b at 7:00 p.m. eastern we'll continue with the series "free to choose" produced by milton friedman and his wife rose friedman in 1980. the episode is entitled how to cure inflation, watching the american story. watch american history tv saturdays o■on span 2 and find a full schedule on your program e or watch online any time on c-span.org/history. >> ahis. it looks like this where americans can see democracy at work. where citizens are truly informed, our republic thrives. get informed straight from the source. on c-span. unfiltered, unbiased, word for word. from the nation's capital to wherever you are. because the opinion that matters the most is your own. this is what address looks like.

this is what democracy looks like. c-span, powered by cable. >> jerome powell testified on interest rates inflation before the banking committee. they talk about bank requirements and immigration and digital currency after his remarks. this is nearly 2 1/2 hours. >> thank you, the housing affairs committee will come to order. general powell, after your opening statement and you want to give it again, you can certainly do that. the fed has immense power in shaping the economy, your report is clear, stable prices and employment. the cost of living is too expensive for americans. the fed has one tool to fight the hi p rates. that tool does nothing to takes the real cause.

corporations price gouging to boost profits and make their shareholders richer. higher interest rates don't force corporations to lower their prices but high interest rates are raising housing costs, hindering wage growth, stifling small businesses, we all know that. now is the time for the fed to decide whether it will make good to their commitments to workers and families by lowering interest rates and protecting our financial system from wall street executives who have used their wealth and power to influence economic policy and avoid accountability. keeping rates too high for too long strangles the economy. no one wants this and makes it harder for small businesses to expand and hire more wer rates e investments that are creating high quality, good paying jobs and that are necessary for us to remain the most competitive andv

high interest rates are raising housing costs, higher and higher for families. families already facing a tough market with too few options and too high prices. i hear from so many ohioans who feel trapped, feel like they'll never afford to buy. those who own their homes feel like they'll never be able to afford a larger one if they decide to grow their family. if they're fortunate enough to have a interest rate from a couple years ago don't want to give it up and limits their choices and the house. and by driving up construction costs, higher rates makes it harder to build new apartments and homes and have less apply at exactly the same time wn it's harder to afford a mortgage. families are stuck delaying the purchase of their first home and renting for longer. that cycle drives rents up even further. americans pay a steep price for higher interest rates, continued high rates are not going to make

life less expensive for their workers or families. we know why prices are high years after supply chains haveef our economy. corporations want bigger profits to award their executives in. in 2020 and 2022 at the peak of inflation, corporate profits soared to historic levels. that's not hyperbole but corporate profits soared to higher levels. those profits went in the pockets of their top executives. that same year the largest out nearly $1.5 trillion in stock buybacks and dividends. americans today pay more for groceries than they have in 30 years. ohioans pay, every time you go to a grocery store, ohioans pay for corporate executives!$ and stock buybacks. every time you go to the grocery store, grocery shoppers are paying for corporate executive

buybacks, the biggest corporations are always finding new ways to charge people more to increase their profits. fast food restaunt are experimeh electronic price tags so they can change prices constantly, making it easier to sneak prices up little by little, making it harder for people to comparison shop and find a store with the lowest price. many companies increase their profits by charging more for less. the media started calling it shrinkflation. mr. casey from pennsylvania has been a leadeint■ pointing this out. your bottle of gatorade used to be 32 ounces and now is 28 ounces but the price hasn't gone down and if anything has gone up a bit. that's why i introduced legislation to stop that kind of deceptive corporate practice. it's the kind of solution we need to take on corporate price gouging and has nothing to do with higher interest rates. the fed doesn't only set monetary policy but you make the rules that keep our safe and sod

consumer money safe. we've had positive development, mr. chair, since the last time you testified in june and like the update community reinvestment act. thank you for your work on this. this took years of listening carefully to all stakeholders. it was long overdue. wel watching to make sure you implement this quickly so banks are fulfilling the purpose of the community reinvestment act. i spoke to ohioost of them small banks and they understand the importance of this. you issued an updated capital requirement proposal called basal3, the subject of much discussion of this committee and small capital companies is how we ensure investments pay off and shareholders are on the hook and not the tapes. too many in this country of taxpayers holding the bag for corporate misfeasance and malfeasance and greed. we need these guardrails in place and i urge you committed to protecting the public despite the amount ofg banks and lobbyie

spending trying to kill these taxpayer protections. let's finish the job. let's finalize basal3. last year's bank failures demonstrate the dangers of letting the banks chip away at rules and oversight. it's entirely predictable.e to e the already massive profits and take big risks that undermine our economy. when things go wrong, bank executives■q coming to the regulators with hands out accepting no responsibility. that's why congress must finish the job and pass our bipartisan recoop act. senator scott and i worked on it, 21-2 in this committee to hold senior bank executives accountable when they gamble with customers' money. when the biggest banks exercise special privilege, they do so at the peril of our broader economy. we've seen that too many times. we know that's a source of so much that's wrong in this country. big corporations using their power and influence to write the rules of our economy to benefit them and their executives and their investors to the detriment

of everyone else. that's why i stand up for workers and why i stand up for their right to organize. that's why i stand up to take on railroads and drug companies and the biggest banks and corporations who time and time again try to rewrite the rules to increase their profit margins. chair powell, i look forward to hearing from you today. thank you, and how the fed will work to promote a economy where everyone who wants a good job has the opportunity to find one. senator scott? senator scott: thank you for being here. march 10th will be the one year anniversary of the failure of the silicon bank. it was the third failure in u.s. bank history and the largest since the2008 financial crisis. i've said it many times before and will say it today, there are three opponents to s.b.b.'s failure. the bank was rife with smanagement. second, there was a clear

supervisory failure and our regulators were certainly asleep at the wheel. and third, president biden's reckless spending caused record high inflation which resulted in drastic interest rate hikes and tremendous loss. when you print and spend trillions of dollars at the end of covid, we should not be surprised that we have record high inflation, record high inflation translatesnto todays still 40% higher for gas for your car, 30% higher for your food, 20% higher for your energ costs. the devastation the average american is facing because of bidenomics is undeniableut certainly measurable. so i'm glad to spend some time talking about the state of our economy, an economy that's been ravaged as inflation, suffering under the

weight of an open border and millions of illegal immigrants and drowning in disastrous regulations. i hear from my constituents all the time that inflation and unsustainable cost of living continues to impact their families. for far too many, the american dream seems further and further t of reach than ever before. and frankly, the past three years of this administration's failed policies have landed us right in that spot. in fact, last month, treasury secretary yellen sat before this committee and attempted to spin a narrative of how strong the economy is, how well off consumers are and how much people have in the bank thanks to bidenomics. but in the midst of this she also admitted many prices are not going down. in fact, she said, and i quote,

we don't have to get these prices down. tell that to the mechanic working in south carolina. tell that to the teacher trying to put gas in the tank. it is simply unacceptable. because the truth is that americans are now spending more of theirom they have in 30 years. the truth is that housing affordability remains at its lowest level in 40 years. but inflation isn't the only concern i'd like to raise. i'd also like tad economic impacts of illegal immigration. during your recent interview "60 minutes" you stated over time the u.s. economy has benefited from immigration. let's be clear, america is a nation of immigrants. no doubt.

but when we talk about illegal immigration today, we must also face the dire reality that our towns and cities are suffering from the adverse impacts of illegal immigration facilitated by the biden administration's open, unsecure, and unsafe southern border. because of president biden's policies, we've seen over seven million illegal immigrants cross our borders in just three years. by the time this election happens this year in november, the numbers suggest it could be as high as 10 million illegal immigrants coming into our country. so we cannot have an honest conversation about the benefits of legal immigration in our labor force without also addressing the elephant in the room. our country is strained. our economy is strained. under thew weight of illegal immigration. in fact, recent reporting has

highlighted that cities and states across our country are kd some have been forced to cut public services to americans in order to fund the cost of■p houl immigrants. one clear example we saw in new york city where the poorest kids in the city, minority kids in the city, were stuck at home because the city was using the schools to house illegal immigrants. another example, the city of denver recently announced that some of its employees may have their hours cut in order to how in the world is that fair to americans? it's not. we must illegal immigration crisis under

control, because if we don't, our local economies will be crushed and opportunities will be stripped from our citizens and their families. finally, the impacts of illegal immigration were not enough, thn economic opportunity. for months we have heard bipartisan criticism of the fed's proposal, which will restrict lending and access to credit for those who need it the most. i was surprised to hear about your thoughts on its future. 97% of the comments that you receive are negative. that's good news. good news for the american consumer. goods rs who would like to start a business

who do not have access to catal and millennials who would like to be and opposition from basal3 from farmers, housing groups and heard opposition in this ver this very committee from democratic senators. i look forward to hearing your testimony and looking forward to asking some questions as well.

