large faction that continue to work with their families and the household formation has remained quite depressed. Use seemed to be implying they ought to be living in the basement as opposed to they are unable to get out. Even as the job market is strengthened and the unemployed rate has come way down. From the builders we hear about the skilled workers and there may be some supply issues there as well. Your time is expired. Day appreciate you being here today and earlier agreement with the nations Financial Institutions but the fed has implemented controversial policies that could have unintended consequences clayey i resident scholar noted coordinated stress test with the groupthink approach to riskmanagement. If the systemically importuned banks are all tested then isnt the fed creating a herd of banks to be pushed off the cliff . Dont we want a mechanism truly cable of resilience such as market discipline . I think that is an issue we dont want groupthink of management of risk of banks we want them to be focused with their holon idiosyncratic and referring to that mono coulter we have consistently resisted sharing the banks and one consideration is changing their portfolios. I want to ask you about that. To say this is the way to manage your risk. So could a bank have a stress test quick. Understanding the particular areas of risk and what they may look like and how to evaluate them in our models to understand they could make portfolio changes , it would enable them to fare better. And to gain the stress test to dont have to risk that profile with those very concerns that you have about Systemic Risk . Not necessarily because they have individual sources of risk. Inseams that transparency would help you to achieve your objective while reducing costs so with the Financial Institutions was put a place what analysis is commensurate with the risk to provide access to credit . So with the review of our stress test gao also did a review and noted earlier today to finalize a rule that takes over 20 smaller institutions to exempt them from the qualitative portion of our program. To include the Regulatory Burden to change our rules of the Regulatory Burden in responsive way. Also earlier before the governor departs so why is the fed moving away. Igo know what the time being will be but i think we would want to have the ability to finalize such changes with the stress test going into effect. With the appointment of the vice chair. I have 20 seconds left. Last year the gao had stressed testing already affected growth do you agree that the fed should act cautiously the regarding changes greg. With the gao recommendations. My time is expired. Votes are currently pending on the floor we will have of brief recess then reconvene and members are encouraged to come back promptly. Last year i asked about the custody bank and the supplementary ratio. The former governor made similar statements stating that as part of of regulations there are ways to address those special issues with certain elements of the Regulatory Framework id like to continue to work with you on the issue. What progress has been made over the last year . We have continued to engage and conversation with those banks to understand the issues that they face a possible strategies they have undertaken to mitigate those burdens. As you know, the president issued the Core Principles this includes the of list to enable American Companies to be for markets with International Financial regulatory negotiation when asked about the Core Principles yesterday said i do agree with them and unseat important goals for the system end of afford to working with the treasury secretary but i like to get a better understanding specifically house should u. S. Alter its approach in response to these Core Principles . With the federal insurance office. And not to be designated to be consistent with American Interest . Of their supervision and in Foreign Countries where they operate with the regulators that our concerned about the impact on Financial Stability with those two perspectives that may not always lineup. You testified earlier but the format permits them to deviate. Does it not quite. It involves review by the gao for decision making. Wouldnt every deviation improvised and opportunity to educate the American People and members of congress as to what they are doing and i try to do so with my testimony and press conference and Monetary Policy report. Explain your deviation in the paula c. I blew up the Balance Sheet and demigod six years substandard growth and as i have said previously useful guidelines and gave the speech a few weeks ago as stanford where i explained in detail reasons why the recommendations would not have been a good guide for us. Bringing gao into the realtime reviews of the policy decisions simply compromises the independence of monetary policies. Cf pd receives funding from a the fed . Does it have any oversight responsibility . No. I am running out of time but has uh target for inflation and the Financial Literacy i am carey is duty each the Financial Literacy peace that a pound of ground beef will cost 6 will cost 6. 