[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]




                   THE FEDERAL RESERVE'S SEMI-ANNUAL
                         MONETARY POLICY REPORT

=======================================================================

                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

                               __________


                             MARCH 8, 2023

                               __________

       Printed for the use of the Committee on Financial Services

                            Serial No. 118-5






                 [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]






                               ______
                                 

                 U.S. GOVERNMENT PUBLISHING OFFICE

52-361 PDF                WASHINGTON : 2023











                 HOUSE COMMITTEE ON FINANCIAL SERVICES

               PATRICK McHENRY, North Carolina, Chairman

FRANK D. LUCAS, Oklahoma             MAXINE WATERS, California, Ranking 
PETE SESSIONS, Texas                     Member
BILL POSEY, Florida                  NYDIA M. VELAZQUEZ, New York
BLAINE LUETKEMEYER, Missouri         BRAD SHERMAN, California
BILL HUIZENGA, Michigan              GREGORY W. MEEKS, New York
ANN WAGNER, Missouri                 DAVID SCOTT, Georgia
ANDY BARR, Kentucky                  STEPHEN F. LYNCH, Massachusetts
ROGER WILLIAMS, Texas                AL GREEN, Texas
FRENCH HILL, Arkansas                EMANUEL CLEAVER, Missouri
TOM EMMER, Minnesota                 JIM A. HIMES, Connecticut
BARRY LOUDERMILK, Georgia            BILL FOSTER, Illinois
ALEXANDER X. MOONEY, West Virginia   JOYCE BEATTY, Ohio
WARREN DAVIDSON, Ohio                JUAN VARGAS, California
JOHN ROSE, Tennessee                 JOSH GOTTHEIMER, New Jersey
BRYAN STEIL, Wisconsin               VICENTE GONZALEZ, Texas
WILLIAM TIMMONS, South Carolina      SEAN CASTEN, Illinois
RALPH NORMAN, South Carolina         AYANNA PRESSLEY, Massachusetts
DAN MEUSER, Pennsylvania             STEVEN HORSFORD, Nevada
SCOTT FITZGERALD, Wisconsin          RASHIDA TLAIB, Michigan
ANDREW GARBARINO, New York           RITCHIE TORRES, New York
YOUNG KIM, California                SYLVIA GARCIA, Texas
BYRON DONALDS, Florida               NIKEMA WILLIAMS, Georgia
MIKE FLOOD, Nebraska                 WILEY NICKEL, North Carolina
MIKE LAWLER, New York                BRITTANY PETTERSEN, Colorado
ZACH NUNN, Iowa
MONICA DE LA CRUZ, Texas
ERIN HOUCHIN, Indiana
ANDY OGLES, Tennessee

                     Matt Hoffmann, Staff Director











                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    March 8, 2023................................................     1
Appendix:
    March 8, 2023................................................    57

                               WITNESSES
                        Wednesday, March 8, 2023

Powell, Hon. Jerome H., Chair, Board of Governors of the Federal 
  Reserve System.................................................     4

                                APPENDIX

Prepared statements:
    Powell, Hon. Jerome H........................................    58

              Additional Material Submitted for the Record

McHenry, Hon. Patrick:
    Letter to Vice Chair Barr, Chairman Gruenberg, Chairman 
      Harper, and Mr. Hsu re: Prudential Impact of SEC Staff 
      Accounting Bulletin (SAB) 121, dated March 2, 2023.........    63
    Letter to Treasury Secretary Janet Yellen, dated February 28, 
      2023.......................................................    66
Huizenga, Hon. Bill:
    Federal Reserve legal opinion letter re: BlackRock, Inc., 
      dated December 3, 2020.....................................    68
    Federal Reserve legal opinion letter re: Vanguard Group, 
      Inc., dated November 26, 2019..............................    76
Pressley, Hon. Ayanna:
    Federal Reserve Bank of Cleveland Working Paper Series, 
      ``Post-COVID Inflation Dynamics: Higher for Longer,'' by 
      Randal J. Verbrugge and Saeed Zaman, dated January 2023....    85
Waters, Hon. Maxine:
    Written statement of Accountable.US..........................   122
Powell, Hon. Jerome H.:
    Monetary Policy Report of the Board of Governors of the 
      Federal Reserve System, dated March 3, 2023................   128
    Written responses to questions for the record from Chairman 
      McHenry....................................................   199
    Written responses to questions for the record from 
      Representative Barr........................................   201
    Written responses to questions for the record from 
      Representative Fitzgerald..................................   226
    Written responses to questions for the record from 
      Representative Flood.......................................   228
    Written responses to questions for the record from 
      Representative Loudermilk..................................   230
    Written responses to questions for the record from 
      Representative Lucas.......................................   234
    Written responses to questions for the record from 
      Representative Meeks.......................................   236
    Written responses to questions for the record from 
      Representative Nickel......................................   239
    Written responses to questions for the record from 
      Representative Nunn........................................   242
    Written responses to questions for the record from 
      Representative Sessions....................................   251
    Written responses to questions for the record from 
      Representative Timmons.....................................   254









 
                   THE FEDERAL RESERVE'S SEMI-ANNUAL
                         MONETARY POLICY REPORT

                              ----------                              


                        Wednesday, March 8, 2023

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:03 a.m., in 
room 2128, Rayburn House Office Building, Hon. Patrick McHenry 
[chairman of the committee] presiding.
    Members present: Representatives McHenry, Lucas, Sessions, 
Posey, Luetkemeyer, Huizenga, Wagner, Barr, Williams of Texas, 
Hill, Emmer, Loudermilk, Mooney, Davidson, Rose, Steil, 
Timmons, Norman, Meuser, Fitzgerald, Garbarino, Kim, Donalds, 
Flood, Lawler, Nunn, De La Cruz, Houchin, Ogles; Waters, 
Sherman, Scott, Lynch, Green, Himes, Foster, Beatty, Vargas, 
Gottheimer, Gonzalez, Casten, Pressley, Horsford, Tlaib, 
Garcia, Williams of Georgia, Nickel, and Pettersen.
    Chairman McHenry. The Financial Services Committee will 
come to order.
    Without objection, the Chair is authorized to declare a 
recess of the committee at any time.
    Today's hearing is entitled, ``The Federal Reserve's Semi-
Annual Monetary Policy Report.''
    And I will note at the outset that this hearing has a hard 
stop of 1 p.m., which is traditional for the Fed Chair, and we 
intend to strictly observe that.
    I now recognize myself for 4 minutes to give an opening 
statement.
    Thank you, Chairman Powell, for your testimony today. This 
week, you stated that the Fed will, ``stay the course until the 
job is done,'' and that job is to restore price stability. This 
is positive. But you know as well as I do that you are facing a 
very strong headwind from the political left. Democrats are 
pressuring the Fed to stray from its narrow mandate. It is a 
page out of their same old progressive playbook. When they 
don't have the votes to achieve something here in Congress, 
they turn to regulators, and now, Chair Powell, they are 
looking at you and the Federal Reserve. President Biden's 
kowtow into the far left is what got us into this inflationary 
mess. I urge you to reject the idealogues who put their social 
agenda ahead of economic prosperity.
    High prices continue to eat away at workers' wages and 
retirees' incomes. Since President Biden took office, we have 
experienced inflation rates not seen since the late 1970s and 
early 1980s. Inflation rapidly accelerated after Democrats 
passed their so-called American Rescue Plan, which poured 
nearly $2 trillion of inflationary fuel into the economy. By 
June of last year, the Consumer Price Index (CPI) showed that 
inflation skyrocketed from below 2 percent to nearly 9 percent, 
and personal consumption expenditures, the Fed's preferred 
measure of consumer prices, ballooned to 7 percent. Instead of 
being rescued by Democrats, Americans were punished with pain 
at the grocery store and sticker shock at the pump. While 
inflation is below its mid-2022 peak, it is persisting at rates 
well above the Fed's target. It remains broad-based and 
continues to hammer Americans' pocketbooks. In fact, a recent 
Gallup poll shows that half of the respondents say they are 
worse off financially than they were a year ago. It is clear 
that there is still a long way to go in an effort to bring down 
costs. I look forward to hearing you reaffirm your commitment 
to that work today.
    Republicans also want to hear from you regarding some 
concerning developments from the Federal Reserve on the 
regulatory front. Recently, the Federal Reserve's Vice Chair 
for Supervision announced a, ``holistic review of bank capital 
and the Fed's regulatory regime.'' However, it seems that only 
a small group within the Fed knows what this means, what it 
entails, how much review is being vetted by the full Board, and 
the type of quantitative analysis the Fed is performing. The 
Fed shouldn't operate in the shadows, especially when the 
regulation in question can have broad and significant economic 
effects.
    The motivation for the Fed's holistic review is also clear, 
particularly when so many Board members have stated that the 
banking system is very well-capitalized, and a review of the 
capital standard should be targeted--it appears that the 
Federal Reserve Board is laying the groundwork for climate 
policy to be implemented through the Fed regulation with an 
opening salvo to, ``scenario analysis.'' Addressing an issue 
like climate change is important, but that is a policy that 
should originate here in Congress by the elected 
representatives of the people, not the central bank. As you 
said, the Fed needs to stick to its knitting. I agree. There is 
concern by many that the Fed is picking up new needles and 
knitting partisan sweaters. At such a precarious time for our 
economy here at home and in the global economy, that would be a 
mistake.
    Thank you for being here today. I look forward to your 
testimony and the questions of our Members.
    The Chair now recognizes the ranking member of the 
committee, Ms. Waters, for 4 minutes for an opening statement.
    Ms. Waters. Thank you very much, Mr. Chairman. Good 
morning, Chair Powell. Since your last visit, our country, 
under the leadership of President Biden, has made major 
progress toward improving economic conditions, including adding 
a record 12 million jobs, and reducing unemployment to its 
lowest rate in 54 years, while also reducing the deficit by 
$1.7 trillion. Unfortunately, many families are still 
struggling to afford basic necessities because of inflation.
    What's more, interest rate hikes are making borrowing, 
especially for mortgages, outrageously expensive. Since I 
raised this concern for you in a November letter, the rate 
hikes continue to have an outsized impact on housing costs, 
which are, as you know, a primary driver of core inflation. 
But, Chair Powell, I think that you will agree that Congress 
also has a role. That is why I am somewhat disappointed that 
after 2 months, Republicans have taken no serious action to 
address inflation.
    By this time last Congress, House Democrats had passed the 
American Rescue Plan to provide relief from the ongoing 
pandemic, which included our committee's efforts to provide $70 
billion for homeowners, renters, businesses, and first 
responders. If Republicans are looking for ideas, Committee 
Democrats have put forth additional bills, like the Build Back 
Better Act, to bring down costs for Americans, especially 
housing costs.
    Even more concerning, we are just months away from an 
economic catastrophe beyond what we have ever seen, including 
spiking interest rates, massive job losses, and global 
instability. I am talking about the threats by the Republican 
leadership to force a default on our nation's debt if we don't 
agree to their demands to cut Social Security, Medicare, or 
other critical programs.
    You have urged Congress to take immediate action to raise 
the debt ceiling, but rather than focusing on this very real 
issue, the first bill that Committee Republicans brought to the 
House Floor instead suggested that Social Security and Medicare 
are socialist threats to America. Since then, we have 
considered legislation related to deregulating securities and 
banking laws, and countering threats from China, but 
Republicans have completely ignored the biggest economic threat 
to businesses, consumers, and our economy: defaulting on our 
debt. Last month, I wrote a letter to Chair McHenry urging him 
to take this matter seriously and hold the hearing, but I am 
still waiting for a response. I hope Republicans will listen 
today to the real consequences that even the mere threat of a 
default would have for everyone in this country.
    And finally, I am so pleased that we are finally making 
progress on diversity and inclusion for key positions at the 
Fed, including last year's historic confirmation of Dr. Lisa 
Cook to serve as the very first Black woman on the Federal 
Reserve Board, with the Board's Vice Chair and Kansas City Fed 
President positions vacant. I think President Biden and the 
Kansas City Fed Board should build on this progress by 
seriously considering diverse candidates for these positions. 
With that, I yield back the balance of my time.
    Chairman McHenry. The ranking member yields back.
    I ask unanimous consent to submit for the record my letter 
to Secretary of the Treasury Janet Yellen from February 28th, 
asking for an update on the X date for the debt ceiling. I also 
ask unanimous consent to submit for the record the latest CBO 
long-term budget outlook on the unsustainability of our debt, 
most recently released.
    Without objection, it is so ordered.
    The Chair now recognizes the gentleman from Kentucky, Mr. 
Barr, who is also the Chair of our Subcommittee on Financial 
Institutions and Monetary Policy, for 1 minute.
    Mr. Barr. Thank you, Mr. Chairman. And Chairman Powell, 
thank you for being here today to discuss the Federal Reserve's 
monetary policy actions in a time of economic uncertainty, 
mixed economic data, and historic inflation that continues to 
plague families and businesses around the country.
    It is paramount that the Federal Reserve remain vigilant on 
reducing inflation, anchoring inflation expectations, and 
restoring price stability at the Fed's 2-percent target. I also 
look forward to discussing the Fed's regulatory and supervisory 
activities. As the Fed reviews the bank capital framework, it 
needs to consider the impact to the real economy and our global 
competitiveness when raising capital requirements, and 
sidelining capital would work at cross purposes with monetary 
tightening, constraining the supply side when we need more, not 
less, investment to fix supply chains and reduce inflation. 
Tailored regulations are required of the Fed by law, and a one-
size-fits-all approach would be the wrong path to take. 
Finally, I urge the Fed to, in your words, ``stick to its 
knitting,'' and not attempt to be a climate regulator. I yield 
back.
    Chairman McHenry. The gentleman's time has expired. I will 
now recognize the ranking member of our Financial Institutions 
and Monetary Policy Subcommittee, the gentleman from Illinois, 
Mr. Foster, for 1 minute.
    Mr. Foster. Thank you, and thank you, Chair Powell, for 
being here today. Today is the 15th anniversary of when I was 
first elected to Congress and placed on the Financial Services 
Committee just as the economy was about to collapse. And that 
was my trial by fire, the emergency response to rescue the 
economy and the legislative response to the Dodd-Frank Act that 
successfully stabilized our financial system.
    So 15 years later, as I take my place as the ranking member 
on the subcommittee with oversight over U.S. banking and 
monetary policy, I recall the solemn oath that I swore to 
myself back then to make sure that this kind of calamity never 
happened again. The monetary policy report that we are 
receiving today is largely a narrative of a return to normal. 
Lead times to manufacturers are back to pre-COVID levels, the 
job market retains supernatural strength, and inflation is 
responding more or less as predicted to the usual measures. And 
by far the largest threat on the horizon is a repeat of the 
2011 default crisis. Congress has the power to avoid that, and 
we owe it to the American people to do so. I yield back.
    Chairman McHenry. Today, we welcome the testimony of Jerome 
Powell, Chair of the Board of Governors of the Federal Reserve 
System. Chair Powell was reappointed and sworn in for a second 
4-year term as the Chair on May 23, 2022. Chair Powell also 
serves as Chairman of the Federal Open Markets Committee 
(FOMC), which is the System's principal monetary policymaking 
body. Chair Powell, we thank you for taking the time to be 
here. We will recognize you for 5 minutes to give an oral 
presentation of your testimony. And without objection, your 
written statement will be made a part of the record
    Chairman Powell, you are now recognized.