mr. powell: and slowing in inflation has occurred without a significant increase in unploilt. as labor market has eased, the risks to achieving our employment and inflation goals have been moving into better balance. the committee remains attentive and highlation poses significant hardship especially on those least able to meet the higher costs like food, housing and transportation. we are returning. restoring price stability is essential to have strong market

conditions that benefit all. i will review current economic condition before turning to monetary policy. economic activity expanded at a strong pace over the past year for 2023 as a whole, gross domestic product inceased 1.3%. activity in the housing sethor was subdued largely reflecting high mortgage rates. interest rates appear have to be weighing on business fixed investment. the labor market is tight but supply and demand conditions have continued to come into balance. payroll job gains have averaged 235,000 jobs per month and unemployment is at 3.7%. strong job creation has been accompanied and increase in supply of workers in workers

aged 25-54 and strongg< pace of immigration. job vacancies have declined. although the jobs to workers' gap has narrowed labor demand exceeded the supply of available workers. strong labor market over the past helped narrow longstanding disparities in earnings across demographic groups. inflation has but remains above the longer run goal of 2%. total personal consumption or f.c.e. prices rose 2.4% excluding the vol and energy categories. core p.c.e. prices rose 2.8. widespread across goods and services.

and expectations are well anchored as reflected by households, businesses and forecasters as well as measures from financial markets. and since early 2022 they remained the rate at 5.1/4. and shrunk our balance sheet in a predictable manner. it is putting downward pressure on economic activity and inflation. we believe our policy rate is at its peak. if the economy evolves broadly aswill be appropriate to dial back policy restraint this year. but the economic outlook is uncertain and ongoing process towards our objective is not

assured. reducing policy restraint too soon or too much could result in reversal in progress and rerequire tighter policy to get inflation back to%. reducing policy restraint too late or too little could weaken activity and employment. in considering adjustments for the policy rate, we will assess the incoming data, evolving outlook and balance of risks. the committee does not reduce the rate until it has gained confidence that inflation is moving towards 2%. we remain committed to bringing inflation to 2% goal and keeping expectations well anchored. restoring price stability is essential to set the stage for achieving maximum employment and stable prices. to conclude, we understand that our actions affect families,

communities and businesses across theeverything we do is ic service to our commission. we will do everything we achieve our price stability goals. mr. brown: you acknowledged that the fed to raise rates when es up in 2021. we can't make that expense. mr. powell: what we are seeing is continued strong growth and strong labor market and continued progress in bringing inflation down. if that happens, if the economy evolves over that path, we think

the process of carully removing policy will begin over the course of this year. senator brown: we have had this conversation publicly here that you know working people are hit the hardest with inflation and companies trying to lay off. maximum employment is -- l you . senator scott last year's bank failure and supervision didn't react. the fed in response a supervisory process to identify and address gaps to the speed of force and ability if that's the right word. explain at concrete steps the federal reserve has strengthened supervise and any specific areas

that to improvements is ongoing. mr. powell: many, many people in the system who are involved in supervision, thousands of them. and there is a rule book. there has been careful study and thought and a lot of listening to understand how we can meet those goals to be more effective. if you look at silicon valley wd working hard to develop a new rule and other set of practices which is still and earlier intersendingses and more effective ones and this is work that is ongoing and will be for some time. senator brown: the job of the fed is to serve the american nok portfolios. i wrote to you last month asking

you to identify substantive penalties for board officials who violate the trading rules. where is that in the process and where is it? mr. powell: inspector gene thin. i read the list from beginning to end. and i said we are going to do all of these. and done five of them and working on thepx sixth. is more and more companies combine competitive price information to engage in what they call dynamic pricing or surge pricing. corporate p.r. teams and another way for corporations to make it harder for consumers to seek out lower prices.

are you concerned that these price gouging strategies?ip mr. powell: same thing with the ride companies. i don't know the implily occasion for consumers. senator brown: you think this kind of surge pricing might lower prices overall? mr. powell: my understanding is that the idea is that in slow periods prices actually go down and higher -- busy periods they go up. senator brown: these are sophisticated economists working for these companies.

mr. powell: as long as they are not fixing prices or failing to disclose the nature of the. senator brown: research hoop behind the inflation we have seen. the supply chain of autos have been more resilient and more housing availability made your job easier? mr. powell: yes. big part of the inflation was and we saw it in 2023 problems d and when the labor supply shot unwind as well. it came down quickly and it's also down to tight monetary policies playing a role as well. senator brown: which leads me to the plea with you to speak out about inflation and the contribution of corporate

profits and greed to inflation. >> the fact of the matter is that so often, if in fact. i don't know how they afford a downpayment for a home and take into consideration and looking at their financialu future and fixing and repairing. happens for every homeowner in

theountry. i think the issue is far more my first question s between the challenges of illegalyv immigration. it seems like every single week there is a story of another city under water attempting to feed and houseil immigrants and american taxpayers are footing that bill. just recently in denver we saw city workers having their hours zeroed out so that the city could allocate resources for illegal immigrants. in san francisco, the average cost in oakland because of crime

is almost

store, you have more shoppers. except for these days, when you have more folks in the store, sometimes they are there to steal. mr. powell: quoting my statement earlier and accurate quote. but i would say right before that and none of our business. we don't set immigration policy and don't comment on it. mr. scott: when you are going to tell a story please tell the whole story when it is 10 million folks coming into the countrnd on crime and americans living in the poorest parts of america face on a daily basis. mr. powell: i said over time.

i was standing away from the current political context. and it's not appropriate for us. we are independent and like to remain that. and we stay out of political issues that we really aren't assigned. so the kind of issues you are talking about are very real but not for us. mr. scott: the fed does not the costs associated nor do they consider the impact on states like new york, carn the devastation of crime has an impact? we don't take that into consideration? >> we do try to estimate population and the effect immigration legal or illegal on the size of the work force or g.d.p. we don't have a way -- we do

look at the finances in the aggregate in state and local government. that's og we look at but we wouldn't do an assess meant like that. senator brown: senator menendez of new jersey is recognized. mr. menendez: we have seen t lat latino federal bank president. we are making progress on something that i have been at for quite some time to the leadership of our economic institutions. so i want to applaud that and mr. chairman, i hope that troughing can extend to the rest of the federal staff.

it goes on to say economists say the surge was key to solving unprecedented gaps in the economy that threaten the country's ability to from prolonged■x shutdowns. mr. powell: there are adjectives and adverbs you wouldn't say in fed world.

mr. menendez: take them out. mr. powell: it is that there was a very significant increase in the size o last year and happening during the year and the answer was it was two things. nd it was immigration. and if you look at the congressional budget office numbers, it makes sense because there is a lot of growth. wages were coming down and the economy is bigger and partly -- this is without making judgments on immigration policy. mr. menendez: the facts are we had 10 or 11 million jobs going unfulfilled in our economy and lacked the productivity for success economically. and part of that clearly immigration helped fuel part of our revival coming out of the

those were the people that were the essential workers when we were staying home. i agree we need to do what is necessary to have a regularized border but just to create the conflicts of■ú immigration as a scourge is absolutely wrong. in my view, the sticky inflation we have been seeing in the housing sector is due to the housing shortage. the fed's policy to restrictive zoning, higher interest rates and tighter regulation, i would say underfunding of h.u.d. programs that shore up and expand our supply. if the housing supply shortage continues to grow are we likely to see continued housing inflation? mr. powell: yes. mr. menendez: housing is becoming less and less.

the 2023 out of reach report, a worker earning a minimum wage in new jersey would have to work ja modest one bedroom home at fair market rent. do you agree that unaffordable housing is a problem for the economy? mr. powell: long-term housing shortage and the higher interess which are things that will pass through. when that passes through and rates are normized we will have the housing shortage and causing upward pressure. mr. menendez: the monetary policyt that mortgage lenders impose maximums on the ratio to the borrowers' income. i'm worried how it will interact with the capital requirements proposal which according to analysis from the urban

institute would increase mortgages for black, hispanic and low and moderate income borrowers. if the capital rule is implemented without changes it could make it harder to disadvantage borrowers? mr. powell: there is a risk. mr. menendez: are you mitigin it? mr. powell: yes. senator brown: senator rounds. senator rounds: i have pee an understanding to stay as neutral as possible with regard to the politics involved in an election year. basal end game proposal. and found that 97% were either

opposing it or expressing substantial concerns. in the hearing last month on the monetary policy report youstates organization and you said, i will do everything i can -- i will do everything i can possibly to bring people together in consensus and have a capital framework that can be proudly supported. my question to that is do you believe there is a consensus on this capital framework? mr. powell: i'm fairly confident we will have such a consensus when we do move forward. senator rounds: you will probably not call a vote on the proposal until you believe there is a consensus? mr. powell: we are in the process of digesting the comments and making the appropriate changes.

