Fed Chair Powell testifies before the House committee on monetary policy — 3/8/23

objection all members will have five legislative days within which to submit extraneous materials to the chair for inclusion in the record and I'll note at the outset that this hearing has a hard stop of 1 pm this is traditional for the Fed chair um and uh which we intend to strictly observe um I now recognize myself for performance given an opening statement uh thank you chairman Powell uh for your testimony today this week you stated that the FED will quote stay the course until the job is done uh and that is to restore price stability this is positive but you know as well as I do you're facing a very strong headwind from the political left Democrats are pressuring the FED to stray from its narrow mandate without uh it's a page out of their same old Progressive Playbook when they don't have the votes to achieve something here in Congress they turn to regulators and now chair Powell they're looking at you in the Federal Reserve President Biden's cow towering to the far left is what got us into this inflationary mess I urge you to reject the ideologues who put their social agenda ahead of economic prosperity high prices continue to eat away at workers wages and retirees incomes since President Biden took office we've experienced inflation rates not seen since the late 70s and early 80s inflation rapidly decelerated accelerated after Democrats passed their so-called American Rescue plan which poured nearly two trillion dollars of inflationary fuel into the economy by June of last year the Consumer Price Index showed inflation skyrocketed From Below two percent to nearly nine percent and personal uh consumption expenditures the fed's preferred measure of consumer prices ballooned to seven percent instead of being rescued by democrats Americans were punished with pain at the grocery store and sticker shock at the pump while inflation is now believed uh it is now below its mid-2022 peak it is persisting and rates well above the fed's target it remains broad-based and continues to hammer Americans pocketbooks in fact a recent Gallup poll shows half of the respondents say they are worse off financially than a year ago it's clear that there's still a long way to go in the effort to bring down costs I look forward to hearing you reaffirm your commitment to that work today Republicans also want to hear from you regarding some concerning developments at the Federal Reserve on the regulatory front recently into Federal reserve's Vice chair for supervision announced a quote unquote holistic review of Bank capital and the fed's regulatory regime however it seems that only a small group within the FED knows what this means what it entails how much review is is being vetted by the full board and the the type of quantitative analysis the FED is performing the FED shouldn't operate in the shadows especially when the regulation in question can have Broad and significant economic effects it's also unclear the motivation for the fed's holistic review particularly when so many board members have stated that the banking system is very well capitalized an interview of um of of capital standards should be targeted it also appears the Federal Reserve board is laying the groundwork for climate policy to be implemented through the FED regulation with an opening Salvo to quote unquote of quote unquote scenario analysis addressing an issue like climate change is important but a policy that should originate here in Congress by the elected representatives of the people not the central bank as you've said the FED needs to much Mr chairman good morning chair Powell since your last visit our country under the leadership of President Biden has made major progress to improve economic conditions including adding a record 12 million jobs reducing unemployment to its lowest rate in 54 years while also reducing the deficit by 1.7 trillion dollars unfortunately many families are still struggling to afford basic necessities because of inflation what's more interest rate hikes are making borrowing especially for mortgages outrageously expensive since I raised this concern for you in a November letter the rate hikes continue to have an outsized impact on housing costs which are as you know a primary driver of core inflation but Mr chair I think that you will agree that Congress also has a role that's why I'm somewhat disappointed that after two months Republicans have taken no serious action to address inflation by this time last Congress house Democrats had passed the American Rescue plan to provide relief from the ongoing pandemic which included our committee's efforts to provide 70 billion dollars for homeowners renters businesses and First Responders if Republicans are looking for ideas committee Democrats have put forth additional bills like the bill back better act to bring down costs for Americans especially housing costs even more concerning we just must we're just months away from an economic catastrophe beyond what we have ever seen including spiking interest rates massive job losses and Global instability I'm talking about the threats by Republican leadership to force a default on our nation's debt if we don't agree to their demands to cut Social Security Medicare or other critical programs you have urged Congress to take immediate action to raise the debt ceiling but rather than focusing on this very real issue the first bill that committee Republicans brought to the floor instead suggested that Social Security and Medicare or socialist threats to America since then we have considered legislation related to deregulating Securities and banking laws and countering threats from China but Republicans have completely ignored the biggest economic threat to businesses consumers and our economy defaulting on our debt last month I wrote a letter to chair McHenry urging him to take this matter seriously and hold a hearing but I'm still waiting for a response I hope Republicans will listen to Dave to the real consequences that even the mere threat of a default would help everyone in this country and finally I'm so pleased that we're finally making progress on diversity and inclusion for key positions at the FED including last year's historic confirmation of Dr Lisa Cook to serve as a very first black woman on the Federal Reserve board with the board's Vice chair and Kansas City fed president positions bacon I think President Biden and Kansas City fed board should build on this progress by by seriously considering diverse candidates for these positions with that I yield back the balance of my time the ranking member yields back the balance of my time asking him as consent to submit for the record uh my letter to Secretary of the Treasury Janet Yellen from February 28th uh asking for an update on the X date for the debt ceiling I also ask unanimous consent to submit for the record the latest CBO long-term budget outlook on the unsustainability of our debt um most recently released and without objection so ordered I'll now recognize the chair of the financial institution subcommittee chair Mr Barr for one minute thank you Mr chairman and chairman Powell thank you for being here today to discuss the federal reserve's monetary policy actions in a time of economic uncertainty mixed economic data historic inflation that continues to plague families and businesses around the country it is Paramount that the Federal Reserve remained Vigilant on reducing inflation anchoring inflation expectations and restoring price stability at the fed's two percent Target I also look forward to discussing the fed's Regulatory and supervisory activities as the FED reviews the bank Capital framework it needs to consider the impact to the real economy and our Global competitiveness when raising Capital requirements and sidelining capital would work at Cross purposes with monetary tightening constraining the supply side when we need more not less investment to fix Supply chains and reduce inflation tailored regulations are required by the by of the fed by law and a one-size-fits-all approach would be the wrong path to take finally I urge the FED in your words to stick to its knitting and not attempt to be a climate regulator I yield back so many times expired will now recognize the ranking member of the financial institution subcommittee um Mr Foster for one minute thank you and thank you chair Powell for being here today today is the 15th anniversary of when I was first elected to congress and placed on the financial services Committee just as the economy was about to collapse and so that was my trial by fire the emergency response to rescue the economy and the legislative response the Dodd-Frank Act that successfully stabilized our financial system so 15 years later as I take my place as the ranking member on the committee of oversight over U.S banking and monetary policy I recall the solemn oath that I swore to myself back then to make sure that this kind of Calamity never happens again the monetary policy report that we're receiving today is largely A Narrative of a return to normal and Lead times to manufacturers are back to pre-covered levels the job market retains Supernatural strength and inflation is responding more or less as predicted to the usual measures and by far the largest threat on the horizon is a repeat of the 2011 default crisis Congress has the power to avoid that and we owe it to the American people to do so and I yield back today we welcome the testimony of Jerome Powell chair of the Board of Governors of the Federal Reserve System chair Powell was appointed reappointed and sworn in for a second four-year term as chair on May 23 2022. chair Powell also serves as chairman of the Federal Open markets committee and the systems principal monetary policy making which is the system's principal monetary policy making body um chair Powell we thankful to do so and I yield back today we welcome The Testament of Jerome Powell chair of the Board of Governors of the Federal Reserve System chair Powell was appointed reappointed and sworn in for a second four-year term as chair on May 23 2022. chair Powell also serves as chairman of the Federal Open markets committee and the systems principal monetary policy making which is the system's principal monetary policy making body um chair Powell we thank you for taking time to be here we will recognize you for five minutes give an oral presentation or testimony without objection your written statement will be made part of the record chairman Powell you're recognized chairman McHenry ranking member Waters and other members of the committee good morning and I appreciate the opportunity to present the federal reserve's semi-annual monetary policy report my colleagues and I are acutely aware that high inflation is causing significant hardship and we're strongly committed to returning inflation to our two percent goal over the past year we've taken forceful actions to tighten the stance of monetary policy we've covered a lot of ground in the full effects of our tightening so far are yet to be felt even so we have more work to do our policy actions are Guided by our dual mandate to promote maximum employment and stable prices without price stability the economy does not work for anyone in particular without price stability we will not achieve a sustained period of labor market conditions that benefit all I will review the current economic situation before turning to monetary policy the data from January on employment consumer spending manufacturing production and inflation have partly reversed the softening trends that we had seen in the data just a month ago some of this reversal likely reflects the unseasonably warm weather in January in much of the country still the breadth of the reversal along with the revisions to the previous quarter suggest that inflationary pressures are running higher than expected at the time of our previous flmc meeting from a broader perspective inflation has moderated somewhat since the middle of last year but remains well above our longer run objective of two percent 12-month change in total pce prices has slowed from its peak of seven percent in June to 5.4 percent in January as Energy prices have declined and supply chain bottlenecks have eased over the past 12 months core pce inflation which excludes the volatile food and energy prices was 4.7 percent as supply chain bottlenecks have eased and Tighter policy has restrained demand inflation in the core Goods sector Has Fallen and while Housing Services inflation remains too high the flattening out in rents evident in recently signed leases points to a deceleration in this component component of inflation over the year ahead that said there is little sign of disinflation thus far in the category of core Services excluding housing which accounts for more than half of core consumer expenditures to restore price stability we will need to see lower inflation in this sector and there will very likely be some softening in labor market conditions although nominal wage gains have slowed somewhat in recent months they remain above what is consistent with two percent inflation and current Transit productivity strong wage growth is good for workers but only if it's not eroded by inflation turning to growth the U.S economy slowed significantly last year with real GDP rising at a below Trend pace of 0.9 percent although consumer spending appears to be expanding at a solid Pace this quarter other recent indicators point to subdued growth of spending and production the activity in the housing sector continues to weaken largely reflecting higher mortgage rates higher interest rates and slower output growth also appear to be weighing on business fixed investment despite the slowdown in growth the labor market remains extremely tight the unemployment rate was 3.4 percent in January its lowest level since 1969. job gains remain very strong in January while the supply of labor has continued to lag as of the end of December there were 1.9 job openings for each unemployed individual close to the all-time Peak recorded last March while unemployment insurance claims have remained near historic lows turning to monetary policy with inflation well above our longer run goal of two percent and with the labor market remaining extremely tight the fomc has continued to tighten the stance of monetary policy raising interest rates by four and a half percentage points over the past year we continue to anticipate that ongoing increases in the target range for the federal funds rate will be appropriate in order to obtain a stance of monetary policy that is sufficiently restrictive to bring inflation down to two percent over time in addition We are continuing the process of significantly reducing the size of our balance sheet we are seeing the effects of our policy actions on demand in the most interest-sensitive sectors of the economy it will take time however for the full effects of monetary restraint to be realized especially on inflation in light of the cumulative tightening of monetary policy and the lags with which monetary policy affects economic activity and inflation the committee slowed the pace of interest rate increases over its past two meetings we will continue to make our decisions meeting by meeting taking into account the totality of the incoming data and their implications for the outlook for economic activity and inflation although inflation has been moderating in recent months the process of getting inflation back down to two percent as a long way to go and is likely to be bumpy as I mentioned the latest economic data have come in stronger than expected which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated if And I stress that no decision has been made on this but if the totality of the data were to indicate that faster tightening is warranted we'd be prepared to increase the pace of rate hikes restoring price stability will likely require that we maintain a restrictive stance of monetary policy for some time our overarching focus is using our tools to bring inflation back down to our two percent goal and to keep longer-term inflation expectations well anchored restoring price stability is essential to set the stage for achieving maximum employment and stable prices over the longer run the historical record cautions strongly against prematurely loosening policy we will stay the course until the job is done to conclude we understand that our actions affect communities families and businesses across the country everything we do is in service to our public Mission we at the Federal Reserve will do everything we can to achieve our maximum employment and price stability goals thank you I look forward to your questions uh thank you chairman Powell I'll now recognize myself for five minutes for the purpose of this question uh chairman Powell there's been a lot of discussion over the last 24 hours about the effective rate increases on the economy a lot of debate about what you said yesterday in the Senate um how does but no one asks you this directly we have a March meeting coming up open markets committee meeting coming up in two weeks um how do you think about the March meeting what's your approach to that what are we likely to see thank you so I I won't repeat what I what I just said in my testimony but but if I turn to the March meeting um I guess I would say that we have some potentially important data coming up uh data to be analyzed one of them came out at exactly 10 o'clock that would be the joltz report which of course I haven't seen having been sitting here at 10 o'clock but we're also getting a jobs report on Friday and a CPI and PPI inflation report next week so those will be important and we'll scrutinize them when we say that we're going to be looking at the totality of the data which is what I said that does include these these reports yet to come they're going to be important in our assessment of the higher readings that we have very recently received and of the overall direction of the economy and of our progress and bringing inflation down and we'll be carefully analyzing them um again I we have not made any decision about the March meeting we're not going to do that until we see the the additional data larger point though is that we're not on a preset path and that we will be guided by the incoming data and the evolving Outlook but you've also said higher longer is that still the case yes so and as I said in my testimony uh we look at the data since January and and and also the revisions to the November and December inflation data and they suggest that uh the ultimate level of interest rates higher than we'd expected what are those economic factors so um going back to January as I mentioned the the nice softer inflation readings of November and December were revised up we got a very strong uh inflation report for January we got an extraordinarily strong employment report very strong consumer spending uh strong manufacturing data right across the board and as I pointed out some of that may have been affected by the very warm January weather but nonetheless all of it pointed in the same direction okay let's move to regulation um chair pal in January the federal reserve put out a policy statement noting that digital asset custody is permissible activity if done in a safe and sound manner however if a bank can demonstrate to the FED that it can conduct that activity and safe and sound manner the capital impact of the sec's staff accounting bulletin effectively precludes Banks from offering digital asset custody service at any scale are you aware of this staff accounting Bulletin by the Securities Exchange Commission and its impact on custodial services I am aware of it of course it's an SEC accounting business this is Sab 121 I think and that's right certainly aware of it and you know we do follow General accepted accounting principles in in our in our Capital regulation okay uh without objection I'll submit to the submit for the record uh my uh letter to the bank regulars about this uh so while the FED says it can be done in a safe and sound manner the Securities Exchange Commission is regulated it so that it cannot be done uh next question is uh certainly about Bank Capital standards you got questions about this yesterday uh chair bar has announced a holistic review of capital requirements uh as I said my opening statement there are a lot of questions about this process um and previous statements by members of the uh the