Fed Chair Jerome Powell Testifies In Front Of The House Financial Services Committee

3 months ago

Fed Chair Jerome Powell testified in front of the Senate Banking Committee on Wednesday.

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Transcript

00:00:00The committee will come to order.

00:00:03Without objection, the Chair is authorized

00:00:04to declare a recess of the committee at any time.

00:00:07The hearing is titled,

00:00:08The Federal Reserve's Semiannual Monetary Policy Report.

00:00:12We like creative titles here,

00:00:13and that is our traditional title for Humphrey Hawkins.

00:00:15Without objection, all members will have five legislative days

00:00:18within which to submit extraneous material

00:00:20to the Chair for inclusion in the record.

00:00:23I'll note at the outset this hearing has a hard stop

00:00:25at 1 p.m., which we will strictly observe,

00:00:28which seems only humane.

00:00:31I'll now recognize myself for four minutes

00:00:34for an opening statement.

00:00:36Thank you, Chair Powell, for being back with us today.

00:00:39With prices increasing more than 20 percent

00:00:44since President Biden took office,

00:00:45inflation remains top of mind for American families.

00:00:49In fact, only a quarter

00:00:50of Americans describe current economic conditions as good

00:00:54or excellent, according to the most recent data

00:00:58from Gallup's Economic Confidence Index.

00:01:01Despite President Biden's gaslighting,

00:01:03inflation was not 9 percent when he took office.

00:01:07It was out of control.

00:01:08The out-of-control inflation we're experiencing now is

00:01:11something that this administration did not inherit,

00:01:15but is a product of their policies and their overspending.

00:01:19The nearly $2 trillion partisan

00:01:21and fiscally reckless spending as a part

00:01:25of the American Rescue Plan poured fuel

00:01:29on a smoldering inflationary fire.

00:01:32After a delayed response to runaway inflation,

00:01:35the FOMC has acted with a historic pace

00:01:38of interest rate hikes to ease the pain caused

00:01:42by Democrats' failed economic policies.

00:01:45It is a response, not the actual disease,

00:01:47but the response the Fed is trying to tame these flames.

00:01:52But it's a response to Democrat policies here on Capitol Hill

00:01:56and the administration.

00:01:58So far this year, inflation has been more persistent

00:02:01than many, including the Fed, previously expected.

00:02:03There's still work to be done to reach the Fed's 2 percent target.

00:02:07As I've repeatedly said, the Fed's-I think

00:02:13as I've repeatedly said, the commitment to independence

00:02:17of the Federal Reserve is of utmost importance,

00:02:20and it is critical especially in a political year like this.

00:02:25Just as-Chair Powell, just as you did

00:02:27in previous administrations, you must not allow politics

00:02:30to cloud the Fed's monetary policy.

00:02:33However, despite your best efforts,

00:02:35the Fed independence remains at risk.

00:02:38And unfortunately, calls are coming from inside the building.

00:02:42Under Vice Chair Barr, the Fed's regulatory

00:02:45and supervisory agenda has become politicized.

00:02:50Most notably, the development

00:02:51of the Basel III endgame proposal has been a mess.

00:02:55This process has been cloaked in opaque standards

00:02:58and timelines set at meetings

00:03:00of unaccountable global governance bodies.

00:03:04The Fed has promised to process 410 almost universally negative

00:03:09comments, public comments, regarding the unjustified

00:03:12and underutilized initial proposal,

00:03:15or an underanalyzed initial proposal.

00:03:19Recent press reports, which seem

00:03:21to be the only way Congress gets details

00:03:23on the Basel III endgame progress,

00:03:26and your comments yesterday indicate the Fed will finally

00:03:29conduct a long overdue quantitative impact study.

00:03:33That is welcome.

00:03:34And if true, this is a promising, promising development.

00:03:38Chair Powell, the last time you testified before this committee,

00:03:41you stated that the initial Basel III endgame proposal will

00:03:44undergo, quote, broad and material changes

00:03:49end quote.

00:03:50Yesterday in the Senate,

00:03:51you said the Board supports reissuing the updated proposal

00:03:54for public comment.

00:03:56I'm concerned that press reports also claim the Fed will tuck any

00:04:00changes to the proposal into this quantitative impact study.

00:04:04That study, including the substantial changes

00:04:07to the proposal, would then be issued for public feedback

00:04:10with relatively paltry comment period.

00:04:14I'll reiterate to you here what I've said to you in private.

00:04:18Broad and material changes

00:04:21to the Basel III endgame necessitate a full

00:04:24re-proposal, full stop, full stop.

00:04:27Failure to do so will result

00:04:30in an immediate Congressional Review Act vote

00:04:34out of this House of Representatives as quickly

00:04:36as we can possibly process it.

00:04:38Now, it doesn't have to be this way,

00:04:41and I think the Fed adhering

00:04:43to its longstanding principles here is highly important,

00:04:46especially with this interagency process.

00:04:48I'll close with this.

00:04:50Your steady and capable apolitical leadership

00:04:53of the Federal Reserve has shepherded our economy

00:04:55through extreme uncertainty.

00:04:58We now find ourselves in the midst of a new type

00:05:00of uncertainty surrounding the leadership of our nation.

00:05:03Doubts, fears, and panic often lead

00:05:05to bad decision-making and even worse policy.

00:05:08I urge you to reject outside political pressure

00:05:11in this volatile time and stay the course for the good

00:05:15of the American people and our economy as a whole.

00:05:18Thank you for your service, and I yield back.

00:05:20I'll now recognize the Ranking Member

00:05:21of the full Committee, Ms. Waters.

00:05:23Thank you very much, Mr. Chairman.

00:05:26Welcome back to the Honorable Jerome H. Powell, Chairman,

00:05:31Board of Governors of the Federal Reserve System.

00:05:36Chair Powell, as we saw with the latest jobs report,

00:05:41the labor market remains strong and the economy is surging.

00:05:45Despite inheriting an economy from the prior administration

00:05:50that had the worst jobs record since the Great Depression,

00:05:54President Biden has now overseen a record 15.7 million jobs

00:06:00created since he took office,

00:06:02with 206,000 new jobs created just last month.

00:06:08Not only that, but under the Biden administration,

00:06:12we're witnessing low unemployment rates,

00:06:15rising wages, and stabilizing prices for goods and services.

00:06:20This is not only because of President Biden's strong

00:06:23leadership, but also because of the historic legislation signed

00:06:28into law by President Biden, which has resulted

00:06:32in lower costs, created more jobs,

00:06:34rebuilt our infrastructure, supported small businesses,

00:06:39eliminated mostly junk fees,

00:06:41wiped out more than $144 billion in federal student loan debt

00:06:48for 14 million bars, and cut child poverty in half.

00:06:53President Biden is and will continue to advance policies

00:06:58that are providing good-paying jobs and an economy

00:07:01that works for everyone.

00:07:02Now, while I'm pleased to see

00:07:05that inflation is declining, the latest data makes clear

00:07:11that housing remains the number one driver of core inflation.

00:07:16Since 2020, house prices have increased by nearly 50%,

00:07:21with Americans now spending, on average,

00:07:24over 30% of their income on housing.

00:07:28This is a top priority for Democrats,

00:07:31but remains an afterthought for Republicans.

00:07:34Earlier this Congress,

00:07:36I reintroduced my comprehensive legislation housing package,

00:07:41including the Housing Crisis Response Act.

00:07:45This bill provides more than $150 billion in fair

00:07:51and affordable housing investments,

00:07:54representing the single largest investment

00:07:56in affordable housing in our nation's history.

00:08:00These funds would create nearly 1.4 million affordable

00:08:04and accessible homes, bring down housing costs for all,

00:08:09and revive the American dream of home ownership.

00:08:12Committee Democrats are committed

00:08:14to getting this bill across the finish line, and continue

00:08:17to hold out hope that our Republican colleagues will

00:08:21finally join us in this effort.

00:08:23Unfortunately, extreme MAGA Republicans are not just

00:08:27ignoring housing inflation.

00:08:29They're advancing their Project 2025 manifesto

00:08:34that would dismantle U.S. democracy

00:08:36and the economy as we know it today.

00:08:39Project 2025 is authored by almost two dozen former Trump

00:08:44White House staffers and Trump administration officials.

00:08:48It was compiled and published

00:08:50by the ultra-far-right Heritage Foundation,

00:08:53whose CEO recently declared that they are, quote,

00:08:57in the process of a second American revolution,

00:09:00which will be bloodless if the left allows it to be,

00:09:04quote, unquote.

00:09:05And if that kind of talk reminds anyone of the rhetoric we heard

00:09:09in the lead-up to, and on January 6, 2020, it should.

00:09:14Project 2025 promotes radical ideas

00:09:19to materially undermine the Federal Reserve,

00:09:22if not effectively abolish.

00:09:24MAGA wants to put you out of a job, Chairman Powell,

00:09:29so I look forward to your testimony and hearing

00:09:32from you, a Republican who was first nominated

00:09:35by President Trump, about your thoughts on the importance

00:09:39of the Federal Reserve and the work you have done

00:09:42to help our economy.

00:09:44And I yield back.

00:09:47Gentlelady yields back.

00:09:48A note for the record, Jerome Powell was initially nominated

00:09:53by President Obama to the Board of Governors

00:09:55of the Federal Reserve before being nominated

00:09:58by President Trump to Chair.

00:10:00So here we are.

00:10:02We'll recognize the Chair

00:10:04of the Financial Institutions Subcommittee, Mr. Barr,

00:10:07Andy Barr, variety, for one minute.

00:10:11Thank you, Mr. Chairman.

00:10:13Welcome, Chairman Powell.

00:10:15Runaway inflation and increased interest rates necessary

00:10:18to confront it continue to hammer Americans,

00:10:21and especially those living paycheck to paycheck.

00:10:23Workers and families feel the pain making everyday purchases

00:10:26at high prices in the grocery aisles and at the pump.

00:10:29They have suffered years of eroding purchasing power

00:10:31in their paychecks

00:10:32under the Biden administration's economic mismanagement.

00:10:35Heightened mortgage rates make it prohibitive

00:10:37for new homebuyers to reach the American dream

00:10:39of a starter home for their family.

00:10:41I am pleased that the Fed is resolute

00:10:44in getting inflation under control.

00:10:46I am pleased that you have committed

00:10:49to an apolitical approach to this.

00:10:51I am not pleased by the Fed's opaque, unjustified,

00:10:53politicized, and underanalyzed regulatory proposals

00:10:56which will ultimately hurt all Americans.

00:10:58We need to know where the Fed is going

00:11:00on its fundamentally flawed Basel III endgame proposal

00:11:03and its opaque regulatory approach.

00:11:05I yield.

00:11:07Well, Chair now recognizes the ranking member

00:11:11of the Financial Institutions and Monetary Policy Subcommittee,

00:11:13Mr. Foster, for one minute.

00:11:15Thank you, Chair McHenry and Ranking Member Waters.

00:11:18I'd like to also thank you, Chair Powell, for joining us today

00:11:21and for the role you have played in combating inflation

00:11:23and supporting a stable economic recovery.

00:11:26While the presidency is often the focus

00:11:28of political pronouncements about macroeconomic conditions,

00:11:31there's no question that that undersells the importance

00:11:34and the independence of the work of the Federal Reserve Board.

00:11:37While actions taken by the President

00:11:39and Congress certainly play a significant role,

00:11:41monetary policy decisions made

00:11:43by an independent Federal Reserve are the big dog

00:11:46in shaping macroeconomic conditions

00:11:48that shape economic outcomes for millions of Americans.

00:11:52And work continues on inflation,

00:11:53but significant progress has been made

00:11:55to bring the country in line with the Fed's 2% target.

00:11:58The good news is that macroeconomic policy is working

00:12:01as designed.

00:12:02Well-calibrated monetary policy with fiscal support

00:12:05from the American Rescue Plan, the Infrastructure and Jobs Act,

00:12:08and the Chips and Science Act has powered strong job creation

00:12:12and low unemployment while staving off a recession

00:12:14that many thought inevitable.

00:12:16And far better, I should point out, than our peer countries.

00:12:20While Democrats are committed to supporting our efforts

00:12:23to cut costs for American families, I yield back.

00:12:27We'll now welcome the testimony of Jerome Powell,

00:12:30the 16th Chair of the Federal Reserve Board of Governors.

00:12:33Chair Powell, you'll be recognized for five minutes

00:12:35to give an oral presentation or testimony without objection

00:12:38or written statement will be made a part of the record.

00:12:41You're now recognized for five minutes.

00:12:45Chairman McHenry, Ranking Member Waters, and other members

00:12:48of the Committee, I appreciate the opportunity

00:12:50to present the Federal Reserve's Semi-Annual Monetary

00:12:53Policy Report.

00:12:55The Federal Reserve remains squarely focused

00:12:57on our dual mandate to promote maximum employment

00:13:00and stable prices for the benefit of the American people.

00:13:03Over the past two years,

00:13:05the economy has made considerable progress toward

00:13:08the Federal Reserve's 2% inflation goal

00:13:10and labor market conditions have cooled while remaining strong.

00:13:14Reflecting these developments,

00:13:16the risks to achieving our employment

00:13:17and inflation goals are coming into better balance.

00:13:21I will review the current economic situation before

00:13:24turning to monetary policy.

00:13:27Recent indicators suggest that the U.S. economy continues

00:13:30to expand at a solid pace.

00:13:32Gross domestic product growth appears to have moderated

00:13:35in the first half of this year, following impressive strength

00:13:38in the second half of last year.

00:13:40Private domestic demand remains robust, however, with slower

00:13:44but still solid increases in consumer spending.

00:13:47We've also seen moderate growth in capital spending and a pickup

00:13:52in residential investment so far this year.

00:13:55Improving supply conditions have supported resilient demand

00:13:58and the strong performance

00:13:59of the U.S. economy over the past year.

00:14:03In the labor market, a broad set of indicators suggests

00:14:06that conditions have returned to about where they stood

00:14:08on the eve of the pandemic, strong but not overheated.

00:14:12The unemployment rate has moved higher but was still

00:14:15at a low level of 4.1 percent in June.

00:14:19Payroll job gains averaged 222,000 jobs per month

00:14:23in the first half of the year.

00:14:25Strong job creation over the past couple

00:14:27of years has been accompanied by an increase in the supply

00:14:30of workers, reflecting increases

00:14:32in labor force participation among individuals aged 25 to 54

00:14:37and a strong pace of immigration.

00:14:40As a result, the jobs to workers gap is well down from its peak

00:14:44and now stands just a bit above its 2019 level.

00:14:49Nominal wage growth has eased over the past year.

00:14:51The strong labor market has helped narrow long-standing

00:14:55disparities in employment and earnings

00:14:56across demographic groups.

00:15:00Inflation has eased notably over the past couple of years

00:15:03but remains above the committee's longer-run goal

00:15:05of 2 percent.

00:15:07Total PCE prices rose 2.6 percent

00:15:10over the 12 months ending in May.

00:15:12Core PCE prices, which exclude the volatile food

00:15:15and energy categories, also increased 2.6 percent.

00:15:20After a lack of progress toward our 2 percent inflation

00:15:23objective in the early part of this year,

00:15:26the most recent monthly readings have shown modest

00:15:28further progress.

00:15:30Longer-term inflation expectations appear

00:15:32to remain well-anchored, as reflected in a broad range

00:15:36of surveys of households, businesses, and forecasters,

00:15:39as well as measures from financial markets.

00:15:42Our monetary policy actions are guided by our dual mandate

00:15:47to promote maximum employment and stable prices

00:15:49for the American people.

00:15:51In support of these goals,

00:15:52the committee has maintained the target range

00:15:54for the federal funds rate at 5.25 to 5.5 percent

00:15:58since last July, after having tightened the stance

00:16:01of monetary policy significantly

00:16:02over the previous year and a half.

00:16:06We have also continued to reduce our securities holdings.

00:16:08At our May meeting, we decided to slow the pace

00:16:11of balance sheet runoff starting in June,

00:16:13consistent with the plans released previously.

00:16:17Our restrictive monetary policy stance is helping

00:16:19to bring demand and supply into better balance

00:16:22and to put downward pressure on inflation.

00:16:26The committee has stated

00:16:27that we do not expect it will be appropriate

00:16:29to reduce the target range for the federal funds rate

00:16:31until we have gained greater confidence

00:16:34that inflation is moving sustainably toward 2 percent.

00:16:38Incoming data for the first quarter

00:16:39of this year did not support such greater confidence.

00:16:43The most recent inflation readings, however,

00:16:45have shown some modest further progress,

00:16:47and more good data would strengthen our confidence

00:16:50that inflation is moving sustainably toward 2 percent.

00:16:54We continue to make decisions meeting by meeting.

00:16:57We know that reducing policy restraint too soon

00:16:59or too much could stall or even reverse the progress

00:17:02that we've seen on inflation.

00:17:04At the same time, in light of the progress made both

00:17:08in lowering inflation and cooling the labor market

00:17:10over the past two years,

00:17:12elevated inflation is not the only risk we face.

00:17:15Reducing policy restraint too late

00:17:17or too little could unduly weaken economic activity

00:17:21and employment.

00:17:23In considering adjustments to the target range

00:17:25for the federal funds rate,

00:17:26the committee will continue its practice

00:17:28of carefully assessing incoming data and their implications

00:17:31for the evolving outlook, the balance of risks,

00:17:34and the appropriate path of monetary policy.

00:17:36Congress has entrusted the Fed

00:17:38with the operational independence that is needed

00:17:40to take a longer-term perspective in the pursuit

00:17:43of our dual mandate of maximum employment and price stability.

00:17:47We remain committed to bringing inflation back

00:17:49down to our 2 percent goal

00:17:50and to keeping longer-term inflation expectations

00:17:53well anchored.

00:17:55Restoring price stability is essential

00:17:56to achieving maximum employment

00:17:58and stable prices over the long run.

00:18:00Our success in delivering on those goals matters

00:18:03to all Americans.

00:18:04I'll conclude by emphasizing that we understand

00:18:06that our actions affect communities, families,

00:18:09and businesses across the country.

00:18:11Everything we do is in service to our public mission.

00:18:14Thank you.

00:18:15I look forward to your questions.

00:18:17CHAIR POWELL.

00:18:17Well, thank you, Chair Powell.

00:18:18I will now recognize myself for five minutes.

00:18:22Chair Powell, let's begin with this question

00:18:25of the Basel III endgame.

00:18:27I know you had questions about it yesterday,

00:18:29but I think we need further clarity.

00:18:31Your testimony about Vice Chair Barr's discussions

00:18:36with the FDIC and with the OCC on the next steps

00:18:41for the Basel III endgame.

00:18:43You mentioned potential changes have been made

00:18:45to the original Basel III endgame, that a lot

00:18:47of progress has been made, and that the Board is very close

00:18:50to agreeing on the substance of those changes.

00:18:53But the next steps, that's really what I want to get into.

00:18:56Let's get through the mechanics of what happens next.

00:18:59If the Fed, the OCC, and the FDIC agree on the substance

00:19:03of whatever changes you're going to make, what happens then?

00:19:09Walk through the mechanics as you anticipated.

00:19:13CHAIR POWELL.

00:19:13Okay. So we're very close to having exactly that agreement

00:19:17on the substance of the proposed changes, pursuant to those talks.

00:19:21The next question, then, is how to proceed.

00:19:24And, you know, it is my view and the strong view

00:19:28of a number of Board members that the appropriate thing

00:19:30to do is to take that new proposal

00:19:34and publish it along with the effects

00:19:37of the Quantitative Impact Survey and put

00:19:40that out for comment again, and receive comment on that,

00:19:43and then take some time

00:19:44to review those comments before finalizing the regulation.

00:19:49And that's a discussion we're having

00:19:51with the other two agencies now.

00:19:53We have not been able to reach agreement on a path to do that,

00:19:56but that's something that we're, you know,

00:19:58we think is the right way to do.

00:19:59That's what we've done in similar situations.

00:20:03There aren't that many similar situations,

00:20:04but when we see broad and material changes

00:20:06to an important regulation, we think, let's go out again

00:20:09and give all the commenters another chance to comment.

00:20:12Yeah, and that also avoids serious lawsuit risk

00:20:16and the risk that Congress step in

00:20:19and overturn this rulemaking using the Congressional

00:20:22Review Act.

00:20:24I think the other agencies here,

00:20:25if they're not agreeing with the Fed, they're running

00:20:28against the independence of the Federal Reserve here.

00:20:31This is not a trifling matter of policy.

00:20:33This is a matter of real substance for the independence

00:20:36of the Fed and rulemaking of the Federal Reserve,

00:20:39which I think we should be able to keep these,

00:20:42keep the independence of the Fed separate,

00:20:44especially in this political environment.

00:20:47But opening up to a new comment period,

00:20:50so that means you have to get consensus for the Board

00:20:54of Governors on the policy.

00:20:56You have to get the agreement of the scandal-plagued chair

00:21:01of the FDIC or the five-member board of the FDIC.

00:21:05You have to get agreement

00:21:08by the acting comptroller of the currency.

00:21:11These people should not have real standing against,

00:21:13with the Fed, on a matter of serious policy,

00:21:16especially with a chair of the FDIC that is being ousted

00:21:20by his own party as soon

00:21:21as they can get a replacement confirmed.

00:21:23It's an absurd thing that the Fed has to go

00:21:26to an acting comptroller of the currency and a guy who's going

00:21:29to be out of a job very soon at the FDIC and get agreement.

00:21:34But thank you for listening.

00:21:36That was more of a, to convey this.

00:21:39So the quantitative impact analysis, is this going

00:21:43to include the interplay with the stress tests,

00:21:46G-SIB surcharge, all the other capital charges here?

00:21:51Will that be a part of the quantitative impact analysis?

00:21:56It'll be this proposal, which does include changes

00:21:58to the G-SIB surcharge,

00:22:00but does not include the stress tests.

00:22:02Okay. But the goal here with the quantitative impact is

00:22:07to actually measure the impact of these rules as enacted, right,

00:22:12based upon what is existing regulatory structures.

