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▶ 0:24:25committee will come to order without objection chair is authorized to declare a recess of the committee at any time this hearing is titled the Federal Reserve semiannual monetary policy report without objection all members will have five legislative days within which to submit extraneous materials to the chair for inclusion in the record I will note that at the outset that this hearing has a hard stop at 1M which we will strictly observe I'll now recognize myself for a four minutes for an
▶ 0:24:55opening statement welcome chairman pal thank you for being with with us today for the last four years inflation has crushed Americans today it takes a121 to purchase what just cost a dollar in January of 2021 as measured by the Consumer Price Index the erosion of Americans incomes and thereby their savings was caused by a combination of irresponsible fiscal policy supply chain disruptions but also by in my view the Federal Reserve
▶ 0:25:26fighting the last war staying too low for too long chairman pal you and I have discussed that previous hearings of the FED like many others assumed that the pre-pandemic error of low inflation and low interest rates would continue this belief was one of the reasons the FED changed its monetary policy framework in August 2020 only seven months before inflation began its four decade steep March upward in March of 2021 in hindsight the adoption of the so-called flexible
▶ 0:25:56average inflation targeting appears ill timed and ill-fitted for a post-pandemic world as the FED undertakes a review of its monetary policy framework you must account for the lessons of the last four years and think about what's ahead over the horizon not what has been the FED has made progress on inflation but it's the last mile seems the hardest as Bank America Economist Steven Juno said yesterday inflation is stuck above Target with risks to the upside in August
▶ 0:26:262022 with inflation r in you gave a speech that echoed some of your predecessors as chair you vowed to keep at it till we're confident the job is done it's a vow you should fulfill with this morning's confirmation that inflation is well above its the 2% Target at 3% and making move upwards other economic indicators are positive as you reported yesterday a low inflation rate solid GDP growth and financial conditions continue to support expansion
▶ 0:26:56and investment this this is not a time uh to say that there are no risks but some perhaps unseen however these risk in comparison to the risk of a Resurgence of inflation a present or modest given the already high prices due to President Biden's inflation Americans simply cannot afford further price increases at the grocery store and gas pump such a Resurgence would likely Force the FED to begin another tightening cycle making mortgages credit cards and small business loads unattainable
▶ 0:27:27for many that's why I urge the FED to forge ahead with its monetary policy duties until you're confident the mission is complete and price stability has been restored the fact is over the past decade we witnessed too many distracting additional mandates deluding the fed's core mission of price stability this is the reason we formed the task force on monetary policy treasury market resilience and economic Prosperity that will be led by chair Frank Lucas the task force purpose
▶ 0:27:57is to Ure that the monetary policy actions of the FED are put under a a magnifying glass and prioritized for this committee and I look forward to our first hearing of the task force I now want to turn to some of the other fed responsibilities Bank regulation and supervision the Fed was created by Congress to be an independent agency the intent is to insulate the federal reserve's monetary policy from political influence unfortunately in the last two and a half years of the Biden Administration the FED took on serious liberties with its
▶ 0:28:27independent in the areas of supervision in law federal Vice chair for supervision is to develop policy recommendations that then have been brought to the Board of Governors for consideration in my estimation over the years you and the board have been too deferential to the statutory Vice chairman for supervision Vice chairman Vice chair bar turned the basil 3 end-game rulemaking into a partisan attempt to propose a massive hike on Capital on American Banks making them less competitive
▶ 0:28:58the FED has a chance right now to get back on the right track and preserve its independence for the long-term benefit of the American people and with that I back chair recognizes uh uh Mr Lucas the chair of the monetary policy treasury market resilience and economic Prosperity task force for one minute thank you Mr chairman while there are differences of approach in this room a bipartisan guiding principle is that maximizing economic growth is the path to economic prosperity
▶ 0:29:28it is the single greatest factor in delivering opportunity and improving the quality of life for the folks back home the actions of the Federal Reserve and the Machinery of monetary policy play an important role in economic stability with the five-year review of the monetary policy framework underway I hope this will be an opportunity to evaluate the effectiveness of the fed's toolkit and its vast influence on the lives of every American the creation of the new monetary policy treasury market resilience and economic Prosperity task force will afford US the opportun Unity to dive
▶ 0:29:58deeper into this topic chairman pal thank you for being here there are real issues that deserve our attention and I hope today will be productive I look forward to hearing your testimony on the state of the economy where we're at and where we're headed you'll back Mr chairman gentlemen yelds back the chair recognizes Mr Vargas the ranking member of the monetary policy treasury market resilience and economic Prosperity task force for one minute thank you very much Mr chairman and thank you ranking member and thank you chairman pal both for
▶ 0:30:28your years of public service and for appearing before our committee today as a ranking member of the newly formed monetary policy treasury market resilience and economic Prosperity task force I look forward to working with chairman Lucas and the rest of my colleagues to address these important issues the research is clear independent central banks perform better in carrying out their mandates than politically motivated central banks the independence of the Federal Reserve is crucial to achievement of this dual mandate goals to Max to maintain both
▶ 0:30:59maximum employment and stable prices and although this dual mandate has been criticized by some it continues to serve Americans well it has not prevented the fed from making substantial progress on driving down inflation all the while avoiding a recession which many Saw as inevitable I look forward to your testimony chairman pal and I yield back gentan yields back I'd like to turn to the gentleman from Michigan and yield to him for a point of personal privilege Mr heising
▶ 0:31:29uh thank you chairman Hill and as we all know um all good things must come to an end and I want to take a minute to recognize someone who is leaving the committee uh but has been an integral part of the oversight work Republicans have done over the last five years uh although uh Nicole vau is all of 29 years old uh something that we tease her about on a fairly regular ba uh basis I quickly realized that despite her physical stature she was a force to be recog with uh her
▶ 0:31:59dedication to my team this committee her colleagues and this institution are something that uh we all should Aspire uh to uh to achieve and Nicole has effectively served in uh various roles from a professional staff member right out of law school to now Deputy uh general counsel in this particular Congress and her time with the committee Nicole has worked on or LED in investigations into Sam bankman freed the bank collapses of uh 2023 terrorist financing
▶ 0:32:30culture and Corruption at the FDIC and the sec's climate disclosure rule just to name a few and I've sat through her questioning and it's Fierce and tenacious and directed um myself my team and frankly the whole financial services committee team can't thank Nicole enough for her work uh and what she has done on behalf of uh this organization and like all good staffers um she has become a confidant a sounding board uh has the
▶ 0:33:00ability to say no in a very nice way but in a very tough way as well and although Nicole will be leaving the committee her contributions will not be forgotten and are deeply cherished so thank you uh Nicole we deeply appreciate all your work and I yield back Mr chairman we uh welcome your testimony chairman pal you'll be recognized for 5 minutes to go an oral
▶ 0:33:30presentation of your testimony without objection your written statement will be made part of the record you're now recognized for five minutes chairman Hill um ranking member Waters and other members of the committee I appreciate the opportunity to present the federal reserve's semiannual monetary policy report the Federal Reserve remains squarely focused on achieving our dual mandate goals of Maximum employment and price stability for the benefit of the American people the economy is strong overall
▶ 0:34:00and has made significant progress toward our goals over the past years labor market conditions have cooled from their formerly overheated State and remained solid inflation has moved much closer to our 2% longer run goal though it remains somewhat elevated we are attentive to the risks on both sides of our mandate I will review the current economic situation before turning to monetary policy recent indicators suggest that economic activity has continued
▶ 0:34:30to expand at a solid Pace GDP Rose 2 and a half% in 20 Mr chairman can we ask you to pull your mic a little closer please thank you so sure recent indicators suggest that economic activity has continued to expand at a solid Pace GDP Rose 2 and a half% in 2024 bolstered by resilient consumer spending investment in equipment and intangibles appears to have declined in the fourth quarter but was s ID for the overall following
▶ 0:35:01weakness in the middle of last year activity activity in the housing sector seems to have stabilized in the labor market conditions remained solid and appear to have stabilized payroll job gains averaged 189,000 per month over the past four months following earlier increases the unemployment rate has been steady since the middle of last year and at 4% in January remains low nominal wage growth has eased over the past year and the jobs to workers Gap has narrowed
▶ 0:35:31overall a wide set of indicators suggests that conditions in the labor market are broadly inbalance the labor market is not a source of significant inflationary pressures the strong labor market conditions in recent years have helped narrow long-standing disparities in employment and earnings across groups inflation has eased significantly over the past two years but remains somewhat elevated relative to our 2% longer run goal total pce Prices rose
▶ 0:36:012.6% over the 12 months ending in December and excluding the volle food and energy categories core pce prices Rose 2.8% longer term inflation expectations appear to remain well anchored as reflected in a broad range of surveys of households businesses and forecasters as well as measures from financial markets our monetary policy actions are Guided by our dual mandate to promote maximum employment and stable prices for the American people
▶ 0:36:31since last September the fomc lowered the policy rate by a full percentage point from its peak after having maintained the target range for the federal funds rate at 5 and a quarter to 5 a half% for 14 months that recalibration of our policy stance was appropriate in light of progress on inflation and the cooling in the labor market meanwhile we've continued to reduce our Securities Holdings with our policy stance now significant ly less restrictive than it had been and the economy remaining strong
▶ 0:37:02we do not need to be in a hurry to adjust our policy stance we know that reducing policy restraint too fast or too much could hinder progress on inflation at the same time reducing policy restraint too slowly or too little could unduly weaken economic activity and employment in considering the extent and timing of additional adjustments to the target range for the federal funds rate the fom c will assess incoming data the evolving Outlook and the balance of
▶ 0:37:33risks as the economy evolves we will adjust our policy stance in a manner that best promotes our maximum employment and price stability goals if the economy remains strong and inflation does not continue to move sustainably toward 2% we can maintain policy restraint for longer if the labor market were to weaken unexpectedly or if inflation were to fall more quickly than anticipated we can ease policy we are attentive to the risks to both sides of our dual mandate and policy is well positioned
▶ 0:38:03to deal with the risks and uncertainties that we face this year we're conducting our second periodic review of our monetary policy strategy tools and Communications the framework used to pursue our congressionally assigned goals the focus of this review is on the fomc's statement on longer run goals and monetary policy strategy which articulates the committee's approach to monetary policy and on the committee's policy Communications tools the committee's 2% longer run inflation goal will be retained
▶ 0:38:33and will not be a focus of the review our review will include Outreach and public events involving a wide range of parties including fed listens events around the country and a research conference in May we will take on board the lessons of the last five years and adapt our approach where appropriate to best serve the American people to whom we are accountable we intend to wrap up the review by late summer let me conclude by emphasizing that at the FED we'll do everything we can to achieve the Dual mandate goals Congress
▶ 0:39:03set for monetary policy we remain committed to supporting maximum employment bringing inflation sustainably to our 2% goal and keeping longer term inflation expectations well anchored our success in delivering on these goals matters to all Americans we understand that our actions affect communities families and businesses across the country everything we do is in service to our public Mission thank you and I look forward to our questions thank you Mr chairman chairman Ys back I want to recognize the ranking member of the full committee Mrs Waters from
▶ 0:39:33California for a 4minute opening statement good morning everyone a welcome chair poell to our our country is on the precipice of a economic disaster unlike anything we've seen in recent memory while Trump promised lower prices for workingclass families we're seeing the exact opposite in fact grocery prices are Rising according to the labor department eggs are up 40% more expensive than they had
▶ 0:40:03were even a year ago in my home state of California we've seen eggs as high as $9 and more for a dozen inflation is rising and it is up to 3% for the first time since June and other Staples are about to get more expensive as Trump leves new taxes on Steel and aluminum America's consumers and businesses are facing uncertainty and Chaos
▶ 0:40:34this is all because Trump and his unelected billionaire co-president Elon Musk are taking a sledgehammer to our economy and democracy in recent days they attempted to illegally kill the Consumer Financial Protection Bureau the same agency created after the financial crisis of 2008 since it's in ion cfpb has successfully fought on behalf of workingclass families against abuse to Big Banks
▶ 0:41:04and predatory lenders and not to mention returned $21 billion back to families who were sendos chair Powell you explained yesterday that with the cfpb shutdown there is no agency to supervise big Banks to ensure they follow Consumer Finance laws in the face of the these illegal cruel and Relentless attacks chair Hill it is both urgent and critical that you immediately
▶ 0:41:35convene a long overdue hearing with cfpb acting director V members of Congress and importantly the American public deserves answers as to why musk and his doge am minions are in possession of sensitive consumer information and what they are doing with it additionally Trump is simultaneously threatening import taxes on us companies that will increase the cost of groceries
▶ 0:42:06and other basic supplies for all Trump is freezing funds for housing assistance and Community Development and whittling down the federal Workforce so that his Billionaire Boys Club can suck any these workers salaries into their own Pockets this is all part of Trump's project 25 Playbook you know what else he's taken from Project 2025 chpw
▶ 0:42:36their plan to eliminate the FED we're watching this play out as Trump doubles down on his efforts to gut the independence of the FED as we have seen with demands that you drop rates immediately in fact his co-president must attack fed Independence in a tweet earlier this year chair pal I know you have been adamant about the independence of the fed and have thus far resisted pressure from Trump
▶ 0:43:06but after your decision to eliminate Dei initiatives following Trump's illegal order I'm concerned that Trump has more influence over you than you let on I speak for all of my colleagues on the Democratic side when I say that you must stand firm in defending the fast Independence reject any attempt by Elon MTH and his doge uh minion to gain access to the FED its systems and data and speak forcefully about what's at stake for our economy
▶ 0:43:37the American public must hear from you our central bank today gentoman gentoman yields back I yield myself uh five minutes for questions thank you again chairman pal for being with us let me start with h the fed's bank regulation and supervisory function as I mentioned in opening statement over the past two and a half years the outgoing Vice chair for supervision has pushed new regulations that would move the United States towards a oniz fits-all
▶ 0:44:07approach to credential regulation that disregards the Congressional mandate that's been quite clearly established for Regulators to tailor Bank regulation based on an institution size complexity and risk profile earlier this year the FED board announced that Michael bar would be stepping down from his position as Vice chair on February 28th 2025 or earlier should a successor be confirmed significantly the board also announced at that time that it does not intend to
▶ 0:44:37take up any major rule makings until a vice chair for supervision successor is confirmed I've discussed this with you I've got concerns about that you're not abdicating your supervisory response while we wait around for a vice chair for supervision do you agree that it's the Board of Governors that has the responsibility for for Bank supervision policy I do and I would also agree that we need to carry on with our Regulatory and supervisory duties we we can't take a
▶ 0:45:07holiday um and we will proceed uh with the things that we should be proceeding with you testified in the Senate uh yesterday and uh know you enjoy time with the Senators and you talked a little bit about basil 3 in game and again in my opening statement I talked about that the intent was to harmonize those rules true for the largest institutions in the world but also do that in a way that's capital neutral and many of us here in Congress on both sides of the aisle felt like Vice chairman Bar's
▶ 0:45:37approach was goal plating already high standards for American Banks you testified yesterday that you think Bank Capital levels are about right for those large institutions would you tell the committee today that it's your intent to Repose a basil 3 endgame approach just speaking on behalf of the FED only not the other supervisors and that it be uh take into account the comments and that it be generally Capital neutral we do intend to repr propose bosel 3 endgame um