60 incense to have you hit that target . I dont know. Recognizing the gentleman from colorado. Thank you for taking the time to be here. So you recognize that trickledown effect legislation i have the primary concern of Community Banks that they are important for the Economic Health of the country. And i will speak back to my colleague when he was referring to your report with the concern you are not addressing or you have not addressed the Regulatory Burden and into recently have been meeting in then discuss and a conference of the Community Banks that was the ongoing concern of the Regulatory Burden. And that trickledown effect met is important to the economy. But will actually help resolve those challenges . Were taking many steps based on my regular meetings with Community Bankers to come in with many banks and with large groups of examiners and were doing very much more work to risk focusing the exam so for those wellmanaged door capitalized firms to focus and to reduce that frequencies of consumer compliance exams and there is uh number of changes. S. A. Appreciate that the going back to the september meeting with Community Bankers with the Regulatory Compliance edges received an email yesterday from a small bank from the western side of colorado. They created three jobs but the bad news is that Small Community bank story really seeing results and everything you were citing . It is day Regulatory Burden and to create jobs. It is say never of burdens. So we do meet with the Community Development of the Community Banks of the experience the supervision. How many new Bank Charters . Dominique consolidations quick. Of what. They were fundamental. Comedy shutdown . I dont know the numbers of how many shutdown. Aoki could understand of problem with the weaver Participation Rate and more Small Businesses shutting down. That they are not even asking for loans. Am looking for alternative methods with second mortgages. Senator warren, in exchange noted that banks have thrived since we passed dodd frank. Why zero i dont know about the big banks and record profits, what i do know is im in main street america and the community Financial Institutions are hurting and see no relief in sight so i would be interested to see what the Community Bankers would say to that comment and i would like to know in the home state of texas that closed as 2010. The new regulations over 100 rules to be considered. Some have consolidated to survive in the larger banks that others havent been so lucky according to the fdic would have limited physical access to the banking. While i do not expect my colleague from massachusetts to understand maiunderstand mainsts burdens i truly hope that you do understand those come at the position of the Community Banks institutions find themselves if you stay true to your work finding a way to provide meaningful relief. So now i want to briefly go back into touch on the Balance Sheet. Some questions in the following weve heard a lot of talk from you and others on the strength of the economy and again how the bank are making record profits but you also stated they would introduce the Balance Sheet until they have a solid course so my question to you is which is it and if the economy is headed in the right direction. I think the economy is doing well that its required a highly accommodative policy from the fed to accomplish that so our overnight federal funds rate could be 75 basis points remains quite low if the economy would be hit i expect we have to prepare for. We want to start the Balance Sheet until the normalization is well underway that means we would like to have more buffer room to cut the overnight raids in the event that there is a negative shock because once we start running off the Balance Sheet it creates some drag and we want to make sure the economy is robust enough and we have enough policy base does the oversight and Balance Sheet as well as the uncertaintuncertainty of the pha lack the exit plan . What do you mean by economic risk in the Balance Sheet . I think weve made a contribution to that, so i dont think i that is a significant rk and weve indicated that we intend to balance substantially but in a gradual way that is not risking. The chair recognizes the gentleman from maine. Thank you very much. We got about 2 feet of snow on monday and we have another two or 3 feet coming this weekend so if you havent made your plans it does something you want to consider. We have the average folks living paycheck to paycheck having a hard time to save. Millions of folks are giving up just look for work and earlier in thin earlier inthe hearing in response to a question i believe what you said is that the labor Participation Rate has been so high because there are so many people that are teaching out of the work force. I ran into a fellow working parttime ebyearsold making shoes and he was concerned about running out of money before he runs out of time. I happen to think we have to do everything we can to grow this economy because it isnt fair. Im sure you look at the same data and we saw the Consumer Confidence is at a 15 year high. Business confidence is at a twoyear high so this is all good when people are creating jobs and we have more opportunity for our families. Thats been my background and i will tell you why they are so confident because they are no longer worried about another layer of regulations on their shoulders making it hard for them to succeed. Cant we agree that this overregulation that weve seen in the economy the past seven or eight years has been stifling growth and opportunity . We noted in the statement the pickup that weve seen in recent months in business and Consumer Confidence but its very real and spink would you attribute that going in a different direction now lets regulations, more confidence, more spending . I think we should do everything we can to release the Regulatory Burden and i pledge to do so and to focus. I noticed that