    [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

                                 SECOND SESSION

                                   __________

                                 MARCH 6, 2024

                                   __________

                               Serial No. 118-78

           Printed for the use of the Committee on Financial Services

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                www.govinfo.gov

                                       _______

                     U.S. GOVERNMENT PUBLISHING OFFICE

    56-348 PDF                   WASHINGTON : 2026

                     HOUSE COMMITTEE ON FINANCIAL SERVICES

                   PATRICK McHENRY, North Carolina, Chairman

    FRENCH HILL, Arkansas, Vice          MAXINE WATERS, California, Ranking
        Chairman                             Member
    FRANK D. LUCAS, Oklahoma             SYLVIA R. GARCIA, Texas, Vice
    PETE SESSIONS, Texas                     Ranking 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
    TOM EMMER, Minnesota                 EMANUEL CLEAVER, Missouri
    BARRY LOUDERMILK, Georgia            JAMES A. HIMES, Connecticut
    ALEXANDER X. MOONEY, West Virginia   BILL FOSTER, Illinois
    WARREN DAVIDSON, Ohio                JOYCE BEATTY, Ohio
    JOHN W. ROSE, Tennessee              JUAN VARGAS, California
    BRYAN STEIL, Wisconsin               JOSH GOTTHEIMER, New Jersey
    WILLIAM R. TIMMONS, IV, South        VICENTE GONZALEZ, Texas
        Carolina                         SEAN CASTEN, Illinois
    RALPH NORMAN, South Carolina         AYANNA PRESSLEY, Massachusetts
    DANIEL MEUSER, Pennsylvania          STEVEN HORSFORD, Nevada
    SCOTT FITZGERALD, Wisconsin          RASHIDA TLAIB, Michigan
    ANDREW R. GARBARINO, New York        RITCHIE TORRES, New York
    YOUNG KIM, California                NIKEMA WILLIAMS, Georgia
    BYRON DONALDS, Florida               WILEY NICKEL, North Carolina
    MIKE FLOOD, Nebraska                 BRITTANY PETTERSEN, Colorado
    MICHAEL LAWLER, New York
    ZACHARY NUNN, Iowa
    MONICA DE LA CRUZ, Texas
    ERIN HOUCHIN, Indiana
    ANDREW OGLES, Tennessee
                        Matthew Hoffmann, Staff Director

                             C  O  N  T  E  N  T  S

                                  ----------

                            Wednesday, March 6, 2024

                                                                       Page

                               OPENING STATEMENTS

    Hon. Patrick T. McHenry, Chairman of the Committee on Financial
      Services, a U.S. Representative from North Carolina............     1
    Hon. Maxine Waters, Ranking Member of the Committee on Financial
      Services, a U.S. Representative from California................     3

                                   STATEMENTS

    Hon. Andy Barr, Chairman of the Subcommittee on Financial
      Institutions and Monetary Policy, a U.S. Representative from
      Kentucky.......................................................     4
    Hon. Bill Foster, Ranking Member of the Subcommittee on Financial
      Institutions and Monetary Policy, a U.S. Representative from
      Illinois.......................................................     4

                                   WITNESSES

    Hon. Jerome H. Powell, Chairman, Board of Governors of the
      Federal Reserve System.........................................     5
        Prepared Statement...........................................     7

                                    APPENDIX

                  ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

    Hon. Andy Barr:
        Comments on the Basel III Endgame Proposal...................    62
    Hon. Frank D. Lucas:
        Joint Agriculture Trade Association letter...................   112
        The American Public Power Association (APPA) and National
          Rural Electric Cooperative Association(NRECA)..............   114
        Joint Energy Trade Association letter........................   117
    Hon. Brad Sherman:
        California Public Employees' Retirement System (CalPERS).....   119
        The New York Times: ``The Fed Has Targeted 2% Inflation.
          Should It Aim Higher?''....................................   125
    Hon. Maxine Waters:
        Employ America...............................................   129
        Groundwork Collaborative.....................................   146

                     RESPONSES TO QUESTIONS FOR THE RECORD

    Written responses to questions for the record from Representative
      Patrick T. McHenry.............................................   148
    Written responses to questions for the record from Representative
      Andy Barr......................................................   151
    Written responses to questions for the record from Representative
      Warren Davidson................................................   164
    Written responses to questions for the record from Representative
      Scott Fitzgerald...............................................   167
    Written responses to questions for the record from Representative
      Andrew R. Garbarino............................................   171
    Written responses to questions for the record from Representative
      French Hill....................................................   175
    Written responses to questions for the record from Representative
      Young Kim......................................................   179
    Written responses to questions for the record from Representative
      Frank D. Lucas.................................................   181
    Written responses to questions for the record from Representative
      Blaine Luetkemeyer.............................................   183
    Written responses to questions for the record from Representative
      John W. Rose...................................................   186
    Written responses to questions for the record from Representative
      Brad Sherman...................................................   189
    Written responses to questions for the record from Representative
      William Timmons................................................   191

            THE FEDERAL RESERVE'S SEMI-ANNUAL MONETARY POLICY REPORT

                                  ----------

                            Wednesday, March 6, 2024

                         U.S. House of Representatives,
                               Committee on Financial Services,
                                                        Washington, DC.

        The committee met, pursuant to notice, at 10:05 a.m., in
    room 2128, Rayburn House Office Building, Hon. Patrick McHenry
    [chairman of the committee] presiding.
        Present: Representatives McHenry, Lucas, Sessions, Posey,
    Luetkemeyer, Huizenga, Wagner, Barr, Williams of Texas, Hill,
    Loudermilk, Davidson, Rose, Steil, Timmons, Norman, Meuser,
    Fitzgerald, Garbarino, Kim, Flood, Nunn, De La Cruz, Houchin,
    Ogles, Waters, Velazquez, Sherman, Meeks, Lynch, Green, Himes,
    Foster, Beatty, Vargas, Gottheimer, Gonzalez, Casten, Pressley,
    Horsford, Tlaib, Torres, Garcia, Williams of Georgia, Nickel,
    and Pettersen.
        Chairman McHenry. The committee will come to order.
        Without objection, the chair is authorized to declare a
    recess of the committee at any time.
        The hearing is titled, ``The Federal Reserve's Semi-Annual
    Monetary Policy Report,'' an inventive title. We use ``semi-
    annually'' here on the committee.
        Without objection, all members will have 5 legislative days
    within which to submit extraneous materials to the chair for
    inclusion in the record.
        I will note at the outset that this hearing has a hard stop
    of 1 p.m., which will be strictly observed, and I see Chairman
    Powell smile. It is just 3 hours.
        I will now recognize myself for 4 minutes to give an
    opening statement, and welcome back, Chair Powell.

     OPENING STATEMENT OF HON. PATRICK T. McHENRY, CHAIRMAN OF THE
      COMMITTEE ON FINANCIAL SERVICES, A U.S. REPRESENTATIVE FROM
                             NORTH CAROLINA

        Since you last appeared before the committee in June 2023,
    the conversation in Washington surrounding inflation has
    shifted significantly. To be clear, it is not because an
    inflationary fire has been extinguished. From the most recent
    data available, food costs are up 21 percent since President
    Biden took office, energy costs are up nearly 32 percent,
    shelter costs are up more than 19 percent, and you will pay 37
    percent more for a dozen eggs in America today.
        As you stated in January, people are still paying more for
    the basics of life, and the prices they are paying are still
    high. Families are not happy about it, as you know and as our
    colleagues know, but according to the Biden Administration and
    many of my Democratic colleagues, they should be thrilled. In
    an attempt to score political points, many in Washington have
    decided the best strategy is to tell people what they are
    feeling is not actually accurate. They claim Bidenomics has
    brought down costs and their partisan so-called American Rescue
    Plan put our economy back on the right track. Of course, we
    know the opposite is true since inflation skyrocketed soon
    after the American Rescue Plan was enacted, which was predicted
    by several former Obama Administration economic officials.
        Instead of working to solve the underlying issues causing
    high prices, the administration has played the blame game,
    citing corporate greed and so-called shrinkflation. Some
    Democrats have even trained fire on you, Chair Powell, blaming
    interest rate hikes, which were necessitated by Democrats
    spending for the high costs, and brazenly calling on you to
    make cuts prematurely. It is highly inappropriate for lawmakers
    to attempt to influence monetary policy. Chairman Powell, I
    have faith that you will not allow politics to cloud your
    judgment in the fight to tackle inflation. As I have always
    said, you are a steady hand, and I believe you are committed to
    the Federal Reserve's independence, as am I. Just as you have
    rejected the outside pressures of politically motivated
    agendas, I hope you will be just as attuned to the threats of
    politicization when the calling is coming from inside the
    House.
        Vice Chairman Michael Barr's so-called holistic review of
    capital requirements and the fatally flawed Basel III Endgame
    proposal represents a concerning trend of partisan proposals
    taking priority over supervision. This has real-world impacts
    as we saw 1 year ago this month when the Supervision &
    Regulation arm of the Federal Reserve (Fed) was late catching
    up to the effects of the acceleration of interest rates on the
    banking system. Americans were understandably shaken by last
    year's banking turbulence. As we continue to monitor potential
    instability, including bank exposure to commercial real estate,
    it is critical that the Fed keep its eye on the ball. This does
    not include enacting new, far-reaching, and, ultimately,
    harmful regulatory policy, though.
        As you know, members on both sides of the aisle on this
    committee and in Congress have made clear that the Basel III
    Endgame proposal would be catastrophic for families,
    communities, and small businesses. Regulators should withdraw
    it and start over. I think that is the proper course with
    something as deeply flawed as the current proposal.
    Additionally, given that other significant proposals would have
    to fit holistically together, regulators cannot simply proceed
    with them as separate modules or using a cut-and-paste
    approach. Most importantly, as the Basel III Endgame proposal
    is discarded or altered, I strongly urge you and other
    regulators not to finalize the long-term debt proposal.
    Instead, Chairman Powell, I would encourage you to stick to the
    task at hand and follow the data. The stakes are way too high
    to put politics over sound policy.
        With that, I yield back, and I will now recognize the
    ranking member of the full committee.

    OPENING STATEMENT OF HON. MAXINE WATERS, RANKING MEMBER OF THE
      COMMITTEE ON FINANCIAL SERVICES, A U.S. REPRESENTATIVE FROM
                               CALIFORNIA

        Ms. Waters. Thank you very much, Mr. Chairman. Good
    morning, everyone. Welcome back, Chair Powell.
        While I am pleased about the progress the Fed and the Biden
    Administration have made to tackle inflation, we are not out of
    the woods yet. In fact, even though my Republican colleagues
    refuse to acknowledge this fact, housing is still the number
    one driver of inflation. Based on the latest data, housing
    costs continue to make up nearly 70 percent of overall price
    increases, outpacing modest wage gains. This means that until
    we address the underlying housing supply shortage, Americans
    will continue to pay an increasing share of their income on
    housing. The affordability crisis will worsen, and inflation
    will remain too high.
        With that said, it is hard to understand why Republicans
    feign concern about the economy when they are unwilling to
    address the key driver of inflation: housing. In fact,
    Republicans have only put forward legislation that makes things
    worse for millions of Americans, including moving legislation
    to slash funding for Federal housing programs, including in
    rural America where homelessness is rising. This abysmal record
    on housing is par for the course for Republicans. Since they
    have been in the majority, they have convened only six hearings
    on housing. On top of launching baseless impeachment efforts,
    censoring members, and pushing our government to the brink of
    multiple government shutdowns, it is clear that Republicans are
    too focused on drama and chaos to deliver anything for the
    American people. That is not how Democrats roll.
        When I was chair of the committee during the 116th and
    117th Congress, not only did we hold 55 hearings on housing,
    but I and my fellow Democrats enacted 12 critical housing bills
    into law in the last Congress alone that helped to stymie
    evictions, foreclosures, and homelessness, keeping millions of
    people stably housed during and after the pandemic. Unlike
    Republicans, we do not just talk about the issue. Democrats
    make law. As House Republicans continue to disappoint,
    committee Democrats are offering evidence-based solutions to
    keep a fair and affordable housing agenda as the top priority
    in Congress. That is why I and my Democratic colleagues
    reintroduced three groundbreaking bills to address the housing
    crisis and bring down inflation once and for all. This includes
    Housing Crisis Response Act, the Ending Homelessness Act, and
    the Downpayment Toward Equity Act. Together, these bills would
    create nearly 1.4 million affordable, accessible, and resilient
    homes, reduce housing costs and homelessness, and revive the
    American Dream of homeownership for all.
        So when my Republican colleagues are ready to get serious
    about our Nation's economy and inflation, Democrats are ready
    to work with you to pass the bills into law. In fact, tomorrow
    at noon, I, committee Democrats, and more than 30 housing
    advocates will join together at a press conference to share
    just how important ending the affordable housing crisis is to
    the State of our Union. So I invite all of my Republican
    colleagues who say they care about this issue to come on and
    join us.
        I look forward to discussing this critical issue with Chair
    Powell today, and, Mr. Chairman, I yield back my time.
        Chairman McHenry. The chair recognizes Mr. Barr, the
    chairman of the Subcommittee on Financial Institutions and
    Monetary Policy for 1 minute.

     STATEMENT OF HON. ANDY BARR, CHAIRMAN OF THE SUBCOMMITTEE ON
          FINANCIAL INSTITUTIONS AND MONETARY POLICY, A U.S.
                      REPRESENTATIVE FROM KENTUCKY

        Mr. Barr. Welcome, Chairman Powell. Runaway inflation and
    increased interest rates still have Americans reeling, and
    while the rate of price increases have come down thanks to
    monetary tightening, the overall level of prices remain high.
    The toothpaste is out of the tube, and the average American
    family still is paying about $15,000 more for the same goods
    and services that they were purchasing just 3 years ago before
    the Biden Administration. So Americans have suffered years of
    eroding purchasing power in their paychecks.
        While I am pleased the Fed is resolved in getting inflation
    back under control, I am not pleased by the numerous recent
    unjustified, politicized, and under-analyzed regulatory
    proposals. The Fed needs to withdraw and re-propose the
    irredeemably flawed Basel III Endgame proposal, especially
    given that 97 percent of public comments across the ideological
    spectrum express disapproval of the proposal. Chair Powell, I
    urge you to listen to the American people, withdraw the Basel
    III Endgame proposal, and tell us today what the Fed's plans
    are moving forward. I yield.
        Chairman McHenry. The chair now recognizes the ranking
    member of the subcommittee on Financial Institutions and
    Monetary Policy, Mr. Foster, for 1 minute.

     OPENING STATEMENT OF HON. BILL FOSTER, RANKING MEMBER OF THE
     SUBCOMMITTEE ON FINANCIAL INSTITUTIONS AND MONETARY POLICY, A
                   U.S. REPRESENTATIVE FROM ILLINOIS

        Mr. Foster. Thank you, Chair Powell, for being here today,
    and I had a chance to actually read the monetary policy report
    from cover to cover, thanks to an exceptionally long airport
    delay going back home last weekend. The feeling I got again and
    again is that things are fairly well recovered from coronavirus
    disease (COVID) and getting back to normal, that we are in the
    range where ordinary monetary policy and fiscal policy will
    allow us to satisfy your dual mandate.
        Today, unemployment remains near historic lows, core
    Personal Consumption Expenditures (PCE) inflation is down at
    2.8 percent year-over-year compared to a peak of 5.6 percent in
    2022, and the major stock indices are hovering around record
    highs. Gross Domestic Product (GDP) growth continues to beat
    expectations, and the U.S. economy has added more than 14
    million jobs since President Biden took office. The GDP itself
    is pretty much back on the trajectory that it would have been
    pre-COVID. U.S. manufacturers alone have added nearly 800,000
    jobs, employing more workers now than any point since 2008. So
    my lesson from that is that the fiscal response that we engaged
    in was appropriately tailored, and the soft landing is within
    sight. Thank you. I yield back.
        Chairman McHenry. The gentleman yields back. Today, we
    welcome the testimony of Jerome Powell, chair of the Federal
    Reserve's Board of Governors. As you know, you will be
    recognized for 5 minutes for an oral presentation of your
    testimony.
        Without objection, your written testimony will be made a
    part of the record.
        Chair Powell, you are now recognized for 5 minutes.

        STATEMENT OF HON. JEROME H. POWELL, CHAIRMAN, BOARD OF
                GOVERNORS OF THE FEDERAL RESERVE SYSTEM

        Mr. Powell. Chairman McHenry, Ranking Member Waters, and
    other members of the committee, I appreciate the opportunity to
    present the Federal Reserve's semi-annual Monetary Policy
    Report.
        The Federal Reserve remains squarely focused on our dual
    mandate to promote maximum employment and stable prices for the
    American people. The economy has made considerable progress
    toward these objectives over the past year.
        While inflation remains above the Federal Open Market
    Committee's (FOMC's) objective of 2 percent, it has eased
    substantially, and the slowing in inflation has occurred
    without a significant increase in unemployment. As the labor
    market tightness has eased and progress on inflation has
    continued, the risks to achieving our employment and inflation
    goals have been moving into better balance.
        Even so, the Committee remains highly attentive to
    inflation risks and is acutely aware that high inflation
    imposes significant hardship, especially on those least able to
    meet the higher costs of essentials, like food, housing, and
    transportation. The FOMC is strongly committed to returning
    inflation to its 2-percent objective. Restoring price stability
    is essential to achieve a sustained period of strong labor
    market conditions that benefit all.
        I will review the current economic situation before turning
    to monetary policy.
        Economic activity expanded at a strong pace over the past
    year. For 2023 as a whole, gross domestic product increased 3.1
    percent, bolstered by solid consumer demand and improving
    supply conditions. Activity in the housing sector was subdued
    over the past year, largely reflecting high mortgage rates.
    High interest rates also appear to have been weighing on
    business fixed investment.
        The labor market remains relatively tight, but supply and-
    demand conditions have continued to come into better balance.
    Since the middle of last year, payroll job gains have averaged
    239,000 jobs per month, and the unemployment rate has remained
    near historical lows at 3.7 percent. Strong job creation has
    been accompanied by an increase in the supply of workers,
    particularly among individuals aged 25 to 54, and a continued
    strong pace of immigration. Job vacancies have declined and
    nominal wage growth has been easing. Although the jobs-to-
    workers gap has narrowed, labor demand still exceeds the supply
    of available workers. The strong labor market over the past 2
    years has also helped to narrow longstanding disparities in
    employment and earnings across demographic groups.
        Inflation has eased notably over the past year but remains
    above the FOMC's longer-run goal of 2 percent. Total personal
    consumption expenditures prices rose 2.4 percent over the 12
    months ending in January. Excluding the volatile food and
    energy categories, core PCE prices rose 2.8 percent, a notable
    slowing from 2022 that was widespread across both goods and
    services prices. Longer-Term inflation expectations appear to
    have remained well anchored as reflected by a broad range of
    surveys of households, businesses, and forecasters, as well as
    measures from financial markets.
        After significantly tightening the stance of monetary
    policy since early 2022, the FOMC has maintained the target
    range for the Federal funds rate at 5.25 to 5.5 percent since
    its meeting last July. We have also continued to shrink our
    balance sheet at a brisk pace and in a predictable manner. A
    restrictive stance of monetary policy is putting downward
    pressure on economic activity and inflation.
        We believe that our policy rate is likely at its peak for
    this tightening cycle. If the economy evolves broadly as
    expected, it will likely be appropriate to begin dialing back
    policy restraint at some point this year, but the economic
    outlook is uncertain, and ongoing progress toward our 2-percent
    objective for inflation is not assured. Reducing policy
    restraint too soon or too much could result in a reversal of
    progress we have seen in inflation and ultimately require even
    tighter policy to get inflation back to 2 percent. At the same
    time, reducing policy restraint too late or too little could
    unduly weaken economic activity and employment.
        In considering any adjustments to the target range for the
    policy rate, we will carefully assess the incoming data, the
    evolving outlook, and the balance of risks. The Committee does
    not expect that it will be appropriate to reduce the target
    range until it has gained greater confidence that inflation is
    moving sustainably toward 2 percent.
        We remain committed to bringing inflation back down to our
    2-percent goal and to keeping longer-run inflation expectations
    well anchored. Restoring price stability is essential to set
    the stage for achieving maximum employment and stable prices
    over the longer run.
        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.