▶ 0:46:08and we intend to do that just as soon as we can get together with the new leadership at the two other banking agencies and as I mentioned I I think we can do that pretty promptly once that once those people are in place I look forward to doing that my my long held view as I've said in many of these hearings is that capital in the banking system for the largest banks is is is it about right and that would be my starting point on going into these discussions but I do want to defer I do want to you know leave it for my uh upcoming you know new leadership at those
▶ 0:46:38agencies to have their own views on that I think that's important I think it needs to be coordinated and harmonize among our supervisory agencies and I do want you to take into account how basil 3 ingame proposal interacts with other pending rules whether they're on liquidity or the uh uh other things like operating risk in the companies I think that was a lot of centrality of the comments that we saw on your bar proposal turning to monetary policy looking back
▶ 0:47:08at 2020 and 2021 I was looking at all the uh principal monetary policy rules that you report in your semiannual report and had you followed any of the monetary policy rules that you track they would have had you tighten sooner uh in the cycle rather than waiting and I think that could have reflected maybe not seen us have a 40-year high in inflation using the benefit of hindsight do you think you should have
▶ 0:47:38looked at those rules more closely in the open market operations and uh tightened sooner I will say and I've said before that um hindsight suggests that it would have been good if we had tightened earlier I don't know how much difference that would have made but i' I'd be very careful with those rules those rules those rules in the middle of last year suggested that our policy rate was a couple hundred basis points too high you know so we we we we need to they're a starting point not an ending point is
▶ 0:48:08well we've had this conversation before the point is that they do offer a road map and you do mention them in writing in your monitary policy reports except for one time during the pandemic uh and I I think though that you're adding that to your reference point in your guide forward guidance and in your communic ations I think would be uh important can you tell us about the uh review of the inflation targeting and when you expect to complete that expect to complete it by the uh late in the summer
▶ 0:48:38this year uh we're just beginning it now and you know we're going to look at all the decisions that we made why we made them back in 2020 we're going to ask ourselves what's changed we're going to be open to criticism and and uh good ways of thinking about it and we'll make I think we'll make appropriate discret adjustments I thank you for for being with us today and I turn to the ranking member of the full committee Mrs waters for 5 minutes for your questions thank you very much Mr chairman uh it is no secret that President Trump
▶ 0:49:09what he wants to do that he wants to do away with the Federal Reserve alog together he said he knows interest rates much better than you do I want you to know that some of us here have been fighting uh to make sure that everybody understand the importance of of the Central Bank every country dealing with crypto their Central Bank is involved but of course Trump and the opposite side of the aisle fought us and that's one of the reasons we were not
▶ 0:49:39able to come together with a bipartisan agreement on stable coins uh you previously said that you would not resign if Trump asked you to do that do you stand by that commitment I have no no changes to that I can't hear you yes you please let the record record that adequately I appreciate that because you have a right uh to your position not to
▶ 0:50:09be interfered with by law I believe or even Constitution when mus comes knocking at the fed's door you g to let him in i u i don't have anything for you that would you like to tell us today that you won't let Doge into the the Federal Reserve I have access to the systems and the data so we don't I don't have any we've had no no contact and I I don't really have I I have nothing for you to report today on that
▶ 0:50:40well you know what happened to Treasury and you know what happened over at the cfpb and the people of this country are being violated because all of our privacy is being taken up by uh Elon Musk and Trump and we don't know what all they have on us our bank accounts uh everything that in our lives so I want to protect it in the fan Mr Powell the last time you testified before this committee you said and I quote really successful institutions in the United States
▶ 0:51:10generally are those that do a really good job on diversity and get the best out of people and attract a broad diverse range of talents to the table that is why we that is the way we feel about it and at the Fed what and that is what we've been doing and will continue to do chair pal how will you ensure that the FED continues to attract the best and most diverse employees you know we're
▶ 0:51:41institutions like ours private and public are in a a constant uh contest to hire the best talent in the country and we've all learned I think and certainly we have that we will go anywhere to find that talent and including places that we didn't go 25 years ago and we'll just continue to do that you know we're recruiting as you know at at many many many universities and colleges including historically black universities and colleges um and others U and that's that's what we find and and that's that's our practice we think that's the best way to
▶ 0:52:11go about it thank you very much and that's what I've always felt about the FED no matter what they call it you only attracted and hired the best qualified people in your operation no matter what they refer to it as what they call it whatever way they Define it is that right yes thank you very much chair pow are you willing to provide my staff with an immediate briefing from your Agency on the status of
▶ 0:52:41your Amis and equal employment offices yes thank you I believe that you know that the amwe were created with the dod Frank reforms it's in law and as I understanded any attempt to dismantle Amis would have to come before the Congress of the United States of America is that your understanding well yes section 342 of Dodd Frank which is the amwe section is uh is the law
▶ 0:53:11thank you chair pal to what extent have you consulted with other board members in determining how your agency is complying with Section 342 of dodf Frank and as well as any other Federal anti-is law I think we've consulted with um senior staff and board members uh quite bit chair pal days after his
▶ 0:53:41inauguration President Trump issued an executive order on digital assets which includes a Prohibition on Central Bank digital currencies or cbdcs the executive order ban any quote form of digital money or monetary value dominated in denominated in the National unit of account that is a direct liability of Central Bank end quote I'm concerned that this extremely broad definition could go far beyond cbdcs well thank you very much my time
▶ 0:54:11is up but I appreciate your presence here today and I appreciate your willing to stand up for Your Right General woman's time has expired but I I now yield back thank you but I do invite the chairman to respond to the general woman's question on cbdcs and writing and now we turn to the vice chair of the full committee Bill heisinger the gentleman from Michigan thank you Mr chairman and uh and chair Powell good to see you again um you had talked a little bit about your uh review
▶ 0:54:42I'm going to start there obviously a lot has changed in the last five years the pandemic inflation uh higher interest rates name a few um however I believe your your dual Mandate of Maximum employment and stable prices should remain the ultimate objective I assume you agree with that um let the record reflect slight head nod on that gu uh this committee is going to be very focused on monetary policy and with my good friend from Oklahoma Mr Lucas cheering a task force that I'm
▶ 0:55:12happy to be a part of uh we're going to be addressing some of those issues chair Hill touched on some of the rules U that have been discussed I for one I've always been uh particular to tailor rule but there's a number of rules I know you go through those at one point I suggested that we could call it the Yellen rule with chair Yellen uh that but there needed to be some sort of public Declaration of what to Benchmark against and I still feel that that is uh of some uh some importance um the
▶ 0:55:42you outlined your timeline on this uh particular review but I'm curious um do you believe that the last policy framework limited the fed's response to raising inflation something that you and I have talked about over the years no uh I'll I'll tell you why we didn't raise rates we thought the inflation was transitory I can show you um forecasts from the end of 20121 By Us by staff by the Blue Chip everybody thought it was going to be transitory that's why we didn't raise rates and I also distinctly remember uh
▶ 0:56:12a uh hearing where you and uh and secretary Yellen at the time were sitting next to each other and it looked like you visibly scooted away when I asked you both whether it was still transitory and you had for the first time ever a separate answer her answer was yes it still was transitory you gave a very fed uh Fede answer of we no longer believe the data shows that so no uh and we to kind of go to chair Hill's uh point we think
▶ 0:56:42that might have been a little late uh on that um the uh on back to the uh to the review I'm curious what sort of input are you looking for from the public and from Congress as you go into that review so from the public we do um we'll do a series of fed listens uh events which were very successful the last time and it involves us sitting down and meeting with people some of whom know a lot about what the FED does some of whom just tell you what's going on in their communities it was really uh it was a very successful part of
▶ 0:57:12our Outreach last time in terms of Congress you know we will we'll keep you informed of our progress we we welcome anything you may offer uh but you know it's it's a public we're open to the public on this it's a public review as distinct what we were doing before and so we're welcoming views from all over and not to get ahead of the chairman by I look forward to us having more conversations about that with the wor the working group I want to switch topics and focus a bit back to the bank supervision uh Michael bars stepped down from his position as Vice
▶ 0:57:42chair for supervision effective the at the end of the month uh and whether frankly president Trump fills that position is entirely up to him uh but in the absence of a vice chair for supervision you're still working I think on it I think your quote to the chairman was there's no time for a holiday um now this this Vice chair of supervision is is a Fed Governor that has frankly extraordinary powers and responsibilities and ultimately uh
▶ 0:58:13my question to you is uh does the FED really need a separate Vice chair to complete its work now I can't I got here in after the 2010 election 2011 shortly after uh Dodd Frank was passed I know this Vice chair position was created by Dodd Frank um I've just been dealing with the echo effects now for the last going on 15 years of dodf Frank do we really need to have a separate Vice chair of supervision so for many
▶ 0:58:43years as you know we did our business without a vice chair for supervision what that means is everything goes through the full board and it was effective I think it was and also it was there was less volatility um explain that why was there less volatility well because you've got a group of seven people on the board and there will be some as as appointments change there'll be there'll be some changes in the approach to regulation but putting it all in a single person admittedly just to recommend to the board can lead to it can lead to S some volatility
▶ 0:59:13in these things which which is really larger swings in polic larger swings in the kind of things and that's you know that's not great for the institutions that we want to regulate we want to have a good set of Regulation that doesn't you know doesn't swing back and forth very much the question of whether a good uh thing to have in the law is really really one for you but I will tell you we we are we will um once Vice chair bar completes his term in a few weeks we will continue on until there's a new Vice chair for supervision and we can very much get our work done or if there is one so with that Mr chairman my time has expired
▶ 0:59:43I thank the vice chairman Mr heis the yields back recognize the gentleman from California Mr Sherman four five minutes of questions chairman pal you are the only bipartisan person or thing left in Washington you were appointed by Obama uh Trump gave you a promotion Biden reappointed you and you are the only Biden appointee not to hear the words you're fired from our uh president so
▶ 1:00:13I hope we listen to what you have to say because you're the only person or that that I can identify in Washington that has support on both sides of the aisle uh Mr hazinga uh mentions the important of your dual mandate uh project 2025 calls for abolishing the Dual mandate and eliminating a mandate that you focus on uh employment if we were to give you just one mandate dealing with price stability and take away
▶ 1:00:43the Mandate on uh uh uh employment uh over the next 10 years would our GDP be uh higher or lower I wouldn't be possible for me to to me to say uh does the fact that you focus on employment as one of your tool mandates lead to lower unemployment higher employment in our country it it may do so we do balance those things um thank you to some extent that may be
▶ 1:01:14right uh chair Hill spoke about how important it is that you maintain your Independence uh I noticed that uh in light of the hiring freeze uh the FED has removed uh all its job postings I'm hoping that your personnel policy will be as independent as everything else at the FED but I'm more concerned with uh the president's statement at 7 58 this morning where he said interest rates should be lowered um he said
▶ 1:01:44it will that influence what the FED actually does I um as a practice never comment on anything the President says but I think people can um can be confident that will continue to keep our heads down do our work make our decisions based on what's happening in the economy the Outlook statements by elected officials are not among the things that cause you to act one way or the other that's correct thank you uh a he went on to say he said interest rates
▶ 1:02:14should be lowered something which would go hand inand with upcoming tariffs let's rock and roll America I certainly agree with the rock and roll America but um the Peterson Institute uh says that the policies that the president ran on will raise the CPI by between four and seven and a half points and I think the biggest element of that is the proposed tariffs uh if we have
▶ 1:02:45higher tariffs across the board say 10 to 25% would that increase the cost of living and would an increase in the CPI or related indexes of the cost cost of living lead to higher interest rates you know there there are many organizations public and private whose role is to to speculate publicly about what this might be what we're doing is we're reserving judgment until we actually know what the policies are but if we if we have a higher cost of living does that lead to higher interest rates the CPI goes up
▶ 1:03:15or CPE excuse me well if with if if inflation goes up in general forget about tariffs in general of course we will use our tools which is the interest rate to uh to bring it back down to 2% % over time okay uh yesterday you told the Senate we're going to release the stress test scenarios before we Implement them uh will you uh take a holistic look at large Bank Capital requirements uh including the risk-based capital ratios like basil 3 endgame stress testing
▶ 1:03:46uh to make sure that you don't have a contraction in the ability of credit uh to Main Street businesses yes great uh um there's a proposal in Project 2025 that we abolish Fanny and Freddy if there was no explicit or implicit um uh Federal guarantee for those who invest in mortgages would that lead to higher mortgage interest rates since you no longer be borrowing on the credit of the United States in
▶ 1:04:16other words so Fanny and Freddy would be privately funded it could lead to that I think they're privatizing Freddy and Fanny might have other virtues too though as you as been been considered many times by this committee and others might have some virtues but it would lead to higher mortgage rates it it could um the cfpb has been um put on ice but all the regulations remain in force so if you're a bank that wants to comply with those regulations there's nobody that can give you any clarification so you don't
▶ 1:04:46know and if you're a bank that doesn't want to comply the next presidential election may put into uh practice a cfpb that enforces all the regulations that the Trump Administration has tried to eliminate does that cause confusion for um you're you're you're speculating about what the situation might be I would say that um it could yeah I yield back gentleman yields back I now recognize
▶ 1:05:16myself for five minutes chair pal let's talk about the balance sheet as we've discussed several times before the consistent and massive growth of the federal debt creates long R run challenges for both the United States and Saddles future generations with an onerous burden but it also creates a challenging environment for the markets as the treasury market expands in kind as the FED engages in quantitative tightening allowing the treasuries to roll off the FED is careful to ensure that there are ample reserves for the
▶ 1:05:46balance sheet could you briefly discuss the conditions that determine the ideal level of reserves sure so um let me say that we intend to slow and we have slowed but then stop the the process of shrinking our balance sheet at a time when we think that reserves are somewhat above the level that we judge to be consistent with our ample reserves framework so what that means is um we want reserves to be ample meaning meaning we don't want them to suddenly appear to be
▶ 1:06:17short shortages of reserves so we're going to think of where those where those shortages might appear and we're going to put a buffer on top of that because nothing good happens when there aren't there's not enough liquidity so that that's our overall framework and right now we feel like we're the all the evidence suggests that reserves are still abundant which is more than Apple as you know in early 2021 the FED stated that it would invite comments on the supplemental leverage ratio uh that has not happened yet I've made the point that the growth
▶ 1:06:47of the US Treasury Market paired with a decreased willingness of banks to act as intermediaries is a major issue on the horizon when former treasury secretary Ellen was before this committee last year I asked her about the resiliency of the treasury market specifically about the wisdom of permanently modifying the SLR she said it's something that the banking regulator should consider does the FED plan to finally look at the SLR yes I believe we will I I have um
▶ 1:07:17for a long time like others been somewhat concerned about the levels of liquidity in the treasury market the amount of treasuries has grown much faster than and the intermediation capacity has grown and one obvious thing to do is to lower is to is to reduce the effective um supplemental leverage ratio the bindingness of it so that's something I do expect we will return to and uh um and work on with our with our new colleagues at the other agencies and and get done
▶ 1:07:47because I think my colleagues are aware that over the course of recent times literally we have eight times as much debt to process but only half as many May market makers the Federal Reserve is not immune to politics you like every fed Governor go through a lengthy confirmation process in the Senate and of course you're required to answer to Congress in hearings like this I can trace a major political Turning Point at the FED to the passage of Dodd Frank which greatly expanded the fed's regulation and supervision
