The meeting is coming to order and were going to declare the recess at any time and its called sem annual system on the sup super vision and i recognize myself for three minutes to give an opening statement. As we know the act decreased way beyond the monetary responsibilities. The act is made the fed omnipotent. Through the exercise of the heightened standards the fed can control the largest Financial Institutions in our economy. Former fed governor kevin warsh wrote that Central Bank Power is premisable when the scope is limited and the track record strong and the aaccount blt assured. None of that do we observe today where as the feds has taken us and the big banks are now bigger and the small banks are fewer and the Economic Growth lags and theres evidence that the economy is more stable. Two mu fed authorities granted under dod dx frank have been problematic. The see kra si make it impossible to measure the over sight or the integrity of the test findings. As columbia has testified its hard to believe that the current structure of the stress test could occur in a country of the United States. Dodds living will is to fundamentally restructure private businesses and the process that relies entirely on the person of the decrease of washington regulators. Can fed stands at too big to fail and occupies the board rooms of the largest financial institutes in the nation and decides how washington will bail them out if they get in trouble. Despite is claims that it taylors regulations to fit the size of Financial Institutions we know that not all banks are suffering under washingtons thumb. As we love on average one Financial Institution per day, consumers lose options to help them with the indy pen dense and then the opportunity to grow jobs and the big banks keep on getting bigger. Theres a better way. Former chair says that lawmakers and regulators give a Capital Buffers and they need to be concerned with the quality of the banks and loans and Security Portfolio since any losses are there by the shared holders and thats the dodd frank act to be shelled and ending the potential nol to destroy the market and the market laquidity and then the current fdic chair says that u. S. Banks operating with reasonable levels of capital should snot occur the same burden as those that do not. Former fbi share has also expressed support for the higher capital levels in waiting. She has said that the fed does not know what is risky. The fdic does not know that its risky. Did we not learn anything. Its been endorsed nationwide and including three noble Prize Winners ask by promoting a higher loss of the bank capital in exchange for the release of the regulations and then the Economic Growth for all bank bail outs for none and then assure that is the bank is accountable. We recognize the Ranking Member for five minutes. Thank you mr. Chairman for holding the meeting and thank you mr. Young for making yourself available the testify today. Just a few weeks ago we passed the ninth anniversary of the failure and leading up to 2008 much of the risk in the Banking System went unchecked by the regulators. Failure to quickly address faud and Miss Management resulted in the loss of more than 8 million joob jobs and millions of families lost their homes and entire industries were on the brink of collapse. Congress responded to this devastation by passing the most comprehensive overall of the system since the great depression. The dodd frank wall street reform and Consumer Protection act. The dodd frank act greatly increased the feds responsibility and authority for safe guarding the Financial System that also set minimum standards to insure that regulators did not lose sight of emerging risk again. The dodd frank act has required regulators to increase capital and acquitty standards, reduce the interconnection and the markets and then the large Financial Firms and the Risk Management. However, theres much work left to be done. As we have seen from the enormous failures of the management at wells fargo, its important to remind the committee and the public kwl these reforms were necessary in the first place. Fraudulent Retail Banking practices may not in and of themselves pose Systemic Risk but they indicate Miss Management that could be catastrophic and risier and more complex divisions of a Bank Holding Company. Supervisors and Law Enforcement must continue to hold both institutions and individuals aaccountable. I know you would keep that in mind over the next several weeks as you review living wills from the five banks that failed their submissions in april, and that includes wells fargo. Perry ellen, i am eager to hear about the feds process and wall street reform and how the boards super vision practices have revolved over the last several years and im interested to hear how the fed is using the flexibility to taylor regulations to the sizes and risks of different sizes of banks. Whose near failure opposed consequences on the economy eight years ago. Since the passage of dodd frank, congress has given the federal reacquaint Additional Authority in setting capital standards where the Insurance Firms subject to enhance super vision look forward to hearing about the regulators and insure ers. Yet, a few weeks ago the republicans pushed a bill that would severely undermine the efforts to regulate the Financial System. The chairmans miss guided legislation would is peel the over sight counsels ability to designate where none of the banks had it by the feds and decr creating a huge of unmonitored risks in the system. The legislation would also replace and carefully consider limit on the banking activities with nothing but an in sufficient equity cushion and the risky behavior that nearly destroyed the economy in 2008. More over, as we and congress consider another funding resolution, we must be mindful of the continued attempts to defund the regulators works and for the first time in resent memory economy data indicates that the middle class is benefitting from the recovery, failure to heed that is going to put it in jeopardy. Thank you mr. Chairman and i yield back my time. Now we recognize the gentlemen from texas and chairman of the Financial Institution from the subcommittee for two minutes. Thank you mr. Chairman. Its in the super vision and regulations of the Financial Institutions. The role of vice chair serves as aa designated o official in the Federal Reserve who over sees and in 2010 chairman champion of the rule note that had the creation might turn out to be one of the most important things in here meaning the dodd frank. It focuses the responsibility on one person. President obama has failed to nominate anyone to fill this important position. The position that sets regulatory policies and respe represents the United States. I remained concern that had the governor dan exercises these authorities outside of the construct and today i hope to understand better many of the resent actions taken by the Federal Reserve and for example how you does the Federal Reserve reduce the Bank Leverage interact with the resent recommendations to aappeal the banking authority. What type of risks does the fed that try to mitigate in the resent capital and similarly, what would the impact be in the users and the physical commodity and does the Federal Reserve recognize the exposure and the characteristics of the margin and does it plan to reevaluate the positions in the rule given the resent discussions. While yellen may not be the best to answer these questions, its important for her to do so given the president ial in action. With that i want to say that this is my last time to be in this committee with the chair yellen, and i thank the chair for her making herself available to us and thanks again for her service and her capacity. With that i yield back. Gentlemen yields back. Today we welcome the testimony of janet yellen. She has testified on