   STATEMENT OF THE HONORABLE JEROME POWELL, CHAIR, BOARD OF 
            GOVERNORS OF THE FEDERAL RESERVE SYSTEM

    Mr. Powell. Chairman McHenry, Ranking Member Waters, and 
members of the committee, good morning, and I appreciate the 
opportunity to present the Federal Reserve's Semi-Annual 
Monetary Policy Report.
    My colleagues and I are acutely aware that high inflation 
is causing significant hardship, and we are strongly committed 
to returning inflation to our 2-percent goal. Over the past 
year, we have taken forceful actions to tighten the stance of 
monetary policy. We have covered a lot of ground and the full 
effects of our tightening so far are yet to be felt. Even so, 
we have more work to do. Our policy actions are guided by our 
dual mandate to promote maximum employment and stable prices. 
Without price stability, the economy does not work for anyone. 
In particular, without price stability, we will not achieve a 
sustained period of labor market conditions that benefit all.
    I will review the current economic situation before turning 
to monetary policy. The data from January on employment, 
consumer spending, manufacturing production, and inflation have 
partly reversed the softening trends that we had seen in the 
data just a month ago. Some of this reversal likely reflects 
the unseasonably-warm weather in January in much of the 
country. Still, the breadth of the reversal, along with the 
revisions to the previous quarter, suggests that inflationary 
pressures are running higher than expected at the time of our 
previous Federal Open Market Committee (FOMC) meeting.
    From a broader perspective, inflation has moderated 
somewhat since the middle of last year, but remains well above 
our longer-run objective of 2 percent. The 12 months' change in 
total Personal Consumption Expenditures (PCE) prices has slowed 
from its peak of 7 percent in June to 5.4 percent in January. 
As energy prices have declined and supply chain bottlenecks 
have eased over the past 12 months, core PCE inflation, which 
excludes the volatile food and energy prices, was 4.7 percent. 
As supply chain bottlenecks have eased, and tighter policy has 
restrained demand, inflation in the core goods sector has 
fallen. And while housing services inflation remains too high, 
the flattening out in rents evident in recently-signed leases 
points to a deceleration in this component of inflation over 
the year ahead.
    That said, there is little sign of disinflation thus far in 
the category of core services, excluding housing, which 
accounts for more than half of core consumer expenditures. To 
restore price stability, we will need to see lower inflation in 
this sector, and there will very likely be some softening in 
labor market conditions. Although nominal wage gains have 
slowed somewhat in recent months, they remain above what is 
consistent with 2-percent inflation and current trends in 
productivity. Strong wage growth is good for workers, but only 
if it is not eroded by inflation.
    Turning to growth, the U.S. economy slowed significantly 
last year, with real GDP rising at a below-trend pace of 0.9 
percent. Although consumer spending appears to be expanding at 
a solid pace this quarter, other recent indicators point to 
subdued growth of spending and production. Activity in the 
housing sector continues to weaken, largely reflecting higher 
mortgage rates. Higher interest rates and slower output growth 
also appear to be weighing on business fixed investment.
    Despite the slowdown in growth, the labor market remains 
extremely tight. The unemployment rate was 3.4 percent in 
January, its lowest level since 1969. Job gains remained very 
strong in January while the supply of labor continued to lag. 
As of the end of December, there were 1.9 job openings for each 
unemployed individual, close to the all-time peak recorded last 
March, while unemployment insurance claims have remained near 
historic lows.
    Turning to monetary policy, with inflation well above our 
longer-run goal of 2 percent, and with the labor market 
remaining extremely tight, the FOMC has continued to tighten 
the stance of monetary policy, raising interest rates by 4.5 
percentage points over the past year. We continue to anticipate 
that ongoing increases in the target range for the Federal 
funds rate will be appropriate in order to attain a stance of 
monetary policy that is sufficiently restrictive to bring 
inflation down to 2 percent over time. In addition, we are 
continuing the process of significantly reducing the size of 
our balance sheet.
    We are seeing the effects of our policy actions on demand 
in the most interest-sensitive sectors of the economy. It will 
take time, however, for the full effects of monetary restraint 
to be realized, especially on inflation. In light of the 
cumulative tightening of monetary policy and the lags with 
which monetary policy affects economic activity and inflation, 
the committee slowed the pace of interest rate increases over 
its past two meetings. We will continue to make our decisions 
meeting by meeting, taking into account the totality of the 
incoming data and their implications for the outlook for 
economic activity and inflation.
    Although inflation has been moderating in recent months, 
the process of getting inflation back down to 2 percent has a 
long way to go and is likely to be bumpy. As I mentioned, the 
latest economic data have come in stronger than expected, which 
suggests that the ultimate level of interest rates is likely to 
be higher than previously anticipated. And I stressed that no 
decision has been made on this, but if the totality of the data 
were to indicate that faster tightening is warranted, we would 
be prepared to increase the pace of rate hikes. Restoring price 
stability will likely require that we maintain a restrictive 
stance of monetary policy for some time.
    Our overarching focus is using our tools to bring inflation 
back down to our 2-percent goal and to keep longer-term 
inflation expectations well-anchored. Restoring price stability 
is essential to set the stage for achieving maximum employment 
and stable prices over the longer run. The historical record 
cautions strongly against prematurely loosening policy. We will 
stay the course until the job is done.
    To conclude, we understand that our actions affect 
communities, families, and businesses across the country. 
Everything we do is in service to our public mission. We at the 
Federal Reserve will do everything we can to achieve our 
maximum employment and price stability goals. Thank you. I look 
forward to your questions.
    [The prepared statement of Chairman Powell can be found on 
page 58 of the appendix.]
    Chairman McHenry. Thank you, Chairman Powell. I will now 
recognize myself for 5 minutes for questions.
    Chairman Powell, there has been a lot of discussion over 
the last 24 hours about the effect of rate increases on the 
economy, and a lot of debate about what you said yesterday in 
the Senate, but no one asked you this directly. We have a March 
Open Markets Committee meeting coming up in 2 weeks. What do 
you think about the March meeting? What is your approach to 
that? What are we likely to see?
    Mr. Powell. Thank you. I won't repeat what I just said in 
my testimony, but if I turn to the March meeting, I guess I 
would say that we have some potentially important data coming 
up, data to be analyzed. One of them came out at exactly 10:00. 
That would be the Job Openings and Labor Turnover Survey 
(JOLTS) report, which, of course, I haven't seen, having been 
sitting here at 10:00. But we are also getting a jobs report on 
Friday, and a Consumer Price Index (CPI) and Producer Price 
Index (PPI) inflation report next week, so those will be 
important and we will scrutinize them.
    When we say that we are going to be looking at the totality 
of the data, which is what I said, that does include these 
reports yet to come. They are going to be important in our 
assessment of the higher ratings that we have very recently 
received, and of the overall direction of the economy and of 
our progress in bringing inflation down, and we will be 
carefully analyzing them. Again, we have not made any decision 
about the March meeting. We are not going to do that until we 
see the additional data. The larger point, though, is that we 
are not on a preset path and that we will be guided by the 
incoming data and the evolving outlook.
    Chairman McHenry. But you have also said higher, longer. Is 
that still the case?
    Mr. Powell. Yes. As I said in my testimony, we looked at 
the data since January, and also the revisions to the November 
and December inflation data, and they suggest that the ultimate 
level of interest rates is likely to be higher than we had 
expected.
    Chairman McHenry. So to repeat, what are those economic 
factors?
    Mr. Powell. Going back to January, as I mentioned, the 
softer inflation readings of November and December were revised 
up. We got a very strong inflation report for January. We got 
an extraordinarily-strong employment report, very strong 
consumer spending, and strong manufacturing data right across-
the-board. And as I pointed out, some of that may have been 
affected by the very warm January weather, but nonetheless, all 
of it pointed in the same direction.
    Chairman McHenry. Okay. Let's move to regulation. Chair 
Powell, in January, the Federal Reserve put out a policy 
statement noting that digital asset custody is permissible 
activity if done in a safe and sound manner. However, if a bank 
can demonstrate to the Fed that it can conduct that activity in 
a safe and sound manner, the capital impact of the SEC's Staff 
Accounting Bulletin effectively precludes banks from offering 
digital asset custody service at any scale. Are you aware of 
this Staff Accounting Bulletin (SAB) by the Securities and 
Exchange Commission and its impact on custodial services?
    Mr. Powell. I am aware of it, of course. It is an SEC 
accounting bulletin, SAB 121, I believe, and--
    Chairman McHenry. That is right.
    Mr. Powell. --we are certainly aware of it. And we do 
follow generally accepted accounting principles (GAAP) in our 
preamble of regulation.
    Chairman McHenry. Okay. Without objection, I will submit 
for the record my letter to the bank regulators about this.
    So, while the Fed says it can be done in a safe and sound 
manner, the Securities and Exchange Commission is regulated so 
that it cannot be done.
    My next question is about bank capital standards. You 
received questions about this yesterday. Vice Chair for 
Supervision Barr has announced a holistic review of capital 
requirements. As I said in my opening statement, there are a 
lot of questions about this process and previous statements by 
members of the Fed Board of Governors about the adequacy of 
current capital standards. So, while the Vice Chair for 
Supervision has announced that the Fed will engage in a 
holistic review of capital regulation, is that done at the 
Governors, the Board level? What is the process? There are a 
lot of questions that people have about his statements, and we 
want to understand why it is necessary for the Fed to conduct a 
holistic review and what that process will entail.
    My general question is, do you still agree with your 
previous statements about the adequacy on a generalized basis 
of our financial system, or are we to read into this that we 
are not adequately-capitalized, and there is a high level of 
risk in the system that we are unaware of at this point?
    Mr. Powell. Thank you. As a new Vice Chair for Supervision, 
Vice Chair Barr is taking a fresh look at everything, including 
capital. That actually is typical of the last two people to 
have this job. And that makes a lot of sense. In terms of the 
process, it is certainly conducted under Vice Chair Barr's 
leadership with input from the staff and discussions with 
Governors on that committee, and I am kept broadly apprised 
about what is going on. But the bottom line is that nothing has 
been proposed to the Board. Nothing has been formalized at this 
point. There is a lot of work that is going on, discussions are 
going on, meetings with industry, and that kind of thing.
    When we get to the place where it is appropriate, the Board 
will be carefully briefed, and will ultimately vote on a 
proposal. And that proposal will go out for comment, and we 
will solicit comment from any and all commenters, and we will 
look very carefully at that. So, it will be a wide-open process 
in the sunshine.
    Chairman McHenry. Thank you. I yield back. And I now 
recognize the ranking member of the committee, the gentlewoman 
from California, Ms. Waters.
    Ms. Waters. Thank you very much. Chair Powell, I agree with 
what you said on February 1st, that Congress must raise the 
debt limit because of what you described as the highly-risky 
consequences of failing to do so. You are perhaps the most 
important expert on the debt limit, which is why I find it very 
concerning that your recommendation to raise the debt limit in 
a timely manner is being ignored by my colleagues on the other 
side of the aisle.
    I am also concerned that the consequences of this 
brinksmanship are imminent. Fitch Ratings said this week they 
may seriously look at downgrading the U.S. debt based on the 
escalating brinksmanship they are observing, even if Congress 
ultimately addresses the debt limit at the last minute. This is 
history repeating itself. Standard & Poor's downgraded our debt 
back in 2011 when Republicans last controlled the House and 
threatened default. The Bipartisan Policy Center later found 
that the 2011 debt limit debate cost us $18.9 billion in higher 
borrowing costs, even though we never defaulted. To put that 
into perspective, that could have been leveraged to provide up 
to $200 billion in loans to small businesses through the State 
Small Business Credit Initiative (SSBCI) or to provide hundreds 
of thousands of people downpayment assistance to buy their 
first home.
    I want to emphasize that House Republicans, including most 
of the Republicans on this committee, had no qualms about 
paying our debts when Trump was in office. Three times, they 
addressed the debt ceiling in a timely manner without holding 
our country hostage. But Republicans are now ready to tear down 
the hard work of Americans everywhere to weather the pandemic 
and build back a strong recovery.
    Chair Powell, can you describe for us the risk you see if 
Congress continues to delay action on the debt limit, both for 
our economy and for individuals and families?
    Mr. Powell. Let me start briefly by saying that we have no 
role and seek no role in what is really at the heart of fiscal 
policy, except I will limit myself to the two things that other 
Fed Chairs have said about this. One is just that Congress 
raising the debt ceiling is really the only alternative. There 
are no rabbits in hats to be pulled out on this.
    Two really is just that no one should assume that the Fed 
can protect the economy from the non-payment of the 
government's bills, let alone a debt default or something of 
that nature, which we don't think will happen here. But no one 
should be thinking that we have the tools to protect the 
economy from all of the potential effects of that.
    Ms. Waters. Thank you very much. I don't want to 
misrepresent what you said. I somewhat quoted you when you said 
that Congress must raise the debt limit because of what you 
described as, ``highly-risky consequences of failing to do 
so.'' Is that your language?
    Mr. Powell. ``Must'' in the sense that it really the only 
way for the debt limit to be raised is if Congress acts to do 
so. Again, these are fiscal discussions and we don't want to be 
a part of them, and really they are between elected officials.
    Ms. Waters. But you are an expert on the subject.
    Mr. Powell. I spent a lot of time on this, as you will 
recall, prior to this--
    Ms. Waters. As an expert on this subject, you are concerned 
about the highly-risky consequences of failing to do so, is 
that correct? Did I correctly quote you?
    Mr. Powell. That is correct.
    Ms. Waters. Thank you. And again, let me just go a little 
bit further. The Chair mentioned that he had either written a 
letter or maybe even had some conversation from Treasury 
Secretary Janet Yellen about the time limit that she had 
attempted to describe. Is it your understanding that she said 
she could maneuver and kind of manipulate things so that she 
paid the bills that were coming due, but this could only last 
until about June? Is that your understanding?
    Mr. Powell. Honestly, I would really have to not try to 
interpret the Secretary's words for you. That is really up to 
her to do.
    Ms. Waters. Can she keep us afloat until about June?
    Mr. Powell. Honestly, that is not for me to say. These are 
really questions for the Secretary. I'm sorry, Ms. Waters.
    Ms. Waters. Have you had any conversation with her about 
the statement that she made about being able to manipulate the 
debt and pay bills that are coming due out of another account, 
et cetera? Did you have that conversation with her?
    Mr. Powell. The conversations that you and I have privately 
don't go anywhere. I don't talk about them with anybody. And 
the conversations I have with Secretary Yellen, I don't--
    Ms. Waters. Okay. And I don't want to get--
    Chairman McHenry. The gentlelady's time has expired.
    Ms. Waters. I beg your pardon?
    Chairman McHenry. The gentlelady's time has expired.
    Ms. Waters. Did I have equal time with you?
    Chairman McHenry. You sure did. He went over time.
    Ms. Waters. If I did, thank you. I yield back.
    Chairman McHenry. I now recognize the Vice Chair of the 
committee, Mr. Hill of Arkansas.
    Mr. Hill. Thank you, Mr. Chairman, and thank you, Chair 
Powell, for being with us. You are welcome anytime. Don't wait 
until we ask, if you want to volunteer to come here. We love 
having your views on many topics.
    Thanks for talking about your commitment to price 
stability. We had this discussion last June of, I do think that 
is the primary mission of the Fed, and I think the only 
priority of the Fed should be price stability, because it is 
the Legislative Branch and the Executive Branch that really are 
responsible for, ``full employment, and having that policy 
environment, and making sure that that is right.'' So, your 
commitment to price stability is welcomed by this committee.
    Yesterday, in the Senate, you suggested that you supported 
a broad regulatory framework for digital assets, is that 
correct?
    Mr. Powell. Yes.
    Mr. Hill. And is it your view that if we had a regulatory 
framework here in the United States for digital assets, there 
would be more transparency and rules of the road for consumers, 
investors, and developers?
    Mr. Powell. Absolutely.
    Mr. Hill. And what if we had those rules of the road for 
business seeking to use and develop blockchain as a potential 
new technology in their business and tokenize payments that, 
again, it would be beneficial to business to know how to go 
about that?
    Mr. Powell. Yes, and to ensure that it is all done in a 
safe and sound manner when we are talking about banks.
    Mr. Hill. Right. And my next point would be exactly that. 
To help banks, investment brokers, and custodians understand 
how they could even participate in that market in a safe and 
sound manner, do you agree that a regulatory framework would 
help with that?
    Mr. Powell. Yes.
    Mr. Hill. And then finally, we have grown up in our 
country, and it is unique in the world that we have a dual 
banking system, and due to a quirk here in Congress over 100 
years ago, we have insurance regulated exclusively by the 
States. Would you believe that regulatory framework would also 
have to preserve some sort of role, subject to safety and 
soundness, for States to play some role in that regulatory 
framework for digital assets?
    Mr. Powell. Let me just say I think that the work certainly 
works in banking and insurance. I have no problem with those.
    Mr. Hill. Right, but you consider it possible that it could 
also work in digital assets?
    Mr. Powell. It is certainly possible.
    Mr. Hill. Yes. Thank you. Turning to a topic that has been 
a subject here for nearly 4 years, central bank digital 
currencies (CBDCs), Article I of the Constitution reserves 
coins, which is money issuance to the Congress, and we have, in 
turn, delegated that to the U.S. Treasury, which has, since 
1912, engaged the Federal Reserve as their fiscal agent. You 
have testified here many times before that to issue a CBDC, it 
would have to be authorized by statute, by Congress. Is that 
still your testimony?
    Mr. Powell. That is absolutely the case as it relates to a 
retail CBDC.
    Mr. Hill. Right.
    Mr. Powell. Potential little forms of a wholesale CBDC, 
that you would need to look at, it is less clear, but we have 
always been talking about a retail CBDC, and that is something 
for which we would certainly need congressional approval.
    Mr. Hill. And what would be a parameter on something that 
is not a retail CBDC, where you think that could be issued in 
some form or fashion without Congress' direct statutory 
authorization?
    Mr. Powell. For example, it would just be something between 
banks, so it would look an awful lot like a bank reserve. And 
you might ask, well, why would we need it, and that is a really 
good question, too. But it is just something that is literally 
within a wholesale market.
    Mr. Hill. But that speaks that you might have a blockchain 
between banks, and the Fed using a central bank digital 
currency token to settle transactions institutionally inside 
the--
    Mr. Powell. Yes.
    Mr. Hill. Yes. That leads me to FedNow, which is supposed 
to be up and running, I think this summer, somewhat behind the 
scenes there. I would like to ask you to formally have this 
committee briefed on that by the Federal Reserve. I know the 
Chair of the Kansas City Fed was involved. She has now left, 
and I think the committee has a lot of questions about FedNow, 
how its interoperability will work, how it is going to roll 
out, and also just a question that we have been asked about why 
the Fedwire system ended up 24-hours-a-day, 7-days-a-week now 
to benefit consumers who are using Venmo. Do you have any 
thoughts on that?
    Mr. Powell. I am not sure why we are not 24/7 on that, and, 
of course, we are delighted to come up and brief the committee 
on FedNow.
    Mr. Hill. That would be good. We will take you up on that, 
and the right person from the Fed. And Mr. Chairman, I yield 
back.
    Chairman McHenry. The gentleman yields back. I will now 
recognize the ranking member of our Capital Markets 
Subcommittee, Mr. Sherman of California, for 5 minutes.
    Mr. Sherman. Thank you. Mr. Chairman, I want to thank you 
for bringing to our committee's attention several years ago the 