senator rounds: i have weighed in on the concerns i have with basal3. and negative effects on mortgage lending and home affordability by disincentivizing banks offering high to low volume loans that help low-income borrowers. i'm■ concerned that buying a hoe will be harder and further down the road i fear it could disincentivize from the larnlest banks particularly with the secondary banks. would you be willing to withdraw the proposal or repropose what significant modifications particularly addressing the concerns that we have raised with regard to the impact and i'm thinking of freddie and fannie.

what would you see the process involving those particular issues? mr. powell: we are well aware and focused on those issues. but we get it on those issues. in terms of process we are not in the stage of making that decision. if it turns out to be appropriate and we get to that point to repropose, won't hesitate to do so. senator rounds: thank you. i think there are serious if basal will go into effect. sounds like may include significant modifications if it were to be brought at all. mr. powell: significant and broad changes to the proposal before it comes back to the committee for a consideration. the board for consideration.

senator rounds: with regard to the economy, limited level of price growth is believed to help and reduce the risk of inflation. however, during the biden administration, inflation climbed to 13% and those prices are now the new norm. i know you make it a policy not to comment on the administration's fiscal policy but well known that i really do believe that high inflation and high prices have been the direct result of president biden's policies. that the feder r limited tools to address some of the policies that this problem created. supply sidee on these costs. what have been the unintended raising the fed rate as rapidly as the chair and as the

committee -- i know we talked about s.v.p. and their inability to look at treasuries and increasing interest rates, but can you talk about some of the things you have seen that were negative in trying to to those high inflation rates? mr. powell: high interest rates are hard for businesses and for people. they are the tool that we have to use to bring inflation down and our job at this time with high inflation comes it is the fed's job to restore stability. you point to the losses in banks that was a substantial thing and the supervisors and that was us didn't get to that problem. we were aware of it but didn't appreciate it enough. we were able to get as far inflation down without seeing a big increase in unemployment.

that is a great result. it is not consistent with the historical record but a positive thing. senator rounds: the only thing you had available was demand side tools.o$ litigate over the next eight or

nine montes. i want to take my time less on monetary policy and we are never out of the woods on stability as we saw with the new york community bank. one area that i raised with you a year ago and reraise today and that is nonbank leaping in terms to financial firms is exceeding regulated bank lending. nonbank financial sector hasthir society over the years. but when folks like former fed president dudley and former. governor: said they had worries that it could lead overall.

i guess what you think are the this pushout effect of more and more lending going outside the perimeter to the nonbank sector. how much do we know about these institutions? and they have very smart sophisticated investors who s lg profile and don't make loans for the next six to nine months, do you think our system will pick up the slack? >> we have the regulated banking system and a lot of transparency, deposit insurance and access to the discount on all those things,■z regulation.

they can't pull their money out and signed a contract and funded these deals. what you see now in the nonbank financial sethor it's that kind of thing and doesn't have the run risk. the bigger it grows and more diversity gets and it is happening outside the perimeter and you worry when there is another crisis you will be surprised that there will be ways that that financial structure down in ways we don't anticipate. we need to be smart about the way that it ivi out of the banks and in to nonbank financial institutions and we need to be thoughtful aboute the aledgerring. >> and that investor may say we don't you want you to leaped anymore but at that moment in

crisis meaning but i got a little bit of explanation why the large regulated banks weren't complaining about in nonbank lending and i'm not criticizing on the nonbank lending ban regulated banks and make money off of those relationships and that is an explation of y they are not being more critical. i would like to come back to another thing we have talked about a lot. and that is the question of using the discount window. one of the original tools that the fed know banks say we are concerned about the stigma and require mandatory use of the discount window and just the

idea having the mechanics of the discount window open 24/7 they didn't know how to use it but two but use it in the nonbank. mr. powell: there is a lot of work and needs to be brought up in the modern age and do more to eliminate the stigma problem and that banks are able to use it when they are able to use it. and that's a broad work program that we are on right now and it's very important. senator warner: i do think before starting a whole host of regulatory issues we ought to use --

senator brown: senator till is. >> time after the hearing and see him, he is a dog-f but thank you for being here. i want to get on the bmp mp as arch l3 proposal. we sent a letter indicating our concerns but worth noting the number of other organizations groups that. national housing conference, nacc. and the list goes on who have concerns with the current proposal. here is my concern. i think we are trying t make the best of what was foundationally a bad proposal. i am imin the category of it she reproposed.

one of the reasons why i did not support mr. barr's nomination, i felt we were going to be here. it was clear we would be here months and years later. here we are. and the industry felt the same way. some of them are on trades and some are on the other side of the spectrum. i cast my vote or provide some weight to the idea that we should repropose it and talk about the reality of increasing capital or the prospect of increasing capital requirements doesn't concern me. prior supervisors had made comments that maybe we needo cat we heard in this proposal is let's talk about raising capital requirements and talk about

reducing the cost of the regulatory burden today. there is no evidence of that in the current proposal and i think that that may produce a different set of comments that will be instructive to final proposal that will increase in capital requirements. over what time horizon would you expect to see try to make the best of this foundation or go back and take a look at a new foundation and-j repropose it?■b

between inflation and chastising manufacturers for creating smaller portion sizes for potato chips, i'll use that as one example. if you have rising input and you're not able to control that and you are in a marginal business to begin with and now you are saying you can't reduce the quantities how does business make that work? >> we see the aggregate level as a mismatch between supply and demand and it is very hot coming out of the

pandemic. >> we saw food inflation between 2010 and 2021 at 8%. and now seen it at 21%. i think we is trying to provide product that consumers want and now they are being chastised trying to make the numbers work. it is confounding. i'm going to submit some record and stay on time. i have a question. i think the chair mentioned and i'm sure the will clarify. he suggested that buy-backs and dividends were a key factor. and is that one of the top five reasons we are experiencing in inflation right now? >> i see stock buy-backs and

dividends. i wouldn't comment on anything that you may have said. i would like to avoid it. >> i'm not going to ask you about policy because you are consistent on can't imagine and dividend payments have material effect on inflation and there are some people but by inference, that could be helpful.gine it would e of the things that would make your job easier. can you opine on that? >> that would be a change in our capital markets. shareholders going back to shareholders who have nothing to do with it. senator brown: well done. snore smith of minnesota is recognized. >> thank you chair pull pol.

i appreciate your testimony and i'm going to focus my question on housing and housing affordability. overall prices have moderated considerably since began raising rates and housing cots are high moving us no closer to addresng the affordability crisis well before the pandemic. shortly before the fed you before the committee how higher interest rates could exacerbate and making mortgages more expensive and at the time you argued we have excess housing demand durin the pandemic and the fed's goal was to bring it closer in line to supply. the housing market is it your

view it has cooled enough so housing supply and demand is better in balance and given the fed's limited tools understanding that, at what point you think you have done all you can to lower housing demand. we past time in congress. but i'm interested in how you see this dynamic. mr. powell: we aren't focused on housing and housing inflation. we are focused on goods. the thing is, there are things in the housing sector that we didn't anticipate. people in very low interest rate homes with low rate mortgages aren't selling. so the quantity of homes is incredibly low of existing home sales and drives up sail

prices. it is a longer run issue and factors associated with the pandemic and our response to it. overall inflation comes down, you will see the housing market start to heal and get better and housing affordability will go up but longer term problem of supply. >> what i see in minnesota is that higher interest rates are driving up the cost of constructi, cost of mortgage rates. people who aren't leaving a small house because they can't afford it. people are staying in their homes long area and double whammy of construction flowing at the same time there is a great need to address housing supply.

one of the things that is happening, a recent analysis by zillo that the monthly mortgaged that the recent monthly mortgage on 333,000 aum $10 downpayment is $2200. the cost of owning a typical home is higher than 30% of median income which is the measure of affordability. we have a lot of issues of■t■q e housing market. from where i sit the cumulative issues of higher mortgage rates are a challenge and until we can get to the bottom of that, we are going to have a hard time■g addressing the housing affordability challenge we have. would you like to comment?