yesterday in front of the senate you mentioned that you were supportive of adjusting the Financial Regulations for the Small Community banks. Its not only the Financial Regulations you are responsible for but also regulations at the epa. They are worried about the Biomass Energy so its different sectors of the economy. During the june 22 testimony the growth has been disappointing and im not sure the reason why. Cant we have created a part of the reason this overregulation and you and everybody else in this position can support whats going on now which is less regulation and more jobs . Productivity growth has been quite weak for the last six years or anything going back before the financial crisis. It seems theres been a step down in the pace of productivity growth. Its not only something weve seen in the aftermath of the crisis so there may be deeper trends. Let me shift a little bit in my remaining time. We now have almost 20 trillion in debt. The Interest Payments with rates at historic lows are 240 billion a year. If you think if the town can aggregate its spending act together to start paying down the debt it will give additional confidence in the Business Community and among the consumers that would lead to a growing economy and jobs . Im not sure what the bottom line would be that weve had a new looming problem. To start paying down the debt, that would help the economy grow. It could. The time of the gentleman has expired and we plan to adjourn the hearing of approximately 30 minutes if any member wishes to utilize less than their five minutes of time im sure other people further down would be appreciative. The chair now recognizes the gentle lady from utah. Thank you for being here today. I always find i am pinching myself when im here with the importance with an aspect of the questions and answers we thank you for being here. In creating the Federal Reserve in 1913, congress charged the central bank with the authority to set Monetary Policy with the objective of assuring price stability that is avoiding inflation in 1978, the act expanded the mandate to include goals of maximum employment, stable prices and moderate longterm Interest Rates and along with its responsibility of the Monetary Policy, the fed also enjoys very significant powers and responsibilities with regards to Bank Supervision and also systemic stability. This has left congress, the markets and the public looking to the progress for nearly every conceivable topic having to do with the nations financial and economic wellbeing so listening to the range of questions that youve been asked and the Humphrey Hawkins hearing so that its crew including topics like incoming a quality with africanamerican unemployment, this is my question to you. Do you agree with my observations in how much the fed is doing with representatives observations in the testimony to the extent congress is looking for answers and guidance . I do see that and weve pointed out a huge range of important responsibilities which we try to carry out as best we can and its important for you to understand there are limits on what we can do. We are not able to address every problem if theres productivity growth in the United States, that isnt something the fed has much ability to address. You think theres income inequality. Do you think that we are looking for too much in your opinion . Sometimes i do feel that, yes. How do you think we can pare down our expectations of the Federal Reserve . You set for your expectations and legislation very clearly and described them and said our responsibility as stable prices do you thin do you think there is room here to pare down or eliminate the dual mandate that is set i dont think that would be a good idea. The two goals of the maximum stable prices are rarely in conflict. We talked about a couple things. One of the other things was our regulation and the burden of the Regulatory Burden. Here is my problem. In april of 2011, the fed predicted a 3. 25 real annual growth rate. Actual real gdp growth rate for the year was 1. 6 according to the official data. The forecast for 2012 and 2013 were close to 4 . For 2012 it was 2. 4 and 2013 felt even further of the predictions and i can go on and on. Annual growth came in far less that 1. 9 in 2016 when it was predicted that 3 . So im asking if you think the numbers the failures of the unconventional policies that try to deliver expected graceful . Is there too much going on and is there a way that through both tearing down the dual mandate and also peering down regulations we can actually bring the growth rate up. The Unemployment Rate forecast proved much closer to being accurate. Youve asked us to focus on maximum unemployment. We have and i believe weve succeeded in meeting the goal. Weve just been so disappointed i have like two seconds that i want to say we are still not happy with the rate of employment when it comes to africanamericans we could do a lot better in our you just recognized there are limits on what the fed can accomplish. The gentleman from arkansas, mr. Hill. Thank you mr. Chairman. Its nice to have you back before the committee. Thank you for your patience today. One of the compromises back on the formation of the Federal Reserve regarded the importance and political decision to have the District Banks how they were owned and spread around the country. Do you agree that theyve provided a good diverse strong voice in both the supervisory and Monetary Policymaking over that ten decades . With respect to Monetary Policy, i feel its been very good