importance of tough legacy London Interbank Offered Rate 
(LIBOR), some $16 trillion of instruments where the creditor 
would know how much the debtor was supposed to pay. This 
committee passed legislation over a year before the LIBOR hit 
the fan. You issued regulations 7 months before the absolute 
deadline. I hope we do this in other areas. And it is my 
understanding that with those final regulations, we are done 
and we have solved the LIBOR issue. Is that correct?
    Mr. Powell. That is my understanding as well.
    Mr. Sherman. Okay. People talk about inflation, and some 
say that it is a matter of the personalities and politics in 
the United States. Others argue that the entire world is hit by 
inflation because of Ukraine and COVID. I think we have the 
answer to this question in that inflation is considerably 
higher in the eurozone than it is in the United States today, 
and it is very hard to say that Joe Biden is responsible for 
inflation in Germany.
    I commend the ranking member for bringing up the debt limit 
and the harm that it has already done to our economy. If we 
solve the problem tomorrow, we will still have had less 
investment than we would have had yesterday, and I would say 
that I commend the President. He is going to issue a budget 
plan tomorrow, and perhaps in their time, one of our Republican 
colleagues can tell us when the Republican budget plan will be 
released. We are all eagerly awaiting it.
    Housing is a huge part of inflation, and we have left it to 
local government, but the permitting process there guarantees 
scarcity, which guarantees high housing costs. Mr. Chairman, we 
talked back in 2001, and several times even before that, about 
wire fraud. And having just bought a home, I saw the process 
upfront. Everybody is very nervous about one thing, and that 
is, will the buyer of the house be tricked into wiring their 
downpayment to the wrong account, or will the seller or the 
buyer be tricked or the escrow agent be tricked into sending 
the money to someone other than the seller of the property?
    We talked about this back in 2001, where I urged you with 
your FedNow system, which I am glad is on track to move 
forward, to have what the Brits have, that when you send the 
wire, you identify not only the number of the account you are 
sending it to, but also the name of the person or entity that 
is supposed to receive that. At that time, back in 2001, you 
said that payee matching was not the best way to do it, that 
there were are other ways to do it and that you would be happy 
to get back to me as to how you were going to make sure that an 
email from a Nigerian prince does not get the wired funds, 
particularly in a housing transaction wired to an account 
number that turns out to be in Lagos. What progress have you 
made? When can homebuyers have a system where they are sending 
it to a named payee as well as to a number?
    Mr. Powell. I hope we did come back in a timely way to you 
on that, but it is a problem you brought to our attention. You 
are right over many years, and we continue to focus on that.
    Mr. Sherman. The bureaucrats who are working on this don't 
want to do what the Brits did. They have proven it can be done. 
You said you were going to accomplish the same goal in some 
other way, and it has been a while and it is not solved, nor 
are you aware of any solution. I would hope that you would go 
back and say, we don't want to add this anxiety to every real 
estate transaction, so we will go back to the drawing board, 
follow what the Brits have done, and have pay matching.
    Finally, as to crypto, cryptocurrency says what it means: 
hidden money. That is what it means. And if we impose Know Your 
Customer (KYC) and Anti-Money Laundering (AML) statutes to it, 
it won't be crypto anymore. What crypto wants is to have part 
of its ecosystem above the waterline, visible and subject to 
Know Your Customer, and then have the rest of the iceberg below 
the waterline.
    Chairman McHenry. The gentleman's time has expired.
    Mr. Sherman. My time has expired.
    Chairman McHenry. I will now go to the gentleman from 
Texas, Mr. Sessions, for 5 minutes.
    Mr. Sessions. Chairman McHenry, thank you very much. 
Chairman Powell, thank you for joining us today. We appreciate 
not only your professionalism, but your direction.
    Chairman Powell, I know that the Fed considers divergences, 
and you talked about it in your opening statement, about the 
Consumer Price Index, personal consumer expenditures, 
inflation, GDP, and all of these things are also talked about 
in your monetary report of March 3, 2023. Thank you. A couple 
of days ago, I had an opportunity to see that an economist, 
Arthur Laffer, produced a report that spoke about literally 
this country doubling GDP. Now, I know we are putting CPI, PCE, 
inflation, all of these things into a mix, but he said that if 
we made changes in healthcare, to efficiencies, we can double 
the current GDP rate.
    My question to you, and I hope you can answer, is what do 
you think about that? Is it something that is in this document, 
that I have missed, and it is seemingly to a person who follows 
this, as Art Laffer does, for 50 years? What do you think is an 
important way to look at efficiencies in healthcare? Thank you.
    Mr. Powell. So, no, that is not in our monetary policy 
report. I will just say one thing, and that is we do spend 
something like 17 or 18, in that range, percent of GDP 
delivering healthcare. Other similarly-wealthy countries spend 
10 percent, so it is the delivery system. It is not that the 
benefits are incredibly rich or anything like that; it is just 
that the delivery system is very expensive. That is a trillion 
dollars a year that we spend and get nothing for it. This is 
fiscal policy, so I would think that he may have meant that if 
we had a delivery system that saved that trillion dollars that 
doesn't really get us anything, then that would be great for 
the economy, with which I agree.
    Mr. Sessions. You have spoken of supply chain disruptions 
because it, in fact, is an inhibitor or an accelerator as we 
gain that advantage. You just talked about some seemingly, 
which would offer some validation to Mr. Laffer as he spoke 
about the huge importance of this. Is that something you should 
start paying attention to, to where policy people not only at 
the Fed, but your Fed banks around the country would start 
looking at and start putting pressure on us to gain those 
efficiencies as a result of a global view?
    Mr. Powell. On supply chains generally, they have suddenly 
become tremendously important in inflation, as you know, for 
the last couple of years, and for the first time, really have 
been something that we have had to study carefully. In terms of 
healthcare delivery, that is strictly a question for you and 
for the parts of the government that are charged whether the 
Fed does not have a role to play and does not seek a role in 
that.
    Mr. Sessions. Does not see a role, and yet, as I look at 
this, you have a role in projecting confidence, you have a role 
in education, you have a role in who is in the workplace, you 
have a role--my talk--my interest rates. And yet my point is, 
it is such a staggering number that impacts us. I would just 
love to have you go back. Perhaps we on this committee need to 
give you some direction on that, but I think your testimony 
today recognizes the staggering impact on that. I don't think 
it is political. The answer may be political, but I think the 
actual numbers are not political. It is an inefficiency that is 
happening across the country, not a regional matter, and so I 
wanted to get your take on that, and I appreciate you being 
here as always. Thank you for your confidence and your hard 
work that you give this country. Mr. Chairman, I yield back my 
time.
    Chairman McHenry. The gentleman yields back. I will now 
recognize the gentleman from Georgia, Mr. Scott, who is also 
the ranking member of the House Agriculture Committee, for 5 
minutes.
    Mr. Scott. Thank you very much, Mr. Chairman, and welcome 
back, Chairman Powell.
    Chairman Powell, listen to me very carefully here, because 
I think we are on the verge of making a terrible mistake. Back 
in 2008, if you recall, Barney Frank and Ms. Waters asked me to 
take a look at and kind of work with you and the Fed. You were 
a Board member in 2008, and we came to the conclusion that we 
needed a more-equitable playing field between our large banks 
like Goldman Sachs and Citigroup, and our regional and smaller 
banks like Truist, and our community banks, and we changed 
that. But now, I hear that the Fed and the FDIC plan to drop a 
new rule which seeks to apply the long-term and higher capital 
requirements that were created. And you and I did this back in 
2008, and you will remember, that were created for the Goldman 
Sachs and for them, and now we want to apply these rules to the 
regional banks. There is a big difference.
    And we have omitted this difference if you proceed in this 
manner. I think it is very misguided. It works. And you and I 
worked on this. You recall this. You were a Board member, and 
we saw that we needed to have a better playing field to 
protect. And if you all go along with this, it could put many 
of our regional banks and small community banks out of 
business. So, I want you to reverse this.
    First of all, tell me, am I speaking the truth? Are you all 
planning to, all of a sudden, put the smaller and regional 
banks under the same heavy or financial load as your large 
worldwide banks? Tell me.
    Mr. Powell. No, we are not planning that. We believe 
strongly, and always have, in tailoring to address the 
different size and risk characteristics of financial 
institutions and certainly nothing like that for the regionals. 
They won't have anything like what the very large, most 
systemically important banks have in terms of overall 
regulation.
    Mr. Scott. Yes, because I remember clearly, I think we were 
on this side then, talking about this in the same committee 
room, and you worked with us on that. I am glad to hear that. 
Where is that coming from? Is it a concern? Is it just a rumor? 
Have there been any discussions about removing the playing 
field and the guard rails we have here, the differentiations 
and the requirements between the regional banks, community 
banks, and your larger global banks? There is nothing to that?
    Mr. Powell. I would say this. We are required by the law 
now and we are doing this. Dodd-Frank actually required us.
    Mr. Scott. Yes.
    Mr. Scott. It suggested that we should tailor, and then, S. 
2155 then required it, and anything that we do will reflect 
appropriate tailoring.
    Mr. Scott. Okay. So, that is off the board. We are not 
going to change and put the smaller and regional banks under 
the same financial obligation role as large banks. We got that 
right from you, correct?
    Mr. Powell. Yes, that is right.
    Mr. Scott. Okay. Good. Now, let me turn to China. I am 
really worried about China, and right now, people may not know 
it, but China is the world's largest economy in terms of 
purchasing power. At our last meeting, I talked about this move 
where we didn't blow the balloon up, and this is an example of 
what I was pointing out.
    Chairman McHenry. The gentleman's time has expired. I will 
now recognize the gentleman from Oklahoma, Mr. Lucas, who is 
also the Chair of the House Science Committee, for 5 minutes.
    Mr. Lucas. Thank you, Mr. Chairman. Chairman Powell, I 
would like to follow up on the topic of capital standards, one 
of those things we have discussed many times together. As you 
know, commodity markets have seen significant volatility in the 
last few years. And during times of tremendous economic 
uncertainty, like we have seen, end users turn to the markets 
to hedge risk, particularly those in the agriculture and energy 
sectors. And I know that the Fed is early in the review process 
of potential changes in capital requirements, but I will ask 
this anyway. Can you commit to ensuring that these changes will 
not increase the cost for banks providing those commodity 
derivatives to end users?
    Mr. Powell. That is really specific. Can I go look at that? 
I am not actually sure that the work even addresses that, so 
let me get back to you on that.
    Mr. Lucas. Fair point, and that particular response makes 
me feel better because, after all, those products are very 
important to my folks and make a great deal of difference in 
how they are able to address their issues.
    As you discussed earlier, and as you have consistently 
assured us, the Fed is not a climate-making policymaker. You 
and I have talked about this issue, again, many times in the 
past. However, I am concerned that the Fed could be heading in 
that direction and could be laying the groundwork for climate-
related stress tests that would reduce access to capital for 
entire sectors of the economy. This would also potentially open 
up the Federal Reserve to political pressure and force the Fed, 
in fact, to make policy decisions related to climate change. We 
have seen, for example, this Administration turn to regulators 
to impose climate policy as an alternative to the legislative 
process.
    Chairman Powell, how careful are you in ensuring that the 
Fed does not place itself into the climate debate, and how can 
Congress ensure that the Fed's regulatory toolkit is not, shall 
we say, warped into creating climate policy outcomes?
    Mr. Powell. I think we do have a narrow, but real, role 
there, which is around bank supervision, making sure the banks 
understand and can manage their risks over time from climate. I 
think my colleagues and I all understand that it is a tightly-
circumscribed role that we are playing, and that we are not 
looking to move into an area where we are actually becoming a 
climate policymaker. I would completely agree with you, though, 
that over time, that border needs to be very carefully guarded, 
and I will tell you that I will do that as long as I am at the 
Board of Governors.
    Mr. Lucas. I very much appreciate that because, again, it 
is a very important issue in my district in Oklahoma. 
Traditional production, agriculture, oil and gas, and the 
actions that the Fed takes have a significant impact back home, 
so it is vital that we resist the demands to do that sort of 
thing now or in the future, and I very much appreciate that 
response. And with that, I will yield back the balance of my 
time, Mr. Chairman.
    Chairman McHenry. The gentleman yields back. The gentleman 
from Massachusetts, Mr. Lynch, who is also the ranking member 
of our Subcommittee on Digital Assets, Financial Technology and 
Inclusion, is recognized for 5 minutes.
    Mr. Lynch. Thank you, Mr. Chairman, and thank you, Chairman 
Powell, for your willingness to come here and update us.
    Last week, the Treasury Department announced that leaders 
from Treasury would begin to meet regularly with leaders from 
the Fed and from the White House to discuss a possible central 
bank digital currency (CBDC) and other payment innovations. In 
the statement, it was mentioned that, ``The Fed is encouraged 
to provide periodic public updates as it continues its research 
and its technical experimentation on central bank digital 
currencies.'' I was wondering, first of all, when you might be 
expecting to share some of these public updates. What is the 
timing on that?
    Mr. Powell. We did go out for comment, in general, on a 
CBDC a year or so ago, and I do expect we will go out, I can't 
give you a date, but we will certainly go out and engage. We 
engage with the public on an ongoing basis. We are also doing 
research on policy and also on technology. That is where we are 
up to.
    Mr. Lynch. I am aware that the Boston Fed has a 
partnership, the Hamilton Project, with the folks from MIT 
Media Lab where they want to create jobs, but it says here that 
the discussions would include technical experimentation. I was 
just wondering, at what level are you talking about making 
decisions on architecture for a retail CBDC?
    Mr. Powell. We are not at the stage of making any real 
decisions. What we are doing is experimenting in kind of early-
stage experimentation. How would this work? Does it work? What 
is the best technology? What is the most efficient? We are 
really at an early stage, but we are making progress on sort of 
technological issues. The policy issues were equally important, 
though. We haven't decided that this is something that the 
financial system in this country wants or needs, so that is 
going to be very important.
    Mr. Lynch. Okay. I think I speak for the chairman as well, 
that we would love to have more dialogue with the Fed on that, 
and maybe bring in the folks from MIT as well, and just make 
sure that Congress and this committee is as up-to-date as 
others.
    Let me switch over to FedNow. There are some champions of 
digital currency and stablecoins, in particular, that continue 
to cite the need for faster payment systems. However, as was 
mentioned earlier, FedNow is a service that the Fed is working 
to finalize that will allow for instant payments between bank 
accounts, and the Fed has a target release date of between May 
and July, which is right around the corner. Do you see any 
reason why cryptocurrencies would provide faster payments than 
the FedNow system? And with this offer, with the transparency 
of FedNow, would it offer distinct advantages over some of 
these stablecoins that are touting faster payments?
    Mr. Powell. What FedNow will do is it will enable all of 
the banks, any bank in the United States, not just the big 
ones, to offer instantly-available funds and real-time payments 
to their customers. That is what it will do. That is a great 
thing. I think you are asking whether a CBDC would serve some 
of that, but a CBDC is going to be years in the evaluation, and 
I think we can get this into the hands of the public very 
quickly. And I think we will have real-time payments in this 
country very, very soon, and that is a good thing.
    Mr. Lynch. It is. I do have an overriding question, and 
that is, before the greenback, everybody had their own 
currency. You had rail companies. You had coal companies. You 
had State banks that were authorized to issue their own 
currency. But when the greenback came out, all of those various 
currencies went to zero because the greenback had the full 
faith and credit of the United States behind it.
    I am worried about a lot of these stablecoins and other 
cryptocurrencies. Do they go to zero when we come up with a 
CBDC that has the full faith and credit of the United States 
behind it? We have thousands of these out there, and you have 
people investing millions and millions of dollars, well, 
trillions right now. And I am just thinking, if we had those 
advantages built into a CBDC, wouldn't those alternatives go to 
zero if they did not have the transparency and the full faith 
and credit that we enjoy?
    Mr. Powell. Certainly, unbacked cryptocurrencies that don't 
have any intrinsic value, but nonetheless trade for a positive 
number--I have never understood the valuation of those. 
Stablecoins, many of them are really drawing on the credibility 
of the dollar. They are dollar-based. They are dollar-
denominated, mainly dollar-based reserves, although we don't 
know what is in the reserves because there is no regulation.
    Chairman McHenry. The gentleman's time has expired. The 
gentleman from Missouri, Mr. Luetkemeyer, who is also the Chair 
of our Subcommittee on National Security, Illicit Finance, and 
International Financial Institutions, is recognized for 5 
minutes,
    Mr. Luetkemeyer. Thank you, Mr. Chairman, and thank you, 
Chairman Powell, for being here this morning. The reserve 
currency status of the dollar to the U.S. has enormous 
financial and national security benefits. In the wake of 
Russia's unprovoked invasion of Ukraine, the Fed took action to 
prevent the Kremlin from accessing more than $300 billion in 
reserves, roughly half of Russia's reserves. However, this led 
to an accelerated effort by countries like China to de-
dollarize their official foreign exchange reserves. Just last 
week, there was an article in the Wall Street Journal entitled, 
``Russia Turns to the Yuan in an Effort to Ditch the Dollar.'' 
Not only that, but China's President Xi Jinping pushed for the 
settlement of energy trades in the Chinese yuan at a summit 
with Arab leaders in December.
    My question is, are you concerned about these actions by 
Russia and China to establish different reserves and conduct 
transactions in non-U.S. dollars?
    Mr. Powell. The U.S. dollar is the widely-accepted and 
really the only serious candidate for the world's principal 
reserve currency, and that is because of our democratic 
institutions, our liquid markets, the rule of law, and all 
those kinds of things, and also the fact that the dollar has 
held its value over time. Other countries who are competing on 
other playing fields want to establish different currencies, 
but, really, the dollar is the one that is going to be used 
more broadly in international commerce because we have those 
aspects and other countries don't.
    Mr. Luetkemeyer. That is true until now, but my question 
is, are you concerned about the actions of these countries, 
because if they see themselves being challenged or concerned, 
for instance, if China were to invade Taiwan? As Russia invaded 
Ukraine, there were some sanctions put on. I don't disagree 
with the sanctions. The last time you were here, though, Mr. 
Chairman, I asked the question, because it is an instructive 
moment for us from the standpoint that knowing that we put 
sanctions on Russia, all of their different accounts, as well 
as the oligarchs from that country, are we thinking about doing 
the same thing to China when they invade Taiwan? And your 
answer at that point was, no.
    We passed a bill out of this committee last week to ask the 
Administration basically to start thinking about that in those 
terms. What kind of situations can you come up with? Are you 
talking to allies, begin to talk to them to start putting 
together a list of how you would go about sanctioning the 
different individuals, the different accounts, things like 
that? Have you started thinking about that at all yet?
    Mr. Powell. Let me say that the business of sanctions is 
entirely in the hands of the elected government and the 
Treasury Department. We are an implementer as it relates to 
banks. That is it. We don't make those decisions.
    Mr. Luetkemeyer. Yes, but we are going to take your advice 
on the different aspects of this.
    Mr. Powell. Honestly, when the sanctions were being put in 
place, Treasury was doing it. We were not doing it.
    Mr. Luetkemeyer. Okay.
    Mr. Powell. Yes, and that is the way it works.
    Mr. Luetkemeyer. Next question. There was an article in one 
of the political newspapers, yesterday I guess it was, and it 
talked about the problem that we have here with the Fed's 
