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tv   Key Capitol Hill Hearings  CSPAN  January 6, 2014 12:30pm-2:01pm EST

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how will you assess the regs put out, the higher capital standards by the fed and occ, and fdic? how will you assess as they go into effect if you need higher
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capital requirements, not just, i mean certainly the surcharges but how will you assess the effectiveness of those? >> there are, you know, studies of an attempt to estimate what the too big to fail subsidy is in the market. while there are a lot of question marks around those studies we can look to see what's happening there. >> you believe there is a subsidy as -- >> will the senator wrap it up? >> that is my next question. do you believe there is subsidy as bloomberg pointed out, some others, 10 of billions of dollars a year for the largest banks? >> i think there are different methodology that is are used in different studies and it's hard to be definitive, but yes most, i would say most sudden did is point to on some sub is i did i that -- subsidy that may reflect too big to fail although other
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factors may account for part of the reason that larger firms tend to face lower borrowing costs. >> thank you. i'm sorry, mr. chairman. >> senator. >> thank you, mr. chairman, thank you dr. yellen. i want to pick up where my colleague left off because as you know i share his and many other concerns about too big to fail being a life and well. as you both of you noted there are many study that is document, even try to measure too big to fail and the market subsidy or advantage that the megabanks have. another is coming out today. gao is releasing its first study that senator brown and i asked for and again confirms this in general. it focuses on the huge discount that the federal reserve offered the megabanks during the financial crisis. and the huge market advantage that they got. and specifically, this gao report coming out today said,
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quote, it recommended, quote, the federal reserve board finalize policies and procedures related to its emergency lending authority. and establish internal timelines for developing those procedures to insure timely compliance with dodd-frank act requirements, close quote. what that means really dodd-frank gives you the ability to wind down that emergency lending authority. the board has not acted on that or even established as far as i know internal timelines to do that. so, one obvious question related to this study coming out today, will you do that as chairman and when will you do it? >> senator, i think that guidance is in, is in the works and, we will try, we will try to get it out soon. >> do you have a general time
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frame in mind? >> i'm not certain just what the time frame is but i will, i will try to make sure that that happens. >> if i could ask you to just supplement the record following the hearing with more specifics about the fed's plan to act on dodd-frank with regard to that. thank you. you also mentioned increased leverage ratios for the biggest banks. i agree that the action you supported in july in terms of supplementary leverage ratio for larger banks was very positive. i do not agree that it's enough. i think even when you consider the sifi surcharge and other things more needs to be done. would you support going further in terms of leverage ratios for the largest banks or not? >> so, i think we will have a
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very meaningful improvement in capital standards by going the approach that dodd-frank has recommended which is higher risk-based capital standards. it will be a sifi surcharge. we're contemplating a countercyclical capital surcharge that would add to that we are contemplating additional ways of dealing with problems of reliance on short-term wholesale funding that could take the form of a capital charge that's related to reliance on that kind of funding or it could take the role of margin requirements. i think a belt and suspenders kind of approach in which we have a leverage requirement that serves as a backup because there
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are potential issues with risk-based capital requirements. remember that we also have stress tests which are yet another approach to assessing whether or not the largest systematically important institutions have the where with all to be able to to lend. >> i don't mean to cut you off but if i can follow up before my time is up. i understand those other categories including the sifi surcharge. but considering all those including the sifi surcharge i personally and others think you should go further with the supplementary leverage ratio. would you support that as we speak today or not? >> oh, i would want to see where we are when we're, when we've implemented all of the dodd-frank requirements that we need to put in place. >> okay. final question, you've said in
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the past, quote, like chairman bernanke, i strongly believe that monetary policy is most effective when the public understands what the fed is trying to do and how it plans to do it, close quote. a lot of us would agree with that and, many of us think that the best way to get there is through true openness and transparency of the fed, not just a better, sort of managed p.r. campaign, but real openness and transparency. would you publicly support s-209? i'm sure you're familiar with that? if not, what specific changes to that would be required to earn your public support? >> so, i strongly, as i have indicated support transparency and openness on the part of the fed. and i think with respect to monetary policy, in terms of the range of information and
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timeliness of that information, we are one of the most transparent central banks in the world. what i would not support is requirement that we, any requirement that would diminish the independence of the federal reserve in implementing and deciding on implementing a monetary policy? for 50 years, congress has recognized that there should be an exception to gao ability to audit the fed, to avoid any political interference in monetary policy. i believe it is critically important to the economic performance of this country and we've seen this around the world, that allowing a central bank to be independent in formulating monetary policy, is critical to assuring markets and
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the public that we will achieve price stability. and i would be very concerned about legislation that would subject the federal reserve to short-term political pressures that could interfere with that independence. >> thank you, mr. chairman. >> senator tester. >> thank you, mr. chairman. i want to thank you for being here, vice-chair yellen. at the end of october the federal reserve formally applied for application in the insurance association. international association of insurance supervisors, for membership. the united states already has membership on that through the federal insurance office, created by dodd-frank. can you tell me why the fed should have membership, its own membership on that board? and furthermore, why there should be a focus on that when domestic oversight challenges seem to be a much higher priority? >> well my understanding,
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senator, is that now that the federal reserve has been charged with supervising some of the largest insurance companies that have been designated by fsoc as systemic, that we want to be in a position to work with regulators in other countries as we have in the case of banking rules to make sure that we have internationally compatible -- >> and fio, excuse me but the fio can not fill that need or you? >> i'm not certain. i think we felt it would be beneficial to participate in that group. >> okay. in our conversations about insuring capital standards appropriately tailored to insurers i've raised concern in the same vain with the fsoc who i encouraged to develop industry-specific guidance and metrics for systematically important financial
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institutions. do you agree that the fsoc has and should exercise its authority to develop industry-specific guidance and metrics rather than forcing insurers or asset managing firms, for example, into a bank-centric regulatory model? >> so, senator, i do believe that one size fits all should not be the model for regulation and that we need to develop appropriate models for regulation and supervision of different kind of institutions. insurance certainly has some very unique features that make them very different from banks and we're taking the time to try to study what the best way is to craft regulations that would be appropriate for those organizationing. >> sew what i'm hearing you saying that a bank-centric regulatory model would not work for insurance companies in this country? >> well there certainly are
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critical differences in terms of their business models that we want to understand and respond to. >> okay. i want to express serious disappointment with a recent decision by fsoc not to release for public comment a study produced by the office of financial research regarding the asset management industry. while the council is probably indicated it would release any metrics or guidance on this industry for public comment, it declined to release this study which i will presumably form basis for future consideration. if you are confirmed as chairman of the fed and member of fsoc will you insure the council is up to its commitment of transparency and will the fed support efforts to make any potential evaluation and metrics and studies they are based available for public comment? >> senator, i have not participated in fsoc but if i do so, i will try to take those concerns seriously. >> if you're confirmed, you will be participating in fsoc. >> i will. >> the question ask about