FED Governors about the adequacy of current current capital standards um and so while the vice chair for supervision has announced that the feds will engage in a holistic review of capital regulation as that fed staff is that done at the uh you know at the governors the the board level um what is the process there are a lot of questions that people have about his statements um and so we want to understand why it's necessary for the cat the FED to conduct a holistic review and what that process is um and so you know my general question is do you still agree with your previous statements about the adequacy on a generalized basis of of our financial system uh or are we to read into this that we're not adequately capitalized and there's there's a high level of risk in the system that we're unaware of at this point thank you so the the why really just is that uh as a new Vice chair for supervision Vice chair bar has has launched into his taking a fresh look at everything including Capital that that actually is typical of the last two people to have this job so that makes a lot of sense um in terms of um the process it's you know it's certainly conducted under Vice chair Bar's leadership with with input from the staff and you know discussions with Governors on that committee and uh I'm kept broadly apprised about what's going on but the the bottom line is there nothing has been nothing has been proposed to the board nothing has been formalized at this point it's a lot of work that's going on I think discussions are going on meetings with industry and that kind of thing when we get to that to the place where that's appropriate uh you know the board will be carefully briefed ultimately will vote on a proposal and that proposal will go out for common and we'll we'll solicit comment from any and all commenters and we'll look very carefully at that so it'll be a wide open uh process in the sunshine thank you now you'll back now recognize the general General one from California the ranking member Frank Miss Waters thank you very much cheer Powell I agree with what you said on February 1st that Congress must raise the debt limit because of what you described as a highly risky consequences of failing to do so you are perhaps the most important expert on the debt limit which is why I find it very concerning that your recommendation to raise the debt limit in a timely manner is being ignored by my colleagues on the other side of the aisle I'm also concerned that the consequences of this brinksmanship are imminent ratings said this week they may seriously look at downgrading the U.S debt based on the escalating brinksmanship they are observing even if Congress ultimately addresses the debt limit at the last minute this is history repeating itself standard and Poor's downgraded our debt back in 2011 when Republicans last controlled the house and threatened Depot the bipartisan policy Center later found that the 2011 debt limit debate cost us 18.9 million billion dollars in higher borrowing costs even though we never defaulted to put that into perspective that could have been leveraged to provide up to 20 200 billion in loans to small businesses through the state small business credit initiative or to provide hundreds of thousands of people down payment assistance to buy their first home so I want to emphasize that House Republicans including most of the Republicans on this committee had no qualms about paying our debts when Trump was in office three times they addressed the debt ceiling in a timely manner without holding our country hostage but Republicans are now ready to tear down the hard work of Americans everywhere to weather the pandemic and build back a strong recovery chair Powell can you describe for us the risk you see if Congress continues to delay actions on the debt limit both for our economy and for individuals and families let me start briefly by saying that we have no role and seek no role in what is really at the heart of fiscal policy except I will limit myself to the two things that other fed chairs have said about this one is just that Congress raising the debt ceiling is really the only alternative there are no rabbits in hats to be pulled out on this to really is just that no one should assume that the FED can protect the economy from from uh you know the non-payment of of the government's bills let alone a a debt default of some or something of that nature which we don't think will happen here but no one should be thinking that we have the tools to to to protect the economy from all the potential effects of that thank you very much I don't want to miss uh what you said I uh someone quoted you uh when you said that Congress must raise the debt limit because of what you described as a highly risky risky consequence of failing to do so is that your language well must in the sense that that's it's really the only way for for the debt limit to be raised as Congress has must act i i again these are fiscal discussions and we're not don't we don't want to be a part of them and uh really they're between you know elected officials but you are an expert on the subject well I spent a lot of time on this as you'll recall as an expert on this subject you are concerned about the high risky risky consequence of failing to do so is that correct did I correctly quote you that's correct thank you um and so um again let me just go a little bit further um the chair mentioned that he had either written a letter or maybe even had some conversation from Janet Yellen about uh the time limits uh that she had attempted to describe is it your understanding that she said she could maneuver and kind of manipulate things so that she paid the bills that were coming due but this could only last until about June is that your understanding honestly I would really have to not try to interpret the secretary's words for you she it's really up to her to do can she keep us afloat until about June that's not for me to say that's these are these are really questions for the secretary I'm sorry have you had any conversation with her about the statement that she made about being able uh to manipulate the debt and pay bills that were coming due out of another account Etc did you have that conversation with her the conversations is that you and I have privately don't go anywhere I don't talk about them with anybody and the conversations I have with with secretary Yellen I don't I don't okay and I don't want to get yeah expired I think about it the general age time's expired you sure did he went over time if I if I did thank you I yield back and I'll recognize the vice chair of the full committee Mr Hill of Arkansas thank you Mr chairman and uh thank you chair pal for being with us you're welcome anytime don't wait till we ask if you want to volunteer and come we we love having your views on many topics thanks for talking about your commitment to price stability you know we've had this discussion last June between us of I do think that's the primary mission of the fed and I think it should be the only priority of the FED is price stability because it's the legislative branch and the executive branch that really are responsible for quote Full Employment and having that policy environment and making sure that that's right so your commitment to price stability is welcome by this committee yesterday in the Senate you uh suggested that you supported a regulatory framework a broadly regulatory framework for digital assets is that is that right yes and is it your view that if we had a regulatory framework here in the United States for digital assets that there'd be more transparency and rules of the road for both consumers investors and developers absolutely and wouldn't if we had those rules of the road for business seeking to use and develop blockchain as a potential new technology in their business and tokenized payments that again that would be beneficial to business to know how to go about that yes and to assure that it's all done in a safe and sound manner when we're talking about Banks right and then as I my next point would be exactly that to help Banks investment Brokers custodians understand uh how they could even participate in that market in a safe and sound manner you agree that a regulatory framework would help on that yes and then and then finally we've grown up in our country and it's Unique in the world that we have a dual banking system and due to a quirk here in Congress over a hundred years ago we have insurance has regulated exclusively by the states so uh would you uh believe that that regulatory framework would also have to preserve some sort of role subject to safety and soundness you know for State uh states to play some role in that regulatory framework for digital assets I uh let me just say I think that it worked certainly Works in banking and insurance I have no problem with those right but you think it could you consider it possible that it could also work in digital assets certainly possible thank you um turning to a topic that's been a subject here for nearly four years Central Bank digital currencies article one of the Constitution reserves coins and coins Ipswich money issuance to the Congress and we've in turn delegated that to the U.S treasury which is since 1912 engaged the Federal Reserve as their Fiscal Agent you've testified here many times before that to issue a central bank digital currency that that would be have to be authorized by Statute by Congress is that still your testimony so that is absolutely the case as it relates to a retail cbdc there are you know potential uh forms of a wholesale cbdc that would be we need to look at it's less clear but we've always been talking about retail cbdc and that's uh that's something we would certainly need Congressional approval for and what would be a parameter on something that's not a retail cbdc where you think that that could be issued in some form or fashion without congress's direct statutory authorization it would so it would be let's for example it would just be an uh something between Banks so it would look an awful lot like a bank reserve and you you might ask well why would we need it and that's that's a really good question too yeah but it's just something that's literally within a wholesale Market but that speaks that you might have a blockchain between Banks and the fed using a central bank digital currency token to settle trans actions institutionally inside the yeah so that leads me to Fed now which is supposed to be up and running I think this summer somewhat behind the the scene there uh I would like to ask you to formally have this full committee briefed on that by the Federal Reserve I know the chair of the Kansas City Bank was involved she's now left and I think the committee has a lot of questions about fed now how it how its interoperability will work how it's going to roll out and also just a question that we've been asked that why the FED wire system isn't up 24 hours a day seven days a week now to benefit consumers that are using venmo do you have a thought on that I I'm not sure why we're not 24 7 on that and we of course be delighted to come up and brief the committee on uh on fed that'd be good we'll take you up on that and uh the right person from the fed and Mr chairman I yield back gentleman yields back we'll now recognize the uh chair of the I'm sorry the ranking member of the Capital Market subcommittee Mr Sherman of California for five minutes thank you uh Mr chairman I want to thank you for bringing to our committee's attention several years ago the importance of tough Legacy Libor some 16 trillion dollars of instruments where the Creditor wouldn't know how much the debtor was supposed to pay um this committee we passed legislation over a year before the Libor hit the fan uh you issued regulations seven months before the absolute deadline I hope we do this in other areas and it's my understanding that with those final regulations were done uh and uh We've solved the the the Libor issue uh is that correct that's my understanding as well good um people talk about inflation and they somehow say that it's a matter of the personalities and politics in the United States others argue that the entire world is hit by inflation because Ukraine and covid I think we've got the answer to this question uh in that inflation is uh considerably higher in the Eurozone than it is in the United States today and it's very hard to say that Joe Biden is responsible for inflation in Germany uh I commend the ranking member for bringing up the debt limit and the harm that's already done to our economy if we solve the problem tomorrow we had less investment than we would have had yesterday um and I would say that I commend the president he's going to issue a budget plan tomorrow and perhaps in their time one of our Republican colleagues can tell us when the Republican budget plan will be released we are all eagerly awaiting it housing is a huge part of inflation and it's we've left it to local government but the permitting process there guarantees scarcity which guarantees uh uh High housing costs um Mr chairman uh chair um we've talked back in 2001 and several times uh even before that about wire fraud and uh having just bought a home I saw the process up front everybody's very nervous about one thing and that is will the buyer of the house be tricked into wiring their down payment to the wrong account or will the seller the buyer be tricked or the escrow agent be tricked into sending the money uh to someone other than the seller of the property we talked about this back in 2001 where I urged you with your fednow system which I'm glad is on track to move forward um to have what the Brits have when you send the wire you identify not only the number of the account you're sending it to but also the name of the person or entity that's supposed to receive that uh at that time back in 2001 you said that payee matching is not the best way to do it there are other ways to do it and that you'd be happy to get back to me as to how you're going to make sure that a uh an email an email from a Nigerian prince does not get uh the wired funds particularly in a housing transaction wired to an account number that turns out to be in Legos um what progress do you have when can when can home buyers have a system where they're sending it to a named payee as well as to a number so we I hope we did come back in a timely way to you on that um but uh it's a it's a problem you've brought to our attention you're right over many years uh and we continue to focus on on on that well the bureau the bureaucrats who are working on this don't want to do what the Brits did they've proven it can be done you said you were going to accomplish the same goal in some other way and it has been a while and it's not solved nor are you aware of any solution I would hope that you would go back and say we don't want to add this anxiety to every real estate transaction um we go back to the drawing boards follow what the the Brits have done and have uh pay uh matching uh finally as to uh crypto um cryptocurrency says what it means hidden money that's what it means and uh if we impose uh know your customer and anti-money laundering statutes to it it won't be crypto anymore what crypto wants is to have part of its ecosystem above the water line visible and subject to know your customer and then have the rest of the iceberg below the water line um I will now uh go to the gentleman from Texas Mr sessions is now recognized for five minutes chairman McHenry thank you very much chairman Powell thank you for joining us today we appreciate not only your professionalism but your direction at us chairman Powell I know that the FED considers divergences and you talked about it in as you spoke in your opening statement about Consumer Price Index personal consumer expenditures inflation GDP and all these things are talked about in your report a monitor report of March 3 2023 thank you uh a couple days ago I had an opportunity to see that a an economist art lapper Arthur Laffer uh produced a report that spoke about literally this country doubling GDP now I know we're putting CPI pce inflation all these things into a mix but he said that if we made changes in health care to efficiencies we can double the current GDP rate my question to you that I hope you can answer is what do you think about that is that something that is in this document that I have missed and it's seemingly to a person who follows this as art lapper does for 50 years what do you think is an important way to look at efficiencies in Health Care thank you so no that that's not in our in our monetary policy report uh I just say one thing and that is we do we do spend something like 1.7 sorry 17 or 18 in that range percent of GDP delivering Health Care other other similarly wealthy countries spend 10 percent so it's the delivery system it's not that the benefits are incredibly rich or anything like that it's just that the delivery system is very expensive that's a trillion dollars a year that we spend and get nothing for it this is fiscal policy but I'm I'm responding to your so I would think that he may have meant that if we if we had a delivery system that that saved that that a trillion dollars that doesn't really get us anything uh then then that would be great for the economy which I would agree with so you've spoken of supply chain disruptions because it in fact is an inhibitor or an accelerator as we gain that advantage you just talked about some seemingly which would offer some validation to Mr lapper as he spoke about the huge Imports of this is that something you should start paying attention to to where policy people not only at the FED but your fed banks around the country would start looking at and start putting pressure on us to get to gain those efficiencies as a result of a global view so on Supply chains generally they have suddenly been tremendously important uh in in inflation as you know for the last couple of years and for the first time really have been something that we've had to study carefully in terms of of Health Care delivery that is strictly a question for you and for you know the the parts of the government that are charged whether the FED does not have a role to play and does not seek a role in that does not see a role and and get as I look at this you've got a role in projecting confidence you've got a role in education you've got a role in who's in the workplace you've got to roll my talk my discu interest rates my and yet my point is it's such a staggering number that impacts us uh just love to have you go back perhaps we from this committee need to give you some direction on that but I think you've your testimony today it recognizes the Staggering impact on that I don't think it's political the answer may be political but I think the actual numbers are not political it's an inefficiency that is happening across the country not a regional matter and so I wanted to get your take on that and I appreciate you being here as always thank you for your confidence and your hard work that you give this country Mr chairman I yield back my time someone yields back will now recognize the ranking member of that agriculture committee Mr Scott of Georgia for five minutes thank you very much chairman and uh welcome back uh chair chair chairman Powell now chairman Powell listen to me very carefully here because I think we're on the verge of making a terrible mistake back in 2008 if you recall uh Barney Frank then Ms Waters asked me to take a look and kind of work with you and the fed you were a board member in 2008 and we came to the conclusion that we needed a more Equitable playing field between our large Banks uh like Goldman Sachs Citigroup and our regional and smaller Banks like truest and our Community Banks and we and we changed that but now I hear that the fed and the FDIC plan to drop a new rule which seeks to apply the long-term and higher Capital requirements that were created and you and I did this back in 2008 and you remember that road created for the Goldman Sachs and for them and now we want to apply these rules to the regional Banks there's a big difference and we've omitted this difference if you proceed in this manner I think it's very misguided it works and you and I worked on this you recall this you were a board member and we saw that we needed to have a better playing field to protect and if you all go along with this it could put many of our regional Banks and small Community