    [House Hearing, 119 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 NINETEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                               FEBRUARY 12, 2025

                                   __________

                                Serial No. 119-4

           Printed for the use of the Committee on Financial Services

    [GRAPHIC(S) NOT AVAILANLE IN TIFF FORMAT

                                www.govinfo.gov

                        U.S. GOVERNMENT PUBLISHING OFFICE
    59-600 PDF                 WASHINGTON : 2025

                     HOUSE COMMITTEE ON FINANCIAL SERVICES

                        FRENCH HILL, Arkansas, Chairman

    BILL HUIZENGA, Michigan, Vice        MAXINE WATERS, California, Ranking
        Chairman                             Member
    FRANK D. LUCAS, Oklahoma             SYLVIA R. GARCIA, Texas, Vice
    PETE SESSIONS, Texas                     Ranking Member
    ANN WAGNER, Missouri                 NYDIA M. VELAZQUEZ, New York
    ANDY BARR, Kentucky                  BRAD SHERMAN, California
    ROGER WILLIAMS, Texas                GREGORY W. MEEKS, New York
    TOM EMMER, Minnesota                 DAVID SCOTT, Georgia
    BARRY LOUDERMILK, Georgia            STEPHEN F. LYNCH, Massachusetts
    WARREN DAVIDSON, Ohio                AL GREEN, Texas
    JOHN W. ROSE, Tennessee              EMANUEL CLEAVER, Missouri
    BRYAN STEIL, Wisconsin               JAMES A. HIMES, Connecticut
    WILLIAM R. TIMMONS, IV, South        BILL FOSTER, Illinois
        Carolina                         JOYCE BEATTY, Ohio
    MARLIN STUTZMAN, Indiana             JUAN VARGAS, California
    RALPH NORMAN, South Carolina         JOSH GOTTHEIMER, New Jersey
    DANIEL MEUSER, Pennsylvania          VICENTE GONZALEZ, Texas
    YOUNG KIM, California                SEAN CASTEN, Illinois
    BYRON DONALDS, Florida               AYANNA PRESSLEY, Massachusetts
    ANDREW R. GARBARINO, New York        RASHIDA TLAIB, Michigan
    SCOTT FITZGERALD, Wisconsin          RITCHIE TORRES, New York
    MIKE FLOOD, Nebraska                 NIKEMA WILLIAMS, Georgia
    MICHAEL LAWLER, New York             BRITTANY PETTERSEN, Colorado
    MONICA DE LA CRUZ, Texas             CLEO FIELDS, Louisiana
    ANDREW OGLES, Tennessee              JANELLE BYNUM, Oregon
    ZACHARY NUNN, Iowa                   SAM LICCARDO, California
    LISA McCLAIN, Michigan
    MARIA SALAZAR, Florida
    TROY DOWNING, Montana
    MIKE HARIDOPOLOS, Florida
    TIM MOORE, North Carolina

                          Ben Johnson, Staff Director
                             C  O  N  T  E  N  T  S

                                  ----------

                          Wednesday, February 12, 2025

                                                                       Page

                               OPENING STATEMENTS

    Hon. French Hill, Chairman of the Committee on Financial
      Services, a U.S. Representative from Arkansas..................     1
    Hon. Maxine Waters, Ranking Member of the Committee on Financial
      Services, a U.S. Representative from California................    12

                                   STATEMENTS

    Hon. Frank D. Lucas, Chairman of the Task Force on Monetary
      Policy, Treasury Market Resilience, and Economic Prosperity, a
      U.S. Representative from Oklahoma..............................     3
    Hon. Juan Vargas, Ranking Member of the Task Force on Monetary
      Policy, Treasury Market Resilience, and Economic Prosperity, a
      U.S. Representative from California............................     3

                                   WITNESSES

    Hon. H. Jerome Powell, Chairman of the Board of Governors of the
      Federal Reserve System.........................................     4
        Prepared Statement...........................................     7

                                    APPENDIX

                       MATERIALS SUBMITTED FOR THE RECORD

    Hon. Sylvia Garcia:
        Brookings: The Labor Market Impact on Deportations...........    62
        The Federal Reserve Bank of Dallas: Migration to Texas Fills
          Critical Gaps in Workforce, Human Capital..................    71
        The Federal Reserve Bank of Dallas: Unprecedented U.S.
          Immigration Surge Boosts Job Growth, Output................    76

                     RESPONSES TO QUESTIONS FOR THE RECORD

    Written responses to questions for the record from Representative
      Frank D. Lucas.................................................    82
    Written responses to questions for the record from Representative
      Andy Barr......................................................    86
    Written responses to questions for the record from Representative
      Warren Davidson................................................    97
    Written responses to questions for the record from Representative
      Bryan Steil....................................................   101
    Written responses to questions for the record from Representative
      Brad Sherman...................................................   104
    Written responses to questions for the record from Representative
      Gregory W. Meeks...............................................   111
    Written responses to questions for the record from Representative
      Bill Foster....................................................   113

            THE FEDERAL RESERVE'S SEMI-ANNUAL MONETARY POLICY REPORT

                                  ----------

                          Wednesday, February 12, 2025

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

        The committee met, pursuant to notice, at 10:07 a.m., in
    room 2128, Rayburn House Office Building, Hon. French Hill
    [chairman of the committee] presiding.
        Present: Representatives Hill, Lucas, Sessions, Huizenga,
    Wagner, Barr, Williams of Texas, Loudermilk, Davidson, Rose,
    Timmons, Stutzman, Norman, Meuser, Kim, Donalds, Garbarino,
    Fitzgerald, Flood, McClain, Salazar, Downing, Haridopolos,
    Moore, Waters, Velazquez, Sherman, Meeks, Scott, Lynch, Green,
    Cleaver, Himes, Foster, Beatty, Vargas, Gonzalez, Casten,
    Pressley, Tlaib, Torres, Garcia, Williams of Georgia, Fields,
    Bynum, and Liccardo.
        Chairman Hill. The committee will come to order.
        Without objection, the chair is authorized to declare a
    recess of the committee at any time.
        This hearing is titled, ``The Federal Reserve's Semi-Annual
    Monetary Policy Report.''
        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
    at 1 p.m., which we will strictly observe.
        I will now recognize myself for 4 minutes for an opening
    statement.

    OPENING STATMENT OF HON. FRENCH HILL, CHAIRMAN OF THE COMMITTEE
       ON FINANCIAL SERVICES, A U.S. REPRESENTATIVE FROM ARKANSAS

        Welcome Chairman Powell, thank you for being with us today.
    For the last 4 years, inflation has crushed Americans. Today,
    it takes $1.21 to purchase what just cost $1 in January 2021,
    as measured by the Consumer Price Index. The erosion of
    Americans' incomes and, thereby, their savings was caused by a
    combination of irresponsible fiscal policy, supply chain
    disruptions, but also by, in my view, the Federal Reserve
    fighting the last war, staying too low for too long.
        Chairman Powell, you and I have discussed at previous
    hearings that the Federal Reserve System (Fed), like many
    others, assumed that the pre-pandemic era of low inflation and
    low interest rates would continue. This belief was one of the
    reasons the Fed changed its monetary policy framework in August
    2020, only 7 months before inflation began its 4 decades steep
    march upward in March 2021. In hindsight, the adoption of the
    so-called flexible average inflation targeting appears ill-
    timed and ill-fitted for a post-pandemic world.
        As the Fed undertakes a review of its monetary policy
    framework, you must account for the lessons of the last 4 years
    and think about what is ahead over the horizon, not what has
    been. The Fed has made progress on inflation, but it is the
    last mile that seems the hardest. As Bank of America economist,
    Stephen Juneau, said yesterday, ``Inflation is stuck above
    target, with risks to the upside.'' In August 2022, with
    inflation raging, you gave a speech that echoed some of your
    predecessors as chair. You vowed to keep at it until we are
    confident the job is done. It is a vow you should fulfill.
        With this morning's confirmation that inflation is well
    above the 2 percent target at 3 percent and making move
    upwards, other economic indicators are positive. As you
    reported yesterday, a low inflation rate, solid growth domestic
    product (GDP), growth, and financial conditions continue to
    support expansion and investment. This is not a time to say
    that there are no risks, but some perhaps unseen. However,
    these risks, in comparison to the risk of a resurgence of
    inflation present, are modest. Given the already high prices
    due to President Biden's inflation, Americans simply cannot
    afford further price increases at the grocery store and gas
    pump. Such a resurgence would likely force the Fed to begin
    another tightening cycle, making mortgages, credit cards, and
    small business loans unattainable for many. That is why I urge
    the Fed to forge ahead with its monetary policy duties until
    you are confident the mission is complete, and price stability
    has been restored.
        The fact is, over the past decade, we have witnessed too
    many distracting additional mandates diluting the Fed's core
    mission of price stability. This is the reason we formed the
    Task Force on Monetary Policy, Treasury Market Resilience, and
    Economic Prosperity that will be led by Chair Frank Lucas. The
    Task Force's purpose is to ensure that the monetary policy
    actions of the Fed are put under a magnifying glass and
    prioritized for this committee, and I look forward to our first
    hearing of the Task Force.
        I now want to turn to some of the other Fed
    responsibilities, bank regulation and supervision. The Fed was
    created by Congress to be an independent Agency. The intent is
    to insulate the Federal Reserve's monetary policy from
    political influence. Unfortunately, in the last 2-and-a-half
    years of the Biden Administration, the Fed took on serious
    liberties with its independence in the areas of supervision. In
    law, the Federal Vice Chair for Supervision is to develop
    policy recommendations that then have been brought to the Board
    of Governors for consideration. In my estimation, over the
    years, you and the board have been too deferential to the
    statutory vice chairman for supervision.
        Vice Chair Barr turned the Basel III Endgame rulemaking
    into a partisan attempt to propose a massive hike on capital on
    American banks, making them less competitive. The Fed has a
    chance right now to get back on the right track and preserve
    its independence for the long-term benefit of the American
    people, and with that, I yield back.
        The chair recognizes Mr. Lucas, the Chair of the Monetary
    Policy, Treasury Market Resilience, and Economic Prosperity
    Task Force, for 1 minute.

    OPENING STATEMENT OF HON. FRANK D. LUCAS, CHAIRMAN OF THE TASK
       FORCE ON MONETARY POLICY, TREASURY MARKET RESILIENCE, AND
        ECONOMIC PROSPERITY, A U.S. REPRESENTATIVE FROM OKLAHOMA

        Mr. Lucas. Thank you, Mr. Chairman. While there are
    differences of approach in this room, a bipartisan guiding
    principle is that maximizing economic growth is the path to
    economic prosperity. It is the single greatest factor in
    delivering opportunity and improving the quality of life for
    the folks back home. The actions of the Federal Reserve and the
    machinery of monetary policy play an important role in economic
    stability. With the 5-year review of the monetary policy
    framework underway, I hope this will be an opportunity to
    evaluate the effectiveness of the Fed's toolkit and its vast
    influence on the lives of every American. The creation of the
    new Monetary Policy, Treasury Market Resilience, and Economic
    Prosperity Task Force will afford us the opportunity to dive
    deeper into this topic.
        Chairman Powell, thank you for being here. There are real
    issues that deserve our attention, and I hope today will be
    productive. I look forward to hearing your testimony on the
    state of the economy, where we are, and where we are headed. I
    yield back, Mr. Chairman.
        Chairman Hill. The gentleman yields back. The chair
    recognizes Mr. Vargas, the Ranking Member of the Monetary
    Policy, Treasury Market Resilience, and Economic Prosperity
    Task Force, for 1 minute.