to have the diversity input around the country and a large group of people with diverse views trying to form a consensus thats been very healthy. When the supervisory policy reserve bank execute a great deal of supervision, they have responsibility for Community Banks but in support of the governors charged with setting supervisory policies and putting regulations into effect and so that policy guidance comes from the board of governors thats carried out in the reserve banks. That you do believe they listen to the District Banks even on the supervisory suggestions. The members of the board of governors in washington they do listen to the views of the District Bank Board Members as it relates to the supervisory policy do they not . The directors dont weigh in on Bank Supervision. Should they have that added to their list of suggestions . I think the directors especially given the role of banks on the board and the fact there are Bank Directors its been important. Theres a lot of District Banks that are not Bank Directors. They are citizens from various industries. Do you think the supervisors and the banks have a good handle on the Bank Asset Quality and supervision within the confines of the district . Wouldnt it be a good idea to try to have the merger and acquisition applications and expansion applications and Business Combination applications all handled at the District Bank backs the board has responsibility ultimately for those decision and much of the work on them is done at the reserve banks, but in some cases, the board has the authority to make decisions. The eu think it is a decent policy to defer to the local reserve bank in special instances to have them come to the board of governors level for approval . I think in many cases the decisions are routine and the recommendations come from the reserve banks. I wouldnt favor changing the government structure around that. On the subject about the size of the Federal Reserve Balance Sheet obviously during the crisis, theres a lot of nontraditional assets as a function of getting through the crisis. A and through the payment of reserves youve built a large portfolio of government securities. It looks like you have 40 of the mortgagebacked securities and youve got 20 of the balancBalance Sheet with a matuy greater than five years and the treasury and owned 15 of the worlds total supply of u. S. Treasuries. Do those numbers sound generally rightfax i dont have them in front of me but they sound generally right. When banks have to go through a Bank Examination there is a section that has an asked for Interest Rate sensitivity and it would seem to me you have a very substantial concentration of risk in the Balance Sheet and a sensitivity to the risk because youve extended the duration. When i was looking at the numbers i was reminded of two of my favorite quotes. One used to be the founder of fannie mae and he described his own company as the Worlds Largest independent mr. Buffett in 2008 described the federal fl reserve as historys greatest hedge fund. So my concern is through the operation as you try to undo the portfolio that you have the Interest Rate sensitivity problem i hope that you will address that and move quickly to reduce the size of the Balance Sheet. The time of the gentleman has expired and we will recognize the gentleman from texas mr. Gonzales. I have a couple questions. President trump stated he intends to create 25 million new jobs. However given the antiimmigrant status stands where would the president gets 25 Million People to fill these jobs . Immigration has been an important source of Labor Force Growth. I would estimate that the economy having a 4. 8 Unemployment Rate, looking for job growth has to come from additions to the labor force and there might be an increase in the labor force participatio pan that we would need the Labor Force Growth given the protections on the Labor Force Growth Something Like 75 to 125,000 jobs a month would be consistent with a stable Unemployment Rate and so if immigration were to reduce the Labor Force Growth, the case of job growth would be consistent with our staying with roughly 4. 8 unemployment is down, not up. What role does immigration have on the competitiveness of the economy . That is a broad question and im not sure if i can answer but it has been an important support for Labor Force Growth and its been important in many sectors. Thank you for the response. The gentleman recognizes the gentleman from michigan. Thank you for your time and service. I want to followup question asked earlier regarding the title ii under dodd frank and i think you said you preferred a bankruptcy alternative but wanted to maintain a just in Case Scenario couldnt be anticipated. You also said that taxpayers wouldnt be put at risk. Do you stand by that statement . If the fdic realized any losses they would be passed on to the Banking Industry which would be to compensate. If they borrow trillions of dollars its not going to taxpayers at risk . Fti borrows trillions of dollars to compensate creditors. I think there is a limit on what they can borrow and it wouldnt be trillions of dollars. We went to a Holiday Party at the bank in birmingham and its a Community Bank in michigan and the ceo fortney in his office and said i just want to let you know we are selling. We cant continue. I would like to know what you are doing today and what we can hope to save the Community Banks because i see it as an obstacle to grow in the economy and believe it is one of the reasons why no one is starting