balance sheet. It says it now appears similar to a hedge fund 
whose long-term assets are financed by short-term borrowing, 
and the bottom line is that it is going to cost money. The Fed 
now has a negative income as a result of having to do this, and 
it says here that the Fed will simply borrow the money to pay 
the bills. Is this true, that we are having the Fed losing 
money right now as a result of the way you have these debts, 
the borrowings that you have purchased, structured?
    Mr. Powell. The place I would start is, we always turn over 
all of our earnings in every year. We turn them over on an 
ongoing basis, and we have turned over something like $1.2 
trillion in earnings just in the last decade or so. We always 
know that when we raise interest rates, you are going to lose 
money, and--
    Mr. Luetkemeyer. Okay. But do you agree with the point that 
we have a negative income right now?
    Mr. Powell. That is right.
    Mr. Luetkemeyer. And this goes to my concern that the 
Consumer Financial Protection Bureau (CFPB) gets their money to 
run their agency from the Fed.
    Mr. Powell. That is right.
    Mr. Luetkemeyer. Basically, there is no money for the Fed 
to pay the CFPB's bills, if this is the case, unless you 
continue to borrow, which is basically what is going to happen 
now is you are going to have to borrow money to be able to pay 
the CFPB's bills. Is that not correct?
    Mr. Powell. No, we don't borrow money. We don't shut down 
the Fed when we have negative income.
    Mr. Luetkemeyer. Okay.
    Mr. Powell. We can pay our bills, and we can--
    Mr. Luetkemeyer. My follow-up question then is, do you do 
any accountability or assessing of the CFPB's spending of these 
dollars at all?
    Mr. Powell. No, we don't. The Inspector General does.
    Mr. Luetkemeyer. So, they just get a blank check? You just 
told me they get a blank check. They send you a bill. You send 
them a check. There is no accountability for them--
    Mr. Powell. No, I think there are limits built into the 
law, which I don't have in front of me right now.
    Mr. Luetkemeyer. I have yet to see a limit, Mr. Chairman. I 
would love to see what the limits are, because I don't think 
that they have ever agreed they have limits, but I see that my 
time is up, Mr. Chairman, so I yield back.
    Chairman McHenry. The gentleman's time has expired. We will 
now go to the gentleman from Illinois, Mr. Foster, who is also 
the ranking member of our Financial Institutions and Monetary 
Policy Subcommittee.
    Mr. Foster. Thank you, and just a quick comment, I think it 
is a mistake to imagine that you can completely hide from the 
macroeconomic effects of technology in your scenario planning. 
We just talked briefly about healthcare costs. Obesity is half 
of our healthcare costs, and there are treatments in these GLP-
1 agonists that look like they are just a home run against 
obesity. So, these will be near-term impacts, which will have 
major macroeconomic effects. I hope you have a certain fraction 
of futurists in the room when you are talking about your 
scenario planning, because a lot of that future is now.
    Okay. Back to economics. We have this historically-low 
unemployment rate of 3.4 percent, and historically, this would 
be considered to drive runaway inflation. Your predecessor, 
Alan Greenspan, repeatedly referred to dangerously low levels 
of unemployment, and yet we see inflation is coming down now. 
What is going on here? How can we have these historically-low 
levels of unemployment without having inflation take off? Is it 
possible that we simply have less frictional unemployment in 
our system due perhaps to the fact that people get their new 
jobs online and have a job lined up before they quit?
    Mr. Powell. Inflation is coming down, but it is very high, 
is the thing. I have never said all of it or most of it, but 
some part of the high inflation that we are experiencing is 
very likely related to an extremely-tight labor market. Wages 
affect prices, and prices affect wages, so I do think that is 
part of it.
    More to your point, though, there was a time when there was 
a tight relationship between inflation and unemployment. In 
other words, the Phillips curve was steep, and that went away 
over the period of the Great Moderation. And really, in our 
thinking, that is because people came to expect 2-percent 
inflation and we had 2-percent inflation, and then people just 
stopped focusing on inflation, and it stayed very low. So, 
there was really no relationship or a very, very tiny 
relationship. We could have very weak economic growth or very 
strong economic growth, and we wouldn't have inflation respond 
very much. That was before the pandemic, though.
    Mr. Foster. Okay. I hope you don't overlearn some of the 
lessons there. It is one of my worries. There have been a 
number of exogenous shocks to the system here, and it will take 
a while to go through them. You want to be careful there.
    And a related issue, when you say refer to the totality of 
factors, you are looking at a mixture of leading and lagging 
indicators when you look at this totality of factors. And 
perhaps you might be paying too much attention to the lagging 
indicators and not enough to the leading indicators, the 
example that you reference in your remarks, and there is more 
detail in the report about the difference between using current 
rental payments versus the amount that you pay for a new rental 
contract, and the difference in how much they lag. Had you paid 
more attention, for example, to the leading indicators like 
current rental contracts, then you probably would have picked 
up inflation earlier. You would have not gotten so far behind 
the curve on that.
    And secondly, there are policy implications going forward. 
If you look at current rental prices for new contracts, you are 
much further along in fixing inflation, and you can take your 
foot off the brake. So, what is your thinking on that and 
whether you may perhaps be systematically not paying enough 
attention to leading indicators versus lagging ones?
    Mr. Powell. We have had our eyes on the whole housing 
inflation thing from the very beginning, and right now, what I 
would say is that every forecaster is baking in lower rent 
increases. That is a big part of why people think inflation is 
going to come down in 2023. I think the thing with transitory 
is it more had to do with goods, and it had to do with the 
thought that the supply side disruptions would go away much 
quicker than they would, that the labor market disruptions 
would go away much quicker than they did. And in hindsight, it 
just took much longer for those disturbances to go away.
    Mr. Foster. Yes, and if you allow yourself to Monday-
morning-quarterback yourself, you probably would have gone up 
to 4 percent earlier and not had such a big problem with 
inflation. Are there structural things you can contemplate or 
even after-action reviews to say what would have happened if we 
would have paid more attention to the leading indicators or, an 
engineering term, improved the bandwidth of your feedback 
regulator? If you want to get the best result, you need a high 
bandwidth feedback in the system even when there is averaging 
on the back end.
    Mr. Powell. This is something we only think about during 
waking and sleeping hours, as you can imagine. It is really 
hard to know what the lessons are. Again, nobody had seen the 
supply chains collapse. No one had seen labor force 
participation plummet or unemployment go to 14 percent and 
higher than that really--
    Chairman McHenry. The gentleman's time has expired.
    Mr. Powell. --it would take to go away. And if we ever see 
this pitch again, we will know how to swing at it, but it has 
been--
    Chairman McHenry. We will now recognize the--
    Mr. Powell. --a bunch of firsts. Sorry.
    Chairman McHenry. The gentleman's time has expired. We will 
now go to the gentlewoman from Missouri, Mrs. Wagner, who is 
also the Chair of our Capital Markets Subcommittee, for 5 
minutes.
    Mrs. Wagner. I thank you, Chairman McHenry, and, Chair 
Powell, welcome. Thank you for your service and for being here 
today. Yesterday, I was pleased to hear you discuss how 
inflation is severely hurting the working people in America. In 
your testimony, you also state that strong wage growth is good 
for workers but only if it is not eroded by inflation, and that 
is key. Inflation is a tax, a hidden tax on every American. If 
the Federal Reserve were to shirk its mandate to stabilize 
prices, leaving inflation alarmingly high, what would it cost 
America's hardworking families in Missouri's 2nd Congressional 
District and beyond?
    Mr. Powell. I think the costs of failure to restore price 
stability would be extremely high, and while there will be a 
cost to success, the cost of failure will be much higher. You 
would be looking at an extended period where people learn to 
expect and live with high and volatile inflation, and it is 
very, very hard to have rising real incomes during such a 
period. So, it would be a bad thing for the country.
    Mrs. Wagner. Can you reassure the committee that the Fed 
remains committed to bringing prices down for our constituents?
    Mr. Powell. Yes, I do.
    Mrs. Wagner. Thank you.
    Mr. Powell. I hereby assure you.
    Mrs. Wagner. And changing topics here a bit, as China's 
economy reopens, and about 18 percent of the world's population 
resumes its consumption of oil and other key goods, what sort 
of inflationary impact will we see here in the United States, 
sir?
    Mr. Powell. A faster reopening of China, which it looks 
like we may be seeing, does have the potential to put upward 
pressure on commodity prices, but it also would mean a faster 
sort of unraveling of the problems in supply chains, so those 
would be offsetting effects. I think sitting here today, we 
don't expect the net effect to be big for the United States. It 
might be bigger for other parts of the world, but we think it 
ought to be moderate overall.
    Mrs. Wagner. China is one of the world's top oil importers. 
Do you expect any inflationary effects on global energy markets 
as China's oil consumption returns to previous levels?
    Mr. Powell. I think oil prices could be affected. I think 
that is a big concern in Europe, for example. We have our own 
domestic oil and we have a lot of natural gas as well.
    Mrs. Wagner. We sure do. I wish we were actually harvesting 
more of that liquid natural gas. Chair Powell, you, Vice Chair 
Barr, and many others have recently identified that the banking 
system is well-capitalized and strong. Bank capitalization 
remained robust during the shock of the pandemic and related 
shutdowns of economic activity. Capitalization of large 
financial institutions weathered severe stress testing mandated 
by the Fed. And despite all of that, as also previously 
mentioned by Chairman McHenry, Vice Chair Barr insists on 
conducting a review of capital rules.
    I am concerned that this review is being conducted in a 
silo, and that the findings will not be made fully available to 
the public. Taking such an approach in the context of this 
holistic capital requirement review would make it impossible to 
conduct a transparent rulemaking process, denying the public 
information necessary to consider and to comment. I think this 
is just simply not appropriate in this situation, and I am 
concerned by the lack of clarity, I think is the best word, 
perhaps at this point by the Vice Chair.
    I have a couple of questions. You have served on the Fed 
Board for over 10 years since the financial crisis regulatory 
framework has been put in place. And over that period, have you 
seen any real-world evidence that America's banks are 
undercapitalized?
    Mr. Powell. American banks are strongly-capitalized, and I 
believe Vice Chair Barr has said that as well.
    Mrs. Wagner. Yes.
    Mr. Powell. But the point is there have not been any real 
proposals to evaluate yet, and when there are, that will be 
done in a highly-transparent manner.
    Mrs. Wagner. I hope so. I am glad to hear you say, ``in a 
highly-transparent manner.'' Do you agree that excessively-high 
capital levels constrain banks' lending capacity, with 
spillover effects on jobs and living standards for Americans?
    Mr. Powell. I think it is always a balance, right? More 
capital means more safety and soundness and more ability to 
withstand terribly-stressful periods, but it is more expensive. 
Equity capital is more expensive. U.S. banks have competed 
incredibly well around the world with the high levels of 
capital.
    Mrs. Wagner. Yes, they have internationally.
    Mr. Powell. That is a tradeoff that you are always going to 
be making when you think about capital.
    Chairman McHenry. The gentlewoman's time has expired.
    Mrs. Wagner. My time has expired, yes. Thank you.
    Chairman McHenry. We will now recognize the gentlewoman 
from Ohio, Mrs. Beatty, who is also the ranking member of our 
Subcommittee on National Security, Illicit Finance, and 
International Financial Institutions, for 5 minutes.
    Mrs. Beatty. Thank you, Mr. Chairman, and I like that 
title. Chairman Powell, thank you for coming and being such a 
good colleague and friend. I have a couple of questions I am 
going to try to get through quickly.
    Chair Powell, in a press conference last month, you stated, 
``There is a lot of spending coming into the construction 
pipeline, both private and public, and that is going to support 
economic activity.'' How do you think the strong pipeline of 
funding from what the Democrats put together in passing the 
Inflation Reduction Act, the Infrastructure Investment and Jobs 
Act, and the CHIPS and Science Act will do to have economic 
activity this year and moving forward?
    Mr. Powell. I guess I was making the point that there are a 
lot of sources of demand that we can rely on, even though 
demand has been relatively increasing at a relatively modest 
rate. Part of it is--
    Mrs. Beatty. Will this help in that demand?
    Mr. Powell. Yes. State and local governments, I mentioned, 
are about to--
    Mrs. Beatty. Would you say this is a great thing that we 
have done, coming from the left of--
    Mr. Powell. It is not for me to judge the merits of what 
gets done, but I am just saying there is--
    Mrs. Beatty. But it will contribute--
    Mr. Powell. --demand there that will support economic 
activity.
    Mrs. Beatty. --and support it?
    Mr. Powell. Yes.
    Mrs. Beatty. I am going to assume from that, that that is a 
positive. Let me go to the second question. Chairman Powell, 
the Federal Open Markets Committee is projecting that 
unemployment will increase to 4.6 percent by the end of the 
year, and those costs, as we know, won't be borne equally. If 
we look at the ratio from the last time unemployment was 4.6 
percent and compare it to our numbers now, it would mean that 
White unemployment would go up to about 0.9 percent, but Black 
unemployment would go up by 2.3 percent. Does that sound 
somewhat accurate to you?
    Mr. Powell. Yes.
    Mrs. Beatty. Can you address the disparity impact with 
that, and before you answer, let me go to the book, and thank 
you that it was put in our places together. In this book with 
your signature on it, it is stated, ``However, while 
disparities in unemployment have largely returned to pre-
pandemic levels, there still remains significant disparities in 
absolute levels of employment across groups like African 
Americans and Hispanics.'' Can you address that?
    Mr. Powell. I can. Right now, to your point, actually, 
African-American unemployment is, I think, 5.4 percent, which 
is just about as low as it has been since we started tracking 
it in 1972.
    Mrs. Beatty. But differential from majority by--
    Mr. Powell. That is 5.4 percent, whereas the overall is 3.4 
percent, and that includes Blacks, so that means for Whites, it 
is well lower than that, so there is a persistent gap between 
Black and White unemployment. And also, when unemployment goes 
up quickly in a recession, it goes up much faster for African 
Americans. When the economy grows again, it comes down faster. 
So, that is somehow embedded in our economy. The best thing we 
can do is achieve stable prices so that we can have long 
expansions. And what happens in those long expansions is that 
the labor market gets tight, sustainably tight, and we have 
historic lows in unemployment, including for African Americans.
    Mrs. Beatty. Let me say, thank you. As you know, in the 
117th Congress, I was the Chair of the Diversity and Inclusion 
Subcommittee, and let the record state that you always pushed 
for making sure that you understood and respected that. This is 
very minor and certainly personal to me. In this report, maybe 
those who helped you author it, I would like to see the areas 
that talks about unemployment not under a title of special 
topics, but something that draws a little more attention to it 
as some of the others. Just very minor.
    Last question, can you tell me if the Fed is committed to 
working with the other agencies like the FDIC and the OCC to 
finalize a rule soon on the Community Reinvestment Act (CRA)? 
Certainly, that is something of great interest to many of my 
colleagues, so can you give us any updates on it, or how the 
process is going, or what we can expect?
    Mr. Powell. Yes. With Governor Brainard's departure from 
the White House, I have asked Vice Chair Barr to take the lead 
in moving it forward. I would characterize it that there is 
essentially agreement between the three banking agencies on the 
changes to be made. That is all being written up and vetted, 
and at a certain point, the members of the Board of Governors 
will be briefed on it, and will vote on it.
    Mrs. Beatty. Is there anything we can do to help with that?
    Mr. Powell. No, I think we are hard at work on it. It is 
going to take some months, but I think we can see the airport 
and we will be landing in a few months.
    Chairman McHenry. The gentlewoman's time has expired.
    Mrs. Beatty. Thank you. I yield back.
    Chairman McHenry. The gentleman from Kentucky, Mr. Barr, 
who is also the Chair of our Financial Institutions and 
Monetary Policy Subcommittee, is recognized for 5 minutes.
    Mr. Barr. Thank you, Chairman McHenry. And, Chairman 
Powell, economic data are mixed, as you know. On the one hand, 
low unemployment, robust hiring, strong consumer spending, and 
persistent core inflation, and a CPI that is still more than 3 
times your 2-percent target suggests more aggressive tightening 
is warranted. On the other hand, because the Fed misjudged the 
inflationary impact of Democrats' overspending, kept interest 
rates too low for far too long, and failed to end quantitative 
easing soon enough, the Fed has been forced to raise the Fed 
funds rate 450 basis points in just 11 months and reduce the M2 
money supply at the fastest rate since the 1930s. As a result, 
wage gains have slowed, credit card debt is at an all-time 
high, the housing market is in a slump, and the yield curve is 
inverted.
    I agree with you that the historical record cautions 
strongly against prematurely loosening policy, but what would 
you say to those who caution about the lag effects of monetary 
policy, the precipitous decline in liquidity? Will the economy 
have to suffer a recession in order to bring inflation down to 
2 percent?
    Mr. Powell. We are very well aware of the lags with which 
monetary policy affects economic activity, inflation. Those are 
long and variable, and, I would stress, highly uncertain. There 
is nearly no agreement on exactly how long they are, but we 
know that slowing down the pace of rate hikes this year is a 
way for us to see more of those effects as they come in.
    Mr. Barr. In December, most Fed officials expected to lift 
rates this year to between 5 and 5.5 percent. Is that still 
your estimated terminal rate, or does the data suggest that the 
terminal rate could be higher than 5.5 percent?
    Mr. Powell. My colleagues and I will write down new 
forecasts and release them to the public on March 22nd. But as 
I mentioned in my testimony, the data we have seen so far this 
year suggests that the ultimate level of rates will need to be 
higher, but we still have some more data to come in between now 
and the meeting. But as of today, it suggests a higher level 
than that.
    Mr. Barr. Let's go to Vice Chairman Barr's review of the 
capital framework. I have a lot of questions for you on that. 
When Governors Brainard, Quarles, Clarida, Bowman, and Waller 
made up the Board under your leadership, major changes in 
policy were addressed following Board consensus and not when 
there was significant dissent. Will you commit to not 
implementing a new capital framework following this holistic 
review or the Basel end game if there is considerable dissent 
from the Board?
    Mr. Powell. I can't really commit to that. We are a 
consensus kind of an organization, and that is what we will 
work toward, but ultimately, we--
    Mr. Barr. Would that be a break from your prior practices? 
You are a consensus builder, Mr. Chairman. You pride yourself 
on that, and we credit you for being a consensus-oriented 
Chairman. Will you commit to continuing that practice and not 
allow major changes to the bank capital regulatory framework to 
be made by one person?
    Mr. Powell. They can't be made by any one person, but I do 
commit to that. And I commit to doing everything I possibly can 
to bring people together in consensus, to have something that 
can be broadly supported.
    Mr. Barr. Thank you. Earlier this year, you said, ``We are 
not and will not be a climate policymaker.'' However, in the 
Fed's draft Principles for Climate-Related Financial Risk 
Management for Large Financial Institutions, one proposed 
principle suggested that boards of directors of financial 
institutions should consider making changes to compensation 
policies to align with values in the context of supposed 
climate risks. It appears then that the Federal Reserve, 
through regulation, wants to begin implementing climate 
policies, so which is it? There seems to be a disconnect 
between your statements publicly and the rules that the Board 
is putting forward for comment.
    Mr. Powell. I feel strongly that climate change is an 
important issue that needs to be addressed by elected people. 
It is just not something that we have been charged with by 
Congress. So, we do have a narrow role, and that role will be 
around making sure that banks understand and can manage the 
risks that they are running, and that is going to be it. And as 
I said before, we don't want to drift into becoming a climate 
policymaker, and we will have to guard that border very 
carefully.
    Mr. Barr. Regarding the Fed's Climate Scenario Analysis 
pilot program, did the Board vote to approve the creation of 
that pilot program?
    Mr. Powell. I have to check, but I don't think so. I think 
it was already authorized.