mr. powell: home prices don't go into the calculation of it's really rents. the housing market is in a very, very difficult situation. the sooner we get back to price stability, the sooner it can start healing. >> thank you,nator kennedy of ls recognized. senator kennedy: i think i have said before, i believe you and your team probably saved the world economy during the pandemic economic meltdown and i thank you for that. you gave an interview,on februaf this year to cbs, "60 minutes, i

think." i ordered a transcipts of that hearing. you were asked a question about inflation and asked a prices de. and here was your response. i would like to quote you, if it's ok. quote,o, some things will decline. others will go up. but we don't expect to see a decline in the overall price level. that doesn't tend to happen in economies except in very negative circumstances, end quote. did i quote you accurately. mr. powell: i believe you did. senator kennedy: later in the interview, you were asked about the national debt, do you recall

that? mr. powell: i don't but i'm sure it's right. senator kennedy: your answer was, i'm quoting long run, the united states is on an unsustainable fiscal path. u.s. federal government is on an unsustainable fiscal path and that just means that the debt is growing faster than the economy. so it is unsustainable, end quote. do you remember that? mr. powell: i have said it many times. that is uncontroversial. senator kennedy: later in the interview, i would quote, i would just say this, integrity is priceless and in end, that's all you have. and we plan on keeping ours, end

quote. is that an accurate statement? mr. powell: that's it is. senator kennedy: i want to ask■ you about the fdic. have you read the article "wall street journal" entitled strip clubs and nude photos and. did you read the article fdic lawyers sted on paid leave for weeks after child porn arrest. mr. powell: i don't remember that fdic chair known for temper ignored bad behavior in workplace, end quote? mr. powell: i read so much. i remember the broad story, but

the particular stories. senator kennedy: did you read the article in which a former female employee of the recalled her male colleagues saying women needed to use sex to get ahead at the fd inch c? mr. powell: i don't recall. senator kennedy: did you read the article that a female risk manager during a lunch said she had become friendly with that examiner and he complained to her about his marriage, telling her he wasn't getting enough sey said, obviously if i walked into this office and you were naked, i would f-right here.

wall wall do you remember the supervisory member in denver who was denoted minnesotaed in 2014 to a nonsupervisory position in tulsa after having sex twice with a subordinate female employee and in this article, it says, allegedly, mr. ditch one not to be a pussy and drank a shot of whiskey during work hours, do you recall that? mr. powell: i don't recollect that. senator brown: you are past your five minutes. senator kennedy: sir? senator brown: your time has already expired. you consumed the five minutes with yourmon log -- senator kennedy: you did six minutes, i timed it.

senator brown: for months i have let you go over the five minutes. senator kennedy: but you did six minutes. you still did six minutes. check the record. senator brown: you are going to be at 6:15. ask your question. senator kennedy: mr. chairman in lightthese allegations how can the fd inch c lead this charge which is going to tu bane down? mr. powell: i don't know how i would make the connection to basal3. these are troubling. if proven -- i think we basal3 t looking them to lead but do what the fedhi right.

they don't look to us. senator brown: senator butler is recognized. >> thank you so much chair powell and thanks for the time to talk. i wantre senator smith was in relationship to housing affordability and draw a it on the point you were making about rent. it definitely is an important crisis in my state of california and i know across the country where at least according to the department of and development 50% of what is -- spending more than 50% of what is considered affordable and statewide. and more than three million households are spending more than 30% rent.

more than one in 5 million households pay 5. and chicago fed president even referred to housing as a missing piece of the possible. so to continue our conversation and the point you have made about how inflation has a disproportionate ate impact on lower i have income■ç housing, w is the fed's monetary policy impacting the supply of affordable rentals? mr. powell: i don't know if we are affecting it. affordable housing is connected to a government program. that's not our bailiwick. interest rates affect the ability of housing, though.

>> key earlier reference in your reference to senator smith and calculation of rents, can you talk about that. i want to get you before i run out of time. >> it is concept tale challenging to think about housing inflation and include the cost of financing it and sales prices, we don't. we convert ownership in computed rent and that is 2/3 and measure rents but leases are turned over once a year. you look at market rents and what is h newly signed leases and what was happening a year ago. we understand all that and look through that. we look at housing services as one of the three important categories with nonhousing >> thank you for that in the

line of affordability and housing, very general to the broad monetary policy and state of economy and unique to california and i raise this with secretary yellen when she was here, the insurance tbapare preo climate change. and where one in five californians love in that and have a risker of flood damage and seeing more and more home insurance providers withdrawing from the state. we have talked about thir preparation for today's conversation. can you talk about or share with us how it is that what you think

the impact might be of this protection gap in insurance coverage on the overallility ofl institutions and the broader community. automobile insurance, things like that, that is a significant source of inflation and nothing we control from a regulatory or supervisory standpoint. in the longer term, companies ared withdrawing from writing insurance in coastal areas and 10 years from now how are we hazard insurance? and maybe the government will step in, but it's a continuing issue. senator brown: senator advance of vance is

recognized. >> thank you for being here. imd have an opportunity to provide oversight what is going on in the fevered that affects ourh constituents. i wanted torm focus on basal3 and there have beenious proposals that draw them down to focus on the regional banks and go back to one of the most significant crisis in our banking sector and the u.s. spoke in private and i believe in public, but one ofzz the concerns i have when we talk about capital requirements on the banks and there is maybe an argument that they would have bought long-term treasuries and even treasury bond risk and

would hasten the collapse. i guess i want to we talk aboute basal regulations, what washe original sort of proposal for which banks would fall under those regulations? around or earlier on? mr. powell: it's down to -- well there are four categories of banks and this is down through the fourth cat engineer. the proposal that's out there now does extend to category four as well as 3, 2 and 1. >> what is the management that you have proposed? mr. powell: $100 billion. >> there is some discussion

about whether you apply them at $700 billion and maybe walk me through that decision process at the fed where you guys are and justify drawing down to the $700 billion threshold. mr. powell: and there is one category and regionals and they are big banks and they are category three and one of them is a two. but they have different taylor of regulation and the question is we have to ask the question since it was a category four, what if anything needs to be changed, regulatedded there was tailing all the way down. below 100, those are community banks, that's a different regime as well. this makes s. we want to have a diverse

banking sector. that's a great benefit to our country and very unusual for an advanced economy. so it's something we want to preserve. sen. vance: i'm sure you know, chairman powell, but just to put this on the record. a lot of the commercial lending, a lot of the real estate lending and consumer lending, about half of that lending, coum lending, is provided by the regional banks. i believe huntington in my home state of columbus is the number one s.b.a. lender in the entire country. so to your point, i think these do provide incredibly important benefits to our economy. you hear people talk about the economic miracle. , in the process of amending the basel requirements, you have guys made a decision about where to set the threshold yet? and when do you expect to set that threshold? mr. powell: we haven't made any final decisions. we've put out for proposals some months ago. a proposal.

and we've gotten a lot of comments, as i'm sure you're aware. we're chewing through those and digesting them and we're just beginning now to sit down and talk about the changes that we'll appropriately make to the original proposal. sen. vance: and when do you expect to issue a final proposal? mr. powell: i think it's going to take some time. i think it's more important to do it right than it is to do it fast. my guess is we'll get through this and be done over the course of the year but it could be faster than that, it could be slower than that. sen. vance: i'm wondering, being mindful of time, i have 30 seconds left, would you be willing to commit to say that in the process of amending, the fed will remove the regional bank drawdown and limit basel to the g-sibs or $700 billion or above? mr. powell: i can't get that specific to this point. we're clearly looking at the whole tailoring issue. sen. vance: i appreciate that. i just repeat, given what actually happened with the banking sector --

[indiscernible] -- first republic, i encourage you guys not to apply a regulation to that because it doesn't solve ■zthe underlying problem. my fear is if you apply it to banks of $100 million and above, you're doing just that. with that in mind, i'll yield. thanks, mr. chair. chair brown: senator tester of montana, is recognized. senator tester: thank you for being here, chair powell. we appreciate your work. but i think you have done a really good job.that. look, success at the fed mandate for strong employment and stable prices is critical for small businesses on main street. for farmers, ranchers, for montana families. you fall all the metrics. from your perspective, where is now and where is it going? chair powell: the economy is growin■r[jg atea

that's the one thing. second thing, the labor market is very strong and quite tight still. 3% -- 3.7% unemployment for the last 24 mont.iod in 50 years. third is inflation. inflation was too high. it's come down sharply since the beginning of last year. the headline number has come down from the 5 down to 2.4. the core number is at 2.8. i think it was at 4.9 a year ago. these are big declines. we are in a very different place. a healthy place. we are going to use our tools to keep that strong economy, keep that strong labor market while we continue to make progress on inflation. senator tester: one of the areas where there has been inflation, i don't know where it's now. but food rose quite rapidly. i'm a farmer. we didn't get much of that. we didn't get any of it. prices now compared to what they were a year ago are actually off. compared to six years ago they

are up. compared to a year ago they are down. my question to you, chairman powell, is there anything you can do specifically to deal with food costs? chair powell: i'm telling a farmer his business, but if you look at the food cost to the consumer, part of that is commodity costs. that was partly spiked because of ukraine grains and oil and that thing. the rest of it is a lot of costs in the supply chain from when it leaves the farm to get collected and processed and trucked around and put on the shelves and in the stores. all those costs are just part of the general economy.ts overheato years ago, you will see, and you have seen, food inflation flattening out. the really high rates of inflation have come down. the prices have not.