▶ 1:08:18Authority chairman pal do you worry that the independence of the Federal Reserve monetary policy function is any way hindered by its role as a bank regulator can you do both well we can and we do and we'll continue to do that um clearly the um the the Regulatory and supervisory side is more contentious in political circles um but we will continue to carry it out as best we can and to do so in a non-political way as best we can
▶ 1:08:48and clearly that'll be a major discussion topic in the task force in my remaining time could you discuss the fed's five review of monetary policy what are the categories of issues you think that will be helpful to receive feedback on so a good part of it will be looking at the changes we made in 2020 which were made in an environment where um we had been stuck at the effective lower bound at zero for seven years and as the highest we
▶ 1:09:18got our rate really was sustainably was 1 a half% and that was the highest of any advanced economy Central Bank so the concern was that at the slightest downturn we'd be back at the zero lower bound and we'd be stuck so we were looking for ways to make up for that so then the question is U we got this inflation out of the pandemic and the events related to it are we in a different place now and I think the chances are pretty good that we that maybe that the effective lower bound is still a concern but it's not the base case anymore
▶ 1:09:48so we we need to look at that and and decide how that what what are the implications of that for our framework thank you chairman and I look forward to several more discussions on these topics and with that I yeld back the balance of my time and I recognize the gentleman from New York Mr Meeks for 5 minutes thank you Mr chairman chair pow thank you for being here today and you've indicated in past hearings that geopolitical tensions pose important risk to global economic activity
▶ 1:10:19fact around this time last year when you appeared before the committee you and I discussed the how conflicts around the world specifically the war in Ukraine had impacted the cost of things like groceries in the United States of America at that time you indicated that the war had caused commodity prices to move sharply back home does that sound correct to you I'm familiar to you yes it does
▶ 1:10:50so just to reiterate in this interconnected world that we live in would it be safe to say that economic instability in other countries has the potential to impact economic factors here in the United States sometimes yes so given that fact would it seem like a smart move for the United States government
▶ 1:11:21to remove one of our most effective strategic TOS that by mandate assist us commercial interests by supporting developing countries economic growth and building countries building country's capacity to participate in the World Trade would you agree with that it's not for me to to to be the judge or to say that
▶ 1:11:52well we do know that a number of usaid they buy a lot of their agricultural products Etc from American farmers and in fact it helps the US economy when you look at the volume of agricultural products that are being bought so that we can continue to be a part of
▶ 1:12:22the rest of the world would that be correct as far as I know yes so you know today we find ourselves facing a situation where the president and his Dodge buddy Elon Musk seem hellbent on usaid no matter the consequences even if they are dire to me the assault on this
▶ 1:12:52congressionally authorized body represents an attack on the rule of law and should outrage every member of this body every member Democrats and Republicans and and I and I know that your interest is squarely within your dual mandate and not foreign policy I sit on both committees I'm here but I'm also the ranking member on the foreign policy committee
▶ 1:13:23and so I can't sit here and pretend that what we're doing won't impact employment and economic stability right here in the United States of America weakening usaid will fuel Global crisis endanger American Security embolden other nations like China and Russia and leave us
▶ 1:13:53here in the Trump solely responsible for the Fallout so I have to take this opportunity to urge my colleagues on the other side of the aisle to also stand up for USA anytime we travel we go visit what they do we go visit the good that they do we go visit what they're and how their economies improve so that they can be part of
▶ 1:14:24the global economy so if not because people just care about the rest of the world then because we care about our country and recognize elsewhere threatens our stability right here it is extremely important in an interconnected world
▶ 1:14:54because the econ economy is interconnected around the world we cannot isolate ourselves from the rest of the world I thank you Mr chairman and I yield back the balance of my Time gentleman yields back the chair recognizes the gentleman from Texas Mr sessions for five minutes Mr chairman thank you very much chairman pal welcome we're delighted to be here and I hope that this comes uh with greetings from every single member that we appreciate and respect you taking the time even though you're expected here
▶ 1:15:25we think you show up and we admire you Mr chairman you and I both know that way back when in we assumed 21 that there was a decision made by the FED that gets close to quantitative easing and then the term tapering and we know that it was sold as a monetary stimulus to help the country and I get that there was about in my opinion $2.33 trillion doar that were taking
▶ 1:15:55out loans and chairman uh uh just spoke a minute ago about the term debt versus growth debt versus growth about this amount of money that sits out there on the debt side could you please take a minute and discuss this issue and how we should be looking at it thank you sorry Mr session are we talking about U asset purchases that we made during the
▶ 1:16:25we are we're talking about when when the FED went and sold treasuries no we bought treasuries I bought treasuries yeah we bought Treasures so you know it was a situation I'll tell you why we did it you know we we were just out of the worst part of the pandemic and we didn't know how frankly how good things were going to be how strong the economy we were very concerned Co is still raging and um it actually you know had a very strong wave right into 22 um but we
▶ 1:16:55we wanted to just we didn't want to stop buying treasuries too soon because I mean but that has a stimulative effect on the economy because we didn't want to provoke an unwanted tightening in in financial conditions at a time when we thought the economy was still vulnerable you look back in hindsight we probably could have uh have done that earlier and halted purchase earlier in any case we turned right around and started shrinking the balance sheet and we've you moved it from about 120 a month to 110 we're down now we're
▶ 1:17:25now we're we've been tapering for two years now and we're down more more than $2 trillion doll so and we're still going we're still going so that's why we did what we did um tell me what that looks like in the longer term aggregate versus with what the chairman said debt versus growth because we believe the debt remains and the growth is not equaling that ability to pay it back so what happens is um you
▶ 1:17:56we borrow money to cover the spending that Congress has done we our purchases don't affect that we're basically issuing reserves which is cash and we're reducing we're retiring treasury Securities and the effect of that is to drive down long-term rates that's the whole reason for QE what are you paying for those long-term rates Market Market rates we're paying exactly the market and what would that market be approximately uh a year ago or to now well you know the 10e we're not we're not of course we're going in the other direction
▶ 1:18:26now we're shrinking now but weying you know the 10year was was yielding a very very low yield on it was quite low during the pandemic extremely low because you know growth was slow there was a lot of demand for treasuries so we were pushing down rates to support economic activity that's that when you when you're when you can't lower your policy rate anymore and you want to do more stimulus that's really the main thing you can do was actually the forefather of that was Milton Friedman who who came up with that thought way back uh in
▶ 1:18:56the past but that's that's what we did and then as I mentioned we turned around as soon as we lifted off and started raising rates we we immediately started shrinking the balance sheet and we've we've shrunk it a lot $2 trillion do and still counting you have shrunk it$ trillion doll yes we have okay and what do you believe remains and you believe you're now stable for moving forward so I I think we have a ways to go um the actually the level of reserves which is the thing we're focused on hasn't really changed all of that has come
▶ 1:19:27out of What's called the overnight reverse repo facility I'd be happy to spend some time with you on this this stuff is very complicated and yes I've tried to find new data on it and the last I found really was a CRS report of 22 so I I uh big 12722 and so the changes that you speak of are important yeah and and so I would would appreciate that time be happy to do that I great I want to
▶ 1:19:57thank you for being here the confidence that this that the American people have that we will turn not just the economics of their lives but of the country is very important and I today spoke about the country and I want to thank you for your service and time Mr chairman I yield back gentleman yields back the chair now recognizes the gentleman from Georgia Mr Scott for five minutes thank you very much chairman and welcome chair pal
▶ 1:20:27prow I'm worried about these terorists and uh I want you to kind of share with us your thoughts on these tffs I'm worried about I think the president is wrong here tariffs can cause a terrible situation to the economy I'm concerned about the inflationary impact on tariffs
▶ 1:20:58and where cost increases from the Tariff there's a cost to these tariffs and we need not move into this blindly and some of these costs will be absorbed by business companies but there are other costs that will be borne by the American consumers we don't even understand this and yet
▶ 1:21:28you have the president just using these chairs as a means of fight or like a war and this is going to do it everybody is not going to be Mexico or Canada and while we got a little time I want your thoughts on the dangers of these tears uh the stock market is anticipating rate Cuts what will these tariffs do about
▶ 1:21:58that does the FED see financial markets stability as a factor in this decisionmaking process when considering the rate cuts and here is specifically what I want you to get to in light of the president and politely I will say his ill crafted ter strategy do you foresee future rate
▶ 1:22:28Cuts as a result of inflationary issues or due to a weaker labor market and what do you consider to be promising inflation data that's our big fight and these chairs are going to just add to inflation like a rocket ship thoughts so um and and share
▶ 1:22:59with us give us your opinion of the danger of these there's a cost here tell us what you think about this the uh the president has certain authorities over tariffs Congress has authorities over tariffs uh the Commerce department is involved in some ways but the FED has no role in uh in setting tariffs and you know we don't comment on decisions made by those who do have that Authority we try to stick to our own knitting in this particular case um
▶ 1:23:29we're it's it's possible that um the economy would evolve in ways that because of tariffs or partly because of tariffs that we would need to do something with our our our policy rate but we can't know what that is until we actually know what policies are enacted and remember it's not just tariffs there are significant changes to immigration policy fiscal policy and also regulatory policy you put all four of those and all four of those were things that the president was elected to do U we
▶ 1:23:59we will then try to make an intelligent judgment about the overall effect on the economy of those and and conduct our policy accordingly but we're it's not it's not our role in any way to comment on the wisdom of the policies that are enacted by by Congress or by by the administration well well well he have an effect on whether whether or not you will resume uh your uh
▶ 1:24:29plan to H uh cut the interest rates this year or continue to hold so we'll we'll make our decisions as we go about about what to do with interest rates based on you know the data that we see the Outlook the evolving Outlook and the and the balance of risks and you know we'll we'll be considering all of those things it we won't be focusing on any particular policy and and I can't tell you you know what we'll
▶ 1:25:00be doing because it will really depend this it's fairly uncertain environment right now yeah the underland economy is very strong but uh but there's some uncertainty out there about new policies we're just going to have to wait and see uh what what the effects of those policies are before we before we think about what we can do well all I want to say uh God bless you I know your strength we've worked together over the years on many things and this nation is grateful that we have you
▶ 1:25:30your wisdom and intellect at this time I agree but the gentleman's time has expired gentle chair now recognized as the gentle lady from mour Miss Wagner uh I thank the chair and it's good to see you again chairman Powell chair Powell under the Biden Administration American families were hit with a huge stealth tax from as we've spoken about inflation that drove up grocery prices and led to high rates on things like mortgages
▶ 1:26:00and car loans 2021 the average Missouri household is paying about $1,100 more per month due to inflation to put that number into perspective the media and family income in Missouri is $69,000 these families have had to spend dollars more of their annual income on the exact same
▶ 1:26:31Goods What specifically is the federal reserve's plan for making life easier for everyday Americans so the best thing we can do for for Americans is to um vigorously pursue uh both stable prices and maximum employment that's we're we're trying to get back to a long expansion where price price prices are stable around 2% seem to be there on labor as you've pointed out so tell me what else sorry you seem to be there on labor so what else you know I would
▶ 1:27:01say uh we're we're close but not there on inflation and you did see today's inflation print which which says the same thing I mean we're we've had made great progress toward 2% last year inflation was 2.6% so great progress but we're not quite there yet so we want to keep policy restrictive for now so that we can see we're definitely not there for 30-year mortgage is you know upwards of 7% uh chair pal so let me switch topics I continue to believe that the as
▶ 1:27:31we spoken about and as was brought up up prior prior uh uh uh colleagues here that the Federal Banking agencies including the Federal Reserve should scrap the flawed bosel 3 endgame proposal and start over um you talked a little bit about how you plan to perhaps do that and uh and a timeline potentially but how will the public chair Powell be able to provide comments on any revised proposal as required by the administration
▶ 1:28:02administrative procedures act so I I fully expect and I think it's a good idea for us for the United States to finish bosel 3 in a way that's you know in keeping with basil and and also with what other jurisdictions are doing comparable jurisdictions the key there is end game this is been going on for two decades where's the end already right so um you know we we'll put all of that out for comment again and welcome the comments of for all commenters that that's I make sure we're following the administrative procedure act yes
▶ 1:28:32as you as you move forward we will we will PAL I understand you are interested in making the stress test scenarios that assess how a bank will perform through a crisis more transparent as things stand now while the FED may make some information public it doesn't show its math uh which makes it difficult to assess the robust and analytical rigor of the stress test recently the Federal Reserve announced that due to the quote evolving
▶ 1:29:03legal landscape it would begin to take public comment on its stress test models and annual scenarios can you describe how describe the changes in the legal landscape that have caused the Federal Reserve to suddenly seek public comment on its stress test regime and why it did not seek public comment from the beginning um so we we're an agency that's strongly committed to following the law as written by
▶ 1:29:33Congress and as interpreted by the Supreme Court in the past few years we've seen a string of administrative law cases from the Supreme Court which are uh dealing with different issues but there's a common theme and that is significantly less difference to the views of agencies as as compared to those of Courts also just a a raised expectations for compliance with the administrative procedures act we take that very much to heart and that's this is one of the things that we're doing because of that and
▶ 1:30:03we we feel the you can look at things like Chevron de Defence you can look at at the EPA ruling by the courts and they returning the power back to the people and the congress not the administrative State uh not those agencies of rul makers so those because of those things you know we are we are putting as you went through it we're putting the the models and the uh and everything else out for comment and taking similar steps well I'm glad to see that I understand the FED intends to complete a comprehensive review of its monetary policy strategy
▶ 1:30:33tools and Communications practices you mentioned that what is the timeline we expect to complete our work and announce the results uh by the uh by the end of the summer end of the summer thank you are you back gentle lady y back the chair recognized the gentle from Massachusetts Mr Lynch for five minutes thank you Mr chairman welcome chair poell good to see you uh thank thank you for your good work chairman Powell the the Senate uh just filed a a bill uh called the
▶ 1:31:03Genius act I'm always worried about anything that comes over from the Senate with the title genius in it um but it is a it is a an attempt to provide a regulatory framework for cryptocurrency and in that proposal which is similar in some respects to the house proposal uh it would allow individual states to oversee issuers um and there would be no Central Federal Authority
▶ 1:31:34the idea is to to disperse the responsibility from state to state um my my concern my overriding concern is that uh that with that spread of and expansion of crypto and the president is 100% behind it he just started his own coin he's making making a lot of money off of that uh which is another issue um my concern is that the spread of and expansion of
▶ 1:32:04crypto will infect the traditional banking system because it's it's a volatile speculative asset and uh we we've seen some very sudden disasters with crypto I'm just wondering are there any back stops that we can use any fire walls that we can put in place that might insulate the traditional banking system you know because they have access to the discount window and the FDIC
▶ 1:32:35insured so there may be you know second order impacts if we have a collapse of a major crypto issuer are there any any extra things that we can do uh to protect the traditional banking system yes so um first I would say um there really two things that are happening one is banks are serving crypto customers and we don't want to get in the way of banks serving perfectly legal customers as long as they understand the risks
▶ 1:33:05and that sort of thing we don't want to single out any particular you speaking to custody well custody is more the second thing is undertaking activities on their own right and in that case I I do think it's appropriate to uh to to you know as usual as Bank supervisors make sure that that that we understand and Banks understand the risks that are involved in the activity that they're taking inside an insured depository on the other hand you don't want to go too far you know I think there were a bunch of disasters