        [Prepared statement of Mr. Powell follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman McHenry. Thank you, Chairman Powell, and I should
    have noted this at the outset, but this is your 25th testimony
    before the U.S. Congress as chair of the Federal Reserve, and
    we thank you for your service and your commitment to
    congressional oversight. Very much appreciate it. I will now
    recognize myself for 5 minutes for the purposes of questions.
        Let us begin with what is top of mind. There are two issues
    that are top of mind with the Fed: regulatory policy with the
    Michael Barr proposal on capital and interest rates. We are in
    a political year, and the lens of a political year falls
    heavily on all parts of government. There is a lot of debate
    the past 3 years on high inflation and the impact on American
    families, and now that inflation is receding, there has been a
    great deal of speculation about when the Fed would cut rates.
    Some say that it is going to be a lot of rate cutting this
    year. Some say none. What say you?
        Mr. Powell. I say that, really, it will depend on the path
    of the economy. Our focus is on maximum employment and price
    stability and the incoming data as it affects the outlook, and
    those are the things we will be looking at. I can go further if
    you would like.
        Chairman McHenry. So at what point will the Fed be forced
    to cut rates? What kind of data would you point to, and do you
    have any updates there?
        Mr. Powell. What we have said is that the Committee would
    like to see more data that confirm and make us more confident
    that inflation is moving sustainably down to 2 percent. We have
    some confidence of that. Headline inflation has moved down more
    than 3 full percentage points now to 2.4 percent, as I
    mentioned in my remarks. We want to see a little bit more data
    so that we can become confident and so that we can take that
    step of beginning to reduce policy rates. It is a very
    important step. We think because of the strength in the economy
    and the strength in the labor market and the progress we have
    made, we can approach that step carefully and thoughtfully and
    with greater confidence and when we reach that confidence the
    expectation is we will do so sometime this year. We can then
    begin dialing back the restriction on our policy.
        Chairman McHenry. Well, let us pivot to regulatory policy.
    Chair Powell, as you know, there have been serious concerns
    expressed on both sides of the aisle and across America and
    across industries about the Basel III Endgame proposal that
    Vice Chair Michael Barr, has proposed and that the Fed is
    taking up. The concern is on both process, meaning how the
    proposed rule was developed, analyzed, released for comment,
    the general concern of a lack of economic justification for
    these actions, but also on the substance. The proposal goes
    much further than the Basel III committee recommended on
    capital requirements, putting us at a great disadvantage
    internationally, potentially.
        My first question is on substance. Is the Fed listening to
    these comments that have been nearly unanimous in opposition to
    this rule, and is the Fed listening to these comments on the
    impact the rule will have on everyday Americans and what is the
    status on rulemaking, and what is the plan moving forward?
        Mr. Powell. You are right. We have received voluminous and
    very substantive comments as well as the quantitative impact
    study that we put out. We got those responses in mid-January,
    and we are carefully analyzing them. We had asked for very
    specific, detailed, data-based comments, and I am happy to say
    that we did get that, so we are just now reaching the stage
    where we can begin to make decisions about how to proceed. We
    really have not made any decisions yet, but I think I can say a
    few things. First, we do hear the concerns, and I do expect
    that there will be broad and material changes to the proposal.
    I will add that I am confident that the final product will be
    one that does have broad support both at the Fed and in the
    broader world.
        As far as process is concerned, we are really not at the
    stage of making decisions about that. That is down the road, at
    least a bit. I will say the question we get is re-proposal, and
    I will say that we have not made that decision, but if and when
    we get to that point and that turns out to be the appropriate
    thing, we will not hesitate to do it.
        Chairman McHenry. You will not rule that out? You would not
    rule that out at this stage of the game, re-proposal?
        Mr. Powell. Not at all. No, I think it is a very plausible
    option. It will depend on how things lie at the time when we
    reach that point.
        Chairman McHenry. Okay. There is a lot of concern about the
    interplay between different parts of the rule, and if you just
    change one, what does the economic analysis look like for the
    new proposal? So it is good to hear that you will be methodical
    and the Fed will do its traditional role of building consensus
    around the substantive changes and that is your intention?
        Mr. Powell. That is right. I said this would be a
    thoughtful, deliberative process. It is more important that we
    get this right than that we do it fast. We understand that.
    This is an important rulemaking, and it is going to have
    potential implications for the economy and the people we serve.
    We are going to take our time and do it right.
        Chairman McHenry. Thank you, Chairman Powell. The ranking
    member, Mr. Waters, is recognized for 5 minutes.
        Ms. Waters. Thank you very much, Mr. Chairman. Chair
    Powell, I want to talk to you about housing, but before I get
    there, let me address the issue of mergers.
        Last week, I wrote a letter, along with 15 committee
    Democrats, to you as well as the Department of Justice (DOJ),
    Comptroller of the Currency (OCC), and Federal Deposit
    Insurance Corporation (FDIC), expressing my strong concern
    about the lack of progress you have made in updating your bank
    merger review procedures. This is critical now. We just learned
    of another mega merger involving Capital One and Discover,
    which will create the sixth largest U.S. commercial bank with a
    major role in the credit card market. For too long, experts
    have raised the alarm that there is a rubber stamping process
    of bank mergers where virtually all applications are approved.
    All the while, unbridled market consolidation poses great risk
    to consumers and entrepreneurs. What is the status of your
    updates to the merger review process, and does the Fed plan to
    convene public hearings on the Capital One and Discover merger?
        Mr. Powell. I believe we are in regular contact with the
    Justice Department on what is going on with their review of
    merger practices. We are looking at that and considering. I
    think on the potential merger that you mentioned, we have not
    received an application, so there is really not much to say
    yet. It is early days. When we do get that application, though,
    we are going to evaluate that merger, as always, under the
    factors laid out under the law, and that is our commitment.
        Ms. Waters. So you do believe that your bank merger
    procedures are ready to do the work that is necessary when you
    evaluate this possible merger?
        Mr. Powell. I do.
        Ms. Waters. Are you supportive of organizing community
    hearings on this merger?
        Mr. Powell. I have not talked about that with anybody. I
    will say this. We have done that in many large mergers, but
    that is not a conversation we have had yet. We literally do not
    even have an application for the merger yet.
        Ms. Waters. Thank you. We will stay in touch with you on
    that. So turning to the national affordable housing and
    homelessness crisis where we have seen steady increases year
    after year in home prices and rent costs, which are a symptom
    of the chronic under supply of affordable housing. Indeed, more
    renters and homeowners are now spending more of their income
    than ever on housing costs. As you know, housing costs continue
    to be a primary driver of inflation. Do you think the Fed has
    sufficiently emphasized the role that housing costs play in
    keeping us from your 2-percent inflation goal? Do you think it
    is reasonable to believe that monetary policy can accomplish
    this goal without a fiscal policy response? If you do, how long
    will it take to get there?
        Mr. Powell. Housing services inflation is one of the three
    components that we look at that make up the core PCE Index, and
    it has been coming down from its heights of a couple years
    back. It is part of the story. I think the overall story is
    that goods price inflation has turned negative. Goods prices
    are actually coming down a bit. Housing services inflation, you
    can see from currently entered-into leases that as leases turn
    over, the increases are going to be smaller. So in our forecast
    and in everyone's forecast, housing services inflation comes
    down, and that leaves non-housing services----
        Ms. Waters. It has been reported that the methodology used
    to assess housing costs as an indicator of inflation is
    imperfect namely because it considers costs based on both new
    and old rent, including for owner-occupied housing on a month-
    to-month basis. This results in stale data since families'
    housing costs typically do not change unless they move or their
    lease is up for renewal. So to address these imperfections in
    the housing costs indicators, the Bureau of Labor Statistics
    and Cleveland Fed created an improved methodology based solely
    on new lease rents, which is referred to as New Tenant Rent
    Index. Has the Fed incorporated this new indicator into its
    economic assessments? If not, why not? If so what changes have
    you had on the level of housing inflation observed by the Fed?
        Mr. Powell. We are well aware of that, and we do
    incorporate it into our thinking. As I was starting to mention,
    the fact that market rents are moving up at a much slower pace
    is the reason why forecasts are for housing services inflation
    to come down, and that absolutely plays a role in our thinking.
        Ms. Waters. Thank you, and I yield back.
        Chairman McHenry. The gentlelady yields back. The vice
    chair, Mr. Barr, is--I am sorry.
        Mr. Hill. Wrong vice chair.
        Chairman McHenry. Wrong vice chair. The gentleman from
    Arkansas, the vice chair of the full committee, Mr. Hill, is
    recognized for 5 minutes.
        Mr. Hill. Thank you, Chairman. I want to welcome you,
    Chairman Powell, to the committee. We are glad to have you back
    and your expertise, and I want to pick up where Chairman
    McHenry left off on his conversation about Basel III Endgame.
    You made a good point, saying you are not taking the whole
    concept of re-proposal off the table as you review the
    analytics, and you will discuss the interactivity of that rule
    with other rules. So if you were to re-propose the Basel III
    Endgame, would the Federal Reserve delay then the long-term
    debt proposal that is on the table? In other words, would you
    agree that the Agency should not finalize this long-term debt
    proposal for bank holding companies until banks have a better
    understanding of what their capital obligations under Basel III
    Endgame might be?
        Mr. Powell. We have not made the first decision yet, so I
    could not say definitively, but, yes, that is a question we
    would be asking ourselves is what would be the implication for
    other rules, including the long-term debt.
        Mr. Hill. Is the Fed considering changes to the requirement
    for regional banks to issue long-term debt? Right now, it is
    stated to be issued at 6 percent of risk-weighted assets in an
    abundance of caution in case there needs to be a resolution.
    Obviously, we know the logic for it, but as I understand it, it
    is being required at both the holding company level and down at
    the bank level, and that seems redundant to me. Are you aware
    of that, and have you considered changing that in your
    discussions?
        Mr. Powell. Yes, that is another area where the comment
    period ended a little while back, and so once again, we are in
    the process of evaluating the comments. There will be a
    thoughtful, deliberative process around that. We welcome
    comments on these kinds of things, very important the
    implications for the banks that are affected. We want to
    understand the effects to make sure we understand them
    correctly so that we can evaluate what a final rule should look
    like.
        Mr. Hill. Good. Let me turn to the monetary policy outlook.
    As the chairman noted, consumer prices are 17 percent higher
    for American households since President Biden was inaugurated
    back in January 2021, and yet, in spite of that 17 percent
    increase in costs, real wages have actually fallen 2 percent
    over that period. So there is no doubt that inflation is the
    biggest issue facing American households, and in my view, there
    are three principal causes. Certainly, we had supply
    disruptions, but we have had unprecedented fiscal policy
    laxity. You described it in a recent interview as
    unsustainable, but we also think that the Federal Reserve, in
    my view and many people in this committee commented, should
    have reduced accommodation after the pandemic sooner.
        One of the things coincident with that, which is what I
    want to talk to you about, is that the FOMC announced in August
    2020 a flexible average inflation targeting framework right in
    the middle of the pandemic, which many of us did not understand
    why the Fed would take that decision then but it would give you
    flexibility on the 2 percent, saying the Fed could allow
    inflation to rise above 2 percent and stay there above that
    level for some time because the Fed had such challenges in
    getting the price level to 2 percent. That was a major shift in
    the Fed's approach. Do you think in retrospect of now what we
    have witnessed over the past 4 years, that was a mistake in
    hindsight to change that framework, and is it under review?
        Mr. Powell. We said we would do a review on a 5-year basis,
    and that means we will be starting that review toward the end
    of this year, so we really have not started. I do think that
    the question you raised will be one of the questions we look
    at, but the bigger question really is, that change in the
    approach was really based on the fact that we had very low
    interest rates and very low inflation for a long period of
    time, and policy was always very close to the effect of lower
    bound, so there was not any firepower for central banks, and so
    it was a way to keep inflation expectations anchored at 2
    percent and not have them slide down.
        Now we have entered a different period. The pandemic really
    may have changed that in a sustained way. We do not know that
    yet, but the big question we will be asking ourselves is, is
    the effect of lower bound to be thought of in a different way
    now, and if it were, that would have ramifications for our
    framework, but we have not begun the review yet. It will begin
    at the end of this year and probably end late the next year.
        Mr. Hill. Thank you. I yield back, Mr. Chairman.
        Chairman McHenry. The gentleman yields back. We will now go
    to the gentleman from New York, Mr. Meeks, for 5 minutes.
        Mr. Meeks. Thank you, Mr. Chairman. Thank you, Chairman
    Powell, for being here, and I think I am going to pick up a
    little bit right where we are. Two hundred nineteen, 2020, the
    entire world was under the unprecedented pandemic with COVID,
    right? Is that correct----
        Mr. Powell. Yes.
        Mr. Meeks [continuing]. at the time? That changed a lot of
    things with reference, not just for the United States, but for
    the entire world, and it affected the economies of countries
    just about on the planet. That is not also correct?
        Mr. Powell. Yes.
        Mr. Meeks. Supply chains were disrupted. In fact, I can
    remember many Americans and people around the world could not
    get toilet paper or paper towels and some of the basics. So the
    prices, because of supply and demand, skyrocketed, causing the
    inflation, not only in the United States, but basically all
    over the world. Is that correct?
        Mr. Powell. Yes.
        Mr. Meeks. Therefore, the Fed had to do certain things
    because of what we were in at that particular time. We could
    not just go back and act like the pandemic was not there. We
    had to do something to try to make sure that we were able to
    get through the pandemic. Is that not correct?
        Mr. Powell. Yes.
        Mr. Meeks. Now we are at that point where we are about to
    get through this pandemic, and we can look at the rest of the
    world, what they did or did not do at that time, but what we
    did at that time. As a result of that, 3 years post the
    pandemic, when you look around the world, I think that you were
    correct with what you stated, that by most accounts, our
    economy is doing well. In fact, I would say our economy is
    doing better than most of the other countries in the world.
    Would you say that is correct?
        Mr. Powell. I would.
        Mr. Meeks. I would say then that some of the other
    countries of the world maybe should have looked at the policies
    that we put in place thereafter so that they could get out of
    it so that they could have a labor market that is strong, where
    the unemployment rate is near a 50-year low. As you have
    stated, inflation is also now coming down faster than any place
    else on the planet just about. Is that not correct?
        Mr. Powell. I think that is right. Yes.
        Mr. Meeks. I think that you also recognized a mismatch
    between the strength of the economy--that is what we are
    talking about--and the feel. I think that Ranking Member Waters
    touched on one of those big issues of housing, which is now,
    you know, we are still trying to get that under control, and I
    think the ranking member has some ideas on how we can do that,
    and that may be something that you need to consider so that we
    can further get down the inflation rate. The other would be the
    commodity markets because the cost of food is too high for
    people, so that is something else that we need to get in
    control. Is that not correct?
        Mr. Powell. Yes.
        Mr. Meeks. Let me just ask this: Can you say that there is
    a connection, for example, between conflicts in other areas of
    the world, like Russia's war against Ukraine and/or the turmoil
    in the Middle East, and the economic pressures that the United
    States feels? Does that not also go into the reason why the
    cost of commodities can be still higher? Is there a connection
    therein, Mr. Chairman?
        Mr. Powell. Certainly the war in Ukraine caused commodity
    prices to move up sharply.
        Mr. Meeks. So could you tell what would the connection lead
    you to believe that there is an urgent need for us, I would
    think, for, you know--and we are running out of time--for us to
    do everything that is in our power in Congress to support
    Ukraine so that we can make sure that and other strategic
    partners that we can help the commodities market, and that
    would help lower the cost of some of the commodities, bringing
    food prices down, if we would just be able to pass certain
    things that is going to help Ukraine right here in the United
    States Congress? Is that correct?
        Mr. Powell. Here is where it gets outside of our
    jurisdiction, so I would not have an opinion on Ukraine
    funding.
        Mr. Meeks. If we had more grain that was going through, was
    not blocked by Russia, things of that nature, that generally
    just say that helps bring the cost down. Cost is higher because
    of the disruption in the Black Sea that has happened because of
    this war, so that would help bring the cost down. That is not
    necessarily the policy just here in the United States, but that
    is the policy because of what is going on in Russia, and we
    need to make sure that we do something to prevent that if we
    really are serious about bringing inflation down. Is that not
    correct?
        Mr. Powell. It is correct that a full supply of grain would
    help with commodity prices.
        Mr. Meeks. So, instead of us playing politics with this and
    acting like it is your fault or anyone else's fault, that we
    had to go and do what we did because of the unprecedented
    pandemic. What we did was save the economy then, knowing we got
    some problems that we had now, and now we are recovering
    quicker and better than any other country on this planet as a
    result of your policies and the policies of Joe Biden.
        Chairman McHenry. The gentleman's time has expired. The
    gentleman from Oklahoma, Mr. Lucas, is now recognized for 5
    minutes.
        Mr. Lucas. Thank you, Mr. Chairman, and, Chairman Powell,
    thank you for testifying today.
        When you were before this committee a year ago, I cautioned
    against raising capital requirements on commodity derivatives
    that our agricultural and energy producers use back home to
    keep prices of food and power stable for consumers. At the
    time, you said that was a very specific concern, and you were
    not sure the proposal would even address commodity derivatives,
    and in fairness, that was before the Basel proposal was
    officially published.
        Unfortunately, we now know that the proposal does impact
    commodity derivatives, and, in fact, they are among the most
    penalized financial products that banks offer. I would note for
    just a moment, I very much appreciate your comments and
    responses to Chairman McHenry about the nature of the overall
    proposal. Congress wanted end users to be able to secure their
    hedges without posting margin to keep the derivatives markets
    affordable, but I have seen estimates that some of these types
    of transactions for end users could face 10 times the capital
    requirement. Chairman Powell, make me feel a little better.
    Ease my concerns here. Will you and the Fed work to fix this?
        Mr. Powell. Let me start by saying I want to echo the fact
    that our commodity markets and our capital markets are a huge
    national asset, and we need them to be functioning well and
    with as little friction as possible. I now understand that what
    you are referring to is the things that were done to increase
    capital requirements for various kinds of derivative
    activities. I will just say that is an area where we are aware
    of the concerns, and it is an area that we are taking a very
    close look at.
        Mr. Lucas. I appreciate that. I was a member of the Dodd-
    Frank Conference Committee where there was bipartisan support
    to not disadvantage end users, farmers, ranchers, small
    businesses. This had broad bipartisan support then and still
    does today. Unfortunately, the Fed could undermine this
    longstanding work done by Congress.
        I would like to enter a few letters into the record, Mr.
    Chairman, that discuss the detrimental impact to end users;
    first, a joint agricultural trade association letter from the
    American Farm Bureau Federation, the National Cattlemen's Beef
    Association, among seven others; next, a joint energy trade
    association letter from the American Gas Association and four
    others; and last, a letter from the American Public Power
    Association and the National Rural Electric Cooperative
    Association.
        Chairman McHenry. Without objection.