    Mr. Barr. And this is a concern that I have. I am concerned 
that one Governor acting unilaterally to implement major policy 
changes without Board consensus is a problem. So, I would urge 
you and your colleagues on the Board to continue a consensus-
oriented approach.
    I yield back.
    Chairman McHenry. The gentleman's time has expired. We will 
now go to the gentleman from Connecticut, Mr. Himes, who is 
also the ranking member of the House Permanent Select Committee 
on Intelligence, for 5 minutes.
    Mr. Himes. Thank you, Mr. Chairman, and welcome, Chairman 
Powell. Thank you for your careful conduct of monetary policy, 
independent of the many political desires that circulate in 
this building. Independent monetary policy is a bedrock of a 
solid economy. I want to reflect for a moment on another 
bedrock of the American economy: the full faith and credit of 
the United States Government, which is now being put at risk by 
the Republican Majority.
    My Republican friends know how very dangerous a game they 
are playing. They know that salary payments to our soldiers are 
at risk. They know that their irresponsibility will raise 
mortgage rates for new homebuyers, but they say this is the 
only time we focus on spending in the debt, which, of course, 
is baloney. It is a pernicious form of baloney. The time to 
focus on the deficit is when you are voting for the spending 
and the tax cuts that create the deficit. When you are voting 
for the Trump tax cuts, which the Congressional Budget Office 
(CBO) said would add $2 trillion to the national debt, that is 
the moment to consider whether you want to do that, not when 
the good name of the United States is hanging in the balance.
    This stuff gets a little complicated, but the American 
people really need to understand what is happening here. The 
Congress sits down to a huge 10-course meal of tax cuts, and 
spending, and more defense spending, and expansion of this 
program and that stimulus, all of which we vote for 
collectively, first course, second course, white wine, red 
wine, four servings of dessert. And then the bill comes and 
Republicans say, whoa, wait a minute, wait a minute. Hold on. 
Look at this bill. This is irresponsible. Do we really want to 
pay this bill? That is not the moment for the consideration. 
The moment is when you are ordering four helpings of dessert. 
That is when we should be talking about it and taking 
responsibility for the choices that we make without putting the 
full faith and credit of the United States at risk.
    Now, here is where the hypocrisy comes in. My Republican 
friends like to point the finger at this side of the aisle and 
blame us, but, Chairman Powell, as you know, fully one-quarter, 
25 percent of today's U.S. debt, was accrued in the 4 years of 
the Trump Administration. This country has been around for 246 
years, and fully one-quarter of the United States' debt was 
accrued under President Trump. By the way, speaking of 
hypocrisy, in the 4 years of President Trump, the debt ceiling 
was raised or suspended 3 times. I didn't even notice, but now, 
of course, we have a different President, and so the calculus 
is different.
    Now, I don't think I am going to persuade the Majority to 
act responsibly here. I actually think the markets will 
persuade them. And you will recall, because we were watching 
this closely, that on September 29, 2008, the Republican House 
of Representatives voted down the Great Recession rescue 
package. As the vote was going down in the House of 
Representatives, the equity market dropped 7 percent, with $1.2 
trillion lost from people's retirement accounts. Then, Congress 
sobered up, and a couple of days later, we passed the Rescue 
Act.
    So, Mr. Chairman, there is a question here and the question 
is this. You and I both watch the markets pretty closely. 
Treasury tells us that on June 5th--that is just 3 months 
away--the Treasury runs out of money. My question to you, Mr. 
Chairman--and I know I am asking you to be a little speculative 
here--is what should we watch for? What market signals could 
indicate that the markets are getting fed up with the manifest 
irresponsibility around this? Give us some things that we 
should be looking for?
    Mr. Powell. And I would love to, but I am going to limit 
myself to what other Fed Chairs have said about the debt 
ceiling, which is that it does need to be raised by Congress. 
In the end, there are no rabbits in hats, as I mentioned, and 
also no one should assume that it is the Fed's business to 
protect the economy from various events. And no one should 
assume that we have the tools to predict the highly-uncertain 
effects of that kind of an event.
    Mr. Himes. Monetary policy is obviously very concerned with 
interest rates. If global capital markets begin to decide that 
we are really serious about hurting ourselves this time, is it 
possible that we could see interest rates rise more because 
borrowers of United States debt decide that we are actually a 
little risky? Is that possible?
    Mr. Powell. I think that and many other things are 
possible. The thing is, we have never crossed that line, and if 
we cross that line, we are going to find out, and I think it is 
highly uncertain.
    Mr. Himes. Okay. So, that is possible. And you know I don't 
like pressing you on these things, but you said that this and 
many other things are possible. Do you want to elaborate on 
what might be in the category of, ``many other things?''
    Mr. Powell. I would rather not, actually.
    Mr. Himes. Okay. I figured. Thank you. Mr. Powell, again, I 
thank you for your really responsible conduct of monetary 
policy. And there is a reason that you are insulated from our 
political desires, and I very much appreciate that, and I yield 
back.
    Chairman McHenry. The gentleman yields back. The Chair now 
recognizes the gentleman from Texas, Mr. Roger Williams, who is 
also the Chair of the House Small Business Committee.
    Mr. Williams of Texas. Thank you, Mr. Chairman. And 
Chairman Powell, it is good to see you. It's always good to 
have you here. In past congressional testimony, you have 
repeatedly stated that you support protecting the State-based 
system of insurance regulation, which is the most effective and 
competitive in the world. And my home State of Texas is the 
world's 7th-largest insurance market, proving the success of 
this system.
    Now, with the International Association of Insurance 
Supervisors (IAIS) conference in November, there is the 
opportunity to have the U.S. State-based aggregation method 
become formally recognized as comparable or equivalent to the 
insurance capital standard. We should not be following the 
European model that has increased regulations and less 
competition, and we should prioritize a model that encourages 
deregulation, competition, and less government involved in 
pricing.
    My question is, Chairman Powell, can you highlight the 
benefits of the U.S. State-based aggregation method compared to 
the European model regarding market resiliency and systemic 
risk, and can you confirm that you will push for an aggregation 
method to be deemed equivalent by the IAIS?
    Mr. Powell. I can say this. I do think that our insurance 
regulatory system has proved itself appropriate and adequate 
and has gotten the job done for a long time, and we don't need 
to be copying other country's or other region's insurance 
regulatory systems. I am a little rusty on the details of the 
capital requirements, but that sounds right.
    Mr. Williams of Texas. But the bottom line is, our side 
works, and the other doesn't. We need to stay where we are.
    Mr. Powell. Our side works.
    Mr. Williams of Texas. Yes, thank you. Also, in the past, 
you stated that banks were well-capitalized. We talked about 
that today, but now there have been increased conversations 
about raising capital requirements. Numerous economic studies 
have found that raising capital requirements for banks will 
increase borrowing costs for their consumer and commercial 
customers. In 50 years, I have never had a day I wasn't out 
debt, so I am concerned about this, and implementing additional 
regulatory capital requirements will slow economic growth and 
limit financial institutions' lending ability. So, do you 
believe that raising capital requirements would raise the cost 
of borrowing and add cost to our economy and to Main Street 
America?
    Mr. Powell. It depends on which banks experience higher 
capital requirements, and there isn't any proposal to evaluate 
right now, of course, but it is always a tradeoff. Higher 
capital is good in a sense, because it keeps banks able to lend 
during bad times. That is really a good thing. Too much 
capital, though, probably limits credit availability, so we are 
always trying to strike that balance.
    Mr. Williams of Texas. This has been touched on a little 
today, but let me come from a different angle on it. The 
Federal Reserve was created to act as a nonpartisan entity that 
remains separate from party politics. You talked about that. 
Unfortunately, throughout recent years, the Fed has gotten 
caught up in politically-charged issues like economic 
inequality, gender and race discrimination, and climate change. 
Recently, the Federal Reserve Board proposed guidance on 
managing climate-related risks for large banks, further proving 
that the Fed is giving in to some political pressure and 
operating outside its intended purpose and responsibilities.
    Our country's financial leaders, in my mind, should be 
focused on addressing runaway inflation instead of worrying 
what the financial institutions are doing to monitor climate 
change. We have touched on this a little bit, but how can the 
Fed ensure that they are not placing undue regulations and 
guidance on banks by forced involvement in partisan green 
politics, and how is the Federal Reserve ensuring they remain 
separate from political influence?
    Mr. Powell. Our independence is partly founded on the idea 
that we will stay out of stuff that you have not assigned us to 
do, and if we are going to wander all over and take on the hot 
issue of the day, our case for our independence is dramatically 
weakened. On climate change, you mentioned the guidance, and 
then there are also the stress scenarios, and those are the two 
things that we have done. We tried to keep those tightly 
focused on the banks' understanding and being able to manage 
the risks that they will run over the longer time periods on 
climate, and not slide into a broader sort of policymaking role 
on climate change.
    I accept that that could be a slippery slope and a moving 
border. And I just want to say I think my colleagues feel the 
same way on the Board, that we are going to guard that border 
carefully, and we are going to stick to our role and not try to 
be policymakers. In many other countries, the central bank is 
out there in the lead with the support of the public doing 
climate policy, but that is not where we are in the United 
States, and we are not going to pretend that it is.
    Mr. Williams of Texas. I have some time left, and I yield 
back, but I just want to say as an auditor, I am looking 
forward to that first day of that rate cut. Thank you for being 
here. We appreciate it.
    Chairman McHenry. The gentleman's time has expired. We will 
now go to the gentleman from California, Mr. Vargas, for 5 
minutes.
    Mr. Vargas. Thank you very much, Mr. Chairman, and again, 
thank you for holding this hearing. Chairman Powell, it's a 
pleasure to see you again. I have said it before and I will say 
it again, it is always great to see you because I always think 
of the old Republicans, the ones who are very noble, did the 
right thing, didn't play chicken with the economy, very 
forthright. Anyway, I appreciate you being here very much. Like 
some of my colleagues on the other side, I would say the same 
thing about some of them, and I appreciate you.
    We heard today that the inflation is President Biden's 
fault. What is the inflation rate in the European Union today?
    Mr. Powell. It is high.
    Mr. Vargas. It is high. Is it 10 percent possibly?
    Mr. Powell. I don't have that figure in my head, but it is 
very, very high from a headline standpoint, and they have had 
core inflation move up, too.
    Mr. Vargas. Are they following President Biden's policies? 
Is that what caused the inflation, because it seems to be 
President Biden's fault?
    Mr. Powell. I think inflation is everywhere, and it must 
have to do with a common factor, and that common factor has to 
be the reopening of the economy after and the things that were 
done with COVID. On the other hand, each country has a little 
bit different case, and I think you have to be careful. We had 
much more of a demand-oriented issue than they did. Their 
inflation looks a lot like ours did a year ago.
    Mr. Vargas. Okay. Yes, I just had to bring it up, because, 
again, Mr. Sherman brought it up, but it is interesting. Every 
time I hear inflation is caused by President Biden, I wonder, 
why is it all over the world? It is not because of the 
pandemic, of course, or because Europe is at war. That wouldn't 
cause it, of course. It would have to be President Biden's 
policies. That is ridiculous, and I think the voters saw 
through it last time.
    I haven't been here for 15 years like my good friend, Mr. 
Foster. I have only been here for 11 years. But when I first 
got here, I heard from my friends on the other side that the 
boogeyman was the Dodd-Frank Act. Dodd-Frank was going to be 
the end of banking, and, in fact, all my colleagues would 
almost scream how horrible this was. And then we got the 
bankers up here during a real stress test, which was the 
pandemic, and we asked them, has it been helpful to have Dodd-
Frank? Do you know what they said?
    Mr. Powell. I don't.
    Mr. Vargas. They said it was helpful. In fact, it kept the 
banks capitalized. It was fascinating. Now, to be fair to them, 
they did complain about some of the smaller issues, but not 
Dodd-Frank in general, the bill. Then, it seemed that the 
Consumer Financial Protection Bureau (CFPB) became the next 
boogeyman, but they seem to be fading on that. And I think the 
reason for that is the CFPB has actually helped so many people, 
that now a lot of their own constituents now are getting helped 
by the CFPB. All of a sudden, there is not quite the energy. So 
now, they are attacking ESG, and they are saying that you and 
everybody else is somehow conspiring to make sure they don't 
buy their oil or their coal. Are you conspiring to do that? Are 
you conspiring?
    Mr. Powell. No, I don't believe we are conspiring.
    Mr. Vargas. No? Now, I heard it was supposedly climate 
risk. Is there a risk in the climate change?
    Mr. Powell. Yes.
    Mr. Vargas. There is? Could it affect the banks?
    Mr. Powell. Certainly, in the longer run, yes.
    Mr. Vargas. Yes, of course, it can. Do you think insurance 
companies take this into account?
    Mr. Powell. Yes. Actually, I believe they do.
    Mr. Vargas. They absolutely do.
    Mr. Powell. They write long-duration liabilities. They 
certainly do.
    Mr. Vargas. Of course, they do. They are very concerned 
with it. Weather is a big deal. I was the vice president of 
Liberty Mutual in their corporate legal department, and we used 
to have what we called catastrophes, and these catastrophes 
happened every 25, 50, or 100 years. Now, those 25-, 50- and 
100-year events happen every 5 years, or every 2 years. So, of 
course, it is.
    It is ridiculous not to take a look at these ESG factors. 
We have to, and, again, I am glad that you are taking a look at 
it, because it is real. I am glad that the President is taking 
a look at it. And it is sad that my colleagues on the other 
side just want to stick their head in the sand and say, no, 
climate change is, ``supposed climate change.'' No, the reality 
is that it is real climate change, and it is costing billions 
and billions of dollars. And if you don't believe it, go ask 
all those poor people in Florida who had those huge hurricanes 
come through and wipe them out.
    Again, I appreciate very much the work that you have done. 
The only thing I hope is, as you said, that if we ever see this 
pitch again, we will know how to swing at it. And I hope we 
don't get the pitch of defaulting because I am not sure we will 
know how to swing at that one. Thank you again, Mr. Chairman.
    Mr. Powell. Thank you.
    Mr. Vargas. I yield back.
    Chairman McHenry. The gentleman yields back. The Chair now 
recognizes the gentleman from Michigan, Mr. Huizenga, who is 
also the Chair of our Subcommittee on Oversight and 
Investigations, for 5 minutes.
    Mr. Huizenga. Thank you, Mr. Chairman, and I am going to 
move quickly. It's good to see you again, Chair Powell. I 
caught a little bit of the Senate hearing yesterday, and you 
had a lot of pressure to keep the sugar high going. And 
frankly, if the Fed and many of our colleagues had listened to 
what many of us were saying, we should have been weaned off 
that artificially low, cheap money that kept the party going, 
and frankly, we wouldn't be in this position.
    To reference Chair Greenspan's punchbowl analogy, not only 
did no one have the courage to remove the punchbowl, you had 
people cheering on the pouring of another bottle of 151 rum 
into the punchbowl, and here you have folks wanting to do the 
exact same thing. Let's spend more, and now, here we are. You 
have an impossible decision: to slow the economy or let 
everyone get crushed by inflation. And we know tightening means 
a slower economy. And a slower economy means fewer jobs. Fewer 
jobs hit those who can least afford to lose a job. And so, in 
short, the lower rungs of the economic ladder will suffer more 
than the rest of the ladder, so that is the state of play of 
where we are at currently.
    I have to hit a couple of quick issues here. I wanted to 
start off by discussing climate, especially given the Fed's 
announcement in January that they were going to conduct a Pilot 
Climate Scenario Analysis Exercise. The Fed, along with the OCC 
and the FDIC, have each issued proposed climate risk management 
principles for banks that you are attempting to finalize by the 
end of the year, and their requirements don't stop at the 
border. The U.K. and the EU central banks are moving to require 
significant ESG disclosure regimes as well.
    I know the Fed is taking a look at commodities capital 
charges in the holistic review, but even though the Fed isn't 
forcing banks to encompass climate analysis in their stress 
tests, there are many initiatives at the Fed that are going to 
make it more costly for banks to finance traditional fossil 
fuel companies. I want to ask you a very specific question: 
Will you commit that you will withhold support for a new 
capital rule that increases capital charges on bank activities 
in traditional energy companies?
    Mr. Powell. I can't sit here and promise what I will and 
will not vote for, because I don't know what is going to be in 
the proposal, but that is not the kind of thing I think we are 
looking at.
    Mr. Huizenga. I'm sorry. It is not the kind of thing--
    Mr. Powell. This is about overall capital levels more than 
anything else, I think, rather than the specific thing you are 
talking about.
    Mr. Huizenga. Okay. We are going to follow up on that, 
because we need to have a real-time conversation about what is 
going on there. I want to quickly switch topics and go in a 
different direction for this next question. I want to ask you 
about two opinions issued by your legal staff in November of 
2019 and December of 2022 to the asset managers, Vanguard and 
BlackRock.
    Chairman McHenry, I would like to submit the two letters 
for the record.
    Chairman McHenry. Without objection, it is so ordered.
    Mr. Huizenga. Thank you. These opinions appear to outline 
the parameters of how both Vanguard and BlackRock can operate 
without being deemed a bank holding company. In addition to the 
legal restrictions outlined by the bank holding company, these 
opinions listed out here in quite detail list out commitments 
that the companies would need to take to avoid being viewed as 
having, ``control.'' These opinions also appear to provide 
assurances that the Federal Reserve Board staff would not 
recommend that the Board find the asset managers to be bank 
holding companies. Further, it is unclear whether the Board 
will take any steps beyond a periodic self-certification by the 
asset managers to monitor compliance, with the condition that 
they, ``not take any action to control a banking organization. 
As some asset managers play a larger role and clearly strive to 
influence policy in companies across the free market, we need 
to remain vigilant.''
    So, Chair Powell, is the Board taking any steps to assess 
or monitor whether Vanguard and BlackRock are complying with 
the commitments made in November of 2019 and December of 2020, 
respectively?
    Mr. Powell. I would have to check and get back to you on 
that.
    Mr. Huizenga. Okay.
    Mr. Powell. I am familiar with the issue.
    Mr. Huizenga. I appreciate that, but that says to me that 
it doesn't sound like there is an ongoing assessment that is 
taking place or scrutiny of that. Is somebody reviewing that or 
is somebody in charge of reviewing that?
    Mr. Powell. That is a very specific, narrow question. I am 
quite familiar with the issue.
    Mr. Huizenga. It is specific and narrow to two companies, 
but not to an industry. That is what we need to be driving at, 
and I guess we need to find out whether there is somebody 
proactively reviewing these activities and these commitments 
that the companies have made as well as the Fed has made. How 
often do you think they should be reassessed: annually, 
monthly, biannually?
    Mr. Powell. This is a very narrow set of questions. I can 
get you great answers really easily, but I don't have them in 
my head to--
    Chairman McHenry. The gentleman's time has expired.
    Mr. Huizenga. I look forward to those great answers, and I 
yield back.
    Chairman McHenry. We will now go to the gentleman from New 
Jersey, Mr. Gottheimer, for 5 minutes.
    Mr. Gottheimer. Thank you, Mr. Chairman. And Chairman 
Powell, thank you for joining us today. Chairman Powell, when 
you testified before the committee last June, PCE inflation was 
up 6.3 percent year-over-year. Just a few weeks ago, PCE data 
showed that the number has decreased to 5.4 percent. We are 
moving in the right direction, but despite the Federal Reserve 
raising interest rates, the highest rates since October 2007, 
we are still far off from the 2-percent inflation that the 
Federal Reserve is targeting.
    Do you believe 2 percent is still the right target for 
inflation? And given the ongoing energy transition, the push to 
shift supply chains out of China, and the labor shortage here 
in the U.S., should the Fed consider adjusting its target to 