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transparency and transparency of metrics that will be used that people need to have the ability to comment on before they're applied. i guess my question to you is, will you be willing to make that commitment, to transparency as it applies to the fsoc. >> so i will need to study this issue more closely in terms of what fsoc's procedures are but i feel it should, you know, should be clear why a particular firm has been designated if that occurs. >> and the metrics that they're using for that designation? okay. in closing i want to say, thank you for your willingness to work on the end user issue we discussed last week. i very much appreciate it. thank you, mr. chairman. >> senator kirk. >> technical question on behalf of large insurance employers in illinois. to extract a commitment from you to do a cost benefit analysis if
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we are to require them to switch from sap to gaap accounting which they warned me could cost couple hundred million dollars. >> so, senator, i'm aware that there is an issue around different accounting standards in insurance companies. i haven't had a chance to study that myself but i would certainly agree this is something we need to look into and to consider very carefully and pledge to do so. >> thank you, dr. yellen. mr. chairman, thank you. >> senator warner. >> thank you, mr. chairman and thank you, dr. yellen for being here. i got a series of quick questions. one i would like to make a
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comment. i understand our colleagues concerns about some of the extraordinary measures the fed has had to take on, quantitative easing. i guess i would simply make a comment and ask for a short response on this, part of our political dysfunction in this town in terms of grappling to get our country's balance sheet right in terms of a grand bargain or actual budget in place, if we were able to actually perform our functions, wouldn't that allow you to move out of these extraordinary measures in a quicker manner? >> well, certainly, it is certainly the case that the economy has suffered over the last year a substantial drag from fiscal policy. cbo estimates that the drag amounts to something like one 1/2% on growth and as we commented in our fomc statement, most recently, taking account of
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the, that large amount of fiscal drag, the economy, even though it has only been growing around 2%, is showing greater momentum. so i think it is fair to say, and i would expect that if there were less fiscal drag and i hope there will be less going forward, that the economy's growing rate is going to pick up. so that certainly has been a headwind on the economy and something that we've tried to offset. obviously our tools to do so, it is not perfect, not -- >> obviously. government shutdowns, which cost latest estimate, $24 billion, or potential default threats which result in spikes of interest rates sure as heck don't provide that predictability. i want to actually follow up as well where senator tester left off. i have to say someone, along with our friends senator corker were involved with title one and
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title two. i've been certainly disappointed in the fsoc's to be that inneragency arbiter around regulatory conflicts. i've also been somewhat disappointed with the actions so far of the ofr and, i simply would say, i think it is, i hope as you move into this role on the fsoc, there will be financial institutions, nonbank financial institutions that will be, sifi as senator tester mentioned, asset management terms, it seems as if the ofr report did not have a lot of collaboration, a lot of clarity and i would hope in your role on the fsoc, again i think one of the reasons why i wish we would have an independent chair on the fsoc but you will clearly have an outsized role as the fed representative, we try to give some clarity that we don't think we're going to view everything through a bank-centric
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regulatory prism. we realize as we look at nonbank institutions that maybe require that sifi designation that we give some clarity how we're going to evaluate those nonbank institutions. >> i think that is completely fair and very reasonable and logical objective for fsoc to have. our staff have been working very closely with fsoc and the ofr in trying to, you know, participate constructively to facilitate the work of those groups. >> i would just add my voice to senator tester's that we'd like to see that transparency as we strike to evaluate nonbank institutions for sifi designation so we all know the rules going forward. i think that would be helpful. one of the things as we think about balance sheets and stimulation of or getting more private capital lent, one of the things that i know that fed pays
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interest on excess reserves of the banks but i believe now you're holding about 2.4 trillion of those banking asset reserves and i think we pay 25 basis points. we've seen other central banks, denmark and others start to lower those payments. would you consider that possibility of, in effect, incenting the banks to get this capital not on your balance sheet but back out into the marketplace to stimulate more loans and more private capital into the market? >> so, senator, that is something that that the fomc has discussed and the board has considered on past occasions and it is something we could consider going forward. it, i think our assessment we've worried if we were to lower that rate too close to zero, we would
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begin to impair money market function and, and that's, that's been a consideration on the other side but it certainly is a possibility, senator. >> i would say, that i ask you to look at this as well because it is one of the ways without necessarily growing your balance sheet as some of my colleagues expressed a concern with. >> thank you, senator. >> senator helloer. >> thank you, senator and dr. yellen, and spam family showing their support. i think that make as real difference. question, do you follow gold prices? >> to some extent. >> do you believe there is any economic indicate behind the rise and fall of gold prices? >> i don't think anybody has a very good model what makeses gold prices go up or down but certainly it is an asset that people want to hold when they're
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very fearfulful about potential financial market catastrophe ore economic troubles and tail risks and when there is financial market turbulence, often we see gold prices rise as people flee into them. >> that was a better answer than i go from chairman bernanke last july. i asked him the same question and he said that nobody really understands gold prices. then he went on to say, i don't pretend to really understand them either and, do you share that view or clearly with a few extra tidbits that you just shared with us? >> i think beyond what i shared i don't have strong views what -- i haven't seen a lot of moddells that have been successful in predicting them. >> thank you. you talked in your general statement at the beginning about the role of the federal reserve, promoting conditions to foster
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maximum employment, stable, low and stable inflation, safe and sound financial system. do you believe we have a safe and sound financial system today? >> i think we have a much safer and sounder financial system than we had pre-crisis but as i indicated, i think we need to do more. we're not at the end of the road in terms of putting in place regulations and enhanced supervision that will make the system safe and sound as it needs to be to contain systemic risk. >> the reason i raise the question is, we had this discussion when you were in my office about community banks and sitting as chairwoman of the san francisco federal board you have a pretty good understanding what is going on out west, california, nevada, and as you're aware of, as i shared with you, we lost half the community banks and credit unions in our community, making
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it very, very difficult for choices. making it very difficult for housing recovery. getting loans for small businesses. and i guess the question is, what steps will you take to avert a culture of consolidation of these major banks and the loss of the small community banks? >> well, senator, in the first place, to the. >> tent that the large banks have an advantage because they benefit from a too big to fail subsidy, i think our objective in regulation should be to put in place tough enough regulations and capital and liquidity standards that we level the playing field and make it costly since those firms do pose systemic risk to the financial system. we should be, making it tougher for them to compete and encouraging them to be smaller and less systemic. and, with respect to the
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community banks we need a model for supervision of them that's different and much less onerous and much less regulatory burden and is appropriate to their business model. we're obviously imposing on the largest systemic institutions much higher and more onerous prudential standards. >> and i appreciate your comments because i do believe the one size fits all is what's really at a disadvantage for community banks and these smaller banks. quick question about quantitative easing. do you see it causing an equity bubble in today's stock market? >> i mean stock prices have risen pretty robustly but i think -- >> correct. >> if you look at traditional valuation measures the kind of things that we monitor, akin to price equity ratios you would