        [The information referred to can be found in the appendix.]

        Mr. Lucas. Thank you, Mr. Chairman. Chairman Powell, I
    would now like to focus on how the proposal is set to
    significantly disincentivize banks from offering clearing
    services. In Dodd-Frank, Congress mandated central clearing as
    a way to reduce risk in the system. The number of banks that
    can clear derivatives for end users has reduced over time,
    making it harder for end users to find a bank to offer this
    service. There are some estimates that the Fed's proposal will
    increase capital for this activity by 80 percent. I am worried
    that this will make it even harder for end users to find a bank
    to clear their hedges.
        This also comes at a time when the Securities and Exchange
    Commission (SEC), our friends at the Securities and Exchange
    Commission, has just finalized a rule in December that will
    increase clearing cost in Treasury markets. This will have a
    real impact on market access and liquidity not just in
    commodities, but the $26 trillion Treasury market that plays a
    critical role in the world economy. Will you work with the
    Commodity Futures Trading Commission (CFTC) to address this
    problem?
        Mr. Powell. Again, I will say that we are aware of those
    concerns, and we are prepared to work with other agencies and
    also to make sure that our capital proposal appropriately
    addresses them.
        Mr. Lucas. The strength of central clearing is entirely
    dependent on banks' willingness to participate, and problems
    with the Basel Endgame warrant a full re-proposal to give us
    time to appreciate their consequences, and there are real
    consequences, as you and I both know, Mr. Chairman. With that,
    Mr. Chairman, I yield back the balance of my time.
        Chairman McHenry. The gentleman yields back. The gentleman
    from Texas, Mr. Green, is recognized for 5 minutes.
        Mr. Green. Thank you, Mr. Chairman, and welcome again, Mr.
    Powell. It is an honor to have you before us today. I always
    enjoy hearing your commentary.
        As you know, recession and inflation, these are buzzwords,
    and they are used in some circumstances to cast a dim light on
    perhaps the Fed and others who are working to end some of these
    troubling circumstances we are dealing with. Are you now at a
    point where you believe that there will not be a recession?
    There was much talk about recession, and many people worried
    that we would find ourselves having to negotiate our way out of
    a recession. What is your position currently on a recession?
        Mr. Powell. So U.S. growth last year was in excess of 3
    percent. What we are seeing so far this year is continued solid
    growth. My expectation and that of other forecasters and of my
    colleagues is that we will see continued growth at a solid
    pace. I will say there is no reason to think that the U.S.
    economy is in some kind of short-term risk of falling into a
    recession. Having said that, though, there is always a
    possibility, a meaningful possibility, that an economy will
    fall into recession. I do not think that possibility, though,
    is elevated at the current time.
        Mr. Green. Thank you. I appreciate you saying this because
    we want to at some point eliminate the great deal of fear
    associated with just the term ``recession.'' Next point: the
    December FOMC projections showcase a slightly lower
    unemployment rate than last June's projections, and slightly
    higher GDP, suggesting a soft landing remains likely. Are you
    of the opinion that we are headed to a soft landing, Mr.
    Powell?
        Mr. Powell. I will just say that what we have seen so far
    is an economy that is growing at a solid pace. We are seeing a
    labor market that is still tight, still strong. Wages are
    moving up, but the labor market is coming into better balance
    between supply and demand, and inflation has come down sharply,
    really, since the middle of last year. So those are the
    conditions we see. They are very attractive conditions, and we
    are trying to use our policies to keep that growth going and to
    keep that labor market strong while also achieving further
    progress on inflation. That is our goal and do I think there is
    a possibility we can achieve all of that while keeping the
    labor market strong and the economy growing? Yes, I think there
    is a possibility. Indeed, that is what we are trying to
    achieve.
        Mr. Green. A soft landing can be difficult to identify. We
    could possibly have a soft landing and miss the point at which
    the landing took place. How do you define the soft landing such
    that a member of the public, a layperson, would understand that
    we have indeed had a soft landing?
        Mr. Powell. We really think about it in the terms I just
    discussed, which is we want to keep the economy growing. We
    want the labor market to remain strong. Three-point-seven
    percent unemployment is pretty near 50-year historical lows,
    and we want inflation to continue to move down closer and
    closer to that 2 percent objective. We have made quite good
    progress on that over just the past year, so we want to
    continue those conditions, and I do not want to put the label
    on it. Other people can do that, but I would just say we are
    using our tools to keep a strong labor market and strong
    growth, while making further progress on getting inflation down
    to 2 percent for the benefit of the public. That is the economy
    that we are trying to achieve, and I think we are on a good
    path so far to be able to get there.
        Mr. Green. Well, I concur, but I would ask this as my last
    question. Will there be some announcement at some point that we
    have had a soft landing, because we have people who are
    continually indicating that we are not having a soft landing,
    there is a possibility of a recession. So will there ever be
    some official statement that would give people some comfort?
        Mr. Powell. I do not think by us, no. I think we are just
    going to keep our heads down and do our jobs and try to deliver
    what the public is expecting from us. We would not be declaring
    victory like that.
        Chairman McHenry. The gentleman's time has expired.
        Mr. Green. Thank you, Mr. Chair.
        Mr. Powell. Thank you.
        Chairman McHenry. The gentleman from Texas, Mr. Sessions,
    is now recognized for 5 minutes.
        Mr. Sessions. Mr. Chairman, thank you very much. Chairman,
    welcome back. I think we enjoy this. I hope you do, too. I know
    there is some bit of trepidation about all the things that are
    available to us and you to answer. I learned a long time ago on
    the campaign trail, every problem can be solved on a campaign.
    Reality is a little bit different. Welcome back despite all
    that.
        I am looking at the Monetary Policy Report, March 1, 2024,
    and as I review this, I would like to focus on the term that I
    would say high prices are here to stay because what I have
    heard you say today in this report, really go to, is you got
    everything under control, but we are going to keep the high
    prices. I think the high prices really take a toll on the
    American people, as you are hearing from our colleagues, no
    matter whether they be Republican or Democrat. Page 7 of your
    report, and you do not have to go focus on it, it says, ``While
    core service price inflation has been slowing, but remains
    elevated.'' It does. Labor costs, as you know, and energy costs
    are a driver to your monetary policy. The question that I have
    is, because you began referencing policy, 2 weeks ago or so,
    the President announced that he was going to slow down the
    gifting of opportunities in Texas for natural gas to be able to
    continue the exploration. This in Texas is a trillion-dollar
    answer/problem to us because if we do not constantly go find,
    through these new finds but also through the permitting
    process, we are in trouble. We are also putting in trouble our
    contracts that we have with Germany and a lot of other
    countries.
        This is going to mean also that business in America
    continues to have high prices because, as you know, wages are
    already high and now energy is high. There is no resiliency to
    continue this and see the American people win. You talked about
    policy. So what is your advice to policy about energy and what
    this administration is doing on the policy perspective?
        Mr. Powell. We have broad, significant, important
    responsibilities, but we are really not responsible for energy
    policy, and we try to avoid commenting on it because we are not
    responsible----
        Mr. Sessions. But it has a huge impact. On this report, it
    arbitrarily keeps prices high. It arbitrarily means that
    business, while they are making money and while households,
    people do buy that, it is diminishing their long-term
    advantages to make progress. So you are just going to leave
    that alone?
        Mr. Powell. Really not appropriate for us to comment on. If
    I am commenting on energy policy, I should comment on
    everything. We have a mandate, which is maximum employment and
    price stability. We take decisions by the legislature and by
    the administration as a given. We are not in charge of second-
    guessing them. It is just not our job.
        Mr. Sessions. Okay. All right. Let us say we are not going
    to second-guess them. I will. I believe that the energy
    policies that this President and the Democratic Party have
    supported are causing a huge boom in prices staying high. They
    will not come down: a boom in attacking the energy industry,
    jobs that are associated with it, our foreign policy as it
    relates to contracts that we have signed with foreign
    countries, giving up the natural gas market almost entirely on
    the world market to Qatar. It has a huge impact on whether we
    are going to keep prices high or control these prices. It has a
    huge impact on, I think, your monetary report about how many
    houses get built, how many jobs get filled, whether we have
    jobs in place, whether we continue to have more jobs available
    than workers that are there because overregulation is having a
    lot to do with the nervousness not only on this panel, but also
    by the American people.
        It would be my hope that you would pass some sort of a memo
    and tell them you have no opinion but you want them to see what
    the impact is. I want to thank you for being here. Thank you,
    Mr. Chairman. I yield back my time.
        Chairman McHenry. The gentleman yields back. The gentleman
    from Connecticut, Mr. Himes, is recognized for 5 minutes.
        Mr. Himes. Thank you, Mr. Chairman, and, Chairman Powell,
    thanks for being with us today. I have a question, but I want
    to start by not celebrating, but acknowledging what has been a
    really remarkable soft landing in our economy. I am not
    celebrating because the American people, consumers, are still
    feeling the effects of high prices. Wages have not caught up
    with prices in some instances, but I think that it would be
    fair to say that observers would never have predicted the
    conduct of this economy. You, yourself said it in the final
    press conference of 2023 when you said, ``A very high
    proportion of forecasters predicted very weak growth or a
    recession.'' Not only did that not happen, we actually had a
    very strong year, so I want to acknowledge that and acknowledge
    your commitment to independent monetary policy.
        Because I am still burdened with this idea that truth and
    facts matter, I want to point out, especially having listened
    to my good friend, Mr. Sessions, talk about the energy market,
    truth and facts matter. We are producing more oil and natural
    gas today than any other country on the planet. We are the
    world's number one energy producer. I could spend my entire 5
    minutes sort of pointing out facts.
        The fact I want to point out here, and this comes right out
    of the report, is that the premise that inflation is Joe
    Biden's fault, his fiscal policy's fault, first, is faulty
    because half the fiscal stimulus that occurred in the face of
    the pandemic happened under the previous President, Donald
    Trump, and it has faded. This report makes the case, ``Core
    goods prices have been declining as supply bottlenecks ease and
    import price inflation falls.'' So, Mr. Chairman, I do not want
    you to comment on that because it gets a little bit political,
    but I do think it is important that we keep some foot on the
    plane of facts.
        I do want to ask you a question, though, Mr. Chairman,
    because I always worry about risks, risks that we see and risks
    that we do not see. I want to use the remainder of my time to
    talk about a risk you are very conscious of, which is the
    overhang in the commercial real estate market.
        As you know, the Financial Stability Oversight Council
    identified commercial real estate as perhaps the most salient
    risk to the financial system: $6 trillion roughly in loans,
    half of that on bank balance sheets. In a ``60 Minutes''
    interview a few weeks ago, you characterized distress in the
    commercial real estate market as sizable but manageable. Do you
    still feel like that risk is manageable? Do you feel like you
    have the visibility and the transparency and the tools to
    address it? It makes me nervous because this has echoes of
    2008-2009 when vacancy rates declined relatively rapidly. We
    are not seeing that right now. So how do you feel? Does that
    risk continue to be manageable, and do you have the tools to
    manage it?
        Mr. Powell. I would say yes to that. I think it is
    manageable, and we have been working hard to manage it for some
    time now, really. What it really is, is it is a lot of downtown
    real estate where there is too much office supply because of
    work from home and also the kind of downtown retail that is no
    longer as profitable, and things like that are really at the
    heart of it. So what we have done is we have looked at banks
    that have significant concentrations, and we have been in touch
    with them to make sure that they have a plan to deal with that.
    There will be losses by some banks. It is not really the big
    banks. It is really medium-and small-sized banks that have
    these higher concentrations.
        It is going to be with us as a problem we will be working
    through, I think, for several years. The idea is you have to
    have enough capital, enough liquidity, and a plan to take the
    losses that you are probably going to take, and so that is what
    we are doing. We are very active in this space with small-and
    medium-sized banks.
        Mr. Himes. So let me ask you about that. Sorry to
    interrupt, but let me ask you about that. Silicon Valley Bank,
    wild irresponsibility inside the bank, egregious
    irresponsibility on the part of corporate treasurers who put so
    much on deposit. The Fed also had some self-examination to do
    because the examiners and the supervisors of the bank, quite
    frankly, were not doing what they should have been, so we might
    be forgiven for being a bit skeptical of claims on this. What
    has changed in the context of Silicon Valley Bank that gives
    you the confidence that supervisors and the examiners will be
    on top of this?
        Mr. Powell. I see it with my own eyes. I mean, frankly,
    there is a risk that we would overreact to something as
    significant as that. It is not like we would not have reacted
    very, very strongly to what happened with Silicon Valley Bank,
    and we have. I know that our supervisors are out there, and we
    are hearing back from media reports that we have been engaged
    with medium-and small-sized banks principally on this. So I am
    confident that we are doing the right things there, and I do
    believe it is a manageable problem. If that changes then I will
    say so.
        Mr. Himes. Thank you. Thank you, Mr. Chairman. I yield
    back.
        Chairman McHenry. The gentleman from Missouri, Mr.
    Luetkemeyer, is recognized for 5 minutes.
        Mr. Luetkemeyer. Thank you, Mr. Chairman, and thank you,
    Mr. Powell, for being here today. I would like to associate my
    remarks or myself with Mr. Hill's remarks earlier with regards
    to the FDIC proposed long-term debt requirements that are based
    on the risk weighting of assets. I think it is an ill-thought-
    out proposal, and hopefully, your position on FSOC, you will be
    able to advise them and hopefully guide them that this is going
    to be held up until we actually get a Basel III rule.
        In October 2023, the Board issued a proposal to update the
    Debit Interchange Fee Cap in Regulation II. This is very
    concerning given the data from both the Government
    Accountability Office (GAO) and Fed's own studies show that Reg
    II has significantly harmed access to free checking and other
    banking services for the country's poorest citizens. Yesterday,
    I introduced the Secure Payments Act, which will prohibit a
    final rulemaking until the Fed, among other things, studies the
    impact of the Board's proposed rule, completes a quantitative
    impact analysis specifically as it relates to affordable
    banking services for low-income Americans, and reports those
    findings to the Congress.
        I understand the Fed acted here because you feel you are
    facing litigation, but I urge the Board to proceed with extreme
    caution with any type of price control proposals, especially
    since the first iteration was so clearly harmful. Chairman
    Powell, knowing of the hardship caused by this policy on low-
    income consumers, does it give you any pause to continue down
    this road?
        Mr. Powell. As you know, this rule is out for comment. We
    extended the comment period to May 12, so we do not have all
    the comments yet. We will evaluate them carefully and make an
    assessment. I mean, the law does assign us a specific job,
    which is to assess whether an interchange fee received by a
    large debit issuer for processing a debit card transaction is
    reasonable and proportional to issuer costs. This is the
    obligation that Congress has bestowed upon us, not something we
    sought but that is our obligation under the law, and we do not
    know what else to do than to keep doing it for as long as that
    is our assignment, and that is all we think we are doing, but I
    think that the concerns that have been raised will be things
    that we think about.
        Mr. Luetkemeyer. Well, hopefully, you will study this, and
    I understand that from the previous types of rules along this
    line, they were very detrimental to a lot of low-income folks.
    As you know, the price reductions that were promised during the
    Durbin Amendment, for instance, the profits actually went to
    the large retailers rather than going to the consumers as they
    were talked about. Ninety-eight percent was one of the studies
    that showed that the retailers kept all the money instead of
    lowering prices as they were telling us that were going to
    happen, so I am very concerned about that.
        So what is the legal basis for updating your regulation?
    You have talked about it a little bit that you believe that
    there is something in the law that says that you need to be
    doing this updating all the time, or should you be studying it
    before you actually propose a rule and make all these things
    more appropriate?
        Mr. Powell. Well, again, I think our reading of the law is
    that it is not something you do once and leave it there. It is
    supposed to be reasonable and proportionalable to a certain
    identified issue or cost, the implication being there if those
    costs change, then this should change. So that is our reading.
    I think we do a lot of work. We waited a long time to change
    it. It has been many years since we did change it, but we do
    quite a bit of work to make this assessment, and we will review
    the comments and the data that we get very quickly.
        Mr. Luetkemeyer. One of the things I hope that you consider
    is the fact that even though it is supposed to be $10 billion
    and up, this stuff all rolls downhill, and as the last study
    showed, the smaller banks, the community banks are also feeling
    the effects of this. So be sure to consider that when you start
    talking and thinking about this. I appreciate that.
        Yesterday I had two different foreign banker CEOs in my
    office, and one of them brought up a subject to me, which is
    very concerning, with regards to artificial intelligence being
    able to impact financial institutions in this country and our
    banking system. I tell people, I say, think about this for a
    second. You find some individual who is a well-known
    individual, perhaps Larry Kudlow, Dave Ramsey or Bloomberg,
    somebody who has got credibility, and suddenly you see an
    artificially produced advertisement or Facebook post, and this
    person says, look, we have a hundred banks that have a problem
    today. Now, that individual did not do this. It is artificially
    produced. I have seen a commercial already with an individual.
    You could not tell the difference between that individual and
    the real thing.
        We have just come through the Silicon Valley situation. If
    you have real-time payments, the Fed now, where you can
    instantaneously transfer money and you have people scared to
    death by some well-known individual to an artificial
    intelligence situation, and I can tell you that China is
    watching this like a hawk. They are ready to pounce on this
    situation. I have some bills that actually would solve the
    problem. Do you think there are some issues here we need to be
    taking a look at?
        Mr. Powell. Yes, I think we are very focused on AI like, I
    mean, many government agencies and law enforcement agencies in
    particular. It is very challenging. You paint one picture.
    There are lots of pictures you can paint.
        Chairman McHenry. The gentleman's time has expired.
        Mr. Luetkemeyer. It is interesting because the foreign
    institutions are watching this.
        Chairman McHenry. The gentleman's time has expired.
        Mr. Luetkemeyer. Thank you.
        Chairman McHenry. We will now go to the gentlewoman from
    Texas, Ms. Garcia, for 5 minutes.
        Ms. Garcia. Thank you, Mr. Chairman, and, Chairman Powell,
    thank you for being with us this morning. It is always a
    delight to have you before us.
        Chair Powell, the February Congressional Budget Office
    report estimated that the U.S. economy will grow an estimated
    $7 trillion over the next decade, thanks in large part to the
    surge in immigration created a larger labor force. Immigration
    also increases demand for goods and services. I know you
    mentioned in your report that the growth during COVID was held
    down due to some restrictions in COVID and restrictions on
    immigration. Can you detail how immigrants have been fueling
    our national growth, and did you consider this report from the
    Congressional Budget Office (CBO) in this current report?
        Mr. Powell. I am very familiar with the CBO report. I have
    read the demographic projections and I have read the economic
    projections, so I do understand what they did.
        Ms. Garcia. So you do agree with a $7 trillion growth in
    the next decade?
        Mr. Powell. I have no judgment on that. I have not tried to
    make a parallel assessment, but I am familiar with the
    assessment. What they are doing is they are saying more people
    working, a bigger economy, and it makes the economy bigger. It
    is just arithmetic. If you add a couple of million people to an
    economy and a percentage of them will work, then there will be
    more output, and that is what they are showing. I just want to
    be very, very clear, though, that we do not make immigration
    policy. We do not comment on immigration policy indirectly or
    directly.
        Ms. Garcia. Well, I am not asking you do that, but, Mr.
    Chairman, I am simply asking if you agree that the immigration
    surge has added to our strong labor force, which is necessary.
    I think you said that we expect a continued growth at a solid
    pace, so to be able to continue on a solid pace, then we need
    that labor force. Would you not agree?
        Mr. Powell. So last year we got a big increase in workers,
    and it came from two sources. One was participation increased
    from people who are already here, and, in addition, we got a
    significant increase in immigration. Many of those people take
    part in the working economy, and so there was a big increase in
    labor supply. That will have increased output. It will have all
    kinds of economic effects. I am just reporting the facts there.
        Ms. Garcia. Right.
        Mr. Powell. I am not going to say anything is needed for
    the future or good policy indirectly or directly, but, I mean,
    I think it is just reporting the facts to say that immigration
    and labor force participation both contributed to the very
    strong economic output growth that we had last year.
        Ms. Garcia. Right. Is it possible for the Fed to conduct a
    formal assessment into the positive impact immigrants have on
    our economy and report it back to Congress?
        Mr. Powell. Not really, no. I think that is a job for the
    CBO. That is precisely what the Congressional Budget Office
    does, not what we do.
        Ms. Garcia. Right, but the other question that you have not
    addressed is, did you consider the CBO's assessment that the
    growth in the next 10 years would be 7 trillion and about 1
    trillion in added revenues. Was that considered in this report
    because that was the February report, and this, I believe, is
    through February 29.
        Mr. Powell. I think that the answer to your question is 10-