▶ 1:33:35as we all remember and you know we don't want to and we were reacting to some extent to those you don't want to go so far as to you know overplay your hand on that so I think we need to be mindful that many of these activities can very well be done inside of Banks and custody May well be one of them in fact in fed regulated Banks there are lots of crypto activities happening now they've just happened under a framework where we made sure that the bank understood and we understood exactly what they're doing right we also have
▶ 1:34:05the example of uh you know Silicon Valley Bank and Signature Bank First Republic Bank uh one of the one of the triggering events there I mean obviously the risk management was very poor in that that respect and and uh uh they got on the wrong side of interest rates but there were also some failures of issuers who had huge deposits at uh at Silicon Valley I believe or or signature maybe both of them
▶ 1:34:36and uh the suddenness of their collapse uh caused you know a run for the the exits and and luckily with with a scramble uh we were able to sort of save save that situation so it didn't it didn't create a greater contagion but are there are there steps that we can take that might um strengthen our ability to respond to
▶ 1:35:06that type of of of collapse as well yes so in in the wake of Silicon Valley Bank we did um work with many many um medium and and sized banks that had any of the characteristics that we saw and you mentioned you know a long position in in in long-term Securities that was underwater along with a very unstable deposit base made up mostly of of uninsured deposits and in the case of Silicon Valley Bank it was a lot of
▶ 1:35:36of um similar private equity and venture capital and hedge fund um companies where they were they all just pulled their money out at the same time so it was a bank run which and Bank runs are very distructive whenever they happen so we we looked for that pattern we worked with companies too who had that any asp expected that pattern and you know we were successful I think in in not having that crisis spread very broadly and that that was that was a good thing looking forward though we need to we need to not forget that lesson and and make sure that that funding
▶ 1:36:06bases are are stable and that we're focused on the basics of of banking which is credit risk interest rate risk liquidity risk gentleman's time expired thank you I yield back gentleman yields back chair recognize a gentleman from Kentucky Mr bar for five minutes chairman pal let me ask you a quick monetary policy question and then turn to bank regulation and and treasury market structure uh I know hindsight is 2020 but it's important to learn from mistakes as you as you know and and you've conceded that the FED miscalculated on
▶ 1:36:36inflation and mischaracterized inflation as transitory in 2021 2022 time period uh given that inflation remains stuck above the fed's 2% Target will you commit to scrapping the flexible average inflation targeting framework and and if not uh why wouldn't you commit to returning just to a simple Target so we're you know we're just in we're just beginning the review it'll be done as I mentioned by the end of the summer and that's the exact
▶ 1:37:06question We'll be asking I I can't I can't commit to a particular outcome I need to respect the the process and the views of the other 18 participants on the fomc yeah I appreciate that and I just hope that in that process that you and your colleagues uh recognize that that framework allow Ed Rising inflation to persist and allowed the FED to mislabel it as transitory let me turn to bank regulation um in October of last year I led a bipartisan codell to bosel Switzerland met with the Basel committee
▶ 1:37:37on Bank supervision uh and there uh the committee actually conceded to us agreed with me uh that um the Michael bar proposal of July 2023 actually goldplated Bank Capital requirements and and instead of actually oting uh International Harmon harmonization actually made American Banks less competitive they conceded that to us so I applaud the FED for not moving forward on that July 2023 proposal that would have made it harder for
▶ 1:38:07large Banks uh to among other things fail facilitate the smooth functioning of of the US Treasury Market including holding treasuries on the balance sheet uh couple questions one is should the goal of our bank Capital uh rules should it be regulatory harmonization uh internationally or should it be American economic competitiveness I mean clearly the goal is to have a strong banking system that supports
▶ 1:38:37American economic activity and growth that's the ultimate goal what you get from Basel is a a global floor so that the other Banks can't can't run on less capital and and sort of have a short-term advantage that that's that was the whole point of Basel was to get everybody to the same kind of level so that it wouldn't be the race to the bottom and I see that utility but I think the goal of our regulatory system should be America First and it should be about American economic growth and competitiveness but let's let's talk about um the treasury market
▶ 1:39:07issues um obviously we're issuing a ton of debt right now in fact according to Black Rock we're issuing $573 billion dollar of Treasury bonds every week to put that in perspective the entire national debt of Australia is 573 billion so we're issuing Australia every week in this country if you want to think of it that way would reducing excessive capital and liquidity requirements on US Banks for intermedi US intermediating US Treasury Market take the heat
▶ 1:39:38off of us Capital markets and increase treasury market liquidity and stability I'm I strongly think it would help well I think that's especially uh an important comment um on your in terms of your regulatory uh approach because as you uh maturing Bonds were being financed at an average of near zero during covid and now uh they're about double the cost of the average of about three and three and a half percent so now is not the time to make it more difficult for banks to hold treasuries let me just drill
▶ 1:40:08down uh with a little bit more detail on this treasury market structure issue do you agree that the supplemental supplementary leverage ratio uh and the enhanced supplemental leverage ratio the eslr are problematic as they create a disincentive for banks especially large Banks broker dealer Affiliates to serve as intermediators in the primary secondary and repo markets for US Treasury Securities I do and so you would commit to reviewing the SLR
▶ 1:40:39framework to create greater capacity for our banks to provide liquidity in the treasury market I think it's time to move on the eslr and you know we proposed doing so several years ago we just didn't fall through on it so I do think it's time well thank thank you for that and finally yesterday during your appearance in front of the Senate Banking Committee Senator Warren asked you about the future of the of consumer protection laws if the cfpb is abolished uh isn't it true chairman po that prior to dodf Frank consumer
▶ 1:41:09protection laws were implemented by financial institutions primary Prudential Regulators yes and so uh if if there were a decision by the Congress and Doge or whatever to repeal the fpb we could return the Consumer Protection Law Enforcement function to other Financial Regulators you you could yes thank you I yield back gentleman yields back the chair now recognizes the gentleman from Texas Mr Green for five minutes thank you Mr chairman
▶ 1:41:40I thank the ranking member as well and U would like to associate myself with the comments of the ranking member and Mr Powell I would like to compliment you for standing up to the president for literally preserving the independence of the FED uh it was one of those pivotal moments in time it would have been more than your simply resigning it would have been the president taking control of the FED
▶ 1:42:10with one of his Pluto puppets Mr Powell I'd like to speak to you now about the process of collecting tariffs when the Tariff is collected it at what point does that actually happen if we impose a tariff product is coming into the country where is that tariff collected great question um I'm not I'm not an expert on that I'm going to say the Customs Bureau collects it but I stand I
▶ 1:42:41I stand to be corrected by anyone who I I believe you're correct that's what my research reveals permit me to extend this when it is collected it goes into a coffer I believe we call that Coffer the general fund is this correct right I I don't know actually it does the Tariff goes into the general fund a tariff is another way of saying tax I believe for many people
▶ 1:43:11is that a statement it it is sometimes characterized as a tax so if the president imposes a tariff which is a tax and the tax is collect elected by some entity before it actually on the product before it gets into the country then the president is putting tax dollars into a general fund such that they may at some point and these dollars by the way are coming from the consumer
▶ 1:43:42at some point they may be used to cover some of appropriations of this very house that the president has enormous control over so in a sense what the president can do is Aid with the payment of what he would call uh a tax break
▶ 1:44:12but Aid with putting dollars in the pockets of his billionaire buddies that he collects on the Tariff that the people in this country ultimately have to cover uh I think that the president while he seems to always avoid the question of how the tariffs are going to dispersed he knows that he can at some point use that money
▶ 1:44:43to help pay the taxes that he plans to return to his billionaire buddies I think that's a very Sinister way of doing business to require the consumer to fund tax breaks uh I think this President knows what he's doing I think he he believes that the very wealthy need more to do more and that the poor can do more with less uh I don't agree with it and I will do all that I can to
▶ 1:45:13prevent it I yield back the balance of my Time gentleman yields back the balance of his time the chair recognizes gentleman from Texas Mr Williams for five minutes thank you Mr chairman and over here Mr pal thank you good to see you how are you all right the Federal Reserve recently withdrew from the network for Greening the financial system stating this work had extended beyond the FED statut statutory mandate well I agree with this decision I still have concerns with how previous fed policies may have discouraged lending to traditional energy sectors like oil
▶ 1:45:43and gas and it should not be the role of the government and the Federal Reserve to be in the business of picking winners and losers so my question is can you clarify whether the FED will ensure that financial institutions are not pressured to making lending decisions based on political or climate considerations rather than sound Financial Risk analysis I confirm that is not our policy that would be inappropriate and um absolutely not something we should be doing okay thank you the bosil uh committee on banking supervision
▶ 1:46:13intended for the bosel 3 endgame proposal changes to be implemented in a capital neutral manner to ensure a Level Playing Field for US Banks following this intent the previous Federal Reserve Vice chair for supervision initiated implementation efforts with capital neutrality in mind however his successor politicized the process imposing harsher requirements that exceeded BC BS recommendations and this approach not only made the proposal more difficult for banks and their customers but also weakened US Banks Global competitiveness
▶ 1:46:43ultimately he took his eye off the ball and went in the wrong direction so Mr chairman will the Federal Reserve commit to conducting a more thorough economic impact analysis before finalizing any Capital requirements to ensure that they do not hinder economic yes regulatory overreach disproportionately impacts community and Regional Banks which do not posee systematic or system risk for yet yet they face many of the same capital and compliance requirements as the largest institutions
▶ 1:47:14so many of these Banks serve as lifelines for small businesses rural communities and the firsttime home buyers and it's key for the Federal Reserve to protect these instit and ensure that they are not subject to one- siiz fits all regulations so Mr chairman what steps is the Federal Reserve taking to ensure that new regulations do not force consolidation in the banking industry therefore make it a little harder for smaller institutions to compete so like everybody else we see the consolidation that's happened really over the last 30 40 years and
▶ 1:47:44Community Banks going out of business and and just uh fewer and fewer Banks and we know that may be happening due to technology and VAR various things but we we and also just people moving to cities uh and away from rural areas but we don't want to be we don't want our regulation to in any way Foster that so we try hard uh and can I try as hard as we can to make sure that we we're not letting the the heavier regulation that we apply to the to the GBS and even to the Regionals slip
▶ 1:48:14down to smaller institutions that are serving their community and generally doing a good job at that and we we try hard to do that this is this is tail ing it's very much of a basic value that we have and it's also what we're instructed to do under the law and um I won't say we're perfect but we do keep this in mind I'd like to say thank you for being here good to see you and with that I yield my time back Mr chairman gentleman yields back the balance's time the chair turns the gentleman from Missour Mr Cleaver for five minutes thank you Mr chairman thanks
▶ 1:48:45uh to our uh very uh capable and courageous uh member uh Mr chairman thank you for for being here today um as you know my my words the CFB has been disemboweled uh over the last 10 days or so um which probably people you know
▶ 1:49:15it may not be much concerned here on the hill uh in certain quarters but uh there are two two things that I want to ask about you know rules over at cfpb must be from time to time updated uh right now there is no system for updating uh any of the rules um and one of the uh other issues uh is that
▶ 1:49:49um is there a regulatory Gap are there gaps uh that you can see clearly that people can feel uh because there is essentially no cfpb for the first time since the the end of the Great so it I I don't think we know where this comes to rest you may have seen last night that the administration nominated somebody to be the permanent
▶ 1:50:19head of the cfbb so I don't know what I'm not sure what the what the end intention is here but if you if you assume that it goes away then yeah there would be a gap there wouldn't be anyone any federal agency that that can examine Banks above 10 billion whether they're State member banks or State non-member Banks or or National Banks that would be the case but I I don't I'm not sure we know how I'm not sure we know what the end game really is here in terms of regulatory um
▶ 1:50:50gaps that that that that are created when the when the agency was essentially shut down now I'm assuming that there's been somebody appointed uh to complete the murder uh of the cfpb uh and and so if I'm correct uh that means that there are some regul there must there have to be or either reg or they've been tricking us all these years that uh that
▶ 1:51:20they were not doing any regulations but but uh that's that's my my uh uh political position um I I was very proud in my community to get the Hispanic chamber and the black Chambers to come together we got a building they're they're functioning uh big celebration all across uh my congressional district in Missouri um and then about two weeks ago uh I started getting these phone calls as I
▶ 1:51:50think many of us on both sides of I received um about 64% of of small businesses have invoices uh unpaid for more than than 60 days and the FED now the the fed's uh uh you know real time payment system allows individuals and uh and small businesses to send and receive money instantly uh which is a step in the right direction Mr
▶ 1:52:20chairman uh so so uh what is the status of the FED now adoption for institutions so it's coming along um as as was the case with a back in the day uh it takes quite a while there's investment that has to take place on the part of Banks and so we're working with you know a lot of small and medium-sized Banks to get them comfortable with the requirements of uh of fed now so that this can build
▶ 1:52:50up over time it's you know it's something that we expected to be slow in terms of uptake and it has been a bit slow well is is technology adoption a barrier for smaller Community Banks and uh Mission based lenders yes it is and and so you know we we work with um there there are non-bank service providers that that do reach out and do a good job with smaller institutions and we encourage that those institutions
▶ 1:53:21can't actually have direct access access but their business is to they have they have the information and they they can go to smaller institutions and show them how to do this and that there's a lot of that going on so we encourage that thank you let me just say uh I've been here on this committee for 20 years and I've seen uh chairman Republicans and Democrats and whether they a Republican or a Democrat they need to be independent thank you Mr chairman gentleman's time is expired gentlemen yields back the chair recognizes gentl from Ohio Mr Davidson
▶ 1:53:51for five minutes uh thank you thanks for joining us today chairman pal uh first I want to reflect on our hearing on February 24th here in this same room uh frankly via Zoom for a lot of people because it was in the height of Co and during my five minutes you felt confident that inflation being at 1.4% would stay under control uh and it wouldn't be an issue despite the very large increase in the supply of money we talked about M2
▶ 1:54:22in a subsequent meeting uh frankly my office we discussed Milton Friedman's quantity theory of money in depth and you believe that it was no longer relevant that inflation would not hit consumers we debated asset prices during the hearing and you claimed that the Federal Reserve massive purchases of treasuries did not distort the market lastly during the B Administration you were actively calling for more fiscal stimulus at times
▶ 1:54:52and at some point along the way more dollars chasing fewer Goods seems to have actually resulted in higher prices uh all of these things inflated money supply inflated asset prices inflated consumer prices happened on your watch in light of the actual outcomes have your views changed well I think we uh I think we've learned a lot but maybe not the lessons you think but
▶ 1:55:22but I do I do think we've learned a lot from the situation um we and essentially all of mainstream macroeconomics thought the thought that this would be transitory U and it and what that meant was it would go away fairly quickly as the supply site healed and as demand came down and it didn't it took it actually did go away and substantially for those reasons but it took years to to that point you you felt like in the fall that it was going away and things were going going to under control
▶ 1:55:53and you had achieved your soft Landing but the market pretty quickly spoke I mean frankly rates went up over 100 basis points where you guys were going down and now in today's reports we see that inflation is actually trending up quite a bit from where it was in the fall so again would you in light of the facts would you reassess what you're doing um with the central planning you're right that uh long-term rates went up but they did not go up because of expectations of higher inflation there's no evidence
▶ 1:56:23of that it's actually different things it's not about inflation well it look at look at markets markets are pricing in break evens I'll show you the I'll show you the the markets the markets don't believe there's increased risk with massive uh fiscal spending in the market and they're not demanding a higher premium because there's more risk more risk yes but not more risk of it's it's not it's not mainly about and when when you see asset price inflation and rate inflation doesn't that result in Consumer Price inflation it's it's not it's not a question of