     OPENING STATEMENT OF HON. JUAN VARGAS, RANKING MEMBER OF THE
    TASK FORCE ON MONETARY POLICY, TREASURY MARKET RESILIENCE, AND
       ECONOMIC PROSPERITY, A U.S. REPRESENTATIVE FROM CALIFORNIA

        Mr. Vargas. Thank you very much, Mr. Chairman, and thank
    you, Ranking Member. Thank you, Chairman Powell, both for your
    years of public service and for appearing before our committee
    today. As the Ranking Member of the newly formed Monetary
    Policy, Treasury Market Resilience, and Economic Prosperity
    Task Force, I look forward to working with Chairman Lucas and
    the rest of my colleagues to address these important issues.
        The research is clear. Independent central banks perform
    better in carrying out their mandates than politically
    motivated central banks. The independence of the Federal
    Reserve is crucial to achievement of these dual mandate goals
    to maintain both maximum employment and stable prices, and
    although this dual mandate has been criticized by some, it
    continues to serve Americans well. It has not prevented the Fed
    from making substantial progress on driving down inflation, all
    the while avoiding a recession which many saw as inevitable. I
    look forward to your testimony, Chairman Powell, and I yield
    back.
        Chairman Hill. The gentleman yields back. I would like to
    turn to the gentleman from Michigan and yield to him for a
    point of personal privilege, Mr. Huizenga.
        Mr. Huizenga. Thank you, Chairman Hill, and as we all know,
    all good things must come to an end. I want to take a minute to
    recognize someone who is leaving the committee but has been an
    integral part of the oversight work Republicans have done over
    the last 5 years. Although Nicholle Vo is all of 29 years old,
    something that we tease her about on a fairly regular basis, I
    quickly realized that despite her physical stature, she was a
    force to be reckoned with. Her dedication to my team, this
    committee, her colleagues, and this institution is something
    that we all should aspire to achieve.
        Nicholle has effectively served in various roles, from a
    professional staff member right out of law school to now deputy
    general counsel in this particular Congress. In her time with
    the committee, Nicholle has worked on or led investigations in
    the Sam Bankman-Fried, the bank collapses of 2023, terrorist
    financing, culture and corruption at the Federal Deposit
    Insurance Corporation (FDIC), and the Securities Exchange
    Commission's (SEC's) climate disclosure rule, just to name a
    few. I have sat through her questioning, and it is fierce and
    tenacious and directed.
        Myself, my team, and, frankly, the whole Financial Services
    Committee team cannot thank Nicholle enough for her work and
    what she has done on behalf of this organization. Like all good
    staffers, she has become a confidant, a sounding board, and has
    the ability to say no in a very nice way, but in a very tough
    way as well. Although Nicholle will be leaving the committee,
    her contributions will not be forgotten and are deeply
    cherished. Thank you, Nicholle. We deeply appreciate all your
    work, and I yield back. [Applause.]
        Chairman Hill. Mr. Chairman, we welcome your testimony.
    Chairman Powell, you will be recognized for 5 minutes to give
    an oral presentation of your testimony.
        Without objection, your written statement will be made part
    of the record. You are now recognized for 5 minutes.

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

        Mr. Powell. Chairman Hill, 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 achieving
    our dual-mandate goals of maximum employment and price
    stability for the benefit of the American people. The economy
    is strong overall and has made significant progress toward our
    goals over the past 2 years. Labor market conditions have
    cooled from their formerly overheated state and remain solid.
    Inflation has moved much closer to our 2 percent longer-run
    goal, though it remains somewhat elevated. We are attentive to
    the risks on both sides of our mandate.
        I will review the current economic situation before turning
    to monetary policy.
        Recent indicators suggest that economic activity has
    continued to expand at a solid pace. GDP rose 2.5 percent in
    2024----
        Chairman Hill. Mr. Chairman, can we ask you to pull your
    mic a little closer, please? Thank you so much.
        Mr. Powell. Sure. Recent indicators suggest that economic
    activity has continued to expand at a solid pace. GDP rose 2.5
    percent in 2024, bolstered by resilient consumer spending.
    Investment in equipment and intangibles appears to have
    declined in the 4th quarter but was solid for the year overall.
    Following weakness in the middle of last year, activity in the
    housing sector seems to have stabilized.
        In the labor market, conditions remain solid and appear to
    have stabilized. Payroll job gains averaged 189,000 per month
    over the past 4 months. Following earlier increases, the
    unemployment rate has been steady since the middle of last year
    and at 4 percent in January remains low. Nominal wage growth
    has eased over the past year, and the jobs-to-workers gap has
    narrowed. Overall, a wide set of indicators suggests that
    conditions in the labor market are broadly in balance. The
    labor market is not a source of significant inflationary
    pressures. The strong labor market conditions in recent years
    have helped narrow longstanding disparities in employment and
    earnings across demographic groups.
        Inflation has eased significantly over the past 2 years but
    remains somewhat elevated relative to our 2 percent longer-run
    goal. Total Personal Consumption Expenditures (PCE) prices rose
    2.6 percent over the 12 months ending in December, and
    excluding the volatile food and energy categories, core PCE
    prices rose 2.8 percent. Longer-term inflation expectations
    appear to remain well anchored, as reflected in a broad range
    of surveys of households, businesses, and forecasters, as well
    as measures from financial markets.
        Our monetary policy actions are guided by our dual mandate
    to promote maximum employment and stable prices for the
    American people. Since last September, the Federal Open Market
    Committee (FOMC) lowered the policy rate by a full percentage
    point from its peak after having maintained the target range
    for the Federal funds rate at 5.25 to 5.5 percent for 14
    months. That recalibration of our policy stance was appropriate
    in light of progress on inflation and the cooling in the labor
    market. Meanwhile, we have continued to reduce our securities
    holdings.
        With our policy stance now significantly less restrictive
    than it had been and the economy remaining strong, we do not
    need to be in a hurry to adjust our policy stance. We know that
    reducing policy restraint too fast or too much could hinder
    progress on inflation. At the same time, reducing policy
    restraint too slowly or too little could unduly weaken economic
    activity and employment. In considering the extent and timing
    of additional adjustments to the target range for the Federal
    funds rate, the FOMC will assess incoming data, the evolving
    outlook, and the balance of risks.
        As the economy evolves, we will adjust our policy stance in
    a manner that best promotes our maximum-employment and price-
    stability goals. If the economy remains strong and inflation
    does not continue to move sustainably toward 2 percent, we can
    maintain policy restraint for longer. If the labor market were
    to weaken unexpectedly or if inflation were to fall more
    quickly than anticipated, we can ease policy accordingly. We
    are attentive to the risks to both sides of our dual mandate,
    and policy is well positioned to deal with the risks and
    uncertainties that we face.
        This year, we are conducting our second periodic review of
    our monetary policy strategy, tools, and communications, the
    framework used to pursue our congressionally assigned goals.
    The focus of this review is on the FOMC's statement on longer-
    run goals and monetary policy strategy, which articulates the
    committee's approach to monetary policy and on the committee's
    policy communications tools. The committee's 2 percent longer-
    run inflation goal will be retained and will not be a focus of
    the review. Our review will include outreach and public events
    involving a wide range of parties, including Fed Listens events
    around the country and a research conference in May. We will
    take on board the lessons of the last 5 years and adapt our
    approach where appropriate to best serve the American people,
    to whom we are accountable. We intend to wrap up the review by
    late summer.
        Let me conclude by emphasizing that at the Fed, we will do
    everything we can to achieve the dual mandate goals Congress
    set for monetary policy. We remain committed to supporting
    maximum employment, bringing inflation sustainably to our 2
    percent goal, and keeping longer-term inflation expectations
    well anchored. Our success in delivering on these goals matters
    to all Americans. We understand that our actions affect
    communities, families, and businesses across the country.
    Everything we do is in service to our public mission.
        Thank you, and I look forward to your questions. Thank you,
    Mr. Chairman.

        [The prepared statement of Mr. Powell follows:]
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        Chairman Hill. The chairman yields back. I want to
    recognize the ranking member of the full committee, Ms. Waters
    from California, for a 4-minute opening statement.