    year growth projections by CBO do not have big implications, do
    not have any implications, really, for the current stance of
    monetary policy. I will say that the immigration that we saw
    was a notable factor of the 2023 and 2024 economic outcomes,
    and, of course, we are aware of that, and it plays a role in
    our thinking about appropriate policy and the path of the
    economy.
        Ms. Gracia. Okay. Well, thank you for that. Related to
    that, I know that the last time that you were here, you and I
    talked about diversity and diversity inclusion efforts at the
    Fed. I applauded you and applauded the President for his
    appointment of Dr. Adriana Kugler. I expect to visit with her
    this week. What other strategies and programs are you using in
    the Fed, not only in here, but in all of the branches to ensure
    that there is diversity and inclusion?
        Mr. Powell. So in terms of intake of people, when Reserve
    Banks go to hire a new president, those processes are very
    focused on having a diverse applicant pool, and you see the
    results of that more and more over the years. That happens. We
    do not have any role in appointments of Governors, so that is
    not our job. The administration does that.
        Chairman McHenry. The gentlelady's time has expired.
        Mr. Powell. I will just say internally we are very focused
    on having an open and inclusive place to work, and also in
    hiring, we work hard, you know, to have diversity.
        Chairman McHenry. The gentlelady's time has expired.
        Ms. Garcia. Thank you. Thank you, Mr. Chairman.
        Chairman McHenry. The gentleman from Michigan, Mr.
    Huizenga, is now recognized for 5 minutes.
        Mr. Huizenga. Chairman Powell, good to see you in person.
    Mr. Chairman, I have to make a comment here. It is stunning to
    me that equating an underground economy, which is very
    different and not a healthy alternative to the regular economy,
    and basing that on an illegal workforce that is not legally
    able to work ultimately will fail. That is not a strategy, to
    my colleagues on the other side. So just ask any farmer who is
    going to then have somebody, a regulator, come in and fine them
    for employing people who are not legally allowed to be here in
    the country. That is one of their greatest fears, so that is
    just a fallacy of growth within this economy that is not
    sustainable.
        Chair Powell, last fall I sent Vice Chairman Barr a letter
    expressing my concern over the cumulative impact pending
    rulemakings governing products and services will have on
    consumers. This morning, there has been a fair amount of time
    spent on Basel III, but among the agencies--and here I am
    including Fed, FDIC, OCC, CFPB--the number of pending or final
    rules is, frankly, just staggering.
        Regulators last year finalized new rules for the Community
    Reinvestment Act. The Fed is also looking at Reg II, which, in
    my opinion, would unintentionally undermine recent significant
    progress in bringing low-and moderate-income consumers into the
    mainstream banking system. Just yesterday, the CFPB unveiled a
    rule that would cap late fees for banks, and I just literally
    walked out of a meeting with my credit unions, who are very
    concerned about those things that may be in their future as
    well. So I think it is critical that we do not look at any of
    these rules in a vacuum and we need to consider their total
    impact and full scope on that.
        So I am going to ask you a question I have asked some of
    the other regulators. How much do you as the Fed and you
    personally consult with other agencies on their own rulemaking
    agenda? Do you coordinate? Do you talk?
        Mr. Powell. I do not lead that area of our business, but I
    know there is a lot of talking. I am not sure there is
    coordination.
        Mr. Huizenga. We are in government. There is always a lot
    of talking. I am concerned about the coordinating. All right.
    Well, let me ask you this way. When a rule is finalized under
    another regulator, are you mandated or have any kind of policy
    to go back and look at your other pending rules under your
    purview and see if changes need to be made because of these
    other agencies' rulemakings?
        Mr. Powell. There is no mandate like that. I think where it
    made sense to do that, though, we would do it.
        Mr. Huizenga. Do you genuinely have some sort of review of
    that, its consequences?
        Mr. Powell. I do not think there is a formal review, no.
        Mr. Huizenga. Okay. I have heard repeatedly that elements
    of Basel III overlap with the Fed's annual stress tests. What
    are you going to do to address that overlap?
        Mr. Powell. So, I mean, we are in just the beginning,
    actually, of deciding what to do about Basel III, and part of
    that may be the interaction with stress tests. So I do not have
    anything for you on that today, but that is certainly an issue
    that presents itself.
        Mr. Huizenga. I would like to continue that conversation. I
    do want to touch on the bank failures of last year very
    quickly. Do you think that the banks that ultimately needed the
    government bailout lacked sufficient capital, or was it more of
    a management problem?
        Mr. Powell. With Silicon Valley Bank, could they have used
    more capital? I mean, they were actually raising capital. It
    was a capital raise that they announced that triggered the run
    and everything. So you can argue that it needed more capital,
    but I would not say that was the proximate cause, really. It
    was a funding structure that was all about too much
    concentration of uninsured deposits.
        Mr. Huizenga. Yes. I am asking the question because many of
    us are very concerned that those failures are being used as an
    excuse to raise capital standards across the board and because
    the SEC just released its climate disclosure rule this morning,
    I am going to touch on the climate-related question for you.
    The FSOC chair has repeatedly stated that climate change is
    ``an existential threat.'' Presumably a threat that is
    existential affects banks and financial institutions of all
    sizes. Why then have FSOC member regulatory agencies, including
    the Fed, limited their guidance on climate-related risks only
    to large financial institutions? Why not everybody?
        Mr. Powell. Well, it is a new thing, and, you know, we are
    not----
        Mr. Huizenga. It is a heck of a new thing, yes.
        Mr. Powell. We are not climate change policymakers. This
    certainly needs to be handled by elected representatives and so
    we are starting this very carefully with large institutions,
    who are already doing it, by the way. They are doing this
    because to remain active internationally, they have to be doing
    it, so we started with them because they understand it.
    Imposing it on smaller banks, is not something I am for.
        Chairman McHenry. The gentleman's time has expired.
        Mr. Huizenga. We will be following up on the Taylor rule.
        Chairman McHenry. The gentlelady from Michigan is
    recognized for 5 minutes, Ms. Tlaib.
        Ms. Tlaib. Thank you so much, Chairman. Thank you, Chair
    Powell, for being here. Do you agree with the April Federal
    Reserve report that compensation incentives contributed to
    Silicon Valley's bank failure?
        Mr. Powell. I am sorry. I did not get----
        Ms. Tlaib. So the April Federal Reserve report, it said
    that compensation incentives contributed to the Silicon Valley
    Bank's failure. Do you agree with that?
        Mr. Powell. I would say it is at best a tertiary factor,
    but it probably had something to do with it, for me not a
    major----
        Ms. Tlaib. So that is no?
        Mr. Powell. That is very small.
        Ms. Tlaib. Okay. So it did. Okay. So do you agree the
    appropriate rules on incentive compensation could have reduced
    the likelihood of Silicon Valley's failure maybe if they did
    not take all that money?
        Mr. Powell. No, I really do not think so. I mean, I do not
    think it is----
        Ms. Tlaib. So if they all that money----
        Mr. Powell. I do not think it is a first order question for
    Silicon Valley. A lot went wrong there.
        Ms. Tlaib. Yes.
        Mr. Powell. Incentive comp would be way down the list.
        Ms. Tlaib. They actually blame you guys.
        Mr. Powell. Sorry?
        Ms. Tlaib. They blame the oversight even though they did
    not respond to your correspondences.
        Mr. Powell. We took our medicine.
        Ms. Tlaib. Yes. Do you think it also has something to do
    with the fact that Section 956 of the Dodd-Frank rule has not
    been finalized by you?
        Mr. Powell. No, I do not.
        Ms. Tlaib. You do not think it is the reason?
        Mr. Powell. I do not.
        Ms. Tlaib. You do not think it is because people made money
    off of the failure?
        Mr. Powell. I think nothing----
        Ms. Tlaib. You do not think money drove them to do what
    they did?
        Mr. Powell. I did not say that. There are lots of----
        Ms. Tlaib. So they made money from it. It was a lottery for
    them, right?
        Mr. Powell. I do not think that incentive compensation
    arrangements were at the heart of the Silicon Valley Bank
    failure, no.
        Ms. Tlaib. Okay. Do you support robust rulemaking for
    executive compensation, Chairman?
        Mr. Powell. I know that the----
        Ms. Tlaib. Oh, you do not?
        Mr. Powell. I am sorry?
        Ms. Tlaib. Do you support robust rulemaking for executive
    compensation? Do you believe in Section 956?
        Mr. Powell. Section 956 is the law. As I understand it, the
    agencies are looking at doing something. It has been 12 or 13
    years, right, that nothing has happened.
        Ms. Tlaib. Yes, multiple agencies. Yes.
        Mr. Powell. It has been hard to get it done. I lived
    through the last episodes of trying to get it done.
        Ms. Tlaib. Yes. So do you believe in a robust rulemaking
    process for executive compensation?
        Mr. Powell. I do. I do, yes.
        Ms. Tlaib. Oh, great. That is awesome. Will you commit to
    helping finalize the Dodd-Frank Section 956 this year?
        Mr. Powell. I would not say that----
        Ms. Tlaib. It has been 12 years, Chairman.
        Mr. Powell. Yes. No, I would not----
        Ms. Tlaib. It played a role in the bank failure, Chairman.
        Mr. Powell. If I can answer. What I would like to do is
    understand----
        Ms. Tlaib. So you do not want to do it this year? I mean, I
    am being serious. You are saying no.
        Chairman McHenry. If the member will allow the witness to
    answer the question. We have had a good day today, and the
    gentleman is trying to answer the question.
        Mr. Powell. I would like to understand the problem we are
    solving, and then I would like to see a proposal that addresses
    that problem.
        Ms. Tlaib. Okay. Do you believe people should profit off of
    bank failure, the executives that made those decisions?
        Mr. Powell. No, not the executives.
        Ms. Tlaib. They should not profit?
        Mr. Powell. Well, I would say executives who are
    responsible for a failed bank should not profit from the
    failure. Absolutely not.
        Ms. Tlaib. So they get to walk away with compensation based
    on their failure?
        Mr. Powell. You are asking about a----
        Ms. Tlaib. It is true it happened.
        Mr. Powell [continuing]. different rule that would have
    clawback and things like that?
        Ms. Tlaib. Yes.
        Mr. Powell. Yes. So that is something I know you have been
    looking at for a while. That is certainly an appropriate thing
    to look at.
        Ms. Tlaib. Yes, because it is just going to continue to
    happen is my opinion. It does not have to be yours, but it sure
    the heck could have helped here if they knew they could walk
    away with not the bonuses, the compensation. I mean, they made
    money, a significant amount of money for their bank failure.
    Last question, Chair Powell. Do you believe that the impacts of
    climate change pose a risk? Have you been talking about that
    more?
        Mr. Powell. I certainly believe that climate change is real
    and poses risks over the longer term, sure.
        Ms. Tlaib. So there have been some that say higher interest
    rates actually makes it more difficult to build out the
    renewable energy projects and other investments required to
    prevent climate impacts. Do you believe that to be true?
        Mr. Powell. I believe that we need to do our job that you
    have assigned us, which is maximum employment and price
    stability, and we do it through interest rates. It is not our
    job to consider the effect on climate change of that, and I
    think any effect on climate change of that would be kind of
    miniscule.
        Ms. Tlaib. Last question, Chair Powell. Who do you see as
    the major winners and losers from high interest rates in terms
    of income groups, age groups, and racial or other demographics?
        Mr. Powell. So the point of high interest rates in the
    current environment is to bring inflation under control. The
    people who are hurt the most by inflation, as you know, are
    people who are on a fixed income, who right away are in trouble
    when the cost of transportation, food, energy, and when those
    things go up, they do not have financial resources to deal with
    it.
        Ms. Tlaib. Have you looked----
        Mr. Powell. We are accountable to provide price stability
    to the American people. Those people benefit the most over time
    from stable prices.
        Ms. Tlaib. Thank you.
        Chairman McHenry. The gentlelady's time has expired. We
    will go to the gentlelady from Missouri, Mrs. Wagner, for 5
    minutes.
        Mrs. Wagner. Thank you, Mr. Chairman, and thank you, Chair
    Powell, for your service. I want to associate myself with the
    comments of my colleague, Mr. Himes. I am concerned about
    banks' commercial real estate exposure, and I do hope that the
    Fed is doing everything it can to ensure that the exposure that
    these banks have will continue to be, in your words, manageable
    because this is a looming crisis out there given the workplace
    changes and dynamics.
        Chair Powell, in remarks on Bloomberg, Larry Summers,
    former Treasury Secretary during the Obama Administration,
    stated that, ``It would be much more productive for our central
    bank to be focused on the question of real estate portfolios in
    the banks they supervise than some of the more abstract and
    politically driven arguments about various kinds of capital
    charges on the largest banks.'' Do you agree, sir, that it
    would be more productive for Fed supervisors and regulators to
    keep their eye on the ball, in this case, commercial real
    estate and other real estate investments?
        Mr. Powell. I absolutely think we need to keep our eye on
    the ball on commercial real estate, and, yes, I think we are
    doing that.
        Mrs. Wagner. I hope so. According to your semi-annual
    report, the median of members on your Monetary Policy Committee
    estimate that your target overnight interest rate will average
    4.1 percent in 2024. Does that mean that the median number of
    members anticipate that you will be cutting interest rates
    sometime this year by as much or more than a full percentage
    point?
        Mr. Powell. No, it does not mean that. Actually, the
    Summary of Economic Projections showed a median of this is in
    the December FOMC, so this is now 3 months old showed three
    rate cuts this year, so that would be 75 basis points, three
    quarters of 1 percentage point. You were quoting the next
    year's number, so you would add that on. That was through 2025,
    I believe.
        Mrs. Wagner. So are you anticipating that there would be
    more cuts that are coming?
        Mr. Powell. The way I would say it is we are making
    economic projections, and so we write down a path of growth,
    what is happening in the labor market, what happens with
    inflation, and what goes with those forecasts is an appropriate
    monetary policy, appropriate interest rates. So we expect
    inflation to come down, the economy to keep growing, and the
    labor market to remain strong, and if that is the case, it will
    be appropriate for interest rates to come down significantly
    over the coming years.
        Mrs. Wagner. Good.
        Mr. Powell. It is not a plan. What will happen is actually
    what the economy needs. The economy will do something different
    from that, and that is what will actually happen.
        Mrs. Wagner. Chairman Powell, 15 Members of Congress,
    including myself, Ranking Member Sherman, Chairman Barr, and
    Ranking Member Foster, sent a letter to the prudential
    regulators regarding the impact that Basel will have on U.S.
    capital markets' activities. The letter highlighted ``critical
    areas of our U.S. markets, including securities underwriting,
    securitization, and derivatives that will be severely impacted
    by the Basel proposal.'' This was also a common theme
    represented throughout the comment file on the Basel proposal,
    over 95 percent of them. Considering that 75 percent of
    financing in the U.S. is done through our capital markets,
    which are the deepest and most liquid in the world, why would
    the Fed continue to pursue this flawed proposal instead of re-
    proposing a rule that would not have such a drastic impact on
    the U.S. economy?
        Mr. Powell. In fact, the capital markets concerns you
    raised are among those that I raised myself in our open Board
    meeting when we put this out for comment. I did also say----
        Mrs. Wagner. You said you wanted broad support, and
    obviously, there is dissent among some of your Governors, the
    FDIC, others. So how are we coming on this and how are we
    reconciling----
        Mr. Powell. We are working our way through the comments,
    and we are coming to the point where it will be appropriate for
    us to begin to evaluate what changes are appropriate. I have
    said I think those changes will be broad and material, and that
    is where that is, but we have not made any decisions yet. We
    just got the comments.
        Mrs. Wagner. In my role as chairman of the Capital Markets
    Subcommittee, I have seen SEC Chair Gensler push the envelope
    in terms of rules and regulations that go well beyond the
    congressional mandate, even encroaching on the jurisdiction of
    other financial regulators. What is the Fed's response to
    another agency encroaching on its jurisdiction?
        Mr. Powell. We do not comment on other agencies'
    regulation. However, to take your hypothetical at face value,
    if they were to come into our jurisdiction----
        Mrs. Wagner. Oh, it is more than a hypothetical.
        Mr. Powell [continuing]. then we would react.
        Mrs. Wagner. Good. Well, I hope you do. I yield back.
        Chairman McHenry. The gentlelady from New York, Ms.
    Velazquez, is recognized for 5 minutes.
        Ms. Velazquez. Thank you, Mr. Chairman. Right here.
        Mr. Powell. Hi.
        Ms. Velazquez. Hi. Thank you for being here, Chairman
    Powell. Property insurance rates are becoming prohibitively
    expensive or inaccessible for homeowners and developers in my
    community. The FSOC's annual report identifies property
    insurance rates as an increasing risk, and I recently raised
    this issue with Secretary Yellen. Is the Fed monitoring the
    rising costs of insurance and its impact on macro economy?
        Voice. Is this mic off?
        Chairman McHenry. We will pause the clock. We will have
    staff take a look at the microphone.
        Ms. Velazquez. We need to----
        Chairman McHenry. The clock being frozen is out of respect
    for Ms. Velazquez, or out of good luck. I am not sure.
        Ms. Velazquez. The clock.
        Chairman McHenry. We will get staff to listen. We will just
    suspend for a moment.
        Ms. Velazquez. We need to invest in infrastructure for this
    committee.
        Chairman McHenry. Yes. Well, we are trying to do electronic
    voting and----
        Ms. Velazquez. This is not voting for us.
        Chairman McHenry. No. It is hard now just to get the
    microphones to work. Madam Clerk, thank you. Nice. So all the
    photographers have left, so the awkward photos for Trish will
    be less awkward.
        [Pause.]
        Chairman McHenry. Any luck?
        Voice. Well, we are grabbing a new mic.
        Chairman McHenry. We are getting a new mic. It may not be
    better, but it is a different one. All right. Let us just
    restore her timing.
        [Pause.]
        Chairman McHenry. All right. We will start over. We are
    going to restore the clock. Thanks for members' indulgence. Ms.
    Velazquez, you are recognized for 5 minutes.
        Ms. Velazquez. So, Mr. Chairman, I was asking you about the
    property insurance rates are becoming prohibitively expensive
    or inaccessible for homeowners and developers in our community.
    The FSOC's annual report identifies property insurance rates as
    an increasing risk, and I recently raised this issue with
    Secretary Yellen. Is the Fed monitoring the rising costs of
    insurance and its impact on macroeconomy?
        Mr. Powell. Yes, we are very much aware of increases in
    insurance, including property insurance, and it has been adding
    meaningfully to inflation. It is not something we have any
    control or authority over. The same is true of auto insurance
    or just insurance generally as prices have gone up a lot.
        Ms. Velazquez. When we talk about the lack of affordability
    when it comes to housing, the rising cost of insurance is an
    important factor that is affecting the availability of
    affordable housing in our communities. I hope that there are
    some discussions among the Feds because it is an increasing
    risk, and it is going to have a direct impact on our economy.
    Chairman Powell, I know you spoke with Chairman McHenry a
    little bit on inflation and interest rates. Can you explain
    what evidence you are looking for before inflation has returned
    to 2 percent and interest rates can be cut?
        Mr. Powell. Sure. We are not looking for inflation to go
    all the way down to 2 percent. That is not what we are looking
    for. What we want is just more evidence that will give us more
    confidence that inflation is on a path down to 2 percent
    sustainably, so that will come in the form of good inflation
    readings really. We want to see just a bit more evidence so
    that we can be confident. We do not want to have a situation
    where it turns out that the 6 months of good inflation data we
    had last year, that did not turn out to be an accurate signal
    of where underlying inflation is. So we are just being careful
    and because the economy is so strong and the labor market is so
    strong, we think we can and should be careful as we approach
    that decision.
        Ms. Velazquez. When you say ``evidence,'' what evidence? Is
    there anything that----
        Mr. Powell. We would like to see more good, relatively low
    inflation readings. We are not looking for better inflation
    readings than we have had. We are just looking for more of
    them, and what will happen is that as we go forward, the 12-
    month inflation will continue to drop because it will be lower
    than early last year.
        Ms. Velazquez. Thank you. Mr. Chairman, I would like to
    pick up on where Ms. Tlaib left off and reiterate the
    importance of the rulemaking on Section 956. This is an issue
    that I also raised with Vice Chair Barr, Chairman Gruenberg,
    Acting Comptroller Hsu. I told them, when they came before this
    committee, that I will be asking for the status update on the
    rulemaking at every future hearing because it is well past
    time: 12, 13, 14 years. If you are employed in a company and
    you are given a task, I will think that you will be fired if
    you do not get it done, and you have taken 12 long years. So
    you are the chairman of the Fed. How is the Fed working with
    other agencies to propose the rule?
        Mr. Powell. There is a lot going on in regulation at the
    Fed right now. My understanding on 956 is that there have been
    discussions between the regulatory agencies, and I think it is
    not three. I think it is more like six agencies that have to
    agree.
        Ms. Velazquez. I know.
        Mr. Powell. I have not seen a proposal. I think something
    is under consideration, but it is not something that has gotten
    to me yet.
        Ms. Velazquez. I will ask the next time, and believe me, I
    will be here.
        Mr. Powell. Great.
        Ms. Velazquez. Thank you.
        Chairman McHenry. The gentlelady yields back. The gentleman
    from Kentucky, Mr. Barr, is now recognized for 5 minutes.
        Mr. Barr. Mr. Chairman, good to see you. You have said
    numerous times that the capital framework is about right, and
    that banks are well capitalized. Do you still believe this?
        Mr. Powell. I do.
        Mr. Barr. Given that you believe that and given the fact
    that the Basel III Endgame proposal dramatically increases
    capital requirements on banks, would a re-proposal that
    implemented Basel III in a capital neutral way, could it do so
    without jeopardizing financial stability?
        Mr. Powell. It could. I mean, hypothetically, yes.
        Mr. Barr. According to Latham & Watkins, 97 percent of the
    comment letters either opposed, called for a re-proposal, or
    expressed substantial concerns about the Basel III Endgame
    proposal, and those negative comments came from across the
    ideological spectrum and from various interests.
        Without objection, I would ask the chair to include that
    report into the record.
        [No response.]
        Mr. Barr. Without objection, I would ask the chair to
    include that report into the record.
        Chairman McHenry. Without objection.