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not see stock prices in territory that suggests bubble-like conditions. when we look at a measure of what's called the equity risk premium which is the differential between the expected return on stocks and safe assets like bonds, that premium is not, is somewhat elevated historically which again suggests valuations that are not in bubble territory. >> do you believe there's a federal role to support the stock market? >> a federal role to support the stock market? no. >> thank you. thank you, mr. chairman. >> senator merkley. >> thank you, mr. chair and thank you, dr. yellen. i don't believe any nominee for this position has come with such an extensive set of qualifications and fascinating to read the diversity of your writings over the last four decades. i wanted to give a special welcome to carla chambers, who
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represented oregon very well on the board of directors of the federal reserve bank of san francisco. a number of issues have arisen in the international banking community just sit the melt down in 2008, including libor rate manipulation, energy market manipulation, the "london whale,", massive issues related to money laundering, robo-signing fraud on foreclosure documents. the fed plays an important role in regulation and supervision. can the fed under your leadership help restore faith in our regulatory system? >> senator, i feel that is an exceptionally important goal and one i'm happy to espouse and work toward. i absolutely feel that's essential and appropriate, yes. >> thank you very much. and as a second i wanted to ask you to address the rules that are being completed on the volcker rule, or firewall, which
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creates a wall between hedge funds that make risky bets with funds from private investors and commercial banks that have insured deposits and access to the discount window and played an essential role in providing loans to individuals and businesses. there has been a lot of concern that the, this firewall will be compromised with loopholes related to liquidity management, portfolio hedging and market-making. can we count on the fed under your leadership to work with the other regulators to produce a strong volcker rule? perhaps it will be completed before you're there in the final stages but if so to implement it in a fashion that keeps faith with this goal of reducing systemic risk by keeping the commercial banking world in the commercial banking sphere? >> yes. senator. we're working very closely and i believe constructively on this rule-making with the other agencies. we are certainly trying to be faithful to the intent of this
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rule which is to eliminate short-term financial speculation in institutions that enjoy the protection of the safety net. the devil here is in the details. the rule does permit appropriate hedging and market-making activities and we're trying to devise a rule that will permit those activities but absolutely be faithful to the intent that congress had here. >> thank you. and third, i wanted to ask you to ponder an issue that received considerable attention regarding commodities, and the concern that, under certain situation, large banks are available to put their thumb on the scale through their ownership of electric power generation facilities, pipelines, oil tankers, warehouses for key metals, and there is certainly a history in
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terms of gramm-leach-bliley, in terms of grandfathered commodity invests and in terms of related activities but there is concern that the ability to influence supply and demand to affect price, while at the same time having the ability to make bets on the price creates a conflict of interest that provides essentially a hidden tax on the american economy and the fed does have regulatory powers related to this and can you, maybe chew on this a little bit, a little bit in terms of your perspectives? >> so, senator, we're involved in a very comprehensive review of commodities activities and bank and financial holding companies. as you indicated, we alluded some activity that is we deemed
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to be complimentary to financial activities. we're reviewing what is appropriate there. in addition, congress as you noted, grandfathered certain activities in firms that later became financial holding companies. we want to make sure that these are conducted in the safe and soundmanner and we may be involved in additional rule of making as we complete this review. with respect to market manipulation i would just note though that it is also, it's the role and responsibility of market regulators, particularly the cftc here, to be looking into the possibilities of market regulation. our main job and we would certainly cooperate in any, any look there, our main role is prudential and safety and soundness. >> thank you so much for being willing to consider taking on
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this role at the fed and bringing your expertise to bear and your past public service and that certainly i wish you well. thank you. >> thank you, senator. >> senator corker. >> thank you, mr. chairman, and dr. yellen, thank you for being here and i appreciate the time in our office and your transparency here today and just for the committee's record, if you would, share with all of us how many rate increases you have voted for during your term on the federal reserve? >> so, i served as governor from 1994 to '97 and we had a cycle of rate increases during that time. >> if you just give me the number. >> i believe 20 or more. >> 20 or more. i think it was maybe 27 or so. >> it could be. >> and how many have you voted against? >> none. >> okay. as i thought that was just good to get into the record and i
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appreciate that very much for being here. >> i appreciate that. >> we talked a little bit about monetary policy and maybe more than a little bit in the office and i think one of the things that we discussed was my concern, and i think yours too, in many ways, easy money is a an elitist policy. it is the ultimate trickle-down in that, you know, based on premise you will have this wealth creation and what we've seen is largely the largest wall street institutions have done the best and fund managers made a lot of money but it really hasn't trickled down to the economy and as you were mentioned earlier it is a blunt object. would you agree that while it has been an attempt to stimulate the economy the more well off have benefited much better than those at the lower end of the spectrum? >> well to the extent that low interest rates do have an impact
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on asset prices, these policies have probably to some extent boost the stock market, which, may be an example of what you're talking about but it is also had a, played an important role i think in helping the housing sector. >> right. >> and boosting housing prices. and i think this is something that has been broadly beneficial to all those americans who own homes and has improved their financial, sense of financial well-being. and that's broad-based. >> yeah. we talked a little bit about the fed in the early summer. we began talking about the moderating the pace at which it was going to be making purchases and the market had a pretty stringent reaction in like federal reserve appeared if it touched a hot stove and that
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policy would greatly affect, if you will, the wealth effect you were trying to create. >> the policy of modrating. so the fed jumped back, and it seemed to me and we discussed this a little bit in the office, that the fed had become prisoner to its own policy. to really try to step away from qe3 was really going to shatter possibly the markets and therefore take away from the wealth effect. i wonder if you could talk a little bit about some discussions taking place during that time. >> senator, i don't think that the fed ever can be or should be a prisoner of the markets. our job -- >> but to a degree in this case it did affect the fed, did it not? >> well, we do have to take account of what's happening in the markets, what impact market conditions are likely to have on spending and the economic outlook. so, it is the case and we highlighted this in our
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statement, when we saw a big jump in rates, a jump that was greater than we would have anticipated from the statements that we made in may and june, and particularly saw mortgage interest rates rise in the space of a few months by over one hundred basis points, we had to ask ourselves, whether or not or not, that tightening of conditions in a where we were seeing a recovery, and a recovery that could, really, recovery in housing that could drive a broader recovery in the economy, we did have to ask ourselves, whether or not that could potentially threaten what we were trying to achieve. but overall, we're not a prisoner of the markets. i continue to feel that we're seeing an improvement in the labor market which was the goal of the program and it will