▶ 1:56:53that you're you're saying that the rate increases at the long end are caused by expectations of higher inflation they certainly influence infl true and if they don't influence the inflation why do you guys try to steer inflation by controlling the rates I mean the reality is you've got pressure including from the president to lower rates are you are you going to be able to get lower inflation with lower rates I I think our policy is in a good place I think inflation has come down from high levels to 2.6% last year my colleagues and I
▶ 1:57:23are are holding where we are awaiting further evidence of inflation com a lot of the data that you guys are looking at lagged just like when you said it was 1.4% and everything's fine I think a lot of people said it's not fine you got to go out and talk to regular people and constituents in Southwest Ohio just like all over the country aren't saying they're fine and they might go that the rate of increas has slowed down a bit but they know that the prices aren't going down they're still getting hit pretty hard and meanwhile you guys still continue some of these policies like your paying Banks still
▶ 1:57:53not to put their Capital At Risk in the market interest on excess reserves going back prior to the 0809 financial crisis you didn't even pay banks for reserves now you're paying them for an unlimited amount of reserves that they want to hold on on on it to what extent is that distorting the market by pulling Capital out of the market none not at all you're you're right though people are unhappy about the price level you know and and that's what we need is several years of real wages moving up higher than inflation okay so if there they're having no impact at all why is the Fed
▶ 1:58:24paying the interest what is what is the rationale for the policy is it monetary policy or is it regulatory policy because as chairman bar pointed out uh you guys are effectively gold plating the standards and us is actually holding way more reserves than we're required to and part of that is iear so what's your question if it if it if it's if it's not distorting the market and what's the purpose for doing it what what if it has no impact
▶ 1:58:54on the market why are you doing it it's the way it's the way we uh control it's the way we exercise interest rate control in the market I didn't say it doesn't it has an impact and and so I will have questions for the record and I yeld back gentlemen yelds back the chair recognizes gentle lady from Ohio Miss batty for five minutes uh good morning chairman uh pal and thank you for being here uh I want to thank you for your leadership at the FED over the last seven years which I've had the pleasure of being here that entire time under
▶ 1:59:24both uh Republican and Democratic presidents through an unprecedented pandemic and certainly an uncertain economy your apolitical guidance is a testimony to the historic Independence of the Federal Reserve which is absolutely essential for you to carry out your mandate keep prices stable and Achieve maximum unemployment over the last few years inflation as we all have witnessed has come down from a high of 9.1% in 2022
▶ 1:59:55to about 2.8% during your tenure under President Biden we saw the unemployment rate drop to a staggering 3.4% in 20123 its lowest rate that we've seen in some 55 years and now it sits at around 4.1% which is still low by historic standards although the economy has a way to go and American families as we've heard throughout today are
▶ 2:00:25still struggling to pay for expensive groceries and gas and the list goes on it is truly remarkable what the FED has managed to achieve over the last few years chairman pal while I have sat on this committee you and I have frequently discussed the importance of representation at the Federal Reserve and the benefits of recruiting the best and the brightest that this country has to offer by broadening the talent pool the FED has been a great partner to this
▶ 2:00:55committee on this issue which as everyone knows has been very personal to me however the White House recently attacked on these very basic concepts are incredibly concerning to me as many of my Democratic colleagues so I'm just going to ask you a few uh questions and you may answer them for the sake of time yes or no will the FED continue to follow existing law as passed by Congress that requires all financial institutions
▶ 2:01:25reform recovery and enforcement agencies to maintain offices dedicated to recruiting from a broad Talent base and fostering an inclusive workplace yes or no yes uh I am pleased to hear as uh my ranking member uh mentioned uh amwe and also uh talked about implementing it under uh dodf Frank Section 3 4 uh2 uh but I also am pleased to see
▶ 2:01:55that the FED recruits from Ohio schools and I'm from that great State uh of Ohio institutions like the Ohio State University or casy Western Reserve uh University Dennison University Kenyan University in Oberlin do you agree that hiring the best in the brightest whether it's an economist whether it's an analyst a lawyer a researcher or I it professionals that this country has to offer
▶ 2:02:26means that you don't have to recruit just from IV League schools but you can find these individuals whether it's an HBCU or it's also a state school have you found success in recruiting from those uh universities yes we have thank you do you agree that these recruitment programs at their core do in fact prioritize Merit and skill and simply expand the pool of candidates being considerate yes
▶ 2:02:56do you agree that the Federal Reserve has directly and concretely benefited from initiatives to attract hire and retain a highly skilled and diverse uh Workforce I do as I mentioned uh at the top the United States economy has come a long way since the pandemic and Peak inflation but hardworking families still are struggling last night I was in a store night before last eggs here in Washington DC
▶ 2:03:28$14.99 so I am concerned about how recent policies from the executive branch would impact the fed's Dual mandate we're seeing reports of of course uh from the Department of government efficiency's attempt to conduct massive layoffs do these policies whether you agree with them or not affect the labor market unemployment in the United States economy and how does the FED plan to achieve maximum employment during these uh circumstances
▶ 2:03:58we have a we have I want to say 170 million people in the labor force so these are you know these are they would affect the numbers technically but it's a it's not clear that it would be material okay uh thank you and my time is up a bat and thank you again for being here the Gent woman yields back the gentleman from Georgia Mr loudermill recognized for five minutes well thank you Mr chairman and chairman pal thank you for being here um before I ask my questions I want to
▶ 2:04:28spend just a moment on data privacy I find it very ironic that my colleagues on the other side of the aisle and uh the ranking member and her remarks take a sudden interest in uh data privacy and especially information regarding uh individuals transactions uh when in the the IRA bill they worked very hard to force Banks to report the financial transactions of individuals at $600 um however data privacy is something
▶ 2:04:59that I have been very serious about since I've been here I've been fighting the Securities Exchange Commission with their uh unconstitutional acquisition of pii from Individual investors uh we're attempting to reform the uh and modernize the bank secrecy act to limit the amount of information taken from individuals and uh you know they often turn to Blind Eye to the abuses by the cfpb but it's encouraging to know that they're finally interested in uh in some level of data
▶ 2:05:29privacy I bring that up because there's something about data and data security I want to ask you about um the US Department of Justice announced that it was Prosecuting a senior federal reserve official for economic Espionage and this just came out in the the past few days uh this economist who apparently had access to sensitive monetary policy documents allegedly provided non-public information to representatives of the Chinese Communist party and I know you're limited in what you can share about this
▶ 2:05:59case in a public setting but to say that I'm concerned would be uh as others be an understatement um and in what you can share with us if you will please answer a few of these questions um do you know what kinds of sensitive non-public information would this individual have access to in his role at the Federal Reserve I him personally no I don't I mean I honestly I really don't know the facts of the case and I can't I couldn't comment
▶ 2:06:29but okay um just assuming certain types of information from the role he's he's in is there any idea if if information was provided to the CCP what advantages would that give them without knowing what it is I I can tell you what staffers generally get which is kind of the economic analysis that we do in advance of an fomc meeting and you know in in modern
▶ 2:06:59Central Banking we try to be as transparent as possible so I I don't want to sound like I'm dismissing this case which we take very very seriously just as just as you do but I um we really the truth is the what we what we have that is secret is knowledge of what we're going to do in the future and in monitored Central Banking the whole idea is to be transparent about what you're going to do so nonetheless this is a we take this case very seriously so to your question yeah and I appreciate it and this is not adversarial at all I'm really just
▶ 2:07:30trying to get to um what possibly the Chinese could have done and if they've done anything with it of course if you're unaware of the type of information to access to you couldn't answer that question but does the Federal Reserve have an Insider threat program designed to combat this kind of Espionage so we have very very strict U information handl requirements we do background checks on every Federal Reserve employee uh we start those before they start working there we do everything we can
▶ 2:08:01uh on this but obviously U certain things do uh do happen and people slip through the crack do you see that there is does this open the door for a a more strategic analysis of the Federal Reserve and how to protect uh critical uh ecomic information yeah I I do think that you know once we see this unfold a little bit and know what the facts are I think we'll absolutely look and make sure that our controls
▶ 2:08:31and that and that employees understand the consequences of this and I I think they do but you know with a few thousand employees there's going to be one sometimes that breaks the rules and I again I can't comment on this case but and understand it's sensitive but as things move forward I'd ask if you could at some point share with me in this committee more information so we can work with you to make sure that um our nation's uh policies are kept just to those and more so kept away from our our adversaries and
▶ 2:09:01with that Mr glad to do that gentleman y's back gentlemen from California Mr Vargas ranking member on our monetary policy task force recognize for five minutes uh thank you very much Mr chairman uh chairman pal thank you I don't want to insult you in any way but I hear you're a dead head I'll Le up to that so I assume that with a few words often times you could uh you would know one of the songs of the Grateful dad so I'm going to
▶ 2:09:31give you here a quote to see if you know who who said this clever the risk of a dispute over the position could be a distinction a distraction excuse me to our mission you know who said that no I don't Michael bar did and I would be remiss if I didn't say and mention that what uh Governor bar did was recently was very selfless Noble
▶ 2:10:02the rest of that quote by the way is in the current environment I've determined that would be more effective in serving the American people from my role as a governor so I think he himself took the position that it would be a distraction to continue in that role I person personally think he's a person of great distinction that um that always managed himself in a way that was appropriate and I appreciate
▶ 2:10:32the role that he played I didn't always agree with him um he was always agreeable and certainly uh was able to communicate with him our disagreement and again I just want to thank him because I I think what he just did is what a lot of people can't do and that is make a decision that for the the betterment of the situation that were in for our country he would um he would purposely do something that wasn't necessarily beneficial to him personally but anyway I'd be remiss if I didn't thank him but since I am asking tough
▶ 2:11:03questions I do want to ask you another tough question see if you know this one do you know what the pon Del sspi is I do not okay you might know it in English it's called The Bridge of size are you familiar with the Bridge's size rings a bell I can't okay in Venice the Doge who was the leader of Venice had a palace and across the palace he had his prison and often times
▶ 2:11:33a prisoner would be taken into the palace and interrogated in a very rough way and then be tortured and then after he confessed to something he normally didn't do he would have to walk over the bridge and then into the dungeon and off often times die there however before he completed the task of crossing the bridge there are two windows there and he would stop at the windows and he'd look out over the Magnificent city of Venice
▶ 2:12:04and it's the last time often times that person would get to see Venice and so he'd saigh and that's why it's called the bridge of size the Ponte Del suspi the reason I bring that up is I think a lot of Americans feel that way right now that they're Crossing this bridge and maybe it's the last time they've seen the beautiful America that we've had and they're worried they're worried about the usurpation of powers they're worried about the balance of powers now I was very proud of you when you stood up
▶ 2:12:34and said I can't be fired president can't fire me I'm staying can anyone up here you anyone up there no no single person can no single person can right I hope you continue with that Independence I think at this moment is very important someone mentioned it earlier and I think it is very very important so without out of the way I did want to talk about the Dual mandate especially the employment issue um
▶ 2:13:04for a lot of people in America their job really is the most important thing for them not even their investment their job and that's why employment is such an important position I think and so important to be part of the Dual mandate are you looking at changing in any any way the Dual mandate so we don't we don't have that Authority that's uh who has the authority to do that Congress only Congress yes well Congress would have to pass a bill which would be signed by the president say that again sorry Congress would need to pass a
▶ 2:13:34bill to change the Dual mandate that the president signs that's right and so I I hope that you maintain your Independence and at the same time follow the law that there's a dual mandate and that's I think very very important to most Americans and with that again I thank you for your service I thank Michael barers I know he's going to continue to serve I know he'll serve honorably like he always has and with that chairman I yield back the gentleman yields back we recognize the gentleman from Middle Tennessee Mr Rose for five
▶ 2:14:06minutes thank you chairman Hill and ranking member waters for holding the hearing today and thank you chair pal always good to see you here with us chair pal you may recall the last time we spoke I brought up the issue of credit credit risk train transfers CRTs and urge you to allocate more resources to ensure that uh to ensure that that framework applicants were receiving decisions from the Federal Reserve I've recently heard back from stakeholders that they are receiving decisions from the
▶ 2:14:37Federal Reserve regarding CRT applications I hope that the Federal Reserve team continues to be focused on cutting down the backlog so that financial institutions can take risk off their balance sheet thank you for that however I still have concerns that we are not fully optimizing the use of CRTs in the case of mortgage risk CRTs have successfully shifted risk from taxpayers to private Capital including Capital markets and Global reinsurers
▶ 2:15:07while government sponsored entities have clear regulatory treatment under the federal Housing Finance Agency financial institutions lack similar Clarity particularly under bosel 3 I understand that the Federal Reserve has begun to provide guidance but more is needed to ensure that financial institutions can effectively manage risk stay competitive globally and serve their con their customers chair pal do you believe that there should be greater alignment in CRT
▶ 2:15:38treatment between Banks gses that's a uh that's a great question I will take your feedback back I don't honestly I don't know the answer to that and I just wonder uh what steps is or could the Federal Reserve take to clarify and harmonize Capital rules to promote Financial stability and competitiveness in this space again I'll take back your your feedback and um that is our objective is to is to be timely and um and thoughtful in in
▶ 2:16:08in that work thank you I appreciate that in April 2024 synapse Financial Technologies of fintech company that provided banking as a service solutions filed for chapter 11 this event significantly impacted its Partnerships with various fintech firms and Banks including evolve Bank and Trust to this day I have constituents in the in Tennessee 6th District who are not able to access thousands of dollars of their funds and there
▶ 2:16:38has been no communication regarding the timeline for resolution chair pal since the Federal Reserve board is a supervisor of the evolved Banking Trust could you provide any updates on what you doing to ensure that my constituents receive their funds and the uh ex expected timeline for for them to receive their funds so as their as their supervisor as you point out we've been pressing that bank to get money back to their customers and we're actively engaged with the bank as they take steps to
▶ 2:17:08to do so and return that money um we're deeply concerned about the complaints that we've heard and aware of concerns uh raised during the bankruptcy proceedings and to the extent their violations of law will follow on that thank you again and and are there any specific steps that my constituents could take to expedite the process or ensure that they receive their rightful balances I I'll have to come back to you on that I there may be I um I don't have anything for you though on that today
▶ 2:17:39thank you chair pal is there anything else that the Federal Reserve board is considering to prevent situations such as this on a going forward basis I think when we see things you know it's it's a lot of pattern recognition so we'll be looking to avoid things like this happening in the future all right thank you I think there has been a lack of appreciation for the work that uh president Trump has done to restore the American Workforce it is his example of calling federal employees
▶ 2:18:09back to the office that we are now seeing Corporate America follow as well Cher pal as the federal government and companies move to end work from home policies and bring employees back to the office how do you anticipate this shift will impact key economic indicators such productivity um Urban commercial real estate markets and consumer spending patterns that's that's a really good question I'm not sure the answer you know there uh
▶ 2:18:39I've always been felt that I am personally more productive in the office and that's where I work except on weekends when I work at home um but in terms of productivity I think there there are different views I know a lot of CEOs feel strongly that people are more productive in the office uh and we'll just have to see I I also think though that you know on the other side work from home did allow very high levels of of Labor Force participation among for example women we had all-time record high participation by