avoid overly burdening Americans? Would a decline to 3-percent 
inflation be enough to offer price stability without excessive 
economic pain?
    Mr. Powell. No, 2-percent inflation is going to remain our 
longer-term inflation goal.
    Mr. Gottheimer. Are you concerned, given all of the other 
factors that I mentioned, or do you think we just have to keep 
sticking with that?
    Mr. Powell. I think that has to remain our longer-term 
inflation goal. It is the global standard and it is our 
standard, and this is not a time at which we can start talking 
about changing it. We have no instinct to do that.
    Mr. Gottheimer. Thank you, Mr. Chairman. The gig economy 
has grown significantly in recent years as more Americans are 
working as contractors or running small businesses. The Dallas 
Federal Reserve has written that gig workers are often not 
included in payrolls and not counted among the unemployed, and 
this may understate the number of Americans who could be 
counted as unemployed. The Fed has also noted a large number of 
Americans who are missing from the workforce after the 
pandemic. Do we need to change the way we think about measuring 
unemployment to account for these changes?
    Mr. Powell. I missed the word you are saying. Gig?
    Mr. Gottheimer. Sorry. Do you think we need to change the 
way we think about measuring unemployment to account for these 
changes?
    Mr. Powell. I didn't catch that. What was the word--
    Mr. Gottheimer. Oh, sorry. Gig workers.
    Mr. Powell. Gig workers.
    Mr. Gottheimer. Yes, I'm sorry. Gig workers.
    Mr. Powell. That is the word I didn't hear. Okay. No, we 
clearly need to incorporate gig workers both into the labor 
force and to whether they are working, and they certainly are 
working. We are trying to do that. It is not that we are not 
trying to do that, but we may not be doing it perfectly.
    Mr. Gottheimer. And is there a better way to capture them? 
Given we are still using older measurement ways, are we 
updating our measurement--
    Mr. Powell. We are definitely trying to get those people. 
Self-employed people, they do report in the household survey, I 
believe. I can get more for you on that, but I am sure we are 
not doing a perfect job at it because it is a relatively new 
thing. But we are very well aware of it, and they are supposed 
to be included.
    Mr. Gottheimer. That would be great. I would love to talk 
to you more about that.
    Mr. Powell. Great.
    Mr. Gottheimer. Thank you. As you are also aware, many of 
us are having discussions about the long-term fiscal health of 
our country and our economy. Like many, I worry that higher 
interest rates will put upward pressure on the national debt. 
CBO already estimates that annual interest costs will nearly 
triple for the U.S. over the next decade. You said to the 
Senate yesterday that interest payments are not a consideration 
of the Fed, but are you concerned that higher interest rates 
will more rapidly make payments on the debt unsustainable, and 
are there actions Congress should consider to address this 
issue?
    Mr. Powell. I will say what my predecessors have said, 
which is that we are on an unsustainable path, and ultimately, 
we will get back on a sustainable path. And the sooner we get 
to work on that, the less painful it will be.
    Mr. Gottheimer. And rates, of course, were low between the 
financial crisis and the end of 2021, particularly low. After 
the target inflation rate is hit, what do you think the new 
normal looks like in terms of rates and the Fed balance sheet 
over the next 5 to 10 years?
    Mr. Powell. That is a really good question. There was a 
secular decline in longer-term interest rates, which we don't 
control, for 40 years, to the point where the 10-year Treasury 
was at 10 percent, and then at the end of 40 years, it was 
quite low. You are at higher levels, as you pointed out, levels 
we haven't seen since earlier in this century. I don't think 
anybody knows what this is going to look like 5 years down the 
road. Demographics haven't gotten better. Globalization may 
actually move a little bit in reverse, which would tend to 
produce higher inflation, and thus, higher rates. But you have 
to ask, of the factors that caused low rates, how much of that 
has changed, and some of it has, but much of it hasn't.
    Mr. Gottheimer. And building on that a little bit, what is 
the right metric, do you think, if you were in our shoes, for 
assessing our fiscal health? Do you think we should be focused 
on maintaining a specific debt-to-GDP ratio, or is there a 
specific number? Are there other measures lawmakers should be 
focusing on?
    Mr. Powell. We have traditionally focused on debt-to-GDP, 
but many people pointed out before the pandemic that rates were 
secularly lower, and that, therefore, you could look at sort of 
real debt service. There was a lot of research on that, and by 
those measures, actually, debt service was much easier to 
handle. Now, the 10-year is back close to 4 percent, and I 
think we need to be careful not to assume that these secularly-
low longer-term rates are going to continue indefinitely, 
because that doesn't look likely now. And frankly, most 
forecasts have always shown things like the 10-year going back 
to a higher level, so it won't be that big of a change. I think 
it has more or less been handled, for example, by CBO that way.
    Mr. Gottheimer. Excellent. Thank you so much, and I yield 
back. Thank you.
    Mr. Powell. Thank you.
    Chairman McHenry. The gentleman from Ohio, Mr. Davidson, 
who is also the Chair of our Subcommittee on Housing and 
Insurance, is now recognized for 5 minutes.
    Mr. Davidson. Thank you, Mr. Chairman. And Chairman Powell, 
thank you. It is an honor to be able to talk with you today, 
and I appreciate the work you and the monetary policy focus 
portion of the Fed does. We are waiting for maybe a more 
consistent input from our bank regulators. So, for the 
regulatory side, I have spoken with multiple bankers who tell 
me that they have never seen a higher degree of regulatory 
burden, steering guidance, and shaping activities in the market 
from regulators, and I don't think that is just narrowly 
focused on the Fed, but I ask you to look into it.
    There are a lot of people who feel like there is an 
Operation Choke Point 2.0 going on, and it is particularly 
focused on de-banking people who are disfavored by the current 
Executive Branch primarily, just like the previous Operation 
Choke Point. And so to the extent that you yield any influence 
over the regulatory component of the Federal Reserve, I think 
that would be meaningful and important, because part of the 
strength of the U.S. dollar is, of course, the stable store of 
value. Currencies around the world are wrestling with that and 
inflation, and you all are working to tackle it. But the other 
part is, is it is an efficient means of an exchange, and when 
people really feel like some third party is going to steer or 
shape their money, they don't trust it. For the unbanked and 
the underbanked, fundamentally, that lack of trust is part of 
why they don't use our banking system today. In fact, that is 
part of the appeal of the digital asset space, is the 
permissionless nature of it.
    It seems that a lot of people in the financial services 
space who have grown up in it and are leading it today, feel 
threatened by the prospect of change. And if they have maybe 
reluctantly concluded that you can't ban crypto, they at least 
want to keep it account-based so that some third party can 
actually control the assets, which is a polite way of saying we 
don't actually trust our citizens to control their money or 
their assets. We will let somebody else do it for them, because 
we can control those third parties. And in fact, that is what 
the regulators do, isn't it?
    Mr. Powell. As in what?
    Mr. Davidson. They control the third parties. If you don't 
comply with the regulatory regime, you don't get to operate a 
financial services business, right?
    Mr. Powell. That is right.
    Mr. Davidson. Yes. And at the end of the day, I think a lot 
of people were concerned by your remarks yesterday--I know I 
was--saying that permissionless digital assets pose a systemic 
risk to the financial system.
    Mr. Powell. By the way, I think if you read through the 
digital guidance, which I did getting ready for this hearing--
and of course, I read it before we put it out the first time--
but it is pretty careful to say that we don't want regulation 
to oppose innovation, and thus, entrench incumbents and things 
like that. It is pretty balanced, the language, and I think it 
essentially goes to the question of protecting the safety and 
soundness of institutions. I think what we say about it is--I 
will paraphrase it--that they have been vehicles for fraud, 
vehicles for--
    Mr. Davidson. Zero-point-two-four percent. So, if you 
follow your own report on fraud, it is a fraction of what it is 
with the U.S. dollar. Speaking of the dollar, is there any real 
current threat to the dollars preeminence as the world's 
reserve currency?
    Mr. Powell. You are asking a question? I didn't--
    Mr. Davidson. Yes, sir.
    Mr. Powell. Is there a real threat?
    Mr. Davidson. Is there a threat?
    Mr. Powell. I think that our status as the world's reserve 
currency is not under a particularly strong threat right now. I 
think it is a pretty stable equilibrium. It is not a permanent 
equilibrium, but there isn't really a serious competitor, and 
that is because of our democratic institutions, and the rule of 
law, and the fact that the dollar's value is pretty stable.
    Mr. Davidson. Okay. Quickly, on the repo market, just any 
insight into that, and then I will have my last comment here 
and just leave the last word to you, but I'm particularly 
curious about the repo market. But I will close by simply 
saying I would ask you to turn off the purchase of mortgage-
backed securities. As the Chair of the Housing and Insurance 
Subcommittee, I am particularly concerned about affordable 
housing, and the artificial prop for the mortgage-backed 
securities does raise the cost of capital in that space. So 
whether you own it, or occupy it, or rent it, it is going to 
raise the cost there, but I just ask if you would comment on 
the safety and soundness of the repo market, if you would?
    Mr. Powell. Of the repo market--as far as I know, the repo 
market is functioning reasonably well these days. You are 
talking about the reverse repo facility or the--
    Mr. Davidson. Yes.
    Mr. Powell. Reverse repo facilities are a different thing. 
We can continue this later.
    Mr. Davidson. I would like to follow up with you later. My 
time has expired, so I yield back.
    Mr. Powell. Thank you.
    Chairman McHenry. The gentleman from Illinois, Mr. Casten, 
is recognized for 5 minutes.
    Mr. Casten. Thank you, Mr. Chairman. Chairman Powell it's 
always a pleasure to see you, and I appreciate your time here 
today. I want to start with this chart in your monetary policy 
report, which I think is fascinating, Chart 14 on page 17. This 
is the history of wage growth and job growth, and for those of 
you who don't have it in front of you, broadly speaking, from 
2000 to 2017, we had more workers than jobs. From 2017 until 
the COVID crisis, it was about the same, and since COVID, we 
have had more jobs than workers. And there is tons of rich 
stuff in here that I just enjoyed reading. But broadly 
speaking, if that was the only thing going on in the economy, I 
would assume that we had 20 years where it was essentially a 
buyer's market for labor, and the last year-and-a-half where it 
has been a seller's market for labor, as you look at that.
    And if I go through and I look at from 2010 to 2020, CPI 
was up 20 percent over the period and real median wages was 
less than 10 percent. So, for half of the economy, they didn't 
keep up with wages, even though we think of that as a very low 
inflationary period. Corporate profits were also up strongly, 
as you would expect. I am not saying that with judgment. If it 
is a buyer's market for labor, you would expect the gains from 
labor productivity to flow to consumers and profits, and it 
looks like that is what it did. In the--
    Mr. Powell. Which chart you are looking at?
    Mr. Casten. This is Chart 14 on page 17. It is the top 
right corner there.
    Mr. Powell. Got it. Okay. Thanks.
    Mr. Casten. In the last year-and-a-half, median wages are 
up 5 percent, which is almost as much as they grew during that 
10-year period before, and, yes, inflation is still a bit 
higher than that. But what I am wondering is, as you look at 
the economy, is wage growth universally bad in your view, or is 
wage growth good to the extent that it is keeping up with wages 
because, historically, wages didn't keep up? And how do you 
think through that nuance, because interest rates are a very 
blunt tool? And if you agree with me that we are now basically 
in a seller's market for labor, shouldn't we expect and welcome 
some of the wage inflation which goes with that?
    Mr. Powell. I would say two things. First, we want wages to 
go up in ways that are consistent over time with the increase 
in productivity and inflation, and that makes all the sense in 
the world. The other thing I would say is that in this 
instance, what we have seen is these very high nominal wage 
gains have very largely been eaten up by higher inflation. So, 
it is very important that we restore price stability so that we 
can start to see real wage gains after inflation across the 
income spectrum.
    Mr. Casten. No. And to be clear, we are all opposed to 
inflation here. But in that 2010-2020 period that we all viewed 
as a very low inflationary period, the gains from productivity 
did not flow to labor. Wages did not keep up with inflation, 
and we didn't think about that as a problem for the Fed to fix 
because overall inflation was down. This gets sort of 
theoretical, but let's say that we had 6-percent wage inflation 
and 5-percent CPI. There would be more money in people's 
pockets, but would we view that as an inflationary period to 
clamp down because we didn't view the inverse as a problem, if 
you will?
    Mr. Powell. Our job is to restore price stability and keep 
price stability. It isn't to keep wages down, and it is 
certainly not to get involved in trying to establish the 
appropriate level of labor share of profits, for example. That 
is not the way we think about it at all. We think about price 
stability, and when we think about price stability, we think 
about wages as an important input to that. But we are not 
targeting a particular level of prices, and we would never say 
that we don't want real wages to go up.
    What we are really charged with is price stability, and to 
do that, we have to think about wages. In particular, no one at 
the Fed would be upset to see the labor share go up, but that 
is not something that our policies affect. That is set by 
globalization, and the advance of technology, and educational 
skills, and aptitude and all those things. That is what drives 
productivity, and that is what drives labor share.
    Mr. Casten. Yes, and I realize it is hard to have these 
conversations in 5 minutes.
    Mr. Powell. Yes. I would be happy to follow up after the 
hearing.
    Mr. Casten. I guess what is hard is that, also in that 
2010-2020 period, median home prices went up by 50 percent. We 
didn't view that as inflationary. And 401(k)s went up a lot. We 
didn't view that as inflationary because those were asset 
increases. So, as we have shifted the gains from people who had 
wealth to people who were dependent on wages, there needs to be 
some correction. And I leave it there because I am out of time, 
but how we think about that--
    Chairman McHenry. The gentleman's time has expired.
    Mr. Casten. I yield back.
    Chairman McHenry. We will now go to the gentleman from 
Tennessee, Mr. Rose, for 5 minutes.
    Mr. Rose. Thank you for being with us today, Chairman 
Powell. I just want to echo at the outset some of the concerns 
that my colleagues have raised about Vice Chair Michael Barr's, 
``holistic review,'' of capital markets, and also about the Fed 
engaging in climate policy, as well as your decision to put 
Vice Chair Barr in charge of the Community Reinvestment Act 
rulemaking. With that said, I am going to dive right into my 
questions.
    Chair Powell, I was pleased to see that the U.S. Coin Task 
Force released their report on the State of Coin a few months 
ago. The report notes that the Federal Reserve and the U.S. 
Mint will be jointly contracting with a third-party consultant 
to review the coin supply chain and develop recommendations to 
improve it.
    Chairman Powell, could you provide us with an update on 
what the Fed has learned from its review of the coin 
circulation issues that occurred during the pandemic?
    Mr. Powell. We know that the natural flow of coins in the 
economy slowed down a lot because people were staying home and 
that kind of thing, and they may have switched to non-coin-
based means of payment. And we feel like the evidence shows 
that has continued now. People are paying electronically and 
things like that, and coins are sitting in jars on people's 
desks and at home, and they are not circulating back into the 
banks, and thus, to the retail stores. So, we are working on 
that. We are working with the Mint. We are working with all of 
the stakeholders in the coin ecosystem to try to address this 
problem, and we are well aware of it.
    Mr. Rose. It seems to me that what we learned from that is 
that it is probably necessary to have a greater reserve of 
coins if there is such an interruption in the future so that 
commerce is not indeed interrupted. Would you share that broad 
view?
    Mr. Powell. That sounds right. I am not an expert. I will 
say it feels like we need more coins now because more of them 
are sitting in people's homes and pockets, and they are not 
flowing back to where retailers, in particular, need the flow 
of coins. So, that sounds right to me.
    Mr. Rose. On a related note, could you speak about the 
importance of maintaining cash as a viable payment option, 
particularly for those who lack or don't have access to 
traditional financial services?
    Mr. Powell. We think it is absolutely critical, because 
there are people who don't have credit cards. Many people don't 
have credit cards, they don't have good credit, and they need 
to be paying in cash. And when stores are not dealing with 
people who don't have cash, it is a serious problem for those 
people in the economy. We have it at the Board of Governors and 
you see it elsewhere because most payments are now taken care 
of by credit cards, and it is very efficient, but we need to be 
looking out for people who use cash.
    Mr. Rose. Thank you. I appreciate the perspective. Picking 
up on Mr. Luetkemeyer's concerns that he expressed earlier, as 
you know, the Consumer Financial Protection Bureau's (CFPB's) 
funding mechanism is intricately linked to the Federal Reserve 
System. According to Title X of Dodd-Frank, each quarter, the 
CFPB Director requests an amount that is reasonably necessary 
to carry out the Bureau's authorities, and the Federal Reserve 
must transfer that amount so long as it does not exceed 12 
percent of the Federal Reserve's total operating expenses.
    For the first 5 years of the existence of the CFPB, of 
course, there was a relaxation there with respect to that 12-
percent cap that allowed $200 million annually to be spent 
beyond that number so long as it was reported and so long as 
the reported excess was sent to the President by congressional 
appropriators. Chair Powell, during your chairmanship, has the 
Fed ever rejected a CFPB budget request?
    Mr. Powell. I do not believe so.
    Mr. Rose. And could you tell us what policies and 
procedures are in place at the Fed to ensure that there is no 
waste, fraud, or abuse, or that these limits are not otherwise 
exceeded?
    Mr. Powell. We have no role in engaging with that. We share 
a common Inspector General who does work on those issues, but 
we don't have any governance of any kind over the CFPB. We are 
just a source to them.
    Mr. Rose. Thank you. I appreciate that insight. In closing, 
Chair Powell, yesterday Senator Warren asked you what you would 
say to the 2 million people who may lose their jobs if the Fed 
keeps raising interest rates. Frankly, Senator Warren should 
have been asking herself the same question when she voted and 
advocated for the Democrats' reckless spending packages that 
caused this inflation that we are seeing today, and is the 
reason the Fed has had to raise interest rates, in my view. 
Frankly, I would call on Senator Warren, the President, and the 
Democratic Party, for that matter, to apologize to the American 
people for causing this kitchen table crisis across the 
country. With that, Mr. Chairman, I yield back.
    Chairman McHenry. The Chair now recognizes the gentlewoman 
from Massachusetts, Ms. Pressley, for 5 minutes.
    Ms. Pressley. Thank you, Chairman Powell, for joining us 
today and for your testimony. I am going to focus my comments 
and my questions on the high costs that families in my district 
are seeing because of your interest rate hikes. Now, while the 
Fed has acknowledged that higher interest rates are not the 
primary driver for the slowdown in price increases, you 
continue to raise interest rates, risking not only millions of 
jobs, but also a recession. Based on projections from the Fed, 
approximately 2 million people will lose their jobs, so that is 
2 million families who will struggle to put food on the table, 
keep a roof over their heads, and to make ends meet, but the 
economic hardship does not end there.
    Mr. Chairman, I would like to request unanimous consent to 
submit a recent paper by the Federal Reserve Bank of Cleveland, 
entitled, ``Post-COVID Inflation Dynamics,'' into the record.
    Chairman McHenry. Without objection, it is so ordered.
    Ms. Pressley. Chairman Powell, are you familiar with this 
publication? Yes or no?
    Mr. Powell. No, I am not.
    Ms. Pressley. Okay. Let me give you some context. In this 
paper, the Fed's own economists predict that reaching the 2-
percent inflation goal that you have set will be impossible 
without causing a recession and spiking the unemployment rate 
to 7.4 percent, which translates to millions of working people 
losing their jobs.
    Chairman Powell, many economists agree with me when I say 
that engineering a recession to bring inflation under control 
is not the right strategy, especially at a time when we are 
seeing inflation cool in real time, independent of your rate 
hikes. On behalf of the people of this country, to prevent a 
recession, yes or no, Chairman Powell, will you pause future 
interest rate hikes?
    Mr. Powell. We are not seeking to have a recession, and we 
don't think we need to have a recession to get--
    Ms. Pressley. Respectfully, will you pause interest rate 