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continue to stroll wait incoming data and continue to make decisions on the program and the like going forward. >> thank you. i just a little bit of a prisoner, maybe not fully. i understand. i would just, my last question is, you talked a little bit about monitoring, sort of the financial markets. i know that it is again, monetary policy is a blunt instrument. i know that you've been credited with back in 2005 signaling that that the housing market was bubbling if you will in that part of the country. i guess my question is, do you believe that under your leadership the fed would have the courage to, when it saw asset bubbles, even though you only have blunt instruments, and i realize that, would it have the courage to prick those bubbles and insure we didn't create another crisis? >> no one, senator, no one who lived through that financial crisis would ever want to risk
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another one that could subject the economy to what we're painfully going through and recovering from. and, we have a variety of different tools that we could use if we saw something like that occur. they include tools of supervision. >> right. >> and monetary policy and -- >> you would have the courage to do that? >> i believe that i would and i believe that this is a, the most important lesson learned from the financial crisis, senator. >> mr. chairman, thank you for having this hearing and, dr. yellen, i do want to tell you i very much appreciate your candor and transparency and i really do. i appreciate the conversation both in the office and i want to thank you for giving the same answers to questions here today that you gave in the office. so thank you very much. >> thank you very much much,
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senator. appreciate that. >> senator hagen. >> thank you, mr. chairman. thank you, ranking member crapo. i want to echo what i am sure everybody stated is the depth of your background, your experience, your expertise, and we're very honored to have you here and thanks for your testimony. i wanted to talk about the section 716 in dodd-frank. in that section, it is required that banks would with access to deposit insurance as well as, or the federal reserve discount window to push out certain plain vanilla derivatives such as equity or commodity-based swaps, to push them out to separately capitalized affiliates. this move would raise costs to the end-users without significantly reducing risk to the financial system. when i have spoken with chairman bernanke and he has consistently stated that the federal reserve had concerns about the swap
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pushout rule prior to the enactment of dodd-frank. and that the, that they still have concerns about it today. are your views on this issue consistent with chairman bernanke's and would you share the view that it is a good idea to repeal parts of the swaps, of the pushout rule? if that did not take place, what would be, what would, what would the markets do then? >> so, senator, as you indicated, the federal reserve and other agencies did have concerns about this rule and they expressed them when dodd-frank was being considered. we're working very hard to address the concerns around this rule. and, we think that we're likely to be able to do so. i certainly hope that in the final rule that we come out
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with, we will be able to effectively address the concerns that people had so that it won't be necessary to repeal the rule. that, it is, it is my hope. we're certainly trying to do that. >> and what is your time frame on that? >> i -- >> once you're confirmed. >> i believe this is something we hope to get out hopefully later this year. >> and you say you could do that without changing section 716? >> i believe that that's the case. we're hopeful we'll be able to find ways to address the concerns. >> okay. >> understand the concerns and we'll, are trying very hard to -- >> so do you share chairman bernanke's viewpoint? >> i believe so. about the concerns that are there and the need to address them. i'm hopeful that we will be able to do so in the rule.
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>> okay, thank you. since the start of the, the qe, the financial markets have responded to pronouncements by the fed. are you at all concerned that markets are too driven by speeches and official pronouncements from central banks around the world? and if the suggestion of tapering can contribute to volatility and asset prices, can we expect more volatility in the future? >> well, the federal reserve, and i think this is true of other central banks, we're trying as hard as we can to communicate clearly about monetary policy. both of our goals and our intentions in terms of how we carry out programs. now, this is challenging. we're in unprecedented circumstances. we're using policies that have never really been tried before. and multiple policies. and we're trying to explain to
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the public how we intend to conduct these policies. so, it is a work in progpress. sometimes miscommunication is possible, but i think my von view would be, we certainly want to diminish any unnecessary volatility. sometimes there is volatility because we all learn news about the economy that changes our views about the course of the economy and the course of policy and there it is natural to see a response. but, to diminish unnecessary volatility, i think we have to redouble our efforts to communicate as clearly as we possibly can. and that will be my emphasis. >> thank you, mr. chairman. >> senator toomey. >> thank you, mr. chairman, and dr. yellen, thank you for being here. thanks for our chat earlier this week. i appreciate that. i want to get back to where some
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of the issues senator corker was raising regarding monetary policy but first i just think it is important to stress, i know you're very well aware of these but the adverse consequence that is we're already experiencing from directly as a result of the extraordinary monetary policy is really problematic i think. we are, we continue to have this artificially suppressed, cost of funding these excessively large deficits we run. it contributes to, i would argue, fiscal imbalances. we are punishing middle class savers for years now. people who spent and entire working lifetime to choosing so forgo consumption, they decided they would save and have a little bit of income in their retirement. now they have no income, because they earn nothing on their savings. they do watch as it gradually gets eroded by a low level of inflation when they have no income from it. we have exacerbated the problems
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of underfunded pension plans and we have got distortions in financial markets. these all things have been occurring i would argue and continue to occur and yet what worries me perhaps even more is the point that senator corker was getting to i think, which is what happens when the morphine drip starts to end? at some point, some time this is going to be, we're going to move away from this, i assume. i think everybody believes that. and the assumption seems to be that every, the markets will behave very bee ninely when that occurs. yet we've seen some, i think worrisome glimpses that is not save assumption. the members of the fed bit be contemplating a little earlier. treasury backs up a 100 basis points. the testimony in the equity market rally, doesn't this feel like something a little artificial here and isn't it possible while you have many tools available to begin and
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unwind and retreat from this, that the markets may not respond very well and we could end up creating a real problem as we try to exit from this? >> so, senator, you made a number of different points and, i think the point you mentioned is that low rates, in a way, give rise to fiscal irresponsibility -- >> make it easy. >> takes pressure off congress. usnea, we've established low row rates to get the economy moving which is congress's mandate to us. i think it is important for congress to recognize as the economy recovers and both and short and long-term rates move up, a situation in which the government's funding costs remain as low as they are. , if we're successful achieving
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our goal of getting economy back on track, this is very temporary situation, so i believe members of congress should be looking out a few years to a time when rates are going to be higher. low interest rates harm savers. it es absolutely true. and, this is a burden on people who are trying to survive on the income from cd. there is not much that they can get. but, you know, if you think about how can we get rates, i would argue we can't have normal rates unless the economy is normal. at the moment we have a lot of saving and not very much investment. i assume policy of low rates getting economy moving will best enable us to formalize policy and get rates back to normal
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levels over time. . . >> it was not just true now, but this previous tightening cycles like the one we had from '94 and 1995 where long rates moved up over the span of six months over a hundred basis points. we to -- we've tried to make
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sure the financial system is more resilient. in our stress tests we have tested and continue to do so in this round to make sure that banks are appropriately managing interest rate risk, and, um, that is a risk that, you know, we will try to mitigate, but it is inherent in any tightening cycle. >> mr. chairman, i know i'm just running out of time, just two quick points i'd like to pick. one is, i'd like to express my concern, which is the exact opposite of the concern that was raised by senator merkley, which is i think the danger of the implementation of the volcker rule could be too restrictive and increase the cost of especially corporate bond issuers. i think the decision by congress to exempt u.s. treasuries was an implicit acknowledgment that when you ban proprietary trading in those instruments, you make them for expensive for issuers.