senator tester: correct. i would just say that cattle's doing better. grain actually has dropped in price at the farm gate. i don't want to get into that debate with you at all. we probably agree but it would take too long, too much time. we have other stuff. chair powell: i would be learning from you. senator tester: you discussed in previous hearings the impacts the pandemic shutdowns andpa supply chain issues have had on economies, globally. how does the u.s. economy look today compared to our competitor nations? particularly china? chair powell: i start with the advanced economies. are doing tf anybody. we have the strongest growth and lowest inflation of advanced economies. chin a story. china is having significant

difficulties with its economy right now. they are in a very different acwhat i heard you say, the economy of the united states is basically in better shape than any other economy in the world? chair powell: major economy, yes. senator tester: one of the other challenges out there is housing. in communities across this country. whether you are in montana, a city in ohio, workforce housing in particular is a top priority, top commodity. plenty of folks, great organizations working to address this. i meet them every day and i appreciate the work they are doing. how do these housing supply issues show up in the data that the fomc uses to make decisions? chair powell: housing prices don't go into the data. housing starts and activity. that shows up. when it comes to inflation, we convert ownership into an imputed rent. then we look at rents. that's how we look at that. we are not directly affected by changes in housing prices. over time those will drive rents up.

senator tester: are there economic trends that you see for housing? chair powell: yes. two big things going on. one is, we have this underlying shortage of housing due to things like difficulties of zoning. a lot of close in to cities, places already built. more difficult to get zoning, more difficult to get people and materials. that's one thing. that's not going away. then there is just a ton of things happening because of the, because of higher rates. those are in the short-term, those have really -- they are weighing on the housing market. as rates come down, and that all goes through the economy, we are still going to be back to a place where we don't have enough housing. senator tester: thank you for your work. i appreciate it. thank you. chair brown: senator cramer of north dakota. senator cramer: thank you, mr. chairman. chairman powell, good to see you. it's been a rather uneventful couple of days considering you spent two days in this place. i don't -- i'm not going to upset that.

i did appreciate your response earlier to senator scott when he asked about immigration. he said the fed hasn't been assigned that. i want to bring up something us you and you talked about over the years, that is climate. the role of climate in your job, climate risk, banking. you oven said, the most commonok to our knitting. stay in our lane. similar to what you said probably to senator scott. but that said, in october the fed, the o.c.c., fdic issued climate guidance as you know for management of covered institutions. i'm just curious did congressg e the fed authority over climate policy as well? is that another one of those things somebody took on? i realize you are not the dictator, only the chairman of the fed. i would be interested as the

chairman your views. chair powell: our assignment is banks. they understand and can manage the risks that they face. that's our assignment. we said in climate world we would do two andnl one was to do an illustrative stress scenario -- not stress scenarios, scenarios, climate -- banks are already doing this. the large banks who are subject -- they are already doing it. th internationally and don't have a choice. we said we would do that. we also said we would offerot of climate risk or anything like that. just on what had you to do to be in a position to assess. for my thinking that's what we are doing. we are not doing -- there are no new initiatives.

we are not going to change our capital requirements to reflect climate risk or anything like that. i'm really determined that we are not a climate policymaker. that is really the business of elected officials. senator cramer: thank you. i'm going to bring up another topic. that's central bank digital currency. i think from a lot of my friends out there i think there is -- kn there is some confusion. i'm easy to confuse. there are a lot of people that get confused about what is meant by the administration's admonition to continueing, expe, looking at a digital bank sentry currency. i think people back home look at that and go oh, my gosh, they are going to control this now. could you maybe just differentiate a little bit what people think of in terms of a bitcoin or their held digital currencies what a central bank digital currency, who in mylate. it still should be about the dollar. could you explain to people back home?

chair powell: we are nowhere near recommending let alone adopting a central bank digital currency in any form. the idea is as technology has evolved money has become digital. but the government doesn't issue digital money. it's digital if you look at the bank account, people don't hold those dollars. the thought was the goveme could create a digital form of money people could transfer among themselves. that raises a concern that ifntl your transactions, that's something we would not stand for or do here in the united states. that is how that works in china, for example. but that's not -- if we were ever to do something like that. we are a very long way from thinking about it. we would do this through the banking system. the last thing we would want, we the federal reserve, would be to have individual accounts for all americans or any americans for that matter. only banks have accounts. that's the way we'll keep it.

it's just it's a question of evolves in a way that serves the public better. people don't need to worry about central bank issues currency. nothing like that is remotely close to happening any time soon. senator cramer: that was helpful. thank you. chair brown: senator cortez masto of nevada is next. senator cortez masto: thank you for your good work. i want to talk a little bit about the commercial real estate and what's happening there. the financial stability oversight council's 2023 annual report identified commercial real estate as a financial risk. and the feds' monetary report also noted commercial real estate prices continue top decline, especially in the office retail and multifamily sectors. i'm especially concerned that because of the low levels of, pt fully reflected the true decline

in the value. can you expand on the emerging risk the federal reserve has identified in the commercial real estate market? and i'm curious, can you discuss the compound risks identified in commercial real estate lending, particularly at banks with large c.r.e. concentrations and high fractions of uninsured deposits? chair powell: sure. let me say i think there are very, very few transactions in commercial real estate right now, particularly in the troubled areas. it's not a question of prices still falling, it's a question you don't have the price discovery. you just have to assume the prices are very low and have come down a lot. on commercial real estate, we have a secular change in people working from home. this is one big part of it. that means that in many cities the downtown office district is

very underpopulated, there are empty buildings in many manger and minor cities. it means that all of the retail that was there to service the thousands and thousands of people who work in those buildings, they are under pressure, too. banks will have made loans to many of those buildings. not all of them, but many. this we have known for some years. what do we do? we have identified the banks that have high commercial real estate concentrations, particularly office and retail. and other one that is have been affected. we identify them and we are in dialogue with them around do you have your arms around this problem? do you have enough capital? do you have enough liquidity? a plan. you'll take losses here. are you being truthful with yourself and owners? we have been working with them. for some time we have been doing that. this is a problem that we'll be

working on for years more i'm sure. there will be bank failures. this is not the big banks. if you look at the very big banks it's not a first order issue for any of the large banks. it's more smaller and medium-sized banks that have the issues. we are working with them. we are getting through it. i think it's manageable is the word i would use. it's a very active thing for us and the other regulators. it will be for some time. senator cortez masto: do you have concerns -- let me ask you this. as you are talking with these small and medium-sized banks, we know there will be a contagion we have seen in the past, do you have concerns that if they fail somehow this will impact the financial sector? are you prepared or trying to address that and prevent that from happening? chair powell: we are trying to stay ahead of that. we also ac that had high concentrations of uninsured deposits and particularly uninsured deposits and a lot of commercial real estate in the of sector.■> we are well aware of that issue. just trying to stay ahead of it on a bank by bank basis and overall.

so far we have been able to do that. concluded that the distinction between the f.h.l. banks roll and that of the federal reserve

discount window of lenders of last resort has not been specially during times of market stress. during the 2023, we saw banks rely on advances from advances from the federal home loan banks and didn't have relationships with the federal reserve to use its discount window. i know you talked a litt bh sen. how is the federal reserve working with the federal home loan banks to ensure that banks establish protocols to borrow from the fed's discount window prior to times of stress? chair powell: we work with the federal home loan banks because in many cases banks were moving their loan from the federal home loan bank to the fed. we need to have smooth transfer -- we need to be in good touch with them. even more important than that is that banks, any bank in the united states, needs to be in touch with the discount window. know how to be able to access it. be able to access it. have appropriate collateral. have control of that collateral. in many cases it would just -- it was incredibly inefficient and took a long time for banks to actually go through that function. the home loan banks are ahead of us in technology. we know that we need to really invest in technology to modernize the discount window. we need to do more to get our banks, all o tou with the discount window in a way they can use it quickly should they need to do so. senator cortez masto: thank you. chair brown: senator hagerty of

tennessee is recognized.rty: unr tenure, mr. chairman, the fed has taken the stands that the 2% inflation target shouldn't be viewed as a snapshot in time but rather needs to be achieved, quote, sustainably. when inflaon and early 2022, the fed was patient and allowed rates to offset below inflation that occurred prior. it strikes me odd now while we are still well above target inflation, and have been for the prior year, market seems to expect the fed to immediately cut even before we reach the 2% inflation threshold. my question is, does the that be considered a return to the target rate on a sustainable basis? or is it still the case that inflation would need to more or less overcorrect well below 2% before the fed makes the rate cut adjustments? chair powell: we -- it would take us a while to really get comfortable that inflation had