Banks out of business so I want you to reverse this first of all tell me am I speaking the truth are you all planning to all of a sudden here put these smaller and Regional Banks under the same heavy or financial load as your large worldwide Banks tell me no we're not planning that we um we believe strongly and always have in tailoring to address the the different size and risk characteristics of financial institutions and certainly uh nothing like that for the Regionals they won't have anything like what the what the very large most systemically important banks have in terms of overall regulation yeah because I remember clearly you and I were back I think we were on this side then talking about this in this same committee room and you worked with us on that I'm glad to hear that uh where's that coming from I mean it's is a concern it's just a rumor of have there been any discussions about removing the uh playing field and the guard rails we have here the differentiations and the uh requirements between the regional Banks Community Banks and your larger Global Banks there's not nothing to that yeah well I would say this we were required by the law now and and we're doing this Dodd-Frank actually required us yes suggested that we should tailor and then the s2155 then required it and anything that we do or effective reflect appropriate tailoring all right so we we that's off the board we're not going to change and put the smaller and Regional Banks under the same financial obligation role as a large Banks we got that right from you correct yeah that's right all right good now let me turn to China I'm really worried about China and right now people may not know it but China is the world's largest economy in terms of purchasing power now at our last meeting I I talked about this move where we didn't blow the balloon up and this is an example of what I was pointing out gentleman's times expired I will now recognize the chair of the science committee Mr Lucas of Oklahoma for five minutes thank you Mr chairman chairman Powell I'd like to follow up on the topic of capital standards one of those things we've discussed many times together as you know commodity markets have been have seen significant volatility in the last few years enduring times of tremendous economic uncertainty like we've seen end users turn to the markets to hedge risk particularly those in the Agriculture and the energy sectors and I know that the FED is early in the review process of potential changes in capital requirements can you uh well I'll ask anyway can you commit to ensuring that these changes will not increase the cost for banks providing those commodity derivatives to end users okay I I that's a really specific uh can I can I go look at that I mean I'm not actually sure that that the work even addresses that so um fair point to come back to you on that and that particular response makes me feel better because after all those products are very important to my folks and make a great deal of difference in how they're able to address their issues so as you discussed earlier and as you've consistently assured the fed's not a climate making policy maker you and I have talked about this issue again many times in the past however I'm concerned that the FED could be heading in that direction and could be laying the groundwork for climate related stress tests that would reduce access to capital for entire sectors of the economy this would also open up the Federal Reserve potentially to political pressure and force the FED in fact to make policy decisions related to climate change we've seen for example this Administration turned to Regulators to impose climate policy as an alternative to the legislative process chairman Powell how careful are you in ensuring that the FED does not Place itself into the climate debate and how can Congress ensure that the fed's regulatory toolkit is not shall we say warped into creating climate policy outcomes so I think we do have a narrow but real role there which is around Bank supervision making sure the banks understand and can manage their their risks over time from climate I think my colleagues and I all understand that it's a it's a tightly circumscribed role that we're playing and that we we're not looking to uh you know move into an area where we come where we're actually becoming a climate policy maker I would completely agree with you that over time that border needs to be very carefully guarded and I I will tell you that I will I will do that as long as as long as I'm at the Board of Governors I very much appreciate that because again it's a very important issue to the Third District of Oklahoma traditional production agriculture oil and gas and the actions that the FED takes have a significant impact back home so it's vital that we resist the demands to do that sort of thing now or in the future and I very much appreciate that response and with that I'll yield back the balance of my time Mr chairman gentleman yields back the gentleman from Massachusetts the ranking member of the digital asset subcommittee Mr Lynch is recognized for five minutes thank you Mr chairman and uh thank you Mr chairman and for your willingness to come here and to to update us uh last week the treasury Department announced that leaders from treasury would begin to meet regularly with leaders from the fed and and from the White House to discuss a possible cbdc Central Bank digital currency and other payment Innovations in the statement it was mentioned and I'll quote from it it said that the FED is encouraged to provide periodic public updates as it continues its research and its technical experimentation on Central Bank digital currencies I was wondering uh first of all when you might be expecting to share some of these public updates uh What's the timing on that so we did go out for for comment uh in General on a cbdc a year or so ago and I do expect to we'll go out I don't I can't give you a date but we'll certainly go out and you know engage we we engage with the public on an ongoing basis yeah we are we're also doing research on policy and also on technology that's what we're up to I'm aware of the the Boston fed has a partnership there uh the the uh Hamilton project over there with the folks from MIT uh media lab they're doing a great job but you know it says here that the discussions would include uh technical experimentation I was just wondering at what level are you talking about making decisions on architecture for a cbdc a retail we're not we're not at the stage of making any real decisions what we're doing is experimenting in kind of early stage experimentation how would this work does it work what's the best technology what's the most efficient we're really at an early stage on but we're making progress on sort of technological issues that the policy issues are equally important though you know we haven't decided that this is something that the financial system in that country want or need right all right so that's going to be very important right well I think I speak for the chairman as well uh would love to have more dialogue with the FED on on that and maybe bring in the folks from MIT as well and just make sure that Congress and this committee is as up-to-date as uh as others uh let me switch over to uh fed now there are some champions of digital currency and stable coins in particular that uh continue to cite the need for faster Payment Systems however as uh was earlier mentioned the FED now is a service that the FED is working on to finalize it will allow for instant payments between bank accounts and the FED has a Target release date of off fed now uh between May and July which is right around the corner uh do you see any reason why cryptocurrencies would provide faster payments than the FED now system uh and uh with this offer with the transparency of fed now would it offer distinct advantages over some of these stable coins that are touting faster payments so what fednow will do is it will enable all the banks any Bank in the United States not just the big ones to offer instant you know instantly available funds and real-time payments to their customers that's that's what it will do so that's that's a great thing you know with cbdc I think you're asking whether whether a cbdc would serve some of that but a CD cbdc is going to be years in the evaluation and you know I think we can get this into the hands of the public very quickly and I think uh you know State Banks that were authorized to issue their own currency but but when the Greenback came out uh all of those various con currencies went to zero because well trillions right now and I'm just I'm just thinking if we had those those advantages built into a uh you know a cdbc wouldn't those Alternatives go to zero if they did not have the transparency and the full faith and credit that that we enjoy so certainly unbacked cryptocurrencies that don't have any intrinsic value but nonetheless trade for a positive number um those those have never understood the valuation of those stable coins are actually many of them are really they're they're drawing on The credibility of the dollar they have they have Dollar based their dollar denominated mainly dollar based reserves although we don't know what's in the reserves because there's no regulation gentleman's times expired the gentleman from Missouri Mr lukemeyer is recognized for five minutes the chair of the National Security subcommittee thank you Mr chairman and thank you chairman foul for being here this morning the reserve currency status of the dollar uh to u.s's enormous financial and Financial Security benefits in the wake of Russia's unprovoked invasion of Ukraine the FED took action prevent the Kremlin from accessing more than 300 billion dollars in reserves roughly half of Russia's Reserves however this led to an accelerated effort by countries like China to de-dollarize their official foreign exchange reserves just last week there was an article in the Wall Street Journal titled Russia terms to the Iran in an effort to ditch the dollar not only that but China's president Xi Jinping published for the settlement of energy trip a push for the settlement injury trades in the Chinese Yuan at a summit with Arab leaders in December the question is um are you concerned about these actions by Russia and China to push to establish different reserves and conduct transactions in non-us dollars so the uh the US dollar is the the widely accepted and really the only serious candidate for for the world's principal Reserve currency and that's that's because of our Democratic institutions our liquid markets the rule of law and all those kinds of things and also the fact that the the dollar has held its value over time so other countries who are competing on other other Playing Fields may want to they want to establish different currencies but really the dollar is the one that's going to be used more broadly in international Commerce because we have those aspects and other countries don't well that's true to now but my question is are you concerned about the actions of these countries uh because if they they see themselves being challenged or are concerned for instance if China would invade Taiwan um you know as Russia invaded Ukraine there were some sanctions put on and I don't disagree with the sanctions the last time you were here though Mr chairman asked the question because it's an instructive moment for us the standpoint that knowing that we put sanctions and on on Russia all their different accounts as well as the oligarchs from that country uh are we thinking about doing the same thing to China when they invite invade Taiwan and your answer at that point was no we passed a bill out of this committee last week to ask the administration basically to start thinking about that in those terms what kind of uh situations can you come up with are you talking to allies beginning to talk to them to start putting together a list of how you would go about sanctioning the the different individuals the different accounts things like that so have you started thinking about that at all yet well let me see the business of sanctions is entirely in the hands of the elected government in the treasury Department we are we are an implementer as it relates to Banks that's it we're going to take your advice on different different aspects of this sorry we're going to take your advice on the different aspects of this well I mean honestly when the sanctions are being put in place treasury was doing it we weren't doing it okay yeah yeah I mean that's the way it works um next question uh there was an article again in one of the political newspapers this yesterday I guess it was um and it talked about the uh the problem that we have here with the fed's balance sheet it says it now appears similar to the to a hedge fund whose long-term assets are financed by short-term borrowing and the bottom line is that um it's going to cost money the FED now has a negative income as a result of having to do this and so it says here that the FED will simply borrow the money to pay the bills is is this true that we're having the feds losing money right now as a result of the way you've got your these these I think that the borrowings that you've started you've purchased uh structured the place I would start is that that the FED has you know we we always turn over all of our earnings in every year we turn them over on an ongoing basis and we've turned over something like 1.2 trillion dollars in earnings just in the last you know decade or so so we always know that when you know when we when we raise interest rates okay you're going to lose money okay of course would you agree with you agree with the point that we have a negative income right now this makes my point to my next question or my concern is the cpb gets their money to be able to cfpb gets their money to run their agency from the fed that's right so basically there's no money for the FED to pay the cfebe's bills if this is the case unless you continue to borrow which is basically what's going to happen now is you're going to have to borrow money to be able to pay the the cfpb's bills is that not correct no we don't we don't borrow money we we issue basically yes we can we can we don't shut down the FED when we have negative income okay we can pay our bills and we can so my question the next question my follow-up question then is do you have any do you do any accountability or assessing of of the cfib's spending of these dollars at all you just told me they just got a blank check they send you a bill you send them a check there's no accountability there no I think there are limits built into the log which I don't have in the in the front of my head I have yet to see a limit Mr chairman I'd love to see what the limits are because I don't think that they've ever agreed that they have that but I see my time is up Mr chairman I yield back it's almost times expired we'll now go to Mr Foster the ranking member of the financial institutions monetary policy subcommittee um thank you and just a quick comment I think it's a mistake to imagine that you can completely hide from the macroeconomic effects of technology and your scenario planning you know if you we just talk briefly about health care costs you know obesity half of our health care costs and there are treatments in these glp-1 receptor Agnes the agonists that look like they're just a home run against obesity and so these will be near-term impacts which on which will have macroeconomic effects so just just a comment I hope you have a certain fraction of futurists in the room when you're talking about your scenario planning because a lot of that future is like now okay back to economics um so we have this historically low unemployment rate you know 3.4 percent and historically this would be considered to drive runaway inflation you know your predecessor Alan Greenspan would repeatedly referred to dangerously low levels of unemployment um and yet we see inflation is coming down so what is going on here how can we have these historically low levels of unemployment without having inflation take off is it possible that we simply have less frictional unemployment in our system that due perhaps to the fact that people get their new jobs online and have a job lined up before they quit so inflation is coming down but it's very high is the thing in some some part I've never said all of it or most of it but some part of the high inflation that we're experiencing is very likely related to an extremely tight labor market wages affect prices and prices affect wages so I do think that's part of it more to your point though there was a time when there was a tight relationship between inflation and unemployment in other words the Phillips curve was Steep and that went away over the period of the of the great moderation and really in our thinking that's because people came to expect two percent inflation and we had two percent inflation and then people just stopped focusing on inflation and it stayed very low so there was really no relationship or very very tiny relationship we could have very weak economic growth or very strong economic growth and we wouldn't have wouldn't have inflation respond very much that's that that was before the pandemic though okay I I hope you don't over learn you know some of the lessons there it's one of my worries that there have been a number of exogenous shocks to the system here and it'll take a while to to go through them and if um you want to be careful there now in a related issue um you know when you say refer to the totality of factors you know you're looking at a mixture of leading and lagging indicators when you look then this totality of factors and my question perhaps you might be paying too much attention uh the land to the lagging indicators and not enough to the leading indicators you know the example that's referenced the reference in your marks and is in more detail in the in the report about the difference between using current rental payments versus uh versus versus the amount that you pay for a new rental contract and difference is how much they lag um had you paid more attention for example to the leading indicators like current rental contracts um then you probably would have picked up uh inflation earlier you would have been you know not gotten so far behind the the curb on that um and secondly their policy implications going forward if you look at current rental prices uh for new contracts we're much farther along in in fixing inflation and that you can you know take your foot off the brake and so what's your thinking on that and whether you may perhaps be systematically not paying enough attention to Leading indicators versus lagging ones so we've been we've had our eyes on the whole housing inflation thing from the very beginning and you know right now what I would say is that um uh every forecaster is is baking in uh higher low sorry lower rent increases that's a big part of why people think inflation is going to come down in 2023. I think the thing with transitory was more more had to do with goods and it had to do with the thought that that these supply-side disruptions would go away much quicker than they would that the labor market disruptions would go away much quicker than they did and in the Heinz you know in hindsight it just took much longer for for those disturbances to go away so with hindsight and if you you know allow yourself to Monday Morning Quarterback yourself you probably would have gone up to four percent earlier um and not had such a big problem with inflation um and so what is your um you know are there structural things you can contemplate or or even uh after after Action reviews to say what would have happened if we would have paid more attention to uh to the leading indicators or or improve the band in engineering term improve the bandwidth of your feedback regulator that you know this is this is something if you want to get the best result you know you need a high bandwidth feedback in in the system even when there's averaging on the back end so that this is something we only think about during waking and sleeping hours as you can imagine um it's uh it's it's really hard to know what the lessons are again um we you know we really thought things would nobody had seen the supply chains collapse no one had seen labor force participation plummet we didn't know or or unemployment go to 14 and higher than that really go away and if we ever see