00:22:16Okay. That's right.

00:22:17All right.

00:22:17So let's get into the question of balance sheet as quickly

00:22:20as we can.

00:22:21Two and a half years ago, you know, you stated, quote,

00:22:26the committee stand, the committee intends to slow

00:22:29and then stop the decline in the size of the balance sheet

00:22:31when reserve balances are somewhat above the level it

00:22:33judges to be consistent with ample reserves.

00:22:36That's two and a half years ago.

00:22:38Where are we in this question of what are ample reserves?

00:22:42Well, so the balance sheet, the runoff

00:22:44in the portfolio is now, I think, $1.7 trillion so far.

00:22:50So we've made quite a lot of progress.

00:22:52We think we have a good ways to go.

00:22:53And as I mentioned and as you just mentioned,

00:22:57we've now slowed the pace really with a view to getting as far

00:23:02as we can without creating frictions and disruption

00:23:04that might cause us to prematurely stop shrinking.

00:23:07Going a little bit slower might actually enable us

00:23:09to go further.

00:23:10We think we have quite a ways to go.

00:23:11It's very hard to be precise about it.

00:23:13It's really a question of supply and demand.

00:23:15And we'll find that level with a little bit of a buffer on top

00:23:19of it, and that's where we'll stop.

00:23:20All right.

00:23:20Thank you for your testimony.

00:23:22The Ranking Member, Ms. Waters, recognized for five minutes.

00:23:24Thank you very much.

00:23:27Chairman Powell, are you familiar with Project 2025?

00:23:32Not really, no.

00:23:35You've heard about it?

00:23:37I really don't focus on these things at all.

00:23:40You don't focus, but you know there's something known

00:23:43as Project 2025?

00:23:46The reason I'm asking you is because one proposal is

00:23:50to get rid of the Fed's dual mandate

00:23:52to promote only stable prices, but also maximum employment.

00:23:57This is your mandate.

00:24:00These are mandates, right?

00:24:02This is what you do.

00:24:04Is that right?

00:24:04We do serve a dual mandate.

00:24:06That's right.

00:24:06And so if there was anything that would get rid

00:24:11of the mandate, what would it do to our economy?

00:24:15What would it do to our country?

00:24:17So the question of which mandate we serve is very much a question

00:24:20for Congress.

00:24:22My own view has been that the dual mandate has served us well.

00:24:25This is something Congress can change and change back

00:24:27to a single mandate.

00:24:29What do you do to get maximum employment?

00:24:34What do you do?

00:24:36Well, basically we have one tool on the economy,

00:24:40and that is we raise and lower interest rates.

00:24:42You'll find, though, that, anyway, we certainly

00:24:45at the Fed do believe that the dual mandate has been a

00:24:48good thing, and it's enabled us to, it has not stopped us

00:24:52from controlling inflation when that was the thing

00:24:55that needed to be done.

00:24:56And so while, of course I understand you may not have seen,

00:25:01heard, or read Project 2025, are you familiar with an effort

00:25:07in the country to get rid of diversity and inclusion?

00:25:11I see these things mentioned, but honestly, we're, you know,

00:25:17we're pretty focused on our task,

00:25:18which is maximum employment price stability.

00:25:21We're strong supporters of diversity

00:25:24at the Fed, as you know.

00:25:25Are you aware that I created a subcommittee on diversity

00:25:29and employment in this committee?

00:25:32Yes, I remember that.

00:25:33And do you think that getting rid of diversity

00:25:39and inclusion interferes with your ability

00:25:42to really realize the mandate of maximum employment?

00:25:48I, so I've, you know, I was, spent most of my career

00:25:51in the private sector,

00:25:52and what I observed was really successful institutions

00:25:55in the United States, companies, organizations generally,

00:25:58are those that do a really good job on diversity

00:26:01and get the best out of people

00:26:03and attract a broad diverse range of talents to the table

00:26:06and people feel comfortable speaking.

00:26:09So that's the way we feel about it at the Fed,

00:26:11and that's what we've been doing and will continue to do.

00:26:15And do you think it's important not only to have diversity

00:26:20and inclusion in the public sector,

00:26:24but in the private sector also?

00:26:26Yes, and as I mentioned,

00:26:27if you look at very successful American companies,

00:26:29you will very often see that they're good at that.

00:26:33They're good at hiring, attracting, investing in,

00:26:36and keeping diverse talent.

00:26:38That's one of the things

00:26:39that our really good U.S. public companies do well.

00:26:43Have you seen improvement during your tenure where diversity

00:26:46and inclusion has created opportunities for more jobs

00:26:51and helped to reduce the unemployment rate?

00:26:54Certainly seen, I think you see over the course

00:26:58of my long career a big change in diversity and inclusion,

00:27:03and you see that in the private sector and the public sector,

00:27:06and I think that's generally progress.

00:27:08I do. Under the work of this committee

00:27:11and the subcommittee is chaired by Ms. Beatty.

00:27:13She was able to gather important data about what was going

00:27:18on in the private sector, and what she discovered was

00:27:24that many of the CEOs and others welcomed the opportunity

00:27:29to learn more and to do better and to get assistance,

00:27:32and we saw improvement with diversity and inclusion.

00:27:37Have you seen that?

00:27:39There's no question if you talk to CEOs, they get this.

00:27:42If you want to attract the best talent in our country now,

00:27:46you need to be committed to these things.

00:27:50And so I would like to compliment you

00:27:54on the job that you have been doing.

00:27:57I'd like to compliment you on keeping us informed

00:28:01about inflation, and not only do I welcome you here today,

00:28:05I look forward to working with you for years to come.

00:28:10I yield back.

00:28:11Thank you.

00:28:12The gentleman from Arkansas, the vice chair of the full committee,

00:28:15Mr. Hill, is now recognized for five minutes.

00:28:18Thank you, Chair.

00:28:19Chair Powell, thanks so much, and welcome back to the committee.

00:28:22I want to pick up where Senator Tim Scott

00:28:24and Chair McHenry left off, and reiterate my strong support

00:28:28for your comment yesterday in the Senate about the need

00:28:32to re-propose the Basel III endgame.

00:28:35The Supreme Court's precedent, I think, makes clear

00:28:38that if a rule undergoes broad and material changes

00:28:42from the proposal to final rule,

00:28:44the public must be given a meaningful opportunity to review

00:28:47and comment on those changes.

00:28:49You generally share that view, I think.

00:28:51Is that right?

00:28:52Yes. And I'm looking forward to seeing the results

00:28:55of the quantitative impact study and the separate comment period,

00:28:59as well as an interagency agreement you referenced

00:29:02yesterday, because of Dodd-Frank's role

00:29:05and the vice chair for supervision,

00:29:07Vice Chairman Barr's role, and the Fed's role,

00:29:10would it be fair to say the Fed is a first among equals

00:29:14on proposing a rule like this?

00:29:16In other words, does the Fed have a supremacy position

00:29:20on determining whether it should be fully re-proposed or not,

00:29:23or do you view it strictly as a collaborative basis?

00:29:26Just curious in your view on that.

00:29:28I would say it's strictly collaborative, and I would say

00:29:30that our discussions with the FDIC,

00:29:32which Vice Chair Barr has actually been conducting,

00:29:35and the OCC, they've been very productive so far.

00:29:38So I want to make sure to say that we continue to work our way

00:29:42through this, and I believe we will get fairly soon

00:29:44to a resolution of the remaining process issue.

00:29:48Good. Well, let me turn from that subject

00:29:50to the court's recent decision

00:29:53to overturn the so-called Chevron Doctrine.

00:29:57Many of us believe this was the first step to reining

00:29:59in decades, literally, of an unprecedented,

00:30:02uncontrolled growth in the administrative state.

00:30:07And so I think all of us on at least this side

00:30:09of the aisle are certainly saying to the Federal Reserve

00:30:12and other federal agencies in our jurisdiction

00:30:14that we want to reassert Article I authority over the direction

00:30:18that independent agencies work.

00:30:21Would it be fair to ask you to certify that because

00:30:24of this change in Chevron that the Fed would commit

00:30:27to promulgating new rules only if they're at the direction

00:30:30of an explicit congressional authorization?

00:30:34So I think, first of all, we're studying that

00:30:37and several other decisions that have just come

00:30:39down in the last week or two.

00:30:40So I haven't got anything definitive for you on that.

00:30:44I think you know us to be an organization.

00:30:46I know us to be an organization that is strongly committed

00:30:49to the rule of law.

00:30:50Supreme Court says what the law is.

00:30:52We'll always do what we believe the law is.

00:30:55Well, I'll submit that question maybe in more detail in writing

00:30:58and maybe you'll have a chance to reflect on that.

00:31:01Back in February, you were on 60 Minutes

00:31:04and you said the U.S. budget deficit,

00:31:05the national debt are unsustainable.

00:31:08Do you still view that the U.S. is

00:31:10on an unsustainable fiscal path?

00:31:13I do.

00:31:13So I think I tried to be clear that the level

00:31:16of the U.S. debt is not itself unsustainable, but the path

00:31:19that we're on is unsustainable

00:31:20and I think that is not controversial.

00:31:24I think many of us certainly agree with that and we know

00:31:27that when the deficit's at three times the economic growth rate

00:31:31and growing, it's of concern and it's contributed to inflation.

00:31:37Just three years ago in Jackson Hole, Wyoming,

00:31:40you gave a speech where you were confident

00:31:41that inflation was transitory, which I think we've come

00:31:44to realize it's not the case.

00:31:47This hearing is sort of a can't miss opportunity for the Fed

00:31:51to demonstrate some humility on the monetary policy decisions,

00:31:55which some on this side

00:31:56of the aisle particularly think have made inflation worse.

00:31:59Your August 2020 Jackson Hole speech,

00:32:01you said the flexible average inflation targeting framework

00:32:05regarding 2% that you would let it run above 2%,

00:32:09was the Fed blinded by the previous 20 years

00:32:13of global change that was deflationary and not

00:32:18or you were not alert enough in 2020 to be more cautious

00:32:23about that change in policy?

00:32:25So we were certainly mindful of a long period of time

00:32:29in which there have been very low interest rates,

00:32:31but also very low inflation,

00:32:33suggesting that the neutral interest rate must have fallen

00:32:35quite substantially.

00:32:36That was the standard view.

00:32:38The thing we didn't see coming was the pandemic.

00:32:41It's not like everything went off the rails.

00:32:43It's like we had this pandemic

00:32:45and it really changed the way the economy is working.

00:32:47We had a big crisis.

00:32:48We did a lot of things.

00:32:49So the concerns that led us to, those concerns that we were

00:32:53in a world of very low interest rates all the time.

00:32:55But now wouldn't you say we're in a very opposite situation

00:32:58where because of reshoring and tariffs

00:33:01and other policies that are quite inflationary?

00:33:04Well, I would say this.

00:33:05Those concerns are, right now we have the policy rate

00:33:10in the mid-fives, right?

00:33:12And we don't see, we see the policy is restrictive,

00:33:15but clearly interest rates,

00:33:17the neutral interest rate must have moved up,

00:33:19at least in the short term.

00:33:21So I think that's the question we'll be asking ourselves

00:33:23in our review, which begins at the end of this year.

00:33:26We look forward to that and I'll go back to the chair.

00:33:28How much of what we did in that time period is relevant

00:33:32to the new world order?

00:33:33Is it relevant to the new world

00:33:34where rates appear to be higher?

00:33:36The gentleman from Georgia, Mr. Scott,

00:33:38is recognized for five minutes.

00:33:40Thank you, Chairman, and welcome, Chair Powell.

00:33:43It's great seeing you.

00:33:45Last time I saw you, you had, we had the gracious pleasure

00:33:51of you visiting with me in my office

00:33:54and we discussed a great variety of things.

00:33:57Thank you for that visit.

00:33:59Now, Chair Powell, this year the Fed tested 31 banks

00:34:06up from 23 last year, is that correct?

00:34:09I believe that's right, yes.

00:34:11And by estimating losses, revenues, expenses,

00:34:16and capital level under hypothetical stress scenarios,

00:34:21we did that, correct?

00:34:23Yes. And all 31 banks remained above their minimum common

00:34:29equity tariff, one capital requirements,

00:34:34after observing losses of nearly $685 billion, is that correct?

00:34:44Yes, that is correct.

00:34:46Yeah, I wanted to get those figures out and provide you

00:34:52with, you may have heard this, but I want to share

00:34:55with the nation because your Vice Chair Barr made this

00:35:01statement, and I wanted to put this in the record,

00:35:05his exact quote from this great achievement.

00:35:09He said, our goal of our stress test is to help ensure

00:35:16that we have enough capital to observe losses

00:35:21in a highly stressful scenario.

00:35:25And this test shows that we do.

00:35:29I thought that was a great statement of your record.

00:35:34Now, let me ask you my question.

00:35:36It's simple.

00:35:37Will the 2024 Fed stress test results have an impact

00:35:45on how prudential regulators roll out a new

00:35:50and updated capital proposal?

00:35:55So, the two are really two different things.

00:35:59There's the Basel III capital proposal,

00:36:02and then there's the stress test.

00:36:04So, and really the Basel III, as I mentioned, we've discussed,

00:36:09we're almost ready to put forward

00:36:11for further comment a revised proposal with material

00:36:16and broad changes to it.

00:36:17The stress tests are a different thing, and of course,

00:36:19we realize we have to adapt those over time and be open

00:36:24to changes, and we, you know,

00:36:26we have, it has evolved significantly over time.

00:36:28But it's really a separate thing from the Basel III endgame.

00:36:30Give us a little bit more information on the Basel III,

00:36:35because I work with you with this.

00:36:39Our work goes all the way back to the Obama administration

00:36:43when we responded to that crisis with our banks.

00:36:51And you and I worked that up where we came

00:36:55up with the hardest hit program to help those

00:36:59who were suffering with, those states that were suffering

00:37:03with high unemployment and at the same time,

00:37:07high home foreclosures.

00:37:10And we were successful.

00:37:12And we've established that program, and it's still going

00:37:16on and helping many of our states.

00:37:19But, you know, I want to also share what is happening

00:37:25around the world as a result of our activities.

00:37:30The European Union is now set to delay key parts

00:37:35of its bank capital rules by more than a year

00:37:39so that their leaders,

00:37:41lenders will not be at a disadvantage.

00:37:44Over in Canada, it's important to know

00:37:47that their banking regulators have also delayed

00:37:51for another year, imposing high capital rules

00:37:55on countries' banks at the risk of making them uncompetitive.

00:38:00And the Swiss National Bank is highly unlikely now

00:38:05to adopt a proposed 15 percent capital requirement for UPS

00:38:11and other Swiss banks.

00:38:13And the Bank of England has issued a near-final proposal

00:38:17to increase UK bank capital by three-two percent.

00:38:23And I think this is all a measure of your great work

00:38:29and that of your vice chair.

00:38:32And I just wanted to let you have a comment on that, please.

00:38:38Sure. So we're committed to finalizing this proposal.

00:38:43Our banks are going to live with these rules

00:38:44for a long, long time.

00:38:45The main thing is to get it right,

00:38:47and that's what we're doing.

00:38:49What we do in the end will be consistent

00:38:51with the Basel Agreement, and it will also be consistent

00:38:55with what other comparable large jurisdictions are doing.

00:38:58You're doing a great job.

00:39:00Keep up the good work.

00:39:02We'll recognize the gentleman from Pennsylvania,

00:39:03Mr. Muser, for five minutes.

00:39:06Thank you very much, Mr. Chairman.

00:39:07Thank you very much, Chairman Powell.

00:39:09And also, thank you for continuing to indicate

00:39:12that you will look at the entirety of the economy,

00:39:15the whole economy.

00:39:16We appreciate that.

00:39:17So one of the nation's largest banks recently warned in a memo

00:39:21and has also been voiced by smaller banks

00:39:23that the current pace of regulation, such as changes

00:39:25to capital requirements and lowering debit card

00:39:28interchange caps, could lead to a new fees associated

00:39:32with checking accounts and other increased costs

00:39:35for small businesses.

00:39:37This does come amid expiring tax provisions

00:39:40that are sunsetting as we speak that are critical

00:39:44for small business, such as the R&D tax credit,

00:39:46interest deductibility, and bonus depreciation.

00:39:49This does raise the question,

00:39:51are you considering how these regulations

00:39:54and tax increases will directly work against your mandate

00:39:58to achieve 2 percent inflation?

00:40:00Moreover, with the proposed changes to Basel III,

00:40:03it is crucial to ensure that all stakeholders have a voice

00:40:06in this process, which you are stating will occur,

00:40:10and a Basel re-proposal

00:40:12and adequate comment period are certainly very welcome.

00:40:16So, Chairman Powell, yesterday in the Senate you mentioned

00:40:18that the majority view of the board is

00:40:20to re-propose Basel III for comment period.

00:40:24Could you clarify if this means the proposal will be re-proposed

00:40:28from scratch and any other specifics you can provide?

00:40:32Sure. So we haven't reached agreement on this.

00:40:34As I mentioned, we're working through this with our colleagues

00:40:37at the FDIC and the OCC,

00:40:40and I can't tell you exactly what the form will be.

00:40:44The sense of it would be, though,

00:40:45that we're making material changes

00:40:47and that we would want the public to have a chance to look

00:40:51at those changes in the light of the way they play off

00:40:54against the quantitative impact survey

00:40:56and should have a reasonable time to comment on those.

00:40:59In addition, you know, we're focused on one big area,

00:41:04but there are institutions that have made comments all

00:41:08across the spectrum, and we're reading all of those carefully.

00:41:11And we're not going to republish all of those.

00:41:15Some of those we can just make changes and move forward on.

00:41:19So it's going to be a very labor-intensive,

00:41:23time-consuming process.

00:41:25Writing these things up takes a long time, and, you know,

00:41:27we're going to get it right.

00:41:28Good. That's great.

00:41:29Obviously, you know, Canada recently postponed,

00:41:32as did the EU and UK,

00:41:34for international competition standpoint.

00:41:36It seems to make sense, and so that's appreciated.

00:41:40Chairman, would you agree that excessive spending,

00:41:44increased taxes, limits on domestic energy production

00:41:50in principle are a cause for higher costs for business,

00:41:55contributes to inflation, and as well tightens the labor markets,

00:41:59kind of running contrary to your two mandates?

00:42:03You know, you're asking me kind of a political question there.

00:42:06I'm not going to, I don't want to criticize a platform

00:42:09of economic fiscal policies

00:42:11that are not really ours to decide.

00:42:13That's really, it's more of an economic question,

00:42:15but I appreciate your answer, sir.

00:42:17So when you mentioned recalibrate policy yesterday

00:42:21in the Senate hearing, was part

00:42:24of your thinking taking a more holistic view

00:42:26of economic conditions?

00:42:29Yes, very much so.

00:42:30Okay. Yeah.

00:42:32Chairman, is there any data

00:42:35to support the so-called greedflation,

00:42:40this term greedflation somehow has caused inflation?

00:42:44Is there any data to support those comments?

00:42:46So we look at it that inflation, disinflation has been caused

00:42:50by a combination of, you know,

00:42:52very strong demand and constrained supply.

00:42:56So it was really a high-speed collision

00:42:59between an economy that was reopening, and by the way,

00:43:02this was, there was inflation all

00:43:03over the world at the same time,

00:43:05so these are some common factors.

00:43:06But at the same time, you had tremendous demand, for example,

00:43:09for automobiles, you had constrained supply

00:43:12because there weren't enough semiconductors.

00:43:14Long story short, but, you know,

00:43:17so that to us is what inflation, disinflation is all about.

00:43:21So we've observed, you know, the sort of healing

00:43:24of the supply side at the same time,

00:43:26restrictive monetary policies weighing on demand,

00:43:28and we've seen inflation coming down.

00:43:29Right, so there's no data that supports that gouging

00:43:32of consumers is part of the inflation.

00:43:34It's been very hard to track a connection with, you know,

00:43:39earnings and things.

00:43:40Secretary Yellen mentioned that she didn't feel

00:43:42that there was grocery price shock and that sort of thing.

00:43:47Groceries and gasoline are the two driving problems

00:43:50for American families and certainly my constituents.

00:43:53Do you believe your policies are helping

00:43:55to alleviate in those two areas?

00:43:59So a lot of things affect, let's take energy first.

00:44:03You know, the energy prices are generally set

00:44:05at the global level.

00:44:07We do have some effect on that.

00:44:08Sorry, Chairman, I've run out of time.

00:44:09Thank you.

00:44:10I yield back, Mr. Chairman.

00:44:11Sorry, we can continue.

00:44:12Great, thank you.

00:44:14The gentleman from Missouri,

00:44:15Mr. Cleaver is now recognized for five minutes.

00:44:17Thank you, Mr. Chairman.

00:44:18Thank you, Mr. Chairman, for being here.

00:44:21And in some ways I want to follow up or at least respond

00:44:27to the very civil but I think reason

00:44:33of why we need an independent central bank.

00:44:38And your response was, you know, the question you raised would,

00:44:46if I answered it, it would be along some kind

00:44:49of a political avenue and you didn't want

00:44:54to drive on that avenue.

00:44:56So I'm also very much concerned about a lot of the discussion.

00:45:01I've been on this committee a while

00:45:03and so it comes up quite often.

00:45:06When the Federal Reserve was birthed around the turn

00:45:13of the century, I think, 1913, 1918, somewhere like that,

00:45:21prior to the establishment of the central bank, did we,

00:45:24was our country experiencing a lot of recessions

00:45:29because of no security, people felt no security,

00:45:36particularly the business community,

00:45:39and making big investments because nobody was in control.

00:45:44You just kind of think what went on just went on.

00:45:47Is that relevant?

00:45:48Yes, I think the lack of a central bank between 1836

00:45:53and the founding of the Fed was a period of lots and lots

00:45:56of depressions and a lot of it had to do with the crop cycle

00:46:00and the banks not being able

00:46:02to handle the very large seasonal swings

00:46:05and there was no central bank to provide liquidity.