        [The information referred to can be found in the appendix.]

        Mr. Barr. Thank you. Mr. Chairman, did you see that report?
        Mr. Powell. I did.
        Mr. Barr. Does that concern you that 97 percent of the
    comments were negative.
        Mr. Powell. We did not do our own count, so I cannot make
    an assessment, but I would say it is unlike anything I have
    seen.
        Mr. Barr. If the Basel III comment period ended on the same
    day as the Fed's data collection on the proposal, which is an
    odd process since the data should have been collected far
    earlier, analyzed, and the results should have been available
    for the public to comment on before the comment period ended,
    why did the Federal Reserve choose to do a quantitative impact
    study during the comment period for the proposal before closing
    any ability by the public to comment on the results of the
    study?
        Mr. Powell. Well, I mean, the movie is not over. We are
    where we are, and Vice Chair Barr did commit to putting the
    Quantitative Investment Strategies (QIS) out for comment. We
    will receive those comments, and those comments will be taken
    into consideration as we think about the path ahead.
        Mr. Barr. Well, speaking of process, you have your
    excellent general counsel right behind you there, and I do not
    want to get into privilege here, but have the lawyers at the
    Fed raised any process concerns or Administrative Procedure Act
    issues with the Board?
        Mr. Powell. Let me just say that we are committed to doing
    transparent and reasonable and data-based rulemaking in
    compliance with the Administrative Procedure Act.
        Mr. Barr. Well, of course, giving the public the ability to
    comment on the quantitative data that has been provided,
    obviously is consistent with good process. Sir, Governors
    Bowman and Waller, Vice Chair Hill, and Director McKernan, all
    dissented on the proposal, and Vice Chair Jefferson expressed
    concerns with it during his statement. Under your tenure as
    chair, can you identify any other regulatory proposal which has
    elicited this much dissent?
        Mr. Powell. No.
        Mr. Barr. You have, in the past, acknowledged in front of
    this committee that you will not move forward with proposals
    without consensus, or you have acknowledged that in the past
    that, and we appreciate that commitment to consensus. Have you
    achieved consensus yet on the Basel proposal?
        Mr. Powell. Let me say I am confident that we will, but
    that is a process that, as I mentioned, we are evaluating the
    comments. We are just coming to the place where we are going to
    start talking about the path ahead, and I am confident that we
    will achieve very broad support on the Board.
        Mr. Barr. Mr. Chairman, do you agree that the heterogeneity
    and business model diversity within the banking sector
    contributes to system wide financial stability?
        Mr. Powell. I strongly do.
        Mr. Barr. Do you agree that a concentrated business model
    in the banking sector would present a potentially systemic
    risk?
        Mr. Powell. Potentially, yes.
        Mr. Barr. This is one of my major concerns with the
    proposal, Mr. Chairman, because by de facto repealing
    regulatory tailoring, subjecting Category III and IV regional
    banks to one-size-fits-all standards that currently only apply
    to large Global Systemically Important Banks (G-SIBs),
    discouraging securitization, which is the private sector
    solution for dispersing risk, eliminating the use of internal
    risk models, and transitioning the industry and regulators
    toward only a standardized framework, actually would push the
    industry into a smaller and more concentrated looking industry,
    and, as a result would, in my view, actually increase systemic
    risk and decrease market competition. Do you share that
    concern?
        Mr. Powell. I think it is a real concern, and, again, I
    think that is part of what goes into my thinking, certainly,
    about the proposal and where it needs to go.
        Mr. Barr. Well, given all of these concerns, we hope that
    you can commit to re-proposing the Basel III Endgame, and we
    strongly urge you to take that into consideration. With that,
    Mr. Chairman, I appreciate the time.
        Chairman McHenry. The gentleman from Massachusetts, Mr.
    Lynch, is recognized for 5 minutes.
        Mr. Lynch. Good morning, Mr. Chairman, welcome. Good to see
    you again.
        I want to go a little deeper onto the commercial real
    estate issue and the potential impact on regional banks. This
    morning, Scott Rechler, who is a member of the New York Fed
    Board of Directors, released a white paper on CNBC this
    morning, describing the trillions of dollars in commercial real
    estate loans that will come due over the next couple of years.
    He described it as a ``slow moving train wreck'' for our
    regional banks. He went on to predict that it will force a
    little over 500 banks, they are about to either fail or
    consolidate. He also described what he termed as a doom loop
    where, similar to Silicon Valley Bank, when people lose
    confidence, when depositors lose confidence in the bank, they
    pull their money out, and we end up in a bad situation.
        Now, I do not believe everything that I read here, but in
    Congress, we do tend to repeat it, and I just wanted to get a
    sense from you. I am seeing in my own city of Boston, we have
    20 percent vacancy rates in office space. We rely on that for a
    lot of the tax revenues for the city, but I am just wondering,
    your thoughts on that issue. Is there a systemic concern here,
    or is this isolated, and might lowering the interest rates help
    some of those banks, because I hear from my developers in our
    area that no one's lending. So your crack at it?
        Mr. Powell. Sure. I have not seen that report, so I cannot
    comment on it, but I can comment on commercial real estate. We
    have had a secular change in the economy, which has left office
    rentals in many places, office buildings, the demand for them
    is just significantly lower, at least temporarily, and perhaps
    for a long time. Also the same is true for downtown, in some
    places downtown, retail that is associated with office workers.
    So it is a shock to the system, and we have known this for some
    time. We have gone through the commercial banks in the United
    States, and some of the other regulators, we have done it
    jointly and identified the ones that have high concentration,
    and are going to need to deal with that. So we have been in
    contact with those banks and talking to them about how they are
    going to deal with this, how are they going to absorb these
    losses. Do they have enough capital, do they have the
    liquidity, do they have a plan to do this, and is it consistent
    with their lending practices, and that kind of thing. So it is
    going to be something we work through over a period of years,
    and I do think it is slow moving. I think that part of it is
    right.
        You asked about 500 banks. I have no idea about that
    number, but certainly there would be some banks, probably
    smaller ones, that have these high concentrations. It is not
    the very large banks. It is really a manageable thing at the
    large banks, so I think that is what it is going to be. It is a
    serious problem and more serious in some locations, and
    jurisdictions, and with some banks than others, but it is one
    we will be working through, and I think that is how I would
    think about it.
        Mr. Lynch. The Silicon Valley Bank situation, Signature,
    the money moved so quickly in those cases. It was
    instantaneous. Now, the velocity of money moving out of those
    banks, really, I think, in some ways contributed to their
    failures. Are we looking at any anything technologically that
    might be able to address some of that or mitigate it?
        Mr. Powell. Sure. We also, after Silicon Valley Bank, got
    in contact with and worked with financial institutions that had
    high concentrations of uninsured deposits, and many of them
    have greatly improved their liquidity position, so that is the
    thing that we are working on. As you probably know, we are also
    working on some liquidity rules, which will strengthen our
    framework of liquidity rules, but that is something we have not
    proposed yet.
        Mr. Lynch. Let me ask you something off topic. So we know
    that we have frozen assets, Russian assets, of about $300
    billion between U.S. and European banks. Do you want to comment
    on that? What I would like to see is us give that to Ukraine,
    to be honest with you. I know that is a very simplistic idea,
    but I am just wondering if there is any historic example that
    we could look to, if Congress has to take the necessary steps
    to redirect that money to Ukraine, so they can feed their
    people and fight that war.
        Mr. Powell. This whole area of sanctions and foreign assets
    and things like that is really controlled and directed by the
    administration, by the elected branch of government. All we are
    is just a technical seat around in the back row to help. We do
    not make those decisions. I would not comment.
        Mr. Lynch. I know you are not big on history. I was just
    wondering if there was any examples out there that might
    provide guidance to us.
        Chairman McHenry. The gentleman's time has expired. The
    gentleman from Texas, Mr. Williams of Texas, is now recognized
    for 5 minutes.
        Mr. Williams of Texas. Mr. Chairman, thank you for being
    here. When I am back in my district in Texas, I am constantly
    hearing concerns surrounding the fundamentally flawed Basel
    III--we have talked at length about that today--Endgame
    proposal. These concerns are not only coming from my banking
    industry, but also from farmers, ranchers, small business
    owners, who are concerned about how this proposal will impact
    the ability to access capital in the future and to all of us,
    did not raise alarms. Now we have heard about the 97 percent
    today, public comments on this proposal, and they all came out
    negative and Americans across all sectors worried about the
    disastrous implications that will follow this proposal. I tried
    to make that known to banking regulators, who continue to
    ignore them. It is time for Federal regulators to take these
    concerns seriously and, quite frankly, just, I believe, start
    over. So I urge you and your colleagues to rethink the
    misguided policy and do what is best for American people, small
    business, Main Street America, and withdraw the Basel III
    proposal.
        Now, Chairman Powell, given the concerns raised by
    financial institutions, again, farmers, ranchers, et cetera,
    and other communities across country, can you elaborate on how
    the Federal Reserve is responding to and address these comments
    that are mostly negative and request modification, delay, or
    complete withdrawal of the proposal of Basel?
        Mr. Powell. Yes, I will. So we are in the process of
    reviewing the comments. They were quite voluminous. They are
    very detailed with a lot of data, a lot of analysis and that is
    just what we wanted, so we got those. It is a lot, it is
    hundreds of them, and we are going through them. We are just at
    the point we are about to begin then turning to the question of
    what changes should we make to the proposal. We have not made
    any decisions. We have not really gotten to that stage yet.
    Remember, we only got the comments less than 2 months ago, so
    it is just we are at that stage, so we are looking at it. As I
    mentioned, my own view is that there will be material and broad
    changes to the proposal as we go forward, and we have not
    really made decisions yet, though. It is just a little bit
    early for that.
        Mr. Williams of Texas. We are glad you are looking at it. I
    want to bring up the long-term debt proposed rule, which would
    require banks to issue enough long-term debt to cover capital
    losses. Now, Congress worked to pass legislation requiring
    detaining regulations to the size of financial institution.
    This is meant to protect banks of all sizes and allow for
    families and businesses in my district to have options to meet
    their lending needs. So the Fed's long-term debt proposal would
    undo any sort of regulatory tailoring and puts into place a new
    long-term debt issuance requirements on regional banks, which
    require these banks to issue long-term debt both at the parent
    holding company level and the Insured Depository Institution
    (IDI) level. Now, these regional banks will face increased
    costs when they are already facing tiring regulatory burdens in
    this administration, and those are the banks that people do
    business with.
        So Mr. Chairman, do you believe that this proposal rule
    goes against the requirements of S. 2155, the Economic Growth,
    Regulatory Relief, and Consumer Protection Act, and will you
    commit to exploring this issue further with your colleagues?
        Mr. Powell. We are committed to implementing S. 2155. We
    believe that the regulation and supervision of banks needs to
    reflect their size and activities, and that is something we
    will be considering as we go forward with this.
        Mr. Williams of Texas. Okay. Short time I got left.
    Americans continue to feel the pain from inflation created by
    the Biden Administration, as everyday cost continues to be
    expensive. As you know, I am in the car business, and inflation
    is just running rampant in my industry, and the irresponsible
    and partisan American Rescue Plan, forced through Congress by
    Democrats, only made inflation more of a problem. Now American
    families and businesses have been forced to deal with runaway
    inflation for 3 full years now, which has caused a major
    hardship. So quickly, the American Rescue Plan Act (ARPA)
    injected nearly $2 trillion of deficit spending to our already
    struggling economy, and how does this type of inflated
    spending, combined with economic headwinds, like supply chain
    shortages, impact the economy, and does not this kind of
    reckless spending actually fuel the pressures of inflation?
        Mr. Powell. I think there are a lot of causes of the
    inflation we have seen. We saw this inflation everywhere in the
    world. So really the reopening of the economy after--with very
    strong demand and constrained supply, you saw inflation in all
    the advanced economies. It was a little sharper here at the
    beginning. I think there is a role for monetary policy in that.
    There is a role for fiscal policy. There is a role for the
    pandemic, a starring role for the pandemic. Our job is to deal
    with it, and that is what we have been doing.
        Mr. Williams of Texas. Well, thank you for always keeping
    small business and Main Street America in your calculations,
    and with that, Mr. Chairman, I yield back.
        Chairman McHenry. The gentleman yields back. The gentleman
    from California, Mr. Sherman, is recognized for 5 minutes.
        Mr. Sherman. Mr. Chairman, I want to thank you for
    recognizing in your opening statement the importance of
    immigrants in keeping costs down, and I want to thank you and
    the administration for what has been an excellent 2023 economic
    report. We have 3.1 percent economic growth, by far the best in
    the developed world, headline inflation 2.4 percent and that is
    not a little blip, 1-month number. That is for the whole of
    2023 and compares very favorably with the pre-pandemic portion
    of the Trump Administration when we had inflation of 3.5
    percent.
        My goal here is to convince you to cut more and sooner for
    a number of reasons. The first is that I know, if you ask a
    constituent if they want zero inflation and zero unemployment,
    you know that we cannot have that, and have concluded that the
    economy works best with a 2-percent inflation rate target. I
    have looked at the history of that 2-percent number. It seems
    to come from Auckland, from the 1980s, and there are a lot of
    arguments that your target should be just a little bit higher.
        Larry Summers recently produced a study arguing that the
    cost of money is part of the cost of living. So we have this
    weird paradox where you are trying to keep the cost of
    groceries down by raising interest rates, but as the ranking
    member points out, the big issue is housing, and your measure
    of inflation seems to treat all Americans as renters, even
    though two-thirds are homeowners. When interest rates go up,
    that is an increase in the cost of living for anyone with an
    adjustable-rate mortgage, anybody looking to buy a house,
    anybody with a home equity loan. Obviously, we would cut
    interest rates a little sooner and a little more if your target
    was something closer to 2.3 percent.
        So I will ask you, is there substantial economic analysis
    that argues that your target rate and the economy would work
    better if we had a slightly higher target than 2 percent?
        Mr. Powell. Not really, no. What has happened is, you
    pointed out New Zealand, but what has happened is that 2
    percent has become the global standard. It is a pretty durable
    standard. I do not have any reason to think that it is a
    problem for the United States to get to 2 percent inflation. We
    are at 2.4 percent right now, headline inflation.
        Mr. Sherman. I would ask to add to the transcript of this
    hearing numerous articles that argue for something between 2.3
    and even 3 percent.