hikes, yes or no?
    Mr. Powell. I don't answer, ``yes'' or ``no',' about 
whether I will pause the interest rate hikes. That is a serious 
question, and I can't tell you because I don't know all the 
facts. That is not a possible--
    Ms. Pressley. It is a very serious question because it has 
very serious implications. The people who will bear the brunt 
of an economic recession are most-vulnerable. We know from past 
experiences that recessions have catastrophic and deeply 
inequitable consequences. In fact, while some will catch a 
cold, others will catch pneumonia, but you know that, an 
economic cold or pneumonia. In fact, in your opening statement, 
you said, ``We will stay the course until the job is done.'' To 
conclude, ``We understand that our actions affect communities, 
families, and businesses across the country.'' Could you 
elaborate what this effect will be on communities, families, 
and businesses of these interest rate hikes?
    Mr. Powell. Right now, we are trying to bring down 
inflation on behalf of all of those families. I think high 
inflation is particularly hurting working families all around 
the country very badly. And as you know, if you are on a very 
limited budget and you don't have a lot of excess earnings, 
when prices start going up, you are in trouble right away. 
Middle- and upper-middle-class people have more resources, so 
we think it is absolutely critical for the working people of 
this country that we get inflation back under control. And 
also, while we are at it, we have a dual mandate--
    Ms. Pressley. Apologies, Mr. Chairman, just reclaiming my 
time here, the most devastating impacts will be to our most-
vulnerable populations: veterans, the elderly, low-income 
workers, and Black and Brown workers, those who have often been 
ignored and neglected in the name of what you refer to as, 
``appropriate monetary policy.'' And yet, you assert that you 
will stay the course. It is unconscionable, and our most-
vulnerable workers and families cannot afford to wait for you 
to realize the harm that you were doing. In my opinion, this 
sounds more like the assertions of a greedy corporation than 
someone who has a public mission on behalf of the people of 
this country.
    I have one more question with my remaining time here. 
Chairman Powell, another consequence of your interest rate 
hikes has been the increase of the average 30-year fixed-rate 
mortgage rate to 6.6 percent, double what it was 2 years ago. 
Do you see this widening inequity in the housing market as a 
problem, and what steps will you take to make housing more 
affordable? This is putting homeownership further and further 
out of reach for my constituents, including new parents, 
parents, millennials, and people of color, and contributing to 
inequities and the racial wealth gap. So, what are your 
thoughts on that?
    Mr. Powell. Our policies do affect--
    Chairman McHenry. The gentlelady's time has expired. Chair 
Powell can submit an answer for the record.
    Mr. Powell. I will briefly say, if I can, that interest 
rate policies affect interest sensitive spending very directly. 
When we cut rates, they help housing. When we raise rates, you 
see the effect on housing.
    Ms. Pressley. Thank you.
    Chairman McHenry. The gentleman from South Carolina, Mr. 
Timmons, is now recognized for 5 minutes.
    Mr. Timmons. Thank you, Mr. Chairman, and thank you, Chair 
Powell, for being with us today. We currently have $32 trillion 
in debt. Our debt-to-GDP ratio is 120 percent, the highest it 
has ever been, and, yes, we have a debt ceiling fight brewing 
for the summer. I would argue it is an opportunity to get our 
fiscal house in order, but sadly, there is no meaningful 
bipartisan effort to responsibly address our debt.
    Both sides have even preemptively started political 
attacks, alleging either side wants to cut Social Security and 
healthcare, but politics and talking points will not fix our 
problem. Our debt is the greatest national security threat. 
Social Security will be insolvent in 2033, and our healthcare 
system is fundamentally broken. We spend twice as much as the 
average country per person, and our obesity rate is 3 times the 
average. I want to be clear, though, I am not advocating cuts 
to Social Security, but my Social Security will have to be 
different than my father's, and we must change the incentive 
structures of our healthcare system.
    Briefly, let's go over some history. Social Security was 
created in 1937. The retirement age then was 65, and average 
life expectancy was 60. It's easy to see how that math works. 
In 1960, Congress raised the retirement age to 67. It has not 
been increased since then. That year, life expectancy was 69. 
That math still works due to a growing population, but it is 
getting narrower. I will throw in another few statistics for 
that year, 1960: 14 percent of Americans were obese; and our 
debt-to-GDP ratio was 53 percent. Let's fast forward to this 
year. Our retirement age is still 67, but our life expectancy 
is 77. That math clearly does not work, nor is the program 
functioning for the purpose for which it was designed. And 
shockingly, our obesity rate is 37 percent, and we spend 
$13,000 per person on healthcare, compared to the global 
average of $6,000 per person, and a 13-percent obesity rate. 
Clearly, our healthcare system is failing.
    Our system focuses on managing sickness, where we should be 
facilitating health and wellness. We will only meaningfully be 
able to address the debt ceiling by focusing on the biggest 
drivers of our debt. Responsible policymakers should be focused 
on saving Social Security by reforming it and transforming our 
healthcare system to facilitate healthy citizenry capable of 
working and being contributing members of society. The American 
people deserve more than the political nonsense.
    Five years ago, the number-one issue I ran on was debt. It 
has been and continues to be our greatest national security 
risk. I hate to say it, but in the last 4 years, it has gotten 
way worse. Congress has spent $7 trillion, of which $5 trillion 
was done mostly on party lines. The Democrat Majority has not 
only spent money we don't have over the last 4 years, but their 
fiscal policy has caused out-of-control inflation, which caused 
you to raise interest rates.
    Last year, I asked you if you ever took into consideration 
the impact of interest rate increases on the cost of our debt 
service. You appropriately and adamantly said, no. Our debt 
service cost the next 10 years will be over $10 trillion. I am 
going to point out two things. Number one, that is more than 
all of our debt service since 1940 combined, the last 80 years. 
And while you did not take interest rate increases impact on 
our debt service into your decision-making, the best estimate 
is that those rate increases will increase our debt service 
cost by $2 trillion in the next 10 years. So basically, the $7 
trillion that the Democrats spent in the last 4 years is going 
to cost us an additional $2 trillion, and that is not factoring 
in future rate increases as you continue to appropriately try 
to get inflation under control. As you can tell, this is a huge 
problem. The $7 trillion in unnecessary spending in the last 4 
years has caused inflation.
    Some of my colleagues across the aisle disagree with that 
causal relationship. Clinton's Treasury Secretary and Obama's 
Director of the National Economic Council, Larry Summers, wrote 
an op-ed before they spent the money and said it was going to 
cause inflation, and he has gone on the, ``I was right,'' tour 
for the last couple of years. We need responsible policymakers 
to address our debt.
    Let's talk about what is not serious, and that is minting a 
trillion-dollar coin. Many of my colleagues across the aisle 
have advocated for this. Luckily, both President Biden and 
Treasury Secretary Yellen have said that this is not a serious 
proposal, and they have no plans of considering it. 
Unfortunately, the Biden Administration has a bit of a history 
of doing a 180 when the political winds blow. Most recently, 
President said he would veto the D.C. crime bill, and now he is 
adamantly supporting it and plans to sign it.
    Chair Powell, my only question to you is, if President 
Biden and Secretary Yellen send you a trillion-dollar coin, 
will you accept it?
    Mr. Powell. And what I will say to that is this only winds 
up one way, and that is with Congress raising the debt ceiling.
    Mr. Timmons. So, you will not accept a trillion-dollar coin 
and treat it as a trillion dollars if it is sent to you?
    Mr. Powell. I will add, there are no rabbits to be pulled 
out of hats here. This only--
    Mr. Timmons. I know you don't like yes-or-no questions, but 
if you were sent a trillion-dollar coin and asked to treat it 
as a trillion dollars, will you treat it as a trillion dollars?
    Mr. Powell. That would be a rabbit coming out of a hat.
    Mr. Timmons. I will take that as a, no. Thank you. Mr. 
Chairman, I yield back.
    Chairman McHenry. The Chair now recognizes the gentlewoman 
from Michigan, Ms. Tlaib, for 5 minutes.
    Ms. Tlaib. Thank you so much, Mr. Chairman. And thank you, 
Chair Powell, for being here. You have a lot of economic 
projections of various data, various reports that are coming 
out, and you have studied inflation, right? Obviously, it is 
your number-one priority right now. How much is inflation 
impacted by these three things: corporate profiteering; 
egregious executive pay; and the use of stock buybacks?
    Mr. Powell. I don't have the numbers, but I would say in 
the case of executive pay, and, well, in the case of share 
repurchases, I can't think of how it would affect inflation. In 
the case of executive pay, that would be very small in terms of 
the broader economy. In terms of profits, though, the way I 
think about that is the places where profits are really high 
are places where there are shortages and supply chain issues. 
And as those things get better, as they are, you are going to 
see inflation comes down and even prices come down, and you 
will see corporate margins come down there. And that will be 
part of how inflation comes down.
    Ms. Tlaib. Corporate profiteering does impact inflation. 
You don't have any stats of, percentage-wise, how much of it? I 
really paid attention to your testimony in the Senate hearing 
yesterday, and there was a lot of conversation about my 
neighbors' and residents' wages and so forth. They are finally 
starting to see a little bit more closer to possibly getting 
fair wages. It is not even far enough. But I don't know if the 
Fed is paying closer attention to monopolies, corporate 
profiteering, and executive egregious pay, all of it, even 
these stock buybacks. You are saying all of that aside, you are 
focused more on wages and increasing the interest rate than on 
those other major--
    Mr. Powell. Our focus is really on price stability, not so 
much wages. Wages play into that because they are an important 
cost for business, but we are not trying to achieve a 
particular level of wages. We are trying to achieve 2-percent 
inflation.
    Ms. Tlaib. Yes, and I think it is really important. 
Chairman Powell, what we saw during the pandemic is the wealthy 
and the corporations continued to profit in large scale, and 
still do buybacks, and still do really egregious executive pay, 
and benefits, and so forth for those at the top. And then, of 
course, the communities and such were impacted by it. But what 
I hear consistently is folks thinking that is the reason that 
all of a sudden, wages are skyrocketing and all this. But all I 
see is a continuation, again, of those who are already getting 
a huge benefit, the folks at the top, the executives and so 
forth.
    My friend, Glenn, taught me this today, that the Feds are 
actually sitting on something in Dodd-Frank, Section 956. You 
all have been sitting for the last 12 years on guidance 
regarding executive compensation and the high risks of it. 
There were some proposals done, but not implemented. Again, it 
has been 12 years. Why is that something that you are not 
concerned about regarding inflation? One, you are sitting on 
it, right? Why? It has been 12 years. And then two, why is that 
you are saying that is not a big deal, that it is not going to 
impact the cost of products and so forth for our residents?
    Mr. Powell. It is a multi-agency rule, and there have been 
repeated attempts to get five or six or seven, however many it 
is, agencies to agree. That is one thing.
    Ms. Tlaib. On disclosures?
    Mr. Powell. No, no, it is on policies to--
    Ms. Tlaib. Yes, which include disclosures and arrangements 
regarding the executive pay and risk of it.
    Mr. Powell. I think the disclosures are there. You are 
right, we haven't been able to get agreement among the 
agencies. But more to the point, the Board has long since--this 
is just for the big banks where we have this authority--the 
Board of Governors are very focused on how executive 
compensation works and that it not reward unnecessarily-risky 
behavior and that kind of thing.
    Ms. Tlaib. Yes, but in Dodd-Frank, which Congress passed, 
you are supposed to put something in place, and it is not in 
place. And look, I am saying this because I feel like the Fed 
is more obsessed with wages than they are in regards to the 
monopolies, the corporate profiteering. I don't think there is 
a laser focus on that, because I think the Fed and Congress can 
support fair wages and still combat inflation if you are fair 
in combating egregious executive pay, monopolies, and corporate 
profiteering.
    Mr. Powell. We don't do competition policy, and we also 
don't, broadly speaking, regulate corporate wages.
    Ms. Tlaib. But Section 956 sort of addressed it.
    Chairman McHenry. The gentlelady's time has expired.
    Ms. Tlaib. Section 956 addresses it. And it has been 12 
years.
    Chairman McHenry. The gentleman from South Carolina, Mr. 
Norman, is now recognized for 5 minutes.
    Mr. Norman. Thank you. Chair Powell, I appreciate you 
coming in. I don't have to tell you the fact that as goes 
housing, so goes the economy. I am from South Carolina. We have 
people moving in, and the population is increasing, and I can 
tell you that housing, and not just single-family housing, is 
in trouble. People are finishing what is in the pipeline. It 
has now affected multifamily apartments, the higher rents that 
they did get with inflation. This is entirely caused, for the 
most part, by the policies of this Administration with gas, 
buying it from other countries, and with supply chain 
shortages. There is no reason to start a project when you can't 
get supplies, and that is what we are facing in the housing 
industry at all levels. So, any increase in interest is just 
another dagger that is going to kill the housing industry along 
with commercial projects.
    Again, the pipeline is filling up, but the pipeline, once 
it leaves, you are not going to have any. And I am from a State 
where there are people moving in. One of the things that you 
hear, I think Mr. Davidson mentioned, was regulations. Banks 
are complaining about being overregulated and the costs 
associated with it. I know that since Governor Brainard left, 
the CRA is in a state of flux. Who is determining that, and 
when you will you have some guidelines out?
    Mr. Powell. That will be done by the whole Board of 
Governors when we vote on it, and also by the OCC and the FDIC.
    Mr. Norman. Will they have any input from those who are 
having to pay the price of implementing CRA, like get any input 
from banks or having to navigate--
    Mr. Powell. I know that throughout the multiyear process, 
there has been a tremendous amount of interaction with banks, a 
tremendous amount, and bank lobbying groups, and also consumer 
groups. But yes, there has been a ton of input and working with 
the industry to try to achieve these statutory goals 
efficiently. I wouldn't say it is perfect, but there has 
certainly been a lot of interactions.
    Mr. Norman. So, they are getting input prior to 
implementing the requirements for CRA or the guidelines for 
CRA?
    Mr. Powell. Yes, I am pretty sure there has been quite a 
bit of interaction with the industry in terms of what to do and 
how to do it.
    Mr. Norman. Okay. Now, I think you have stated that you 
don't feel it is the Federal Reserve's policy to get into 
implementing climate change.
    Mr. Powell. We are not and we shouldn't be climate 
policymakers. We do have a small role, a focused role to play, 
principally with the larger banks to make sure they understand 
and can manage their climate risks in the long run.
    Mr. Norman. Should it be mandated?
    Mr. Powell. Should what be mandated?
    Mr. Norman. Should climate change policies be mandated by 
the Federal Reserve?
    Mr. Powell. Again, climate change is something that is 
going to affect businesses, and people, and regions, and 
States, and whole countries, and I think that has to be a job 
for elected people, by and large. I think what we are going to 
affect is we just want to make sure that banks understand and 
can manage the risks that they are running, and these are 
principally longer-term risks.
    Mr. Norman. What is concerning to those of us in the 
business community is that we have to borrow from banks. The 
Federal Reserve is conducting a Pilot Climate Scenario Analysis 
that is being mandated, not asked. It is being mandated for the 
six largest banks to participate in. When you have to do a 
scenario and mandate that they do this, is that not the Federal 
Reserve getting directly involved in mandating it?
    Mr. Powell. I think the banks actually want this. These six 
big banks have to face this globally, and what they want is 
uniform approaches and guidance on how to have one set of 
rules. The big six banks that we are talking to are already 
running climate scenarios all the time, multiple climate 
scenarios.
    Mr. Norman. Most of the banks are well-capitalized now. 
That could change, and this is just another expense that is out 
there. On the CFPB, the history, I think you said it was 12 
percent. It cannot go above 12-percent ratio. That does not 
seem logical to me. Has it ever been below the 12 percent, from 
your perspective?
    Mr. Powell. Someone here quoted the law, and that rang a 
bell for me, so that is what the law says. Have they been 
below? I would have to go back. I am happy to provide it. It is 
all kind of--
    Mr. Norman. If you could, because it seems to me like it 
is. If you have that cap, businesses couldn't operate like 
that, because there would be no incentive to reduce the price 
as long as it is automated. Thank you.
    Mr. Powell. That is the way the law is set up.
    Mr. Norman. Okay. Thank you for being here.
    Mr. Powell. Thank you.
    Chairman McHenry. The gentlewoman from Texas, Ms. Garcia, 
is now recognized for 5 minutes.
    Ms. Garcia of Texas. Thank you, Mr. Chairman, and thank 
you, Chairman Powell for being with us today. The end is in 
sight.
    I would like to begin by highlighting an issue that has 
been a concern for the Congressional Hispanic Caucus and 
others. I know that the Chair has suggested that we are going 
to weave in the diversity and inclusion issues throughout our 
hearing, so here is my concern: There has never been a Latino 
Federal Reserve President, and further, only about 5 percent of 
the Federal Reserve's overall workforce identifies as Hispanic 
or Latino. As we know, over the past year or so, there have 
been several presidential vacancies at the Federal Reserve 
Banks, and there has still been consistent failure to appoint a 
Latino candidate.
    Chair Powell, are you aware of this trend, and do you agree 
that it is a problem that our diversity and inclusion numbers 
in Federal Reserve Board are not reflective of the Latino 
population?
    Mr. Powell. Yes, it is something we have been focusing on.
    Ms. Garcia of Texas. Okay. And can we get a commitment from 
you that you will work on the workforce issues internally?
    Mr. Powell. Yes.
    Ms. Garcia of Texas. Thank you so much. And I would like to 
now follow up a little bit on some of the questions from 
Representative Norman, because I do have a concern about 
housing costs, particularly as it relates to equity and the 
negative impact on minority communities. I think you said in 
your paper that activity in the housing sector continues to 
weaken, largely reflecting higher mortgage rates. As he 
mentioned, the rates are higher, not only impacting single-
family housing, but multifamily housing. And it is also 
becoming even more and more difficult for people in my 
district, which is 77-percent Latino, to be able to buy their 
first-time/first homebuyer, the workforce, entry-level kind of 
housing.
    As financing for homes get harder to find and mortgage 
rates rise, the population of new buyers is skewing towards 
older, wealthier, and wider communities. In many cases, in our 
suburbs, equity firms are buying out the housing stock.
    Chair Powell, can you please speak about the relationship 
between Federal Reserve interest rate hikes and housing 
inequity, and what needs to change here?
    Mr. Powell. What needs to change is we need to get 
inflation under control so that interest rates can come back 
down. In the meantime, they are high because inflation is 
hurting all of your constituents, not just the housing sector, 
and all of everybody's constituents, and it is our job under 
the law to restore price stability, and also to keep maximum 
employment.
    Ms. Garcia of Texas. Is there anything else that Congress 
can be doing in this respect?
    Mr. Powell. That would be up to Congress, but there are 
lots of ways in which Congress can support people in various 
ways, but that is really in your hands.
    Ms. Garcia of Texas. Right. Now, I want to move on to the 
numbers that you mentioned. Again, in your remarks at page 2, 
of course, we all know there has been a record. The historic 
unemployment rate is down now to 3.4 percent, the lowest, I 
believe, in history, and thank you, Mr. President, for that. 
But you also mentioned that there are 1.9 job openings for each 
unemployed individual. I wonder if you could tell me how you 
define, ``unemployed individual?'' What does the unemployed 
individual profile look like?
    Mr. Powell. That has a very specific meaning. It is someone 
who is not working, but is actively seeking a job. For example, 
if you take 6 months off and stop looking for a job, you are no 
longer unemployed. That means there is a group of people who 
are kind of around the edges of the labor force who don't count 
as unemployed, and those people are marginally attached to the 
labor force, that kind of thing. But to be actually considered 
unemployed in the statistics, you have to be actively looking 
for work.
    Ms. Garcia of Texas. Right. So, it does not include people 
who are perhaps disabled and cannot find accommodations in the 