00:46:08So that's really what gave rise to the founding of the Fed

00:46:11in the early part of the last century.

00:46:13Do you think that it is dangerous

00:46:16to blend monetary policy and fiscal policy?

00:46:23To blend them?

00:46:24Yes.

00:46:26So we try to keep them very separate and, you know,

00:46:29we try not to express views on fiscal policy.

00:46:34That's for elected people who have, you know,

00:46:36undergone elections and won

00:46:39and make those very difficult decisions.

00:46:41We have a really specific, narrow, but important mandate

00:46:44that we do that you've given us and we try to stick to that.

00:46:48And so we take your policies as given

00:46:53and then we conduct monetary policy with that.

00:46:59I don't want to draw you into any kind

00:47:04of a political response, but, and I have not read all

00:47:09of this Project 2025 document.

00:47:12I read some of it online a couple of nights ago,

00:47:17but even whether it comes out of a 2025 or a 3089, whatever,

00:47:22that one of the things that I'm concerned about reading this,

00:47:29from this little, this document, that the document argues

00:47:35that the Federal Reserve is the inflation problem

00:47:40and eliminating the Federal Reserve,

00:47:44imposing economic policy on the Fed that does not come

00:47:47from within the Fed.

00:47:49So I'm wondering here, would you agree with any of that?

00:48:00I just stated, whether it came from me

00:48:03or Chairman McHenry or anybody else?

00:48:08So I'll just say, first of all, you know,

00:48:10we're certainly a fair game for any criticism people have.

00:48:14I think we've, what we've learned and what we know is

00:48:17that having an independent central bank is really

00:48:20essential.

00:48:20If you want to have high and volatile inflation,

00:48:23then the quickest road to that would be

00:48:25to undermine the independence of the central bank,

00:48:27of the Fed in our case.

00:48:29So I frankly think that that view is very widely held,

00:48:32I find up here on Capitol Hill in both political parties, so.

00:48:36So eliminating the Federal Reserve is best

00:48:41for promoting economic stability.

00:48:43Yes.

00:48:43Thank you.

00:48:45I knew that our Chair, that our Ranking Member was going to come

00:48:52in and deal with the issue of housing.

00:48:53She always does, and we all appreciate the fact

00:48:57that she's obsessed with it, and I like that obsession.

00:49:01But I'm wondering, as we try to figure out how to deal

00:49:08with this issue, oh my goodness, my time's running out.

00:49:13Was that a question?

00:49:16I didn't finish it, but I sure, yes,

00:49:18if you knew where I was going, please.

00:49:22Gentleman's time has expired.

00:49:24We'll now recognize the gentleman from New York,

00:49:25Mr. Garbarino, for five minutes.

00:49:29Thank you, Chairman.

00:49:29Chair Powell, thank you very much for being here today.

00:49:32Based on some comments you made today and yesterday,

00:49:34it appears you've made quite a bit of progress on changes

00:49:37to the Basel III endgame proposal, and you're very close

00:49:40to hearing some of those, the substance of those changes.

00:49:43I know you won't get into specifics, you said that.

00:49:45I just don't know how deep you won't get into them,

00:49:48but I just want to confirm what you said

00:49:51to my colleague, Mr. Musi.

00:49:53There will be, you're not reproposing some things,

00:49:56it's just going to be a partial reproposal?

00:49:58That's what we're looking at doing, is major things

00:50:02that we've been working on, and there will be additional changes

00:50:06that will be made that won't be reproposed.

00:50:08That's what we're working on, rather than a full,

00:50:10wide proposal.

00:50:12So it's not a complete reproposal, it's just partial.

00:50:14Can you get at least, can you tell me which components you're?

00:50:20You know, it's not, until it's all agreed and ready to go

00:50:24and vetted, I'm reluctant to try to get into too many specifics,

00:50:27just because, you know, when you're doing these things,

00:50:29nothing is agreed until everything is agreed.

00:50:31No, I understand.

00:50:32I just might ask him for what specifically your changes,

00:50:34which, if you're willing to say which.

00:50:37I hope to be able to come to you with a really clear answer

00:50:41on that soon.

00:50:42I mean, I think we're ready to go at the Fed.

00:50:45So that's my next question.

00:50:47So it's been said several times that you and many of your members

00:50:50of the board are at odds with your counterparts at the FDIC

00:50:52and OCC over how to proceed with putting

00:50:54out a revised proposal for comment.

00:50:56So if the FDIC and the OCC are not yet on board with allowing

00:50:59for a new comment period, who is holding up this consensus?

00:51:03Is it Chair Grunberg?

00:51:04Is it Director Chopra?

00:51:05I don't want to say that we're at odds.

00:51:08I just want to say we're working

00:51:09through this issue together and...

00:51:12Someone's got to be holding it up.

00:51:15Well, you know, it's a discussion that we're having

00:51:18and I think it's been constructive

00:51:20and I think we'll try to keep it that way.

00:51:22Can you at least answer whether or not the five-member FDIC board

00:51:26needs to sign off or can you just go to the Chair?

00:51:30No, I think it's the board and, of course,

00:51:32the comptroller is one person.

00:51:34But I think it's, I mean, the FDIC can speak for themselves,

00:51:36but I do think their board would be the question.

00:51:40Okay. One final question,

00:51:42timeline question before I move on.

00:51:44You mentioned yesterday that a reasonable prediction would be

00:51:46that Basel would not be finalized

00:51:47until the first quarter of 2025.

00:51:50Under this timeline, would it be safe to say

00:51:51that implementation would then not occur

00:51:53until at least the beginning of 2026?

00:51:56Again, I can't be that specific.

00:51:58And, you know, that's, someone asked me, does it sound

00:52:02like the first quarter of next year might be, and it might be.

00:52:04I mean, there's a range of times it would take.

00:52:06The thing is, as I mentioned, U.S. banks are going to be living

00:52:10with these rules for many years.

00:52:11The point of it is to get it right, not to do it quickly.

00:52:14You know, we want to get it right, listen to the comments,

00:52:16make sound decisions, and move ahead in a way that is, you know,

00:52:21gives us a sustainable set of rules that we won't have

00:52:23to come back and fix all the mistakes in.

00:52:27Thank you.

00:52:27I want to move on to another topic, long-term debt.

00:52:31You mentioned yesterday that you would most likely not move

00:52:33forward with other rules until people reach a place

00:52:35of understanding and acceptance of a revised Basel proposal.

00:52:38I hope that's the truth, as banks need

00:52:41to fully understand the implications

00:52:43of a Basel proposal before any action is taken

00:52:46on long-term debt.

00:52:48Finally, Chair Powell, I'd like to emphasize the need

00:52:51for the Fed to conduct a comprehensive, data-driven,

00:52:54and most importantly, transparent assessment

00:52:57of the current liquidity framework.

00:53:00So very quickly, will you commit

00:53:02to conducting a public quantitative impact study

00:53:05and a full notice and comment rulemaking before imposing any

00:53:08new liquidity requirements?

00:53:10I didn't catch the first part of that,

00:53:11the first part of your ask.

00:53:13Will you commit to conducting a public quantitative impact study

00:53:17and a full notice and comment rulemaking before imposing any

00:53:19new liquidity requirements?

00:53:20On the liquidity thing.

00:53:21I'm not exactly sure what we're contemplating there.

00:53:25We certainly contemplate getting a full range of input

00:53:28from the public on that, because these are,

00:53:30some of these are novel ideas, and we understand that.

00:53:32All right.

00:53:32As the Chairman said before,

00:53:33these impact studies are very important,

00:53:35because they're to show what impact these rules will have.

00:53:38So I think that is very important that we have that,

00:53:40because we had a mucked up process with Basel 2.0,

00:53:44and I don't think there's, we don't want to repeat that.

00:53:48And I have a little time left.

00:53:49I'm going to yield to my colleague from Pennsylvania,

00:53:51Mr. Musa, because I know we had another question.

00:53:53I thank my colleague.

00:53:55Chair Powell, just back to what we were talking about,

00:53:57the price instability of groceries and gasoline,

00:54:00where we do have somewhat

00:54:01of an affordability crisis has been termed.

00:54:04So would lowering rates in the near future be a pro-growth

00:54:09initiative, perhaps?

00:54:10Is that something that's being considered

00:54:12that would actually drive investment

00:54:14and give a clearer picture for investment, and perhaps help

00:54:19in these two categories, and in the end, increase in supply,

00:54:22so as we lower those prices?

00:54:24Honestly, when we think about our near-term rate moves,

00:54:28we're thinking about a couple things.

00:54:29And the first of which is we want to be more confident

00:54:31about inflation.

00:54:32My apologies, Chairman.

00:54:33I went over.

00:54:34Sorry. Chairman, I yield back to my colleague.

00:54:36The gentleman from California, Mr. Vargas,

00:54:38is recognized for five minutes.

00:54:40Thank you very much, Mr. Chairman.

00:54:42Thank you again for this hearing, and the Ranking Member.

00:54:44Thank you very much.

00:54:45Chairman Powell, thank you very much for being here.

00:54:48We appreciate it.

00:54:48In fact, I was looking at your history

00:54:50when they were saying who nominated you

00:54:52when you got here and all that.

00:54:53In fact, you had had public service even prior

00:54:56to that time, right?

00:54:57That's right.

00:54:58So I thank you for your long public service to the nation.

00:55:01I think you've been outstanding.

00:55:02I think we all respect you deeply here.

00:55:04You're pretty boring here today, to be frank.

00:55:09Sorry? You're pretty boring here, to be frank.

00:55:12Thank you.

00:55:12That's a high compliment.

00:55:14Yes, it is, because sometimes when you're here,

00:55:18there's all sorts of cameras here,

00:55:20and they're watching your every step and all.

00:55:22And I think there's a reason for that, right?

00:55:24And that's because the economy's doing all right.

00:55:27Am I wrong about that?

00:55:29You know, take a look at our economy.

00:55:31We're growing at around 2%, it feels like.

00:55:34Inflation is down to 2.5, 2.6%.

00:55:37Unemployment's at 4.1.

00:55:39These are good numbers.

00:55:40Yeah. I mean, I hear the parade of horribles

00:55:43on the other side, how the sky's falling.

00:55:46But I don't see the media here to attest to that.

00:55:51In fact, it's just the opposite.

00:55:53Did you read some of the headlines

00:55:55of the new government in Britain?

00:55:57Some of the headlines?

00:55:58If not, let me read one.

00:56:00It says, New British Government Inherits Worst Economic Plight

00:56:05Since World War II.

00:56:06And in fact, there's a number of headlines like that saying

00:56:09that England's in trouble.

00:56:12I imagine if you were running, you know, their central bank,

00:56:17it'd be a whole bunch of media here beating you up to find

00:56:20out, you know, what the hell you're doing

00:56:21or what you aren't doing.

00:56:22And I think the reason for that, again,

00:56:24is I think the government here has done a pretty darn good job.

00:56:28One of the things you said you didn't see coming was

00:56:30the pandemic, right?

00:56:32I'm not putting words in your mouth.

00:56:33Right. In fact, I was here and I heard the parade of horribles

00:56:37that we were going to have a recession, maybe a depression.

00:56:40In fact, the country was going to fall apart.

00:56:42Did it?

00:56:45No. We went through a period of high inflation

00:56:47as the other countries did.

00:56:50And, you know, that's very challenging for the people.

00:56:53Isn't it the case that most of those countries had higher

00:56:55inflation than we did in Europe?

00:56:59Over time, there were times when their inflation was higher.

00:57:01I think overall, it was broadly comparable.

00:57:04Yeah. In fact, I brought it up a number of times here

00:57:06because there was a whole bunch of those countries

00:57:07that had much higher inflation than we did.

00:57:09Well, Europe was much harder hit with the energy issues coming

00:57:12out of the Ukraine war than we were.

00:57:14Sure. I mean, there's a whole bunch of other issues

00:57:16to instability they had, political instability,

00:57:18a whole bunch of other things, obviously.

00:57:20But, I mean, it is interesting today that, you know,

00:57:24the parade of horribles that we hear doesn't seem

00:57:26to manifest itself with the media or the attention

00:57:29that you normally get.

00:57:30And that's good.

00:57:31I mean, I think it's a great thing.

00:57:32Now, I do want to ask a couple of questions.

00:57:34I do have concerns, Basel III on housing.

00:57:36I think I've made those concerns known to your office

00:57:39and I won't rehash them.

00:57:42But I do have issues that I want to talk to you

00:57:45about with regard to climate.

00:57:47Obviously, you said you don't read too much of the news.

00:57:50You didn't hear about Project 25.

00:57:51I don't think that's what you meant to say.

00:57:52And I don't want to put words in your mouth.

00:57:54I think when the ranking member asked you

00:57:58if you had heard about it, I think you said no.

00:58:00I think you've probably heard about it,

00:58:02but you haven't read it.

00:58:04I've seen nothing more than headlines on it.

00:58:06I mean, I've devoted zero energy into it.

00:58:11Yeah, I don't read that wacky stuff myself either,

00:58:14but I certainly read the headlines.

00:58:17But the reason I ask about the headlines is

00:58:19that you obviously have seen what has happened in Texas.

00:58:22You've seen what has happened with climate change.

00:58:25In fact, you've testified, I think,

00:58:27before that you believe in climate change.

00:58:29Is that correct?

00:58:30Sure. Yeah.

00:58:32And so what are we doing?

00:58:33You've taken a number of steps,

00:58:35I think they've been very positive, to make sure

00:58:37that we look at the risks of climate change.

00:58:39Could you go over some of those?

00:58:40Because that does concern me.

00:58:41I think that's a change that we also didn't seek.

00:58:44Well, we saw it coming.

00:58:45I saw it coming.

00:58:45I've been saying it for a long time,

00:58:46but a lot of people didn't believe.

00:58:48So, you know, if you're looking at financial regulators,

00:58:51you're looking at people who have a very,

00:58:52very limited role in climate, and that is just to look

00:58:57at the institutions that we supervise and make sure

00:58:59that they understand and can manage the risks

00:59:02that they're running.

00:59:03That, we are not climate policy makers.

00:59:05Right, right, and I'm not asking that.

00:59:06It has to be elected people who do that.

00:59:08Right, but you have to take a look at the risks.

00:59:10I mean, look at the risks

00:59:11that the insurance companies are taking, and the banks,

00:59:13of course, are financing these homes,

00:59:16and now you can't get insurance on them.

00:59:18So, all of a sudden, you can't rebuild.

00:59:19I mean, these are risks that the banks are looking at.

00:59:22So, we don't regulate insurance companies.

00:59:25No, right, but you regulate the banks.

00:59:26Banks, yeah.

00:59:27And these banks have mortgages on those houses, do they not?

00:59:32Many of them.

00:59:33Well, in many cases, they're not writing mortgages anymore.

00:59:36So, that's the result we're getting is

00:59:38that banks are saying, you know, they see these risks.

00:59:42They do.

00:59:43My time's up, but thank you again.

00:59:45I appreciate you.

00:59:45Thank you.

00:59:47The gentlelady from California, Mrs. Kim,

00:59:50is recognized for five minutes.

00:59:52Thank you, Chairman.

00:59:54Chairman Powell, thank you for being with us today.

00:59:58Gosh, you're under a lot of pressure from all sides

01:00:01to divert from our monetary policy goals,

01:00:05and I commend you for your leadership and staying focused

01:00:08on the core missions of the Fed, which are price, stability,

01:00:12and maximum employment.

01:00:13So, thanks again for your leadership.

01:00:16And you have stated that it is the Fed's strong view

01:00:20that you will have to reopen the Basel III end-game proposal

01:00:23for common again, and I really urge FDIC

01:00:27and OCC moving forward with reopening the common period.

01:00:34Chairman Powell, would broad support mean abandonment

01:00:41of any modified proposal

01:00:43that garners mostly negative public comments

01:00:46in a public common period for the modified proposal?

01:00:50Sorry, I didn't follow your question.

01:00:51Would broad support mean abandonment

01:00:55of any modified proposal

01:00:57that garners mostly negative public comments

01:01:00in a public common period for the modified proposal?

01:01:04I mean, broad support empirically would mean,

01:01:08you know, a good solid vote on the Fed board.

01:01:11And I've tried not to be specific about what that means,

01:01:14but it also means broad support among the broader community

01:01:19of commenters on all sides.

01:01:21That's what I meant by broad support.

01:01:23Got it. Yeah, that's what I meant by it.

01:01:26Thank you.

01:01:27And as the Fed looks to enacting several changes to the proposal,

01:01:32I would also urge you not to overlook how the Basel

01:01:35and endgame proposal would disproportionately impact FBOs

01:01:41and regional banks and U.S. domestic jobs

01:01:43because of the way the outside operational risk is,

01:01:47you know, weighted.

01:01:49So can we get your commitment to that?

01:01:52So let me just say we're, I'm not going to get

01:01:55into specifics, we're well aware of those concerns.

01:01:58You know, we've obviously carefully digested all

01:02:02of the comments we've gotten from all different sectors,

01:02:04and those are concerns that we're well aware of.

01:02:07Thank you.

01:02:08Let's switch gears to another matter.

01:02:11You have spoken for the need of transparency.

01:02:15Are there any conversations at the Fed

01:02:18to have more transparency and better engagement

01:02:21and consistency with stress tests?

01:02:25So we, you know, we have increased transparency

01:02:28in the stress tests over time.

01:02:31And I would say, you know, we do, if people want

01:02:34to write articles and make comments that are critical

01:02:37of the stress tests, we're going to read those

01:02:39and we're going to think about that.

01:02:40We're open to improving it.

01:02:42We know that we, the stress test has to evolve over time

01:02:44if it's to remain relevant, and I think transparency is one

01:02:47of those subjects where we're, you know, we're prepared

01:02:50to listen and think about ideas.

01:02:52Definitely.

01:02:53I would like to see more stress test regime

01:02:56that is more transparent and adapted,

01:02:59identifying unforeseen risks so we can achieve

01:03:03that by being more collaborative, I believe, yes.

01:03:06So I'm also interested to hear from you whether you

01:03:10and your fellow banking regulators have considered the

01:03:13cumulative impact of any new liquidity standards

01:03:17with the Basel III framework

01:03:19and the existing post-crisis liquidity requirements.

01:03:24So what industry engagement has the board staff held

01:03:28with respect to changes to the liquidity framework?

01:03:33So we haven't actually made any proposals on it yet.

01:03:36We have had significant industry interaction on the proposals

01:03:40and I mean, we will move, I think, at some time this year.

01:03:45What about the board staff?

01:03:47Have they conducted any industry-wide data collection

01:03:51to study the necessity for and the impact of any changes

01:03:56to the existing liquidity framework?

01:03:58I think we've done a lot of investigation on that front,

01:04:02but I think that this is the beginning

01:04:03of the process, not the end.

01:04:04You know, we'll, we haven't published proposals yet.

01:04:07We're, you know, working on them,

01:04:10and it's a pretty early stage.

01:04:11Thank you.

01:04:12Let me quickly talk about the inflation issue.

01:04:15We had a peak inflation rate of 9.1% in June 2022,

01:04:22and a lot has been talked about being a supply-side issue

01:04:25and the demand shock from the opening economy.

01:04:29So can you elaborate how the expansion in the money supply

01:04:32and fiscal stimulus played a role in persistent inflation,

01:04:35and why is it so important to get

01:04:37to the 2% inflation rate goal right now?

01:04:41So the inflation that arose here was a collision

01:04:45between very strong demand as the economy reopened.

01:04:49Remember that there had been fiscal transfers.

01:04:51We had rates very low.

01:04:53You know, those things were done because we thought we could be

01:04:56looking at a very, very bad economic time.

01:04:58As it turns out, the economy reopened,

01:05:00and demand spiked very high.

01:05:03People had saved a lot of money because they couldn't spend,

01:05:06and so there was tremendous demand,

01:05:07and there was constrained supply.

01:05:09What you got was inflation.

01:05:10And you got that everywhere in the world.

01:05:12That's what happened.

01:05:13So what's happened, to bring inflation down,

01:05:15we've made quite a lot of progress on inflation.

01:05:17To bring inflation down, the Fed has been working

01:05:20on with restrictive policy on cooling demand.

01:05:22That has been working, and the supply side has been healing.

01:05:25And, you know, the negative labor participation shock has

01:05:29essentially reversed, adjusted for.

01:05:32So it's kind of working out as we had expected.

01:05:35Thank you very much, Chairman.

01:05:36General Warren from Georgia.

01:05:37Mrs. Williams is now recognized for five minutes.

01:05:41Thank you, Chairman McHenry, and thank you, Chair Powell,

01:05:43for joining us today.

01:05:44As the president of the Federal Reserve Bank of Atlanta,

01:05:48Rafael Bostic has so rightly pointed

01:05:50out that combating economic inequality is a critical part

01:05:54of the Fed's dual mandate.

01:05:56When everyone in our community doesn't have the opportunity

01:05:59to contribute to their fullest potential,

01:06:01the economy is not firing on all cylinders.

01:06:04Nowhere is this more apparent than in my home city of Atlanta,

01:06:08which has more black-owned businesses

01:06:10than any other city in the country,

01:06:13but is still among our nation's leaders

01:06:15in the racial wealth gap.

01:06:16I applaud you and your staff at the Federal Reserve

01:06:19for the work that you're doing to make sure that the economy

01:06:22works as well for the hardworking people

01:06:24of Georgia's fighting 5th District as it does

01:06:27for those in the top 1%.

01:06:29This includes helping to make sure

01:06:31that financial services are affordable

01:06:33and accessible to everyone.

01:06:35As the Fed moves forward with the proposed changes

01:06:38to Regulation 2, I know that protecting access to affordable

01:06:41and accessible banking is at the top of your mind.

01:06:45That is why I was concerned when I started receiving outreach

01:06:48about the unintentional effects

01:06:49that Reg 2 proposed rule would have on marginalized communities,

01:06:53including my constituents in Atlanta.