        [The information referred to can be found in the appendix.]

        Mr. Sherman. I am not arguing for as high as 3 percent. Let
    us look at Basel. There is nothing free here. If the standards
    are too high, we lose economic growth. If they are too low, we
    have bailouts and bankruptcies, but I think everybody agrees
    that the standard should be well crafted. You have a system
    where everybody drafting this is well dressed and focused on
    Wall Street and you have Basel rules that discriminate against
    Main Street and for Wall Street. I will give you some examples.
    It is 65 percent if you are a publicly traded company and make
    a loan to a publicly traded company. You make a loan to the
    California Public Employees' Retirement System (CalPERS). They
    are not publicly traded.
        Without objection I would like to put their article into
    the record.

        [The information referred to can be found in the appendix.]

        Mr. Sherman. They are, in effect, going to have a tougher
    time getting a loan. The local pizzeria is going to have a
    tougher time getting a loan. You have Basel III ignoring
    mortgage insurance, which obviously makes the loan more
    prudentially sound for the bank and is very necessary for
    first-time homebuyers and you have a system where if you make
    investments in long-term bonds on Wall Street and you put them
    in the held-to-maturity category, you do not have to recognize
    the losses in mark-to-market. So there, I hope you will look at
    these in terms of the competition between Wayne Street and Wall
    Street for bank loans.
        Finally, we go to clean energy investment. Can I count on
    you to personally look at the paradox where Basel III treats
    clean energy tax credits much more harshly than low-income
    housing tax credits for no ascertainable reason?
        Mr. Powell. Yes.
        Mr. Sherman. Thank you.
        Chairman McHenry. The gentleman's time has expired. The
    gentleman from Georgia, Mr. Loudermilk, is recognized for 5
    minutes.
        Mr. Loudermilk. Thank you, Mr. Chairman, and, Mr. Powell,
    thank you for being here today.
        I am concerned with the small dollar credit for businesses.
    As a former business owner for over 20 years, I can attest
    that, as the small dollar business credit becomes more
    expensive and less convenient, businesses are going to turn to
    credit cards and other alternative financing for business
    purchases. These inevitably result in even higher costs, which
    goes down to the consumer, which means that they are going to
    pay more for the services or the products. In February of this
    year, total credit card debt reached a record of $1.7 trillion.
    According to Intuit Small Business Index Annual Report, average
    monthly credit card balances were 27 percent higher in 2023
    than they were in 2019. What do you view is the driving force
    behind these record high levels of credit card debt?
        Mr. Powell. Part of it would be growth in the economy, so
    that will be part of it, just that it is a bigger economy and a
    bigger number. I am not sure what that is. As you know, people
    had lots of extra cash during the pandemic from forced savings.
    They spent that down and now they are borrowing. I am not sure.
        Mr. Loudermilk. So if there was a rule to force banks to
    tighten lending, do you think that rule would drive businesses
    and consumers to alternative forms of credit?
        Mr. Powell. I do. I think, yes, if you raise lending costs
    for banks, then at the margin, that will make nonbank lenders,
    right, they will get some of that business.
        Mr. Loudermilk. If it becomes more complex or less
    convenient, then businesses will turn to these alternative
    forms of credit card. I can tell you that from experience.
        Mr. Powell. And have. Yes.
        Mr. Loudermilk. Yes. Well, I have called for the withdrawal
    of the Basel III Endgame proposal entirely. Will you commit to
    an analysis of how bank capital proposals, like Basel, affects
    small business credit access and the small dollar lending
    before finalizing such proposals?
        Mr. Powell. Will I commit to that? Let me look into that. I
    do not want to make a commitment that I will undertake some big
    study, but we will look at the issue.
        Mr. Loudermilk. Do you feel it is important that we do have
    an understanding, the effect it is going to----
        Mr. Powell. I do.
        Mr. Loudermilk [continuing]. have on folks? Small business
    is the backbone. It is the bloodline of our economy.
        Mr. Powell. They create the jobs. That is right. I do
    agree.
        Mr. Loudermilk. Okay. The chairman asked you for your
    thoughts on withdrawing or re-proposing the Basel III Endgame
    proposal. Have you specifically discussed withdrawing the
    proposal with vice chairman, Michael Barr, or the other
    Governors?
        Mr. Powell. So I do not want to get into our internal
    doings, but I will say that I understand it is a live option.
    Again, we are not at a stage of being able to even have that
    discussion yet because we have to decide, first, what changes
    do we think are appropriate, and that will take a little time,
    and then the question will be re-proposal. What I said is when
    we get to that point, if a re-proposal is the right thing to
    do, we are not going to hesitate at all. It is a perfectly live
    option.
        Mr. Loudermilk. All right. In the current environment we
    have in politics in this country, there is not a lot that you
    find bipartisan agreement on, but I think you could find some
    agreement in withdrawing that proposal. Can you explain the
    importance of broad consensus at the Fed on proposals like the
    Basel III Endgame (B3E)? Are you concerned with recent trends
    of disagreement among Board members related to major proposals?
        Mr. Powell. So I think we are going to get to broad
    consensus at the Fed. I do. I think it is very important. This
    has been our culture that we try to find common ground, and we
    have been able to do that in the regulatory space, and I expect
    we will be here as well. I am committed to that.
        Mr. Loudermilk. So could it be that we are seeing this
    level of disagreement because of extreme measures that are
    being taken now that may not have been taken in the past, I
    mean, a total difference of opinion and understanding and
    philosophy regarding free market economy?
        Mr. Powell. I will not speculate, but I will point out that
    four of the seven Governors, during the open Board meeting at
    which we put it out for comment, expressed real concerns, very
    specific concerns about the proposal and said we would look at
    the comments when they came in, and that is what we are doing.
        Mr. Loudermilk. All right. Do you feel that they have
    validity in their concerns?
        Mr. Powell. I was one of the four, so yes.
        Mr. Loudermilk. With the few moments I have, seconds I have
    remaining, there is a recent report of Financial Crimes
    Enforcement Network (FinCEN) working with financial
    institutions to query legal purchases made by American
    citizens. Has the Federal Reserve been instructed within the
    past 3 years by Treasury or anyone else to search Americans'
    legal transactions?
        Mr. Powell. Not that I know of, no.
        Mr. Loudermilk. Okay. Thank you. I yield back.
        Chairman McHenry. The gentleman from Illinois, Mr. Foster,
    is recognized for 5 minutes.
        Mr. Foster. Thank you, Mr. Chair, and thank you for being
    here. As Greg remarked, there is a near-term emergency to get
    the $60 billion in military assistance to Ukraine. Separate
    from that, there remains a longer-term need for reconstruction
    assistance to Ukraine, which the World Bank estimates somewhere
    north of $400 billion.
        Now, at the start of the Russian invasion, the free
    democracies of the world froze roughly $300 billion in Russian
    currency assets, primarily at European banks and financial
    institutions. The Biden Administration and many of our allies
    have recently taken the stance that those assets should be
    leveraged somehow to provide reconstruction resources to
    Ukraine. I support this concept, and I believe that additional
    action should be taken to ensure that we hold Russia
    accountable but there are real concerns on the impact that this
    might have on central banking system, on the primacy of the
    dollar, the euro, and so on.
        My question is, have you seen just the act of freezing
    these assets and not seizing them, but simply freezing them,
    have you seen deleterious effects on the primacy of the dollar,
    the confidence in the central banking system? Is there any
    visible downside from the act of freezing that is visible so
    far in the 2 years since we have done it?
        Mr. Powell. I cannot point to any. I cannot point to any.
        Mr. Foster. Okay. So that is an interesting observation
    when we think of taking the additional step of actually seizing
    them, at least so far, because to my mind, having them frozen
    is as violent as seizing them outright. So that is interesting
    that so far we have not seen that.
        Now, in terms of the Basel III and so on, there is a
    frustration I have had over the fact that, directionally, the
    effects of these are clear, but the magnitude of effects are
    not. For example, if you talk about the effect on the prices
    seen by derivative end users of increased capital requirement,
    directionally, it is clear. If you raise capital requirements,
    banks will withdraw from these markets. To some extent, other
    players will step in partly and take up part of the slack, and
    the spreads will increase and so on. Is the data that you have
    collected enough for you to actually estimate the magnitude of
    these effects instead of simply the direction?
        Mr. Powell. I think it is really hard to get down to the
    micro level and try to assess that because you are right, there
    would be multiple effects, but you know the direction. You know
    what the sign is.
        Mr. Foster. That is right, but if you can avoid financial
    crisis with a microscopic increase in prices seen by end users,
    that is one thing if it is a very large difference in the
    price. So the magnitude matters a lot when you are doing these
    balancing things, and a lot of it depends on actually you need
    a model for how the different market players will react, and is
    that really not going to be in the scope of the analysis that
    you anticipate from the quantitative.
        Mr. Powell. I believe we have done some work on that, and I
    think the banks and other participants have done work on that
    as well, and came up with a range of answers. I mean, there are
    just an awful lot of variables in these equations, so it is
    hard to say with any confidence. I mean, that is why the job of
    deciding the precise level of appropriate capital is a hard
    one.
        Mr. Foster. Yes, and now with 10 years, we have had two
    major crises with both a fiscal and a monetary response. Are
    there the lessons that you can learn now that, I believe, and
    it seems like your testimony indicates, that we are kind of
    approaching back to normal now? We have seen in the crisis of
    15 years ago, we saw what many people thought was an inadequate
    fiscal response, that the fiscal response was less than half of
    the output gap, and we were limited by political will to do
    things. Then, of course, you were limited by the zero bound in
    what you could do for most of a decade, and we had a long
    recovery. The comparison to the COVID recovery has been very
    sharp, and it has quite remarkably put us right back on that
    track. Are there any lessons that you have sort of drawn about
    the importance of getting the right balance of fiscal and
    monetary response to these shocks?
        Mr. Powell. So we think about that a lot, and I have to
    start by saying it is too soon to really tell because the
    answers you would give today, the picture looks very different
    than what it looked like a year ago. In a year from now, we
    will be looking back, going and saying we have learned so much
    more, so I think the pandemic is still----
        Chairman McHenry. The gentleman's time has expired.
        Mr. Powell [continuing]. writing the story of our economy
    right now. We should just be prepared to be surprised with the
    next chapter as we were with 2023, the very strong growth, the
    sharp decline in inflation, while the labor market remained
    very strong.
        Chairman McHenry. The gentleman's time has expired.
        Mr. Powell. Very few forecasters had that, but we can talk
    about it.
        Chairman McHenry. The gentleman's time has expired. We will
    now go to the gentleman from Ohio, Mr. Davidson, for 5 minutes.
        Mr. Davidson. Thank you, Chairman. Chairman Powell, thank
    you for being here today and for your testimony.
        I would like to start off, first of all, by completely
    echoing everything Congressman Barr said. A lot of us have
    talked about Basel III Endgame, and I think Congressman Barr
    kind of nailed the thought process. I do hope you will withdraw
    that and take the comments you have heard from here and from so
    many others about the hazards with the current approach. I
    would also like to address one of the other practices by the
    Federal Reserve, and it is the practice of paying interest on
    excess reserve balances held with the Fed accounts. It is my
    strong belief that rewarding banks with returns for taking no
    market risks actually harms our economy, and it discourages
    financial institutions from lending money into the economy.
    Instead, they park it at the Fed.
        This has little to no impact on very large corporations,
    but it can have a crippling impact on small and mid-market
    firms. We especially saw this in the long recovery as Dodd-
    Frank was implemented in the Obama years, transition to the
    Trump years. We changed some of that mindset with a lot of
    other policies, but we saw a strong surging economy. So our
    countrymen pay a price for this market distortion by the Fed in
    two ways. First, they are unable to obtain loans at competitive
    rates because the money is sucked out of the market. Frankly, a
    lot of them do not even have access to lending except through
    bank capital, so it forces them into other forms of capital,
    equity capital and others. Second, they ultimately pay higher
    rates whenever they have these alternative means of capital.
        Today, I have introduced a Prohibition on the IOER Act,
    which would prohibit the Federal Reserve from paying interest
    on excess reserves. By eliminating Interest on Excess Reserves
    (IOER), we can begin to return our economy to the undistorted
    free market economy it is supposed to have. The alternative is
    you could simply raise requirements. We see some of those moral
    hazards when you do it across the board with approaches like
    Basel. So what is your case for why you should keep paying
    interest on excess reserves?
        Mr. Powell. Well, as you know, we do not see the downsides
    that you are talking about. Banks have a cost of funds and they
    have what they can earn, and that is what really matters is the
    spread.
        Mr. Davidson. If they wanted to do it, they could simply
    buy Treasuries on their own, and they could do that
    independently. I suppose they can independently keep it at the
    Fed, but they do not even have to put it on their own balance
    sheets in the same way. They have immediate liquidity with Fed
    overnight account, so I do not see how that is different than
    what they could already do.
        Mr. Powell. What I was going to say was banks can earn a
    much bigger spread by lending to corporates, so their incentive
    to lend is the same as it always was. This does not affect
    that. Really, they have a cost of funds and they have the
    ability to have reserves, but they are not earning a profit on
    that or a big one. They can earn a much bigger profit by
    lending to small corporates.
        Mr. Davidson. Well, speaking of profit, I mean, the Federal
    Reserve is not officially supposed to be a for-profit
    corporation, but you are supposed to pay for your operating
    costs off of positive cash-flow, and right now, the Fed does
    not have positive cash-flow. In fact, the Fed has negative
    cash-flow, so it is not entirely unrelated that the Federal
    Reserve operated at a $114.3 billion loss in 2023 and currently
    is carrying a $133 billion loss on its balance sheet this year.
        So it is not the right approach, I think, to be paying,
    essentially, that much out in excess reserves to banks that are
    holding capital in the Fed when they could be deploying it into
    the market. So right now, the interest you are paying banks in
    money market funds exceeds the income you are getting on the
    $7.6 trillion balance sheet assets that you have to the tune of
    a $133 billion asset. So effectively, the Fed is operating at
    an operating loss. So what is the path back to cash-flow
    positivity for the Fed?
        Mr. Powell. As you know, for many years during the
    quantitative easing (QE) large balance sheet period, we have
    contributed way over a trillion dollars in net earnings to the
    Treasury Department. So you cannot look at the loss without
    mentioning that we have been giving effectively $100 billion a
    year in profits every year to the Treasury Department. So the
    other side of that is when we raise rates to do the job you
    have assigned us to get inflation under control, when we do
    that, we absorb paper losses. It has no effect on the way we
    operate the Fed, and if we retained all the earnings we have,
    then it would not be a problem, but we do not do that. We give
    that money to Treasury.
        Mr. Davidson. Thank you, and I think the last thing is, I
    just encourage you to halt any effort to develop a central bank
    digital currency. It does not need to be designed, developed,
    and it certainly does not need to be established. I yield.
        Chairman McHenry. The gentlewoman from Ohio, Mrs. Beatty,
    is recognized for 5 minutes.
        Mrs. Beatty. Thank you, Mr. Chairman, and thank you to our
    ranking member, and thank you, Director Powell, for being here.
        Let me start by saying thank you for the monetary report. I
    have had a chance to try to peruse it, and there are headings
    in there that says the labor market remains strong. You would
    probably agree to that, your report.
        [Nonverbal response.]
        Mrs. Beatty. Let us just say that is a yes. Also, it talks
    about unemployment rates being low by historical standards. You
    would agree with that?
        [Nonverbal response.]
        Mrs. Beatty. It also states that the global pandemic played
    a huge role with the inflation rate, and inflation rates are on
    the decline. It is reported in several charts in here and also
    substantiated by the Federal Reserve of New York and Michigan
    surveys that I have read. It also talks about job gains and
    uses the word ``robust jobs.''
        So I want to thank you for educating us on that, and, Mr.
    Chairman, I would like the record to show that all of this also
    resulted during the Biden-Harris Administration. So often we
    hear in this committee and other committees about what the
    administration is not doing and what our economy and jobs look
    like.
        Now, let me move on to something that is very dear to me,
    and I want to thank our ranking member for bringing it up, and
    that is the lack of affordable housing, which is one of the
    primary things that I hear about when I am back home. I am on
    more panels to try to explain what you do, what we do, or
    oftentimes what we do not do and why we have this. While I know
    that interest rate hikes have successfully brought down the
    inflation, rising rates have also had an adverse effect on the
    cost and the pace of housing construction and costs. Are you
    concerned about the effects that interest rate hikes are having
    on the cost of financing new construction and the second part,
    how do you expect to control for long-term housing inflation
    that might have a potential rate cut, how it might affect that?
        Mr. Powell. Our policy to bring inflation down is to raise
    interest rates, and that works through several channels. One of
    them is, probably the most important, is interest-sensitive
    spending, and within that, you have housing and durable goods
    and things like that. So during the early days of the pandemic,
    the housing industry was about to all go bankrupt, and all of
    the facilities that we did really supported that industry
    through their critical time.
        When we are going in the other direction, when we are
    raising rates, housing is definitely affected. We understand
    that. It is not something we want to have happen. Just it is
    the reality that housing will slow a lot when you raise
    interest rates. We have done that, and we are doing it for the
    longer-run benefit of the people we serve to restore price
    stability, which is beyond value for people to have price
    stability. We get it that in the near term, that is higher
    rates, that is fewer sales, people are locked into low-rate
    mortgages. We get all of that, but we got to do this because it
    will benefit the country and people in the longer run.
        Mrs. Beatty. I have a great appreciation for that, but
    also, when I go back home to the district, what I hear a lot
    from agencies and individuals who work with advocacy groups,
    that the effects of interest rate hikes are not borne equally