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

        Ms. Waters. Good morning, everyone. Welcome Chair Powell.
        Our country is on the precipice of an economic disaster
    unlike anything we have seen in recent memory. While Trump
    promised lower prices for working class families, we are seeing
    the exact opposite. In fact, grocery prices are rising.
    According to the Labor Department, eggs are up, 40 percent more
    expensive than they were even a year ago. In my home State of
    California, we have seen eggs as high as $9 and more for a
    dozen. Inflation is rising, and it is up to 3 percent for the
    first time since June, and other staples are about to get more
    expensive as Trump levies new taxes on steel and aluminum.
        America's consumers and businesses are facing uncertainty
    and chaos. This is all because Trump and his unelected
    billionaire Co-President, Elon Musk, are taking a sledgehammer
    to our economy and democracy. In recent days, they attempted to
    illegally kill the Consumer Financial Protection Bureau, the
    same Agency created after the financial crisis of 2008. Since
    its inception, Consumer Financial Protection Bureau (CFPB) has
    successfully fought on behalf of working-class families against
    abuse of big banks and predatory lenders and, not to mention,
    returned $21 billion back to families who were swindled. Chair
    Powell, you explained yesterday that with the CFPB shutdown,
    there is no agency to supervise big banks to ensure they follow
    consumer finance law. In the face of these illegal, cruel, and
    relentless attacks, Chair Hill, it is both urgent and critical
    that you immediately convene a long-overdue hearing with CFPB
    Acting Director Vought, Members of Congress, and, importantly,
    the American public deserves answers as to why Musk and his
    Department of Government Efficiency (DOGE) minions are in
    possession of sensitive consumer information and what they are
    doing with it.
        Additionally, Trump is simultaneously threatening import
    taxes on U.S. companies that will increase the cost of
    groceries and other basic supplies for all. Trump is freezing
    funds for housing assistance and community development and
    whittling down the Federal workforce so that his billionaire
    boys club can suck any of these workers' salaries into their
    own pockets. This is all part of Trump's Project 2025 playbook.
        You know what else he has taken from Project 2025, Chair
    Powell? Their plan to eliminate the Fed. We are watching this
    play out as Trump doubles down on his efforts to gut the
    independence of the Fed, as we have seen with demands that you
    drop rates immediately. In fact, his Co-President Musk attacked
    Fed independence in a tweet earlier this year. Chair Powell, I
    know you have been adamant about the independence of the Fed
    and have thus far resisted pressure from Trump, but after your
    decision to eliminate diversity, equity and inclusion (DEI)
    initiatives following Trump's illegal order. I am concerned
    that Trump has more influence over you than you let on.
        I speak for all of my colleagues on the Democratic side
    when I say that you must stand firm in defending the Fed's
    independence. Reject any attempt by Elon Musk and his DOGE
    minions to gain access to the Fed, its systems and data, and
    speak forcefully about what is at stake for our economy. The
    American public must hear from you, our central bank, today. I
    yield back.
        Chairman Hill. The gentlewoman yields back. I yield myself
    5 minutes for questions.
        Thank you again, Chairman Powell, for being with us. Let me
    start with the Fed's bank regulation and supervisory function.
    As I mentioned in my opening statement, over the past 2-and-a-
    half years, the outgoing vice chair for supervision has pushed
    new regulations that would move the United States toward a one-
    size-fits-all approach to prudential regulation that disregards
    the congressional mandate that has been quite clearly
    established for regulators to tailor bank regulation based on
    an institution's size, complexity, and risk profile.
        Earlier this year, the Fed Board announced that Michael
    Barr would be stepping down from his position as vice chair on
    February 28, 2025, or earlier, should a successor be confirmed.
    Significantly, the Board also announced at that time that it
    does not intend to take up any major rulemakings until a vice
    chair for supervision successor is confirmed. I have discussed
    this with you. I have concerns about that. You are not
    abdicating your supervisory response while we wait around for a
    vice chair for supervision. Do you agree that it is the Board
    of Governors that has the responsibility for bank supervision
    policy?
        Mr. Powell. I do, and I would also agree that we need to
    carry on with our regulatory and supervisory duties. We cannot
    take a holiday, and we will proceed with the things that we
    should be proceeding with.
        Chairman Hill. You testified in the Senate yesterday, and I
    know you enjoyed time with the senators, and you talked a
    little bit about Basel III Endgame. Again, in my opening
    statement, I talked about that the intent was to harmonize
    those rules, true for the largest institutions in the world,
    but also do that in a way that is capital neutral. Many of us
    here in Congress, on both sides of the aisle, felt like Vice
    Chairman Barr's approach was gold plating already high
    standards for American banks. You testified yesterday that you
    think bank capital levels are about right for those large
    institutions. Would you tell the committee today that it is
    your intent to repropose a Basel III Endgame approach, just
    speaking on behalf of the Fed only, not the other supervisors,
    and that it be taken into account the comments and that it be
    generally capital neutral?
        Mr. Powell. We do intend to repropose Basel III Endgame,
    and we intend to do that just as soon as we can get together
    with the new leadership at the two other banking agencies. As I
    mentioned, I think we can do that pretty promptly once those
    people are in place. I look forward to doing that. My long-held
    view, as I have said in many of these hearings, is that capital
    in the banking system for the largest banks, is it about right,
    and that would be my starting point on going into these
    discussions. I do want to leave it for my upcoming new
    leadership at those agencies to have their own views on that.
        Chairman Hill. I think that is important. I think it needs
    to be coordinated and harmonized among our supervisory
    agencies. I do want you to take into account how Basel III
    Endgame proposal interacts with other pending rules, whether
    they are on liquidity or the other things like operating risk
    in the companies. I think that was a lot of centrality of the
    comments that we saw on your Barr proposal.
        Turning to monetary policy, looking back at 2020 and 2021,
    I was looking at all the principal monetary policy rules that
    you report in your semi-annual report, and had you followed any
    of the monetary policy rules that you track, they would have
    had you tighten sooner in the cycle rather than waiting and
    maybe not seen a 40-year high in inflation. Using the benefit
    of hindsight, do you think you should have looked at those
    rules more closely in the open market operations and tightened
    sooner?
        Mr. Powell. I will say, and I have said before, that
    hindsight suggests that it would have been good if we had
    tightened earlier. I do not know how much difference that would
    have made, but I would be very careful with those rules. Those
    rules in the middle of last year suggested that our policy rate
    was a couple 100 basis points too high, so they are a starting
    point, not an ending point----
        Chairman Hill. Right. We have had this conversation before.
    The point is that they do offer a road map, and you do mention
    them in writing, in your monetary policy reports, except for
    one time during the pandemic. I think, though, that you are
    adding that to your reference point in your forward guidance
    and in your communications, I think would be important. Can you
    tell us about the review of the inflation targeting and when
    you expect to complete that?
        Mr. Powell. I expect to complete it late in the summer this
    year. We are just beginning it now, and we are going to look at
    all the decisions that we made, and why we made them back in
    2020. We are going to ask ourselves, what has changed? We are
    going to be open to criticism and good ways of thinking about
    it, and I think we will make appropriate discrete adjustments.
        Chairman Hill. I thank you for being with us today, and I
    turn to the ranking member of the full committee, Ms. Waters,
    for 5 minutes for your questions.
        Ms. Waters. Thank you very much, Mr. Chairman. It is no
    secret that President Trump, that he wants to do away with the
    Federal Reserve altogether. He said he knows interest rates
    much better than you do. I want you to know that some of us
    here have been fighting to make sure that everybody understands
    the importance of the central bank: every country dealing with
    crypto, that central bank is involved. But of course, Trump and
    the opposite side of the aisle fought us, and that is one of
    the reasons we were not able to come together with a bipartisan
    agreement on stablecoins. You previously said that you would
    not resign if Trump asked you to do that. Do you stand by that
    commitment?
        Mr. Powell. I have no changes to that.
        Ms. Waters. I cannot hear you.
        Mr. Powell. Yes.
        Ms. Waters. Thank you. Please let the record record that
    adequately. I appreciate that because you have a right to your
    position, not to be interfered with by law, I believe, or even
    Constitution. When Musk comes knocking at the Fed's door, are
    you going to let him in?
        Mr. Powell. I do not have anything for you on that.
        Ms. Waters. Would you like to tell us today that you will
    not let DOGE into the Federal Reserve, have access to the
    systems and the data?
        Mr. Powell. We have had no contact, and I have nothing for
    you to report today on that.
        Ms. Waters. You know what happened to Treasury, and you
    know what happened over at the CFPB. The people of this country
    are being violated because all of our privacy is being taken up
    by Elon Musk and Trump, and we do not know what all they have
    on us, our bank accounts, everything in our lives. I want to
    protect it in the Fed.
        Mr. Powell, the last time you testified before this
    committee, you said, ``Really successful institutions in the
    United States generally are those that do a really good job on
    diversity, and get the best out of people, and attract a broad,
    diverse range of talents to the table. That is the way we feel
    about it, and that is what we have been doing and will continue
    to do.'' Chair Powell, how will you ensure that the Fed
    continues to attract the best and most diverse employees?
        Mr. Powell. Institutions like ours, private and public, are
    in a constant contest to hire the best talent in the country.
    We have all learned, I think, and certainly we have, that we
    will go anywhere to find that talent and include places that we
    did not go 25 years ago, and we will just continue to do that.
    We are recruiting, as you know, at many, many, many
    universities and colleges, including historically Black
    universities and colleges, and others, and that is what we find
    and that is our practice. We think that is the best way to go
    about it.
        Ms. Waters. Thank you very much, and that is what I have
    always felt about the Fed. No matter what they call it, you
    only attracted and hired the best qualified people in your
    operation, no matter what they refer to it as, what they call
    it, whatever way they define it. Is that right?
        Mr. Powell. Yes.
        Ms. Waters. Thank you very much. Chair Powell, are you
    willing to provide my staff with an immediate briefing from
    your Agency on the status of your Office of Minority and Women
    Inclusions (OMWIs) and Equal Employment Offices?
        Mr. Powell. Yes.
        Ms. Waters. Thank you. I believe that you know that the
    OMWIs were created with the Dodd-Frank reforms. It is in law,
    and as I understand it, any attempt to dismantle OMWIs would
    have to come before the Congress of the United States of
    America. Is that your understanding?
        Mr. Powell. Yes. Section 342 of Dodd-Frank, which is the
    OMWI section, is the law.
        Ms. Waters. Thank you. Chair Powell, to what extent have
    you consulted with other Board members in determining how your
    Agency is complying with Section 342 of Dodd-Frank, and as well
    as any other Federal antidiscrimination law?
        Mr. Powell. I think we have consulted with senior staff and
    Board members quite a bit.
        Ms. Waters. Chair Powell, days after his inauguration,
    President Trump issued an executive order on digital assets,
    which includes a prohibition on central bank digital currencies
    or CBDCs. The executive order banned any ``form of digital
    money or monetary value dominated and denominated in the
    national unit of account that is a direct liability of central
    bank.'' I am concerned that this extremely broad definition
    could go far beyond CBDCs. Thank you very much. My time is up,
    but I appreciate your presence here today, and I appreciate
    your willingness to stand up for your right to be the chair.
        Chairman Hill. The gentlewoman's time has expired.
        Ms. Waters. I now yield back. Thank you.
        Chairman Hill. I do invite the chairman to respond to the
    gentlewoman's question on CBDCs in writing.

        [The information referred to was not submitted prior to
    printing.]