01:06:56Specifically, I heard about the impact that the reduction

01:06:59in interchange fees proposed by this rule could have

01:07:02on bank-on certified accounts in my district

01:07:05and across the country.

01:07:06The bank-on initiative is a partnership

01:07:08between financial institutions

01:07:10and trusted community-based organizations to offer low

01:07:13or no-cost bank accounts to unbanked

01:07:16and underbanked individuals.

01:07:18Access and affordability are at the heart of the changes

01:07:22that you're proposing, and I couldn't agree more

01:07:24with those goals, but we have to make sure that programs designed

01:07:28to serve unbanked and underbanked individuals

01:07:31in marginalized communities continue to flourish.

01:07:35In response to these concerns, my colleague across the aisle,

01:07:38Mr. Luckemeyer, and I sent a bipartisan comment letter

01:07:41in March to you highlighting those very concerns and urging

01:07:45that the final rule not negatively impact low

01:07:48and moderate income communities.

01:07:50Chair Powell, how does the Fed take

01:07:52into account how regulations impact constituents

01:07:55who don't have an attorney or an interest group

01:07:58to submit a comment on their behalf?

01:08:00Well, let me say first, we have heard those concerns

01:08:04that you raised and others have raised about aspects

01:08:07of the proposed rule, and we very much understand the

01:08:12concerns that are being raised.

01:08:13In terms of people where we don't have comment letters,

01:08:17we try to be thoughtful about the impact of our regulations,

01:08:22but principally we're looking for public comment on things.

01:08:25Thank you.

01:08:27The FDIC's most recent data shows that the rate

01:08:29of unbanked households is at an all-time low.

01:08:32The Bank On initiative has certainly played an important

01:08:34role in this progress.

01:08:35Bank On certified accounts are available to more than 95 percent

01:08:39of low and moderate income households across all 50 states.

01:08:43Access to low or no-cost banking services is a door

01:08:47to financial inclusion and wealth generation

01:08:50for marginalized families.

01:08:51As written, Reg 2 could undo some of the costs

01:08:55As written, Reg 2 could undo some

01:08:57of the enormous progress made in the past several years.

01:09:01Chair Powell, how can regulators work with members

01:09:03of this committee to ensure

01:09:05that future proposed rules do not hinder Americans' access

01:09:09to tools that enhance the Federal Reserve's financial

01:09:11inclusion efforts?

01:09:13So we're very focused on things like Bank On, as you pointed out,

01:09:16and on, you know, access to the financial system

01:09:19for marginalized communities, and we wouldn't want

01:09:21to do anything to weigh on that.

01:09:24And we're happy to work with you and your office on those issues.

01:09:30So, you know, as I mentioned, we're hearing the comments,

01:09:34and we're reading them, and we're, you know,

01:09:36we're taking those into account as we think

01:09:37about appropriate changes to the proposal.

01:09:40So we will definitely follow up on that,

01:09:42because as we're writing these regulations,

01:09:44I want to make sure that we're thinking

01:09:46about the real-world impact and what it means to consumers

01:09:49when they're accessing financial institutions.

01:09:52I look forward to working with you

01:09:53to further the Fed's financial inclusion efforts.

01:09:56Like earlier this week,

01:09:57I sent you another bipartisan letter related

01:10:00to the Federal Reserve's April proposal

01:10:02to extend the operating hours of FedWire fund service

01:10:06to 22 hours per day, seven days per week,

01:10:09and every day of the year.

01:10:10That was news that I was eager to hear.

01:10:13This may sound like a small technical change,

01:10:15but it can have a big impact on our constituents,

01:10:18especially for those living in marginalized communities

01:10:21who live paycheck to paycheck.

01:10:23Growing up in the booming metropolis

01:10:25of Smith Station, Alabama,

01:10:26probably never heard of a Cheer Pal.

01:10:29But there are limited options for loans and short-term loans.

01:10:33In an area where everyone needs a car to get to work,

01:10:35and they have to work to eat, when money is short,

01:10:38any delay in accessing a paycheck

01:10:41or paying a bill can disrupt your entire household.

01:10:44Extending operating hours for FedWire fund service

01:10:47and national settlement service will allow people continual

01:10:50access to their funds outside

01:10:52of what we deem normal operating hours.

01:10:54And I hear the gavel.

01:10:55I'm out of time, but we will be following

01:10:57up for more conversation.

01:10:59Thank you.

01:11:02The gentleman from Nebraska, Mr. Floods,

01:11:04recognized for five minutes.

01:11:05Thank you, Mr. Chairman.

01:11:07Chairman Powell, after a year with very high inflation

01:11:10that battered American paychecks,

01:11:11inflation rates have moderated some.

01:11:14However, inflation continues to linger

01:11:16above the 2% target rate set by the Federal Reserve.

01:11:19In fact, the PCE inflation index has remained above 2%

01:11:24for the last three years.

01:11:26The Federal Open Market Committee's statement

01:11:28on longer-run goals and monetary policy strategy issued

01:11:31at the beginning of the year stated, and I quote,

01:11:34the committee seeks to achieve inflation

01:11:36that averages 2% over time, and therefore judges

01:11:40that following periods

01:11:41when inflation has been running persistently below 2%,

01:11:45appropriate monetary policy will likely aim

01:11:47to achieve inflation moderately above 2% for some time, end quote.

01:11:53Chairman Powell, does the commitment

01:11:55to achieve a 2% average over time apply

01:11:59in the other direction as well,

01:12:01meaning that if inflation remains above 2%

01:12:03for a protracted period, would the committee instead aim

01:12:06for inflation moderately below 2% for some time in order

01:12:10to achieve an inflation average of 2%?

01:12:13No, it doesn't.

01:12:15Is it fair to say that you would need

01:12:16to see the PCE index dip below 2% at least once

01:12:20in the coming months in order to contemplate a rate cut?

01:12:23No, that's not fair to say.

01:12:25We've said that you don't want to wait

01:12:27until inflation gets all the way down to 2%

01:12:30because inflation has a certain momentum.

01:12:32You wouldn't wait that long.

01:12:33If you waited that long, you probably waited too long

01:12:35because inflation will be moving downward and will go well below 2%,

01:12:39which we don't want.

01:12:41What combination factors would you need to see in order

01:12:43to support a rate cut this month or in September?

01:12:46So once again, I'll say I'm not sending any signals

01:12:50on any particular date of any meeting whatsoever on policy.

01:12:53I said that yesterday, and I'm saying it again today,

01:12:55but I will answer your question.

01:12:56So what we've said is that we want to be more confident.

01:12:59We want to have greater confidence,

01:13:01and that means more good inflation readings.

01:13:03That inflation is moving sustainably down to 2%,

01:13:08greater confidence that that is the case.

01:13:10Remember, we have a dual mandate, too.

01:13:12We're not just an inflation-targeting central bank.

01:13:14We also have an employment mandate.

01:13:16So I could also see us cutting, and we've said this,

01:13:19I've said this, if we saw unexpected weakening

01:13:22in the labor market.

01:13:23And we do now see, I'll speak for myself, I now see the risks

01:13:28to the two mandates as much closer to being in balance.

01:13:32I think for a long time, we've had to focus heavily

01:13:35on the inflation mandate, but I think now we're getting

01:13:38to the place where the labor market is getting pretty much

01:13:44in balance to where it needs to be.

01:13:46And so we're looking at both sides.

01:13:49I know that the media and others have continued to talk

01:13:51about the prospect of political interference

01:13:53with the Federal Reserve.

01:13:55With an election coming up, I know you are very aware

01:13:57of the heightened scrutiny awaiting the Open Market

01:13:59Committee meetings in July and September.

01:14:02Can you use this opportunity

01:14:03to speak regarding the Federal Reserve's political

01:14:05independence going into this election?

01:14:08Sure. I'd be glad to.

01:14:09So, you know, our political independence is critical

01:14:14to our ability to do our jobs and to sustain the faith

01:14:19of people across the political spectrum.

01:14:21And it comes down to we make our decisions based

01:14:24on economic data, the evolving outlook, the balance of risks,

01:14:28and we don't take into consideration any other factors,

01:14:32including political factors.

01:14:34We have a long history of doing that,

01:14:37and I think the public believes we will do that.

01:14:39Any decision that we make, you know, on rates,

01:14:43on any of our policy tools, it's going to be very well-grounded

01:14:46in the data, and it will represent our best thinking

01:14:50about what is best for the American public

01:14:53in the near and medium term.

01:14:55And that's the promise that I will give

01:14:57and that all my colleagues will give.

01:14:59And that means we're not looking at things like election cycles.

01:15:02We're not looking at any of those things.

01:15:04We're looking at the data.

01:15:06What does it tell us is the right thing to do

01:15:07when we figure that out?

01:15:08When we think it's time to move, we go ahead and move,

01:15:11but not until then.

01:15:12I appreciate that.

01:15:14Finally, I'd like to raise concerns with housing costs.

01:15:16While shelter is one component of the broader PCE calculation,

01:15:19housing often makes up one of the largest,

01:15:21if not the largest, expense for many consumers.

01:15:24Inflation for housing remains persistently high.

01:15:27One of the characteristics of this economy is

01:15:30that consumer sentiment is remarkably low.

01:15:33Do you think high housing costs could be contributing

01:15:35to the persistently low consumer sentiment?

01:15:39I think prices, high prices generally,

01:15:41I think nobody really has, can be super highly confident

01:15:45of their answer on this.

01:15:46But I do think it's the fact that while inflation has come

01:15:49down, prices are high, if you know what I mean.

01:15:51And people are paying more for things, more for housing,

01:15:54more for the essentials of life, food, energy.

01:15:58And, you know, that to me is how I would explain surveys.

01:16:02We say that the economy is growing.

01:16:04Inflation has come down.

01:16:05Unemployment is low.

01:16:06And all that's true.

01:16:07But prices are high.

01:16:08Thank you, Chairman Powell, for your answer

01:16:09and your testimony, and I yield back.

01:16:13General from New York, Mr. Torres is recognized

01:16:16for five minutes.

01:16:18Thank you.

01:16:18Chair Powell, the Fed has an inflation rate target of 2%.

01:16:22Are you waiting for both PCE inflation and CPI inflation

01:16:26of all the 2% or only one of those metrics?

01:16:29So we look at different measures, but for a quarter

01:16:32of a century, the PCE inflation has been the Fed's goal.

01:16:36We've defined our goal in terms of that

01:16:38because we think it's the better measure of the costs

01:16:42and inflation that the public actually faces.

01:16:45And now you've said that you're willing

01:16:46to cut interest rates before reaching the 2% target.

01:16:50Is the decision to cut interest rates going to be driven

01:16:53by reaching a particular target en route to 2% or is it driven

01:16:58by the overall trajectory of the inflation rate?

01:17:00It's going to be driven by the totality of the data.

01:17:03There isn't a particular number that we have in mind

01:17:06that we have to get to.

01:17:07It's more, you look at all of the data

01:17:09and the question we're asking ourselves is,

01:17:12are we sufficiently confident

01:17:13that inflation really is moving down toward 2%?

01:17:16So what's the underlying inflation rate,

01:17:18looking through the volatility?

01:17:19We're also looking, though, as I mentioned, at the labor market

01:17:22and we're asking ourselves, you know, we have to take

01:17:25into account now maximum employment, that mandate.

01:17:28So we're looking at both of those

01:17:29in the decisions that we make.

01:17:31I mean, are you confident that the inflation rate is

01:17:33on a downward trajectory?

01:17:37I do have some confidence of that.

01:17:39I think we've seen that over the past several years.

01:17:41The question is, are we sufficiently confident

01:17:43that it is moving sustainably down to 2%?

01:17:45And I'm not prepared to say that yet.

01:17:48Chair Powell, you announced a re-proposal

01:17:50of Basel III rather than a mere revision.

01:17:53Do you believe that the U.S. banking system is sufficiently

01:17:56capitalized in the absence of Basel III?

01:17:59I've long been of the view that U.S. banks are well capitalized

01:18:04and at the level of capital

01:18:05in the U.S. banking system is about right.

01:18:08Okay. So if the banking system is sufficiently capitalized

01:18:11in the absence of Basel III,

01:18:13then what exactly is the need for Basel III?

01:18:15First of all, there's no precise answer

01:18:19as to the appropriate level of capital.

01:18:20I think we've been part of developing the Basel Standards.

01:18:24They create international broad parity.

01:18:27It's important that we have that.

01:18:29And it's important that we do something that is comparable

01:18:33to what the other large jurisdictions are doing.

01:18:35And it's consistent with Basel.

01:18:37And I think that's what our banks want.

01:18:39That's what we want.

01:18:39And that will be best serving the public.

01:18:42But you agree we should conform without gold plating?

01:18:47You know, some things we've gold plated

01:18:50and some things we haven't.

01:18:51And but I think we should make,

01:18:54I think our end game proposal should be, at the end,

01:18:57should be consistent with the requirements of Basel

01:18:59and consistent with what the other large jurisdictions

01:19:02are doing.

01:19:03Are you confident that there's no legal conflict

01:19:05between the standardization recommended by Basel III

01:19:09and the regulatory tailoring mandated by Congress?

01:19:12I think we can work through all that.

01:19:14Yeah. Okay.

01:19:14But if there were a conflict.

01:19:16Basel doesn't impose any requirements on anyone.

01:19:19There's no enforceable requirements.

01:19:21Every jurisdiction does what it's going to do.

01:19:23Basel is, doesn't bind anybody.

01:19:26Right. But the regulatory framework you're adopting would

01:19:28codify those recommendations.

01:19:30Yes. Which would have the force of law, right?

01:19:32Yes. That's right.

01:19:32And so if there were a conflict

01:19:34between the codified recommendations and an act

01:19:36of Congress, would you agree that an act

01:19:38of Congress would supersede those recommendations?

01:19:41Sure. Does the loss

01:19:43of Chevron deference have any implications for Basel III?

01:19:45You know, it's very early days to assess.

01:19:51There's several decisions that are about administrative law,

01:19:54and I think it's too early for us to say.

01:19:56I mean, ultimately, the question is,

01:19:59are the actions we're taking in compliance with the law?

01:20:02And that decision says that there will be less deference

01:20:06or no deference, maybe, to the opinions of the agency.

01:20:10But that just means a court will be answering the same question,

01:20:12which is, are those actions consistent with the law?

01:20:16The Fed has a target rate when it comes to inflation.

01:20:19Does the Fed have a target when it comes

01:20:21to quantitative tightening, like when it comes

01:20:23to what should be the size of the Fed's balance sheet?

01:20:27Well, we have a, we don't have a specific target, no.

01:20:31What would you consider to be a healthy size

01:20:34for the Fed's balance sheet?

01:20:35We define it, you know, not with numbers, but with words.

01:20:39And, you know, we want an ample reserves regime

01:20:42with a buffer so that reserves are not scarce.

01:20:47And we think plentiful reserves,

01:20:49ample reserves is the right place to be.

01:20:51And, you know, we'll find that empirically.

01:20:53Can you put a number on that?

01:20:55No, I can't really.

01:20:57For four decades, we've had the best

01:20:58of both worlds, low unemployment and low inflation.

01:21:02Can the U.S. economy return to the golden age

01:21:04of low unemployment and low inflation, or are we doomed

01:21:06to live with a new normal of higher interest rates?

01:21:09Well, you know, I think we have low inflation.

01:21:11We've got a period here of very low, I'm sorry,

01:21:14of low unemployment.

01:21:15We have high inflation, so can we have the best

01:21:17of both worlds?

01:21:17We certainly can, and that's the plan.

01:21:20We will, we're going to return to 2% inflation,

01:21:22I'm reasonably confident.

01:21:24Some people argue that we're entering into a world of a lot

01:21:27of upward inflation shocks.

01:21:29That would be a challenging world, but, you know,

01:21:30that remains to be seen.

01:21:31Thank you.

01:21:33Gentleman from Iowa, Mr. Nunn is recognized for five minutes.

01:21:37Thank you, Mr. Chair.

01:21:38And thank you, Chairman Powell, for being with us today.

01:21:40Your office has done a very diligent job in working

01:21:44with this body on both sides of the aisle.

01:21:46I chalked some of that up to the fact

01:21:47that you've got some very good folks from Iowa

01:21:49on your staff there helping keep the trains running on time,

01:21:52so that's excellent.

01:21:53I will note that, you know,

01:21:54in Iowa the average family has experienced, you know,

01:21:57annual inflation of about $925 per month just

01:22:02in the last three years.

01:22:03I've got six kids.

01:22:04We're the number one egg-producing state

01:22:06in the country, but yet eggs for each one

01:22:09of my kids goes up 40% this past year, and take that times six.

01:22:12I'm no economist, but that adds up real quick,

01:22:15and I think I'm reflective of a lot of families

01:22:17across the country right now.

01:22:19So, Mr. Chair, one of the things I'd like to talk

01:22:21about is, you know, what we are focused on

01:22:24and what your department's working on at the Fed.

01:22:27The U.S. Federal Reserve, in my opinion, should be more focused

01:22:30on folks like my hometown of Bondurant, Iowa,

01:22:33versus what's coming out of elected bureaucrats

01:22:36in Brussels, Belgium, for example, which is one

01:22:38of the reasons I'm so grateful that you have talked

01:22:40about reopening Basel III for a conversation on what's

01:22:44in the best interest of the American people.

01:22:46I applaud you and your team for this.

01:22:48While I would like to see Basel III candidly scrapped

01:22:51altogether, I think that there are three things

01:22:52in this proposal that we've got to look at immediately.

01:22:54One, the impact of credit availability,

01:22:57especially to ensure that it won't be tighter credit

01:23:00conditions on small businesses back home in places like Iowa.

01:23:04The ability for farmers across the country to be able

01:23:07to hedge their grain, corn, soybean,

01:23:09livestock in a new Basel III conversation.

01:23:13And ultimately, eliminate the downstream effects

01:23:15on American banks being held to higher standards and very clear

01:23:19in Basel III than what's being held in Europe.

01:23:22So with that, I want to readdress your team's attention

01:23:25to the letter I sent in a bipartisan way

01:23:27with Senator Jerry Moran,

01:23:28specifically emphasizing the negative impact

01:23:30of increased bank capital requirements on the economy,

01:23:34our constituents, and ultimately our ag producers

01:23:37across the country.

01:23:38So what I'll first say is, can you confirm

01:23:41that the next Basel III proposal

01:23:43as outlined will address concerns

01:23:45from our ag growers, including our farmers?

01:23:48Let me just say that we're well aware

01:23:50of the concerns you're raising about hedging.

01:23:52And I'm not going to be too specific about things,

01:23:56but we're quite aware of those concerns.

01:23:59I certainly hope your team gets the opportunity to hear that

01:24:01because it's one of the most painful things I'm hearing back

01:24:03in my home district.

01:24:05Would you agree that the end user's concerns could have been

01:24:09mitigated maybe at the front end of this if, you know, Congress

01:24:15or say a farmer in my district had been included

01:24:17in those opening conversations?

01:24:19You know, in hindsight, perhaps that's right.

01:24:25But in any case, this is what the comment period is for.

01:24:28Well, I'll note that 84% of the comments coming

01:24:31from this proposal concern entities outside

01:24:34of banks, as you know.

01:24:36A lot of those were from the ag industry who felt

01:24:38that they had no voice in this and were a recipient of things

01:24:41that really harm their businesses.

01:24:44With that, I want to read quickly,

01:24:45former Treasurer Secretary Larry Summers was asked about Basel,

01:24:49and he said, quote, we're going to need to prepare

01:24:51for consolidation in banking in the future, quite possibly some

01:24:55even further evolution of lending away from banks.

01:24:57Now, I'm going to note here that Iowa has

01:24:59over 250 community banks with assets under $7 billion.

01:25:03His comments are of great concern on this consolidation.

01:25:07Do you share concerns

01:25:09about a consolidation amongst banks across America?

01:25:12So, you know, we all, I speak for myself, you know,

01:25:15I realize that community banks are tremendously important

01:25:18in their communities, and it's not a better world

01:25:22when community banks go out of business.

01:25:24At the same time, if there needs to be consolidation,

01:25:28I don't think we should be standing in the way of that,

01:25:30but we shouldn't, we don't want to be part

01:25:32of the reason why community banks are going out of business

01:25:36or being forced to merge because of, for example, high fixed costs

01:25:40because of regulation or other things.

01:25:42I would agree with you, Mr. Chairman.

01:25:43We don't want to be the instigator for a small bank

01:25:45to have to go out and stop serving a local community.

01:25:48You know, as we look at Basel III,

01:25:50if it's finalized in early 2025,

01:25:53does that mean we will push implementation back to 2026?

01:25:56I don't know exactly what it would be,

01:25:59but something like that is right.

01:26:00You know, we'd have a typical phase-in process at the end

01:26:04of the, you know, quite a lot of work to do to get

01:26:06to a final rule, and then there'll be a phase-in process.

01:26:09I don't know exactly what the date would be.

01:26:11Thank you, Mr. Chairman.

01:26:12I just want to know kind of a timeline for my folks.

01:26:14I mean, there's obviously 2026, or take my advice,

01:26:17scrap it all together, and we can start over,

01:26:19if we even need to do that.

01:26:20Let me ask very quickly, with Chevron overturn,

01:26:22is there anything you're, the Fed is doing to identify areas

01:26:26where maybe we have over-regulated

01:26:27at the federal side, and you're self-policing right now?

01:26:30Under the Chevron decision?

01:26:31I mean, again, our view is we're very focused on obeying the law

01:26:37and reading the actual words of the law and interpreting it

01:26:40according to the words that are in the law.

01:26:41This is the way we approach things,

01:26:42and I'm not sure how much will change.

01:26:45You know, basically a court will be doing

01:26:47that with a little bit less deference to the agency,

01:26:50but you know, we think we're already interpreting the law

01:26:54pretty carefully.

01:26:55So, and again, these are brand-new decisions.

01:26:57There are several of them, and it's way early.

01:26:59We're just studying them now.

01:27:01Thank you, Chairman Powell.

01:27:02Thank you, Chair, and I hope you continue to self-police.