▶ 2:19:10women so I I think there are there are benefits from from work from home I I hope we continue to realize those gentleman Tom inspired the gentlemen from uh Illinois the ranking member on our financial institution subcommittee Mr Bill Foster five minutes hi um well thank you and thank you for everything you do uh I just like to um get some sort of level setting on what you've been facing in recent it's my understanding that you're Inspector General in the Federal Reserve has not yet been fired is that
▶ 2:19:40correct that is correct okay um and and you've not also had the high level resignations resignations of senior personnel as they've had in treasury nothing like that so no nothing like that as of yet no um and so no examples of you know Junior Personnel being given administrative access to your systems your Technical Systems are you talking now about the payment systems that we payment systems or other Technical Systems um email systems
▶ 2:20:10anything like that none of that okay all right so so far you've not suffered through what treasury has um have you had any inquiries from from other Central bankers or commercial Bankers from around the world about you know what can we uncertainty about whether the Federal Reserve will be able to continue doing its job if you suffer the same sort of intrusion that treasury did I haven't no so you haven't they haven't called you up and said what the heck is going on you know do we have to defend ourselves against um you know unknown
▶ 2:20:41software being installed on the system so I haven't had any such calls okay all right um let's see the um you know there we've also seen calls to um resume resumption of calls to audit the FED all right which is you know as you can remember from that gentleman up on the wall there this was it's a big theme of and you know first off um the FED does get audited correct we are audited in the sense that everyone understands that word to to mean uh which is we have we have a you
▶ 2:21:11know big four accounting firm who looks at our books and and uh gives us an opinion does an audit and and publishes that opinion that's all public right and it's my recollection that never been any big problems uncovered in no we actually have quite a simple business model although we have a large balance sheet we're you know we're like a big Community Bank only with less with no credit risk and very simple so in in the ordinary sense talk of auditing the FED fully a no sense it makes no sense but what was really meant you know certainly during the time when we were talking
▶ 2:21:41a decade ago I guess um it was really all about micromanaging fed monetary policy that they said we want to audit the the monetary policy which doesn't really make sense since it's a policy thing uh do you have any indication of whether the resumption of calls to audit the FED will be um you know audits or some new effort to politically micromanage the monetary policy I I have no way of knowing really what it is is the GAO is free to work on every area of the FED
▶ 2:22:11except monetary policy and does so we have GAO reports you know all over the place over many years but they don't audit monetary policy and you know what the the the um the threat would be if if that were to go away you'd have investigations into decisions on monetary policy and you know that would be a different thing I think it was designed by you know by its designer to to be a step on the way to eliminating the FED uh that is correct yeah the calls to End the Fed
▶ 2:22:42came from the same wing of the Republican party and and I guess still exists I think we're up to something like 20 Republican sponsors of the end of the FED bill that um uh let's see I I was sort of surprised to see that the the word tariff only occurred twice in your monetary policy report whereas if you look at Financial trade journals you know it's it's mentioned five times above the fold in um for those that read hard copies um so you know this must be a very hard thing for you to deal with because you know as you're
▶ 2:23:12aware um Trump's tariffs and other trade policies put us in a manufacturing recession a year before covid hit and so this is not a small thing if these resume um but you have to sort of filter out the chaotic noise and the guidance that varies hour by hour or week by week so what how do you actually filter that and you say correctly that let's wait to see what the actual policies are but then that depends if you if you listen you know one day you get these are the actual policies you know how at some point you have to feed these
▶ 2:23:42into your into your macr models of of what happens and how do you how do you do that filtering when there's just so much random noise on the signal well well I I think it's it's straightforward now in the sense that no one knows pretty much what the exact policies will be that that's still evolving and so you can't really you can't really take action you can you can do analysis of various hypothetical things and we've been doing a lot of that but ultimately it matters what happens you know what's tariffed for how long uh you know are there substitutes there
▶ 2:24:12many many many questions that will have to be answered and even then the question will be how much of that will trans transfer to the to consumer as you know that can fall on the exporter the Importer the retailer or the consumer or in my case manufacturers are on both ends of this yeah so so we really just don't so if if those that sort of analysis G's time has expired Congress it would be great so thank you the gentleman from South Carolina Mr Norman's recognized for five
▶ 2:24:46minutes thank you Mr chairman thank you Mr pal I appreciate you coming uh and addressing our body um in 2011 Vice chairman Yellen made a statement about the concern about the long-term debt situation and the imbalance that we have in our with our budget um in the fourth quarter when she made the statement the federal debt held by the public was as a percentage of GDP was 64.75 per now the same debt to
▶ 2:25:17GDP uh is identified by CBO was 99% at the end of 24 um do you express the same concern that michelen had about the severity of where we are with our continued long-term inbalance I done so on many occasions and essentially that that the us we're on an unsustainable path and um the debt level isn't unsustainable but the path is sustainable and and and
▶ 2:25:47certainly it's uh it's past time for Congress to to work on that but that's what I can say I can't say more than that what do you think the Benchmark would be in we're in the middle of the budget situation now trying to debate particularly with reconciliation what's the what would you say is a benchmark that would ease what level of cuts in your opinion would would ease your concern over what we're doing we're 37 trillion now but when you add the agents the
▶ 2:26:17the mandatory spending we have on Social Security as example it's going bankrupt in 35 uh Highway trust fund running an imbalance what level do you think will give you uh I guess some assurance that we're GNA get our house in order so I I don't have a specific number wouldn't be appropriate but but I will say this in having looked at at this you know the successful plans to programs to get back on the right track they tend to be they tend to
▶ 2:26:47make progress over a long period of time and in other words you've got to get to a place where the economy is growing faster than the debt and then you need to stay on that path for 20 years this is not the kind of thing where we can fix it overnight we just need to be making progress and you know right now we're running very large deficits at a time of Full Employment so we need to we need to start moving you're either making progress or you're not right now we're not so the key thing is to just you know is for it to become a big issue and then people work together the things that need
▶ 2:27:17to be done are all are things that can only be done on a bipartisan basis only these are the things that need to be dealt with cannot be dealt with by one political party I'll leave you with that it's going to be a tall order it is to get B only grows it gets taller every year yeah it gets yeah it does I that's that's a that's one of my issues we're having now um the um level of growth you think
▶ 2:27:48with what president Trump is doing with uh giving Americans confidence with the dose commission which is um giving Americans hope that we would we we're seeing things that are being spent of the taxpayers dollars that we never imagined that we couldn't get to now he's exposing that uh what level of growth you think with the confidence growing under Trump that we will be able to reach this year and the years after because the 20 years you're talking
▶ 2:28:18about we got to have a pretty solid can't be uh it's got to be would you say 18 uh 2% growth uh GDP I you know for a long time the people thought that us potential growth was a little bit below 2% I think we've had a real uh we've had five years of good productivity growth and and we hope that'll continue if that does continue then it might be it might be two or two and a quarter if you're if you're just to
▶ 2:28:48talk if you're talking about long-term budget assumption so I'd be conservative and say 2% you think that's doable 2% yes um on another note the stress tests that uh Banks run and that uh public has been given information on everything but how that stress test relates to them why is it not further why is it most people don't understand what it is
▶ 2:29:18why is it not broadcast more in your opinion why why the stress tests correct so the theory from the beginning was um was to not to disclose the whole models and the way that they worked because in a way that felt like giving the test it in advance this was a brand new initiative uh that started coming out of the global financial crisis very successful generally but over time the argument for not giving away the models giving the models out has
▶ 2:29:48I think weakened and then and also the law has moved the Supreme Court has has moved to uh reduce the level of deference given to agencies and increased our obligations to be transparent under the administrative procedure act and so it's time the models thank you so much thank you thank the gentleman gentleman neel's back the general woman from Texas Miss Gonzalez is recognized for five minutes thank you Mr chairman and thank you chairman pal for joining us this morning
▶ 2:30:18as you know the United United Kingdom European Union Mexico Brazil India and Japan all allow non-bank payment service providers access to their instant payment services this allows Improvement improved access to liquidity for users by ensuring they can send and receive payments instantly without waiting multiple days to access their money I believe this is especially important for those who have tighter flow tighter cash flows and for those sending payments to loved ones abroad uh both which happens quite frequently in South Texas
▶ 2:30:49and across the country with that in mind uh does a Federal Reserve plan to allow non non-bank payment service providers access to Fed now payment re we don't plan that right now what we really want to do is to have the consumer not care you know the consumer can have an access but our payment rails go through the banks and so you have to go through a bank yeah so there's no plans on changing that no um not that I'm aware of okay
▶ 2:31:19what getting on on consumer price index what Consumer Price Index reading would cause you to cut rates is it 2% exactly or is it a trend closer to 2% how much more uh movement downward do you need to see in CPI for the FED to start looking in at uh rate Cuts so remember we're looking at two things we're looking at the labor market and inflation and so headline inflation last year was 2.6% and we've said assuming the labor market remain
▶ 2:31:50solid and strong we want to see further progress we didn't actually make much progress on core pce inflation last year for reasons that I can explain but nonetheless the progress wasn't there so we want to see a resumption of progress I'm not going to put a really specific number on it I mean the truth is the econom is strong the labor Market's solid and we have the luxury of being able to wait and and let our restrictive policy work to get inflation coming down again and that's what we're doing um is there any concerned
▶ 2:32:20at the FED that uh deporting millions of undocumented workers that do a lot of crucial work in in in the agriculture industry and construction uh in Hospitality business will create upwardly pressure on inflation in this country so we don't you know we don't have concerns about policies we we just look at the data and you know um labor Supply um has actually the new labor Supply from immigration has actually come down quite sharply over the second half of of last year
▶ 2:32:50and there's every reason to think that will continue demand has also come down so that the the unemployment rate has actually been flat since July we're going to look at but would taking a million workers out of out of the out of the economy have a direct impact on it could you we'll just have to see how supply and demand match up in any case we don't you know we're not we're not here to comment on immigration we're here to achieve right no I totally get that I'm just figuring if you take a million people out of the workforce how do we make that up and how would that have an upwardly inflation AR
▶ 2:33:20pressure on on our economy but moving on uh recently the Cleveland's uh Cleveland fed's new tenant rent index tumbled uh to a negative 2.4 year-over-year uh rate does that type of deflation and shelter make you more positive on future interest rate Cuts so yes but the thing is it's it uh what we're really looking at is in the aggregate Housing Services inflation that's I believe that's a measure of current rent so Market
▶ 2:33:50rents that are happening and Market rents are have not been showing much inflation for a long time Market rents don't make their way into rents until leases turn over existing leases turn over and that's been the slow part of the process we have seen a lot of progress on that but we're not there yet we're not back to levels of of Housing Services inflation which is what I described but we're getting there we're making clear progress uh you recently said that employment prospects are
▶ 2:34:20solid and uh construction employment which represents 6.1% of all private employment is falling sign significantly does this concern you so we look at the aggregate numbers there there are always industries that are growing and not growing I think the last few job reports have been U have been significant job creation you saw the one here a week or so ago where which revised up the last two months in strong job creation in fact it looks like the job creation may actually have picked up a little bit around the end of the year last
▶ 2:34:50just real very briefly given what we what we had in uh had a business capex recession the last time the economy faced uncertainty with large tariffs are you monitoring uh capex developments closer this time around we're monitoring them carefully yes thank you I Y back gentleman y's back chair of our oversight investigation thank you Mr chairman and thank you very much chairman pal good to see you uh I did recently and oversight subcommittee
▶ 2:35:21a hearing on Deb banking during our hearing uh we revealed evidence that the FDIC directly pressured Banks to debunk debank crypto what do you think of that situation so it's um I think we're all struck at the number of complaints and the breadth of them and um you know want to understand we want to take a fresh look at this at this area it's it's not something we we're not telling um banks that they can't um Bank certain people from C certain in anything like that nonetheless
▶ 2:35:51we're hearing these things and and I I take at least some of it is is real so we need to we need to understand it and stop it from happening because and you know the if you look at what the banks are saying they're really saying that a lot of this is that the enforcement of of um any money laundering is so tough that at any sign any flag at all that gets raised they just cut people off and they don't and they can't explain so that may be part of it but I think we need to do some work get to the bottom of it and address this thanks there were hundreds
▶ 2:36:21of letters by the way that were pretty clear that Banks should avoid doing business with crypto companies no such pause letters as they're referred to or Communications of this uh coming from the FED not that I'm aware of no it's not been our policy our banks are you know are doing business with crypto companies and they're doing crypto inside the bank some of them are we're we've been a little bit careful with it but we I really don't think we've been telling people they can't do it I think a lot of people including us would appreciate you keep it doing a careful review of that the banking industry itself is concerned
▶ 2:36:52uh that there's no Vice chair of supervision to provide Clarity on multiple issues from bosel 3 uh to Reg II and Deb banking do you expect to have an acting Vice chair of supervision any when do you expect to have a acting Vice chair we don't have uh I we need to have a confirmed Vice chair if we're going to have a vice chair we there's no such thing as acting for us but but uh I don't know that's up to the administration I'll tell you what the way we look look at it is we're going to do our jobs and and I think
▶ 2:37:22there are a number of things that can be done that'll be very constructive and um you know if there is a a new Vice chair for supervision I will welcome that person and do everything I can to make him successful okay thank you uh yesterday you you noted that Basel 3 endgame could be finalized fairly quickly given last year's extensive public comments uh will you ensure the rule does not restrict access to Capital and fully incorporates industry feedback and as you stated you felt that the cap Capital reserves for banks was about right
▶ 2:37:52so I'd imagine you not looking for anything too drastic there no that's right yeah that's that's correct okay great um so the CPI this morning came in a little hotter than expected at 3% did this surprise you it it was the CPI reading was above uh almost every uh forecast but I I would just offer a note of caution on this two notes of caution one is we don't get excited about one or two good readings and we don't get excited
▶ 2:38:22about one or two bad readings the second thing though is we target pce inflation because we think it's a simply a better measure of inflation and so you need to know the translation from CPI to pce and we get more data on that tomorrow we'll get the the producer price index so I think it's always wise and you know the the people who follow us closely know this we'll know actually what the pce readings are you know uh late tomorrow okay so so in the past as you all know you called inflation in uh transitory
▶ 2:38:53uh then the FED signaled three rate cuts for 2024 and the markets priced in six now uh that you're saying that there's no rush to cut rates uh do you find this forward guidance stabilizing markets or fueling volatility um so this is the the summary of economic projections The Dot Plot and you know I mean I think markets like it it's it's kind of the only it's the it is the forward guidance that we give we don't really mean it as forward guidance but markets
▶ 2:39:23do take it sometimes they take it too seriously I think most Market participants understand that it's highly conditional and dependent on what actually happens in the economy and that's the feedback that you do receive that find it yeah when we talk about get getting rid of it Market participants will tell you please don't do that okay if Doge found a trillion dollars in wasteful unnecessary spending the department of government efficiency of course and um wouldn't that have a positive effect on inflation allowing you to perhaps lower interest rates