        Chairman Hill. Now we turn to the vice chair of the full
    committee, Bill Huizenga, the gentleman----
        Ms. Waters. Thank you.
        Chairman Hill [continuing]. from Michigan.
        Mr. Huizenga. Thank you, Mr. Chairman, and, Chair Powell,
    good to see you again. You had talked a little bit about your
    review. I am going to start there. Obviously, a lot has changed
    in the last 5 years, pandemic, inflation, higher interest
    rates, to name a few. However, I believe your dual mandated
    maximum employment and stable prices should remain the ultimate
    objective. I assume you agree with that.
        [Nonverbal response.]
        Mr. Huizenga. Let the record reflect a slight head nod on
    that. This committee is going to be very focused on monetary
    policy, and with my good friend from Oklahoma, Mr. Lucas,
    chairing a task force that I am happy to be a part of, we are
    going to be addressing some of those issues. Chair Hill touched
    on some of the rules that have been discussed. I, for one, have
    always been particular to the Taylor Rule, but there are a
    number of rules. I know you go through those. At one point, I
    suggested that we could call it the Yellen Rule with Chair
    Yellen on that, but there needed to be some sort of public
    declaration of what to benchmark against, and I still feel that
    is of some importance. You outlined your timeline on this
    particular review, but I am curious. Do you believe that the
    last policy framework limited the Fed's response to raising
    inflation, something that you and I have talked about over the
    years?
        Mr. Powell. No. I will tell you why we did not raise rates.
    We thought the inflation was transitory. I can show you
    forecasts from the end of 2021 by us, by staff, by the blue
    chip. Everybody thought it was going to be transitory. That is
    why we did not raise rates.
        Mr. Huizenga. I also distinctly remember a hearing where
    you and Secretary Yellen, at the time, were sitting next to
    each other, and it looked like you visibly scooted away when I
    asked you both whether it was still transitory, and you had,
    for the first time ever, a separate answer. Her answer was,
    yes, it still was transitory. You gave a very Fed speak answer
    of we no longer believe the data shows that, so no, and we, to
    kind of go to Chair Hill's point, we think that might have been
    a little late on that.
        Back to the review. I am curious, what sort of input are
    you looking for from the public and from Congress as you go
    into that review?
        Mr. Powell. From the public, we will do a series of Fed
    Listens events, which were very successful the last time, and
    it involves us sitting down and meeting with people, some of
    whom know a lot about what the Fed does, some of them whom just
    tell you what is going on in their communities. It was a very
    successful part of our outreach last time. In terms of
    Congress, we will keep you informed of our progress. We welcome
    anything you may offer, but we are open to the public on this.
    It is a public review as distinct from what we were doing
    before, and so we are welcoming views from all over.
        Mr. Huizenga. Not to get ahead of the chairman, but I look
    forward to us having more conversations about that with the
    working group.
        I want to switch topics and focus a bit back to the bank
    supervision. Michael Barr has stepped down from his position as
    vice chair for supervision, effective at the end of the month,
    and whether, frankly, President Trump fills that position is
    entirely up to him, but in the absence of a vice chair for
    supervision, you are still working, I think, on it. I think
    your quote to the chairman was, there is no time for a holiday.
    Now, this vice chair for supervision is a Fed Governor that
    has, frankly, extraordinary powers and responsibilities.
    Ultimately, my question to you is, does the Fed really need a
    separate vice chair to complete its work? Now, I got in here
    after the 2010 election, 2011, shortly after Dodd-Frank was
    passed. I know this vice chair position was created by Dodd-
    Frank. I have just been dealing with the echo effects now for
    the last going on 15 years of Dodd-Frank. Do we really need to
    have a vice chair for supervision?
        Mr. Powell. For many years, as you know, we did our
    business without a vice chair for supervision. What that means
    is, everything goes through the full Board.
        Mr. Huizenga. It was effective?
        Mr. Powell. I think it was, and, also, there was less
    volatility.
        Mr. Huizenga. Explain that. Why was there less volatility?
        Mr. Powell. Because you have a group of seven people on the
    Board, and as appointments change, there will be some changes
    in the approach to regulation. Putting it all on a single
    person, admittedly, just to recommend to the Board, it can lead
    to sort of some volatility in these things, which is really----
        Mr. Huizenga. Larger swings in policy?
        Mr. Powell. Yes, larger swings and the kind of things, and
    that is not great for the institutions that we want to
    regulate. We want to have a good set of regulations that do not
    swing back and forth very much. The question of whether it is a
    good thing to have in the law is really one for you. I will
    tell you, once Vice Chair Barr completes his term in a few
    weeks, we will continue on until there is a new vice chair for
    supervision, and we can very much get our work done.
        Mr. Huizenga. If there is one. With that, Mr. Chairman, my
    time has expired.
        Chairman Hill. I thank the vice chairman. Mr. Huizenga
    yields back. I recognize the gentleman from California, Mr.
    Sherman, for 5 minutes of questions.
        Mr. Sherman. Chairman Powell, you are the only bipartisan
    person or thing left in Washington. You were appointed by
    Obama. Trump gave you a promotion. Biden reappointed you, and
    you are the only Biden appointee not to hear the words ``You
    are fired'' from our President. I hope we listen to what you
    have to say because you are the only person that I can identify
    in Washington that has support on both sides of the aisle.
        Mr. Huizenga mentions the importance of your dual mandate.
    Project 2025 calls for abolishing the dual mandate and
    eliminating a mandate that you focus on employment. If we were
    to give you just one mandate dealing with price stability and
    take away the mandate on employment, over the next 10 years,
    would our GDP be higher or lower?
        Mr. Powell. It would not be possible for me to say.
        Mr. Sherman. Does the fact that you focus on employment as
    one of your dual mandates lead to lower unemployment, higher
    employment in our country?
        Mr. Powell. It may do so. We do balance those things. To
    some extent, that may be right.
        Mr. Sherman. Chair Hill spoke about how important it is
    that you maintain your independence. I noticed that in light of
    the hiring freeze, the Fed has removed all its job postings. I
    am hoping that your personnel policy will be as independent as
    everything else at the Fed, but I am more concerned with the
    President's statement at 7:58 this morning where he said,
    ``Interest rates should be lowered.'' He said it. Will that
    influence what the Fed actually does?
        Mr. Powell. I, as a practice, never comment on anything the
    President says, but I think people can be confident that we
    will continue to keep our heads down, do our work, make our
    decisions based on what is happening in the economy, the
    outlook, the balance of risks.
        Mr. Sherman. Statements by elected officials are not among
    the things that cause you to act one way or the other?
        Mr. Powell. That is correct.
        Mr. Sherman. Thank you. He went on to say, he said,
    ``Interest rates should be lowered, something which would go
    hand in hand with upcoming tariffs. Let us rock and roll,
    America.'' I certainly agree with the rock and roll America,
    but the Peterson Institute says that the policies that the
    President ran on will raise the consumer price index (CPI) by
    between 4 and 7.5 points, and I think the biggest element of
    that is the proposed tariffs. If we have higher tariffs across
    the board, say, 10 to 25 percent, would that increase the cost-
    of-living, and would an increase in the CPI or related indexes
    of the cost of living lead to higher interest rates?
        Mr. Powell. There are many organizations, public and
    private, whose role is to speculate publicly about what this
    might be. What we are doing is we are reserving judgment until
    we actually know what the policies are.
        Mr. Sherman. If we have a higher cost of living, does that
    lead to higher interest rates? The CPI or personal consumption
    expenditures (PCE) go up?
        Mr. Powell. If inflation goes up in general.
        Mr. Sherman. Yes.
        Mr. Powell. Forget about tariffs. In general, of course, we
    will use our tools, which is the interest rate, to bring it
    back down to 2 percent over time.
        Mr. Sherman. Okay. Yesterday, you told the Senate, ``We are
    going to release the stress test scenarios before we implement
    them.'' Will you take a holistic look at large bank capital
    requirements, including the risk-based capital ratios like
    Basel III Endgame stress testing, to make sure that you do not
    have a contraction in the ability of credit to main street
    businesses?
        Mr. Powell. Yes.
        Mr. Sherman. Great. There is a proposal in Project 2025
    that we abolish Fannie and Freddie. If there was no explicit or
    implicit Federal guarantee for those who invest in mortgages,
    would that lead to higher mortgage interest rates?
        Mr. Powell. Since you are no longer will be borrowing on
    the credit of the United States, in other words, so Fannie and
    Freddie would be privately funded, it could lead to that. I
    think privatizing Freddie and Fannie might have other virtues,
    too, though, as has been considered many times by this
    committee and others.
        Mr. Sherman. Might have some virtues, but it would lead to
    higher mortgage rates?
        Mr. Powell. It could.
        Mr. Sherman. The CFPB has been put on ice, but all the
    regulations remain in force. If you are a bank that wants to
    comply with those regulations, there is nobody that can give
    you any clarification. You do not know, and if you are a bank
    that does not want to comply, the next presidential election
    may put into practice a CFPB that enforces all the regulations
    that the Trump Administration has tried to eliminate. Does that
    cause confusion for banks?
        Mr. Powell. You are speculating about what the situation
    might be. I would say that it could, yes.
        Mr. Sherman. I yield back.
        Mr. Lucas [presiding]. The gentleman yields back. I now
    recognize myself for 5 minutes.
        Chair Powell, let us talk about the balance sheet. As we
    have discussed several times before, the consistent and massive
    growth of the Federal debt creates long-run challenges for both
    the United States and saddles future generations with an
    onerous burden, but it also creates a challenging environment
    for the markets. As the Treasury market expands in kind, as the
    Fed engages in quantitative tightening allowing the Treasuries
    to roll off, the Fed is careful to ensure that there are ample
    reserves for the balance sheet. Could you briefly discuss the
    conditions that determine the ideal level of reserves?
        Mr. Powell. Sure. Let me say that we intend to slow, and we
    have slowed, but then stop the process of shrinking our balance
    sheet at a time when we think that reserves are somewhat above
    the level that we judge to be consistent with our ample
    reserves framework. What that means is we want reserves to be
    ample, meaning we do not want there to suddenly appear to be
    shortages of reserves. We are going to think of where those
    shortages might appear, and we are going to put a buffer on top
    of that, because nothing good happens when there is not enough
    liquidity. That is our overall framework, and right now, we
    feel like all the evidence suggests that reserves are still
    abundant, which is more than ample.
        Mr. Lucas. As you know, in early 2021, the Fed stated that
    it would invite comments on the supplemental leverage ratio.
    That has not happened yet. I have made the point that the
    growth of the U.S. Treasury market, paired with a decreased
    willingness of banks to act as intermediaries, is a major issue
    on the horizon. When former Treasury Secretary Yellen was
    before this committee last year, I asked her about the
    resiliency of the Treasury market, specifically about the
    wisdom of permanently modifying the supplemental leverage ratio
    (SLR). She said it is something that the banking regulator
    should consider. Does the Fed plan to finally look at the SLR?
        Mr. Powell. Yes, I believe we will. I have for a long time,
    like others, been somewhat concerned about the levels of
    liquidity in the Treasury market. The amount of Treasuries has
    grown much faster than the intermediation capacity has grown,
    and one obvious thing to do is to reduce the effective
    supplemental leverage ratio--the bindingness of it. That is
    something I do expect we will return to and work on with our
    new colleagues at the other agencies, and get it done.
        Mr. Lucas. I think my colleagues are aware that over the
    course of recent times, literally, we have 8 times as much debt
    to process, but only half as many major market makers. The
    Federal Reserve is not immune to politics. You, like every Fed
    Governor, go through a lengthy confirmation process in the
    Senate, and, of course, you are required to answer to Congress
    in hearings like this. I can trace a major political turning
    point at the Fed to the passage of Dodd-Frank, which greatly
    expanded the Fed's regulation and supervision authority.
    Chairman Powell, do you worry that the independence of the
    Federal Reserve's monetary policy function is any way hindered
    by its role as a bank regulator? Can you do both?
        Mr. Powell. We can and we do, and we will continue to do
    that. Clearly the regulatory and supervisory side is more
    contentious in political circles, but we will continue to carry
    it out as best we can and to do so in a nonpolitical way as
    best we can. Clearly that will be a major discussion topic in
    the task force. In my remaining time, could you discuss the
    Fed's 5-year review of monetary policy? What are the categories
    of issues you think that will be helpful to receive feedback
    on?
        Mr. Powell. A good part of it will be looking at the
    changes we made in 2020, which were made in an environment
    where we had been stuck at the effective lower bound at zero
    for 7 years. The highest we got our rate really was,
    sustainably was 1.5 percent, and that was the highest of any
    advanced economy central bank. The concern was that at the