01:27:04It's much appreciated to you and your team.

01:27:05We'll now recognize the gentleman from North Carolina,

01:27:07my friend, Mr. Nickel, for five minutes.

01:27:09Thank you so much, Mr. Chairman.

01:27:11Welcome back, Chair Powell.

01:27:13I represent a Republican-leading,

01:27:16very purple district, so my constituents sent me here

01:27:18to get things done.

01:27:20It's been disappointing that we're on track

01:27:22for what I believe could be the least productive Congress

01:27:25in our nation's history, but this committee has done some

01:27:27good bipartisan work on the Digital Assets Market Structure

01:27:32Bill and stable coins.

01:27:33It's a place where I have hope that we're going

01:27:35to see some action in this Congress.

01:27:38I know you and I have privately spoken about stable coins,

01:27:42and you know, here in the House, in a bipartisan way,

01:27:46we've been working diligently to pass a bill

01:27:49to regulate payment stable coins.

01:27:52This committee voted in favor of the legislation

01:27:54in a bipartisan way last year,

01:27:56and there have been numerous calls from this committee

01:27:59to you and to the Fed, asking that you prioritize working

01:28:04with Congress to help push this legislation forward.

01:28:07We've enjoyed our conversations with staff as well.

01:28:10Can you commit to directing your staff to finalize

01:28:13and support passage of stable coin legislation this year?

01:28:17So we've been, you know, really pleased to take part

01:28:20in this process and, you know,

01:28:23very much appreciate being included in it,

01:28:26and we'll stay with it.

01:28:28You know, we think it's really important

01:28:30that we have a federal framework for stable coins, and again,

01:28:35we'll be all in on working with you to get that done.

01:28:38Thank you very much.

01:28:40A big issue for the folks that I represent, housing.

01:28:43The rising cost of housing hits my constituents especially hard

01:28:47in North Carolina.

01:28:48Our ranking member, Maxine Waters,

01:28:50has made this a big priority for the work

01:28:53that we do in the committee.

01:28:55In North Carolina, we've got 343,000 households that spend

01:28:59over half of their monthly income on rent,

01:29:01leaving little money for other expenses

01:29:05like health care, transportation, and food.

01:29:08Access to safe and affordable housing is essential

01:29:10to the well-being of working families and individuals

01:29:13in North Carolina and around the country.

01:29:15Chair Powell, despite the strong economic trends you mentioned

01:29:18in your testimony, housing prices

01:29:20and median rents have increased by nearly 50

01:29:24and 41 percent respectively since May of 2020,

01:29:27and they continue to rise.

01:29:28In fact, housing costs continue to outpace modest wage gains.

01:29:32High interest rates continue to add to those costs.

01:29:35For example, high interest rates make it more expensive

01:29:39for home builders to finance new housing.

01:29:41High interest rates also cause landlords

01:29:43to change higher rents and lead

01:29:45to higher mortgage costs for would-be homebuyers.

01:29:48I know that you and your colleagues

01:29:49at the Fed are correctly focused on bringing

01:29:52down inflation, an important goal, but have you considered

01:29:55that at this point, with housing cost increases being the primary

01:29:59driver of inflation, keeping interest rates high only

01:30:03towards that stated goal?

01:30:06So a couple things are happening with housing.

01:30:10Before the pandemic, there was, you know,

01:30:12pretty serious housing shortage,

01:30:15and we can't do anything about that.

01:30:17Then the pandemic comes along, and, you know,

01:30:20we really think the best thing, the most important thing we can

01:30:22do for the housing market in the medium and longer term is

01:30:26to get inflation under control so that interest rates can come

01:30:29down, so that we can get back to a more normal interest rate.

01:30:34No one knows exactly where interest rates will go,

01:30:36but they'll be lower than they are now,

01:30:38and the housing market supply and demand will work their way

01:30:42out, and you'll have supply of housing.

01:30:44There's still going to be a housing shortage at the end

01:30:47of that, though, and it's true that our policies work

01:30:54through interest-sensitive spending.

01:30:57Housing is maybe the most interest-sensitive form

01:31:00of spending, buying houses with a mortgage.

01:31:04We know that we have really significant effects

01:31:06in that market, and it's tough on people,

01:31:08but this is the path to getting inflation down,

01:31:10which will bear fruit for many, many years.

01:31:13Thanks so much.

01:31:14I don't think I'm going to be able to get

01:31:15in my next question in the limited time I have,

01:31:19but I wanted to give you this opportunity if you'd like it.

01:31:21I've talked to you privately about this,

01:31:23and I have a pretty good idea what you'll say,

01:31:25but if you would like to say that the economy is heading

01:31:28for a soft landing, you're welcome to say soft landing

01:31:30as much as you'd like right now.

01:31:33I'll say, for some time, I've thought there is a path

01:31:37to getting back to full price stability without,

01:31:41well, keeping the inflation, sorry,

01:31:43the unemployment rate low.

01:31:45There is that path.

01:31:46We've been on it.

01:31:47We're very, very focused on staying on that path.

01:31:49I would say we're at a place now where the risks

01:31:52to the two mandates are much more imbalanced than they were,

01:31:55and that means it's not just about getting inflation down.

01:31:59The job is not done on inflation.

01:32:01We have more work to do there, but at the same time,

01:32:03we need to be mindful of where the labor market is,

01:32:06and we have seen considerable softening in the labor market.

01:32:09We still have a strong labor market

01:32:10with low unemployment, by all means,

01:32:13but so this is what we are very focused

01:32:16on continuing to work toward.

01:32:19Thank you very much, and I yield back.

01:32:20Thank you.

01:32:21The gentlewoman from Texas, Ms. Dela Cruz, is now recognized.

01:32:25Thank you, Mr. Chairman, and thank you, Chair Powell,

01:32:28for being here today.

01:32:30I appreciate that.

01:32:31I represent a working class in South Texas.

01:32:35In fact, my district is mostly Hispanic,

01:32:39one of the most Hispanic districts

01:32:41in the entire nation, over 80 percent,

01:32:45and my district is also a rural community,

01:32:49so the topic today greatly affects my constituents

01:32:54and is something personal for me.

01:32:57That being said, the population that I represent is a population

01:33:03that the Federal Reserve research has shown

01:33:08disproportionately will be the hardest hit in inflation.

01:33:14That being said, higher prices due

01:33:17to Biden's induced inflation is something not only the nation is

01:33:23feeling, but my constituents are feeling.

01:33:27They're feeling it at the grocery store.

01:33:29They're feeling it at the gas pump.

01:33:31Small businesses are feeling this, and we know

01:33:37that cutting back on their spending,

01:33:41people who are living paycheck to paycheck,

01:33:44they still can't get away from these increasing costs

01:33:47at the grocery store or the gas station.

01:33:50So even small changes have a big impact

01:33:54in rural communities like mine.

01:33:56In fact, the Farm Bureau recently said

01:34:00that the cost of the 4th of July prices,

01:34:04the 4th of July celebration had high, high increases.

01:34:10The headline reads, Record High 4th of July Cookout Costs,

01:34:14Inflation Hits the Backyard.

01:34:17This report says that costs were up 5 percent from last year

01:34:22and up 30 percent from just a few years ago,

01:34:26all during the Biden administration time.

01:34:29Now, the Biden administration wants us to simply forget

01:34:33about the last three years

01:34:35and the pain it has caused families in my district.

01:34:39They don't understand why people are unhappy

01:34:42about their current economic situation, and quite frankly,

01:34:46it is angering and it's simply out of touch

01:34:50with the everyday American.

01:34:52It seems obvious that until we grapple

01:34:55with the runaway government spending,

01:34:58that unfortunately, we are going to continue

01:35:02to have runaway inflation.

01:35:05Chairman Powell, can you explain

01:35:07to us how the excessive government spending not only

01:35:11increases the national debt but also affects inflation as well?

01:35:18Sure. So let me say, first of all,

01:35:20we completely understand that inflation hurts people, you know,

01:35:25low- and moderate-income people, directly and immediately

01:35:29in a way that it doesn't affect even middle-class people

01:35:32because, you know, paying more for the necessities of life

01:35:36when you don't have much of a financial safety net,

01:35:38the pain starts right away.

01:35:39We get that, and so it is for those people, among others,

01:35:43that we are doing everything we can to get inflation

01:35:46under control and stay at the job until it's done.

01:35:50In terms of the causes of inflation, you know,

01:35:53the inflation that we're having is not that different

01:35:56from what other advanced economies

01:35:58around the world are having, and it really results from, you know,

01:36:02the pandemic comes along.

01:36:03Inflation is low.

01:36:04The pandemic comes along.

01:36:05We shut down the economy.

01:36:07People are sent checks to replace their income.

01:36:10They can't spend that money because they can't go

01:36:12to the movie theater or to a football game

01:36:14because everything is closed.

01:36:16So savings go up, and so people are spending a lot.

01:36:19Meanwhile- Chair Powell, I have only a minute left,

01:36:21so I yield my time back.

01:36:23I want to shift gears real quickly.

01:36:26I continue to believe that the federal banking agencies,

01:36:30including the Fed, should scrap the flawed Basel III endgame

01:36:36proposal and start over.

01:36:39At this point, the last thing, a first-time home buyer,

01:36:43a small business owner, and constituents, as you said,

01:36:48low-income people who are rule people, for example,

01:36:53in my community, the last thing they need is harder access

01:36:56to capital, which is exactly what that proposal does.

01:37:00The public knows it and doesn't want it either,

01:37:04with a whopping 97% of public comments being negative

01:37:09for this proposal.

01:37:11Chair Powell, don't you agree

01:37:13that with the overwhelming negative reception

01:37:16of this proposal that it shows a lack of public support?

01:37:20I do think that's fair to say.

01:37:24Thank you.

01:37:25I yield back.

01:37:26The gentlewoman from Colorado,

01:37:28Ms. Pedersen, is now recognized.

01:37:31Thank you, Mr. Chairman, and thank you for your service

01:37:34in such difficult times.

01:37:35We sign up to serve, and we don't know what's going

01:37:38to come our way when I think about what we've been

01:37:40through as a country, with a global pandemic,

01:37:43the economy in collapse, and what this Congress was able

01:37:48to do to infuse money, to keep our small businesses afloat,

01:37:53critical services available, and making sure that we were

01:37:56in a position for the quickest, strongest recovery in the world.

01:38:01And while we have a lot to feel proud of, we recognize

01:38:05and have had many conversations throughout this committee

01:38:07about the pain points that people are continuing

01:38:10to feel with rising costs, and you touched on this.

01:38:14I really appreciate the discussion around housing

01:38:17in an earlier question,

01:38:18because this is the greatest inflationary cost,

01:38:22especially in Colorado,

01:38:24where we have seen significant home price increases,

01:38:28a lack of supply, people are unable to move,

01:38:32because they would go to a much higher interest rate,

01:38:36and then people are unable to buy

01:38:37because they can't afford those mortgage payments.

01:38:40And so while you've talked about recognizing

01:38:43that lowering the interest rates will actually help

01:38:47with addressing the housing crisis,

01:38:49we still have a lack of housing supply.

01:38:52So can you talk a little bit more about what's happening,

01:38:55and that the lower interest rates are only a piece of this?

01:38:58It's a longer-term thing, and a lot of it is it's harder

01:39:02to get lots and zoning and materials and workers,

01:39:07and in many, many metropolitan areas,

01:39:10the near-in areas are all built up.

01:39:14If you look around Washington,

01:39:15I grew up near Washington, D.C., and, you know,

01:39:18it was countryside just a couple of miles outside the Beltway.

01:39:21There was no Beltway when I was born,

01:39:22but ultimately it's just we have not enough housing.

01:39:29And that was true before the pandemic,

01:39:31and certainly the pandemic did slow down housing construction.

01:39:35I think we'll get back to a more normal economy

01:39:37with lower interest rates and those sorts of things,

01:39:40but we're still going to have, you know, a housing shortage.

01:39:45Absolutely.

01:39:46When I think about the other pieces of the fallout

01:39:49from the global pandemic and the changes that we saw

01:39:51in our economy was in commercial real estate, and I've continued

01:39:56to read about regional bank failures and the risk

01:40:00that the commercial real estate poses in the long-term

01:40:04for those assets being on the books for our banks.

01:40:07What is your insight on the risk that it poses

01:40:12for financial stability and what we should be thinking

01:40:15about here in Congress?

01:40:17So the commercial real estate situation, which is, you know,

01:40:20it's significantly downtown office and related retail

01:40:23and things like that, this is something the banks have been

01:40:26working their way through for the last couple of years.

01:40:29I think it'll take more time,

01:40:31more years to work all the way through it.

01:40:34We know from the stress tests and from our own work

01:40:37that the large banks, they're going to be okay here.

01:40:42Some of the regional banks

01:40:44and smaller banks have what you would expect,

01:40:45which is high concentrations

01:40:47in their local community in real estate.

01:40:49We are aware of those.

01:40:50The banks are aware of it.

01:40:51I think the supervisors have been

01:40:53around those banks making sure they have capital,

01:40:56they have liquidity, they have a reasonably, you know,

01:41:00not too optimistic assessment of how much capital they'll need,

01:41:02how big the losses will be.

01:41:04So I think we'll be working through this.

01:41:06And, you know, it doesn't seem to be a systemic problem or one

01:41:11that threatens broader financial stability.

01:41:13It does threaten bank profitability

01:41:15and those sorts of things.

01:41:17But it'll be with us a while.

01:41:18We'll just keep working our way through it.

01:41:21And the ability to continue to loan to small businesses

01:41:24because you're being locked up.

01:41:25You are not going to have enough time to answer this question,

01:41:29but my remaining outstanding question is

01:41:32around the recent Chevron ruling and, you know,

01:41:35how you anticipate that impacting the Fed's ability

01:41:41to adjust to the needs of the country

01:41:43and ensure financial stability without being sued at every turn?

01:41:48You know, we're just looking at all these new decisions.

01:41:51So it's early to stay on.

01:41:52I speak under the control of my general counsel.

01:41:54I don't want to cause him to strike me.

01:41:57That's how I feel about my staff.

01:41:59I mean, not striking me.

01:42:01No, but I mean, look, ultimately, we're already doing,

01:42:06we're already very careful at the Fed

01:42:08about keeping within the law.

01:42:10We're really committed to that value.

01:42:12And, you know, this ruling doesn't change that.

01:42:16And I think we'll continue

01:42:18to be an institution that's strongly committed

01:42:21to the rule of law.

01:42:23Great. Thank you so much.

01:42:24I yield back.

01:42:24Thank you.

01:42:25General, I yield to the gentleman from Wisconsin.

01:42:27Mr. Fitzgerald is recognized.

01:42:28Chairman, thanks for being here.

01:42:30There has been a lot of talk about Basel III.

01:42:33I wanted to just change that subject a little bit.

01:42:36Long-term debt proposal, I think, should be rewritten

01:42:40and re-proposed as well, but at the very least,

01:42:44the rule needs to be tailored, as law requires,

01:42:47so that regional banks aren't treated more harshly

01:42:50than the largest banks, of course.

01:42:53In particular, the requirement for regional banks

01:42:55to hold long-term debt at both the holding company

01:42:59and insured depository institution, that seems

01:43:02to be a burden is what we're hearing, I think.

01:43:05I just wanted to mention that I would hope

01:43:09that there would be some flexibility for smaller regional

01:43:12banks to pre-position resources,

01:43:15because there are obviously some resources that are loss,

01:43:20I don't know, loss-absorbing,

01:43:22I guess is the way you would consider them in the re-proposal.

01:43:25Do you have any thoughts on kind of how this is playing

01:43:28out right now or what this looks like?

01:43:30Yes. So on the long-term debt thing, you know,

01:43:32we put it out for comment.

01:43:35We've received quite a few comments, and we're, you know,

01:43:37we're, staff has been analyzing them, and, you know,

01:43:40we're, that's something we're well aware of,

01:43:43the concerns that have been raised,

01:43:44and we're thinking carefully about how

01:43:45to move forward on that.

01:43:47The other one was pre-positioning,

01:43:49that's more along the lines of the discount window

01:43:51and the liquidity requirements, I take it.

01:43:53So, you know, we haven't made a proposal there yet.

01:43:57We're thinking carefully about that.

01:43:58You know, I think we're trying to learn the right lessons

01:44:01from what happened last spring at Silicon Valley Bank

01:44:04and a couple other banks, and one of them just is,

01:44:07the discount window worked,

01:44:09but we could certainly modernize it and make it more effective.

01:44:12And also, we learned, you know,

01:44:14that bank runs are moving just a whole lot faster,

01:44:17at least in that case, and that the, even bank runs from 10

01:44:21or 15 years ago were nothing like as fast

01:44:25as what happened at Silicon Valley.

01:44:26So we need to, we need to bake that, that new learning

01:44:29into the liquidity requirements in some way or other.

01:44:33We, again, haven't made a proposal.

01:44:35When we do, of course, it'll go out for comment,

01:44:37and we'll very much want to learn from those comments.

01:44:43Very good.

01:44:44There's been a clear trend of banks stepping away

01:44:47from the mortgage market,

01:44:49kind of in the face of increased regulation.

01:44:52That's my interpretation, at least.

01:44:54Non-bank lenders have stepped in to kind of fill that void.

01:44:58Today, banks support the non-bank lenders

01:45:02and the broader housing finance system

01:45:04through the so-called the warehouse lending

01:45:07for home mortgages.

01:45:09But I'm deeply concerned that some of the, as was mentioned

01:45:13by my colleagues earlier, that some

01:45:15of the Basel rules will, could harm both bank

01:45:18and non-bank lenders alike, kind of undermining the liquidity

01:45:22and kind of the raising costs of home buyers.

01:45:26So, let me just ask, in regards to Basel III,

01:45:31the endgame proposal,

01:45:33could it make housing finance less stable,

01:45:37I guess is the question.

01:45:39That's certainly not the intention.

01:45:40And, you know, we're, again, well aware of the concerns

01:45:43that have been raised and, you know,

01:45:45certainly paying careful attention to those.

01:45:48Despite the smaller issuer exemption for the debit,

01:45:51for debit interchange fee cap, insurers with less

01:45:54than $10 billion of assets reportedly lost about 35%

01:45:59of inflation adjusted interchange revenue.

01:46:01Have you considered the impact of further reduction

01:46:04of debt interchange will have on small financial institutions

01:46:08with less than $10 billion of assets?

01:46:10Yes. So, we're, that's another one where we put

01:46:12out a proposal, we got a lot of comments

01:46:14and we're carefully reviewing those.

01:46:16And we're certainly, you're certainly aware

01:46:17of that specific concern that you raised.

01:46:20As you may know, the latest Fed Y14 proposal,

01:46:24which is used to help collect data for Fed stress tests,

01:46:28ask banks for more detailed data on bank lending to non-banks.

01:46:32You know, as a result, there's concern

01:46:35that the Fed may start trying

01:46:37to indirectly regulate non-banks and the financial risk.

01:46:40I just talked to one this morning that's concerned

01:46:43about that.

01:46:44So, given those concerns raised about the lack of transparency

01:46:47in its stress testing models

01:46:49and the potential unintended consequences, is the Fed planning

01:46:52to indirectly regulate non-bank financial institutions

01:46:56through these tests?

01:46:57That's not the idea.

01:46:58The idea is we, you know,

01:47:00we see intermediation growing very quickly in non-banks.

01:47:06And, you know, we don't regulate them, we're not,

01:47:08we don't have a secret plan to regulate them

01:47:10or anything like that.

01:47:11It is, but the question is, what risks are being kept inside the

01:47:16banking system, which we do regulate and supervise,

01:47:19and what are the relationships

01:47:21between these large non-banks and banks?

01:47:23And, you know, we don't have a preconceived answer to that.

01:47:25We just want to understand what are the, you know,

01:47:28what are those business relationships the likes

01:47:30and what kind of risks does that mean the banks are running?

01:47:32That's all it is.

01:47:33Thank you, Chairman.

01:47:34I yield back.

01:47:34The gentleman from New York, Ms. Velasquez, is now recognized.

01:47:40Thank you, Mr. Chairman.

01:47:42Thank you, Chairman Powell, for being here this morning, today,

01:47:47almost noon.

01:47:48Once the Fed is reassured that inflation is under control,

01:47:54what does the path back to neutral interest rates look like?

01:48:00We said that we wouldn't reduce rates until we were confident

01:48:04that inflation is moving sustainably down to 2%.

01:48:07I think the question of what is neutral is going

01:48:11to be an empirical question.

01:48:13I think, it seems to me it's unlikely

01:48:17that we'll be going back to the very low interest rates

01:48:21of the pre-crisis period.

01:48:23But we'll know that from, you know, we won't know

01:48:25that until we get there in a way.

01:48:28And the Fed's dual mandate comprises of price stability

01:48:33and maximum sustainable employment.

01:48:37As the Fed is thinking about inflation and the possibility

01:48:40of interest rate cuts, how are you balancing these priorities

01:48:45with the need to maximize employment?

01:48:48So we, over the past couple of years,

01:48:51we've had a very strong labor market

01:48:53and inflation well above target.

01:48:55And that has led us to focus mainly

01:48:56on bringing down inflation.

01:48:59Over the course of two years,

01:49:00inflation has come down pretty significantly.

01:49:03There's more work to do there.

01:49:04We're not at our target.

01:49:05We need to keep on that job.

01:49:06At the same time, the labor market has cooled pretty

01:49:09significantly.

01:49:10And so I would say those two goals are now much closer

01:49:14to being in balance.

01:49:16And that means from a policy standpoint,

01:49:18we need to be paying attention to both of them.

01:49:20Whereas for the last couple of years, really,

01:49:22we had to pay mostly attention to inflation.

01:49:25Chairman Powell, I have told you that I will be asking

01:49:30for a status update on the Section 956 rulemaking

01:49:35at every future hearing.

01:49:38Since your last appearance in March,

01:49:40several of your fellow regulators have issued a

01:49:44proposed rule.