settled sustainably at 2%. interest rates. interest rates right now are in restricted territory, they are well above neutral. we would not wait for inflation to get to 2%. monetary policy works with long lags. we have said for some years that we would start restoring the federal funds rate to a more normal, almost neutral level. we are far from neutral now. we do plan -- assuming the economy moves along the lines we expect, we do plan on starting a process of dialing back restrictions. senator hagerty: i know we allowed the economy to overshoot when inflation was high. and we sort of made up for prior

trying to scare that with the fact -- chair powell: we didn't do that. we adopt add framework that said we would do that. suddenly a few months later we got almost an explosion of very high inflation. that's not what we were looking. we said moderately above or modestly above 2%. this was not modestly above. we reacted.e mistake we made we thought that that inflation would go away. it was transitory, it goes away quickly without effort by us. we figured out at the end of 2021 that was not the case and we acted. senator hagerty: you don't see that abrupt dynamic the other way? chair powell: i think we are in the right place. we are waiting -- we are waiting to become more confident that inflation is moving sustainably to 2%. we do get that confidence. we are not far from it. it will be appropriate to begin to dial back the level of restriction so we don't drive the economy into a recession rather than normalizing policy. senator hagerty: go to the balance sheet and talk about that. we have seen a dramatic expansion of the fed's balance sheet over the past couple decades. in 2005 it was $800

billion. it's $7.5 trillion today. doubled since the pandemic was under way. through quantitative tapering the fed is attempting to reduce its footprint. is on the other hand government spending tends to just continue to be profligate. we are running a $1 trillion deficit every 100 days. we are flooding the market with treasury debt and putting pressure on interest rates as well. what's lost on many of us here is the spending levels will only make your job harder when it comes to lowering interest rates, not to mention there is a tacit expectation that the fed will step in once the markets can no longer absorb our new issue lance. i think this -- issuance. i think this deserves more attention. we are at the point your objectives may be very much at odds with the behavior of our physical policy. increased net issuance by the treasury lead to higher rates?

chair powell: in principle more supply should lead to modestly higher rates. that's not going to affect what we do. that's not a problem for us. our balance sheet normalization is running very much as expected. we have decreased the size of our holdings by almost $1.5 trillion. senator hagerty: i think it's troubling we continue to put physical pressure by continuing to put -- we are run ago testifies of $1 trillion every -- running a deficit of $1 trillion every 100 days. the issuance is required to deal with that. in fed. making your job harder. i think we need to take that into consideration. another component of this topic, your colleague said he would like the fed to shift holders toward a larger share of short-term treasuries. prior to the financial crisis about a third was in bills. now they are around 3% of your total securities holdings. do you share the goal with governor waller? if so, how long would it take to

us get tre? chair powell: a while. that's an issue in our fomc meeting in a couple weeks we are going to have our first really deep■x dive on what to do with e balance sheet. that's one of the issues. i don't think we'll deal with that at this meet, but over time you love to own not a lot of m.b.s. i can see a case for shortening the maturity. it's not something that would happen quickly. we are not actually looking at that. that's sort after longer term aspiration. senator hagerty: we talked about this before. we are in an election year. you are getting pressure i hear from lawmakers to adjust rates. i'm not saying to raise rates or lower rates. i'm here to emphasize the fact the credibility of the fed remains to be data driven. the reserve currency of the world depends on that and i encourage you to maintain that

posture. chair brown: senator warren from massachusetts is recognized. senator warren: it's been a year since we had the second, third, and fourth largest bank failures in american history. greedy bank executives were part of the problem. the fed as the chief regulator of the biggest banks was part of the problem. under your leadership and direction, the fed steadily weakened rules for the biggest billionaire banks. exactly the banks that failed last march. in other words, chair powell, you failed to do your job to keep these big banks in line. n mode, promising the fed would do better. after years of hemming and hawing you finely agreed to put in place basel iii rules that would strengthen capital standards for the biggest banks. and i mean the biggest banks. these are the fed's proposed rule would apply to only 37 of the nation's 4,500 banks, only the banks that have $100 billion or more in capital.

chair powell, when you testified before this committee last june, i asked you about taking responsibility for bank failures. and you said, quote, the main responsibility i take is to learn the right lessons from this and to undertake to address them so we don't have a situation like this where we had unexpectedly a large bank fail and spread contagion into the banking system. as part of learning those lessons you also said, quote, that you agree with and support, end quote, vice chair for super vision barr's recommendations for strengthening the fed's rules and supervisory practices for the big banks, and that, quote, confident -- you're, quote, confident they would lead to a stronger and more resilient banking system, end quote. i just want to be clear. you haven't backed down from any 'oof your comments right lessons, don't let this happen again, supporting vice chair barr's recommendations,

which include stronger capital standards. chair powell: no. senator warren: still stand by that? i'm glad to hear that. i understand those 37 big banks don't like higher capital rules because th aake the banks safer but they cost a little money and would nip into the bank's profits.ble weight around to try to weaken the capital rules. they spent tens of millions of dollars running ads during sunday night football and millions more for an army of lobbyists to try to twist arms here in congress. impressive spending, but who exactly are they trying to impress? a man on the inside? despite all you said last year, when the banks failed, about supporting vice chair barr's recommendations to strengthen rules for big banks, public

reporting now says that you are driving efforts inside the fedn. you even told the house financial services committee representatives yesterday that yose quote, that you withdraw the rule. as one analyst put it, i don't think they will. they won't pass a final rule without powell's support, suggesting that the rules will have to be weakened, quote, to appease powell. chair powell, i'm having trot yu made last year, which you say you hold on to, statements you made when the headlines were all about three giant bank failures, and now your reported efforts to quietly weaken the rules that would strengthen capital standards for giant banks and prevent more bank failures. let me just give you a chance to clarify the record here. are you mminalizing

the strongest version of the basil three capital rules this■( -- basel iii capital rules this year? chair powell: let me first say that we have taken and are taking many more steps to deal with the problems that revealed themselves at silicon valley bank. that's around supervision -- senator warren: i'm asking about the basel iii rules. the onesave required for years now to put in place and have dragged your feet on. mr. powell: the basel iii rules are not directly related. they are not the thing that is directly related to silicon valley bank. they are a longer run thing. and i would just say that we put them out for comment. we got the comments. anybody's free to go read the comments. my view is that it will be appropriate to make material and broachs to that before we finalize it. in terms of -- i didn't -- senator warren: broad changes to strengthen the rules? chair powell: material and broad changes.

we are talking about what that will mean in the end. i did not say that we would withdraw the rule. i said there is a concept reproposal. i said, we hadn't made a decision on that. if that turns out to be appropriate, in the view of the board of governors, that's something we would look at doing. senator warren: everything you said a year about supporting the vice chair, who is responsible for writing these rules -- chair powell: you and i had a long -- if you read it again. senator warren: i have.f] chai doing exactly what i said i would do. senator warren: you said you woulsu get us strong rules. now he is putting out rules -- chair powell: that was about silicon valley bank. the vice chair for supervisiy rg proposals to the board. that has happened. as i made clear in our colloquy you are not the comptroller of the currency. when i do monetary policy i have one vote. there are 11 other voters. that's the way it works. it's not different from the vice chair for supervision. senator warren: are you the leader of the fed.

when the heat was on you talked a lot about getting tougher on the banks. now the giant banks are unhappy about that and you have gone weak-kneed on this. the american people need a leader at the fed who has the courage to stand up to these banks and protection our financial system. thank you. chair brown: senator danes of montana is recognized. senator daines: i can tell you montanans are continuing to see the impacts across the board from inflation that's been brought on by the policies of this administration and by colleagues across the aisle. i commend you for the job you have done in trying to rein in inflation and encourage you to continue to fight despite political pressures you may face. last time i checked it's going to get more potical around here between now and november. i'm also encouraged contrary perhaps to my colleague from massachusetts, i'm encouraged by your comments yesterday that

there will be broad changes to the basel iii proposal which as currently proposed would have significant detrimental impacts to credit cost and availability to small businesses. lastly, i enyour answer yesterday that the fed is not a climate agency in considering the impact of climate change is not given mandate, congressional mandate of maximum employment and stable prices. mr. chairman, i recently joined many of my colleagues in writing to you about my concerns about the long-term debt proposal that would mandate regional banks issue new long-term debt. i'm concerned that this will have a disproportionate impact on sll hold their long-term debt at both the parent holding company

and insure depository bank levels. can you explain how this aligns with the tailoringeq set forth in the financial reform bill that we passed back in 2018, senate bill 2155?ve a r term debt proposal that lines with that. first of all, that's been out for comment on that one, the comments are in we are reviewing it. i don't want to say too much, but the theory of it in the first place was that they are -- those banks are not subject to the living will process to the extent that the g-sibs are. this was a middle step to make them more resolvable without imposing all of the burdens that we impose on the g-sibs to have elaborate resolution plans. that was the thinking, i think, on the calibration of it. we have voluminous comments. we are looking at them. we'll make an assessment and