    slightest downturn, we would be back at zero lower bound, and
    we would be stuck, so we were looking for ways to make up for
    that. Then the question is, we got this inflation out of the
    pandemic and the events related to it, are we in a different
    place now? I think the chances are pretty good that maybe that
    the effective lower bound is still a concern, but it is not the
    base case anymore. We need to look at that and decide what are
    the implications of that for our framework.
        Mr. Lucas. Thank you, Chairman, and I look forward to
    several more discussions on these topics. With that, I yield
    back the balance of my time, and I recognize the gentleman from
    New York, Mr. Meeks, for 5 minutes.
        Mr. Meeks. Thank you, Mr. Chairman. Chair Powell, thank you
    for being here today, and you have indicated in past hearings
    that geopolitical tensions pose important risks to global
    economic activity. Back around this time last year when you
    appeared before the committee, you and I discussed how
    conflicts around the world, specifically, the war in Ukraine,
    had impacted the cost of things like groceries in the United
    States of America. At that time, you indicated that the war had
    caused commodity prices to move sharply back home. Does that
    sound correct to you, familiar to you?
        Mr. Powell. Yes, it does.
        Mr. Meeks. Just to reiterate, in this interconnected world
    that we live in, would it be safe to say that economic
    instability in other countries has the potential to impact
    economic factors here in the United States?
        Mr. Powell. Sometimes, yes.
        Mr. Meeks. Given that fact, would it seem like a smart move
    for the U.S. Government to remove one of our most effective
    strategic tools that, by mandate, assist U.S. commercial
    interests by supporting developing countries' economic growth
    in building countries' capacity to participate in the world
    trade? Would you agree with that?
        Mr. Powell. It is not for me to be the judge or to say on
    that.
        Mr. Meeks. Like U.S. Agency for International Development
    (USAID), they buy a lot of their agricultural products, et
    cetera, from American farmers, and, in fact, it helps the U.S.
    economy when you look at the volume of agricultural products
    that are being bought so that we can continue to be a part of
    the rest of the world. Would that be correct?
        Mr. Powell. As far as I know, yes.
        Mr. Meeks. Today, we find ourselves facing a situation
    where the President and his DOGE buddy, Elon Musk, seem hell
    bent on dismantling USAID, no matter the consequences, even if
    they are dire. To me, the assault on this congressionally
    authorized body represents an attack on the rule of law and
    should outrage every Member of this body, every Member,
    Democrats and Republicans alike. I know that your interest is
    squarely within your dual mandate, and not foreign policy. I
    sit on both committees. I am here, but I am also the Ranking
    Member on the Foreign Policy Committee, and so I cannot sit
    here today and pretend that what we are doing will not impact
    employment and economic stability right here in the United
    States of America. Weakening USAID will fuel global crises,
    endanger American security, embolden other nations, like China
    and Russia, and leave us here and the Trump Administration
    solely responsible for the fallout.
        I have to take this opportunity to urge my colleagues on
    the other side of the aisle to also stand up for USAID. Anytime
    we travel, we go visit what they do, we go visit the good that
    they do. We go visit what their and how their economies improve
    so that they can be part of the global economy. If not because
    people just care about the rest of the world, then because we
    care about our country and recognize that instability elsewhere
    threatens our stability right here. It is extremely important
    in an interconnected world because the economy is
    interconnected around the world. We cannot isolate ourselves
    from the rest of the world. I thank you, Mr. Chairman, and I
    yield back the balance of my time.
        Mr. Lucas. The gentleman yields back. The chair recognizes
    the gentleman from Texas, Mr. Sessions, for 5 minutes.
        Mr. Sessions. Mr. Chairman, thank you very much. Chairman
    Powell, welcome. We are delighted to be here, and I hope that
    this comes with greetings from every single member that we
    appreciate and respect you taking the time. Even though you are
    expected here, we thank you for showing up, and we admire you.
        Mr. Chairman, you and I both know that way back when, and
    we assumed 2021 there was a decision made by the Fed that gets
    close to quantitative easing and then the term tapering, and we
    know that it was sold as a monetary stimulus to help the
    country, and I get that. There was about, in my opinion, $2.3
    trillion that were taken out in loans, and the chairman just
    spoke a minute ago about the term debt versus growth, debt vs.
    growth, about this amount of money that sits out there on the
    debt side. Could you please take a minute and discuss this
    issue and how we should be looking at it? Thank you.
        Mr. Powell. Sorry, Mr. Sessions, are we talking about asset
    purchases that we made during the----
        Mr. Sessions. We are. We are talking about when the Fed
    went and sold Treasuries.
        Mr. Powell. No, we bought Treasuries.
        Mr. Sessions. Bought Treasuries.
        Mr. Powell. Yes, we bought Treasuries, so it was a
    situation. I will tell you why we did it. We were just out of
    the worst part of the pandemic, and we did not know how,
    frankly, how good things were going to be, how strong the
    economy--we were very concerned. Coronavirus disease (COVID)
    was still raging and it actually had a very strong wave right
    into 2022, but we did not want to stop buying Treasuries too
    soon because that has a stimulative effect on the economy
    because we did not want to provoke an unwanted tightening in
    financial conditions at a time when we thought the economy was
    still vulnerable. If you look back in hindsight, we probably
    could have done that earlier and halted purchase earlier. In
    any case, we turned right around and started shrinking the
    balance sheet, and we have----
        Mr. Sessions. You moved it from about $120 a month to $110.
        Mr. Powell. We have been tapering for 2 years now, and we
    are down more than----
        Mr. Sessions. That is correct.
        Mr. Powell [continuing]. more than $2 trillion, so and we
    are still going. We are still going, so that is why we did what
    we did.
        Mr. Sessions. Tell me what that looks like in the longer-
    term aggregate versus with what the chairman said, debt versus
    growth because we believe the debt remains and the growth is
    not equaling that ability to pay it back.
        Mr. Powell. What happens is we borrow money to cover the
    spending that Congress has done. Our purchases do not affect
    that. We are basically issuing reserves, which is cash, and we
    are retiring Treasury securities, and the effect of that is to
    drive down long-term rates. That is the whole reason for
    quantitative easing (QE).
        Mr. Sessions. What are you paying for those long-term
    rates?
        Mr. Powell. Market rates. We are paying exactly the market.
        Mr. Sessions. What would that market be approximately a
    year ago or to now?
        Mr. Powell. The 10-year, and we are not, of course, we are
    going in the other direction now, we are shrinking now. The 10-
    year was yielding very, very low. The 10-year was quite low
    during the pandemic, extremely low because growth was slow.
    There was a lot of demand for Treasuries, so we were pushing
    down rates to support economic activity. When you cannot lower
    your policy rate anymore and you want to do more stimulus, that
    is really the main thing you can do. Actually, the forefather
    of that was Milton Friedman, who came up with that thought way
    back in the past, but that is what we did. Then, as I
    mentioned, we turned around. As soon as we lifted off and
    started raising rates, we immediately started shrinking the
    balance sheet, and we have shrunk it a lot, $2 trillion and
    still counting.
        Mr. Sessions. You have shrunk it $2 trillion?
        Mr. Powell. Yes, we have.
        Mr. Sessions. Okay. What do you believe remains, and you
    believe you are now stable for moving forward?
        Mr. Powell. I think we have a way to go. Actually, the
    level of reserves, which is the thing we are focused on, has
    not really changed. All of that has come out of what is called
    the overnight reverse repo facility. I would be happy to spend
    some time with you on this. This stuff is very complicated and
    difficult.
        Mr. Sessions. Yes, I have tried to find new data on it, and
    the last I found, really, was a Congressional Research Source
    (CRS) report of 2022, so I----
        Mr. Powell. It is very, very big changes----
        Mr. Sessions [continuing]. January 27, 2022, and so the
    changes that you speak of are important.
        Mr. Powell. Yes.
        Mr. Sessions. I would appreciate that time because----
        Mr. Powell. I will be happy to do that.
        Mr. Sessions. Great. I want to thank you for being here.
    The confidence that the American people have that we will turn
    not just the economics of their lives, but of the country is
    very important. I today spoke about the country, and I want to
    thank you for your service and time. Mr. Chairman, I yield
    back.
        Mr. Lucas. The gentleman yields back. The chair now
    recognizes the gentleman from Georgia, Mr. Scott, for 5
    minutes.
        Mr. Scott. Thank you very much, Chairman, and welcome,
    Chair Powell. Chair Powell, I am worried about these tariffs,
    and I want you to kind of share with us your thoughts on these
    tariffs. I think the President is wrong here. Tariffs can cause
    a terrible situation to the economy. I am concerned about the
    inflationary impact on tariffs, and where cost increases from
    the tariffs, there is a cost to these tariffs, and we need not
    move into this area blindly. Some of these costs will be
    observed by business companies, but there are other costs that
    will be borne by the American consumers. We do not even
    understand this, and yet you have the President just using
    these tariffs as a means of fight or like a war, and this is
    going to do it. Everybody is not going to be Mexico or Canada.
    While we got a little time, I want your thoughts on the dangers
    of these tariffs, the stock market is anticipating rate cuts.
    What will these tariffs do about that? Does the Fed see
    financial market stability as a factor in its decision making
    process when considering the rate cuts?
        Here is specifically what I want you to get to. In light of
    the President, and politely, I will say, his ill-crafted tariff
    strategy, do you foresee future rate cuts as a result of
    inflationary issues or due to a weaker labor market? What do
    you consider to be promising inflation data? That is our big
    fight, and these tariffs are going to just add to inflation
    like a rocket ship. Your thoughts? Give us your opinion of the
    danger of these. There is a cost here. Tell us what you think
    about this.
        Mr. Powell. The President has certain authorities over
    tariffs. Congress has authorities over tariffs. The Commerce
    Department is involved in some ways, but the Fed has no role in
    setting tariffs, and we do not comment on decisions made by
    those who do have that authority. We try to stick to our own
    knitting. In this particular case, it is possible that the
    economy would evolve in ways that, because of tariffs or partly
    because of tariffs, that we would need to do something with our
    policy rate, but we cannot know what that is until we actually
    know what policies are enacted.
        Remember, it is not just tariffs. There are significant
    changes to immigration policy, fiscal policy, and also
    regulatory policy. You put all four of those, and all four of
    those were things that the President was elected to do. We will
    then try to make an intelligent judgment about the overall
    effect on the economy of those and conduct our policy
    accordingly. It is not our role in any way to comment on the
    wisdom of the policies that are enacted by Congress or by the
    administration.
        Mr. Scott. He has an effect on whether or not you will
    resume your plan to cut the interest rates this year or
    continue to hold?
        Mr. Powell. We will make our decisions as we go about what
    to do with interest rates based on the data that we see, the
    evolving outlook, and the balance of risks, and we will be
    considering all of those things. We will not be focusing on any
    particular policy, and I cannot tell you what we will be doing
    because it will really depend. It is a fairly uncertain
    environment right now.
        Mr. Scott. Yes.
        Mr. Powell. The underlying economy is very strong, but
    there is some uncertainty out there about new policies. We are
    just going to have to wait and see what the effects of those
    policies are before we think about what we can do or should do.
        Mr. Scott. All I want to say, God bless you. I know your
    strength. We have worked together over the years on many
    things, and this Nation is grateful that we have you, your
    wisdom, and intellect at this time.
        Mr. Lucas. I agree, but the gentleman's time has expired.
        Mr. Scott. The gentleman yields back.
        Mr. Lucas. The chair now recognizes the gentlelady from
    Missouri, Mrs. Wagner.
        Mrs. Wagner. I thank the chair, and it is good to see you
    again, Chairman Powell. Chair Powell, under the Biden
    Administration, American families were hit with a huge stealth
    tax from, as we have spoken about inflation, that drove up
    grocery prices and led to high rates on things like mortgages
    and car loans. Since 2021, the average Missouri household is
    paying about $1,100 more per month due to inflation. To put
    that number into perspective, the median family income in
    Missouri is $69,000. These families have had to spend $13,000
    more of their annual income on the exact same goods. What
    specifically is the Federal Reserve's plan for making life
    easier for everyday Americans?
        Mr. Powell. The best thing we can do for Americans is to
    vigorously pursue both stable prices and maximum employment. We
    are trying to get back to a long expansion where prices are
    stable around 2 percent.
        Mrs. Wagner. You seem to be there on labor as you have
    pointed out, so tell me what else.
        Mr. Powell. Sorry?
        Mrs. Wagner. You seem to be there on labor, so what else?
        Mr. Powell. I would say we are close, but not there on
    inflation, and you did see today's inflation print, which says
    the same thing. We have made great progress toward 2 percent.