01:49:45Why did the Fed choose not to sign onto this proposal?

01:49:49So what we're doing is we're looking at the current state

01:49:54of affairs as it relates to incentive compensation.

01:49:58As you may know, we've had guidance in place now

01:50:02since 2010 for all banks.

01:50:06And we supervise pretty significantly around that.

01:50:09So it's a very different picture than the one

01:50:11that was there in 2010.

01:50:14So we're asking ourselves, what is the situation today

01:50:17and how do we tailor a proposal to address, you know,

01:50:22the residual risk as opposed to what the situation in 2010 was?

01:50:26Yes. In previous hearings, you said that you need

01:50:31to better understand the problem in order to write the rule.

01:50:36In a speech in June, SEC Commissioner Lizarraga said,

01:50:42and I quote, it has been well documented that in the lead

01:50:46up to the financial crisis,

01:50:48pay structures often encourage big bets

01:50:52that maximize short-term profits

01:50:55but ignore bigger longer-term risk that threaten

01:50:59to take down the entire financial system.

01:51:02Additionally, since your last appearance,

01:51:05several of your fellow regulators have moved

01:51:08to work with a proposed rule.

01:51:11Why have your fellow regulators

01:51:14and Commissioner Lizarraga been able to understand the scope

01:51:20of the problem and the Fed has not?

01:51:22Well, I think the quote absolutely makes my point,

01:51:26which is I think everyone agrees

01:51:28that incentive compensation practices

01:51:30for the global financial crisis were not in a good place.

01:51:34However, we published guidance on incentive compensation,

01:51:39binding on all, well not binding, but guidance

01:51:41for all banks in 2010.

01:51:44After putting it out for comment, very thought,

01:51:46a lot of thought went into that guidance

01:51:48and now we supervise on that guidance.

01:51:50And so the situation with incentive compensation now

01:51:53and banks is completely different

01:51:54than it was before the global financial crisis.

01:51:56It's completely different.

01:51:58Well, you know, the other regulators have been able

01:52:02to figure this out and you haven't.

01:52:04But let me just say, this is not how congressional mandates work.

01:52:10Of all the rulemaking provisions in the Dodd-Frank,

01:52:14only 148 were mandatory.

01:52:18And of those, only 22 had a deadline of less

01:52:22than a year after enactment.

01:52:24Section 956 was one of them.

01:52:27And I hope that you come to the conclusion

01:52:32that it is your duty to issue the regulation.

01:52:38Thank you and I yield back, Mr. Chairman.

01:52:40Section 156 requires either a rule or guidance, by the way.

01:52:44It does not require a rule, a rule or guidance.

01:52:48Thank you.

01:52:49The gentleman from Florida, Mr. Donald, is now recognized.

01:52:52Thank you, Mr. Chairman.

01:52:53Secretary Pollack, it's good to see you.

01:52:55Let's cover a lot of different areas of ground.

01:52:59According to the Bureau of Economic Analysis,

01:53:01since President Biden took office,

01:53:03the price of goods has continued to outpace family incomes.

01:53:07With prices increasing now 19.3%,

01:53:10while average weekly earnings have only increased 14.6%.

01:53:15So families have fallen behind with respect

01:53:18to their purchasing power that they're able to go

01:53:22and acquire goods.

01:53:23What role has government spending played

01:53:26in creating this untenable economic crisis?

01:53:30Close that door, please.

01:53:32Sorry, I can't hear very well when the door is open.

01:53:34I'll repeat.

01:53:35That's fine.

01:53:35No, I heard you.

01:53:36Okay. Okay.

01:53:37That needs to be closed.

01:53:38So what role has government spending as part of the story?

01:53:43So government spent, we had our rates really low.

01:53:47The pandemic happened and we closed the economy

01:53:50and then reopened it.

01:53:51And I think you saw a burst of inflation, you know,

01:53:54everywhere in the world.

01:53:55And certainly there were many contributors to that.

01:53:57Do you think that the President in his budget calling

01:54:00for an increase of federal spending,

01:54:03upwards of 5% increase in federal spending

01:54:05across the board, do you think that's going

01:54:08to have further implications

01:54:10on stubborn inflation plaguing the pocketbooks

01:54:12of the American people?

01:54:14It would be inappropriate for me to comment

01:54:17on the President's budget.

01:54:19The only reason why I would ask, Mr. Powell,

01:54:22is because obviously the Federal Reserve is having to respond

01:54:26to various aspects of fiscal policy coming

01:54:29from Capitol Hill.

01:54:30Regardless of the President's budget,

01:54:32would it be appropriate in the current environment

01:54:34for federal spending to increase 5%, 10%, 15%?

01:54:38Honestly, that's a question for elected representatives.

01:54:40We don't play a role in fiscal policy.

01:54:43Oh, fair enough.

01:54:44Is it the view of yourself and the Federal Reserve Board

01:54:50that fiscal policy does create impacts on the Fed's ability

01:54:54to manage monetary policy for the United States?

01:54:57We take fiscal policy as a given.

01:54:59And we're not commentators.

01:55:01We're not the Congressional Budget Office or the Office

01:55:03of Management and Budget.

01:55:04Whatever fiscal policy happens up here,

01:55:09we decline all opportunities to be commentators on it.

01:55:12We take it as a given.

01:55:14And that's because we didn't run for office.

01:55:16We don't have that job.

01:55:17We stick to our knitting.

01:55:18And the fact that we're independent really depends

01:55:20on us sticking to what our assignment is, which is to deal

01:55:24with, you know, things with the economy as it is.

01:55:27I would argue that the fiscal policy

01:55:30of the United States has given you guys a lot more to deal with

01:55:34and whatever the various burdens that come with it.

01:55:36Unfortunately, you have to deal, you have to tangle with it.

01:55:40But the American consumer is the one

01:55:41that truly has to deal with it.

01:55:42I'm going to move on.

01:55:43The Monetary Policy Report cites a pickup

01:55:45in immigration as one of the major factors

01:55:48that has improved the supply of labor.

01:55:50However, labor force participation rate remains below

01:55:53pre-pandemic levels.

01:55:55What percentage of the increased foreign-born labor supply,

01:55:59to your knowledge, comes from illegal immigration?

01:56:03I, what percentage of the, say it again, the question?

01:56:08What percentage of foreign-born labor comes

01:56:11from illegal immigration?

01:56:14I think all foreign-born labor comes from immigration.

01:56:16No, illegal immigration.

01:56:17Illegal.

01:56:18Illegal.

01:56:18Sorry, I didn't get that.

01:56:19Yes, sir.

01:56:20I don't know the answer to that.

01:56:21All right.

01:56:22Well, one of the things that I think will be important

01:56:24to help, I guess, advise Congress on what

01:56:27to do going forward is if the Federal Reserve had some data

01:56:31to that regard to help us make further decisions

01:56:33into the future.

01:56:34Chairman Powell, let me ask you this one overarching question.

01:56:38Obviously, interest rates, if you compare it

01:56:41over the last 15 years of monetary policy,

01:56:45is at an elevated rate.

01:56:47Does the Fed anticipate any possibility

01:56:50of rates being lowered, whether it's 50 basis points,

01:56:55100 basis points, at some point over the next year or two?

01:56:59So, I guess the question really is where are interest rates

01:57:04going to settle out when all of the effects

01:57:06of the pandemic are really done?

01:57:09And no one knows.

01:57:10This is a great discussion to have.

01:57:12But I think my sense, and pretty commonly,

01:57:14people think we probably won't go back to that era

01:57:18between global financial crisis and the pandemic,

01:57:21where rates were very, very low, and inflation was very low.

01:57:25And, you know, like extremely low.

01:57:27There were major European countries

01:57:29that had negative 10-year bond rates.

01:57:32Negative. And that was not the case here.

01:57:34But I don't think we're going back to rates that are

01:57:38that low.

01:57:39We think that things like the neutral rate are driven

01:57:42by slow-moving forces.

01:57:43But ultimately, you can see the effect.

01:57:45We have, you know, our policy rate is over 5% now.

01:57:48And it feels like policy is restrictive, but not, you know,

01:57:51intensely restrictive.

01:57:52So that suggests that the neutral rate of interest,

01:57:56at least as of now, will have risen somewhat,

01:57:58which means rates will be a little higher.

01:58:00Okay. Thank you so much.

01:58:01I yield back.

01:58:01Thank you.

01:58:02The gentleman yields back.

01:58:03We now go to the gentleman from California, Mr. Sherman,

01:58:07who is recognized for five minutes.

01:58:21Would you like us to move on?

01:58:25If it's Josh's turn, it's Josh's turn.

01:58:27Gentleman from New Jersey is recognized for five minutes.

01:58:30Thank you, Mr. Sherman.

01:58:31Thank you, Mr. Chairman.

01:58:34Chairman Powell, you have said

01:58:35that custody assets are off balance sheet, always have been.

01:58:39And do you stand by that?

01:58:41Sorry, say that again?

01:58:42You've said that, quote,

01:58:43custody assets are off balance sheet, always have been.

01:58:46Do you stand by that statement, sir?

01:58:49I think as a general matter, yes.

01:58:52The SEC's Staff Accounting Bulletin 121 affects a core

01:58:56banking activity, custody.

01:58:58The specific bulletin requires banks to put digital assets held

01:59:01in custody on their balance sheet,

01:59:03effectively keeping banks out of the market entirely.

01:59:06Have the Fed and the SEC had conversations about the impact

01:59:09of SAB 121, and I just wanted to get a sense

01:59:11of your thoughts on the policy, please.

01:59:13So we, as you know, I think we don't comment

01:59:16on the SEC's policy.

01:59:17They don't comment on our policies either.

01:59:19So I know that, I knew you were going to SAB 121 on that,

01:59:23but honestly, it's the SEC's business, not ours.

01:59:28Thank you.

01:59:29Last month, you said that when evaluating inflation data,

01:59:32you consider whether wage growth is

01:59:34outpacing productivity.

01:59:36From 1979 to 2019, middle-class workers' productivity grew

01:59:39about 60 percent, while their wages grew by about 16 percent.

01:59:43Do you consider this a historical gap

01:59:45when considering whether to hike rates

01:59:47on families obviously struggling to make ends meet?

01:59:50So we, we're looking at inflation, and we're looking

01:59:55at maximum employment.

01:59:56Those are our goals.

01:59:57We don't really have the ability, we don't have a bunch

01:59:59of different tools for things like what you're talking about.

02:00:01So really, it's just those things.

02:00:03Of course, we're very well aware of longer-run trends like that.

02:00:07You have to also include benefits, though,

02:00:09in that analysis, which does close that gap quite a bit.

02:00:12You just mentioned wages.

02:00:13I appreciate that.

02:00:16Thank you.

02:00:17Mr. Chairman, yesterday, the Director

02:00:20of National Intelligence said that, quote,

02:00:22Iranian government actors have sought

02:00:23to opportunistically take advantage

02:00:25of ongoing protests regarding the war in Gaza.

02:00:28End quote.

02:00:29They have observed actors, quote,

02:00:32observed actors tied to Iran's government posing

02:00:34as activists online, seeking to encourage protests,

02:00:37and even providing financial support to protesters.

02:00:40End quote.

02:00:41As a member of the House Select Committee on Intelligence,

02:00:44I'm equally concerned about our adversaries meddling

02:00:46in our financial system.

02:00:48Can I have your commitment, or if you can discuss the,

02:00:51if you're working with other federal agencies to investigate

02:00:54and address foreign interference channeled

02:00:56through our financial institutions?

02:00:59So we do take part in many of those things,

02:01:02especially at the staff level.

02:01:04And as you know, there's a lot of focus

02:01:06in the intelligence community.

02:01:09And it's very helpful to the banks,

02:01:10the commercial banks, and to us.

02:01:13But we're certainly very focused on those issues.

02:01:16We've got a strong team.

02:01:18Of course, you're never able to sleep on cyber risk.

02:01:23But, you know, we just keep, we just keep fighting it.

02:01:26I would like to switch gears to the discount window, please.

02:01:31Chairman, we've heard that the discount window is behind the

02:01:34times in terms of its operations.

02:01:36We also continue to hear that efforts

02:01:38to modernize the discount window

02:01:39and encourage its use will be ineffective

02:01:41without reducing the associated stigma.

02:01:43The usability of the discount window is an important tool

02:01:46for banks that need liquidity.

02:01:47I just wanted to get a sense of efforts underway

02:01:50to make the discount window a more realistic option

02:01:52for banks that need liquidity.

02:01:55So it's a couple things.

02:01:56First, it is we need to modernize our infrastructure.

02:02:00You know, the discount window

02:02:02in our system is not a primary source of credit.

02:02:07It's a source for banks that they can use

02:02:11under certain circumstances.

02:02:12So, but we know that the infrastructure is a little tired

02:02:16and we're investing in that

02:02:17and making it more user-friendly and all that.

02:02:19So that's a big, big project that's going on.

02:02:23Sorry, the second point was stigma.

02:02:27The stigma is, that's tough, that's a tough one.

02:02:30And, you know, it amounts to, there are a lot of ways

02:02:33to get after that.

02:02:34We're studying all of them.

02:02:35You know, in a sense, if you require banks

02:02:38to use the discount window,

02:02:40then that can help with the stigma.

02:02:41I think, I mean, this is a big ask, but, you know,

02:02:45when Congress required us to publish the names

02:02:48of discount window users, that didn't help.

02:02:50It doesn't help at all, because banks basically say,

02:02:54we're not going to use discount window, because it might,

02:02:56you know, people might see us as troubled.

02:02:58And that's not what we want.

02:03:00We want people to be able to freely use the discount window.

02:03:02So we've been focused on this issue for a long time,

02:03:05have not made a lot of progress on it.

02:03:07But right now, I think we're very focused on it.

02:03:10Thank you, sir.

02:03:11I'll yield back.

02:03:12Thank you.

02:03:13Gentleman yields back.

02:03:14We now go to the gentleman from New York, Mr. Lawler,

02:03:16who is recognized for five minutes.

02:03:18Thank you, Mr. Chairman.

02:03:19Chairman Powell, to the best of my knowledge,

02:03:21the last public meeting between you

02:03:23and President Biden occurred on May 31st, 2022.

02:03:27Does that sound accurate?

02:03:28I'm going to take your word for it.

02:03:31Okay. Have you had any private meetings

02:03:34with the President since that time?

02:03:36No. Any phone calls with the President?

02:03:38No. I don't believe so.

02:03:39Is there any reason why you've not met with

02:03:42or spoken to the President?

02:03:44I mean, I meet with any President calls.

02:03:48You come and you meet, but that hasn't happened, so.

02:03:52So in over two years, with inflation still nagging us,

02:03:57with cost out of control, President Biden has not asked

02:04:01to meet with you in over two years?

02:04:03I haven't had a meeting with him.

02:04:06He hasn't sought a meeting.

02:04:07And, of course, I don't seek meetings.

02:04:08So you have the data.

02:04:10But to your knowledge, in the last two years,

02:04:12you've not spoken with or met with the President at all?

02:04:15He shook his hand in a line once,

02:04:18but that wasn't a conversation.

02:04:19It was just, Mr. President, that was it.

02:04:21That was, it was at a state dinner.

02:04:23I attended a state dinner in, a few months ago,

02:04:27and I shook his hand.

02:04:29Good evening, Mr. President, and that was it.

02:04:31Does that not strike you as odd

02:04:33that the President has not sought to meet with you?

02:04:36Not at all.

02:04:37Not at all.

02:04:38You weren't in an agency and.

02:04:40Mr. Chairman, parliamentary inquiry, please, Mr. Chairman.

02:04:47I'm sorry, I want to answer your, state your inquiry.

02:04:52Thank you, Mr. Chairman.

02:04:54I make a point of order under Clause 4 of Rule 17

02:05:00that the gentleman's words are disorderly

02:05:03and violate the rules of decorum and debate insofar

02:05:06as they are negatively reflecting upon the personality

02:05:11of a candidate for President of the United States.

02:05:15The Congressman is not engaged in any personality or in any,

02:05:21has questioned anything about anyone at this point.

02:05:25I'm not sure where you're going, Congressman.

02:05:28Congressman.

02:05:28We have.

02:05:29Congressman is recognized.

02:05:31Thank you.

02:05:32Happy to answer your question.

02:05:33Mr. Chairman.

02:05:33To answer your question.

02:05:34Thank you.

02:05:34Mr. Chairman, I'd like to continue with the point.

02:05:36Point of order, please.

02:05:39What is your point of order?

02:05:41Mr. Chairman, we have been admonished in this committee

02:05:45that we should not have words that negatively reflect upon

02:05:50persons who are running for President.

02:05:52This would include Mr. Trump as well as the current President.

02:05:56Didn't the ranking member do a whole opening monologue

02:06:00by a tribe about some ridiculous project?

02:06:02Would you please rule my friend out of order, Mr. Chairman,

02:06:05until you rule?

02:06:07Mr. Lawler has not admonished or said anything negative

02:06:10about the President at all.

02:06:13I just listened to his comments.

02:06:15So I'm going to recognize the Congressman again.

02:06:18Mr. Lawler from New York.

02:06:20Thank you, Mr. Chairman.

02:06:22Mr. Powell, you were trying to answer my question.

02:06:24So we're an independent agency.

02:06:27The administration has been very respectful of the Fed

02:06:32and not wanting to try to influence

02:06:36and things like that.

02:06:37And I don't find it at all unusual.

02:06:40I've been at the Fed for my 13th year, and I think there can go

02:06:44by long periods of time when the Fed chair doesn't meet

02:06:46with the President, and that's totally fine.

02:06:52Since you made mention of the independence of the Fed,

02:06:56and I know you pride yourself in that independence,

02:06:59do you acknowledge or do members of the FOMC acknowledge

02:07:04that a rate cut in September could be viewed

02:07:08as political just 30 to 60 days before an election?

02:07:13So our undertaking is to make decisions when and as they need

02:07:19to be made based on the data, the incoming data,

02:07:22the evolving outlook, and the balance of risks,

02:07:25and not in consideration of other factors.

02:07:27And that would include political factors.

02:07:30We will make those decisions.

02:07:31We have a long history of doing that,

02:07:33including during election years.

02:07:36And that is the undertaking we'll make.

02:07:38Anything we do will be very well grounded.

02:07:41And, you know, it's just not appropriate for us to get

02:07:46into the business of thinking about election cycles at all,

02:07:49one way or the other.

02:07:51So inflation year over year from May 2024 to, from May 2023

02:07:58to May 2024 is up 3.3 percent, overall inflation.

02:08:04Energy inflation is up 3.7 percent.

02:08:07Food inflation up 2.1 percent.

02:08:10With inflation continuing to be a challenge,

02:08:14do you see a rate cut as a possibility at this moment?

02:08:19So you, I think you're quoting the CPI numbers,

02:08:21which are operating at an unusually high gap to the PCE.

02:08:26For 25 years, the Fed has focused

02:08:29on personal consumption expenditures inflation,

02:08:32PCE inflation.

02:08:33And usually the gap to CPI is only 25 or 30 basis points.

02:08:37It's more now.

02:08:38So the PCE numbers, the current PCE numbers are 2.6 percent

02:08:42for headline, 2.6 percent for core.

02:08:46And we've articulated for a good long period our test

02:08:51for being willing to consider beginning to loosen policy.

02:08:55And that test is that we want to be more confident

02:08:59that inflation is moving on a path sustainably down to 2 percent.

02:09:03Not at 2 percent, but on a path sustainably to 2 percent.

02:09:07That's the test we've articulated.

02:09:09I have some confidence, as I said earlier,

02:09:12that we are on a downward path.

02:09:14I think if you look at the data, it's pretty clear that,

02:09:17but we have not said, though, that we have sufficient confidence.

02:09:20And that will be a decision that our committee makes.

02:09:24Yeah. I would just note, obviously, CPI,

02:09:27the price of goods, the price of purchasing a home,

02:09:32the price of a mortgage, the cost

02:09:34of a mortgage has been astronomical.

02:09:37In Westchester County, for instance,

02:09:38where I represent, the average mortgage cost is

02:09:40up $1,000 a month.

02:09:43Over $12,000 a year.

02:09:46In the time I have remaining, quick question.

02:09:49In your meetings with the President,

02:09:51have you noticed any mental or cognitive decline?

02:09:55No. Thank you.

02:09:57I yield back.

02:09:58Point of order.

02:09:59The gentleman's time has expired.

02:10:01Point of order, Mr. Chairman.

02:10:03Point of order.

02:10:04Yes, Mr. Chairman.

02:10:05The gentleman just mentioned the President's cognitive capacity.

02:10:09And I believe this to be a violation of the rules

02:10:13with relationship to decorum.

02:10:16And that this goes into a personality of a President.

02:10:21Gentleman's time has expired.

02:10:22You're recognized now for your five minutes, Mr. Green.

02:10:25My point of order is to be made immediately

02:10:28after the gentleman's statement.

02:10:30And that's what I'm doing.

02:10:31I would remind members not to engage in personalities

02:10:37and comments about the President.

02:10:39Mr. Chairman, if I may, with my point of order,

02:10:41I demand that the gentleman's words be taken down insofar

02:10:45as they negatively reflect upon a candidate

02:10:48for President of the United States.

02:11:01Gentleman from New York, Mr. Lawler, is recognized.

02:11:05I'll happily withdraw my words, though everybody understood them.

02:11:12Mr. Chairman.

02:11:14Gentleman withdraws his comments.

02:11:16Mr. Green, you're recognized.

02:11:18If I may, Mr. Chairman, his final comment was,

02:11:21although everybody understood them, in my opinion,

02:11:25that then brings us right back

02:11:27to where we were before he made his attempt to withdraw.

02:11:31Now, if he's willing to withdraw appropriately,

02:11:34I will not demand, but until he does so,

02:11:37I demand that his words be taken down.

02:11:39The gentleman's time had expired.

02:11:42Mr. Chairman, the time does not expire on the request

02:11:47that I've made, the point of order.

02:11:50The time didn't expire on that.

02:11:54I recognize Mr. Lawler.