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i'm told the next rule might also exempt other sovereign issuers. this is a problem for corporate issuers in america, and i'm very concerned that we not unnecessarily raise their cost of borrowing. and the last point i would make is i'm deeply concerned about the consolidation that's happening in small banks, the lack of few small banks. as you know, we used to routinely launch sometimes hundreds of new community banks. i'm told by the fdic there's not a single new community bank that's been launched since 2010. the regulatory compliance for institutions that have no systemic risk to the economy is way overboard, and i hope you will make an effort to diminish that burden. >> i promise to do so, senator. >> thank you. >> senator warren. >> thank you, mr. chairman. thank you, dr. yellen. or you know, there's been a lot of talk today about the fed's use of quantitative easing to try to help the economy get back on its feet. but the truth is if the regulators had done their jobs
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and reined in the banks, we wouldn't need to be talking about quantitative easing, because we could have avoided the 2008 crisis altogether. so i want to focus on the fed's regulatory and supervisory responsibilities to keep the big banks in check. now, i'm concerned that those responsibilities just aren't a top priority for the board of governors. earlier this year the fed and the occ reached a settlement with 13 mortgage servicers that had engaged in a long list of illegal foreclosure activities, and the settlement was for over $9 billion. it directly affected more than four million families. but the fed's board of governors never voted on whether to accept the settlement. instead, this decision was just left to the staff. now, the fed has smart, hard working staff, but the board of governors would never delegate
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critical monetary policy to them, and yet even now after the biggest financial crisis in generations, the board seems all too willing to delegate critical regulatory and supervisory decisions. so i think we need to make reining in the banks a top priority for the board. so i know the board meets regularly to discuss monetary policy. do you think the board should have regular meetings on supervisory and regular that story issues -- regulatory issues as well making it clear that both of those are important to the fed? >> well, senator, i absolutely believe that our supervisory responsibilities are critical, and they're just as important as monetary policy, and we need to take them just as seriously and devote just as much time and attention to them as we do to
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monetary policy. the board operates under a variety of restrictions. you may know about the government in the sunshine rule, and so when you suggest that the board meet to discuss regulatory, regulatory matters, our ability to do so outside of open meetings is very limited. and so we tend to handle those by meeting individually with staff or meeting in small groups. we have a committee system where committees are put in charge of managing particular areas and making recommendations to the board. i remember in the 1990s that the board did regularly meet to discuss supervisory issues because, you know, there there's confidential supervisory information, and it's easier for
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us to have a meeting. and i did consider those very valuable. and so i think that's a very worthwhile idea. when there -- i should just say, when there are delegations to staff and the board of governors doesn't vote, that doesn't mean that board members respect consulted -- aren't consulted. and maybe those are expertise may have played a critical role and had very important input even when there is no formal vote by the board of governors. >> fair enough. but i think it is an important signal here, and i'm glad to hear that you're thinking about this. and thinking about the question of the appropriate delegation to staff and when it's appropriate to delegate to staff. could i ask you just to say something briefly about that, about when it is appropriate to dell gate to staff -- delegate to staff and when you have to retain for the board itself? just very briefly, if you could, because i want to get on to one other question. >> so, yeah, i believe there are certain or matters that the
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board must vote on, supervisory findings, mergers and so forth. rule changes. typically, we delegate enforcement matters to the staff of in the area of supervision. >> and i'm glad to hear, though, that you want to continue to think about that, particularly when we're talking about something this important. i want to ask you one other fundamental question here, and that is do you think that the fed's lack of attention to regulatory and supervisory responsibilities helped lead to the crash of 2008? >> you know, i think in the aftermath of the crisis we've gone back and tried to look carefully at what we should have done differently. and there have been important lessons learned. we have massively revamped our
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supervision, particularly of the largest institutions which we now organize through a process called the list where we're simultaneously reviewing all of the large institutions simultaneously, and the federal reserve system works jointly on these reviews. we no longer delegate to individual reserve banks the supervision of, say, one or two of these large institutions. it's also become an interdisciplinary matter that economists and lawyers and others are involved in. so we've learned, we've learned a lot there about supervision. i would say one of our top priorities now is ramping up our monitoring of the financial system as a whole to detect
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financial stability risks. i think that's something that we weren't doing in an adequate basis before the crisis, and so we missed some of the important linkages whereby problems in mortgages would rebound through the financial system. >> thank you very much. thank you, mr. chairman. i just want to say, dr. yellen, when you're confirmed -- and i very much hope you are confirmed -- that i'm very glad to hear you will make it a top priority for the federal reserve to engage in the supervisory and regulatory responsibilities that help keep our financial system safe and that cannot be something that is merely an after thought, but it has to be a primary effort on your part. >> thank you, senator. i completely agree with that. >> good. thank you. >> senator green. >> well, thank you very much, mr. chairman. and, governor, you demonstrated your wisdom early by going to brown university in providence,
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rhode island -- [laughter] and everything else after that is, i know, anticlimactic. but when you're confirmed as the chairman of the federal reserve, it'll be be consistent with your record of wise selections and wise choices. chairman bernanke has indicated that many times our fiscal policy and our monetary policy have been working at cross-purposes. the federal reserve has been quantitative easing, they've been trying to get an expansive policy in place, and we have been contracting; shutting the government down. we anticipate, and i hope we can avoid this, but we're going to end unemployment insurance abruptly december 31st. how would your job and, obviously, the size and scope of your portfolio and everything else, the question's been asked today, be affected if our fiscal
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policy was complementary to your monetary policy? >> well, senator, i agree that fiscal policy has been working at cross-purposes to monetary policy. i certainly recognize the importance of the objective of putting the u.s. debt, deficit and debt on a sustainable path. congress has worried with about that, and i think it's important to do so. but, um, some of the near term reductions in spending that we have seen have certainly detracted from the momentum of the economy and from demand, making it harder for the fed to get the economy moving making our task more difficult. and it certainly would be helpful going forward if it were possible for deficit reduction efforts to focus on, um,