Small Businesses and people under 30 are not running businesses and the lack of credit for Small Businesses a big issue. I would like to hear your thoughts on that. In the surveys when they are asked the lack of access is one of the significant problems they face and we have seen pretty solid growth of credit overall including Small Business loans, so banks are under a great deal of pressure for different reasons. We have a low Interest Rate environment that have been compromised that tends to reduce profitability so i believe that the Community Banks. There are banks that are under pressure and of course consolidation is a trend for our part. Ive emphasized repeatedly today that. I would be pleased to see Congress Take steps in that direction and we will also do all that we can to reduce those burdens. My friends on the other side of the aisle about all the problems the president has created in the last 25 days. Why do we have a record high in the stockmarket . They are likely anticipating shifts into fiscal policy that will stimulate growth and raise earnings and weve seen longerterm Interest Rates go up and dollars to strengthen thats consistent with expectations of the fiscal policy. Is very prospect causing investors and businesses i have no idea what portion doddfrank plays in that. I have no way of knowing that. The chair recognizes the gentleman from georgia. Chair yellen, as many have discussed today the fed holds 1. 7 trillion of mortgagebacked securities, which equates to 21 of all mortgagebacked securities. This is unprecedented because the fed had virtually 0 mortgagebacked securities on its books, but yesterday at the senate Banking Committee hearing when this issue was brought up, such a large number of securities on the books, you stated after the financial crisis when the economy was very depressed, unemployment very high, inflation was running below the extraordinary support that was needed, that is why you explained why you purchased so many mortgagebacked securities. Both. Today we heard from you and others how well we are doing now that the economy is going well, unemployment is going down. The reason you bought those and you said you are going to divest yourself of those over time. Just last week the fed purchased 81 2 billion of mortgagebacked securities. All we do is reinvest maturing principle to keep the size of the Balance Sheet unchanged, we are not doing any net purchases of either treasuries or mortgagebacked securities. Is this divesting yourself. We have not started divesting ourselves. We are maintaining at a constant level the size of our portfolio and leaving the constitution unchanged for now but we anticipate beginning the process of allowing maturing principle, stop reinvesting it in the Balance Sheet will gradually shrink. The reuters report that came out thursday that you bought 81 2 billion worth of mortgagebacked securities is not exactly accurate. I dont know the details but to the extent we have principal repayments on mortgagebacked securities we would take the principal repayments and reinvest mortgagebacked securities to keep our holdings at a constant level. We are reinvesting maturing principle and might have amounted to the number you cited. A pretty significant number especially holding 21 of mortgagebacked securities. Does that put you and taxpayers at significant risk . We are not getting to our holdings with mortgagebacked securities, we are maintaining our holdings unchanged in dollar terms. These are securities with essentially no credit risk and there is Interest Rate risk. Remind me of the significant factor causing the crash in 2008. Wasnt it the same idea that they have little credit risk, that was the impetus for what protestants the recession. Is their government guaranteed mortgages and we are entitled to invest in treasury and agency debt. In your opinion this doesnt put the american taxpayer at risk for the fed at significant risk by holding 21 of mortgagebacked securities and you are not divesting at this time. I dont see that there is significant risk. A central bank operates in a different way than a normal commercial bank. Our ability to conduct normal Monetary Policy which is our prime responsibility doesnt depend on the reflected value of those securities that may fluctuate, but that has no impact on our ability to conduct Monetary Policy. And losses in those portfolios but we have no intention and stated for a long time we do not intend to show mortgagebacked securities so we would not realize those losses, holdings of them have held since the financial crisis, the payments we are making to the treasury that positively impact federal budget. Prior to the crisis, payments to the treasury ran 20 to 25 billion and last year, to 100 billion. The time of the gentleman expired, currently i intend to recognize the gentleman from ohio, Mister Davidson and the gentleman from North Carolina, mister budd and we will adjourn at that time. Mister davidson is recognized. Thank you, chair yellen. An honor to speak with you. Thanks for taking a chunk of time to talk with us today. We raised a way to trade the dollar index and for an extended time your time as chairwoman of the fed, a desire to raise rates. To what extent does currency appropriation impacted your ability to do that . Appreciation of the dollar reflects Market Expectations that we would be raising rates faster than advanced countries, the economy has been growing more strongly and Stronger Economic performance, the expectation would diverge with the us moving