this pitch again we'll know how to swing at it but we'll now recognize the bunch of Firsts someone's time to expire the gentleman uh as time has expired we'll now go to the general woman from Missouri the chair of the Capital Market subcommittee Miss Wagner for five minutes I thank you chairman McHenry and chair Powell welcome uh thank you for your service and for being here today uh yesterday I was pleased to hear you discuss how inflation is severely hurting the working people in America in your testimony you also state that strong wage growth is good for workers but only if it is not eroded by inflation and that is key inflation is a tax a hidden tax on every American if the Federal Reserve were to shirk its mandates to stabilize prices leaving inflation alarmingly High what would it cost America's hard-working families in Missouri's second congressional district and Beyond so I think the costs of failure to restore price stability would be extremely high and while there will be costs to success that the cost of failure will be much higher you'd be looking at an extended period where people learn to expect and live with high and volatile inflation and it's very very hard to uh to have Rising real incomes during such a period so it'd be a bad thing for the country can you reassure the committee that the FED remains committed to Bringing prices down for our constituents yes I do thank you hereby assure you as in changing topics here a bit as China's economy reopens and about 18 of the world's population resumes its consumption of oil and other key Goods what sort of inflationary impact will we see here in the United States sir so a stronger faster reopening of China which we it looks like we may be seeing it does have the potential to put upward pressure on commodity prices but it also would mean a faster sort of unraveling of the of the problems in Supply chains so those would be offsetting effects I think sitting here today we don't expect the net effect to be uh big for the United States it might be bigger for other parts of the world but we think it ought to be moderate overall well China is one of the world's top oil importers and do you expect any inflationary effects on global energy markets as China's oil consumption return turns to their previous levels so I think oil prices could be affected and that that's a I think that's a big concern in Europe for example we have our own domestic oil we've got a lot of of uh natural gas as well we sure do I wish we were were actually harvesting more of that liquid natural gas um chair Powell You Vice chair bar and many others have recently identified that the banking system is well capitalized and strong Bank capitalization remained robust during the shock of the pandemic and related shutdowns of economic activity capitalization of large financial institutions weathered severe stress testing mandated by the fed and despite all of that as also previously mentioned by chairman McHenry vaisher bar insists on conducting a review of capital rules I'm concerned that this review is being conducted in a in a silo and that the findings will not be made fully available to the public taking such an approach in the context of this holistic Capital requirement review would make it impossible to conduct a transparent rulemaking process denying the public information necessary to consider and to comment I think this is just simply not not appropriate in this situation and I'm concerned by the lack of of clarity I think is the best word perhaps at this point by the Vice chair a couple questions you've served on the FED board for over 10 years since the financial crisis regulatory framework has been put in place and over that period have you seen any real world evidence that America's banks are under capitalized so American banks are strongly capitalized and I believe uh Vice chair Barr has has said that as well but the point is he hasn't there haven't been any real proposals to evaluate yet and when there are that will be done in a highly transparent matter I hope so I'm glad to hear you say in a highly transparent matter do you agree that excessively High Capital levels constrained Banks lending capacity with spillover effects on jobs and living standards for Americans so I think it's always a balance right more Capital means more safety and soundness and more ability to withstand terribly stressful periods but it also you know it's it's more expensive Equity capital is more expensive U.S banks have competed incredibly well around the world yes they have a high level but so that's a trade-off that you uh you're always going to be making when you think about capitalism required yes thank you now recognize the general one uh General woman from Ohio the chair uh I'm sorry the right key member of the National Security subcommittee uh Miss Beatty Mrs Beatty uh for five minutes thank you Mr chair and I I like that uh title uh to uh chairman Powell thank you for uh coming and being such a good colleague and friend I have a couple questions I'm going to try to get uh through quickly uh chair Palin a press conference last month you stated quote there is a lot of spending coming into the construction pipeline both private and public and so that's going to support economic activity end of quote how do you think the strong pipeline of funding from what the Democrats put together in passing the inflation reduction act the infrastructure investment jobs Act and the chips science act uh will do to have economic activity this year and moving forward so I I guess I was making the point that there are a lot of sources of demand that that we can rely on even though demand has been relatively increasing in a relatively moderate modest rate part of it is will this help in that demand yes I mean there is state and local governments I mentioned are about it so would you say this is a great thing that uh we've done uh coming from the left not for me to not for me to judge the merits of what gets done but I'm just saying there's but it will contribute in there that will support that economics and support it so I'm going to assume from that that that's a positive let me go to the second uh question uh chairman Powell the Federal Open markets committee is projecting that unemployment will increase to 4.6 by the end of the year and those cost as we know won't be bore equally if we look at the reaction ratio from the last time unemployment was 4.6 and compare it to our numbers now it would mean that white unemployment would go up to about 0.9 but black unemployment would go up by 2.3 percent does that sound somewhat accurate to you yes uh can you address the disparity impact with that and before you answer let me go to the book and thank you that you that was put in our places together uh you made it in this book with your signature on it is stated however while disparities in unemployment have largely returned to pre-pandemic levels there Still Remains significant disparities in absolute levels of employment across groups like African Americans and Hispanics uh so can you address that I I can so right now to your point um actually uh African-American unemployment is I think four or five point four percent which is just about as it's low as low as it's been since we've started tracking it in 1972. but differential from majority I'm going to say the diff so that's 5.4 whereas the overall is 3.4 and that includes black so that means for Whites Whites is well lower than that what happens is so there's a there's a persistent gap between black and white unemployment and also when when unemployment goes up quickly in a recession it goes up much faster for African Americans when the economy grows again it comes down faster so that's just that that's somehow embedded in our economy we don't really have the the best thing we can do is is Achieve stable prices so that we can have a long long expansions and what happens in those long expansions is that the labor market gets tight sustainably tight and we have we have you know historic lows in in unemployment including for African Americans let me say thank you and let me also again thank you as you know in the 117th I was the chair of the dni committee and let the record state that you always push for making sure that you understood and respected that and and in that this is very minor and certainly personal to me in this report maybe those who helped you author it I would like to see other areas that talks about unemployment not under a title of special topics but something that drives a little more attention to it as some of the others just very minor last question I have can you tell me if the feds is committed to working with the other agencies like the FDIC and the OCC to finalize a rule soon on CRA certainly that's something of great interest to many of my colleagues so can you give us any updates on it or how the process is going or what we can expect yes so uh with with Governor brainerd's departure for the White House I've asked Vice chair Barr to take the lead in in moving it forward there's just I would characterize it that there's essentially agreement between the three banking agencies on on the changes to be made that's all being written up and vetted and at a certain point it uh boards members of the board of Governor will be will be briefed on it we'll vote on it is there anything we can do to help with that you know I think we're we're hard at work on it and we're it's going to take some months but I think we're we're nearing the uh we can see the the the airport and we'll be landing in a few of those times expired there's only Kentucky the uh chair of the financial institutions the monetary policy subcommittee Mr bar is recognized for five minutes uh thank you chairman McHenry and uh chairman Powell economic data are mixed as you know on the one hand low unemployment robust hiring strong consumer spending and persistent core inflation and a CPI that's still more than three times your two percent Target suggests more aggressive tightening is warranted on the other hand because the FED misjudged the inflationary impact of Democrats overspending kept interest rates too low for far too long and failed to end quantitative easing soon enough the FED has been forced to raise the FED funds rate 450 basis points in just 11 months and reduced the M2 money supply at the fastest rate since the 1930s as a result wage gains have slowed credit card debt is at an all-time high the housing market isn't a slump and the yield curve is inverted I agree with you that the historical record cautions strongly against prematurely loosening policy but what would you say to those who caution about the lag effects of monetary policy the the precipitous decline in liquidity will the economy have to suffer a recession in order to bring inflation down to two percent we are very well aware of the lags with which monetary policy affects economic activity and inflation those are long and variable and I would stress highly uncertain there is nearly no agreement on exactly how long they are but we know that slowing down the pace of rate hikes this year is a way for us to see more of those effects as as they come in in December most fed officials expected to lift rates this year to between five and five and a half percent is that still your estimated terminal rate or does uh the data suggest that the terminal rate could be higher than 5.5 percent my colleagues and I will write down new forecasts and releasing to the public on March 22 but as I as I mentioned in my testimony the data we've seen so far uh this year suggests that the ultimate level of rates will need to be higher but we still have some more data to come in between now and the meeting but as of today it suggests a higher level than that let's go to Vice chairman Barr's review of the capital framework a lot of questions for you on that when Governors Brainerd quarrels Clarita Bowman and Waller made up the board under your leadership major changes in policy were addressed following board consensus and not when there was significant dissent will you commit to not implementing a new capital framework following this holistic review or the Basel endgame if there is considerable dissent from the board I can't really commit to that you know I uh I I we are a consensus kind of an organization and that's what we'll work toward um but ultimately uh you know we we would would that be a break from your prior practices you're a consensus Builder Mr chairman you you pride yourself in that and we credit you for being a consensus-oriented chairman will you commit to continuing that practice and not allow major changes to the Capital Bank Capital regulatory framework to be made by one person well they can't be made by any one person but I do commit to that and I commit to doing everything I possibly can to bring people together in consensus something to have something that that can be broadly supported thank you earlier this year you said and I quote we are not and will not be a climate policy maker however the feds in the feds draft principles on climate-related financial risks one proposed principle suggested that Boards of directors of a financial institution should consider making changes to its compensation policies to align with values in the context of supposed climarists it appears then that the Federal Reserve through regulation wants to begin implementing climate policies so which is it there seems to be a disconnect between your statements publicly and the rules that the board is putting forward for comment well I uh I feel strongly that climate change is an important issue that needs to be addressed by elected people uh it's it's about it's just not something that we've been charged with by Congress clearly uh so we we do have a narrow role and that role will be around making sure that Banks understand and can manage the risks that they're running and that's going to be it and I I as I said before there's you know we don't want to drift into becoming policy maker and we'll have to guard that border very quickly regarding the fed's climate scenario analysis pilot program did the board vote to approve the creation of that pilot program I had to check but I don't think so I think it was already authorized and this is a concern that I have I'm concerned that one Governor acting unilaterally to implement major policy changes without board consensus is a problem uh and so I would urge you and your colleagues on the board to continue a consensus-oriented approach and I yield gentleman's time has expired we'll now go to the ranking member of the House intelligence committee Mr Himes of Connecticut for five minutes thank you Mr chairman and uh welcome chairman Powell um thank you for your careful conduct of monetary policy independent of the many political desires that circulate in this building independent monetary policy is a Bedrock of a solid economy um I want to reflect for a moment on another Bedrock of the American economy the full faith and credit of the United States government which is now being put at risk by the Republican majority my Republican friends know how very dangerous a game they are playing they know that salary payments to our soldiers are at risk they know that their irresponsibility will raise mortgage rates for new home buyers but they say this is the only time we focus on spending in the debt which of course is baloney it's a pernicious form of baloney the time to focus on the deficit is when you are voting for the spending and the tax cuts that create the deficit when you're voting for The Trap the Trump tax cuts which the CBO said would add two trillion dollars to the national debt that's the moment to consider whether you want to do that not when the good name of the United States is hanging in the balance this stuff gets a little complicated but the American people really need to understand what's Happening Here the Congress sits down to a huge 10-course meal of tax cuts and spending and more defense spending and expansion of this program and stimulus all of which we vote for collectively first course second course white wine red wine four servings of dessert and then the bill comes and my Republicans say whoa whoa hold on look at this bill this is irresponsible do we really want to pay this bill that's not the moment for the consideration the moment is when you're ordering four helpings of dessert that's when we should be talking about it and taking responsibility for the choices that we make without putting the full faith and credit of the United States at risk now now here's where the hypocrisy comes in my Republican friends like to point the finger at this side of the aisle and blame us but chairman as you know fully one quarter 25 of today's United States debt was accrued in the four years of the Trump Administration this country's been around for 246 years and fully one quarter of the United States debt was accrued under President Trump by the way speaking of hypocrisy in the four years of President Trump the debt ceiling was raised or suspended three times I didn't even notice but now of course we have a different president and so the calculus is different now Mr chairman I don't think I'm going to persuade the majority to act responsibly here I actually think the markets will persuade them and you'll recall because we were watching this closely September 29 2008 the Republican House of Representatives voted down the Great Recession rescue package as the vote was going down and the House of Representatives the equity Market dropped seven percent 1.2 trillion dollars lost in people's retirement accounts now Congress sobered up a couple days later we passed the rescue act so Mr chairman there is a question here and the question is this you and I both watch the markets pretty closely treasury tells us that on June 5th that's just three months away on June 5th the treasury runs out of money so my question to you Mr chairman I know I'm asking you to be a little speculative here but what should we watch for what Market signals could indicate that the markets are getting fed up with the manifestia responsibility around this to get give give us some things that we should be looking for and I'd love to but I'm going to limit myself to what other fed chairs have said about the debt ceiling which is that it does need to be raised by Congress in the end there are no other no rabbits and hats as I mentioned and also that no one should assume that we the fed this is the fed's business is to protect the economy from various events and and you know I wouldn't assume no one should assume that we have the tools to protect uh the highly uncertain effects of that kind of an event so so monetary policy is obviously very concerned with interest rates if Global Capital markets begin to decide that we're really serious about hurting ourselves this time is it possible that we could see interest rates rise more because borrowers of United States debt decide that we're actually a little risky is that possible I think that and many other things are possible the thing is we've never crossed that line and and uh We've across that line we're going to find out and I think it's highly uncertain okay so that's possible and and and I you know I don't like pressing on these things but you said this and many other things are possible you want to elaborate on what might be in the category of many other things rather not actually okay I figured all right uh thank you uh Mr Powell again I I really thank you uh for your really responsible conduct of monetary policy and there's a reason that you are insulated from our political desires and I very much appreciate that and yield back gentleman yields back will now recognize the chair of the small business committee Mr Roger Williams of Texas thank you Mr chairman and uh chairman it's good to see you always good to have you here uh in past Congressional testimonies you've repeatedly stated that you support protecting the state-based system of insurance regulation which is the most effective and competitive in the world in my home state of Texas is the world's seventh largest Insurance Market proving the success of this system now the International Association for Insurance supervisors conference in November there is the opportunity to have the U.S state-based aggregation method become formally recognized as comparable or equivalent to the insurance Capital standard we should not be following the European model that has increased regulations and