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achieving gains in the medium term horizon in the addressing those aspects of fiscal policy that, um, give rise to concerns about debt sustainability over the medium term while not subtracting from the impetus that we need to keep fragile recovery moving forward. >> and such a policy, a fiscal policy, would help you in terms of what we all anticipate is the point at which you have to begin your tapering, because basically this balance would allow you more flexibility and more confidence that when you start to taper, it wouldn't lead to a reverse, to a poor economy, is that fair? >> i think that's fair, senator, because we are worried about a fragile recovery and a more supportive fiscal policy or one
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that at least had less drag that did no harm would make life easier. >> let me switch gears slightly, and that is that we were a few weeks ago discussing the possibility of default on our debt. and the markets were beginning to react. and given the central role that treasury securities play not just in funding the government, but also the tri-party repurchase markets, the collateral markets across the globe, were you beginning to see at the fed sort of ominous signs of a potential catastrophic impact of the default? >> well, senator, i do believe that a default on the u.s. debt would be catastrophic, and we did see some signs in the runup to the debt ceiling that suggested that financial markets
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were taking notice and that there were preemptive protective actions that market participants were beginning to do to protect themselves from what could have been catastrophic consequences. more generally, i think we did see an impact on consumer and business confidence that isn't helpful to a general willingness to make investments in the economy. >> and just the final point, we have been talking a lot about the size of your portfolio, but essentially -- and i don't want to oversimplify it -- the benchmarks that typically you're looking at is inflation and denation and unemployment -- deflation and unemployment. >> correct. >> and i think for a while under chair bernanke there was a real fear, particularly in '09 and '10, of deflation which would have had adverse -- we've
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avoided that. >> we avoided that. >> what we have not yet done is get the employment numbers at a suitable level. so i think our appropriate focus is on those measures rath or than just on the absolute size of your portfolio. is that sensible? >> i think that is sensible, senator. we are very focused on achieving our dual mandate which is we absolutely want to avoid deflation. we have a 2% price stability objective. we're trying to get the economy back to full employment. i do think we've made progress, but we're not there yet. on the other hand, you know, if we recognize from the outset of the asset purchase program there are costs and risks associated with large balance sheet. >> thank you. thank you, mr. chairman. >> senator johanns. >> mr. chairman, thank you. and it's good to see you again
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and thanks so much for stopping by the office the other day. i -- >> my pleasure. >> i felt like we had a good conversation, and i'd like to continue, if i could, with a few questions along the lines of what we talked about in my office. i found your testimony about asset bubbles to be interesting. just before the chairman turned to me, i looked at where the dow was at, it's about 15,850. an economy that, quite honest hi, most everybody -- honestly, most everybody would recognize as too much unemployment, an economy where people comet to struggle -- continue to struggle, an economy where it's kind of hard to see where the growth is going to be. we're now starting to see real
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estate bidding wars just like the old days. now, that's confined to cities in certain areas of the country. we're now starting to see private equity firms who i think are very good at looking where the economy is headed, and lo and behold, they're buying single family houses. that was a shocker to me. having owned a few rentals in the past, i was kind of amazed that they would do that. but obviously, they see something there. and so, um, dr. yellen, i kind of look at these factors, and i think i could go on and on with some other items, and i must admit what am i missing here? i see asset bubbles. and i think if you were to announce today that over the next 24 months you're going to bring that balance sheet down from $4 trillion to 0 or 1
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trillion, i think if you even said over the next four years we're going to bring it down from four trillion to zero, i think we would see how big those asset bubbles are. wouldn't you agree with me on that? >> so i think with respect to real estate you mentioned real estate markets, and we certainly are seeing, as you mentioned, private investors come in to invest in off all cash in -- often all cash in certain markets in the country. is that an asset, is that evidence of an asset bubble? so if you look at the markets where that's occurring, it's some of the hardest-hit markets where prices went up the most like las vegas or phoenix. in my part of the country, that
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had the biggest crashes where you had the largest number of foreclosures with houses being put on the market and borrowers whose, many of them, many of these housing markets where these investments are taking place are ones where you have a substantial fraction of underwater borrowers and individuals who have lost houses, whose credit is impaired, who are not in a position to be buying houses. and these investors are purchasing these houses often at very low prices for cash. and appear to be in the business of representing them out over a reasonably long period of time. i'd say, you know, we have to watch this very carefully, but i don't see that as an asset bubble. i see that as a very logical
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response of the market to generate a recovery in very hard-hit areas. >> dr. yellen, i don't want to be rude and interrupt you, but i'm also running out of time. here's what i would offer. and i think you'd agree with me, although you probably won't want to agree with me in a public hearing setting. but i think if i were to say to you why don't you announce today that you're going to draw this down over the next 24 months from tour trillion to zero -- from four trillion to zero, and i think you would see the impact of your policies on the value of real estate all across the united states, not just in the hardest-hit areas. i think the realities that i own -- the real estate that i own and others own would go down in value. i also think that the stock market would have the same sort of reaction that it has had when chairman bernanke just suggested
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that there might be a phasedown here. here's what i'm saying, because now i am out of time. i think the economy has gotten used to the sugar you've put out there, and i just worry that we're on a sugar high. and that is a very dangerous thing for the little person out there who is just trying to pay the bills and maybe put a buck away for retirement. last thing i'll say, the flipside of your policies that you're advocating for are very, very hard. on certain segments of our society. you know, explain to the senior citizen who is just hoping that cd will earn some money so they don't have to dig into the principal what impact you're having on a policy that says we're going to for as far as the
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eye can see or foreseeable future keep interest rates low. they are hurt by that policy. >> senator, i agree, and i understand that savers are hurt by this policy. but, you know, if we want to get back to business as usual in a normal monetary policy and normal interest rates, i would say we need to do that by getting the economy back to normal. and that's what this policy, i hope, will succeed in doing. the other thing i think that's important is to recognize that savers wear a lot of different hat as. they play many different roles in the economy. they may be retirees who are hoping to get part-time work in order to supplement their income, they may be people who have children who were out of work and who were suffering because of that or grandchildren who were going to college and