    Last year, inflation was 2.6 percent, so great progress, but we
    are not quite there yet. We want to keep policy restrictive for
    now so that we can see----
        Mrs. Wagner. We are definitely not there for 30-year
    mortgages, upwards of 7 percent, Chair Powell. Let me switch
    topics. I continue to believe that, as we have spoken about and
    as was brought up, prior colleagues here, that the Federal
    banking agencies, including the Federal Reserve, should scrap
    the flawed Basel III Endgame proposal and start over. You
    talked a little bit about how you plan to perhaps do that and a
    timeline potentially. How will the public, Chair Powell, be
    able to provide comments on any revised proposal as required by
    the Administrative Procedures Act?
        Mr. Powell. I fully expect, and I think it is a good idea
    for the United States to finish Basel III in a way that is in
    keeping with Basel and also with what other jurisdictions are
    doing, comparable jurisdictions.
        Mrs. Wagner. The key there is ``Endgame.'' This has been
    going on for 2 decades.
        Mr. Powell. Where is the end already, right? We will put
    all of that out for comment again and welcome the comments for
    all commenters.
        Mrs. Wagner. I just want to make sure we are following the
    Administrative Procedure Act----
        Mr. Powell. Oh, yes.
        Mrs. Wagner [continuing]. as you as you move forward.
        Mr. Powell. We will. We will.
        Mrs. Wagner. Chair Powell, I understand you are interested
    in making the stress test scenarios that assess how a bank will
    perform through a crisis, more transparent. As things stand
    now, while the Fed may make some information public, it does
    not show its math, which makes it difficult to assess the
    robustness and analytical rigor of the stress test. Recently,
    the Federal Reserve announced that due to the ``evolving legal
    landscape, it would begin to take public comment on its stress
    test models and annual scenarios.'' Can you describe the
    changes in the legal landscape that have caused the Federal
    Reserve to suddenly seek public comment on its stress test
    regime and why it did not seek public comment from the
    beginning?
        Mr. Powell. We are an Agency that is strongly committed to
    following the law as written by Congress and as interpreted by
    the Supreme Court. In the past few years, we have seen a string
    of administrative law cases from the Supreme Court which are
    dealing with different issues, but there is a common theme, and
    that is significantly less deference to the views of agencies--
    --
        Mrs. Wagner. Correct.
        Mr. Powell [continuing]. as compared to those of courts.
    Also, just raised expectations for compliance with the
    Administrative Procedures Act, we take that very much to heart,
    and this is one of the things that we are doing because of
    that. We feel the appropriate----
        Mrs. Wagner. You can look at things like Chevron deference,
    you can look at the Environmental Protection Agency (EPA)
    ruling by the courts, and they are returning the power back to
    the people and the Congress, not the administrative State, not
    those agencies or rulemakers.
        Mr. Powell. Because of those things, as you went through
    it, we are putting the models and everything else out for
    comment and taking similar steps.
        Mrs. Wagner. I am glad to see that. I understand the Fed
    intends to complete a comprehensive review of its monetary
    policy strategy, tools, and communications practices. You
    mentioned that. What is the timeline?
        Mr. Powell. We expect to complete our work and announce the
    results by the end of the summer.
        Mrs. Wagner. End of the summer. Thank you. I yield back.
        Mr. Lucas. The gentlelady yields back. The chair recognizes
    the gentleman from Massachusetts, Mr. Lynch for 5 minutes.
        Mr. Lynch. Thank you, Mr. Chairman. Welcome, Chair Powell.
    Good to see you. Thank you for your good work. Chairman Powell,
    the Senate just filed a bill called the GENIUS Act. I am always
    worried about anything that comes over from the Senate with the
    title ``genius'' in it, but it is an attempt to provide a
    regulatory framework for cryptocurrency. In that proposal,
    which is similar in some respects to the House proposal, it
    would allow individual States to oversee issuers, and there
    would be no central Federal authority. The idea is to disperse
    the responsibility from State to State. My overriding concern
    is that with that spread and expansion of crypto, and the
    President is 100 percent behind it. He just started his own
    meme coin. He is making a lot of money off of that, which is
    another issue. My concern is that the spread of an expansion of
    crypto will infect the traditional banking system because it is
    a volatile, speculative asset, and we have seen some very
    sudden disasters with crypto.
        I am just wondering, are there any backstops that we can
    use, any firewalls that we can put in place that might insulate
    the traditional banking system because they have access to the
    discount window and they are FDIC insured, so there may be
    second order impacts if we have a collapse of a major crypto
    issuer. Are there any extra things that we can do to protect
    the traditional banking system?
        Mr. Powell. Yes. First, I would say there are really two
    things that are happening. One is banks are serving crypto
    customers, and we do not want to get in the way of banks
    serving perfectly legal customers as long as they understand
    the risks and that sort of thing. We do not want to single out
    any particular----
        Mr. Lynch. Are you speaking to custody?
        Mr. Powell. The second thing is----
        Mr. Lynch. Right, Okay.
        Mr. Powell [continuing]. undertaking activities on their
    own, right? In that case, I do think it is appropriate to, as
    usual, as bank supervisors, make sure that we understand and
    banks understand the risks that are involved in the activity
    that they are taking inside an insured depository. On the other
    hand, you do not want to go too far. I think there were a bunch
    of disasters, as we all remember and we do not want to, and we
    were reacting to some extent to those. You do not want to go so
    far as to overplay your hand on that. I think we need to be
    mindful that many of these activities can very well be done
    inside of banks, and custody may well be one of them. In fact,
    in Fed-regulated banks, there are lots of crypto activities
    happening now. They have just happened under a framework where
    we made sure that the bank understood and we understood exactly
    what they were doing.
        Mr. Lynch. Right. We also have the example of Silicon
    Valley Bank, Signature Bank, and First Republic Bank. One of
    the triggering events there, obviously, the risk management,
    was very poor in that respect, and they got on the wrong side
    of interest rates. There were also some failures of issuers who
    had huge deposits at Silicon Valley, I believe, or Signature,
    maybe both of them, and the suddenness of their collapse caused
    a run for the exits, and luckily, with the scramble, we were
    able to sort of save that situation, so it did not create a
    greater contagion. Are there steps that we can take that might
    strengthen our ability to respond to that type of collapse as
    well?
        Mr. Powell. Yes. In the wake of Silicon Valley Bank, we did
    work with many, many medium-sized banks that had any of the
    characteristics that we saw. You mentioned a long position in
    long-term securities that was underwater along with a very
    unstable deposit base made up mostly of uninsured deposits. In
    the case of Silicon Valley Bank, it was a lot of similar
    private equity and venture capital and hedge fund companies
    where they all just pulled their money out at the same time, so
    it was a bank run. Bank runs are very destructive whenever they
    happen.
        We looked for that pattern. We worked with companies, too,
    who had any aspect of that pattern, and we were successful, I
    think, in not having that crisis spread very broadly, and that
    was a good thing. Looking forward, though, we need to not
    forget that lesson and make sure that funding bases are stable
    and that we are focused on the basics of banking, which are
    credit risk, interest rate risk, and liquidity risk.
        Mr. Lucas. The gentleman's time has expired.
        Mr. Lynch. Thank you. I yield back.
        Mr. Lucas. The gentleman yields back. The chair recognizes
    the gentleman from Kentucky, Mr. Barr, for 5 minutes.
        Mr. Barr. Chairman Powell, let me ask you a quick monetary
    policy question and then turn to bank regulation and Treasury
    market structure. I know hindsight is 20/20, but it is
    important to learn from mistakes, as you know, and you have
    conceded that the Fed miscalculated on inflation and
    mischaracterized inflation as transitory in 2021-2022 time
    period. Given that inflation remains stuck above the Fed's 2
    percent target, will you commit to scrapping the flexible
    average inflation targeting framework, and if not, why would
    you not commit to returning just to a simple 2 percent target?
        Mr. Powell. We are just beginning the review. It will be
    done, as I mentioned, by the end of the summer, and that is the
    exact question we will be asking. I cannot commit to a
    particular outcome. I need to respect the process and the views
    of the other 18 participants on the FOMC.
        Mr. Barr. Yes. I appreciate that, and I just hope that in
    that process that you and your colleagues recognize that
    framework allowed rising inflation to persist and allowed the
    Fed to mislabel it as transitory.
        Let me turn to bank regulation. In October of last year, I
    led a bipartisan Congressional Delegation (CODEL) to Basel,
    Switzerland, met with the Basel Committee on Bank Supervision,
    and there, the committee actually conceded to us, agreed with
    me that the Michael Barr proposal of July 2023 actually gold
    plated bank capital requirements, and instead of actually
    promoting international harmonization, actually made American
    banks less competitive. They conceded that to us. I applaud the
    Fed for not moving forward on that July 2023 proposal that
    would have made it harder for large banks to, among other
    things, facilitate the smooth functioning of the U.S. Treasury
    market, including holding Treasuries on the balance sheet.
    Couple of questions. One is, should the goal of our bank
    capital rule, should it be regulatory harmonization
    internationally or should it be American economic
    competitiveness?
        Mr. Powell. Clearly, the goal is to have a strong banking
    system that supports American economic activity and growth.
    That is the ultimate goal. What you get from Basel is a global
    floor so that the other banks cannot run on less capital and
    sort of have a short-term advantage. That was the whole point
    of Basel, was to get everybody to the same kind of level so
    that it would not be the race to the bottom.
        Mr. Barr. I see that utility, but I think the goal of our
    regulatory system should be America First, and it should be
    about American economic growth and competitiveness but let us
    talk about the Treasury market issues. Obviously, we are
    issuing a ton of debt right now. In fact, according to
    BlackRock, we are issuing $573 billion of Treasury bonds every
    week. To put that in perspective, the entire National debt of
    Australia is $573 billion, so we are issuing Australia every
    week in this country, if you want to think of it that way.
    Would reducing excessive capital and liquidity requirements on
    U.S. banks for intermediating U.S. Treasury market take the
    heat off of U.S. capital markets and increase Treasury market
    liquidity and stability?
        Mr. Powell. I strongly think it would help.
        Mr. Barr. Well, I think that is especially an important
    comment in terms of your regulatory approach because as you
    know, maturing bonds were being financed at an average of near
    zero during COVID, and now they are about double the cost of
    the average of about 3.5 percent. Now is not the time to make
    it more difficult for banks to hold Treasuries.
        Let me just drill down with a little bit more detail on
    this Treasury market structure issue. Do you agree that the
    supplementary leverage ratio and the enhanced supplemental
    leverage ratio, eSLR, enhanced supplementary leverage ratio,
    are problematic as they create a disincentive for banks,
    especially large banks, broker-dealer affiliates, to serve as
    intermediators in the primary, secondary, and repo markets for
    U.S. Treasury securities?
        Mr. Powell. I do.
        Mr. Barr. Would you commit to reviewing the eSLR framework
    to create greater capacity for our banks to provide liquidity
    in the Treasury market?
        Mr. Powell. I think it is time to move on the eSLR, and we
    proposed doing so several years ago. We just did not follow
    through on it, so I do think it is time.
        Mr. Barr. Thank you for that. Finally, yesterday, during
    your appearance in front of the Senate Banking Committee,
    Senator Warren asked you about the future of consumer
    protection laws now that the CFPB is abolished. Is it not true,
    Chairman Powell, that prior to Dodd-Frank, consumer protection
    laws were implemented by financial institutions' primary
    prudential regulators?
        Mr. Powell. Yes.
        Mr. Barr. If there were a decision by the Congress and DOGE
    or whatever to repeal the CFPB, we could return the consumer
    protection law enforcement function to other financial
    regulators.
        Mr. Powell. You could. Yes.
        Mr. Barr. Thank you. I yield back.
        Mr. Lucas. The gentleman yields back. The chair now
    recognizes the gentleman from Texas, Mr. Green, for 5 minutes.
        Mr. Green. Thank you, Mr. Chairman. I thank the ranking
    member as well and would like to associate myself with the
    comments of the ranking member. Mr. Powell, I would like to
    compliment you for standing up to the President for literally
    preserving the independence of the Fed. It was one of those
    pivotal moments in time. It would have been more than you
    simply resigning. It would have been the President taking
    control of the Fed with one of his Pluto puppets.
        Mr. Powell, I would like to speak about the process of
    collecting tariffs. When the tariff is collected, at what point
    does that actually happen? If we impose a tariff, product is
    coming into the country, where is that tariff collected?
        Mr. Powell. Great question. I am not an expert on that. I
    am going to say the Customs Bureau collects it, but I stand to
    be corrected by anyone who----
        Mr. Green. I believe you are correct. That is what my
    research reveals. Permit me to extend this. When it is
    collected, it goes into a coffer. I believe we call that coffer
    the general fund. Is this correct?