less competition and we should prioritize a model that encourages deregulation competition and less government involvement in pricing so my question is Chairman can you highlight the benefits of the U.S state-based aggregation method compared to the European model regarding Market resiliency and systematic risk and can you confirm that you will push for aggregation method to be deemed equivalent by the iais I I can say this I do think that our insurance regulatory system has proved itself appropriate and adequate and gotten the job done for a long time and we don't need to be copying other countries or other regions Insurance regulatory system on I I'm a little rusty on the on the details of the capital requirements but that sounds right but our bottom line is our side works the other doesn't we need to stay where we are our side works yeah thank you also in the past you've stated that Banks were well capitalized we've talked about that today and but now there have been increased conversations about raising Capital requirements numerous economic Studies have found that raising Capital requirements for banks will increase borrowing costs for their consumer and Commercial customers and I'm somebody that's owned 50 years I've never had a day I wasn't out of debt so I'm concerned about this and then Implement additional regulatory capital crimes with slow economic growth and limit financial institutions lending ability so do you believe that raising Capital uh requirements would raise the cost of borrowing and add cost to our economy in Main Street America well it depends on which banks experience higher Capital requirements and there isn't any proposal to evaluate right now of course but it's always a trade-off you know higher capital is good in a sense because it keeps Banks able to lend during bad times that's really a good thing too much Capital though probably limits credit availability so we're trying to strike that balance always and this has been touched on a little today but let me come from a different angle on it but the reserve was created to act as a nonpartisan entity that remains separate from Party politics we talked about that and unfortunately throughout recent years the FED has gotten caught up in politically charged issues like economic inequality gender and race discrimination and climate change recently the Federal Reserve board proposed guidance on managing climate related risk for large Banks further proving that the FED is giving into some political pressure and operating outside its intended purpose and responsibilities so our country's Financial leaders uh in in my mind should be folks on addressing runaway inflation instead of worrying what about the financial institutions are doing to monitor climate change so and we touched on this a little bit but how can the FED ensure that they're not placing undue regulations and guidance on banks before involvement in partisan green politics and how's the Federal Reserve ensuring they remain separate from political influence so it's absolutely critical that we do I mean our independence is partly founded on the idea that we will stay out of of stuff that you have not assigned us to do and if we're going to wander all over and take on the hot issue of the day our case for our independence is is dramatically weakened on climate change I think we do the gut you mentioned the guidance and then they're also the stress scenarios and those are the two things that that we that we've done we've tried to keep those tightly focused on on under on the banks you know understanding and being able to manage the risks that they'll run over the longer over the longer time periods on climate and not slide into you know a broader sort of policy making role on climate change and I I accept that that could be a slippery slope and and a a moving border and I just want to say in my I think my colleagues feel the same way uh on the board that we we we're going to guard that border carefully and we're going to stick to our role and not try to be policy makers the way in in many other countries the central bank is out there in the lead with the support of the public doing uh climate policy but that's not that's not where we are in the United States and and we're not going to pretend that it is I've got some time left I'll yield back but I just want to say as an auto dealer I'm looking for the first day of that rate cut thank you for being here we appreciate it it's almost time has expired we'll now go to the gentleman from California Mr Vargas for five minutes uh thank you very much Mr chairman and again thank you for holding this hearing uh Karen pal a pleasure to see you again I've said it before and I'll say it again it's always great to see you because I always think of the old Republicans the the ones who are very Noble did the right thing didn't play chicken with the economy um very forthright and so anyway I appreciate you being here very much like some of my colleagues on the other side I'd say the same thing about some of them and I appreciate you um so we heard today that the inflation is Biden's fault so what is the inflation rate in the European Union today it's high it's high is it 10 past possibly I think if you're talking about headline I don't have this figure in my head but it's very very high from a headline standpoint and they've had core inflation move up too so are they following bidens then the policies is that what caused the inflation because it seems to be Biden's fault so I think inflation is everywhere and it has to it must have to do with a common factor and that common factor has to be the reopening of the economy after and the things that were done on um uh on coven on the other hand each country has a little bit different case and I think uh you have to be careful we had we had much more of a demand oriented issue than they did now they have their their inflation looks a lot like ours did a year ago right yeah I I just had to bring it up because again uh Mr Sherman brought it up but it's interesting every time I hear inflation is caused by Biden I wonder why is it all over the world I mean it's not because of the pandemic of course or you know Europe's at War I mean that wouldn't cause it of course it'd have to be Biden's policies um that's ridiculous and I think the voters thought through it last time so I haven't been here 15 years as my good friend Mr Foster I've only been here 11. but when I first got here the Boogeyman and I heard all from my friends on the other side was Dodd-Frank Dodd-Frank was going to be the end of banking and in fact some of my colleagues would almost scream how horrible this was and then we had got the bankers up here during a real stress test which was the pandemic and we asked them has it been helpful to have Dodd-Frank you know what they said do you know what they said I don't know they said it was helpful in fact it kept the banks capitalized it was it was fascinating now to be fair to them they did complain about some of the smaller issues but not Dodd-Frank in general the bill then it seemed that cfpb that became the next Boogeyman but they're starting to seem to fade on that and I think the reason for that is the cfpb has actually helped so many people and now a lot of their own constituents now are getting help by the cfpb so all of a sudden there's not quite the energy so now they're attacking ESG ESG and they're saying that you and everybody else is somehow conspiring to make sure they don't buy their oil or their coal are you conspiring to do that are you conspiring I don't believe we're conspiring no now I heard it was supposed climate risk is there risk in the climate change yes there is could it affect the bank certainly in the in the longer run yes yeah of course we can't do you think insurance companies take this into account I Yes actually I believe they do they they absolutely do who write long-term long lived long long duration liabilities they certainly do of course they do I mean they're very concerned with it uh weather is a big deal um I was a vice president of Liberty Mutual in their corporate legal department and I can tell you whether and the changing of the weather we used to have what we call catastrophes and these catastrophes happen every 25 50 100 years now those 25 50 and 100 Year events happen every five years every two years so of course it is I mean it's ridiculous not to take a look at these ESG factors we have to and and again I'm glad that you guys are taking a look at it because it's real I'm glad that you know the the president's taking a look at it and it's sad that my colleagues on the other side just want to stick their head in the sand and say no climate change is supposed climate change no the reality is this real climate change and it's costing billions and billions of dollars and if you don't believe it go ask all those poor people in Florida that had those huge hurricanes come through and wipe them out so again I appreciate very much the work that you've done the only thing I hope is as you said if we ever see this pitch again we'll know how to swing at it and I hope we don't get the pitch of defaulting because I'm not sure we'll know how to swing at that one so thank you again Mr chairman thank you for being thank you I yield back gentlemen's time hey gentleman yields back gentlemen Simon's expire will now go to the chair of the oversight subcommittee gentleman from Michigan Mr hyzinger for five minutes uh thank you Mr chairman and I'm going to move quickly and good to see you again chair um you know I I caught a little bit of the Senate hearings yesterday and um you had a lot of pressure uh to keep the sugar high going and frankly if the fed and many of our colleagues uh had listened to what many of us were saying uh we should have been weaned off that artificially low cheap money that kept the party going and frankly we wouldn't be in this position to reference chair Greenspan's punch bowl analogy not only did no one have the courage to remove the punch bowl uh you had people cheering on the pouring of another bottle of 151 rum into the punch bowl and here you got folks wanting to do the exact same thing let's spend more um it's just in and now here we are you have an impossible decision uh to slow the economy or let everyone get crushed by inflation and we know tightening means a slower economy slow lower economy means fewer jobs fewer jobs hit those who can least afford to lose a job and so in short the lower rungs of the economic ladder will suffer more than the rest of the latter so that's the stay that's that's the state of play of where we're at I have to hit a couple of quick issues here I wanted to start off by discussing climate especially given the fed's announcement in January they was going to conduct a pilot climate scenario analysis exercise the FED along with the OCC and FDIC have each issued proposed climate risk management principles for banks that you are attempting to finalize those by the end of the year and the requirements don't stop at the border the UK and the EU central banks are moving to require significant ESG disclosure regimes as well I know the FED is taking a look at Commodities Capital charges in the holistic review but even though the FED isn't forcing Banks to Encompass climate analysis in their stress tests there are many initiatives at the FED that are going to make it more costly for banks to finance traditional fossil fuel companies so I want to ask you a very specific question will you commit that you will withhold support for a new capital rule that increases Capital charges on Bank activities in traditional energy companies you know I I I can't I can't sit here and promise what I will and not will them will not vote for because I don't know what's going to be in The Proposal but that that's that's not the kind of thing I think we're looking at I'm sorry it's not the kind of thing so this isn't about uh you know this is about overall Capital levels more than anything else I think rather than the specific thing you're talking about okay um we're gonna follow up on that uh because we need to have a real-time uh conversation about what that is going on there I want to quickly switch topics and go in a different direction for this next question uh I want to ask you about two opinions issued by your legal staff in November of 2019 and December of 2020 to the asset managers Vanguard and BlackRock uh Mr chairman uh McHenry I'd like to submit the two letters for the record without objection thank you uh these opinions pure uh to be to outline the parameters of both how how both Vanguard and block BlackRock can operate without being deemed a bank holding company in addition to the legal restrictions outlined by the bank holding company these opinions listed out here in quite detail uh list out commitments that the companies would need to take to avoid being viewed as having quote control these opinions also appear to provide assurances that the Federal Reserve board staff staff would not recommend that the board find the asset managers to be Bank holding companies further it is unclear whether the board will take any steps Beyond a periodic self-certification by the asset managers to monitor compliance with the condition that they quote not take any action to control a banking organization as some asset managers play a larger role and clearly strive to influence policy in companies across the free market we need to remain Vigilant so cheer Powell is the board taking any steps to assess or monitor whether Vanguard and BlackRock are complying with commitments made in November of 2019 and December of 2020 respectively I would have to check and get back to you on that okay I appreciate that um but that says to me that doesn't sound like there's an assessment that's taking place ongoing um or scrutiny of that is somebody reviewing that or someone in charge of reviewing that honestly I you know that's a very specific narrow question I'm I'm quite familiar with you well it's it's specific and narrow to two companies but not to an industry I mean that's that's what we need to be driving at um and I I guess that's we need to find out whether there's somebody proactively reviewing these activities and these commitments that the companies have made as well as the FED has made so um how often do you think they should be reassessed annually monthly biannually you know this is a this is a very narrow set of questions I can I can get you great answers really easily but I don't have them in my head I look forward to those great answers and I yield we'll now uh go to the gentleman from New Jersey Mr godheimer for five minutes thank you Mr chairman and chairman Powell for joining us today Truman Powell when you testified before the committee last June PC inflation was up 6.3 percent year over year just a few weeks ago PC data showed that number of the numbers decreased to 5.4 percent we're moving in the right direction but despite the Federal Reserve raising interest rates at the highest rate since October 2007. we're still far off from the two percent inflation that the Federal Reserve is targeting uh do you believe two percent is still the right target for inflation and given the ongoing energy transition the push to Shift Supply chains out of China and the labor shortage here in the U.S should the FED consider adjusting its Target to avoid overly burdening Americans what a decline of three percent inflation be enough to offer price stability without success of economic pain no two percent inflation is going to remain our longer term inflation goal are you concerned given all the other factors that I mentioned or you think we just have to keep sticking with that I think that's got to remain our longer term inflation goal it's the global standard and it's our standard and and this is not a time at which we can we can start talking about changing it we have no instinct to do that thank you Mr chairman uh the gig economy has grown significantly in recent years as more Americans are working as contractors or running small businesses the Dallas Federal Reserve has written that gig workers are often not included in payrolls and not counted among the unemployed and this may understate the number of Americans who could be counted as unemployed the FED is also noted the large number of Americans who are missing from the workforce after the pandemic do do we need to change the way we think about measuring unemployment to account for these changes I I missed the word you're saying sorry do you think we need to change the way we think about measuring unemployment to account for these changes I didn't catch this you said what was it oh sorry gig you know gig yes I'm sorry gig workers that's the word in here okay no we we clearly need to incorporate gig workers both into the late or the labor force and to whether they're working and they certainly are working we try to do that it's not that we're not trying to do that we may not be doing it perfectly is there a better way to capture them just worried that you don't have the unemployment numbers may not given we're still using older measurement ways are we are we updating our measurement we absolutely we're definitely trying to get those people self-employed people they do they they do report in the in the household survey I believe um I can get more for you on that but that would be sure we're not doing a perfect job at it because it's a relatively new thing but we're very well aware of it and they're you know they're supposed to be included that'd be great I'd love to talk to you more about that great thank you uh as you as you're also aware many of us are having discussions about the long-term fiscal health of our country and our economy like many I worry that higher interest rates will put upward pressure on the national debt CBO already estimates that annual interest costs will only triple for the us over the next decade you said to the Senate yesterday that interest payments are not a consideration of the FED but but are you concerned that higher interest rates will more rapidly make payments on the debt unsustainable and are their actions Congress should consider to address this issue so I'll say what my predecessors have said which is that we're on an unsustainable path and and we really need to ultimately we will get back on a sustainable path then the sooner we get to work on that the less painful it will be um and rates of course were low between the financial crisis and the end of 2021 particularly low uh after the target inflation rates hit what do you think the new normal looks like in terms of rates and the FED balance sheet over the next five to ten years it's a really good question you there was a secular decline in longer term interest rates which we don't control for 40 years to the point where they were you know where the the 10-year was was it 10-year treasury was it was it 10 and then at the end of 40 years it was quite low you're at higher levels you're as you pointed out levels we haven't seen since since earlier in this Century I don't think anybody knows what this is going to look like uh five years down the road it it so you have to ask demographics haven't gotten better globalization may actually move a little bit in Reverse which would tend to produce higher inflation and thus higher rates but you have to ask the factors that caused lower rates how much of that has changed and some of it has but much of it hasn't building on that a little bit what's the right metric you think for if you're in our shoes for assessing our fiscal Health do you think we should be focused on maintaining a specific debt to GDP Ratio or is there a specific number are there other measures lawmakers should be focusing on so we've traditionally focused on debt to GDP but many people pointed out before the pandemic that rates were secularly lower and that therefore you could look at sort of real Debt Service and there was a lot of research on that and by those measures actually debt service was much more easy to handle now we have the 10 years back close to four percent and I think you know we're you know we need to be we need to be careful not to assume that these secularly low longer term rates are going to continue indefinitely because that doesn't look likely now and frankly most forecasts have always shown things like the tenure going back to a higher level so it's it won't be that big of a change I think I think it's more or less been handled for example by CBO