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coming out of college and hope to be able to put their skills to work finding good jobs and entering the job market when it's strong. and i think when those people who worry about our policies thinking about themselves as savers take into account the broader array of interest they have in a strong economy, they would see these policies even though they may harm them in one respect, um, are broadly beneficial to them as i believe they are to all americans. >> my time has expired. thank you, mr. chairman. >> thank you. senator heitkamp. >> thank you, mr. chairman, and thank you, dr. yellen, for hanging in there with us. those of us at the end of the desk love an opportunity to ask you some questions as well. i want to get back to the fed goal of full unemployment, and i want to ask just some quick
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questions. give me a number on what you consider full unemployment. or employment. >> is don't have a precise estimate -- so don't have a precise estimate, but every three months all of the participants in the fomc fill out a survey and indicate what they think the normal, longer-run level of unemployment is. and in our most recent survey in september, the range of opinion was 5-6%. >> okay. and tell me what do you believe the real unemployment rate is today? >> well, the measured unemployment rate is 7-- >> i know the measured unemployment rate. that wasn't the question. >> be as we've discussed previously, we have very high incidents of involuntary part-time employment, we have all too many people who appear to have dropped out of the labor force because they're discouraged -- >> and i don't want to beret
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boar this committee hearing any longer than i have to, but would you agree it is at least close to or probably over 10%? >> well, certainly by broader measures, it is that high. >> okay. and would you also agree that right now in america we have the greatest income disparity that we have had since the great depression, right before the great depression? >> we've had widening wage inequality and income inequality in this country going back to the mid to late '80s, and that comets. >> so i -- continues. so i just want to take a moment to speak for maybe those folks who are on the lower end who look at the fed policy and look at the stock market, don't have a stake as they see it as you just explained to senator johanns. we all have a stake in this economy, but they're day-to-day. they don't see a stake. they don't see their economic condition getting any better. and certainly, they don't see their employment opportunities getting any better, especially for those with low job skills.
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i won't say low education, but low job skills. so what can you do or what have you done to address income disparity, unemployment disparity in this country, and wald you suggest that -- what would you suggest that the fed pursue to avoid the consequences long term of that income disparity? >> i think you're asking about something that is a very deep problem that's afflicted the u.s. economy and other advanced economies. economists have spent a lot of time trying to understand what's responsible for widening inequality, and many of the underlying factors are things outside of the federal reserve's ability to address. >> do you believe your policies have added to the problem? >> i believe that the oils we've -- the policies we've
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undertaken have been meant to generate a robust recovery. i would like to see the u.s. economy and the job market recovering more rapidly than they are, but i believe our oils have helped -- policies have helped. and i think as we saw during the 1990s when we still had trends toward widening inequality, we did have real wage gains, and we did have a reduction in inequality when we had an exceptionally strong and getting ever stronger job market. so faster growth in the united states is going to help, a stronger job market, and, you know, when the economy recovers, we're going to see firms be more willing to undertake training. when they can't find workers, they're going to be willing more to invest in people, to hire, to make capital investments that
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will make our workers more productive when they're on the job. >> all right. >> and we'll see greater wage gains. >> just a final comment. i would suggest that those at the bottom aren't feeling the effects of these policies. they, the trickle down hasn't happened for them. and so they struggle every day, and they may not see their wealth grow because they don't hold a lot of assets. and so anything that you can do taking a look at this broader issue, because this is an issue that will affect the american economy for years to come and affect our competitiveness in years to come. they're the consuming class. when you look at why consumers aren't consuming, because we aren't getting resources to those who do consume. and so i thank you for your willingness to serve and look forward to a long relationship with you. >> thank you, senator. >> senator manchin. >> thank you, mr. chairman, and thank you, ms. yellen. i enjoyed our visit, and you've done a great job today. let me just say this, that i
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look at you and think if there's a person who was involved the last time we had a balanced budget, the last time that we would have been on track to be debt-free. if you go back to those days, i'm sure there was naysayers then said we couldn't do it, it'll never happen. but y'all did it. and then we went off the tracks. what i'm asking is how we get back on the trackings. i know quantitative easing, you and i have a difference of opinion on this, or concern. i have a concern, but you have a concern. you have, i think, a broader view of what has worked and what has not worked around the world. i think we spoke about japan and why you believe what we're doing needs to be done. i would only say this, if $85 billion a month in quantitative easing has not really given us the results that we desire, why wouldn't you recommend doing 200 billion a month? you know, why just 85? we know that hasn't worked. and, of course, i have
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concerneds with doing it, continuing it. because i don't think, i think secretary -- senator johanns sad said we're on -- had said, we're on a sugar high. the bottom line is you all have done your job. you've done everything possible to prop up in this economy. we have failed miserably as congress to do our job. and to me, to get even a budget, we don't even have a budget. and then to say that we could have a balanced budget, you would think peoplety we're crazy, it can't happen. it'd be too harmful, a balanced budget. those of us who are governors and come from the executive branch, that's all we understand. we had to by law. and then to even think that we could be debt-free in the next generation or beyond, do you think those are impossible or unreachable goals? >> well, senator, i feel achieving debt sustainability over the medium term for this country is an exceptionally
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important goal. >> can we balance the budget again? >> it requires very tough decisions, as you know -- >> well, you all, you made decisions back in the '90s. i remember the dialogue then, couldn't be done. >> well, we did make tough decisions, congress and the administration made very tough decisions in the '90s. they did it in a way that i would think would set a model in a sense for this congress. when president clinton was elected, the economy was, had high unemployment, it was just beginning to recover. the administration this congress wanted to -- in congress wanted to achieve deficit reduction, but to do so in a way that wouldn't harm the economic recovery. and so they agreed on a set of tax increases and spending cuts not all of which came into effect immediately, but were phased in over time. >> where sure.