to higher rates than other countries, reduced capital inflows which serve to push up the dollar as your chart, influences, that is one of the ways Monetary Policy normally works. It has tended to diminish net exports, had a negative effect on exports, diminished spending in the economy and part of how tighter Monetary Policy, perceptions that there will be work to slow aggregate demand. It is holding down the same pressures you hope to do so the strong dollar is doing the same things you hope to do with great appreciation. The effect for the savior, the currency appreciating is rates are still low. The rates are still low and has an impact on hardworking families, might have a similar effect for Monetary Policy and the domestic economy. How the dollar moves is a factor, part of the response to Monetary Policy but it is not mechanical and those affect the Interest Rates, for that. One thing we talked about was your accompanying of policy so a specific policy question, if there were an adjustment that had an effect of raising the cost, and lowering the cost of exports, the currency market fully clear. Will it change the balance of trade . The Academic Work in connection with border tax. This suggests the appreciation of the dollar could fully offset a tax change, the cost of imports and provided a comparable export subsidy and principle that could provide a full offset. The problem is there is great uncertainty about how in reality markets would respond to these changes and a strong set of assumptions is needed to believe markets would fully offset those changes. It is difficult to know just what would happen. There is more than trade that affect the countrys exchange rates. Market expectations matter and it is a great deal of wealth that would shift into wealth, the value of us assets held in current policies would be greatly diminished by that. You anticipate my next question, it was held offshore, the desire to see that put the work into the us economy, to what extent over the past several years, high appreciation, the value of the repatriation, you feel currency would have an impact in the present context of relatively high rates, with fiscal policy to drive those payments. There was a complicated question. The net effect of the currency appreciation on repatriation, is there a fiscal policy, that would be offset by the strong dollar, what would happen in that context . Not sure there is a simple answer to that complicated question. Time of the gentleman has expired. Thank you for joining us today. I will shorten the question, the last eight years, the expansion of the Monetary Policy or Financial Regulations, with growing populations of the poor, for middleclass savers. We had low Interest Rates for middleclass savers. How it had an effect, with the correlation there. The Financial Regulation resulted in stronger Financial System, more substantial than before the prices. There is stronger growth and faster recovery than other advanced nations including european nations, it has been beneficial but they have been impacted by the low Interest Rate environment and i hear from them every day as i am sure you do, they would welcome higher Interest Rates. If the economy continues to move along a solid path it is my hope they will be able to raise Interest Rates more rapidly and see some of that to their savings, higher returns on them. The next part, when i talked to Community Banks in the district they keep telling me the fastestgrowing department in their business coming in their bank is the compliance department. This is borne out of the fact we are now near 0 as far as it comes to new Bank Charters where it used to be hundreds of new Bank Charters. Banks have had to massively increase their spending on Regulatory Compliance, is that helpful or harmful to abilities to make loans for individuals and Small Businesses . I agree with everyone this morning who has expressed concern about Regulatory Burdens on Community Banks and i pledge to do everything in our power to get them to look for ways to ease those burdens. The gentleman yields back. I think chair yellen for her testimony. All members have five legislative days within which to submit additional questions for the witness for her response. I asked chair yellen to please respond promptly, this hearing stands adjourned. [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] i had piece of information, didnt articulate that to myself. When i look back and ask myself why i did this bad and stupid thing, that is what it comes down to. Sunday night on q and a, Georgetown University professor Barbara Feynman Todd talks about being a ghost writer for hillary clinton. In her book pretend i am not here, i work with three newspaper icons, one powerful first lady and still managed to dig myself out of the washington swamp. I resisted and spoke in general terms what it was like to be in the white house, being in the room. You cant use it, these two women in the room were doing this, one or two staffers, if you use it, everyone will know i was the source and i was worried about that but i trusted them. Sunday night at 8 00 eastern on cspan ask you a day. The senate continued debate on the nomination of South Carolina congressman mulvaneys nomination to head the white house budget office. John mccain came to the floor to speak against the nominee. The nomination of congressman mulvaney for the office of management and budget. Under those circumstances, the benefit of the doubt to the
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