Thom Tillis Peppers Fed Chair Jerome Powell With Questions On US Banking System And Inflation Rates

last month

During a Senate Banking Committee hearing prior to the Congressional recess, Sen. Thom Tillis (R-NC) spoke about the US banking system.

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Transcript

00:02Senator Tillis is recognized.

00:04Thank you, Mr. Chairman.

00:05Thank you for being here.

00:06I want to be real quick on Basel III in-game,

00:10and I want to be mindful of time.

00:13Just simply, can I get a commitment from you

00:15on releasing the results of the QIS?

00:18We plan to release the results of the QIS.

00:22What time frame?

00:23Well, first we have to get agreement

00:25with the other banking agencies, but as soon as possible.

00:29Can you imagine any other banking agencies

00:32having a concern with releasing it?

00:34Or is it just a matter of pro forma?

00:36No, it's just a matter of the bigger picture

00:38of getting agreement on the revisions to Basel III

00:41and also how to proceed.

00:43That's great, and I really appreciate the feedback

00:47that I've received from you.

00:48I should have started by thanking you, again,

00:50for your continued accessibility

00:52and discussions outside of the committee.

00:54They're very productive, and I appreciate that,

00:56and your leadership at the Fed.

00:58I grew up in the 70s.

01:01Got my Social Security number in 1973

01:04when I was 12 years old.

01:05That's when I made my first payment,

01:07so I've been following the economy even as a youngster.

01:10And that was a really lousy time to enter in the workforce.

01:15Tell me, and I'm hearing discussions

01:17among some of our members now

01:18that would almost be reminiscent of discussions

01:21with prior Fed members saying,

01:23look, we gotta lower interest rates,

01:25and we've got unemployment out of control.

01:30So it sounds like we're taking some suggestions

01:33from some of my colleagues or plays from a playbook

01:36that didn't prove to be very effective back in the 70s.

01:40What can we learn?

01:42I'm not gonna ask you about where you go from here,

01:45but if we look back into a post-mortem

01:47on some of the decisions that were made

01:50when we had consistently high uninflation,

01:54inflation, I should say,

01:55we had consistently high unemployment,

01:58what lessons can we learn there,

02:00or what mistakes should we not necessarily repeat?

02:02And I know that this is a fingerprint of a challenge.

02:06It's not exactly like the stressors

02:09that we had back in the 70s.

02:11But what can we learn from the decisions,

02:13what I think are arguably the wrong decisions made back then

02:16when we were dealing with high unemployment

02:18and high inflation?

02:20What do we learn?

02:21I think the number one thing we learned

02:23was that it's up to the central bank to take it on

02:25and stick with it until it's done.

02:27And that doesn't sound controversial now,

02:30but it actually was back then.

02:31And so people didn't really get in there and get it done

02:35and inflation kept coming back.

02:38I also think there are significant differences this time

02:40to the questions a minute ago.

02:43This is a combination of a supply side

02:46that we had very significant supply shocks

02:49along with big demand shocks

02:52from the reopening of the economy

02:54and from all the other things that happened.

02:55So I think we have to,

02:57each one of these things is different in its own way.

03:00We try to learn the lessons of history though.

03:02Do you agree or disagree,

03:04any disconnect between inflation

03:07and inflation expectations from the 2% target

03:10should be addressed now and not at a later time?

03:12Absolutely.

03:14I like that answer.

03:16I wanna go to something different.

03:18I'm trying to go into a lightning round now

03:21and finish on time.

03:24We've seen the 2024 stress test results

03:27for the banking, U.S. banking system.

03:31It looks like to me by every objective measure,

03:35we've got a strong, we've got a banking system

03:37that's on strong financial footing.

03:40Do you agree?

03:42Yes.

03:45One last thing is the Fed considers making

03:47broad and material changes to the Basel III proposal

03:50back on that one.

03:53Can I urge you not to overlook the second order issues,

03:57important FBOs in certain regionals

03:59to ensure that banks are not unduly influenced?

04:04The current proposal, for example,

04:06the outsized operational risk costs were high.

04:10Are we gonna take care of that in any sort of re-proposal?

04:13Let me just say we're very conscious

04:15of the comments across the spectrum,

04:18foreign banks, domestic banks, small, medium-sized banks.

04:21Everyone's gonna get heard carefully

04:23as part of this process.

04:24That is our obligation.

04:26And I think in response to Senator Round's question,

04:29you did indicate that probably because of the nature

04:32of the likely changes from what Mr. Barr expected

04:36to what may ultimately come,

04:37we are gonna open it up to comment again?

04:39That's the strong view of the Federal Reserve.

04:41We're working on that question with the FDIC

04:45and the OCC to try to find a path to do that.

04:47But from our standpoint, that's essential.

04:49I think it's a strong view from at least several members

04:51on this side of the dais here

04:53that that would be very, very, very important

04:55because I think it's gonna materially change.

04:57Thank you, Mr. Chair.

Thom Tillis Peppers Fed Chair Jerome Powell With Questions On US Banking System And Inflation Rates

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