that way excellent thank you so much and I yield back thank you now go to the gentleman uh the vice chair of the digital asset subcommittee the chair of the uh housing subcommittee Mr Davidson of Ohio for five minutes thank you chairman uh chairman Powell thank you it's an honor to be able to talk with you today and appreciate uh the work you and the monetary focused monetary policy focused portion of the FED does uh we're rooting for for uh maybe a more consistent input from our bank Regulators so for the regulatory side I've spoken with multiple Bankers who tell me that they've never seen a higher degree of regulatory burden steering guidance shaping activities in the market from Regulators I don't think that's just narrowly focused on the FED but I'd ask you to look into it a lot of people that feel like there's not operation choke point 2.0 going on and it's particularly focused on debanking people that are disfavored by you know the current executive branch primarily just like the previous operation choke point was and so to the extent that you yield any influence over the regulatory component of the Federal Reserve I think that would be meaningful and important because you know our monetary system part of the strength of the US dollar is of course a stable store of value currencies around the world are wrestling with that and inflation and you guys are working to tackle it uh but the other part is it's an efficient means of an exchange and when people uh really feel like some third party is going to steer or shape their money they don't trust it I mean the unbanked and the underbanked fundamentally that's lack of trust is part of why they don't use our banking system today in fact that's part of the appeal of the digital asset space is the permissionless nature of it it seems that a lot of people uh in the in the financial services space that have grown up in it that are leading it today um feel threatened by the prospect of change and if they if they've maybe reluctantly concluded that you can't ban crypto they at least want to keep it account based so some third party can actually control the assets which is a polite way of saying we don't actually trust our citizens to control their money or their assets we'll let somebody else do it for them because we can control those third parties and in fact that's what the Regulators do isn't it isn't what they control the third parties I mean if you don't comply with the regulatory regime you don't get to operate a financial services business right that's right yeah and so at the end of the day uh you know I think a lot of people were concerned by your remarks yesterday I know I was by saying that permissionless uh digital assets pose a systemic risk to the financial system well what I think what we said in our guidance I think if you by the way I think if you read through the digital guidance which I did getting ready for this hearing of course I read it before we put it out the first time but it's pretty careful to say that we don't want regulation to to oppose Innovation and thus entrench incumbents and things like that it's pretty balanced the language and I think it essentially goes to the question of of protecting the safety and soundness of Institutions and there is one you what I think what we say about I'll paraphrase it what we say about permissionless block changes is that they have been vehicles for fraud 0.24 so if you follow the your own report on on fraud uh it's a fraction of what it is with the US dollar So speaking of the dollar is there any real current threat to the dollars uh preeminence as the world's Reserve currency you say you're asking a question I didn't yes sir is there a real threat is there a threat uh I think that our our status as the world's Reserve currency is is not is is not under particularly strong threat right now uh I think it's a it's a pretty stable equilibrium it's not a permanent equilibrium but there isn't really a serious competitor and that's not because of any of this it's because of our our Democratic institutions and the rule of law and the fact that we that we that the dollars value is is uh pretty stable okay um so quickly on the repo Market just any insight into that and then I'll have my last comment here and just leave the last word to you but particularly curious about the repo Market but I'll close by simply saying I'd ask you to turn off the purchase of mortgage-backed Securities as the chairman of Housing and insurance I'm particularly concerned about affordable housing and uh the artificial prop for the mortgage-backed Securities uh does raise the cost of capital in that space so whether you own it or occupy it or rent it it's going to raise the the cost there but I'd just ask if you'd come in on the the safety and soundness of the repo Market if you would of the repo Market as far as I know the repo Market is functioning reasonably well these days are you talking about the reverse repo facility or yes reverse repo facilities is a different thing we can we can continue this I'd like to follow up with you later and my time has expired I yield thanks gentleman from Illinois Mr cassen's recognized for five minutes uh thank you Mr chair always a pleasure to see you and appreciate your time here today um the I want to uh I want to start with uh this this chart in your monetary policy report which I think is fascinating chart 14 on page 17 this is this history of wage growth and job growth and for those of you who are don't have it in front of you broadly speaking from 2000 to 2017. we had more workers than jobs um from 17 until the covid crisis is about the same and since covid we've had more more jobs than workers and there's tons of Rich stuff in here that I just enjoyed reading but but broadly speaking if I if that was the only thing going on in the economy I would assume that we had 20 years where it was essentially a buyer's market for labor and and the last year and a half where it's been a seller's market for labor as you look at that and if I go through and I look at from 2010 to 2020 CPI was up 20 over the period um and real median wages less than 10 percent um so for half of the economy they didn't keep up with wages even though we think of that as a very low inflationary period corporate profits were also up strongly as as you would expect I'm not saying that with judgment right if it's a buyer's market for labor you would expect the gains from labor productivity to flow to Consumers and profits and that looks like what it did in these Charter you're looking at this is uh chart 14 on page 17 of them it's the top right corner there um okay thanks the in the last year and a half um median wages are up five percent which is almost as much as they grew during that that 10-year period before and yes inflation is still a bit higher than that but what I'm wondering is as you look at the economy is wage growth universally bad in your view or is wage growth good to the extent that it's keeping up with wages because historically wages didn't keep up and and how do you think through that Nuance because interest rates are a very blunt tool and you know and if we are now if you agree with me that we're now basically in a seller's market for labor shouldn't we expect and welcome some wage inflation that goes with that so I'd say let's say two things first we we want wages to go up uh in ways that are consistent with the over time consistent over time with the increase in productivity and inflation and uh that that makes that makes all the sense in the world um the other thing I would say is that in this instance what we've seen is is inflation eating up these these very high nominal wage gains have very largely been eaten up by higher inflation so it's very important that we restore price stability so that we can start to see real wage gains real wage gains after inflation across the income Spectrum yeah no and and to be clear like you know we're all opposed to inflation here but in in that 2010 to 2020 period that we all viewed as a very low inflationary period wages the gains from productivity did not flow to labor wages did not keep up with inflation and we didn't think about that as a problem for the FED to fix because overall inflation was down so you know I mean this this gets sort of theoretical but let's say that we had six percent wage inflation and five percent CPI there'd be more money in people's pockets but would we view that as a inflationary period to clamp down on you know because we because we didn't View the inverse as a problem if you will so our our job is to restore price stability and keep price stability it isn't to keep wages down and it's certainly not to get involved in trying to establish the appropriate level of labor share of profits for example that's that's not the way we think about it at all we think about price stability and when we think about price stability we think about wages as an important input to that but we're not we're not targeting a particular level of prices and we would never say that we don't wait when wages real wages to go up what we're really charged with is price stability and to do that we have to think about wages in particular no one at the FED would be upset to see the labor share go up but that's not that's not something that our policies affect that's set by global you know globalization and the advance of technology and educational and skills and aptitude and all those things that's what drives productivity that's what drives you know labor share yeah and it's hard to have these conversations in five minutes I realized happy to have you follow the you know I guess what's what's hard is that like you know also in that 2010 to 2020 period median home prices went up by 50 yeah we didn't view that as inflationary you know 401ks went up a lot we didn't view that as inflationary because those were asset increases and so as we have shifted the gains from you know from people who had wealth to people who were dependent on wages there needs to be some correction and I and I leave it there because I'm out of time but how we think it's time to go back we'll now go to the gentleman from Tennessee Mr Rose for five minutes thank you for being with us today chairman Powell uh cheer pal I just want to Echo at the at the outset some of the concerns that my colleagues have raised about Vice chair Michael Barr's quote holistic unquote uh holistic review unquote of capital markets and also about the FED engaging in climate policy as well as your decision to put Vice chair bar in charge of the community reinvestment act rulemaking with that said I'm going to dive right into my questions chair Powell I was pleased to see that the U.S coin task force released their report on the state of coin a few months ago the report notes that the Federal Reserve and U.S mint will be jointly Contracting with a third party consultant to review the coin supply chain and develop recommendations to to improve it chairman Powell could you provide us with an update on what the FED has learned from its review of the coin circulation issues that occurred during the pandemic so the um we know that corn the flow of coins the natural flow of coins in the economy slowed down a lot because people were staying home and that kind of thing and they may have switched to non-coin based uh means of payment and we we feel like that the evidence is that that's continued now people are paying electronically and things like that and coins are sitting in you know jars and on people's desks and at home and they're not circulating back into the banks and thus to the retail stores and so we're working on that we're working with the mint we're working with all the stakeholders in the in the coin ecosystem to try to address this problem and we're well aware of it so so it seems to me that what what we learned from that is that it's probably necessary to have a greater reserve of coins if there is such an interruption in the future so that our so that Commerce is not indeed interrupted would you would you share that broad view that sounds right I'm not an expert I will say we it feels like we need more more coins now because more of them are are sitting in people's uh homes and and pockets and they're not flowing back to where you know retailers in particular need the flow of coins so that sounds right to me On a related note could you speak about the importance of maintaining cash as a viable payment option particularly for those that lack uh or don't have access to traditional Financial Services it's we think it's absolutely critical because there are people who don't have credit cards many people don't have credit cards they don't have good credit and they need to be paying in cash and you know when stores are not uh not dealing with people who don't have cash it's it's a serious problem for those people in the economy we have it at the uh at the Board of Governors and you see it elsewhere because most most payments are now taken care of by credit cards and it's very efficient but we need to be looking out for people who who use cash thank you I appreciate that perspective uh picking up on Mr Luke Meyer's concerns that he expressed earlier as you know the Consumer Financial Protection bureau's funding mechanism is intricately linked to the Federal Reserve System according to title 10 of Dodd-Frank each quarter the cfpb director requests an amount that is reasonably necessary to carry out the bureau's authorities and the Federal Reserve must transfer that amount so long as it does not exceed 12 percent of the federal reserve's total operating expenses for the first five years of the existence of cfpb of course there was a relaxation there with respect to that 12 percent cap that allowed 200 million annually to to be spent beyond that number so long as it was reported uh as so long as the reported excess was sent to the president Congressional appropriators chair Powell during your chairmanship has the FED ever rejected a cfpb budget request I do not believe so and and could you tell us what policies and procedures are in place at the FED to ensure that there is no waste fraud or abuse or that these limits are not otherwise exceeded so we have we have no role in engaging with that it's really the uh what we share a common Inspector General who who does who does work on those issues but we we don't in any way we don't have any governance of any kind over the cfpb we're just a source to them thank you I appreciate that Insight in closing chair Palace yesterday Senator Warren asked you what you would say to the 2 million people who may lose their jobs If the Fed keeps raising interest rates frankly Senator Warren should be asking herself and the same question when she voted and advocated for the Democrats Reckless spending packages that caused this inflation that we are seeing today and is the reason the FED has had to raise interest rates in my view frankly I would call on Senator Warren the president and the Democratic party for that matter to apologize to the American people for causing this kitchen table crisis across the country with that chairman I yield back now recognize the gentlewoman from Massachusetts Miss Presley for five minutes pal for joining us today and for your testimony Focus my comments and my questions on the high cost of families in my district are seeing because of your interest rate Heights now while the FED has acknowledged that higher interest rates are not the primary driver for the slowdown in price increases you continue to raise interest rates risking not only millions of jobs but also a recession based on projections from the FED approximately two million people will lose their jobs so that's two million families who will struggle a little bit of food on the table keep a roof over their heads and to make ends meet but the economic hardship does not end there Mr chair I would like to request unanimous consent to submit a recent paper by the Federal Reserve Bank of Cleveland titled post covet inflation Dynamics into the record without objection chairman Powell are you familiar with this publication uh yes or no uh no I'm not okay um well let me give you some context in this paper the fed's own economist predict that reaching the two percent inflation goal that you have set will be impossible without causing a recession and spiking the unemployment rate to 7.4 percent which translates to millions of working people losing their jobs chairman Powell many economists agree with me when I say that engineering a recession to bring inflation under control is not the right strategy especially at a time when we are seeing inflation cool in real time independent of your rate hikes so on behalf of the people of this country to prevent a recession yes or no chairman Powell will you pause future interest rate hikes we're not seeking to uh to have a recession and we don't think we need to have a recession to get respectfully back will you pause interest rate hikes yes or no I don't do yes or no on will I pause the interest rate hikes yeah that's a that's a serious question um and I can't tell you because I don't know all the facts I you know that's not about my time and if that it is a very serious question because it has a very serious implications the people who will bear the brunt of an economic recession are our most vulnerable we know from past experiences that recessions have catastrophic and deeply and Equitable consequences in fact while some will catch a cold others will catch pneumonia but you know that an economic cold or pneumonia in fact in your opening statement you said we will stay the course until the job is done to conclude we understand that our actions affect communities families and businesses across the country could you elaborate um what is this effect to communities families and businesses these interest rate hikes well um right now we're trying to bring down inflation on behalf of all those families I think High inflation is hurting particularly Working Families all around the country very badly and as you know if you're if you're on a very limited budget and you don't have a lot of excess earnings when prices start going up you're in trouble right away people up middle and upper middle class people have more resources so we think it's absolutely critical for the working people of this country that we get inflation back under control and also while while we're at it we have a dual mandate apologies Mr chair reclaiming my time here here's the thing the most devastating impacts will be to our most vulnerable veterans to our most vulnerable veterans the elderly low-income workers black and brown workers those who have often ignored and been neglected in the name of what you refer to as appropriate monetary policy and yet you assert that you will stay the course it's it's unconscionable and our most vulnerable workers and families cannot afford to wait for you to realize the harm that you were doing in my opinion this sounds more like the assertions of a greedy Corporation than someone who has a public mission on behalf of the people of this country so uh one more question with my remaining time here uh chairman Powell another consequence of your interest rate hikes has been the increase of the average 30-year fixed mortgage rate to 6.6 percent double of what it was two years ago do you see this widening in equity in the housing market as a problem and what steps will you take to make housing more affordable this is putting a home ownership further and further Out Of Reach for my constituents new parents parents Millennials people of color contributing to inequities and the racial wealth Gap so what are your thoughts on that well I uh our policies different activities times expired chairs can submit for the record or answer I'll briefly say that that uh if I can that you know interest rate policies uh affect uh interest sensitive spending very directly when we cut rates they help housing when when they when they when we raise rates you see the effect on housing so thank you gentleman from South Carolina Mr Timmons is now recognized for five minutes famous chairman and thank you chair Powell for being with us today we currently have 32 trillion dollars in debt our debt to GDP ratio is 120 percent the highest it's ever been and yes we have a debt ceiling fight brewing for this summer I would argue it's an opportunity to get our fiscal house in order but sadly there's no meaningful bipartisan effort to responsibly address our debt both sides have even preemptively started political attacks alleging either side wants to cut Social Security and health care but politics and talking points will not fix our problem our debt is the greatest national security threat Social Security will be installed in 2033 and our Health Care system is fundamentally broken we spend twice as much as the average country per person and our obesity rate is three times the average I want to be clear though I'm not advocating cuts to Social Security but my Social Security will have to be different than my father's and we must change the incentive structures of our health care System briefly let's go over some history Social Security was created in 1937 the retirement age then was 65. an average life expectancy was 60. easy to see how that math Works in 1960 Congress raised the retirement age to 67. it has not been increased since then that year life expectancy was 69. that math still works due to a growing population but it's getting narrower I will throw in another few statistics for that year 1960. 