move forward as appropriate. senator danes: i know our smaller regional banks would be happy to hear that thoughtful deliberation, mr. chairman.kk4é senator daines: i know our smaller regional banks would be happy to hear that thoughtful deliberation, mr. chairman. understandably you had to raise interest rates to fight the fires inflation brought on by reckless democrat spending. however a major side effect of that is the impact the rising rates are having on the cost of servicing the out-of-control national debt. d to this in his questioning minutes ago. looking at c.b.o. reports, interest payments on our debt will increase 32% this year, and will now exceed spending for the entire defense department. i have significant concerns, many do here in washington, many americans do, that we eventually reach a point where fiscal policy and monetary policy converge. meaning that the fed would ultimately have to worry about n

potentially the risk of a default. chairman powell, i know fiscal policy is not in your purview, but could you ever foresee a situation where fiscal irresponsibility snowballs to a point that the fed would have to factor this into its decision making? chair powell: i think we are a long way from that.'s a real --a terrible place to be. that's a place where some poor emerging market countries have found themselves over the years. for the united states to get to that point i think it's unlikely. i do think, it's not our business, we should stay out of this fiscal business, i'll say what other fed chairs have said, we really need to get back to that discussion about fiscal sustainability. both sides need to get together. the kinds of things that have to happen can only be done on a bipartisan basis. i really hope that we go back to a place where those discussions are happening again.

senator daines: i have heard from a number of stakeholders about upcoming changes to liquidity regs, including an ultrashort-term liquidity requirement. as with any policy decision establishing the facts matters, it's important that financial regulators have a complete thorough understanding of the financial environment before rule or guidance. my question is, what do you believe is a sufficient time period that would allow your agency to accurately calibrate new sound and reasonable liquidity requirements. chair powell: that is a great question and■8qv one war struggling with. particularly with all the other things going on. we are looking at some -- this is in response to silicon valley bank. we are looking at some liquidity innovations and asking ourselves what form that should take and how long it should be up for comment. we are not ready to do that. that's the question we are

senator daines: follow on question and i'm finished. will you confirm prior to the federal reserve issuing any new liquidity requirements it will first conduct all necessary data collection that would allow for meaningful analysis of all potential policy options? chair brown: please keep your answer short, mr. chairman. chair powell: maybe. air brown: that's very short. chair powell: i don't want to make a specific commitment like that without talking to the people who are carefully in touch with this. that is the right thought. chair brown: thank you, senator. senator fedderman from pennsylvania is recognized. he last. although if senator warnock sits down the next five seconds, are you ready? you're so generous with each other.

>> i'm happy to have the junior colleague -- chair brown: senator fedderman is recognized. senator warnock is recognized from georgia. senator warnock: thank you, chairman. thank you very much, mr. chairman.k) bank spending buy backs is rising again. the consumer small revenue has increased. interest rates are high. depositors, ordinary working families, working people with bank accounts. not a lot of money in wall street accounts remains low. chairman powell, i'm concerned that when banks don't increase the interest rates on bank accounts, families are losing

out on dollars that could be in their pockets. again, they don't have the portfolios that some of the folks in this room would have.m? are you concerned that banks under your supervision are doing this? chair powell: not paying sufficient -- senator warnock: correct. chair powell: that's a question i haven't heard. they have the option of putting money in money market funds. and banks compete with each other. i'll be happy look into that. i hadn't heard that concern. senator wa many lower income individuals and families, they don't have some of the sophisticated products, money markets are available, but we saw high interest rates and that not being reflected in what depositor is able to benefit from. could those individuals and families benefit from a high interest rate on their deposits? chair powell: sure.

for a long time we had a lot of mail from people at the fed -- to the fed saying you should raise interest rates because we are not getting anything on our checking accounts. we solved that problem. senator warnock: i don't think we are asking for that. given the reality -- let me pivot, the monetary policy report states that while demand for housing has fallen, the strong labor market hake prices high, that matches what i have been seeing in georgia. too many folks can't afford a home. according to the monetary policy report, mortgage rates were averaging around 7% last month. that's tough for lower income home buyers. increases of just a percentage point or two can be the difference between owning a home or not. are you concerned about this interplay between lower demandnd what it means for folks trying to buy a home?■

what do you think is driving these high prices? chair powell: the housing market is in a very challenging situation right now.er run housg shortage, but at the same time you've got a bunch of things that have to do with the pandemic and inflation and our response with higher rates. you have a shortage of h available for sale because many people are living in homes with a very low rate mortgage they can't afford to refinance so they are not moving. which means the supply of regular existing homes that are for sale is historically low. and very low transaction rate. that pushes up prices of other existing homes and also of new homes. there is just not enough supply. the builders are busy, but they are running into all kinds of supply issues still around zoning and workers and things like that. it's quite challenging. rates are high, so people who are buying, a lot of the buyers, are cash buyers, able to pay without a mortgage because the mortgage is expensive. will i say the first problem, the longer one problem, supply,

is a longer run problem. the other problems associated with low rate rtgages and high rates and all that, those will abate as the economy normalizes and as rates normalize. we'll still be left with a housing market nationally where there is a housing shortage. senator warnock: no question we have a supply issue. this issue of high prices, lack of supply, of course disproportionately impacts some communities more than others. according to the monetary policy report, the employment rate for the black prime age labor force, persons between 25 and 54, reached a historic peak in 2023. the gap between black and white prime age employment dropped to nearly 50-year low aund 3%. we can appreciate progress for the 3% gap is still significant. would you agree that it is important to continue, to continue focusing on narrowing this gap. if so, what tools does the

federal reserve have to do this work? chair powell: it's very important. the single best thing we can do is get prices under control, inflation under control so that we can have a long expansion with the record is clear, a long expansion really gives significant benefits to people at the low end of the income spectrum. because the labor market gets very tight, inflation is low, and they benefit more than anybody. that's where we were before the pandemic. we'd like to get back to that place.■i senator warnock: i think there are some other legislative tools the congress could use. i'm happy to continue to work with the chair in the ways we have already done to improve that rate. that difference. thank you. chair brown: senator from wyoming is recognized. senator lummis: thank you, mr. chairman. nice to see, mr. powell. my first question is about cdbc's.

there's been chatter ly the social media that people are concerned about the fed creating a cdbc without legislative authorization. you and i have discussed that before, and as you know there are other means other than a cdbc that could use digitalure d instant payment system other than a cdbc.■f the question is this, do you still agree that the federal reserve cannot introduce a u.s. central bank digital currency without congressional authorization? chair powell: i do. senator lummis: thank you. that cal people's fears. the people who are concerned that we could end up with something like the digital yuan used as a means of surveillance. i think that will calm some of

those discussions down. thank you so much. my next question is about your core c.p.e. as you know there's a disconnect between how you measure inflation and how the american people see inflation, because the american people are spending their money on gasoline and food and rent. things that have gone up a lot. and they hear about these improvements in the economy, that they are not seeing in their everyday lives. can you explain what measures you use to evaluate inflation? just explain to the american people why you don't factor in the things they spend money on every day like food and gasoline? chair powell: actually, we do. our statutory target is inflation. it's not core inflation.

if you look at headline inflation over the last 12 months, that's it, that's our goal, it's 2.4%. core inflation is higher than that. it's 2.8%. the reason is that some energy and food prices have come down. those don't count in core. our overall legal target is headline inflation which is -- our best effort to capture the cost of living that people face. you have to make all kinds of adjustments that aren't easy. i mentioned housing earlier. how do you measure housing inflation. lots of issues. that's what we target. the reason we look at core, though, is that headline inflation tends to be more volatile and tends to be pushed around by commodity prices which really don't relate to the overall state of the economy.ndr predictor of overall inflation than overall inflation is.