    to all American households. So we hear that, and there is no
    doubt that low-income and minority communities are hit the
    highest or the hardest by these monetary policy changes. Black
    households and business owners have historically faced
    challenges with homeownership and access to capital, and they
    are disproportionately impacted by the rate hikes. Do you have
    anything that you can help me with, with this dilemma, and how
    we can better achieve economic goals in a more precise and
    equitable manner?
        Mr. Powell. So I think it is working. You see inflation
    coming down, and that is why I do think it is likely at some
    time this year, if the economy proceeds along the path we
    expect, that we will begin to reduce rates. So that is really
    the path that we are on, and I do hope it works out that way.
        Mrs. Beatty. I do not have a lot of time, but when you say
    ``economy,'' what does that mean? Helping poor people and Black
    people get more jobs, more money?
        Mr. Powell. So our forecast is for continued strong growth,
    continued strong labor market with wages going up and also with
    inflation coming down, so that kind of an economy.
        Mrs. Beatty. Okay. My time is up. I yield back. Thank you.
        Chairman McHenry. The gentleman from Tennessee, Mr. Rose,
    is now recognized for 5 minutes.
        Mr. Rose. Thank you, Chairman McHenry and Ranking Member
    Waters, for holding this hearing, and thank you, Chair Powell,
    for being with us today.
        I would like to start by discussing the Independent
    Automated Teller Machine Owners or Operators section of the
    Bank Secrecy Act Examination Manual. I want to ensure that
    financial institutions will not be discouraged from providing
    banking services to the independently owned automated teller
    machine (ATM) industry. In 2021, you made it clear that the
    industry does not automatically present a higher risk for
    illicit finance. I would like to know what efforts have been
    made by the Federal Reserve to fully communicate that position
    to financial institutions across the country?
        Mr. Powell. I will have to get back to you on that one.
        Mr. Rose. All right. Thank you.
        Mr. Rose. Well, and so I might just add, listening to
    independent ATM operators over the time that I have served in
    Congress, I have come to understand that, unfortunately, and it
    was in the bank examiner's manual up until just about a couple
    years ago. These operators were identified as being
    extraordinarily risky, and that was causing them to be debanked
    in many cases. So I do hope that you will take a look at that
    and make sure that we are communicating that to financial
    institutions and, most importantly, to the regulators.
        Chair Powell, Tennessee is home to over a thousand foreign-
    based businesses that have chosen to invest in our State and
    create more than 160,000 jobs. These jobs are reliant upon
    cross-border financing provided by global banks, including
    foreign banking organizations. The Federal Reserve has long
    maintained the principles of national treatment and equality of
    competitive opportunity when regulating foreign banks and
    assessing them based on their U.S. operations. Are you still
    committed to these principles?
        Mr. Powell. Yes.
        Mr. Rose. How will these principles be reflected as you
    move to finalize the Basel Endgame proposal?
        Mr. Powell. We have received a whole separate set of
    comments from the foreign banks, and we will look at those very
    much in that spirit and make appropriate changes.
        Mr. Rose. Thank you. Chair Powell, the Basel III Endgame
    will incentivize firms to transfer credit risks off their
    balance sheets. One avenue for such a transfer is synthetic
    securitization, the framework of which must be approved by the
    Federal Reserve. However, it is my understanding that there is
    a substantial backlog of reviews and approvals of these
    securitization frameworks. It is concerning that the Federal
    Reserve is directing the risk transfer yet also impeding it, in
    my view. Can you comment or can you commit to reviewing this
    approval process and taking steps to reduce the backlog of
    pending securitization applications?
        Mr. Powell. As I understand it, these transactions are
    becoming popular right now. There is a lot of appetite to do
    them, and we are not stopping them. We are just being careful
    because there were similar things that happened about credit
    risk transfer during the global financial crisis that did not
    actually work out. So we want to make sure that these
    structures really do actually durably transfer, and we think
    that they do, but we just need to be careful because the last
    experience with these was difficult back in the last crisis. So
    it is just something that we are not intending to slow these
    down, and I think we will try to get through it.
        Mr. Rose. Is it a lack of available resources to apply to
    the approval process, or is it an intentional slow walking to
    make sure that every I is dotted, every T crossed?
        Mr. Powell. I do not actually know, but what I heard was,
    what I have been told is, we are not stopping these, but we are
    going to be careful with them and just be absolutely careful
    that they really do transfer credit risk in a durable, kind of
    sustained way, and that is the thing. I do not think it is an
    intention to go slow or to have a backlog, and so I do not know
    what the staffing issue is. We will check.
        Mr. Rose. All right. Thank you. As the Federal Reserve
    continues to consider proposals designed and debated in Europe,
    such as Basel III, has the Federal Reserve's Supervisory
    Climate Committee or the Financial Stability Committee had any
    discussions regarding the adoption of environmental, social, or
    governance (ESG) risks in capital requirements?
        Mr. Powell. I do not know.
        Mr. Rose. Has there been any discussion in other committees
    regarding the adoption of the ESG risks in capital
    requirements?
        Mr. Powell. Any discussion? I really do not know. Let me
    say that it is not something we are considering, but when you
    ask me any discussion, I do not know.
        Mr. Rose. It is not a priority in capital requirements?
        Mr. Powell. To put it mildly, yes.
        Mr. Rose. Okay. Thank you. I see my time is running out. I
    appreciate your answers, and any other light you can shed on
    those matters, I would appreciate. I yield back, Mr. Chairman.
        Chairman McHenry. The gentleman from Illinois, Mr. Casten,
    is now recognized for 5 minutes.
        Mr. Casten. Thank you, Mr. Chairman, and thank you, Mr.
    Chairman, for being here today.
        I want to start then just with following up on the exchange
    you had with Mr. Sherman. As I think you know, I led a letter
    with 106 of my colleagues with concerns about, specifically,
    the clean energy tax equity provisions in Basel. I appreciate
    your commitment to look at that. I wonder if I could just put a
    little bit of a sharper point on it. Can you look at that
    before the rule is finalized and potentially issue some sort of
    an addendum to the rule? The concern I have is the number of
    banks who are a little bit frozen right now waiting for some
    clarity on that, and I would prefer we not slow down the rate
    of clean energy investing in our country if we do not have to.
        Mr. Powell. I do not know. I mean, I think there is a
    proposal, and we are well aware of the commentary and we are
    going to react appropriately. I do not know that we can pull
    one thing out of line and deal with it, but also, we are making
    good progress, and I think we will be back reasonably soon with
    some answers.
        Mr. Casten. Okay. Well, time is of the essence. I
    appreciate anything you can do. Second thing, good thing about
    going late here, you get to follow up. I want to follow up on
    your discussion with Congresswoman Garcia here. I really
    appreciated your comments in the ``60 Minutes'' interview last
    month when you mentioned that immigration is a big part of the
    story, the labor market coming back into balance. Now,
    generally, and correct me if I am wrong, more immigration is
    generally going to ease inflationary pressure. All else equal,
    is that a safe characterization?
        Mr. Powell. It is probably closer to neutral, actually,
    because people come in, they also spend, so it is not clear
    that immigrants coming in, they add to GDP.
        Mr. Casten. Okay. So either we are going to get economic
    growth and/or downward pressure on wages.
        Mr. Powell. Right. There will be more workers, so wages
    might go up a little bit less, but at the same time, they are
    also spending. So we had this conversation. It depends on what
    you assume, but I think it is better to just assume it is sort
    of broadly neutral from an inflationary standpoint.
        Mr. Casten. Okay. So I guess, and maybe you have answered
    the second question. Given as you all are using the Census
    Bureau data that is more conservative than the CBO data, and
    obviously we are all making estimates in the future, can you
    speak at all to whether your forward views on economic growth
    and inflation, how sensitive are they to your assumptions about
    that Census versus CBO data on what the actual level of
    immigration is to the country right now?
        Mr. Powell. I think the CBO assumptions are meaningfully
    higher and would affect growth, and would be part of the
    explanation why growth was strong last year. I mean, it is not
    the main reason, but it would definitely add to growth this
    year, and I would not say that we accept one version or the
    other. We study the CBO numbers carefully. We are just trying
    to get to the right answer, but, I mean, I think the CBO shows,
    and they say so, stronger growth, higher growth, more people. I
    do not know if the per-capita growth goes up, but the absolute
    level of growth goes up.
        Mr. Casten. Okay. Last question. I think there is a lot of
    good news in the monetary report that you all just issued
    around wage growth. We have seen the lower quartile of earners
    starting to close some of those historic gaps. We have seen
    minority groups and women start to close some of those gaps.
    What I did not see, and I do not know if this is because you
    all have not done it or I just did not read closely enough,
    have you seen any gaps regionally within the U.S.? Are there
    parts of the country that are seeing stronger wage growth than
    others?
        Mr. Powell. There are. I do not have that off the top of my
    head. I want to go back, if I can, just when I talked about
    immigration, I think that the immigration story for last year
    was part of the positive supply shock and was part of the
    reason why inflation came down. I was really asking the
    question over the longer run.
        Mr. Casten. Fair enough.
        Mr. Powell. There, I think, it is more of it being neutral.
        Mr. Casten. Fair enough. I appreciate that. I want to just
    close on this regional piece because the Atlanta Fed, which is
    the best I could find that looks to do at least some of my
    census regions, that as I look through, and you look at which
    regions are consistently running above. I think that New
    England and the West are consistently showing wage increase
    above average. The West, South Central, Texas, Oklahoma,
    Arkansas, Louisiana are consistently, I think, going back to
    like July 2022, consistently seeing wage growth below average.
        I appreciate you are not going to wade into a political
    question here, but those are all right-to-work States, where it
    is harder to unionize, where it is harder to organize. What I
    am wondering is, without asking you to opine on policy, have
    you all at the Fed done any analysis when there are gains in
    labor productivity, does that gain in labor productivity, is it
    more likely to accrue to workers in those States where there is
    a stronger union presence, easier to organize, and more
    bargaining power for labor as opposed to capital?
        Mr. Powell. My guess is there is plenty of research around
    that area, not necessarily the Fed, but we will take a look and
    come back to you.
        Mr. Casten. Okay. All right. Thank you.
        Mr. Casten. I yield back.
        Chairman McHenry. The gentleman's time has expired. Now we
    will go to the gentleman from South Carolina, Mr. Timmons, for
    5 minutes.
        Mr. Timmons. Thank you, Mr. Chairman, and thank you,
    Chairman Powell, for being here today. We continue to
    appreciate your work and the work of the Federal Reserve on
    behalf of the American people.
        In August 2023, the Federal Reserve, FDIC, and OCC released
    the Notices of Proposed Rulemaking (NPR) requiring the issuance
    of long-term debt for Category II, III, and IV banks. As you
    may know, I, along with many of my colleagues, authored a
    letter to each agency expressing concerns regarding the lack of
    tailoring in the proposal and shortcomings in estimating the
    actual cost of the proposed rules. I am concerned that these
    shortfalls will negatively impact lending in my district and,
    when combined with the other ongoing regulatory proposals,
    could cause further consolidation of the banking industry. It
    appears that the Federal Reserve has primarily deferred to the
    FDIC concerning the proposal. Could you shed light on the
    Federal Reserve's role within the rulemaking process concerning
    the long-term debt proposal, and have you provided input
    regarding the proposal's interplay with Basel III Endgame?
        Mr. Powell. I think we are one of the proposers of the rule
    just like the other agencies are, and right now, we are looking
    at the comments that we have gotten. That comment period, I
    believe, has closed, yes, and so we are very much in reading
    those comments as the law requires us to do.
        Mr. Timmons. You are in the middle of it, fair to say.
        Mr. Powell. Yes.
        Mr. Timmons. Okay. Thank you. I am concerned that the long-
    term debt proposal's lack of tailoring contradicts the
    statutory requirements of the Economic Growth, Regulatory
    Relief, and Consumer Protection Act. Instead of applying
    tailoring principles, this proposal creates Category II, III,
    and IV financial institutions identically for the purposes of
    long-term debt issuances. Additionally, the proposal unduly
    burdens Category II, III, and IV banks by requiring them to
    issue long-term debt at both the parent holding company and
    bank level, which actually could be viewed as reverse
    tailoring, considering G-SIBs are only required to issue debt
    at the parent company level. What is the underlying rationale
    behind this dual requirement, particularly when such a mandate
    is not imposed on our largest banks, and do you believe that
    this represents a tailored approach as required by the statute?
        Mr. Powell. So that tailoring question is one of the
    questions we will be asking ourselves as part of our review of
    the comments.
        Mr. Timmons. Thank you. It is my understanding that
    Category IV banks were not included in the original advance
    notice of proposed rulemaking for the long-term debt rule
    released in the fall of 2022. Is that your understanding as
    well?
        Mr. Powell. I did not catch that.
        Mr. Timmons. Did the advance notice that was released in
    the fall of 2022 include Category IV banks? It is my
    understanding that it did not.
        Mr. Powell. I cannot confirm that, to be honest.
        Mr. Timmons. Well, I think that is something that you
    should take into account because the Category II and III banks
    have had an additional year to foresee this challenge, and so
    Category IV banks are really behind the eight ball. Yes, so I
    guess my next question is, do you believe regulatory agencies
    should provide smaller regional banks longer than the 3-year
    phase-in period to meet any final long-term debt requirements?
        Mr. Powell. It is a good question. That is one of the
    comments we gotten, and we will be looking at that.
        Mr. Timmons. I appreciate it. I just think if we are going
    to impose these new regulations, giving everyone the same
    opportunity to comply with them is something worth considering.
    I guess, one final question: if these proposed regulatory
    changes had been in effect prior to the fall of Silicon Valley
    Bank (SVB) and Signature, do you believe the outcome would have
    been different, because, honestly, I do not think anything
    would have changed.
        Mr. Powell. It is a hypothetical, but I am tempted to say
    that if there had been more long-term debt, that was
    specifically there to absorb losses.
        Mr. Timmons. They were nowhere near being solvent, but I
    guess that is something I think you all should take into
    account whether if these proposed changes to our system that
    are designed to make it more resilient, would have actually
    caused SVB and Signature to have a different outcome because,
    again, it just seems that my colleagues across the aisle let no
    crisis go to waste. These are changes that would not have, in
    fact, prevented the calamity that they are justifying the
    changes based on. Thank you for being here today, and with
    that, Mr. Chairman, I yield back.
        Chairman McHenry. The gentleman yields back. The
    gentlewoman from Massachusetts, Ms. Pressley, is now recognized
    for 5 minutes.
        Ms. Pressley. Thank you. Due to the Fed's aggressive
    interest rate hikes, mortgage rates have surpassed 7 percent,
    rising to 20-year highs, leaving many creditworthy and
    mortgage-ready homebuyers without a path to homeownership. This
    is a problem for everyone. It is an urban issue. It is a
    suburban issue. It is a rule issue. Chairman Powell, I welcome
    the decision of the Fed to pause rates at the end of last year,
    but for families in my district and across the country, that is
    not enough. We need the Fed to start cutting because like the
    rent, interest rates are too damn high.
        Chairman Powell, you have previously indicated that the Fed
    may cut rates this year. What would you expect the impact of
    lowering interest rates to be on the housing market
    specifically, including the rental purchase and construction
    market?
        Mr. Powell. We know that higher rates, of course, have
    slowed down the rate of activity. So if at such time as we
    start to lower interest rates, the housing market will pick up
    broadly across new home construction and new home sales. As you
    know, many, many households are in very low-rate mortgages, and
    they really cannot sell because they would have to refinance
    into a high-rate mortgage. That will go away over time. So
    ideally, the housing market would go back into a more normal
    phase but one with lower inflation in the broader economy.
        Ms. Pressley. Right. So just to further reiterate that,
    interest rate cuts would have a great benefit. Just yesterday,
    actually, I met with a number of representatives from State
    housing finance agencies from throughout the country, and they
    were talking about the barriers to affordable housing projects,
    given the current interest rate environment. Obviously, higher
    interest rates have raised costs for affordable housing
    developers, and many of them have chosen to slow down or halt
    construction entirely. So fewer homes are being built, which
    means fewer people are being housed. Would you agree?
        So given that we already had a massive shortage of
    affordable housing supply prior to the pandemic, when interest
    rates were below 2 percent, the current 5.5 percent rate has
    been devastating, and the price of homes across the country
    have remained stubbornly high. It is clear the current State of
    our housing market is impacting everyone and disproportionately
    hurting those who need stability the most. Does this concern
    you?
        Mr. Powell. So our job is to do price stability and maximum
    employment. We do not target the housing market, and we are
    doing our jobs. That is what we are doing. It is not something
    we want to see, but this is the path to restoring price
    stability.
        Ms. Pressley. Does this impact on the housing market? Does
    it concern you, Chairman Powell?
        Mr. Powell. Does it concern me?
        Ms. Pressley. Yes. Fewer homes are being built, so fewer
    people are being housed.
        Mr. Powell. This is the job we have taken on.
        Ms. Pressley. All right. Well, it concerns me greatly.
    Chairman Powell, the Fed's interest rate hikes have not been
    sufficient in addressing housing inflation. Do you agree that
    we need a more robust fiscal response to increase the supply of
    affordable housing and to lower cost nationwide?
        Mr. Powell. We do not express opinions on things like that.
    I will say that there is a structural housing shortage in the
    United States, and that is really the longer-run problem. The
    problem with high interest rates is a short-run problem. The
    longer-run problem is lack of supply.
        Ms. Pressley. Well, that is why it is critical that
    Congress passed legislation appropriation bills that will make
    those necessary investments and housing for all. Given the way
    that Ranking Member Waters fought for $150 billion investment
    in housing in Build Back Better, I know on this side of the
    aisle, that my colleagues and I are ready and waiting for the
    Republican majority to take housing inflation seriously.
    Housing affordability is the number one issue I am hearing