▶ 2:39:54and of course reduce our deficit spending so this is if if if a trillion dollars of spending were were were eliminated um you'd have to run that through a model but I mean ultimately uh it would you know hard hard to say exactly how it would affect the economy you got a $6 billion dollar budget at the FED would you welcome Doge to have a look under the hood you know I'm we we haven't heard from them and I I've got nothing for you on that today thank you chairman I yield back chairman
▶ 2:40:25gentan time has expired the gentan from Illinois Mr Caston is recognized for five minutes thank you Mr chair chair Powell always a pleasure to see you again um I want to start there's and I I don't expect you to comment on the policy here but there's been um a number of actions from the Trump administration of scrubbing or limiting data that the private sector has historically relied on to understand the direct and indirect acts on the economy Public Health Data um you know information about breaking things down by gender by race
▶ 2:40:55that we need to understand granular shifts in the economy um I realize that you don't rely exclusively on government data but has there been anything that has happened since the Trump White House was sworn in that has limited the fed's access to information you need to fulfill your dur your your dual mandate not not that I'm aware of no if if there was will you commit to sharing it with Congress so that we can ful F our oversight responsibilities sure okay um when you were here in
▶ 2:41:25July um I'd asked you this question I just want to confirm that you still feel the same way is it still your view that the federal of the Federal Reserve that climate change constitutes an emerging threat to US Financial stability I guess I would say it this way I I wouldn't say that climate change is currently a threat to to US Financial an emerging threat I would say that it it may emerge over time as such okay so $250 billion of losses in California we've now got
▶ 2:41:55multiple states where the insurer of Last Resort is insolvent um reporting today that California is having to bail it out I know we have a difference of opinion on ngfs I don't want to go into that but is the Fed monitoring what is happening to our financial system as those insurers pull out as insurance rates goes up and people's both access to property insurance and the cost of insurance are going up are are you monitoring what's happening systemically in our economy as a result of that yes the question though
▶ 2:42:25if the question is is it a threat to the financial stability of the United States that's really the question and we of course we're following that very very carefully okay so if if uh if you're monitoring it where is the risk that was being backed by the insurance industry moving where in the economy is that risk now live so insurance companies as you know can cancel policies and not issue them and they can leave States and they're doing a lot of that so where does that where do those risks fall they fall on homeowners and and and other beneficiaries and they fall on state governments
▶ 2:42:56and to some extent the federal government but they don't fall on they don't they don't cause large financial institutions to fail are are you seeing shifts in in mortgages Mortgage Services their willingness to provide loans to homes as those insurance rates go up or or disappear implicitly if you can't get insurance then there there won't be a mortgage so I don't I can't point to EP episodes where that's happening but that's that's certainly where this looks like it's headed okay because I mean there has been reports going back several years now that the more prone your property is to flood
▶ 2:43:26risk to fire risk the more likely you are as a bank to offload that on to Fanny and Freddy right we've we've seen that data happening so that then raises the question of and this is maybe just purely academic and wonky if you own a set of cash flows and you want to sell them to me and we both have full information I'm only going to buy them from you at and a creative value to you to the extent that I have a lower cost of money than you do right just I mean sort of like econ 101 right so if we own Fanny
▶ 2:43:56and Freddy right now because they're in receivership and they are throwing off a string of cash flows to the treasury setting aside the nuances of how the CBO scores all these sorts of things isn't the sale of Fanny and Freddy on the assumption that the buyer and seller have perfect information the same information on both sides of that transaction if that's a creative to the American taxpayer doesn't that implicitly assume that we have to sell to somebody with a lower cost of capital than we do that's a I I followed your
▶ 2:44:26logic there yeah okay and that would only not be true to the extent I suppose either that um the buyer violates every rule I had in my m&a career of uh paying for upside as they say um or that the buyer lacked information that the seller had right Fair Okay so what I'd like to understand you is does that create a conflict of interest for the United States government because if
▶ 2:44:56have if if we have information about climate change being scrubbed from our our our data sets and we have a white house that would like to sell Fanny and Freddy are we committed to efficient markets that depend on accurate transparent information or are we committed to making a quick buck in which case we might want to have we might want people not to be uninformed what is the Fed committed to to transparent markets I guess is the first question and separate and then the second one do you feel that conflict I think we're getting a little
▶ 2:45:26away from my from our mandate at the FED um I mean there the idea of privatization is to get private get this off the balance sheet of the of the fed and and get it into get private Capital backing it up and sure and there would be good reasons for that but if that if that is coming at the expensive value to the American taxpayer we need to be transparent about that right but we have private sector Banks you know we could make all credit all credit could be made cheaper if if offered by the by the central yield back government right jman yels back the gentleman from South Carolina
▶ 2:45:57Mr Timmons is recognized for five minutes thank you Mr chairman and thank you to chair pal for joining us today uh yesterday in an exchange with Senator Warren on stress testing you said that the FED is having to change their approach quote because the ground has shifted very substantially in administrative law end quote and while yes the ground has certainly shifted since last year I'm slightly confused because after reading reading up on the banking industry's lawsuit uh against the FED I do not see a direct connection between their case and the loss of Chevron Defence
▶ 2:46:27their case seems to Center on the FED not complying with the long-established process laid out be the by the administrative procedures act and while some at the FED may not classify stress tests as a rulemaking when they require Banks to alter their Capital levels they have the effect of rulemaking so cheer pal I'm hoping you can clear this up for me is this a matter of adap adapting to a post Chevron World or or was this the fed unlawfully using stress tests as a back door to increase Capital requirements on Banks without issuing a formal rule making and having to go through the legally required
▶ 2:46:57notice and comment APA process pretty good chance that the next sentence I say would be evidence in the in the court case that we're having so I'm I'm not going to I'm not going to get into you know just debating what the law is because we're we're in litigation I will say it's not just uh Chevon though I think it's it's clear from other cases that expectations under the administrative procedure act are also are also raised just generally speaking and so we felt that like overall that really has changed the field
▶ 2:47:28okay any changes in capital requirements is very disruptive and uh having a more predictable process is helpful for long-term stability of the US economy um on to the next question so uh foreign Banks many of which are smaller than their domestic counterparts play a larger role in providing financing in the treasury market US Banks on the other hand are less involved than they could be primarily because Regulators have made this activity less profitable for them stricter Capital requirements liquidity buffers and compliance costs stemming from regulations like Dodd Frank make it
▶ 2:47:58more costly for US Banks to engage in treasury market operations particularly in repo and securities lending as a result foreign Banks facing fewer regulatory hurdles have stepped in to take on this crucial role providing the liquidity and financing needed this shift has significantly altered the market landscape with foreign institutions now holding a larger share of financing operations there were one dominated by US Banks um so my question is this why are we setting up a system where the US Treasury Market needs to rely on so much on foreign banks for proper functioning and do you
▶ 2:48:29see that as a national security threat I I I see the the what the trend that I see is that we have very significantly raised the capital costs of supporting Market activity and especially for lowrisk activities that are lowrisk low return um what's happened is the the amount of treasur has v grown much greater than is now much greater than the capital that's allocated to intermediate so that's why you see low intermediation and relative
▶ 2:48:59lack of liquidity and I think it's appropriate to do something about that and that's something that we're we be looking at is to uh reduce the uh the the enhanced supplemental leverage ratio to account for that this is something that we proposed before which I think is intended to increase liquidity in the capital markets for for banks subject to it thank you for that I want to end on a positive note uh I want to discuss the optimism among the American public small business optimism experienced its largest increase in 40 years following
▶ 2:49:29president Trump's recent election uh with continued positive momentum in the month since this surge reflects growing confidence in the economy spurred by expectations of favorable policies and reduced regulatory burdens for small businesses the index is not only well above its 50-year average but also reached its highest point in December uh since uh late 2018 this shift has caught the attention of many across the economic landscape back home in South Carolina I frequently speak with small business owners who are enthusiastic about the future and eager to help their businesses Thrive under the new Administration
▶ 2:49:59so my question is this how do you see this significant jump in optimism translating into tangible outcomes in terms of investment hiring and overall growth for small businesses so we know that sentiment really matters uh it's really hard to model it but you do think about it when you're thinking about your forecast you think about um you know optim and that kind of thing because that's what supports investment all the Investments that that companies make you know they have to have on some level optimism that it's worth shelling out this money to do what it is they're doing so
▶ 2:50:30it's it's a key part of of how the how economies work and given the potential for increased investment Are there specific policy adjustments or economic factors that you're watching closely to ensure that this optimism leads to sustainable growth in the long term best thing we can do is is Achieve price stability and and also full employment maximum employment and then create a stable environment where businesses and households can not worry about inflation and we have steady sustainable growth and as one of the millions of Americans about to get a mortgage
▶ 2:51:00um interest rates going down would be helpful thank you Mr chair I you back gentlemen y's back the gentlewoman from Massachusetts Miss Presley is recognized for five minutes chairman pal we're at an inflection point and we need leaders who are courageous enough to speak truth and who are committ to helping every person who calls this country home there are many who wrongfully justify Trump's presidency in the Lawless work of Doge as good for the economy well chairman pal you actually know something about the
▶ 2:51:30economy the Federal Reserve has a dual mandate maximizing employment and stabilizing prices and it is clear to me that Donald Trump and Elon Musk actions are impeding your work the threats of tariffs against our allies are not helping the FED do its job nor will they help people across our country the Boston federal reserve put out a report last week which estimated tariffs would be inflationary and raise prices chair I asked unanimous consent to enter into the record the report titled
▶ 2:52:00the impact of tariffs on inflation additionally Donald Trump has threatened Mass deportations he seeks to terrorize immigrant communities and separate families claiming it will help the economy I don't think so and neither does the Peterson Institute for inter International economics who estimated that employment would drop 7% chair I ask unanimous consent to enter into the record the report
▶ 2:52:30titled deportations would harm the US economy objection now chairman pal I want the Federal Reserve to be successful so if Elon Musk and his doge Bros were to walk into the Federal Reserve intimidate staff access classified data and take control of the agency the same way they did usaid and the Consumer Financial Protection Bureau would that help or hurt our
▶ 2:53:01economy we we don't have that happening I'm I'm not going to speculate well on your own website it says quote the Federal Reserve is accountable to the public and the US unquote so um would like to see a clear answer on this your staff are watching Wall Street is watching Donald and Elon are certainly watching and we all want to know what is your view if Doge does to the Federal Reserve
▶ 2:53:31what it has already done to other independent agencies my my um what we're going to do at the FED is keep our heads down and keep working um wait to see what new policies emerge and try to make a thoughtful sensible uh set of policies on our part once we understand the implications of those right if Elon Musk or anyone from Doge attempts to access the federal reserve's private data
▶ 2:54:02will you alert the members of this sure thank you this is as clear to me as night and day Donald Trump and Elon Musk are not trying to help workingclass people they're trying to help themselves they want the FED to be a tool that helps the rich get richer Banks get bigger and regulations disappear all together but that is not your
▶ 2:54:32mandate the FED must maintain its independence and integrity put the interests of the public before Elon Musk the world's richest man does not care about the price of eggs he doesn't have to when he has already bought the presidency I yield back the gentoman yields back the gentoman from California Miss Kim recognize for five minutes thank you chairman Hill and chairman Powell
▶ 2:55:02thank you for joining us today and I want to commend you again for ignoring the outside noise and staying true to Fat's uh do mandate um chairman Powell it seems the Advent of artificial intelligence and other emerging Technologies has helped the United States increase productivity when compared to other countries around world uh that makes our country more competitive and envy of economic
▶ 2:55:32growth so do you believe that this boom in productivity is sustainable in the long term and if so how does that increase in productivity affect your models to forecast inflation therefore monetary policy we have had a boom in productivity it is most welcome and of course it would be great if it were sustained I think if you look at the at the candidates that try to explain it some of them are kind of one-time things and some of them could be more sustained
▶ 2:56:03you mentioned technology and AI to the extent that's part of it that could be a sustainable increase in the rate of growth and productivity to the extent it was more about Job reallocation people switching jobs coming out of the pandemic that's kind of a one-time thing also we had a wave of startups a wave of early stage compan you know startups that also tends to be linked to productivity that too could just be a one-time increase in productivity um there literally the no one has the record of being able
▶ 2:56:33to successfully forecast productivity uh for very long but again it's it's it's going to depend on many things and it's as long as we we have this increased productivity it's it's most welcome and important thank you uh over the past decade we've seen fed intervene with more regular frequency to maintain the olderly functioning of the US Treasury Market much more than decades before it seemed like the private sector was able to manage
▶ 2:57:03this without too much fed intervention pre financial crisis and a longstanding and growing bipartisan consensus uh that the SLR and other regulations may be causing this if so what do you think the solution is to reduce the need for frequent fed intervention so I do think we need to work on Treasury Market structure and part of that answer can be and and I think will be
▶ 2:57:33uh reducing the calibration of the supplemental supplemental leverage ratio as you mentioned that's something that I have long supported and for the reason that you know the quantity of treasuries has grown really significantly and the Capital allocated to intermediating trades in treasuries has not in fact has shrunk so we we we need a liquid treasury market and this is one of the things that we can and should do is to is to reduce the calibration of that measure thank
▶ 2:58:04you uh I want to go back to March 2023 in response to the Fallout of uh Silicon Valley Bank it is my understanding that the FED is analyzing ways to create a more efficient process for a financi institutions to access the discount window one issue that has come up is that it can take extended periods of time to assess and determine the landable value of collateral potentially denying the institution's ability to access
▶ 2:58:34liquidity quickly is the Fed looking at ways to streamline the process to assess and determine the value of collateral at discount window we are we are looking at uh so there are sort of U impediments to to the efficiency of the discount window and those are things we can work on we're working hard on there's also the question of stigma though that PE banks are reluctant to use it because of the so-called stigma of using it and that is a very hard problem to solve we're also working on that one
▶ 2:59:04regarding the fast review of the discount window operations can you give us an update on what problems the Fed was able to identify what Solutions you're pursuing and what the estimated timeline is for any action so the study is ongoing right now the work's ongoing but you know essentially uh you you touched on some of this it's it's um it's inefficient it's slow and um uh we need to we need to have collateral you know processes that are
▶ 2:59:34very quick and very efficient because they need to be quick and efficient in in a crisis so that's that's part of it just general modernization investing in technology modernizing the discount window that's part of it the harder part is really turning it into something that banks are comfortable using because they feel it's not stigmatized and we're working on that too you know the opening the um discount window 247 could really help the banks in California um especially the state that I represent the Southern California that I represent
▶ 3:00:05thank you thank you gentleman woman yields back the gentleman from New York Mr Torres is recognized for five minutes thank you Mr chair president Donald Trump has been asserting among the most aggressive and expansive claims of Presidential Power that we've seen in our nation's history has taken the unitary executive Theory to new extremes he's claiming to have the authority to defund whatever agency he wishes to abolish whatever agency he wishes and to fire whomever he wishes