02:11:55Let the record reflect, I withdraw my words.

02:11:58Thank you, Mr. Chairman.

02:12:02Gentleman from Texas, Mr. Green,

02:12:04is now recognized for his five minutes.

02:12:08Thank you, Mr. Chairman, and I thank the chair

02:12:11for appearing today.

02:12:12I hope things are going well with you.

02:12:14I know that this is a difficult time for you, and quite frankly,

02:12:18you've been in a difficult time for a number of years,

02:12:21and you've proved to be quite resilient

02:12:23and quite effective at what you do,

02:12:25so I thank you for what you're doing.

02:12:27I do want to ask you about several things, and I hope

02:12:31that I'll get to them, but first,

02:12:34there was a post-failure lessons report after the failure

02:12:40of Silicon Valley and Signature Banks.

02:12:43I thought that report was pretty important.

02:12:45How important is that post-failure lessons report?

02:12:52It's important.

02:12:53We wanted to learn the right lessons

02:12:55and make the right changes to both our rules, but also,

02:12:59really, to our supervisory practices more

02:13:01than anything else, and we're doing that.

02:13:05And is this something that you believe to be important

02:13:08after each incident, such as what happened

02:13:11with Silicon and the other banks?

02:13:14Yes, I think, you know, I think we all have a lot

02:13:16to be humble about, and we try to learn from events.

02:13:21Thank you.

02:13:21Let me go on to the next question, which has to do

02:13:25with the banks that are small.

02:13:30Let's talk about those that are less

02:13:31than $5 billion in total assets, yet they are subject

02:13:35to the special assessments of the FDIC,

02:13:39once there is a systemic risk exception triggered.

02:13:43I'd like to see them exempt from that.

02:13:48Do you have any comments on it?

02:13:51That's really, that's either a statutory matter,

02:13:55or it's a matter of the FDIC's practice,

02:13:57so it's not something the Fed has any input into, really.

02:14:02Okay. Let's do this next, please, as time runs out.

02:14:06Would you kindly finish your commentary?

02:14:09You were giving a comment on the pandemic

02:14:13and how the pandemic helped to generate this inflation,

02:14:18and you stopped in the middle of your comment,

02:14:21so would you go back through that, please,

02:14:23so that the public at large can get a better understanding

02:14:26of what actually happened with the pandemic and inflation?

02:14:30So I'd be glad to, and I think people are now,

02:14:32we have a few years to look back.

02:14:34I think the more years that pass,

02:14:35the clearer we can see what was happening.

02:14:38But I think you look back now, and you're seeing this,

02:14:42broadly what was happening was governments did a lot

02:14:46to support economic activity during the pandemic,

02:14:49and on the theory that, you know,

02:14:51there could be really serious economic bad times ahead.

02:14:55Then the economy reopened, and it reopened very, very strongly,

02:15:01and I think in hindsight, you can see that there was just a lot

02:15:04of support for demand from fiscal policy,

02:15:07from monetary policy, and that supply was constrained.

02:15:10You couldn't make cars.

02:15:13Supply chains were tangled up.

02:15:16There were shortages of so many things.

02:15:18So what happened was we got a burst of inflation,

02:15:21and the United States got a big burst of inflation, really,

02:15:24more from demand than other countries did.

02:15:28Then you have the war in Ukraine, which gave a big burst

02:15:32of inflation, more to Europe than to us, and so you wind

02:15:36up with a situation where you've just got a lot of inflation,

02:15:39and our thinking, my thinking at the time was,

02:15:42it's going to take restrictive monetary policy,

02:15:44and it's going to take time for the supply side

02:15:47and demand side distortions from the pandemic to unwind.

02:15:522023 was the year when that kind of happened.

02:15:55So supply chains were fixed.

02:15:57The labor shortage was greatly alleviated,

02:16:00and unemployment remained very low.

02:16:02Inflation came down by a very large amount last year,

02:16:06while growth remained quite strong.

02:16:08So this was the year that kind of proved that thesis.

02:16:11Now we're in 2024, and it's a question

02:16:14of finishing the job on inflation,

02:16:15which we're committed to do,

02:16:17while also keeping a strong labor market,

02:16:20which we're also committed to doing, and that's a balance

02:16:22that we have to strike in our policy.

02:16:25But I think we know more now about where this came

02:16:28from because we can see what made it go away,

02:16:31and it was a combination of supply and demand,

02:16:34as we had kind of expected.

02:16:36And two of the most significant factors were the pandemic

02:16:41and the war with Ukraine.

02:16:44Is that correct?

02:16:44Yes, and it's also the fact that the pandemic summoned forth a

02:16:48great fiscal and monetary response, and that contributed

02:16:53to really strong activity and to inflation.

02:16:55I have a question.

02:16:56We're going to run out of time, but I have to ask it.

02:16:59But if not for that monetary response,

02:17:02I know that it's a counterfactual,

02:17:04but would we have possibly gone into a depression?

02:17:08That's what we thought at the time,

02:17:10and I think mainstream economists were very concerned

02:17:13that we'd never literally shut the global economy down

02:17:17for a period and then tried to reopen it.

02:17:20We didn't know how long it would take or how well that would go.

02:17:23Thank you, Mr. Chairman.

02:17:24Gentlemen, time has expired.

02:17:25We now go to the gentleman from Oklahoma, Mr. Lucas,

02:17:28who's recognized for five minutes.

02:17:29Thank you, Mr. Chairman, and thank you, Chairman Powell,

02:17:32for testifying today.

02:17:34I realize that my questioning point in the hearing today,

02:17:39probably a lot of material has been covered,

02:17:41but there's never anything ever wrong

02:17:43with asking important questions a second or third time.

02:17:46You've reiterated how members of the board would

02:17:50like to see a revised Boswell proposal put

02:17:54out for public comment, and you're working

02:17:56through the process with FDIC and OCC.

02:17:59From my perspective, the FDIC is in a period of uncertainty.

02:18:04The current chairman announcing he'll resign

02:18:06to restore confidence in his agency, and the replacement

02:18:09is awaiting Senate confirmation hearings.

02:18:13And at the OCC, we have an acting comptroller

02:18:17who has not been yet confirmed by the Senate.

02:18:19At the very least, given the expected broad revisions,

02:18:25I hope the other agencies agree

02:18:27that a complete re-proposal would be appropriate.

02:18:29So, Chairman, could you give me some indication

02:18:33of what the potential timeline

02:18:36around such a decision to re-propose might look like?

02:18:40It's pretty uncertain, but I'll give it a shot.

02:18:43And I'll say again that these discussions we've been having

02:18:46with the other two agencies have been very constructive,

02:18:49and we very much want that to continue.

02:18:52We've got pretty good agreement on the substance,

02:18:55and now it's about to process.

02:18:56So, you know, a baseline might be that we agree on a re-proposal

02:19:04of some kind that, you know, that gives the public a chance

02:19:08to see these changes and react to them

02:19:12and write comment letters.

02:19:14And so that could happen.

02:19:16You know, it would take us a while to write it up,

02:19:18and then we'd put it out for 60 days.

02:19:21I think that couldn't happen probably until part

02:19:25of the way through the fall.

02:19:27Then there would be, let's say, 60 days of comment,

02:19:30and we get the comments.

02:19:31We'd have to then evaluate the comments

02:19:33and think carefully about them.

02:19:35Having done that, we'd have to write up the final version,

02:19:39and that would take some time.

02:19:40So that probably puts you, my guess is it puts you well

02:19:43into next year.

02:19:45As I mentioned, these rules are going to be, these are rules

02:19:48that the banks are going to have to live with for a long time,

02:19:51and we need to get them right.

02:19:53It's not something we should be hurrying on.

02:19:56We need to take our time and get it right and make sure

02:19:59that we hear the comments.

02:20:01This is a very big piece of regulation.

02:20:03A lot of things will need to be changed.

02:20:06There are a lot of good things in there.

02:20:07We want to come out with a good proposal,

02:20:09and that's what it will take.

02:20:10To shift gears on you, Chairman, the 2024 stress test focused

02:20:14on commercial real estate risk,

02:20:17which is an area we've all been paying close attention

02:20:19to here on this committee.

02:20:21Do you agree that the results showed the financial system

02:20:25to be strong?

02:20:26Yes, I do.

02:20:30The folks back home are always very concerned about inflation

02:20:37and the period we've gone through lately,

02:20:39not just the basic necessities that continue to explode,

02:20:42but the cost of doing business and all those other issues.

02:20:45The fact is the inflation is still running

02:20:48above the Fed's 2% target,

02:20:51and we've seen significant price increases in food

02:20:53and energy over recent years.

02:20:55As you and I discussed before, I started

02:20:57out as a young farmer in 1977

02:20:59in that inflationary period during the Carter years.

02:21:03Then when we went through Chairman Volcker's rather,

02:21:05shall we say, dramatic tightening of monetary policy.

02:21:09And I still remember paying 17% to borrow cow feed money

02:21:15when I was a student in college.

02:21:17I was well collateralized, but that was a bargain in the fact

02:21:20that the cow was accessible.

02:21:22So I'm particularly sensitive, being a part of that generation,

02:21:26that if inflation isn't effectively dealt with,

02:21:28it can spiral out of control.

02:21:31Could you expand for a little bit more about your approach

02:21:33in dealing with inflation in a way

02:21:35that doesn't repeat the mistakes of the past?

02:21:38I just want to avoid the mistakes of the past.

02:21:41So I think really one of the big lessons coming

02:21:46out of the high inflation of the 70s, which we both lived through,

02:21:50is that it really is on the central bank to be on the case

02:21:54and do the job and make sure that it is fully well

02:21:57and truly done, and that really that is up to the central bank.

02:22:02And believe it or not, that wasn't fully accepted

02:22:05or that wasn't necessarily the thinking.

02:22:07And also the independence

02:22:09of central banks was much less respected back then.

02:22:12So all the more credit to Paul Volcker

02:22:16for having the courage to do it.

02:22:18So we now, that is an internalized lesson for people

02:22:21in central banking these days.

02:22:23We do understand that.

02:22:25We are committed to bringing inflation sustainably

02:22:27down to 2 percent.

02:22:29One last question in my remaining seconds.

02:22:33You and the leadership of the feds will be there the day

02:22:35before the election this fall, and you'll be there the day

02:22:38after the election, still be the same people carefully watching

02:22:41the feds' responsibilities, correct?

02:22:45This is my fourth presidential election at the fed,

02:22:47and I can tell you we come to the work the next day

02:22:49and we do our jobs.

02:22:50Gentleman's time has expired, and I'll go to the gentleman

02:22:52in California, Mr. Sherman.

02:22:56Coming out of COVID, everyone said a soft landing was

02:23:00impossible and a recession was inevitable.

02:23:03I want to commend you and the administration.

02:23:06It looks like we've seen a soft landing.

02:23:09We've continued to have historically low unemployment

02:23:13rates and historically low unemployment rates

02:23:15for people of color.

02:23:17And in the last 18 months, we've seen a 4.7-point decline

02:23:24in the inflation rate as measured

02:23:26by the Consumer Price Index.

02:23:29Is that the greatest decline or I realize you may not have done

02:23:34the calculations, but I did the calculations.

02:23:36It's the greatest decline that we've seen

02:23:39in an 18-month period this century.

02:23:41Do you have any reason to disagree with that?

02:23:44I hope that's true, and I'm glad you said it

02:23:46because it's certainly a lot.

02:23:48I can't validate the statement, though.

02:23:52I'm sure you have a fine staff that will do the calculation

02:23:55and hopefully we'll see the press release.

02:23:57When Secretary Yellen was here yesterday, I addressed an issue

02:24:01that both you and her should be concerned with.

02:24:04I've always opposed Operation Choke Point,

02:24:06where for political reasons, banks wouldn't provide

02:24:10or might not provide financial services.

02:24:14Florida and Tennessee have passed laws giving anybody

02:24:18who's denied a bank account or even a loan a way to claim

02:24:22that that was for political reasons, and it opens

02:24:25up the possibility that banks would be pressured

02:24:27by those laws to release their suspicious activity reports,

02:24:31which I understand are supposed to be private.

02:24:35And so I hope you'll work with the Secretary in making sure

02:24:40that the laws of Florida

02:24:41and Tennessee do not adversely affect our ability to deal

02:24:45with suspicious financial circumstances.

02:24:49You have a dual mandate.

02:24:52I think you have a third mandate that is implied

02:24:57because the budget deficit poses a great risk to price stability

02:25:02and to keeping unemployment low.

02:25:06And you don't deal with spending.

02:25:08You don't deal with taxation.

02:25:10But in two ways, you dramatically affect the

02:25:12budget deficit.

02:25:14Federal government is the biggest borrower

02:25:16in the history of the world.

02:25:18Interest rates affect the forthcoming budget deficit.

02:25:22And at times, you've turned over to the federal government

02:25:25up to $100 billion in profit.

02:25:28And so I hope that you would consider whether your first two

02:25:31mandates imply that you at least have to look

02:25:34at how your policies affect the budget deficit.

02:25:38I hope that you will go with republication of Basel III

02:25:47and insist on that.

02:25:48I know you're dealing with two other regulators on that.

02:25:51A recent assessment by PricewaterhouseCoopers showed

02:25:55that the original proposal would lead to higher borrowing costs

02:26:01for small and medium-sized businesses.

02:26:04And in every way, Basel III seemed to be slanted

02:26:08toward telling the banks, go and put your money on Wall Street

02:26:11where you just are going to have interest rate risk.

02:26:14And don't loan your money to local Main Street businesses

02:26:18because there's credit risk there.

02:26:20And in fact, if you had a fair system, you would mark

02:26:24to market all bonds, not just those

02:26:27that are quote available for sale.

02:26:30I hope also that as you redo Basel III,

02:26:34you treat energy tax credits, green energy tax credits the

02:26:38same way you currently deal with low-income housing tax credits.

02:26:42That you keep in mind the effect on the securities industry,

02:26:45particularly municipal bonds.

02:26:47That you don't unfairly to local business say

02:26:51that if it's a publicly traded company, it counts only 65%.

02:26:56And that you look at mortgage servicing rights as an asset.

02:27:02And that you fully account for the private mortgage insurance.

02:27:08I know you give some credit for that.

02:27:11But frankly, a 80% loan to value and a 90% loan to value

02:27:17that has private mortgage insurance pretty much expose the

02:27:20bank to the same risk.

02:27:22I'll ask you one question about the debit cards.

02:27:30You're planning to provide only, I believe, a .3 cents,

02:27:36additional charge for dealing with fraud prevention.

02:27:41Fraud has just skyrocketed.

02:27:44Would the Fed consider increasing the fraud prevention

02:27:48adjustment before finalizing its proposal?

02:27:52And that's part of the comments that we've received

02:27:55on the interchange rule.

02:27:56And it's something we're, that's a concern that we're aware of.

02:27:59And we'll take that into consideration.

02:28:01I yield back.

02:28:04Gentleman yields back.

02:28:05And now we, the gentleman from the great state of Missouri,

02:28:08Congressman Luekemeyer is now recognized for five minutes.

02:28:11Thank you, Mr. Chairman.

02:28:12I certainly appreciate the thoughtful gentleman

02:28:16from California's remarks on some of the stuff.

02:28:19But I'm kind of curious how Chairman Powell,

02:28:23he indicated you've got a third implied duty here

02:28:25to actually work with the budget.

02:28:27I really thought that only the Congress had the ability

02:28:31to impact the budget.

02:28:32We're the ones, not even the legislative,

02:28:34not the executive branch, not the judicial branch.

02:28:37The legislative branch is the one that handles the budget.

02:28:40Am I mistaken on that, Mr. Chairman?

02:28:43I believe that is right.

02:28:44I don't think you want our job on top of what you've got.

02:28:50One of the things that's come across my desk

02:28:54in the last few weeks here is some

02:28:57of the legislatures this last year

02:28:59around the country have started to pass banking laws

02:29:03that infringe on federal banking laws.

02:29:07Have you seen this?

02:29:08Are you aware of it?

02:29:09Do you have thoughts on it?

02:29:11Can you tell me what your thoughts may be?

02:29:12Honestly, I have not seen that.

02:29:15And it wouldn't necessarily come across my desk.

02:29:18It might come across Vice Chair Barr's desk more.

02:29:21Okay. Well, I was just concerned because, I mean,

02:29:23you handle lots of banking rules and regulations.

02:29:26And so we don't want to have the state usurp the duties

02:29:30and responsibilities and the legal ability to.

02:29:35These are preemption issues?

02:29:37Yes, preemption issues is what it's all about.

02:29:38Yeah, that's a big deal for the OCC issue.

02:29:40Yeah. So I'm just curious if you'd run across any of that.

02:29:43Have any thoughts on it?

02:29:44I haven't.

02:29:45Okay. One of the things I just got done coming

02:29:48out of a committee hearing with small business a while ago,

02:29:50and there was a home builder individual there, a contractor.

02:29:55And he was talking about the cost of regulations.

02:29:58You know, basically $1,000 increase in costs,

02:30:00costs about 100,000 homes across the country not being able

02:30:04to be purchased because they're no longer affordable.

02:30:07And so it brings up the point with regards

02:30:09to cost of regulations.

02:30:10You know, do you follow the Administrative Procedures Act?

02:30:14Yes.

02:30:16So part of that act is

02:30:17to determine the cost of a regulation, correct?

02:30:20Or the cost of compliance?

02:30:23I don't actually know the answer to that.

02:30:25But I know we follow carefully the EPA.

02:30:27But I mean, to me, that's a really important point

02:30:30from the standpoint of how you look at rules and regulations

02:30:32to ensure that the cost is not going to be more

02:30:35than the economic benefit of what you're doing.

02:30:37So I mean, this has to be part of your analysis, I would think.

02:30:42Certainly, we try to make our rules as efficient as possible

02:30:47to get the job done.

02:30:50One of the concerns we have is what I think the gentleman

02:30:52talked about, the credit card situation here, REG II.

02:30:56And with regards to the Chevron doctrine basically being

02:30:59rescinded, how is that going to affect your rulemaking

02:31:03with regards to some of the more recent ones like REG II fees

02:31:09and stuff, the Basel rule?

02:31:11Are all those things going to be impacted by this at all?

02:31:14I mean, it doesn't change our assignment

02:31:17under the Durbin Amendment to do the interchange rule.

02:31:20So we're always focused as an institution

02:31:24on compliance with the law.

02:31:26We're a very law-abiding group.

02:31:28But does it narrow your ability to go beyond

02:31:32or reinterpret laws and rules and things like that?

02:31:34It seems to me that's what the rule is.

02:31:35That would be a question for the courts.

02:31:36I mean, the courts will be asking the same question,

02:31:38which is what was Congress's intent for that law.

02:31:42And that's the question we're asking.

02:31:44But what they're saying is courts will give less deference

02:31:46to agencies, I think.

02:31:47Again, these decisions were just passed down.

02:31:51I was actually out of the country last week.

02:31:53This is all happening.

02:31:54I've had no time to be briefed on any of that.

02:31:57So I'm kind of speculating here.

02:31:59Okay. One last question.

02:32:01I asked this question yesterday of Secretary Yellen.

02:32:05What keeps you up at night?

02:32:06What is your biggest concern with regards

02:32:08to your responsibilities, with regards to the economy,

02:32:11regards to the banking system?

02:32:13What is your biggest concern?

02:32:14So for a long time, it's been cyber.

02:32:18And the reason is, you know, we know about credit crises

02:32:22and things like that and financial crises.

02:32:24But we haven't really had something

02:32:25where there's a successful cyber attack

02:32:28on a major financial institution or financial market utility.

02:32:31That's always been my answer.

02:32:33I would actually say now the number one thing

02:32:36that just does keep me awake at night is the balance

02:32:39that I talked about before, which is we're

02:32:41at the critical time of inflation is coming down,

02:32:44the labor market is cooling, and we want to get it right

02:32:47for the benefit of the American people.

02:32:49We want to get inflation down to 2%,

02:32:50but we want to keep a strong labor market, too,

02:32:52and trying to make decisions

02:32:54that give that the best chance to happen.

02:32:57That is the thing that I think about in the wee hours.

02:33:01You know, we've talked about this before, too.

02:33:03You really got a tough job from a standpoint.

02:33:05You're trying to drive down demand in the administration

02:33:07by spending all this money and trying to drive it up.

02:33:09It puts you in a really big box, doesn't it?

02:33:13Thank you, Mr. Chair.

02:33:14I yield back.

02:33:15The gentleman yields back, and now we have the gentleman

02:33:18from the great state of Illinois,

02:33:19Congressman Foster, is now recognized for five minutes.

02:33:22Thank you, Mr. Chairman and Chair Powell.

02:33:24You know, I guess when things are going well,

02:33:26it's as they currently are, it's all of our duty is to look

02:33:29around the curve and see the risks

02:33:31that keep you up at night.

02:33:32So I appreciate Representative Luebkenmeier's question.

02:33:36Now, over the last few years, there have been increasing

02:33:38interest in synthetic risk transfers, SRTs,

02:33:41or credit link notes, which are often used by U.S. banks

02:33:45to shift risk away from the banking system and as a means

02:33:48of managing regulatory capital.

02:33:50So I've been concerned by recent reports that the buyers of some

02:33:53of these SRTs may be investing

02:33:56in them using bank-provided leverage,

02:33:58in which case the risk could just boomerang right back

02:34:01into the banking system.

02:34:02You know, frankly, when I read about this, it triggered my PTSD

02:34:06from the AIT situation

02:34:08with credit default swaps during the financial crisis.

02:34:12Now, I understand the Federal Reserve plays a role

02:34:14in approving SRTs, in fact, issued guidance

02:34:17to U.S. banks regarding their issuance last fall.

02:34:20Could you say a little bit about the ways

02:34:22that these investments can be a safe way for banks

02:34:24to offload risk and in what ways they could become a dangerous

02:34:28source of contagion?

02:34:29Sure. So there could be a breakdown in a couple

02:34:31of places in the chain, as you're obviously aware.