workplace to be able to get a job?
    Mr. Powell. Unless they are looking for it. The test is 
whether you are actively looking, I think, in the last--
    Ms. Garcia of Texas. Actively looking, regardless of age.
    Mr. Powell. That is right.
    Ms. Garcia of Texas. Whether or not they are--
    Mr. Powell. It is not a value judgment. It is just the way 
we assess unemployment. We look at the other groups, too, but 
actual unemployment is--
    Ms. Garcia of Texas. How do you factor in the people who 
actually are on unemployment insurance?
    Mr. Powell. I'm sorry?
    Ms. Garcia of Texas. How do you factor in the people who 
are on unemployment insurance?
    Mr. Powell. Well, they are unemployed. By definition, we 
count them as unemployed or they wouldn't qualify under the 
State requirements.
    Ms. Garcia of Texas. Right. I just want to make sure that 
we clearly understand that there are children, there are people 
who are older, people who are disabled, people who can't find 
daycare; there are so many other reasons why someone is 
unemployed.
    Mr. Powell. Yes.
    Ms. Garcia of Texas. Okay. Thank you. I yield back.
    Chairman McHenry. The gentleman from Wisconsin, Mr. Steil, 
who is also the Chair of the House Administration Committee, is 
recognized for 5 minutes.
    Mr. Steil. Chairman Powell, thank you for being here with 
us today. Your testimony has been insightful as we look to 
tackle inflation and the impact that it is having on families 
across the United States right now. I want to go back to a 
comment that was attributed to you regarding a question from 
Senator Kennedy yesterday on the impact that fiscal policy is 
having as it relates to inflation, and the quote that was 
attributed to you was that it wasn't a big factor.
    As we look at kind of a whole host of policies here on 
Capitol Hill, from reckless spending that we saw in the 
previous Congress, a lack of, what we just discussed, 
individuals who are outside the labor market, how do we get 
these folks back into the labor market, whether or not we have 
policies that are discouraging folks to come back into work, as 
we look at high energy costs and the opportunity to drive 
energy prices lower by unleashing American energy, how do you 
factor in the fiscal policies, or how should policymakers 
factor in the fiscal policies and the impact that is also 
having an inflation? I'm not looking for your advice on the 
fiscal policies, because I know you want to stay out of that, 
but how should lawmakers be looking at the fiscal policy and 
its impact on inflation?
    Mr. Powell. Let's take energy, for example. Remember, 
inflation is the change in prices. It is not the level, as you 
well know. Energy prices have been coming down, right? They are 
still high, but they have been coming down, and they are 
contributing negatively to headline inflation. So, when I say 
it is not contributing to inflation, that is what I mean. In 
addition, if you look at aggregate spending, it peaked, and 
then it has been coming down, so the fiscal impulse is actually 
negative at this point. Most of the inflation that we now have, 
something like two-thirds of the contribution of inflation in 
core PCE inflation, comes from the services sector, and that 
isn't really about fiscal policy.
    Fiscal policy was important at the very beginning. So is 
monetary policy, by the way, but now it is more about just that 
inflation is out there and you have to bring it down. The 
record is that it doesn't come down by itself unless it is 
driven by transitory factors. For example, in the goods sector, 
the supply chains have been getting better, and as that has 
happened, goods inflation has come way down, and sometimes it 
is negative now. I hope that is helpful.
    Mr. Steil. Yes. Thank you. To take that one step further, 
we are waiting on the President's budget, it is over a month 
late, but we are anticipating receiving that in the near term. 
And as we look at interest payments on the debt and the cash 
flow implications that has, not asking for what you are going 
to do at the next Board meeting, for obvious reasons, but as 
you are in those deliberations in future Board meetings on 
potential rate increases, how does the impact of interest on 
the debt factor into the calculus of you and your colleagues?
    Mr. Powell. We don't look at that. If we started to change 
our monetary policy because we were concerned about the level 
of debt payments and things like that, that is not something 
that the United States needs to do, and it is not something we 
do.
    Mr. Steil. Why would it be something that the United States 
doesn't need to do? What do you mean? Could you elaborate on 
that?
    Mr. Powell. Yes, we are going to do our job. Congress has 
given us the job: maximum employment, price stability, regulate 
the banks, and manage the payment system to some extent. We 
will do those jobs. We don't have to worry about the United 
States budget. That is not our job. And it isn't that the debt 
today is unsustainable. It is that the path is unsustainable. 
We can service our debts. It is just that we are on an 
unsustainable path, meaning that the debt is growing faster 
than the economy. So, we would never consider that. We will 
never look. If a central bank has to avoid taking actions 
because it is concerned about the budget, that is called fiscal 
dominance, and that is the thing you don't see among advanced 
economies. We think we are a long way from that.
    Mr. Steil. Thanks. Thanks for your feedback on that point. 
The CBO just released their report showing potential interest 
payments on the debt accelerating dramatically over the next 
decade, showing it would be 14 percent of our fiscal spend to 
compare that, right? National defense will be 13 percent. 
Social Security is also 14 percent. On that level, that is a 
policymaker issue, but your insights on that are helpful.
    I only have a few seconds left, and a handful of my 
colleagues have commented on the ongoing review of bank capital 
standards. I just want to echo those concerns about what the 
impact would be of a significant capital-level increase. Could 
you just comment briefly about how you quantify the costs of 
higher capital in the supposed benefits and how you balance out 
that risk and reward?
    Mr. Powell. It is always a balance. That is exactly as you 
say. We know that the capital increases that I supported back 
in 2012, 2013, 2014, 2015, 2016, earlier in my time at the Fed, 
they made the bank stronger, and they made them more resilient, 
and you really want that. You want a banking system that can 
stand up and keep doing its job in times of crisis, but the 
exact balance between that and the availability of capital and 
the cost of capital is always going to be a matter of judgment.
    Mr. Steil. Thank you very much. I yield back.
    Chairman McHenry. The gentlewoman from Georgia, Ms. 
Williams, is now recognized for 5 minutes.
    Ms. Williams of Georgia. Thank you, Mr. Chairman. As the 
Member of Congress representing Atlanta, the City with the 
highest racial wealth gap in the country, I am focused on 
creating an economy of inclusion, an economy that works for 
everyone and brings the most-marginalized into our economy. 
Americans and Atlantans flourish when the economy works for 
everyone. The Federal Reserve has a mandate of maximum 
employment that is measured by analyzing various data points of 
economic conditions. In 2020, the Federal Reserve updated its 
approach to fulfilling and measuring this mandate to include 
job growth that was broad-based and inclusive.
    Chairman Powell, do you agree that broad-based and 
inclusive growth means job growth that helps reduce racial 
unemployment and wage disparities?
    Mr. Powell. I think it means what it says. Remember, we 
can't really target a particular racial or ethnic group with 
that, but we like to think that our decisions are informed by 
an understanding of diverse groups across the economy.
    Ms. Williams of Georgia. Chairman Powell, could you share 
examples of how the Fed is including broad-based and inclusive 
job growth in the maximum employment mandate?
    Mr. Powell. Sure, I would be glad to. One thing we do is it 
is always part of the data that we look at. At each meeting, we 
always talk about it. We always mention it: different 
unemployment rates, and labor force participation rates, and 
wage rates, and things like that by racial, ethnic, and gender 
groups, and that kind of thing. That is always in the data that 
we look at and talk about. That is the first thing, so it 
informs our pursuit of maximum employment. We are trying to 
take a broader and more-inclusive understanding of what that 
statutory goal means.
    Ms. Williams of Georgia. Thank you. Two weeks ago, the 
Federal Trade Commission released data indicating that 
Georgians reported the most fraud and scam claims of any other 
State in 2022, amounting to millions of dollars of stolen 
money. The Federal Reserve's website has resources to help 
consumers protect themselves from scams where criminals 
leverage the Federal Reserve's name, including emails claiming 
potential victims are eligible for lottery winnings, robocalls 
threatening arrest in exchange for money, and other phishing 
communications.
    Chairman Powell, how does the Federal Reserve measure 
whether its counter-fraud communications are reaching the most-
vulnerable households and communities, especially those who 
might not be following the Federal Reserve press releases or 
your website or have limited access to broadband?
    Mr. Powell. When those kinds of scams happen, particularly 
when they involve us, we go on social media to try to reach 
people and tell them that if they are contacted by someone 
pretending to be a Federal Reserve person, that is not, so we 
do that. Also, we work with our Inspector General, who works 
with law enforcement to make sure that law enforcement is 
involved. So, we are aware of these scams. I think you are 
talking about the ones that involve people pretending to be a 
Federal Reserve person and get in touch with me and we will 
send you some money, and we do what we can to reach out to the 
public on that.
    Ms. Williams of Georgia. That is after the fact, but what 
happens before so that the general public is aware that this is 
happening? For those people who are not on social media, is 
there another way to get this information out to the general 
public?
    Mr. Powell. It is real. We do what we can. We are not an 
institution that deals with the general public very much. We 
deal with banks, and, of course, our rate hikes and rate cuts, 
and monetary policy affects all Americans. But I think when 
something like that happens, it is a broad program. It is a 
bunch of people who are perpetuating a fraud on many, many 
people, and we try to get out there quickly, and try to reach 
people and, again, also alert law enforcement.
    Ms. Williams of Georgia. Thank you, Mr. Chairman. And, 
Chairman McHenry, I yield back the balance of my time.
    Chairman McHenry. That is very kind and gracious of you. 
The first of the day. We need to commend that for the record. 
With that, we will recognize the gentleman from Pennsylvania, 
Mr. Meuser, for 5 minutes.
    Mr. Meuser. Thank you very much, Chairman McHenry. And 
thank you, Chairman Powell, for being with us. Chairman Powell, 
is the Fed's commitment regarding ESG not to force investment 
banks to renege on their fiduciary responsibilities?
    Mr. Powell. We don't actually have policies in effect in 
that space.
    Mr. Meuser. Okay.
    Mr. Powell. That is not an assignment that we have.
    Mr. Meuser. You saw some issuances by heads of some 
investment banks, not to mention any names, who felt like that 
was the case.
    Mr. Powell. The Fed was asking them to--
    Mr. Meuser. The SEC, the Fed, you stated a couple of 
minutes ago that you feel that some sort of ESG--you stated 
that banks want it.
    Mr. Powell. I am telling you that is completely different. 
It is regulated financial institutions that we regulate and 
supervise. The big ones are probably subject to the climate 
change issues all over the country.
    Mr. Meuser. So, you agree that the Fed won't ask banks to 
renege on their fiduciary responsibilities? The Fed won't do 
that?
    Mr. Powell. We don't regulate the investment banks. The SEC 
does.
    Mr. Meuser. Okay. So, the answer is, no?
    Mr. Powell. What is the question again?
    Mr. Meuser. I will move on. Earlier, some of my colleagues 
and Chairman McHenry questioned the holistic review of the 
capital bank holdings. This holistic view, which no one has 
seen, according to my sources, but there are published reports 
that it will call for more capital to be held by banks. I 
understand the deferral to Vice Chair Barr, but do you have 
anything you could add that would warrant the need for large 
banks' capital increases?
    Mr. Powell. There isn't a proposal to evaluate or talk 
about it yet. Vice Chair Barr has indicated he was going to 
take a look. He said he thinks capital is strong, and the 
question really is, is it strong enough? I know he has been 
working on it, and there will be a process when he does arrive 
at conclusions. He has no authority to enact something himself. 
It has to go through the Board of Governors, and also through 
the FDIC and the OCC.
    Mr. Meuser. Okay. This has nothing to do with the QT 
initiative, the tightening of the money supply; they are not 
related at all?
    Mr. Powell. No, I would say not.
    Mr. Meuser. Okay. Are you comfortable with the QT 
reductions which have taken place?
    Mr. Powell. Yes. We have the balance sheet moving down at a 
healthy clip, and it seems to be going pretty well.
    Mr. Meuser. Okay. The Biden Administration's fiscal and 
energy policy has cost trillions in deficit spending, as you 
well know, very, very excessive, trillions of dollars. 
Meanwhile, energy costs for the average American, from heating 
oils to gasoline, have increased by over 40 percent, and 
businesses, of course, just over the last 2 years. So, high 
energy obviously affects the cost of manufacturing, wages, 
general cost of living, and almost every aspect of society. 
Wouldn't such fiscal and energy policy work of the Biden 
Administration working hand-in-hand with initiatives, such as 
QT and initiatives of the Fed, be far more effective than the 
Fed fighting inflation on your own?
    Mr. Powell. We are the Agency that has the responsibility 
to restore price stability, and we just have to do it. That is 
the task we have been given under the law. It is great if 
Congress helps, it is great if the Administration helps, but we 
have to deliver it, and we will. That is our responsibility, 
which we fully accept.
    Mr. Meuser. Not risking stagflation if the fiscal policy 
and monetary policy are working against each other?
    Mr. Powell. Again, we don't comment on fiscal policy. That 
is for elected people, and we have a job: maximum employment; 
and price stability. We use our tools. We try to stay in our 
lane, stick to our knitting.
    Mr. Meuser. It is just the fear of a number of people that 
we are going to have high interest rates and higher than 2-
percent inflation if there is not that level of fiscal and 
monetary cooperation.
    Mr. Powell. Again, fiscal policy does what it is going to 
do. We take that as exogenous. The fiscal policy will be what 
you and your colleagues do, and that comes into the economy, 
and we see, and we don't have a view. We don't try to comment 
on the decisions that you make. And we use our tools to restore 
price stability no matter what happens outside of our building.
    Mr. Meuser. Sure. Okay. Mr. Chairman, I yield back. Thank 
you.
    Chairman McHenry. The gentleman yields back. We now 
recognize the ranking member of our Oversight and 
Investigations Subcommittee, Mr. Green of Texas, for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman. And thank you, Chairman 
Powell, for being with us today. I greatly appreciate your 
work, but I would like to take just a few moments to talk about 
how our legislative bodies have legitimized systemic racism. It 
has been done by having a Fed that has a responsibility to 
produce maximum employment, knowing that the 2-to-1 Black-White 
wage gap exists traditionally, and also knowing that 
traditional actions and methodologies will not change that, but 
yet, we won't give you the authority to make recommendations or 
to take actions that would directly target that. It is not your 
fault. It is the legislative body's fault. We perpetuate 
systemic racism in your mandate of maximum employment.
    We also perpetuate it in lending because we know that 
invidious discrimination exists in lending. We know it exists, 
and there are laws that will prevent and punish persons who 
cheat banks. You will be prosecuted, and you will be fined 
criminally if you cheat a bank. No such law exists if you cheat 
a customer. And we know that Black people, who are more 
qualified than White people, will get less money when they get 
a loan and pay a higher interest rate. These are all things 
that are the case. They are true. So, legislative bodies 
continue to legitimize systemic racism, and the bodies have 
become so bold now. Many of the members are so bold now as to 
say that they are sick and tired of hearing about this. They 
don't want a discussion about racism and systemic 
discrimination. They believe that all is well as long as all is 
well in the White world.
    A good many won't see it that way, Mr. Powell, but that is 
the way their actions would lead one to conclude they have 
positioned themselves. Many of these people are my friends, 
people that I associate with, talk to regularly, but there 
comes a time when you just have to be truthful. Systemic racism 
can be eliminated. It can be dealt with. We know how to, but we 
don't have the will to do it.
    So, I don't fault you. Not one scintilla of blame would I 
cast your way. It is the legislative body. It is the people who 
sit on this committee who won't allow laws to be passed making 
it a crime to deny a person a loan who is qualified to get that 
loan, people on this committee who will say they don't want to 
hear any more and encourage persons who are professionals, 
experts, encourage them to push back against talk about 
invidious discrimination.
    Systemic racism emanates from the legislative body. You are 
in a very awkward position, because I genuinely believe that 
you would like to do something about it, but you can't. It 
creates a sad state of affairs. I thank you for the time, Mr. 
Chairman, and I yield back.
    Chairman McHenry. The gentleman's time has expired and he 
yields back.
    The gentleman from Wisconsin, Mr. Fitzgerald, is recognized 
for 5 minutes.
    Mr. Fitzgerald. Chairman Powell, thanks for being here 
today. I just had one question, and some of my colleagues have 
touched on this today, again, that I think we are well aware, I 
am well aware, that there is a dynamic back in the district and 
across this nation. There is a certain segment of adults, 25- 
to 35-year-olds, many of them dual income, no kids, and they 
are completely frozen out of the housing market right now 
because the cost of a home in a new subdivision, in any 
municipality, is a half a million dollars or more.
    And as a result of that, it is not only by actions of the 
Fed, I think, on the interest rates, but certainly the other 
thing I wanted to bring up is, because the balance sheet at the 
Fed has gone from $4 trillion to $9 trillion post-pandemic, 
could the Fed, by no longer buying mortgage-backed securities 
in a smaller universe of the private sector, buyers who demand 
a higher rate of return, is there not another kind of built-in 
trigger there that mortgage rates are going to continue to go 
higher unrelated to what the Fed does? Because I think the 
concern is that between the dynamics of no new subdivisions, 
25- to 35-year-olds unable to get a loan, and then interest 
rates continuing to climb, we are going to lose a generation of 
adults here who are never going to get homeownership. They are 
never going to benefit, which we all know is the big wealth-
builder for any family.
    So, if there is anything I take away from what we heard 
today, and the questions asked, I hope that is something that 
the Fed is in tune to and is looking at closely.
    Mr. Powell. One thing is that there is a challenge with 
supply nationally, and that is zoning, it is people, it is 
materials. And so, the housing stock is constrained to some 
extent by just harder to find zoning anymore because things are 
so built up in so many places, and those are not things that we 
can control. In terms of our ownership of mortgage-backed 
securities, what happens with them as they mature is, they are 
repaid or prepaid, and they run off on their own. That is a 
passive sort of way to shrink the balance sheet. And, of 
course, they don't run off very quickly when rates are this 
high, because people are not refinancing their mortgages, 
because they have much lower mortgage rates. So, there is no 
evidence at this point of the markets having a hard time 
absorbing this supply of mortgages because the supplies in play 
of new mortgages is very low.
    It has to be right that when we are no longer buying 
mortgages, and we won't be. We are not buying mortgages now, 
and I hope we don't have to buy any more mortgage backs. We 
don't buy individual mortgages. We buy mortgage-backed 
securities. I hope we are not doing that anytime soon. We only 
do that in really severe situations where the fixed-income 
markets are gigantic, and there are a lot of buyers out there, 
and where there is a yield, there will be buyers, and I expect 
that will be the case. Not that it wouldn't have some upward 
pressure on rates for us not to be a buyer anymore, but we 
weren't a buyer for a very long time. We thought we would never 
go back in after the global financial crisis. And we kind of 
had to after the pandemic financial crisis just to keep the 
markets working, and now we have stopped again.
    Mr. Fitzgerald. Good. Thank you very much, Mr. Chairman, 
and I yield back.
    Chairman McHenry. The gentleman yields back. Noteworthy. I 
want to thank, in particular, our Members, Mr. Fitzgerald and 
Ms. Williams, for their additional minutes back to the Fed 
Chair. In a rate environment like this, time is money, and that 
is much more valuable these days. And I would like to thank 
Chair Powell for his testimony.
    The Chair notes that some Members may have additional 
questions for this witness, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to this witness and to place his responses in the record. Also, 
without objection, Members will have 5 legislative days to 
submit extraneous materials to the Chair for inclusion in the 
record.
    And with that, this hearing is adjourned.
    Mr. Powell. Thank you.
    [Whereupon, at 1:01 p.m., the hearing was adjourned.]


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