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>> there had been at that time a lot of uncertainty among businesses and among markets, among households about whether or not the government would ever balance its budget. and the response was very positive. long-term interest rates came down, now the fed had, um, scope to use monetary policy to offset any, anything, you know, adverse impact on the economy. but we really didn't see a lot of that imfact because the -- impact because the fiscal tightness was phased in over a period of years, and the economy enjoyed a long and robust boom. >> let me just say this, that you having that experience and lived through it, worked through it and was successful with it, and we have the utmost respect for the reserve, yourself and i'm sure that you see the committee has the utmost respect for you. we just need you to speak out and help us a little bit more
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and challenge us to do our job. if people like yourself who are in the know are unwilling to challenge us, i'll guarantee you, we don't have the political will, seems like, to do what needs to be done. we have got to get our financial house in order. every citizen in america has to face a budget. every one of them has to live within that budget. and we're unwilling to make that difficult decision. we're all not only on a sugar high, we're going to go into sugar shock rate soon. and that's what i've been talking. but unless we hear the unbridled truth from people in the know, people who have been there. they said you couldn't do it, and you did it. it's not like it's the impossible dream. we've had budgets. haven't had one for phi, going on six years. we've balanced budgets, and we've had surpluses. i'd like to get back to that again, and i think people like yourself can help us be steered in that direction. so be bold. >> thank you. >> be bold. >> thanks, i appreciate that. >> senator schumer.
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>> hi. thank you, madam chair, and thank everybody. i just p want to follow up first on a question that heidi heitkamp talked about, and i agree with senator manchin that the deficit is a serious problem. it's less of a problem than it was a year or two with ago, and i know you acknowledge that, but it's not our greatest problem. our greatest problem is that middle class incomes are declining in america for the first time in american history, in my judgment, in terms of our political economy. and the amazing thing is they decline not just because of the recession, but they actually declined between 2001 and 2007. and serendipitously, if that's a word, the person who alerted me to this was a professor at harvard law school named elizabeth warren who wrote articles about this long before being a senator was a gleam in her eye. but it's our most serious problem. and if middle class incomes continue to decline, they decline close to 10% between
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2001 and today, this is going to be a different america. i tell this particularly to business executives i meet. i get in new york, what's all this populism about? well, i say, you know, the american people are a generous people, and they don't mind if the people at the top's income goes up 20% if theirs goes up 3 or 4. but when theirs starts going down, it's a different story. we'd never have that in america. so my question to you is how concerned are you about this, what impact will it have on growth and our economic potential, and does the fed have tools to do in? and i understand this relates to some of my republican colleagues' skittishness about continuing some policies that maintain growth. but i do think given the seriousness at least which i regard this problem that, um, the fed has really a dual mandate, which i know you observe. which is not simply keeping innation down and not simply monitoring the budget deficit and its effects on our economy,
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but in trying to get jobs and middle class incomes back up again. it's so serious. and, frankly, no one gives it the attention that it needs. so it's your -- >> well, senator, i want to echo my agreement with you that this is, this is a very serious problem. it's not a new problem. it's a problem that really goes back to the 1980s in which we have seen, um, a huge rise in income inequality with, as you said, for many, many years the middle and those below the middle actually losing absolutely. and, frankly, a disproportionate share of the gains -- it's not that we haven't had pretty strong productivity growth for much of of this time in the country, but a disproportionate share of those gains have gone to the top 10% and even to the top 1%. so this is an extremely
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difficult and, to my mind, very worrisome problem. there is a lot of research, a lot of debate about exactly what the causes of this problem are. perhaps having to do in part with the nature of technological change, with globalization, with institutional changes in the united states including the decline of unions. but there are things that are involved in this problem. what can the fed do? we can't change all those, all of those trends, the solutions involve a multitude of things including education, maybe early childhood education, job training, other things. but what we can do is try to achieve, as we are, a robust recovery so that we create jobs, we have a stronger job market. and in a stronger job market,
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people will -- or who are having a lot of trouble getting jobs -- will be drawn into jobs. they'll get better jobs. there'll be more training. people will move up job ladders, and opportunities will increase. it's not going to put an end to the problems these long-term structural problems that are striving this, but it -- that are driving this. but it will be helpful, and it's a contribution the federal reserve can try to make. >> just related to that but in specific, some of my colleagues have criticized you for keeping rates, quote, art initially low. but isn't the zero lower bound on the short-term interest rates in some ways also artificial? let's say rates were 5% today but we had high unemployment, very low inflation, wouldn't you lower rates? and isn't qe2 just another way to influence interest rates when you get close to the zero mark? so if you didn't do qe, wouldn't real interest rates be artificially high, so to speak?
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>> i think that's fair if you judge what's high or low by the needs of the economy. people sometimes talk about a concept called the equilibrium rate. what's natural given the levels of saving and investment in the economy, when there's a lot of saving and not very much investment -- which is where we are now in a weak economy -- the natural forces of the economy are pushing interest rates down. and it is these forces that we're trying to go with to, if if we were to try to push rates up when the economy has that much saving and such weak investment, we would harm the, we would truly harm the recovery. and, of course, having pushed rates to zero according to many estimates, we would ideally have negative short-term interest rates. of course, we can't achieve
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that. and as you indicate, that's why we're trying to push down longer term interest rates. >> all right, thank you. i think you'll make a great chair, and your brooklyn wisdom shines through. [laughter] >> thank you very much. i never forget my roots. appreciate that. >> thank you. thank you, director yellen, for your excellent testimony. i ask the members of this committee submit any written questions for the record for dr. yellen by close of business tomorrow. dr. yellen b, please respond promptly so that the committee may proceed to markup as soon as possible. this hearing is adjourned. dr. yellen, please respond
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[inaudible conversations] [inaudible conversations] >> and we expect to hear more today about janet yellen on
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capitol hill. a vote on her nomination scheduled for 5:30. also today top appropriators in the house and senate will be meeting to work through the differences remaining in the budget proposal agreement that was reached last month by a group led by senator patty murray and congressman paul ryan. congress needs to take action by january 15th to avoid another goth shutdown. david rogers writes in pretty toe that negotiators from both chambers are slated to meet today to narrow their differences over the $1 trillion plus spending bill. now, last month's agreement laid out how much congress can spend this year. the appropriations measure will spell out where those dollars will go. the bill is hundreds of pages long, and according to politico, its scope invites conflict over everything from wall street banks to appalachia's coal industry. you can read more from david rogers' article at politico.com. now, the senate's about to return from winter recess in just a few moments, again, working on the nomination of janet yellen to be the new
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federal reserve chair, replacing ben bernanke who steps down at the end of the month, and a vote on her confirmation scheduled for 5:30 p.m. she only needs a simple majority. the president pro tempore: the senate will come to order. the chaplain, dr. barry black, will lead the senate in prayer. the chaplain: let us pray. eternal god, our fortress, stronghold, deliverer, shield and refuge, we have entered a new year that promises opportunities and

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