▶ 3:00:36even if it means violating an act of Congress uh Mr chairman suppose for a moment the president were to ignore the Congressional statute that establishes the independence of the Federal Reserve what economic consequences would result from the FED losing its independence I I think uh you know research over many many years in many many jurisdictions shows that some degree of Independence is very important in keeping inflation under control and the connection is obvious if politicians are going to want to
▶ 3:01:06be reelected and things like that they're not going to be focused on the longer term we have the mandate to remain separate from all of that to stay out of all of that so that we can just focus on not on Election Cycles or helping or hurting any any political party or or politician but just on serving the public as a whole that is essential and you know it's it's uniform I think across all advanced economy central banks much like the Bureau of fiscal service the Federal Reserve has highly sensitive Payment
▶ 3:01:36Systems uh president Trump and secretary bessent granted Elon Musk and his team of Outsiders access to the central payment system of the federal government A system that is often described as American checkbook would you as the Federal Reserve chair ever Grant a team of Outsiders access to the fed's central payment system without sufficient vetting and sufficient security clearance well no but let's remember we're we're the we're the treasury's Fiscal Agent we everything we do is under
▶ 3:02:06their Direction and we they're they're they're treasury payment systems and then there's our side of the wall which is the actual payment to the recipients and so we control access to that very careful the treasury issues the payments and then you process them they they order us to pay someone and we just pay we don't have any we don't you know we don't question it payments we just make the payments and and we control access to those Payment Systems carefully and and what would be the danger of lightly granting access to the fed's payment
▶ 3:02:36system to Outsiders without sufficient vetting like what could go wrong well the reason why we're so careful about it is is just for one thing the possibility of mistakes and someone come coming in and and changing the code and things like that so so we have very careful access another one is just you open your up to open open it up to more cyber risk and things like that so I mean I think all you know really important uh uh computer programming is subject to very very careful access restrictions
▶ 3:03:07and we we're no exception right so you believe as I do that granting an insufficiently vetted team of Outsiders access to the payment systems of the treasury or the Fed would radically raise the risk of a cyber breach at the hands of foreign adversaries like China and Russia so I I you know we're talking hypothetically here I I I can tell you that that that is not something that's happened relative to we can speak to the the systems that the treasury has asked us to operate on their behalf and and that has not
▶ 3:03:37happened in those systems I represent one of the poorest congressional districts in America I have cash dra constituents who pay exorbitant fees simply to transfer their own money often to loved ones abroad uh access to fedwire could play a role and radically reducing the cost of remittances and payments for the lowest income Americans what is your position on expanding fire a Fed wire access for the purpose of reducing the cost of
▶ 3:04:07remittances and payments so we do fedwire is really between banks these are very large wholesale transactions it's one of the world's most important if not the most important Financial Market market utility I don't think we're looking to open it up to you know to retail customers I I think you know faster retail payments and particularly crossb payments are are a subject of a lot of work in the international sphere and and I think we all understand it's important to lower the costs and the risks of those
▶ 3:04:38um the commercial real estate uh is that do you feel that continues to be a a ticking time Bond within the financial system what's your what's your sense of say that you know so we've been saying and I think it's still true that this is a problem that's been with us and it's going to be with us for a while if I can say something modestly constructive it doesn't seem to be getting worse okay so we we have there are a lot of embedded losses a lot and they're just going to need to be realized so we're working with financial institutions to make sure they have a plan and understand
▶ 3:05:08their losses and can manage them I see my time has expired thank you gentleman Ys back the gentleman from Florida Mr Donalds is recognized for five minutes uh thank you Mr chairman chair Pals good seeing you again um I want to start uh with just a a broad-based conversation I know the FED has been making um adjustments to the FED funds rate um over the last several months and what we've noticed is there's not been a lot of although there's been movement on short-term rates there really has been a minimal impact on in
▶ 3:05:38my view intermediate to long-term rates um would you can you expound on why why you think this phenomena is starting to exist with respect to Fed rate mod mon AR policy versus the general borrowing rate borrowing rates for businesses and consumers right so you're right of course we've lowered the federal funds rate and as sometimes happens uh longer rates have gone up they've gone up and come down and going back up you know they moved around but they're higher and the reason is that you
▶ 3:06:08know we don't control long-term rates they react to a whole bunch of different things including a sense of more deficit spending coming including expectations of more growth growth and of risk risk of higher inflation but not so markets aren't pricing in higher inflation but maybe pricing in a little that the risk of that is there and that could be a re reaction to new policies or not but ultimately though what the increase in in longer term rates is really mostly not about fed policy or or our job
▶ 3:06:38of maintaining price stability it's about other things the term premium in particular be happy to to meet with you you know and go through this in in in a lot of detail more than you can do here no I would I would love to do that uh one of the concerns I have as well as a lot of my colleagues up here on the hill is there is but so much that the FED can do with respect to rate policy and and I and I fully acknowledge that wanted to get your views on that but I think it's also the desire and this conversation happening right now obviously with uh
▶ 3:07:08the do with Doge and Elon Musk and the desires for efficiencies but then also uh stability in federal spending and even bending the cost curve um fiscal policy from Capitol Hill do you think that would have yield positive results in medium and long-term rates borrowing borrowing rates not just for the federal government but for the American Consumer when you say fiscal policy you mean fiscal policy that would reduce deficits over time yes fiscal policy that will reduce deficits fiscal restraint
▶ 3:07:39um I would say fiscal Common Sense uh over the intermediate and long term for the United States yes well so I I think part of part of what uh Market participants think about when they buy long our treasuries is how much more of this is coming are we going to get on a sustainable path and they want to get paid if the answer to that is wow we don't have a lot of confidence in that then they're going to need so the term premium the so-called term premium goes up for that reason and uh there's no question if if we were on a more sustainable path I I do
▶ 3:08:09think rates would would be lower no and I appreciate that testimony because one of the things that while we do talk about obviously tax policy and another committee regul policy throughout the entire federal government I think it's important for the American people to know that Washington does have to be fiscally responsible and if we are not and and I say all of Washington if we are not then the risk premium so to speak for borrowings in the marketplace are going to increase not because of the American Consumer not because
▶ 3:08:39of the the strength of the American engine but simply because uh the amount of treasuries that we are putting out to Market are just demanding a higher premium for every new dollar that we borrow because simply people want to be paid back and it's just something where chairman you don't have to comment on that I just something I think is important for the American people to understand that is the major issue if you will over the next 20 years 10 to 20 years for the federal government that we have to get our fiscal house in order
▶ 3:09:09if we're going to give the American Consumer who might be uh poor trying to make a way in this country middle income trying to you know take care of their children and figure out what the the next stage in life is look is going to look like people who are in the upper middle class who are now forming businesses building some real wealth for themselves and for their family all of that is at risk if the United States government does not take its fiscal Health as serious as any other family and any other business would do uh real
▶ 3:09:40quick chairman um you said yesterday that as long as you're chairman the US will never have a central bank digital currency is the Federal Reserve or any of its member banks currently conducting any studies on cbdcs either for retail or wholesale purposes I mean we're not doing any work that is designed to lead to a retail cbdc that's just that's not happening when we don't we don't support one we don't have legal authority to do one so no the notion of a wholesale cbdc
▶ 3:10:10is really not one that we think about or accept you know we we have take fedwire fedwire is a realtime you know digital uh process of trillions of dollars every day between between Banks is that a cbdc some people would say that's gent's time has expired so thank you chairman I yeld back thank you chairman gentleman Ys back the general woman from Texas Miss Garcia is recognized for five minutes thank you Mr chairman and uh chairman poell thank you so much for being here
▶ 3:10:40today it's always pleasure visiting with you I'm going to talk about a topic that both um congressman gonzale as and um representative Prest uh brought up uh which is something that's I think does impact our federal economy uh but I know certainly does impact my district in Texas I'm really concerned about President's Trump's Mass portation efforts and their impact on your dual mandate I believe the last time you were in front of this committee
▶ 3:11:10I asked you about the impact immigration had on monetary policy given last year's Congressional budget office ES esates as a reminder the report estimated that the labor force in 2033 will be larger by 5.2 million people largely due to the immigration surge since then there have been more reports and research about the impact the economy has the immigration has on our economy both in maximizing employment and and
▶ 3:11:40stabil um stability in our prices for example example immigrants are fulfilling lower paying and oftentimes dangerous jobs more frequently than us born workers they earn more money pay taxes invest back in our economy through everyday goods and services and help create even more jobs a study done by the National Academy of Science engineering and Medicine found that foreign born workers or as some people say immigrants pay 237,000 more
▶ 3:12:11in taxes over their lifetime then they receive in benefits let me say it again 23 $7,000 more so these mass deportations will have a massive impact on both our economy and Workforce leading to a drop in production and spending we're already seen some of that in my district chairman pow I recognize that the Federal Reserve does not weigh in on policy and so before you say that in your response I I I already know that
▶ 3:12:41however immigrants impact our economy does does impact both the uh unemployment and and price uh prices as um representative Gonzalez detailed in terms of some of the work that they do does the Federal Reserve account for immigrants in its in its interest rate decisions indirectly yes so we're looking at looking at the labor market and um part of what drives growth in the labor market is population growth and part of what drives population
▶ 3:13:11growth is immigration so sure it can matter and sometimes it matters a lot right in and do you look at at the um the Consumer Price Index in terms of of the the U immigrants as as consumers and if they're afraid to go out because they may get deported they're buying less that's what I'm hearing from businesses in my district I I think things like that would show up in the aggregate data but we don't we don't signal out um any particular
▶ 3:13:41group for that okay so can you quickly list some of your federal Reserve responsibilities and do you have capacity to assume the role of being our our consumer Watchdog as as as the president now is focused on getting rid of the the cons Consumer Financial Protection Bureau so before Dodd Frank um the OCC the FDIC and the FED all conducted consumer um exams and
▶ 3:14:12enforcement for the banks that they regulate and supervise so for us it's state member banks for the FDIC State non-b Banks for the OCC National Banks um Dodd Frank took all fin all banks over 10 billion in assets away just for purposes of consumer examinations and enforcement gave them to the cfbb statutorily you you could give that back to us or not but you know it's certainly possible to restate the old order but that would have to be something no I realize you
▶ 3:14:42you've also said that you know you will your team will be there to get the job done you've got your notes to the Grind we we sent a bunch of people over to cfpb we would need those people back you know we don't have the people now who could take that over they they moved many people from the fed and the OCC and the FDIC so there would have to be a reallocation of resources yes okay all right so um so sounds sounds like you're you're you're obviously willing to do it and um we may have to convince the president to make that
▶ 3:15:12reallocation of resources so thank you for that and Mr chairman now I'd like to ask Ream's consent to uh submit for the record uh three articles one The Brookings uh um the labor market impact on deportations and other the Federal Reserve Bank of Dallas migration to Texas fills critical gaps in Workforce and and second one on unprecedented immigration search Boost job growth without objection and I yield back with two seconds joone y's
▶ 3:15:44back last member to question the chairman today will be the gentleman from New York the vice chairman of the subcommittee on Capital markets Mr Garbarino and you're now recognized for five minutes thank you Mr chairman uh chairman Pilots good to see you again after the last Open Market Committee meeting you said that the labor market conditions remain solid unemployment has stabilized and conditions in the labor market are balanced this comes on Heels of a jobs report this past Friday that indicated the economy added 140,000 jobs during the month of January
▶ 3:16:14yet when you peel back this data and look at recent employment data for the smallest of small businesses the mom and pop shops so firms without not with 100 employees like those included in the jobs report you see that small businesses are actually consistently losing jobs in fact the latest in it QuickBook small business index showed that employment for us small businesses with one to nine employees decreased by 42,000 jobs compared to January last month in my home state of New York small business small business employment
▶ 3:16:44decreased by 33% and Revenue decrease by 62% which is a decrease of $350 per small business on average do you believe that we are seeing the same Economic and Business Trends between companies with fewer than 10 employees and larger companies I guess not no I mean I think it's um it's always the case that uh there differences between sectors and size companies and all that and you know we're we we're really left with looking at the aggregate numbers do you are do you take into account the current
▶ 3:17:14macroeconomic trends of small the smallest of the small businesses when setting policies we do you do yeah I mean we well for one thing we we read the same data you do the Reserve Bank presidents come in talk about their districts at length and they talk about if you read the beige book They're going to talk about small businesses Pro you know um nonprofits everything so we look we look at everything but at the end of the day you know there's only one national unemployment rate but there are many many subtle uh changes in the data that we monitor too we all know small businesses drive the economy
▶ 3:17:45and I know I can you know as a a company in my district Brinkman Hardware 40 years ago they started with less than 10 employees now they have over 200 so they are able to grow and and uh they do great work um but I think just making sure money monetary policy really does focus on on helping small businesses grow is uh is key to making sure the economy continues to grow uh I'd like to move on to a topic that we've discussed on a few different occasions basle 3 and game uh it is well known that I had some serious concerns with the initial proposal one of those concerns that we haven't discussed
▶ 3:18:15is how the proposal would have impacted the securitization framework at the time of The Proposal there was no narrative explanation data quantitative analysis or financial modeling rationale for why the P Factor was doubled while understand that Mr Barb promised we'd see an economic analysis to support the proposed change I believe that was never released so chairman Powell I'm wondering in your opinion have you seen any Market pressures or changes that would have NE necessitated such an increase in the P Factor um
▶ 3:18:46I can't can't point to anything I will say that you know we're going to look at all of that again when we re when we get together again with the other agencies and and uh try to move this forward okay well the proposed doubling of the P Factor would significantly increase the amount of capital required securitization exposures making securitization more expensive for banks to participate in and raising the cost of limiting the availability of credit for households and businesses I appreciate that you will look at that uh but given how this proposed change May negatively impact A bank's ability to act as
▶ 3:19:16Mark market makers in the securitization markets when looking at this again like you just said you would can you commit to review this substantial increase given its outsize impact sure I appreciate that chairman um and I just want to expand on one other top topic um that my colleague representative Lucas brought up earlier over the past decade we've seen the FED intervene with more regular frequency to maintain orderly functioning of the US Treasury Market much more so than decades before
▶ 3:19:46seems like the private sector was able to do to manage this without too much F intervention pre- financial crisis do you think regulation like supplemental leverage ratio which some of your colleagues have commented on is causing this and if so what do you think the solution is which will reduce the need for frequent fed intervention I think part of the answer is going to be to reduce the the calibration of the supplemental leverage ratio that's there a number of things that probably need to happen with treasury market structure but that's one of them that's one of the solutions but do you think there's other things and you'll
▶ 3:20:16all work on that I do yeah okay I appreciate that chairman uh uh thank you very much for being here today and uh I yield back gentleman yields back I want to thank chairman pal for being with us today thank you for your testimony without all objections all members will have five legislative days to submit additional written questions for the witness to the chair the questions will be forwarded to the witness for his prompt response chairman pal please respond no later than March 31st 2025 this hearing is adjourned for