a number of occasions, and she needs to nurth er introduction and with that the written statement is made part of the record and youre recognized for five minutes to give an oral presentation of your testimony, thank you. Thank you. Chairman hensarling and ranking waters and other member of the committee, i appreciate the opportunity to testify this morning on the Federal Reserves regulation and super vision of Financial Institutions. One of the Federal Reserves fundamental goals is to make sure that the super vvise erie program is tailored to the risks thats opposed and as we saw in 2007 and 2008, failure of the systemically important Financial Institutions can destabilize the Financial System and under mine the real economy. The largest most complicated firms must therefore be summit to preden shl standards that are more so than the standards that apply to other firms. Small and medium size banking organizations whose failure we generally would pose a risk to the system should be subject to standards that are materially less stran ris. They have built a supervise erie program thats consistent with the principals. We have implemented key standards to limit the Financial Stability risks posed by the largest and most complex banking firms. We continue to work on some remaining standards and to access the adequate si and with respect to small and medium size banks we must build on the steps that we have taken to sure that they do not face unRegulatory Burdens. Looking forward we must continue to monitor the new risks since another key lesson from the crisis is that Financial Stability threats change over time. The Federal Reserves post crisis efforts to tlethen the regulation and super vision of large banks who focused on the safety and soundness of the firms and unlimiting the adverse affects that theyre distress or failure could have on the Financial System in the broader system. We have aimed to increase by establishing a set of stan stards and including capital and laquidity requirements for a large domestic and foreign banking organizations and we have aimed to make it more resolvable through for example the living wills process and our proposed Long Term Debt requirements. The introduction of the capital stress testing for the large banking organizations has been one of the signatures and supervise erie innovations since the crisis and as it demonstrated, Capital Buffers that seem adequate and with the environment may turn out to be far less than adequate during the periods of stress. For this reason the Federal Reserve conducts supervise erie stress tests each year on the banks organizations with 50 billion or more in total assets to determine whether they have sufficient capital to continue the operations through the periods of the economy stress and market turbulence and whether the Capital Planning frame work are adequate to the risks profiles. The expectations in the stress Testing Program that large banking organizations should maintain the sufficient Capital Buffers to with stand the period of significant stress promotes the resilience of the firms and Financial System and more generally. While the stress Testing Program is successful since it was first introduced in 2009, the crisis reinforced the need for regulators and supervisors to continuely revisit the effectiveness of their toofls and adjust as needed over time. As my written testimony indicates in more detail and as my colleague discussed in the speech earlier this week, were considering making several changes to our stress testing methodology and process. Leading idea thats emerged from a substance of review of the comprehensive capital anal sis reviewer ccar program is to intergrate it with the regulatory capital frame work. Affecting the c charge in the stress test. Were also considering making certain changes to the stress test used in ccar. Were looking at c car any Bank Holding Company that has less than 250 billion in totalle assets and that does not have Significant International or none bank activity. As well as reducing the amount of data that the firms are required to submit for the stress testing purposes. On this and other changes to ccar that were considers, we will seek the in put before adopting. I know the Community Banks play a vital role in the districts and among the lessons of my year of experience on the Federal Reserves is that when it comes to Bank Regulations and super vision, one size does not fit all. And to the laws and without relating the Regulatory Burden and the rules as it approaches should be lay tornados to different types of institutions such as Community Banks. The Federal Reserve has already done an amount to reduce the burden on the Community Banking organizations and were looking for additional opportunities including potential simplification of the capital frame work for the Community Banks. In conclusion, our post approach to the regulation and super vision is both forward looking and tailored to the level of risks that firms pose to Financial Stability in the broad broader economy. Standards for the banking organizations are more than the standards for small and medium size banks which is appropriate given the impact that the failure of the distress of those firms could have on the economy. As i have discussed, we anticipate taking aadditional actions in the near term to further taylor the regulatory and supervise erie frame work. Even as we finalize the major elements of the reform, the work is not complete. We must carefully monitor the impact of of the regulatory changes that we have made and remain individual lent to the Financial Stability. We must stand ready to adjust the reck la tory approach where the changes are warranted. The work that we do to insure the work of the Financial System remains strong and stable is designed to protect and support the real economy and sustains the businesses and jobs on which american households rely. Thank you the chair recognizes himself for five minutes. First yellen, please know that i was encouraged by the aspects of the testimony. I believe that theres hopeful growing bipart son consensus that we need more tailoring of regulations and particularly on page 13 of your testimony, your recommendation that congress consider carving out Community Banks from the rule and compensation limits in section 956 and i was encouraged by your announcement today concerning the ccar quality review exception. I think thats wise and a very small step in the right direction before we get back i want to see that dodd frank demand s that there are 11 different factors that be considered in the Selection Process such items as leverage, off Balance Sheet exposures and in the process, do you weigh each of these 11 factors equa y equally . Are you talking about the nonFinancial Firms . Yes. That they have designate and. Yes. In the case of those firms as required they prepare an anal sis. My question is of the 11 factors that you must consider, do you consider each one equally or for example is leverage for important to Systemic Risk than factor four and importance of the source . So when it comes down to looking at a firm, the question that they have to consider is special to the firm so its individual to the firm . Its virgindividual, but the question is where im going is this what is the impact of the u. S. Financial system of the distress of that particular firm. With 11 different factors that are considered combined that leads to 2,048 different ways in which these criteria can be combined and the statue says that you shall consider these and can can i safely assume that ayou and other members cannot process 2,048 different combinations of this and these 11 criteria . So what the analysis presented and does is looks at the specifics of the Balance Sheet and exposures of an individual firm under consideration and analyzes how the factors would come into play and impact fi