14 of Americans were obese and our debt to GDP ratio is 53 percent let's fast forward to this year our retirement age is still 67 but our life expectancy is 77 that math clearly does not work nor is the program functioning the purpose for which it was designed and shockingly our obesity rate is 37 percent and we spend thirteen thousand dollars per person on Health Care compared to the global average of six thousand dollars per person and 13 obesity rate clearly our Health Care system is failing our system focuses on managing sickness where we should be facilitating Health and Wellness we will only meaningfully be able to address the debt ceiling by focusing on the biggest drivers of our debt responsible policy makers should be focused on saving Social Security by reforming it and Transforming Our Health Care system to facilitate a healthy citizenry capable of working and being contributing members of society the Amer the American people deserve more than the political nonsense five years ago the number one issue I ran on was debt it has been and continues to be our greatest National Security risk I hate to say it but the last four years has gotten way worse Congress has spent seven trillion dollars of which 5 trillion was done mostly on party lines the Democrat majorities not only spent money we don't have over the last four years but their fiscal policy has caused out of control inflation inflation which caused you to raise interest rates last year I asked you if you ever took into consideration the impact of interest rate increases on the cost of our debt service you appropriately and adamantly said no our debt service costs the next 10 years will be over 10 trillion dollars I'm going to point out two things number one that is more than all of our debt service since 1940 combined the last 80 years and while you did not take interest rate increases uh impact on our debt service into your decision making the best estimate is that those rate increases will increase our debt service cost by two trillion dollars in the next 10 years so basically the 7 trillion that we spent the Democrats spent the last four years is going to cost us an additional two trillion dollars and that's not factoring future rate increases as you continue to appropriately try to get inflation under control as you can tell this is a huge problem uh the 7 trillion are necessary spending last four years has caused inflation some of my college I'll disagree with that causal relationship uh Clinton's treasury secretary and Obama's Director of National Economic Council Larry Summers wrote an op-ed before they spent the money and said it was going to cause inflation and he has gone on the uh I was right to her for the last couple years um we need responsible policy makers to address our debt let's talk about what's not serious and that's minting a trillion dollar coin many of my colleagues across the aisle have advocated for this luckily both President Biden and secretary Yellen have said that this is not a serious proposal and they have no plans of considering it unfortunately the buy Administration has a bit of a history of doing a 180 when the political winds blow most recently he said he would veto the DC crime Bill and now he's adamantly supporting it and plans to sign it so uh chair Powell my only question of you is if Biden and Yellen sends you a trillion dollar coin will you accept it and and what I will say to that if there's this only winds up one way and that is with Congress raising the debt ceiling so you will not accept a trillion dollar coin and treat it as a trillion dollars if it's sent to you there are no rabbits to be pulled out of hats here this only I know you don't like yes or no's but if you were sent a trillion dollar coin and asked to be asked to treat it as a trillion dollars will you treat it as a trillion dollars and that would be a rabbit coming out of a head I'll take that as a no thank you Mr chairman I yield back now recognize the general woman from Michigan Mrs Talib for five minutes thank you so much Mr chairman thank you chair Paul for being here you have a lot of economic you know Pro uh projections economic projections uh various data um various reports that are coming out how much and you've studied inflation right am I obviously it's your number one priority right now how much is inflation impacted by these three things corporate profiteering executive egregious executive pay and the use of share you know stock BuyBacks so I'm I don't have numbers but I would say in the case of executive pay and in the case of share of purchases I can't think of how it would affect inflation it takes executive pay that would be very small in terms of uh of the broader economy in terms of profits though the way I think about that is profits are high the places where profits are really high it's places where where there are shortages and and supply chain issues and as those things get better as they are you're going to see uh inflation come down and even prices come down and you'll see corporate margins come down there and that'll be part of how inflation comes down so would you does that corporate profiteering does impact inflation do you don't have any stats of percentage-wise how much of it because you see you know I I play I really paid attention to your testimony in the Senate hearing yesterday and there was a lot of conversation about you know my neighbors and residents wages and so forth um you know they're finally starting to see a little bit more closer to possibly getting Fair wages it's not even far enough but I don't know if the feds is paying closer attention to monopolies copper you know corporate profits hearing and executive egregious pay all of it even the side BuyBacks you're saying all of that aside your focus more on wages and increasing the interest rate than on those other our focus is really on on price stability not not so much wages wages play into that because they're an important cost for business but they're not we're not we're not trying to achieve a particular level of wages we're trying to achieve two percent inflation yeah and I think it's really important you know chairman Dynamic is you know the wealthy and the corporations continue to profit in large scale and still do BuyBacks and still do executive really egregious executive pay and benefits and so forth for those at the top and then you know of course the communities and such were impacted by it but what I hear consistently is folks thinking that's the reason we oh that all of a sudden wages are skyrocketing and all this but all I see is continuation again of those that already getting a huge benefit you know the Corp the folks at the top the executives and so forth you know my friend Glenn taught me this today that the feds are actually sitting on you know something in Dodd-Frank section 956 you all are sitting on the last 12 years on guidance regarding executive cons compensation and their high risks of it like around you know there was some sort of proposal done not implemented again it's been 12 years why is that something that you're not concerned about regarding inflation well like you guys are sitting one you're sitting on it right why well it's been 12 years and then two why is that you're saying that's not big big big deal that's not going to impact the cost of products and so forth for our residents it's a multi-agency rule and there have been repeated attempts to get five or six or seven however many it is agencies to agree that's one thing and disclosures no no this is on it's it's on policies to yeah which include disclosures and Arrangements regarding executive pay the risk of it there it's anyway 956 is you're right we haven't been able to get agreement among the agencies but more to the point um you know their boards long since this is just for the big Banks where we have this Authority long since um board of directors are very focused on on how executive compensation works and that it not reward uh you know unnecessarily risky behavior and that kinds of things yeah but in Dodd-Frank which Congress passed there should you know you're supposed to put something in place and it's it's there's not it's not in place and look I'm saying this because so many people in this chamber and I feel like the feds are more obsessed with wages than they are in regards to the monopolies the corporate profiteering there hasn't been any I mean really I don't think there is a laser focus on that and it's really you know I think that feds in Congress can support Fair wages and still combat inflation if you are fair in combating egregious executive pay monopolies and corporate profiteering we don't do competition competition policy and we also don't broadly speaking regulate corporate wages 956 addresses that you should have Implement a gentleman from South Carolina Mr Norm is now recognized for five minutes thank you Miss pal appreciate you coming in um I I don't have to tell you the fact that housing so goes housing so goes the economy I'm from a state that uh from South Carolina we have people moving in the population's increasing and I can tell you housing not just single-family housing is in trouble people are finishing the what's in the pipeline it's now affected multi-family Apartments uh the high rents that they did get with inflation that's entirely calls for the most part by the policies of of this Administration with gas buying it from other countries with supply chain shortages there's no reason to start a project when you can't get supplies and that's what we're facing in the Housing Industry at all levels so any increase in interest is just another uh another dagger that's going to kill the housing industry along with commercial projects that again the pipeline's filling up but the pipeline once it leaves you're not going to have any and I'm from a state that's with people moving in one of the things that you hear I think Mr Davidson mentioned was regulations banks are complaining about over being over regulated and the costs associated with it CRA and they would bring you the left it's in a state of flux who's who's determining that and when you will you have some guidelines out that will be done by the whole Board of Governors when we vote on it and also by the OCC and the FDIC will they have any input from those who are having to pay the price of implementing cra like get any input from banks that are having a race having to navigate so I know that throughout the multi-year process there's been a tremendous amount of interaction with banks tremendous amount and Bank Bank lobby groups and and uh and also consumer groups and then um but but yeah there's been a ton of input and you know working with the industry to try to make try to achieve these statutory goals efficiently I won't say it's perfect but there's certainly been a lot of interactions are they getting input prior to implementing the requirements for CRA well the guidelines for cra yes I think there's I I'm I'm pretty sure there's been quite a bit of interaction with with the industry in terms of what you know what to do and how to do it okay now I think you've stated that you don't feel this the Federal Reserves uh policy to get into implementing climate change we're not we're not in we shouldn't be climate policy makers we do have a small role you know focused role to play principally with the larger Banks to make sure they understand and can manage their climate risks in the long run should it be mandated should what be minted climate change policies be mandated by the Federal Reserve you know I think again climate change is something that's going to affect businesses and people and regions and states and whole countries and I think that's that's got to be a job for elected people by and large I think what we're going to affect is we just want to make sure that Banks understand and can manage the risks that that they're running and these are principally longer term risks what's concerning to those of us in the business Community who have to borrow for banks uh you're convo to Federal Reserves conducting a pilot a climate scenario analysis that's being mandated not ask it's been mandated for the six banks six largest banks to participate in uh that seems to be like a pretty good when you when you have to do a scenario and mandate that they do this that's is that not Federal Reserve getting directly involved in mandating you know I think the banks actually want this they want the these six big Banks they have to face this globally and what they want is uniform approaches and guidance on how to have one set of rules they're they're already running the big six banks that we're talking to they're already running climate scenarios all the time multiple climate scenarios most of the banks are well capitalized now that could change and this is just another expense that is out there um on the cfpb the history I think you said it was 12 percent it cannot go above 12 percent uh ratio has that I mean that does not seem logical to me has it ever been below the 12 percent from your perspective you know that's someone here quoted the law and that that rang a bell for me uh so that is that is what the law says have they been below it I'd have to go back I'm happy to provide it if you could because it seems to be like that's a man it's it's um if you've got that cap businesses couldn't operate like that uh because it would be no incentive to reduce the price as long as it's automated that's thank you that's the way the law is set up right thank you for being here thank you the gentleman from Texas Miss Garcia is now recognized for five minutes thank you Mr chairman and thank you chairman Powell for being with us today uh that the end is in sight I would like to begin by highlighting an issue that has been a concern for the congressionally spending caucus and others I know that the chairman has suggested that we're going to weave in the diversity inclusion issues throughout our hearing so so here goes my concern uh there has never been a Latino Federal Reserve president uh and further only about five percent of the Federal Reserves oral Workforce identifies as Hispanic or Latino as we know over the past year or so there have been several presidential vacancies at the Federal Reserve Banks and there has still been consistent failure to appoint a Latino candidate chair Powell are you aware of this training do you agree that it's a problem that our diverse diversity inclusion numbers are in Federal Reserve board are not reflective of the Latino population yes it's something we've been focusing on all right and can we get a commitment from you that you'll work on the workforce issues internally yes well thank you so much uh and I'd like to now um follow up a little bit on some of the questions from uh representative Norman because I too have a concern about housing costs particularly as it relates to equity uh in the negative impact on minority communities I think you said in your paper uh that activity in the housing sector continues to weaken largely reflecting higher mortgage rates as he mentioned uh the rates are higher not only impacting single offendling housing but but multi-family housing and it's also become an even more and more difficult for people in my district which is 77 just 77 Latino to be able to buy their first time first home buyer you know the workforce entry level kind of housing as financing homes get harder as mortgage to find and mortgage rates rice the population of human buyers is skewing towards older wealthier and wider communities in many cases in our suburbs Equity firms are buying out the housing to talk chair Powell can you please speak about the relationship relationship between Federal Reserve interest rate hikes and housing inequity and What needs to change here well what needs to change is we need to get inflation under control so that interest rates can come back down in the meantime they're high because inflation is hurting all of your constituents not just the housing sector uh and all of everybody's constituents and um it's our job under the law to get to restore price stability and also to keep maximum employment is there anything else a Congress can be doing in this respect that would be up to Congress but you know there are lots of ways in which Congress can support people in various ways but that's that's really that's really in your hands right now I'd like I want to move on into the numbers that you mentioned uh again in your remarks in page two you mentioned that the of course we all know there's been a record historic unemployment rate is down now to 3.4 percent the lowest I believe in history and thank you Mr President for that but you also mentioned that there's 1.9 job openings for each unemployed individual I wondered if you if you could tell me how you define unemployed individual what does the unemployment unemployed individual profile look like so that has a very specific meaning uh it's it's someone who is not working but is actively seeking a job so for example if you take six months off and stop looking for a job you're no longer unemployed so that means there's a group of people who are kind of around the edges of the labor force who don't count as unemployed um and and those people are marginally attached to the labor force that kind of thing but but to be actually unemployed you've got to be looking actively for work in the statistics right so it does not include people who are perhaps disabled and cannot find accommodations in the workplace to be able to get a job unless they're looking for it if if it's the question the test is whether you're actively looking I think in the last actively looking regardless of you know age you know that's right whether or not they're it's not a value judgment it's just it's the way we assess unemployment we look at the other groups too but actual unemployment what how do you factor in the people that actually have are on an unemployment insurance sorry how do you factor in the people who are on unemployment insurance well they're unemployed they've got to be by definition we count them as unemployed or they wouldn't qualify under the state requirements right well I just want to make sure that we we clearly understand that that there's children there's people that are older people that are disabled people that can't can't find daycare there's so many other reasons why someone is unemployed yes all right thank you yield back gentleman from Wisconsin Mr style the chair of the house administration committee is recognized for five minutes chairman Powell thank you for being here with us today your your testimony today has been insightful as we look to tackle inflation the impact that it's having on families across the United States right now I want to go back to a comment that that was quoted to you as a regards to a question from Senator Kennedy yesterday regarding the impacted fiscal policy is having uh as it relates uh to inflation and the quote that was attributed to you was that it wasn't a big factor is we look at kind of a whole host of policies here on Capitol Hill from Reckless spending that we saw uh in the in the previous Congress a lack of what we just discussed individuals who are outside the labor market how do we get these folks back into the labor market whether or not we have policies uh they're discouraging folks to come back into work as we look at high energy costs and opportunity to drive lower