02:34:33One is just that the risk isn't really well

02:34:36and fully transferred to the buyer.

02:34:38And that's the first step is,

02:34:41is that risk going away off the balance sheet

02:34:44in an unconditional kind of a way,

02:34:46in a way that the bank understands?

02:34:47And that's a good thing, if banks are able to do that.

02:34:49Then the question is, is it coming back

02:34:51through the back door with financing?

02:34:54And so we're well aware of that.

02:34:55We're, you know, banks do tend to bring these things to us

02:34:58and we look at them carefully.

02:35:00We understand the ways, some of the ways it can go wrong.

02:35:04And, but at the end of the day, if it works to reduce the risk

02:35:08on a bank's balance sheet, you know,

02:35:10that's something we should be okay with.

02:35:12Yeah. But, you know, there's the, well, if you could just say,

02:35:16what sort of insight and control does the Federal Reserve have

02:35:19into all the connections, particularly

02:35:20when the connection may go through businesses

02:35:24that you do not have direct non-bank entities,

02:35:27that you may not have direct oversight over?

02:35:30My understanding is that this is a very active dialogue

02:35:33that we're having with banks.

02:35:34They want to know how this is going to be treated.

02:35:36They don't want to do something that is going to come back

02:35:39on them or that we will deny the treatment on.

02:35:41So I think there's a pretty transparent set of exchanges

02:35:46around how these things work.

02:35:47We're, you know, we're very clear

02:35:50on what we think our requirements are.

02:35:52This is what I'm told and, you know,

02:35:54so we saw what went wrong the last time.

02:35:57I think no one wants to repeat that, including the banks.

02:36:00So.

02:36:01Well, if you conclude as you're actively studying it

02:36:04that you need more visibility into certain areas

02:36:07of particularly non-bank, things that may be part of the chain

02:36:11of contagion, please let us know because, you know,

02:36:14it's our job to avoid the next crisis.

02:36:16I think it's my personal goal

02:36:18to die before we have another financial crisis

02:36:21and then I'll be doing my job well.

02:36:23Now, I understand also the value of SRTs

02:36:26in the U.S. are relatively small

02:36:27and the bulk of these are offshore.

02:36:29Is the growth of this practice internationally something

02:36:32you're watching closely and is there anything

02:36:35that might provide a sign of early trouble in terms

02:36:39of international contagion that might creep back in?

02:36:42So I haven't heard that flavor of it, but I'll check on that

02:36:45and let you know.

02:36:45Do you remember with AIG, you know, the real problem

02:36:49with AIG falling into bankruptcy is

02:36:51that it would immediately put a bazillion of the European banks

02:36:55into, you know, into violation of their capital requirements

02:36:58which was a major contagion.

02:37:00So do you have a sense of the time scale

02:37:04for the liquidity proposal at this point?

02:37:08I think, you know, the main thing is we have this very large

02:37:13important project on Basel III and I think we're pretty close

02:37:17to being able to move that out into the public view again

02:37:22and I think once we've done that, we can move

02:37:24on to the other things that are there.

02:37:27And one of them is the liquidity proposals and I don't want

02:37:31to put a specific time frame on it, but, you know,

02:37:33we're certainly working toward

02:37:35that sometime later this year I would think.

02:37:38Later this year, we'll have the first view of that.

02:37:39I would think so.

02:37:40Okay. And can you, I understand it's still

02:37:45under negotiation between agencies,

02:37:47but can you say directionally the Basel III,

02:37:51the new amended proposal, is it just going to be

02:37:54in the direction of sort of weakening it, watering things

02:37:57down toward the current capital requirements

02:38:00or will there be areas

02:38:01where it's actually strengthening them?

02:38:03Oh, no. There will be a capital requirement in it

02:38:06that is consistent with Basel III

02:38:09and a capital increase that's consistent with Basel.

02:38:11My question is if you look

02:38:12at what the original proposal was compared to, you know,

02:38:15what you intend to put out, are you moving in the direction

02:38:18of more toward, you know, the current situation?

02:38:22And if so, if you can just interpolate,

02:38:25it seems like if you have comments

02:38:26on the proposal you put out, you understand comments

02:38:29on the status quo and you're somewhere between that,

02:38:33then maybe you don't need another set of comments

02:38:35because everything that can be said has been said.

02:38:38It's a little more complicated than that,

02:38:40but that's essentially right.

02:38:41You know, you have current levels of capital,

02:38:43you have the proposal and you have, which is a lot

02:38:46of gold plating, and then you have where it's shaking out

02:38:49and that's, but it's.

02:38:52So I just was wondering why you need more comments.

02:38:54There are many different pieces.

02:38:56The answer is there are many, many different pieces of that.

02:38:58Thank you, and I'm over time and.

02:38:59And the time is up.

02:39:02Next, the gentlewoman from the great state of Indiana,

02:39:05Congresswoman Houchin, is now recognized for five minutes.

02:39:08Thank you, Mr. Chairman.

02:39:09Thank you to the Ranking Member, and thank you, Chairman Powell,

02:39:12for coming to speak with us today.

02:39:14It's been a long day, so thank you

02:39:16for being here this entire time.

02:39:18One of the greatest strengths

02:39:19of our financial services industry is the diversity

02:39:22of our banking system.

02:39:24I know firsthand how important it is for us

02:39:26to maintain options and choice for Americans,

02:39:29whether it's somebody looking to open a savings account

02:39:32or take out a loan to start a small business.

02:39:35Increasingly, however, we have seen consolidation

02:39:38in the banking industry and increased difficulty

02:39:41for smaller financial institutions to survive.

02:39:44One of the reasons for this is an excessive regulatory burden

02:39:48that many of the smaller banks face.

02:39:50While this can come in the form of new proposals and adjustments

02:39:53to liquidity requirements or to things like Basel III endgame,

02:39:57it can also be due to outdated technological capabilities

02:40:00at the agencies and inefficiencies in

02:40:03and within the examination process.

02:40:05Chairman Powell, could you just talk

02:40:07about what steps the Fed is taking to upgrade technology

02:40:10and procurement procedures and update training practices

02:40:13to ensure that the banks

02:40:14that you regulate don't face unnecessary burdens?

02:40:18So to your point, the number of banks

02:40:21in the country has been coming down for 40 years.

02:40:24And we, there's consolidation going

02:40:27on for a whole range of reasons.

02:40:29And we're not trying to foster that.

02:40:32We're not trying to push that.

02:40:33And we're aware that, you know, high fixed costs

02:40:36from regulation may be one of the reasons for that.

02:40:38So we do try to keep that in mind,

02:40:41particularly for the smaller institutions.

02:40:44On your question around, you know, IT and specific things,

02:40:49I might take an opportunity to come back to you

02:40:51with somebody who's closer

02:40:53to the specific supervisory practices.

02:40:56That would be great.

02:40:57That would be great.

02:40:57And just for reference, I was proud earlier this year

02:41:00to introduce a bill of fostering the use of technology

02:41:03to uphold regulatory effectiveness

02:41:05in Supervision Act or the Futures Act.

02:41:08It's an important bill that would require our federal bank

02:41:11regulators to conduct an assessment

02:41:13to ensure that the technology

02:41:14and training systems they are using will improve

02:41:17and reduce the burden on our,

02:41:19especially on our smaller financial institutions.

02:41:22At the same time, the bill will strengthen the safety

02:41:24and soundness of our financial system

02:41:26by keeping our regulators up to date

02:41:28on the latest FinTech innovations.

02:41:30So I was glad to see that act, the Futures Act move

02:41:33through the markup earlier this year.

02:41:35I certainly hope to see it come to a floor vote soon.

02:41:37Chairman Powell, in your comments yesterday

02:41:39in the Senate, you said Basel III will need a,

02:41:41quote, meaningful revamp.

02:41:43Before we proceed toward finalization of that rule,

02:41:46I was glad to hear you say that.

02:41:48Considering 97% of public comments

02:41:51on Basel III were negative, with 86%

02:41:54of that negative feedback coming from outside the banking sector.

02:41:58Many of my colleagues here today have highlighted their own

02:42:01concerns with Basel III.

02:42:03Given the pressure that Americans are already facing

02:42:05with inflation and increased interest rates

02:42:08and housing market stalls, I would urge

02:42:10that you take a good, long look at the cumulative effect

02:42:13of this rule in context with the broader economy, our small

02:42:17and mid-sized banks,

02:42:18not just the larger financial institutions.

02:42:21Will a meaningful revamp include consideration of the hardships

02:42:26that overregulations cause for smaller financial institutions

02:42:29like those that are essential to rural communities like mine

02:42:32in southern Indiana?

02:42:34I think it will, yes.

02:42:36And are you concerned about the consolidation

02:42:39that we are seeing in the banking sector?

02:42:41I know you said it's been going on for 40 years.

02:42:44Does consolidation in the banking sector concern you?

02:42:47And are you concerned that the broader effect

02:42:50of cumulative rules is potentially leading

02:42:54to a further consolidation in the banking sector?

02:42:57Again, we don't want to be part of the reason

02:43:00for that consolidation.

02:43:01It seems to be happening, though, organically.

02:43:03We allowed interstate banking, for example.

02:43:06Also, I think for a long time the learning was there weren't

02:43:09a lot of economies of scale in banking.

02:43:11I think with all the technology costs,

02:43:14that old learning is now not really true.

02:43:19And so I do think, in fact, I think a lot of the sort

02:43:22of smaller regionals do feel that they need to grow to be able

02:43:26to compete with the larger regionals and also, you know,

02:43:29the very largest banks are also present, as you well know,

02:43:32in many, many communities where they weren't 30 years ago.

02:43:35So I think people are seeing a need for scale.

02:43:39From a business standpoint, you know,

02:43:41we don't want to push consolidation.

02:43:43I think we also don't want to stand in the way of it

02:43:45if that's what's necessary for banks

02:43:47to compete with the largest banks.

02:43:49I appreciate that.

02:43:49Thank you, Chairman Powell, again, for your testimony.

02:43:51Our financial system is really the envy of the world.

02:43:54We need to make sure that small

02:43:56and growing institutions have the tools they need to innovate

02:43:59without any undue burden.

02:44:00I appreciate your emphasis on that in the meaningful revamp.

02:44:04Thank you, Mr. Chairman, and I yield back.

02:44:08Next, the gentleman who set a record mile run this morning

02:44:11in Washington, D.C. from Illinois, Mr. Kasten,

02:44:15is now recognized for five minutes.

02:44:17Thank you, Mr. Chairman.

02:44:18You looked much better and well-coiffed

02:44:20when I saw you this morning than I was.

02:44:23Nice to see you again, Chair Powell.

02:44:27Just briefly on the Basel III reforms, you and I have talked

02:44:32about the tax equity provisions and the fact

02:44:35that clean energy tax equity got a four times risk weighting

02:44:38relative to other tax equity in the last version.

02:44:41If there is a re-proposal, can you give us any visibility

02:44:44on whether clean energy tax equity will go back

02:44:47to the 100% risk weighting that it's historically had?

02:44:49So I'm trying to, I'm not going to give any specifics

02:44:52out today because, you know,

02:44:53the usual arrangement is nothing's agreed

02:44:55until everything's agreed.

02:44:57So I don't want to get into what the specifics are.

02:44:59I'm hopeful that the three agencies can come out,

02:45:02you know, pretty soon with the whole package.

02:45:05Okay. Well, the sooner even something temporary

02:45:08because there are a lot of banks that want to participate

02:45:10that are, I think, more cautious

02:45:12than they need to be right now.

02:45:13I appreciate that.

02:45:14In 2021, I think you were a part of the FSOC report

02:45:18on climate-related financial risk

02:45:20that for the first time identified climate change

02:45:22as an emerging threat to U.S. financial stability.

02:45:24Do you still agree with that conclusion?

02:45:27The conclusion being what again?

02:45:29That climate change was an emerging threat

02:45:32to U.S. financial stability.

02:45:33Yeah.

02:45:34Okay. I raise that because I'm, I've been troubled, as you know,

02:45:39from some of the letters we've written

02:45:40by this April Bloomberg report that said, number one,

02:45:43that Fed officials were pressuring the Basel Committee

02:45:46to make disclosures of banks' transition plans optional

02:45:48and that succeeded.

02:45:50Number two, that the Fed, OCC, and FDIC were pushing

02:45:54to limit implementation

02:45:56of the Basel Committee's climate risk management principles

02:45:58to remove financed emissions.

02:46:01And number three, that the U.S.,

02:46:02unlike other countries, did not propose that any

02:46:05of its banks be subject to an analysis

02:46:07of how they incorporated climate

02:46:09in their credit risk assessments.

02:46:12Have any representatives from your agency attempted

02:46:15to weaken the Basel Committee's work on climate risk,

02:46:18including by expressing concern

02:46:19about the Basel Committee overstepping its mandate

02:46:22with respect to its climate work?

02:46:24Well, I guess I would say it this way.

02:46:27The Fed does not have a mandate

02:46:30of fostering an energy transition or dealing

02:46:34with climate change.

02:46:36Some of the northern European banks feel that they do.

02:46:39They actually have that, it's in their mandate,

02:46:43either explicitly or implicitly, but we don't.

02:46:45But if we agree that climate change is an emerging threat

02:46:48to the stability of the banking system,

02:46:51are you saying you're not acting on it

02:46:53because you don't have the authority or you're not acting

02:46:54on it because you disagree with what you said in 2012?

02:46:57When you say it's an, and I agree,

02:46:59there's an emerging threat to financial stability,

02:47:01that's over time.

02:47:03We, I think looking to the banking agencies

02:47:06to lead the fight on climate change is a big mistake.

02:47:09I think it's a job for elected people.

02:47:12We don't have that mandate in the United States.

02:47:14We can do a very limited thing, which is make sure

02:47:17that the institutions we supervise are aware of

02:47:21and can manage those risks.

02:47:22We are not going to be the ones who are forcing them

02:47:25to adopt plans to transition and that kind of thing.

02:47:29That's just not going to happen through the banking agencies

02:47:32without a law change.

02:47:34So then if it is the view of the rest of the world

02:47:37that climate change is a financial risk and we're going

02:47:38to regulate our banks, is it the view of the Fed

02:47:40that the USGC should not be required to report?

02:47:45You know, again, we're not going

02:47:47to be climate policy makers at the Fed.

02:47:49We are not going to do that.

02:47:50We don't have that mandate.

02:47:52A key to our independence is that we stick

02:47:55to the job you've given us.

02:47:58And the idea that we should discover climate and say, okay,

02:48:02we're going to lead the fight on climate, it just, we do,

02:48:04if we're going to do things like that, we should be part

02:48:06of the Treasury Department.

02:48:07Well, so to be clear, no one's under the illusions

02:48:12that you're the EPA.

02:48:14But, you know, I spoke with Janet Yellen

02:48:16about this yesterday.

02:48:17We have multiple states

02:48:19where the insurance industry is collapsing.

02:48:22Something like, as you know well, something like a third

02:48:25to 40% of US wealth is tied up in real estate.

02:48:30And, okay, US homeowners are not G-SIBs,

02:48:35but in the 2008 financial crisis, we had risk that moved

02:48:41out of the G-SIBs onto other entities' balance sheets.

02:48:44And we said, well, we're not responsible

02:48:46because it's an insurance company.

02:48:47Well, we've fixed that.

02:48:48You do not have a mandate to,

02:48:50if there's systemic risk in the system.

02:48:52And so the question is, if we know that risk is moving

02:48:55through the system, is the FSOC monitoring that risk

02:48:58or is the FSOC's view that if I'm not allowed to look at it,

02:49:02I'm not going to look at it and it's somebody else's problem?

02:49:04Because somebody else is the person sitting here, right?

02:49:06I mean, we're going to be accountable if that risk comes

02:49:08when those chickens come home to roost.

02:49:10The banks know their risks pretty well.

02:49:12And you'll see the banks

02:49:14and the insurance companies pulling back from lending

02:49:16in coastal areas and things like that.

02:49:18No, I agree.

02:49:19But where are they offloading that risk to?

02:49:22If they're putting, we've seen them putting it

02:49:24onto Fannie and Freddie.

02:49:26We've seen Fannie and Freddie try to put it

02:49:28onto the reinsurance industry.

02:49:29The risk doesn't go away.

02:49:30We don't regulate them.

02:49:31The gentleman's time is up.

02:49:33Yield back.

02:49:35Next, the gentlewoman from the great state of Missouri,

02:49:38Congresswoman Wagner, is now recognized for five minutes.

02:49:41I thank you, Mr. Chairman.

02:49:43And in keeping with baseball analogies here,

02:49:46I think I'm batting cleanup.

02:49:48Chairman Powell, welcome this afternoon to you.

02:49:52Chair Powell, in your testimony, you stated that, and I quote,

02:49:55longer term inflation expectations appear

02:49:59to remain well anchored.

02:50:02Could you please expand on that for us?

02:50:05Sure. So in our thinking and the thinking of economists

02:50:09and central bankers, what the public expects

02:50:11about inflation is really important.

02:50:13Because if you expect there to be low inflation,

02:50:16then it probably will be low.

02:50:17Because you're going to make sure that's true

02:50:19in your daily decisions.

02:50:21So we measure them.

02:50:22You know, we survey individuals and businesses

02:50:26and market participants.

02:50:27And then we look at market-based.

02:50:29You can also derive market estimates

02:50:33of what inflation will be through various instruments

02:50:36of the markets.

02:50:36And all of those suggest that people expect inflation

02:50:40to be right around 2% over the longer term.

02:50:43And that's been very stable right through this episode.

02:50:46When you say longer term, sir,

02:50:48how many years would you be estimating?

02:50:51One year, three year, five year?

02:50:53Is there any?

02:50:53So we look at short and medium term inflation expectations,

02:50:58too, and they tend to be more volatile.

02:50:59Because, you know, when inflation is high,

02:51:01people think that'll last a few years.

02:51:03But one standard thing is to look at five year, five year,

02:51:07which is between year five and year ten.

02:51:09That's a standard way to look.

02:51:10Or longer term than that.

02:51:13If you ask, you just ask people in surveys

02:51:15over the longer term, maybe you don't specify.

02:51:17But they all give you the same answer, which is people kind

02:51:20of have faith that inflation will go back

02:51:22down to its 2% level.

02:51:25Thank you.

02:51:26There has been some reporting lately on shrinkflation.

02:51:30And for our viewers, I'll say this is

02:51:32when you pay the same price for something as yesterday,

02:51:36but get less of it than before.

02:51:38Kind of like my bag of potato chips.

02:51:42Some have sought to direct attention away from the pain

02:51:46of runaway inflation that we've experienced,

02:51:48and instead blame producers

02:51:51who themselves face rising cost pressures.

02:51:55Yet, I haven't seen any mention of shrinkflation

02:51:59as an inflation cause in any recent monetary policy report.

02:52:04Moreover, a Bureau of Labor Statistics article last year

02:52:09looked at shrinkflation and concluded that, and I quote,

02:52:12again, it has a minuscule impact on overall inflation.

02:52:16Chair Powell, from the Fed's perspective and analysis,

02:52:20has shrinkflation been a significant casual

02:52:24or amplifying factor in the runaway inflation

02:52:27of the past several years that has imposed maybe greater pain

02:52:31on American workers and households?

02:52:35I'd have to say no.

02:52:36I mean, I would say it this way.

02:52:38You know, packaging in the U.S. on food products

02:52:42and that kind of thing, you know,

02:52:43it's going to disclose the contents of the thing,

02:52:46and the price will be what it is,

02:52:47and consumers can make their choice to buy it or not.

02:52:49But we don't think that's a major driver of inflation, no.

02:52:54I think from a producer standpoint, it probably is.

02:52:57If the cost of the item is exponentially higher.

02:53:04It may reflect costs on the part of the producer.

02:53:07It probably does, but that doesn't mean it's a cause

02:53:09of inflation as such.

02:53:11Okay. Thank you.

02:53:12So switching topics, the Federal Reserve has produced volumes

02:53:17of research over the last decade highlighting the negative

02:53:20consequences of the debit interchange fee cap.

02:53:25Some of the economists who produced

02:53:27that research have even worked on this proposed rule,

02:53:31the Reg II.

02:53:32Chair Powell, was the previous Federal Reserve research

02:53:36demonstrating Regulation II's detrimental impacts

02:53:41to low-cost checking accounts flawed,

02:53:44or did it have incorrect conclusions?

02:53:48And if not, then why would the Fed propose this rulemaking

02:53:53when all of their research demonstrated

02:53:56detrimental impacts?

02:53:59Please.

02:54:01I am not entirely sure what research you're referring to.

02:54:04I'll be happy to follow up with you on that.

02:54:07Yeah. I hope you are,

02:54:08because I know we're having this discussion

02:54:10about the interchange fee caps and Reg II, and I'm concerned

02:54:16about going forward on that when much of the research

02:54:20that we have seen from the Fed has been pretty steady

02:54:25over the last number of years.

02:54:26It says it has quite detrimental impacts, so please,

02:54:30to low-cost checking accounts.

02:54:32So if you don't mind, I would love to get some answers on that.

02:54:35And also, why hasn't the Fed taken

02:54:38into action the higher fraud costs

02:54:40that debit card issuers will incur as a result

02:54:44of the new dual routing mandate for card,

02:54:47not present transactions?

02:54:50I'm over my time.

02:54:51If you could also answer in writing,

02:54:54I would be ever so grateful.

02:54:55I yield back, sir.

02:54:57Bailey yields back, and I would like to thank Chairman Powell

02:55:00for his testimony today.

02:55:01I know you've got to get out of here, and without objection,

02:55:04all members will have five legislative days

02:55:05to submit additional written questions

02:55:07for the witness to the chair.

02:55:09Questions will be forwarded to the witnesses for his response,

02:55:11and I ask you, Chairman Powell, to please respond no later

02:55:14than August 30th, 2024.

02:55:17With that in mind, this hearing is adjourned.

Fed Chair Jerome Powell Testifies In Front Of The House Financial Services Committee

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