        Mr. Powell. I do not know actually.
        Mr. Green. It does. The tariff goes into the general fund.
    A tariff is another way of saying tax, I believe, for many
    people. Is that a fair statement?
        Mr. Powell. It is sometimes characterized as a tax.
        Mr. Green. If the President imposes a tariff, which is a
    tax, and the tax is collected by some entity on the product
    before it gets into the country, then the President is putting
    tax dollars into a general fund such that they may, at some
    point, and these dollars, by the way, are coming from the
    consumer. At some point, they may be used to cover some of the
    appropriations of this very House that the President has
    enormous control over. In a sense, what the President can do is
    aid with the payment of what he would call a tax break, but aid
    with putting dollars in the pockets of his billionaire buddies
    that he collects on the tariff that the people in this country
    ultimately have to cover.
        I think that the President, while he seems to always avoid
    the question of how the tariffs are going to be disbursed, he
    knows that he can, at some point, use that money to help pay
    the taxes that he plans to return to his billionaire buddies. I
    think that is a very sinister way of doing business to require
    the consumer to fund tax breaks. I think this President knows
    what he is doing. I think he believes that the very wealthy
    need more to do more and that the poor can do more with less. I
    do not agree with it, and I will do all that I can to prevent
    it. I yield back the balance of my time.
        Mr. Lucas. The gentleman yields back the balance of his
    time. The chair recognizes the gentleman from Texas, Mr.
    Williams, for 5 minutes.
        Mr. Williams of Texas. Thank you, Mr. Chairman, and over
    here, Mr. Powell. Thank you. Good to see you.
        Mr. Powell. How are you?
        Mr. Williams of Texas. All right. The Federal Reserve
    recently withdrew from the Network for Greening the Financial
    System, stating that its work had extended beyond the Fed's
    statutory mandate. While I agree with this decision, I still
    have concerns with how previous Fed policies may have
    discouraged lending to traditional energy sectors like oil and
    gas, and it should not be the role of the government and the
    Federal Reserve to be in the business of picking winners and
    losers. My question is, can you clarify whether the Fed will
    ensure that financial institutions are not pressured to making
    lending decisions based on political or climate considerations
    rather than sound financial risk analysis?
        Mr. Powell. I confirm that is not our policy. That would be
    inappropriate and absolutely not something we should be doing.
        Mr. Williams of Texas. Okay. Thank you. The Basel Committee
    on Banking Supervision intended for the Basel III Endgame
    proposal changes to be implemented in a capital-neutral manner
    to ensure a level playing field for U.S. banks. Following this
    intent, the previous Federal Reserve Vice Chair for Supervision
    initiated implementation efforts with capital neutrality in
    mind. However, his successor politicized the process, imposing
    harsher requirements that exceeded the Basel Committee on
    Banking Supervision (BCBS) recommendations, and this approach
    not only made the proposal more difficult for banks and their
    customers, but also weakened U.S. banks' global
    competitiveness. Ultimately, he took his eye off the ball and
    went in the wrong direction. Mr. Chairman, will the Federal
    Reserve commit to conducting a more thorough economic impact
    analysis before finalizing any capital requirements to ensure
    that they do not hinder economic growth?
        Mr. Powell. Yes.
        Mr. Williams of Texas. Regulatory overreach
    disproportionately impacts community and regional banks, which
    do not pose systematic or system risk, yet they face many of
    the same capital and compliance requirements as the largest
    institutions. Many of these banks serve as lifelines for small
    businesses, rural communities, and the first-time home buyers,
    and it is key for the Federal Reserve to protect these
    institutions and ensure that they are not subject to one-size-
    fits-all regulations. Mr. Chairman, what steps is the Federal
    Reserve taking to ensure that new regulations do not force
    consolidation in the banking industry, therefore, make it a
    little harder for smaller institutions to compete?
        Mr. Powell. Like everybody else, we see the consolidation
    that has happened really over the last 30, 40 years and
    community banks going out of business and just fewer and fewer
    banks. We know that may be happening due to technology and
    various things, and also just people moving to cities, and away
    from rural areas, but we do not want our regulation to in any
    way foster that. We try as hard as we can to make sure that we
    are not letting the heavier regulation that we apply to the
    Global Systemically Important Banks (G-SIBs), and even to the
    regionals slip down to smaller institutions that are serving
    their community and generally doing a good job at that, and we
    try hard to do that. This is tailoring. It is very much of a
    basic value that we have, and it is also what we are instructed
    to do under the law. I will not say we are perfect, but we do
    keep this in mind.
        Mr. Williams of Texas. I would like to say thank you for
    being here. Good to see you. With that, I yield my time back,
    Mr. Chairman.
        Mr. Lucas. The gentleman yields back the balance of his
    time. The chair turns to the gentleman from Missouri, Mr.
    Cleaver, for 5 minutes.
        Mr. Cleaver. Thank you, Mr. Chairman. Thanks to our very
    capable and courageous ranking member. Mr. Chairman, thank you
    for being here today.
        As you know--my words--the CFPB has been disemboweled over
    the last 10 days or so, which probably may not be much concern
    here on the Hill, in certain quarters. There are two things
    that I want to ask you about. Rules over at CFPB must be from
    time to time updated. Right now, there is no system for
    updating any of the rules. One of the other issues is that, is
    there a regulatory gap or are there regulatory gaps that you
    can see clearly that people can feel, because there is
    essentially no CFPB for the first time since the end of the
    Great Recession?
        Mr. Powell. I do not think we know where this comes to
    rest. You may have seen last night that the administration
    nominated somebody to be the permanent head of the CFPB, so I
    am not sure what the end intention is here, but if you assume
    that it goes away, then yes, there would be a gap. There would
    not be anyone, any Federal Agency, that can examine banks above
    $10 billion, whether they are State member banks or State non-
    member banks or national banks, that would be the case, but I
    am not sure we know what the end game really is here.
        Mr. Cleaver. In terms of regulatory gaps that are created
    when the Agency was essentially shut down, now, I am assuming
    that there has been somebody appointed to complete the murder
    of the CFPB. If I am correct, that means that there have to be
    or they have been tricking us all these years that they were
    not doing any regulations, but that is my political position. I
    was very proud in my community to get the Hispanic chamber and
    the Black chambers to come together. We got a building
    functioning, big celebration all across my congressional
    district in Missouri. Then, about 2 weeks ago, I started
    getting these phone calls, as I think many of us on both sides
    of the aisle have received, about 64 percent of small
    businesses have invoices unpaid for more than 60 days. The
    FedNow, the Fed's real-time payment system, allows individuals
    and small businesses to send and receive money instantly, which
    is step in the right direction, Mr. Chairman. What is the
    status of the FedNow adoption for financial institutions?
        Mr. Powell. It is coming along. As was the case with
    Automated Clearing House (ACH) back in the day, it takes quite
    a while. There is investment that has to take place on the part
    of banks, and so we are working with a lot of small and medium-
    sized banks to get them comfortable with the requirements of
    FedNow so that this can build up over time. It is something
    that we expected to be slow in terms of uptake, and it has been
    a bit slow.
        Mr. Cleaver. Is technology adoption a barrier for smaller
    community banks and mission-based lenders?
        Mr. Powell. Yes, it is. There are nonbank service providers
    that do reach out and do a good job with smaller institutions,
    and we encourage that. Those institutions cannot actually have
    direct access, but they have the information, and they can go
    to smaller institutions and show them how to do this. There is
    a lot of that going on and we encourage that.
        Mr. Cleaver. Thank you. Let me just say, I have been here
    on this committee for 20 years, and I have seen chairmen,
    Republicans and Democrats. Whether they are Republican or
    Democrat, they need to be independent. Thank you, Mr. Chairman.
        Mr. Lucas. The gentlemen's time has expired. The gentleman
    yields back. The chair recognizes the gentleman from Ohio, Mr.
    Davidson, for 5 minutes.
        Mr. Davidson. Thank you. Thanks for joining us today,
    Chairman Powell. First, I want to reflect on our hearing on
    February 24 here in this same room, frankly, via Zoom for a lot
    of people because it was in the height of COVID. During my 5
    minutes, you felt confident that inflation being at 1.4 percent
    would stand or control, and it would not be an issue despite
    the very large increase in the supply of money. We talked about
    M2. In a subsequent meeting, frankly, in my office, we
    discussed Milton Friedman's Quantity Theory of Money in depth,
    and you believed that it was no longer relevant that inflation
    would not hit consumers. We debated asset prices during the
    hearing, and you claimed that the Federal Reserve's massive
    purchases of Treasuries did not distort the market. Last,
    during the Biden Administration, you were actively calling for
    more fiscal stimulus at times. At some point along the way,
    more dollars chasing fewer goods seems to have actually
    resulted in higher prices. All of these things--inflated money
    supply, inflated asset prices, inflated consumer prices--
    happened on your watch. In light of the actual outcomes, have
    your views changed?
        Mr. Powell. I think we have learned a lot but maybe not the
    lessons that you think, but I do think we have learned a lot
    from the situation. We and essentially all of mainstream
    macroeconomics thought that this would be transitory, and what
    that meant was it would go away fairly quickly as the supply
    side healed and as demand came down, and it did not. It
    actually did go away and substantially for those reasons, but
    it took 2 years.
        Mr. Davidson. To that point, you felt like in the fall that
    it was going away, and things were going to be under control,
    and you had achieved your soft landing, but the market pretty
    quickly spoke. Frankly, rates went up over 100 basis points
    where you guys were going down, and now in today's reports, we
    see that inflation is actually trending up quite a bit from
    where it was in the fall. Again, in light of the facts, would
    you reassess what you are doing with the central planning?
        Mr. Powell. You are right that long-term rates went up, but
    they did not go up because of expectations of higher inflation.
    There is no evidence of that. It is actually different things.
    It is not about inflation. Look at markets. Markets are pricing
    in break-even. I will show you the chart----
        Mr. Davidson. The markets do not believe there is increased
    risk with massive fiscal spending in the market, and they are
    not demanding a higher premium because there is more risk.
        Mr. Powell. More risk, yes. It is not mainly about prior
    higher inflation.
        Mr. Davidson. When you see asset price inflation and rate
    inflation, does not that result in consumer price inflation?
        Mr. Powell. It is not a question of that. You are saying
    that the rate increases at the long end are caused by
    expectations of higher inflation.
        Mr. Davidson. They certainly influence the inflation.
        Mr. Powell. That is largely not true.
        Mr. Davidson. If they do not influence the inflation, why
    do you guys try to steer inflation by controlling the rates?
    The reality is, you got pressure, including from the President,
    to lower rates. Are you going to be able to get lower inflation
    with lower interest rates?
        Mr. Powell. I think our policy is in a good place. I think
    inflation has come down from high levels to 2.6 percent last
    year. My colleagues and I are holding where we are, awaiting
    further evidence of inflation.
        Mr. Davidson. A lot of the data that you guys are looking
    at lag, just like when you said it was 1.4 percent, and
    everything is fine. I think a lot of people said it is not
    fine. You got to go out and talk to regular people and
    constituents in Southwest Ohio, just like all over the country,
    are not saying they are fine. They might go that the rate of
    increase has slowed down a bit, but they know that the prices
    are not going down. They are still getting hit pretty hard, and
    meanwhile, you guys still continue some of these policies.
    Like, you are paying banks still not to put their capital at
    risk in the market, interest on excess reserves, going back
    prior to the 2008-2009 financial crisis. You did not even pay
    banks for reserves. Now you are paying them for an unlimited
    amount of reserves that they want to hold on it. To what extent
    is that distorting the market by pulling capital out of the
    market?
        Mr. Powell. None. Not at all. You are right, though. People
    are unhappy about the price level, and what we need is several
    years of real wages moving up higher than inflation.
        Mr. Davidson. Okay. If they are having no impact at all,
    why is the Fed paying the interest? What is the rationale for
    the policy? Is it monetary policy, or is it regulatory policy,
    because, as Chairman Barr pointed out, you guys are effectively
    gold plating the standards, and U.S. is actually holding way
    more reserves than we are required to, and part of that is
    interest rate on excess reserve (IOER).
        Mr. Powell. What is your question?
        Mr. Davidson. Yes. If it is not distorting the market, what
    is the purpose for doing it? If it has no impact on the market,
    why are you doing it?
        Mr. Powell. It is the way we control. It is the way we
    exercise interest rate control in the market. I did not say it
    does not affect the market.
        Mr. Davidson. It has an impact, and so I will have
    questions for the record, and I yield back.