to drive Energy prices lower by unleashing American energy how do you how do you factor in the fiscal policies or how should policy makers factor in the fiscal policies and their impact that that's also having an inflation not to get not looking for your advice on the fiscal policies because I know you want to stay out of that but how should how should lawmakers be looking at the fiscal policyness impact on inflation so let's take energy for example so remember inflation is the change in prices it's not the level as you as you well know so Energy prices have been coming down right they're they're still high but they've been coming down they're contributing negatively to headline inflation so we so when I say it's not contributing to inflation that's what I mean in addition if you look at the at aggregate spending it was you know it peaked and then it's been coming down so the fiscal impulse is actually negative at this point it's no longer the most of the inflation that we now have something like two-thirds of the contribution of inflation in core pce inflation comes from the services sector and it's not that isn't really about fiscal policy fiscal policy was important at the very beginning so was monetary policy by the way but now it's more about just inflation is is out there and you have to bring it down the record is it doesn't come down by itself unless it's driven by you know transitory factors for example uh in the good sector the supply chains have been getting better and as that's happened Goods inflation has come way down and and sometimes it's negative now that's helpful yeah no thank you is we're so so to take that one step further we're waiting on the president's budget it's over a month late but we're anticipating receiving that in the near term and as we look at interest payments on the debt and the cash flow implications that that that has not asking for what you're going to do with the next board meeting for obvious reasons but as you are in those deliberations to future board meetings a potential rate increases how does the impact of interest on the debt factor into the calculus of you and your colleagues so we don't we don't look at that we're not um you know if we started to change our monetary policy because uh because we were concerned about the level of of debt payments and things like that that's that's not something that the United States needs to do and it's not something we do do why would why would it be something the United States doesn't need to do what do you could you elaborate on that yeah we we we're going to do our job Congress has given us the job maximum employment price stability regulate the banks manage the payment system to some extent that we'll do those jobs we don't have to worry about the United States budget that is not our job and you know it's it isn't that it isn't that the debt today is unsustainable it's that the path is unsustainable so we can service our debts it's just that we're on an unsustainable path meaning that that the debt is growing faster than the economy so we we would never consider we will never look you know if if a central bank has to avoid taking actions because it's concerned about the budget that's called fiscal dominance and that's that's a thing you don't see among advanced economies and it would be something we you know we're we think we're a long way from that thanks thanks for your feedback on that point the CBO just released their report showing uh potential interest payments on the debt uh accelerating dramatically over the next decade uh showing it would be 14 of our fiscal spend uh to compare that right National Defense would be 13. Social Security is also 14. so it's in that level that's a that's a policy maker issue but your insights is that are helpful I normally I have a few seconds left and a handful of my colleagues um have commented on the ongoing review of Bank Capital standards I just want to Echo uh those concerns about what the impact would be of a significant uh Capital level uh increase could you just comment briefly about how you quantify the cost of higher Capital uh in the supposed benefits and and how you how you balance out that that risk and reward so it's it's always a balance exactly as you say we know that you know the the capital increases that I supported back in uh 12 13 14 15 16. it earlier in my time at the FED they made the bank stronger and they made them more resilient and you really want that you want a banking system that can stand up and keep doing its job in times of Crisis so but but the exact balance between that and the availability of capital and the cost of capital is is always going to be a matter of judgment thank you very much I yield back uh the general woman from Georgia Ms Williams is now recognized for five minutes thank you Mr chairman as the member of Congress representing Atlanta the city with the highest racial wealth Gap in the country I'm focused on creating an economy of inclusion an economy that works for everyone and brings the most marginalized into our economy Americans and Atlanta flourish when the economy works for everyone the Federal Reserve has a mandate of Maximum employment that is measured by analyzing various data points of economic conditions in 2020 the Federal Reserve updated its approach to fulfilling and measuring this mandate to include job growth that was broad-based and inclusive chairman Powell do you agree that broad-based and inclusive growth means job growth that helps reduce racial employment unemployment and wage disparities I think it means what it what it says we don't we don't remember we don't Target any particular uh we can't really Target a particular racial or ethnic group with that but we we like to think that that our decisions are informed by an understanding of of diverse groups across the economy well chairman Powell could you share examples of how the FED is including brought based and inclusive job growth in the maximum employment mandate sure I'd be glad to so one thing we do is we always uh it's always part of the uh the data that we look at at each meeting we always talk about it we always mention it different different uh unemployment rates and labor first participation rates and wage rates and things like that by racial ethnic gender groups and that kind of thing that's always in the data that we look at and talk about that's that's the first thing so it informs our pursuit of Maximum employment we're taking we're trying to take a broader and more inclusive understanding of what that statutory goal means thank you two weeks ago the Federal Trade Commission released data indicating that Georgians reported the most fraud and scam claims of any other state in 2022 amounting to millions of stolen money the federal reserve's website has resources to help consumers protect themselves from scams where criminals leverage the federal reserve's name including emails claiming potential victims are eligible for lottery winnings robocalls threatening arrest in exchange for money and other fishing Communications chairman Powell how does the Federal Reserve measure whether it's counter fraud Communications are reaching the most vulnerable households and communities especially those that might not be following the Federal Reserve press releases or your website or have limited access to broadband so we do when when those kind of scams happen particularly when they involve us we we go on social media to make to try to reach people and tell them that if they're contacted by someone pretending to be a social a Federal Reserve person it's that's not so we do that we also we work with our Inspector General who who works with law enforcement to make sure that law enforcement's involved so we're aware of these scams you know I think you're talking about the ones that involve people pretending to be a Federal Reserve person and get in touch with me and uh you know we'll and we'll send you some money and so we do what we can to reach out to the public on that so that is that after the fact but what what happens before said that the general public is aware that this is happening for those people who are not on social media or tracking your is there another way to get this information out to the General Public it's real that's we do what we can you know we're not we're not an institution that deals with the general public very much you know we deal with banks and we and of course our our rate hikes and and rate Cuts our monetary policy affects all Americans but um I think when when something like that happens it's a broad program it's it's a bunch of people who are perpetuating a fraud on many many people and we try to get out there quickly and try to reach people and again also alert law enforcement thank you um chairman and chairman McHenry I yield back the balance of my time that is very kind and gracious of you the first of the day we need to commend that for the record um with that we'll recognize the gentleman from Pennsylvania Mr muser for five minutes thank you very much chairman McHenry uh thank you chairman Powell for being with us chairman is the is the fed's commitment regarding ESG not to force investment Banks to renege on their fiduciary responsibilities we don't actually we don't actually uh have policies in effect in that in that space that's not that's not an assignment that we have you saw some some issuances by heads of some investment Banks not to mention any names that felt that that was the case that the Fed was asking them to you know we don't SEC fed you you stated a couple of minutes ago that that you you feel that some sort of ESG you stated that Banks want it and I'm telling you know that's that's different completely different it's it's you know regulated financial institutions that we regulate and supervise uh they're subject to the particularly the big ones are subjects so the fed the climate change issues all over the country won't ask Banks to renege on their fiduciary responsibilities the FED won't do that I you know we don't we don't regulate the investment Banks the SEC does okay so the answer is no what's the question again I'll move on uh earlier some of my colleagues and chairman McHenry uh questioned the holistic review of the capital uh Bank holdings uh this holistic view which no one has seen according to my sources uh but there are published reports that it will call for more Capital uh to be held by Banks I understand the deferral device uh chair bar but do you have any uh thing that you could add that would warrant a need for large Banks Capital increase so there isn't a proposal to evaluate or talk about yet um Vice chair bar has indicated he was going to take a look he said he thinks capital is strong and the question really is is it strong enough and I know he's been working and and they'll be there'll be a process when he does arrive at conclusions he has no authority to enact something himself it has to go through the Board of Governors also through the FDIC in the OCC okay he has nothing to do with the QT I'm sorry with the QT initiative the tightening of the money supply they're not related at all no no I would say not are you comfortable with the QT reductions which have taken place yes the balance sheet is um we we have uh the balance sheet moving down at a healthy clip and it seems to be going pretty well okay so the Biden administration's fiscal and energy policy has caused trillions in deficit spending uh as you well know very very excessive trillions uh meanwhile energy costs for the average American have from from heating oils to gasoline have increased by over 40 percent and businesses of course in the last just over the last two years so high energy obviously affects the cost for manufacturing wages uh general cost of living in almost every aspect of society wouldn't would not such fiscal and energy policy work by the administration working hand in hand with initiatives such as QT and initiatives of the FED be far more effective than the FED fighting inflation on your own well I mean we so we are the agency that has the responsibility to restore price stability and we just have to do it that's that's what that's the task we've been given under the law it's great if Congress helps it's great if the administration helps but you know we have to deliver it and we will that's our responsibility which we which we fully accept we're not risking stagflation if the fiscal policy monetary policy are working against each other you know again we we uh we don't comment on fiscal policy that's what that's for elected people uh and who uh and you know we have a job maximum employment and price stability we use our tools we try to stick we try to stay in our lane stick to our netting it's just the fear of a number of people that we're gonna have high interest rates and um higher than two percent inflation if if there's not that level of fiscal and monetary cooperation we take that as exogenous you know that's the fiscal policy will be what you and your colleagues do with you know uh and and we will We that that comes into the economy and we see it and we we just we don't have a view we don't try to comment on on on the decisions that you make and we use our tools to restore price stability no matter what happens outside of our building sure okay um Mr chairman I'll yield back thank you gentleman yields back we now recognize the ranking member of the oversight subcommunity Mr Green of Texas for five minutes thank you Mr chairman thank you Mr Powell for being with us today I greatly appreciate your work but I would like to take just a few moments to talk about how our legislative bodies have legitimized systemic racism it's been done by having a Fed that has a responsibility to produce maximum employment knowing that the two to one black white Gap wage Gap exists traditionally and also knowing that traditional actions and methodologies will not change that but yet we won't give you the authority to make recommendations or to take actions that were directly Target that it's not your fault is the legislative body's fault we perpetuate systemic racism in your Mandate of maximum employment we also perpetuated in lending because we know we know that nvidia's discrimination exists in Lending we know it exists and there are laws that will prevent and punish persons who cheat Banks you you will be prosecuted and you will be fined criminally if you cheat a bank no such law exists if you cheat a customer and we know that black people who are more qualified than whites will get less money when they get a loan and pay a higher interest rate these all things that are the case they're true so legislative bodies continue to legitimize systemic racism and the bodies have become so bold now so many of the members they're so bold now to say they're sick and tired of hearing about this they don't they don't want a discussion about racism and systemic discrimination they believed that all is well as long as all is well in the white world but many they won't see it that way Mr Powell but that's the way their actions would lead one to conclude they have positioned themselves many of these people are my friends people that I associate with talk to regularly but there comes a time when you just have to be truthful systemic racism can be eliminated it can be dealt with we know how to but we don't have the will to do it so I don't I don't fault you I don't fault you not not one syllabus until a blame would I cast your way it's the legislative body is the people who sit on this committee who won't allow laws to be passed making it a crime to deny a person alone who is qualified to get that loan people on this committee who will say they don't want to hear anymore and encourage persons who are professionals experts encourage them to push back against talk about invidious discrimination systemic racism emanates from the legislative body and you sir are in a very awkward position because I genuinely believe that you'd like to do something about it but you can't creates a sad State of Affairs I thank you for the time Mr chairman and I yield back gentlemen's time has expired and yields back the gentleman from Wisconsin Mr Fitzgerald is recognized for five minutes chairman thanks for being here today um probably get right under the wire here um I I just had one and some of my colleagues have touched on this today again that they're certainly I think we're well aware I'm well aware that there's a dynamic back in the district and across this nation there's a certain segment of adults 25 to 35 year olds many of them dual income no kids and they are completely froze out of the housing market right now either because the cost of a home at a new subdivision and any municipality is a half a million dollars or more and as a result of that it's it's not only by actions of the FED I think on the interest rates but certainly the other thing I wanted to bring up because the balance sheet at the FED has gone from 4 trillion to nine post pandemic um could the fed by no longer buying mortgage-backed Securities uh in a smaller universe of the private sector buyers who who demand a higher rate of return right is there not well another kind of built-in trigger there that mortgage rates are going to continue to go higher unrelated to what the FED does because I I think the concern is that between the Dynamics of new no new subdivisions uh 25 to 35 year olds unable to get a loan and then interest rates continuing to climb all of these factors are just we're going to lose a generation of adults here that are never going to get home ownership they're never going to benefit you know which we all know is the big wealth builder for any family so I'm just if there's anything I take away from what we heard today and the questions asked I hope that um that is something that the FED is is in tune to and is looking at closely one thing is that uh this the challenge with Supply nationally and that's zoning its people its materials and so they're you know the housing stock is constrained to some extent by just harder to find zoning anymore because you know things are so built up in so many places and those are not things that we can control in terms of our ownership of mortgage-backed securities what happens with them is they mature or they're prepaid they're pre-prepaid or prepaid and they run off on their own that's a passive uh passive sort of way to shrink the balance sheet and of course they don't they don't run off very quickly when rates are this High because people are not refinancing their mortgages because they have much lower mortgages mortgage rates so you know there's no evidence at this point that uh you know that the Market's having a hard time absorbing uh you know the supply of mortgages because in supplies in supply of new mortgages is very low it's probably right it has to be right that that uh when when we're no longer buying mortgages and we won't be we're not buying mortgages now and I hope we don't have to buy any more mortgage backs we don't play individual you know we buy mortgage-backed securities I hope we're not doing that anytime soon we only do that in in really uh severe situations that they're you know the fixed income markets are are gigantic and there's a lot of buyers out there and where there's a yield uh they'll be buyers and I think that that will I expect that'll be the case it might not that it wouldn't have some upward pressure on uh on rates for us not to be a buyer anymore but you know we weren't a buyer for a very long time we thought we'd never go back in after the global financial crisis and we we kind of had to after the pandemic financial crisis just to keep the markets working and now we've stopped again good thank you very much chair and ayuba gentleman yields back noteworthy I want to thank particular our members Mr Fitzgerald Miss Williams for their additional minutes back to the shed chair uh and in a rate environment like this time is money and that's much more valuable these days um I'd like to thank the chair for his testimony um and without objection all members we'll have five legislative days with whom which to submit additional written questions for the witness to the chair which will be forwarded to the witness for his response ask you chair Powell to please respond as promptly as you're able uh and with that the hearings adjourned thank you

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Id: u84uAdQCOMQ

Length: 176min 54sec (10614 seconds)

Published: Wed Mar 08 2023