i know that's complicated, but ultimately our target is headline inflation which does include food and energy. senator lummis: mr. chairman, i'd like to include a letter in the record that senator tillis and i and two democrats on this committee have submitted with regard to basel iii. chair brown: without objection. senator lummis: my question isuy that it will be harder for consumers to buy a house and small business to obtain a loan under basel iii, or will lending just migrate outside the banking system which may be harder to assess because it's opaque? chair powell: i didn't get your question. senator lummis: with regard to basel iii, if there are more constraints on lending activity,

what is more apt to be the consequence of that?px that it's harder for consumers to buy a house or a small business to get a loan? or that lending just migrate outside the traditional banking system? chair powell: if there were anything that constricted credit in the banking system, they would probably be both things. probably fewer loans made, but in addition there would be nonbank lenders more than happy to make the loan. senator lummis: i have a chicken and egg question here. starting with tarp in 2008, there has been a very aggressive printing of u.s. dollars up until today. and particularly went on hyper drive during that 22-month period of covid. my question is, which comes

first, congress spending more and so you respond by printing more money, or are they separate considerations? chair powell: it's hard to get my mind around that question. we don't print money to fund the deficit. that's not what happens. but when the government borrows, it borrows. issues -- basically the government borrows to fund deficits is what happens. senator lummis: right. so that would indicate to me that you do respond because we in spending, in deficit spending, are creating a demand to borrow. and you're responding -- chair powell: we are not making loans. we are not lending money to the

government. we are not financing these deficits. senator lummis: so there is no chicken and the egg relationship? chair powell: there is not■í really, no. i'd have to think about this. i got to think about the way -- why don't we continue this? senator lummis: i'd love to.d he could work with you and bipartisan, maybe next year, to address these issues. when you say things, you have to be careful because what you say has ripple effects outside of this building. buit could sit down with you on a bipartisan basis and have those discussions in a frank way. chair brown: senator fedderman of pennsylvania is recognized. senator van hollen of maryland. senator van hollen: let me start by thanking senator fedderman■m for allowing to question. mr. chairman, good to see you. real wages are up. that's good news.

over the last couple years wages have been going up. that means more families have more spending power in their budgets, right? chair powell: yes. senator van hollen: worker productivity is up, right? chair powell: it is. senator van hollen: corporate profits are up? chair powell: i believe so. senator van hollen: worker productivity's rising faster than corporate profits, right? chair powell: i don't know the answer. senator van hollen: the charts i show suggest that. that would indicate that in last corporations decide to pocket was profits more of the gains they get from their workers' labor that we should be able to continue to have increases in real wages, is that right? chair powell: yeah. senator van hollen: it's important r people to recognize these corporations are

doing better than ever. and they are deciding now to essentially return the gains made through their workers' productivity, which is going up. more to shareholders, obviously shareholders will get a profit, but the question is whether or not workers share in that profit to the extent of their worker productivity. as you know we have seen a great gap over decades between rising worker productivity and real wages. would you agree that it would be good for a more inclusive economy if worker wages tracked worker productivity increases? chair powell: i think if you include benefits, that's a significant part of that gap. i looked into that, but not for some years.

generally speaking people's compensation should equal -- should be over time equal to increases in productivity. senator van hollen: i appreciate that. i also want to -- there is the tradeoff on workers' wages, and also an issue with price gouging. we have seen record profits. we have also seen very high prices, these corporations are charging for things like i listened to a little bit of exchange with the chairman earlier, and of course i think your answer was people will charge what consumers will pay. but it should be known that these corporations are reaping much larger profits now than they were pro-covid, right? chair powell: some of them are. i'm not super focused on individual corporate profits. corporate profits have been high overall.

senator van hollen: they are high for a couple reasons. one is that they are charging consumers, for example, the grocery stores, a lot of money. and the other would be if they are not sharg the benefits of labor productivity with their employees. i think because we have heard a lot of claims by some of our republican colleagues about the causes of price increases, and i think it's very important that american consumers recognize that corporations are choosing to charge them more at the grocery store, or engaging in things like shrinkflation rather than -- in order to have more of their profits. let me turn briefly to a letterf super vision and some of the other federal regulators in

january of this year regarding the basel iii capital requirements. i support the overall effort. is we did raise concern with respect to a different issue it could have on clean energy tax credit investments and all of the regulators ncluding the vice chairman, said they recognized this was a significant issue and hope to address it. would you agree with that? mr. powell: yes, i would. senator van hollen: thank you. >> it's great to be here with you today. i don't know, maybe some people in america were talking about a cookie that was $18. i was alarmed and i hope we investigate that there is a

cookie that costs $18 and do you believe that an he can dote on twitter about a cookie that costs $18, is that reflective of our economy and where we're at or not? mr. powell: i certainly hope not. i don't do much shopping these days but that sounds like a pretty expensive cookie. sen. fetterman: and now, i believe that the american economy now is the envy of the world after everything right now, correct? mr. powell: yes, we're performing very well compared to our peer group. sen. fetterman: yeah, pretty great. and is it fair to say that the stock markets are all a bit record highs, right? mr. powell: pretty close. sen. fetterman: yeah. and inflation has been pretty effectively addressed, mr. powell: coming in sharp lip since the middle of the -- sharply since the middle of last year, yes. we have a ways to go.

sen. fetterman: and corporate profits are pretty robust, is that fair? mr. powell: i believe it is. sen. fetterman: ok. we can agree that -- and don't understand why more people seem to be talking about a cookie that costs $18, but that seems to be against the evidence as well. but given that, now, since things are pretty great and we're in really great, excuse me one sond, place, but now i'm concerned and there's rumors going around that basel, they're going to change and they're going to reduce the capital. and i guess i'm concerned about that because i don't know why we would want to -- also, i want the record to reflect on you're much smarter than i am, but i would be concerned that things are in a really great place right now, we can all degree on that, i would be concerned to change something like that because i wouldn't want to have something like what happened

with s.d.b. i want to get your take on that. mr. powell: sure. so u.s. banks are well capitalized and generally speaking they're quite well capitalized and we're not talking about reducing current capital levels at all. really in the basel iii e game, capital may well go up and what we're talking about is whether the proposal that was put out by the bank regulatory agencies, including the fed, which has now been the subject of quite a lot of comment, whether, you know, what changes will be appropriate to that. that's what we're talking about. we'r]ñe not ta about reducing existing capital requirements. sen. fetterman: ok. and then i also want to play off of alleague from tennessee. i actually agreed with him and he's concerned about the deficit, about it's $1 trillion for every 100 days. so now if the federal government added $3.5 trillion to the deficit by extending the trump

tax cuts, would that increase or decrease inflation? mr. powell: so i'm going to fall back on our long-time reluctance to comment on fiscal policy. we take fiscal policy decisions, whatever they may be, we thing as they are and we conduct monetary policy to achieve 2 do- c.b.o. does that. they'll make a judgment on that. but it's not something we do because we're an independent agency and that requires us to stay the heck out of politics. sen. fetterman: so i don't want to put you on the spot but would those kind of tax cuts help addressing inflation or inflame inflation? mr. powell: i don'tw n inflation. do i know broadly speaking we need to get to a place where revenues and spending are better aligned an and i think we used to talk about this a lot 10 years ago. we don't talk about it as much

anymore. the pandemic was a special thing. but i think it would be great to get back to that on a bipartisan basis. sen. fetterman: ok. 30 seconds left. i want to go on the record. i think you've done a really great job and i think our economy -- and i do agree that it is the envy of the world a well. and i'm confused that more people are talking about cookies or mcdonald's meals and those kinds of things,t's not reflective on the strength of this too. i just want to thank you for your service. mr. powell: thank you, sir. sen. brown: thank you, senator fetterman. that's the last questioner. thanks for your generosity in yielding to colleagues who got here -- for whom you got here before, if i said that right. thank you to chair powell for skroeupbing us today -- for joining us today and every six months and sometimes more often. i look forward to working with you. to strengthen our economy. senators who wish to submit questions for the hearing record are due one week from today, march 14.

chair powell, please submit responses to those questions for the record no more than 45 days from the day you receive them. thank you again for your testimony. [captions copyright national cable satellite corp. 2024] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org]

[inaudible] >> tonight, president biden is set to give the annual state of the union address. ahead of his speech we're asking what issue is most important to you. to participate, scan the q.r. code on your screen or go to c-span.org/poll. to add your voice to theon. a look here at the voting so

far. as is customary, the president will be speaking before a joint session of congress where he's expected to outline some of these policy priorities and share his thoughts on the state of the country. this will be the third state of the union address of his presidency and likely his last speech in front of congress before the 2024 presidential election. we'll keep this poll open leading up to the president's address. >> and a reminder that our live coverage of the state he 8:00 eastern with a preview, followed by the president's speech. the g.o.p. response by alabama senator kateie britt and viewer reaction. that's on c-span, c-span now, our free video app■ñ, and online at c-span.org. >> american history tv, saturdays on c-span2. exploring the people and events

that tell the american story. at 2:00 p.m. eastern on the civil war, coverage of the 2023 lincoln forum as historians an authors discuss how the civil war dead were remembered. the lives of black citizens following emancipation. and the legacy of president lincoln. at 6:00 p.m. eastern we tour the u.s. state department's diplomatic reception■n room with curator jennifer hart. and we talk about ben scra min franklin. at 7:00 p.m. we continue with the series "free to choose," co-produced by milton friedman and his wife rose in 1980. the episode is titled, how to cure inflation. exploring the american story, watch american history tv saturdays on c-span2 and find a full schedule on your program guide or watch onlintime at c-span.org/history.