    about from my constituents. Families in my district and
    throughout this country need relief now. I truly hope that Fed
    will listen to them and cut interest rates. Thank you. I yield.
        Chaiman McHenry. The gentlelady yields back. The gentleman
    from South Carolina, Mr. Norman, is recognized for 5 minutes.
        Mr. Norman. Thank you, Chairman Powell. I think other
    people have noted about the crisis in the office building
    market across this country. That is the line of work we are in.
    I can tell you it is real. I can tell you the buildings that
    are effectively vacant, it is going to have an effect on the
    taxes paid. It is going to have an effect on rents. As far as
    affordability and housing, the rates are one thing, but my good
    friends on the other side of the aisle do not realize that
    housing has got over 200 components to it. One of the biggest
    is gas prices, and as long as we are buying gas from countries
    that hate America and do not manufacture their own housing
    income and down--I do not know how you define ``affordable''
    anyway--it is going to continue a downward slide. I am from a
    State, South Carolina, that people are moving in, and we are
    not going to have the housing starts that we should have
    because of the policies of the Biden Administration, which is a
    trainwreck, in this entire economy.
        On regulations, on Regulation II, which has the guardrails
    for credit card fees, and I know the cap, so you are looking at
    adjusting that. You are getting in the way of banks charging
    fees according to what their costs are. How does these
    regulations affect that, particularly Regulation II?
        Mr. Powell. Is this a Fed regulation we are talking about,
    or is this a CFPB regulation?
        Mr. Norman. From my record, the Federal Reserve has
    finalized the routing restrictions and proposed tighter and
    adjusting the price caps that currently exist. Is that not
    right?
        Mr. Powell. It does not ring a bell with me. It may well be
    right. I am not familiar with that.
        Mr. Norman. If you could look at that. I know that all the
    credit unions and banks have some concerns on it.
        Mr. Powell. I will come back to you on that.
        Mr. Norman. Okay. I appreciate it. Do you need a letter
    from us, so we----
        Mr. Powell. No, we will come back to you.
        Mr. Norman. Okay. Thank you.
        Mr. Norman. Community Reinvestment Act (CRA). For those of
    us who have been involved with banking for a long time, the
    regulations having a clear set of standards that we abide by
    and know where to put the money to, how, when we, should we
    have regulations out that we can read about what is going to be
    acceptable and what is not?
        Mr. Powell. I am sorry. I did not get your question.
        Mr. Norman. The changes and regulations for CRA.
        Mr. Powell. Right. What about it? I am sorry. I missed your
    question. What was the question?
        Mr. Norman. When are the regulations going to be out that
    the banks will know what is acceptable for CRA and what is not
    acceptable?
        Mr. Powell. So the final rule, of course, is out, I think
    we are working on. There is a lot of work to do. The
    requirements do not really kick in, most of them, for a couple
    of years at least, so I think we are working on the follow up
    regulations.
        Mr. Norman. Okay. It is really important to allow all the
    banks because they want to make sure they qualify where the
    dollars are spent. They need to make sure that it is going into
    the right spot because the credits will not be applied unless
    that is it. The Federal, I think, Reserve launched and is
    operating this now. How is the participation rate going with
    that?
        Mr. Powell. Slow. Real slow. It is early days. There are
    network effects. These things, they go slow until they do not,
    and it was the same way with Automated Clearing House (ACH),
    you may remember back in the day.
        Mr. Norman. Right.
        Mr. Powell. So we are at fewer than 500 banks are in there
    now. We are working away at it. We expect it will take some
    time, but it is there, and we think it will be beneficial. We
    had a lot of support from smaller banks to build it, as you
    know.
        Mr. Norman. Is the pricing below cost?
        Mr. Powell. I do not believe so, no. Not longer than cost.
        Mr. Norman. Okay. Okay. That is all the questions I have.
    Thank you for being here.
        Chairman McHenry. The gentleman yields back. The gentleman
    from Nevada, Mr. Horsford, is now recognized for 5 minutes.
        Mr. Horsford. I want to thank the chairman and the ranking
    member for this hearing, and to you, Chair Powell, for
    appearing before the committee to discuss the recently
    published monetary policy report.
        As we continue our work on behalf of the American people,
    we have to keep in mind that our mission here is to grow the
    economy from the bottom up and the middle out. It seems as if
    there has been a constant series of shocks to the economy, both
    domestically and globally, and yet, we can all see just how
    resilient the labor market has been as it has maintained its
    strength. With the robust gain of 353,000 jobs, the January
    numbers are a continuation of the trend that Democrats and
    Congress delivered through historic investments in our
    workforce, putting people over politics. In light of this
    relative economic strength, I really want to implore the
    Federal Reserve to take stock of the holistic economic picture
    before making decisions on monetary policy, and to pay
    particular attention to those communities that have been
    historically left behind during times of accelerated recovery.
        I want to add to the questions from my colleague,
    Congresswoman Pressley, Chair Powell. At a time where it has
    become increasingly difficult for working people and people of
    color, in particular, to purchase a home, I worry that rising
    mortgage rates will put working families even further behind on
    accessing the wealth and equity that a home provides. So what
    actions, if any, is the Federal Reserve considering to better
    understand and to mitigate the impacts that your Basel III
    proposal may have on minority borrowers who disproportionately
    rely on high Loan-to-Value (LTV) mortgages due to the
    generational wealth gap that persist?
        Mr. Powell. We have received comments, including many on
    the mortgage changes, and we understand the concerns and we are
    looking very carefully at that. Have not made any decisions,
    but we will announce them when we have.
        Mr. Horsford. Are you concerned that the shifts in risk
    weights will reinforce the decades-long retreat of banks from
    the mortgage market and push more originations to nonbank
    institutions?
        Mr. Powell. That is a question that people are raising, and
    it is something we take very seriously. We will be taking that
    into consideration as we decide about that recommended change.
        Mr. Horsford. Could you discuss why you feel it is
    necessary to include new requirements around operational risk
    and Basel III in light of recent claims that it will
    significantly increase the cost of or prevent banks from
    offering altogether necessary services, such as underwriting in
    base investment advisory or insurance?
        Mr. Powell. That is one of the concerns that has been
    articulated about the proposed changes to operating risk. We
    take those concerns seriously. As I mentioned, we are in the
    middle of looking at these things and then will soon be in the
    process of turning to the question of what changes to make.
        Mr. Horsford. Well, I just would underscore the sense of
    urgency because the longer there is uncertainty in the market,
    it creates really negative effects to end users, which are all
    of our constituents who are looking to see these costs come
    down.
        Let me shift. This Congress, under the leadership of
    Ranking Member Waters and former Congressional Black Caucus
    (CBC) Chair Joyce Beatty, I have made it a focus of my efforts
    to educate my colleagues and the public at large on the far-
    reaching benefits of increased diversity in the workplace, in
    our boardrooms, and in society as a whole. Despite the efforts
    by some on the other side to take away the very tools of
    economic opportunity that create inclusive work environments
    and improve performance, there has been really misguided
    assault on everything from diversity, equity, and inclusion to
    other programs following the aftermath of the Supreme Court's
    ruling on affirmative action. So, Chairman Powell, as you know,
    your Office of Minority and Women Inclusion has a focus on
    this. As we anticipate the upcoming release of your annual
    report on inclusion, would you be able to speak to the
    necessity of collecting this data that minority-and women-owned
    businesses are included in the Board's contracting and
    acquisition opportunities?
        Mr. Powell. I do believe we collect that data, and we
    monitor that very carefully.
        Mr. Horsford. Why is it important?
        Mr. Powell. Well, I think diversity in the workplace is an
    important thing, and you will not know how you are doing it
    unless you measure it.
        Mr. Horsford. Just as the McKinsey Institute released in
    their ``Diversity Matters Even More'' report, companies that
    have more diverse management teams actually outperform
    companies that do not. That goes to the bottom line of our
    economy, and I wish my colleagues on the other side would stop
    their assault on diversity, equity, and inclusion, and actually
    work with us to grow the economy for everyone.
        Chairman McHenry. The gentleman's time has expired. The
    gentleman from Wisconsin, Mr. Steil, is now recognized for 5
    minutes.
        Mr. Steil. Thank you very much, Mr. Chair. Thank you for
    being here, Chairman Powell. Appreciate it.
        You are navigating a difficult situation where we have had
    stimulative economic policies from the Biden Administration, in
    particular, excessive government spending, investment in
    infrastructure, specific tax credits. At the same time, we are
    seeing a regulatory environment from the administration that is
    also restricting economic growth. We have heard a lot about the
    Basel III Endgame, which you are a chair of. In your opening
    remarks, you noted that high interest rates are impacting
    business investment in a negative way. High interest rates are
    also negatively impacting the housing market.
        As we look at Basel III Endgame, I have heard from a wide
    array of stakeholders, from those that are commenting on
    increase in bank capital standards, the negative impact that
    would have on the housing market, as well as from the business
    community, the impact that would have on their ability to
    invest in capital infrastructure and increase employment. Does
    the broad diversity of voices who hold concerns on a Basel III
    Endgame concern you?
        Mr. Powell. I would say that I have articulated concerns
    and we are reading those comments, and we are very much in the
    process of assessing what we need to do to address them.
        Mr. Steil. Thank you, and I appreciate your time on that.
    Shifting gears slightly, as you may know, the Securities and
    Exchange Commission held an open meeting today to approve the
    final climate change rule. It is a significant regulation that
    I think would have a significant impact on the economy. Can you
    comment how the Fed thinks about the economic impact of this
    new regulation or regulations more broadly and in particular,
    their impact on both inflation and unemployment?
        Mr. Powell. We do not comment on regulations of other
    agencies. Sorry.
        Mr. Steil. You will review that if it is put in place, or
    you will review the economic impact as the empirical data comes
    forward?
        Mr. Powell. We are not in the business of scoring. I mean,
    CBO does that. They will look at this and make a careful
    assessment of the economic impacts and budgetary impacts and
    that kind of thing.
        Mr. Steil. Thank you. I will shift gears again. One of your
    two mandates is to maximize employment in addition to
    maintaining price stability. As you know, government hiring has
    accounted for a large share of total job creation. More than
    600,000 public sector jobs were created last year, and the
    Federal Government now employs nearly 3 million workers. So
    when you are examining employment data, how does the Fed view
    the impact of the public sector employment growth relative to
    private sector economic growth? In other words, how do the two
    data points factor into your assessment of how the broader
    economy is performing?
        Mr. Powell. So the jobs are jobs, right? I think we would
    tend to look at private sector jobs to get a better assessment.
    Private sector job creation is a better indicator of kind of
    the private sector momentum in the economy, but we look at
    both. I mean, they both count.
        Mr. Steil. Does the dramatic increase in the private sector
    number of jobs give you any pause or concern as it relates to--
    --
        Mr. Powell. You mean in the public sector?
        Mr. Steil. In a public sector. Sorry, if I misspoke. Yes,
    the public sector.
        Mr. Powell. The truth is the public sector was unable to
    hire at the beginning because wages went up a lot in the
    private sector at the beginning of the pandemic. Inflation and
    public sector cannot respond to that. So some catch-up hiring
    going on there. Now that things are settling down to normal, I
    think there is some catch-up hiring. I am not sure it is an
    issue we are concerned about.
        Mr. Steil. Okay. I will shift gears in my final minutes
    just to talk a little bit to get your perspective on the
    macroeconomic developments that are having an impact on our
    monetary policy. Specifically, as we think about the potential
    for a productivity boom from AI to work-at-home to other
    factors, the data is probably too early to tell whether or not
    we are having a true productivity view. How does the Fed view
    the adoption of some of these new technologies, in particular
    AI, as it relates to labor productivity?
        Mr. Powell. Everyone is looking at AI for that question,
    and it is hard to say actually. We have had really nice
    productivity in the last year or so, but it is probably still
    very much affected by the post-pandemic factors that we are
    seeing. I think we need to see more to understand whether there
    is a longer-term boom. AI certainly has the capacity to either
    augment labor or to replace labor, and that is a key question.
    We really do not know which of the two it will do, tons of
    money being invested in it, and so it is likely to drive
    significant productivity.
        I would say right now technology, but also higher labor
    mobility, a lot of people quitting during the really tight
    labor market, and also the rise in startups. A lot of people
    started companies during the pandemic. Those are the kind of
    things that do add up to higher productivity over time, so
    there is hope that we will see some productivity out of this.
        Mr. Steil. Thanks for your comments today. Mr. Chair, I
    yield back.
        Chairman McHenry. The gentleman yields back. We will go to
    the last questioner of the day, the gentleman from New York,
    Mr. Torres, for 5 minutes.
        Mr. Torres. Thank you, Mr. Chair. Mr. Chair, I have several
    questions about some of the most common complaints that I have
    heard about Basel III Endgame. I have an open mind on the
    subject, but I want to hear your response to some of the
    arguments that have been leveled against it.
        First, the Fed has repeatedly reassured the public that the
    banking system is well capitalized, yet the Fed is advancing
    Basel III on the assumption that the banking system is
    undercapitalized. So the first question is, how do you
    reconcile the Fed's repeated assurances about a well-
    capitalized banking system with Basel III's assumption of an
    undercapitalized banking system? The second question, if the
    purpose of Basel III is to align U.S. banks with their banking
    peers elsewhere in the world, why is the Fed imposing
    requirements that are more stringent than those prescribed by
    Basel III? In other words, why is the Fed ``gold plating?''
        The third question is, how do you reconcile Basel III's
    recommendation for standardization with Congress' statutory
    requirement for tailoring? Standardization would seem to be in
    conflict or intention with regulatory tailoring and the fourth
    and final question, do you think that Basel III could have the
    unintended consequence of reinforcing the trend toward shadow
    banking, which would mean less regulation, not more? Is there a
    sense in which we are transferring risk from the regulated
    sector of the financial system to the deregulated sectors? So I
    bombarded you with four questions, and I will give you the time
    you need to answer them.
        Mr. Powell. I am going to have a hard time reading my
    handwriting here, but I will start with a ``yes'' to the fourth
    one. I will give you that one because that is clearly a risk.
    We have seen intermediation activity moving out of the
    regulated system, and this has the risk of doing more of that.
    So in a word or two, what was one again?
        Mr. Torres. You testified, yes, reassurances about the
    capitalization of the bank.
        Mr. Powell. So I addressed this in my remarks in the open
    Board meeting. Higher capital is always going to add to safety
    and soundness, but there is a cost. So identifying the precise
    right level is very, very difficult and hard to do it
    objectively. I have said for years in these rooms that I felt
    that the level of capital in the U.S. banking system was about
    right, and I voted for all of these increases during Dodd-
    Frank. So I think it is a very fair question. We will be
    looking at that. The second one was?
        Mr. Torres. The concern about gold plating.
        Mr. Powell. About?
        Mr. Torres. Gold plating?
        Mr. Powell. Gold plating, yes. No, it is, and I said this
    in my public remarks that we are exceeding the minimums with
    this proposal, and we also exceeded what the other big
    jurisdictions are doing. That is a question. That is a good
    question, I will agree.
        Mr. Torres. Okay.
        Mr. Powell. The third?
        Mr. Torres. The third is, I think, more or less
    standardization versus tailoring.
        Mr. Powell. Standardization of? It was something----
        Mr. Torres. Yes. So Congress passed a statute requiring
    regulatory tailoring, and do you think Basel III is in
    compliance with that statue.
        Mr. Powell. I addressed that in my comments, too. I think
    you are right. We do need to take on board the lessons of
    Silicon Valley Bank as it relates to the smaller and large
    banks, but we do not need to throw away the tailoring that is
    required by the law but also that is appropriate if we are
    going to have a diverse banking system.
        Mr. Torres. The collapse of SVB was largely a story about
    liquidity risk and interest rate risk, yet the focal points of
    Basel III are credit risk, market rate risk, and operational
    risk. What is your response to the criticism that the Fed
    should focus its energies on addressing the forms of risks that
    were responsible for the SVB bank failure rather than focusing
    on forms of risks that were largely unrelated to it?
        Mr. Powell. I agree with that, but I would say we are
    working on a package of liquidity measures which directly
    addresses the Silicon Valley Bank situation. We have also taken
    a lot of supervisory actions with other medium-and small-sized
    banks that had a lot of uninsured deposits and a lot of real
    estate risk, and things like that. So we have been doing quite
    a lot on the supervisory section that does not require new
    rules.
        Mr. Torres. Finally, as you know, the crippling cost of
    housing accounts for a third of inflation. One of the most
    powerful tools for producing and preserving affordable housing
    is the Low-Income Housing Tax Credit, which has financed nearly
    4 million units of affordable housing. The banking system
    accounts for 85 percent of LIHTC investments, and there is a
    concern that Basel III, in its present form, would diminish the
    availability of LIHTC and the amount of affordable housing
    development. I am just curious, is that on your radar, and is
    that something you are willing to examine?
        Mr. Powell. Yes, it is.
        Mr. Torres. With that, I will leave it at that. Thank you.
        Chairman McHenry. The gentleman yields back. That is the
    final question of the day. We committed to the chair that we
    would be done, the hard stop at 1 p.m. It is nice when we can
    honor our commitments. So I would like to thank Chair Powell
    for his testimony today.
        Without objection, all members will have 5 legislative days
    in which to submit additional written questions for the witness
    to the chair. The questions will be forwarded to the witness
    for his response. I ask you, Chair Powell, please respond as
    promptly as you possibly can.

        [The information referred to can be found in the appendix.]

        Chairman McHenry. With that, this hearing is adjourned.
        [Whereupon, at 12:56 p.m., the committee was adjourned.]

                                A P P E N D I X

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                   [all]