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

        Mr. Lucas. The gentleman yields back. The chair recognizes
    the gentlelady from Ohio, Mrs. Beatty, for 5 minutes.
        Mrs. Beatty. Good morning, Chairman Powell, and thank you
    for being here. I want to thank you for your leadership at the
    Fed over the last 7 years, which I have had the pleasure of
    being here that entire time. Under both Republican and
    Democratic Presidents, through an unprecedented pandemic, and
    certainly an uncertain economy, your apolitical guidance is a
    testimony to the historic independence of the Federal Reserve,
    which is absolutely essential for you to carry out your
    mandate, keep prices stable, and achieve maximum unemployment.
        Over the last few years, inflation, as we all have
    witnessed, has come down from a high of 9.1 percent in 2022 to
    about 2.8 percent. During your tenure under President Biden, we
    saw the unemployment rate drop to a staggering 3.4 percent in
    2023, its lowest rate that we have seen in some 55 years, and
    now it sits at around 4.1 percent, which is still low by
    historic standards. Although the economy has a way to go and
    American families, as we have heard throughout today, are still
    struggling to pay for expensive groceries and gas, and the list
    goes on. It is truly remarkable what the Fed has managed to
    achieve over the last few years.
        Chairman Powell, while I have sat on this committee, you
    and I have frequently discussed the importance of
    representation at the Federal Reserve and the benefits of
    recruiting the best and the brightest that this country has to
    offer by broadening the talent pool. The Fed has been a great
    partner to this committee on this issue, which, as everyone
    knows, has been very personal to me. However, the White House's
    recent attacks on these very basic concepts are incredibly
    concerning to me, as many of my Democratic colleagues. I am
    just going to ask you a few questions, and you may answer them,
    for the sake of time ``yes'' or ``no.'' Will the Fed continue
    to follow existing law, as passed by Congress, that requires
    all financial institutions' reform, recovery, and enforcement
    agencies to maintain offices dedicated to recruiting from a
    broad talent base and fostering an inclusive workplace? Yes or
    no.
        Mr. Powell. Yes.
        Mrs. Beatty. I am pleased to hear, as my ranking member
    mentioned OMWI, and also talked about implementing it under
    Dodd-Frank Section 342, but I also am pleased to see that the
    Fed recruits from Ohio schools that I am from, that great State
    of Ohio, institutions like the Ohio State University or Case
    Western Reserve University, Denison University, Kenyon
    University, and Oberlin. Do you agree that hiring the best and
    the brightest, whether it is an economist, whether it is an
    analyst, a lawyer, a researcher, or information technology (IT)
    professionals, that this country has to offer means that you do
    not have to recruit just from Ivy League schools, but you can
    find these individuals, whether it is an Historically Black
    Colleges and Universities (HBCU), or it is also a State school?
    Have you found success in recruiting from those universities?
        Mr. Powell. Yes, we have.
        Mrs. Beatty. Thank you. Do you agree that these recruitment
    programs at their core do, in fact, prioritize merit and skill
    and simply expand the pool of candidates being considered?
        Mr. Powell. Yes.
        Mrs. Beatty. Do you agree that the Federal Reserve has
    directly and concretely benefited from initiatives to attract,
    hire, and retain a highly skilled and diverse workforce?
        Mr. Powell. I do.
        Mrs. Beatty. As I mentioned at the top, the United States
    economy has come a long way since the pandemic and peak
    inflation, but hardworking families still are struggling. Last
    night, I was in a store, night before last, eggs here in
    Washington, DC, were $14.99. So, I am concerned about how
    recent policies from the executive branch would impact the
    Fed's dual mandate. We are seeing reports, of course, from the
    Department of Government Efficiency's attempt to conduct
    massive layoffs. Do these policies, whether you agree with them
    or not, affect the labor market, unemployment, and the United
    States economy, and how does the Fed plan to achieve maximum
    employment during these circumstances?
        Mr. Powell. We have, I want to say, 170 million people in
    the labor force, so they would affect the numbers technically,
    but it is not clear that it would be material.
        Mrs. Beatty. Okay. Thank you. My time is up. I yield back
    and thank you again for being here.
        Chairman Hill [presiding]. The gentlewoman yields back. The
    gentleman from Georgia, Mr. Loudermilk, is recognized for 5
    minutes.
        Mr. Loudermilk. Thank you, Mr. Chairman, and, Chairman
    Powell, thank you for being here.
        Before I ask my questions, I want to spend just a moment on
    data privacy. I find it very ironic that my colleagues on the
    other side of the aisle and the ranking member in her remarks
    just take a sudden interest in data privacy, and especially
    information regarding individual's transactions when in the
    Inflation Reduction Act (IRA), bill, they worked very hard to
    force banks to report the financial transactions of individuals
    at $600. However, data privacy is something that I have been
    very serious about since I have been here. I have been fighting
    the Securities Exchange Commission with their unconstitutional
    acquisition of personal identifiable information (PII) from
    individual investors. We are attempting to reform and modernize
    the Bank Secrecy Act to limit the amount of information taken
    from individuals. They often turned a blind eye to the abuses
    by the CFPB, but it is encouraging to know that they are
    finally interested in some level of data privacy.
        I bring that up because there is something about data and
    data security I want to ask you about. The U.S. Department of
    Justice announced that it was prosecuting a senior Federal
    Reserve official for economic espionage, and this just came out
    in the past few days. This economist who apparently had access
    to sensitive monetary policy documents allegedly provided non-
    public information to representatives of the Chinese Communist
    Party. I know you are limited in what you can share about this
    case in a public setting, but to say that I am concerned would
    be, as others, be an understatement. What you can share with
    us, if you will, please answer a few of these questions. Do you
    know what kinds of sensitive nonpublic information would this
    individual have access to in his role at the Federal Reserve?
        Mr. Powell. Him personally, no, I do not. As I said, ``I
    really do not know the facts of the case, and I could not
    comment about it.''
        Mr. Loudermilk. Okay. Just assuming certain types of
    information from the role he is in, is there any idea, if
    information was provided to the Chinese Communist Party (CCP)
    what advantages would that give them?
        Mr. Powell. Without knowing what it is, I can tell you what
    staffers generally get, which is kind of the economic analysis
    that we do in advance of an FOMC Market meeting, and in modern
    central banking, we try to be as transparent as possible. I do
    not want to sound like I am dismissing this case, which we take
    very, very seriously, just as you do. The truth is, what we
    have that is secret is knowledge of what we are going to do in
    the future, and in modern central banking, the whole idea is to
    be transparent about what you are going to do. Nonetheless, we
    take this case very seriously, to your question.
        Mr. Loudermilk. Yes, and I appreciate it, and this is not
    adversarial at all. I am really just trying to get to what
    possibly the Chinese could have done and if they have done
    anything with it. Of course, if you are unaware of the type of
    information he had access to, you could not answer that
    question, but does the Federal Reserve have an insider threat
    program designed to combat this kind of espionage?
        Mr. Powell. We have very, very strict information handling
    requirements. We do background checks on every Federal Reserve
    employee, and we start those before they start working there.
    We do everything we can on this.
        Mr. Loudermilk. Obviously, certain things do happen, and
    people slip through the crack. Does this open the door for a
    more strategic analysis of the Federal Reserve and how to
    protect critical economic information?
        Mr. Powell. Yes. Once we see this unfold a little bit and
    know what the facts are, I think we will absolutely look and
    make sure that our controls and that employees understand the
    consequences of this, and I think they do, but with a few
    thousand employees, there is going to be one sometimes that
    breaks the rules. Again, I cannot comment on this case, but----
        Mr. Loudermilk. I understand it is sensitive, but as things
    move forward, I would ask if you could at some point share with
    me and this committee more information so we can work with you
    to make sure that our Nation's policies are more so kept away
    from our adversaries. With that, Mr. Chairman, I yield back.
        Mr. Powell. I would be glad to do that.
        Chairman Hill. The gentleman yields back. The gentlemen
    from California, Mr. Vargas, Ranking Member on our Monetary
    Policy Task Force, is recognized for 5 minutes.
        Mr. Vargas. Thank you very much, Mr. Chairman. Chairman
    Powell, thank you. I do not want to insult you in any way, but
    I hear you are a Deadhead.
        Mr. Powell. I will own up to that.
        Mr. Vargas. I assume that with the few words, oftentimes
    you would know one of the songs of the Grateful Dead, so I am
    going to give you here a quote to see if you know who said
    this: ``The risk of a dispute over the position could be a
    distraction to our mission.'' Do you know who said that?
        Mr. Powell. No, I do not.
        Mr. Vargas. Michael Barr did, and I would be remiss if I
    did not say and mention that what Governor Barr did recently
    was very selfless and noble. The rest of that quote, by the way
    is, ``In the current environment, I have determined that I
    would be more effective in serving the American people from my
    role as a Governor.'' I think he himself took the position that
    it would be a distraction to continue in that role. I
    personally think he is a person of great distinction that
    always managed himself in a way that was appropriate, and I
    appreciate the role that he played. I did not always agree with
    him. He was always agreeable and certainly was able to
    communicate with him our disagreement. Again, I just want to
    thank him because I think what he just did is what a lot of
    people cannot do, and that is make a decision that, for the
    betterment of the situation that we are in for our country. He
    would purposely do something that was not necessarily
    beneficial to him personally. Anyway, I would be remiss if I
    did not thank him.
        Since I am asking tough questions, I do want to ask you
    another tough question, see if you know this one. Do you know
    what the Ponte dei Sospiri is?
        Mr. Powell. I do not.
        Mr. Vargas. Okay. You might know it in English. It is
    called the Bridge of Sighs. Are you familiar with the Bridge of
    Sighs?
        Mr. Powell. Rings a bell. I cannot----
        Mr. Vargas. Okay. In Venice, the Doge, who was the leader
    of Venice, had a palace, and across the palace, he had his
    prison. Oftentimes, a prisoner would be taken into the palace
    and interrogated in very rough way, then be tortured, and then
    after he confessed to something he normally did not do, he
    would have to walk over the bridge and then into the dungeon
    and oftentimes die there. However, before he completed the task
    of crossing the bridge, there are two windows there, and he
    would stop at the windows, and he would look out over the
    magnificent city of Venice. It is the last time, oftentimes,
    that a person would get to see Venice, and so he would sigh,
    and that is why it is called the Bridge of Sighs, the Ponte dei
    Sospiri.
        The reason I bring that up is I think a lot of Americans
    feel that way right now, that they are crossing this bridge,
    and maybe it is the last time they have seen the beautiful
    America that we have had, and they are worried. They are
    worried about the usurpation of powers. They are worried about
    the balance of powers. Now, I was very proud of you when you
    stood up and said, ``I cannot be fired. The President, cannot
    fire me. I am staying.'' Can anyone up here fire you?
        Mr. Powell. Anyone up there?
        Mr. Vargas. Yes.
        Mr. Powell. No, no single person can.
        Mr. Vargas. No single person can, right? I hope you
    continue with that independence because I think this moment is
    very important. Someone mentioned it earlier, and I think it is
    very, very important.
        With that out of the way, I did want to talk about the dual
    mandate, especially the employment issue. For a lot of people
    in America, their job really is the most important thing for
    them--not even their investment--their job, and that is why
    employment is such an important position, I think, and so
    important to be part of the dual mandate. Are you looking at
    changing, in any way, the dual mandate?
        Mr. Powell. We do not have that authority.
        Mr. Vargas. Who has the authority to do that?
        Mr. Powell. Congress.
        Mr. Vargas. Only Congress?
        Mr. Powell. Yes. Congress would have to pass a bill, which
    would be signed by the President.
        Mr. Vargas. Say that again. I am sorry.
        Mr. Powell. Congress would need to pass a bill to change
    the dual mandate that the President signs.
        Mr. Vargas. That is right, and so I hope that you maintain
    your independence, at the same time follow the law that there
    is a dual mandate, and that is, I think, very, very important
    to most Americans. With that, again, I thank you for your
    service. I thank Michael Barr for his service. I know he is
    going to continue to serve. I know he will serve honorably like
    he always has, and with that, Mr. Chairman, I yield back.
        Chairman Hill. The gentleman yields back. We recognize the
    gentleman from Middle Tennessee, Mr. Rose, for 5 minutes.
        Mr. Rose. Thank you, Chairman Hill and Ranking Member
    Waters, for holding the hearing today, and thank you, Chair
    Powell. Always good to see you here with us.
        Chair Powell, you may recall, the last time we spoke, I
    brought up the issue of credit risk transfers, CRTs, and urged
    you to allocate more resources to ensure that framework
    applicants were receiving decisions from the Federal Reserve. I
    have recently heard back from stakeholders that they are
    receiving decisions from the Federal Reserve regarding CRT
    applications. I hope that the Federal Reserve team continues to
    be focused on cutting down the backlog so that financial
    institutions can take risk off their balance sheets. Thank you
    for that. However, I still have concerns that we are not fully
    optimizing the use of CRTs.
        In the case of mortgage risk, CRTs have successfully
    shifted risk from taxpayers to private capital, including
    capital markets and global reinsurers, while government-
    sponsored entities have clear regulatory treatment under the
    Federal Housing Finance Agency. Financial institutions lack
    similar clarity, particularly under Basel III. I understand
    that the Federal Reserve has begun to provide guidance, but
    more is needed to ensure that financial institutions can
    effectively manage risk, stay competitive globally, and serve
    their customers. Chair Powell, do you believe that there should
    be greater alignment in CRT treatment between banks and
    Government Sponsored Enterprises (GSEs)?
        Mr. Powell. That is a great question. I will take your
    feedback back. Honestly, I do not know the answer to that.
        Mr. Rose. I just wonder what steps could the Federal
    Reserve take to clarify and harmonize capital rules to promote
    financial stability and competitiveness in this space.
        Mr. Powell. Again, I will take back your feedback, and that
    is our objective is to be timely and thoughtful in that work.
        Mr. Rose. Thank you. I appreciate that. In April 2024,
    Synapse Financial Technologies, a financial technology
    (fintech) company that provided banking as a service solution,
    filed for Chapter 11 bankruptcy. This event significantly
    impacted its partnerships with various fintech firms and banks,
    including Evolve Bank and Trust. To this day, I have
    constituents in Tennessee's 6th District who are not able to
    access thousands of dollars of their funds, and there has been
    no communication regarding the timeline for resolution. Chair
    Powell, since the Federal Reserve Board is a supervisor of the
    Evolve Bank and Trust, could you provide any updates on what
    you are doing to ensure that my constituents receive their
    funds and the expected timeline for them to receive their
    funds?
        Mr. Powell. As their supervisor, as you point out, we have
    been pressing that bank to get money back to their customers,
    and we are actively engaged with the bank as they take steps to
    do so and return that money. We are deeply concerned about the
    complaints that we have heard and are aware of concerns raised
    during the bankruptcy proceedings, and to the extent there are
    violations of law and will follow-up on that.
        Mr. Rose. Thank you again. Are there any specific steps
    that my constituents could take to expedite the process or
    ensure that they receive their rightful balances?
        Mr. Powell. I will have to come back to you on that. There
    may be, but I do not have anything for you on that today.
        Mr. Rose. Thank you.

        [The information referred to was not received prior to
    printing.]

        Mr. Rose. Chair Powell, is there anything else that the
    Federal Reserve Board is considering to prevent situations such
    as this on a going-forward basis?
        Mr. Powell. I think when we see things, it is a lot of
    pattern recognition, so we will be looking to avoid things like
    this happening in the future.
        Mr. Rose. All right. Thank you. I think there has been a
    lack of appreciation for the work that President Trump has done
    to restore the American workforce. It is his example of calling
    Federal employees back to the office that we are now seeing
    corporate America follow as well. Chair Powell, as the Federal
    Government and companies move to end work-from-home policies
    and bring employees back to the office, how do you anticipate
    this shift will impact key economic indicators, such as
    productivity, urban commercial real estate markets, and
    consumer spending patterns?
        Mr. Powell. That is a really good question. I am not sure
    of the answer. I have always felt that I am personally more
    productive in the office, and that is where I work, except on
    weekends, when I work at home. In terms of productivity, I
    think there are different views. I know a lot of CEOs feel
    strongly that people are more productive in the office, and we
    will just have to see. I also think, though, that on the other
    side, work from home did allow very high levels of labor force
    participation among, for example, women. We had all-time record
    high participation by women, so I think there are benefits from
    work from home. I hope we continue to realize those.
        Chairman Hill. The gentleman's time has expired.
        Mr. Rose. Thank you. Okay. I yield back.
        Chairman Hill. The gentleman from Illinois, the Ranking
    Member on our Financial Institution Subcommittee, Mr. Bill
    Foster, 5 minutes.
        Mr. Foster. Hi. Thank you and thank you for everything you
    do. I would just like to get some sort of level setting on what
    you have been facing in recent. It is my understanding that
    your inspector general in the Federal Reserve has not yet been
    fired. Is that correct?
        Mr. Powell. That is correct.
        Mr. Foster. Okay. You have not also had the high-level
    resignations of senior personnel as they have had in Treasury,
    nothing like that?
        Mr. Powell. No, nothing like that.
        Mr. Foster. As of yet, no examples of junior personnel
    being given administrative access to your technical systems?
        Mr. Powell. Are you talking now about the payment systems
    that----
        Mr. Foster. No, payment systems or other technical systems.
        Mr. Powell. No.
        Mr. Foster. Email systems, nothing like that?
        Mr. Powell. None of that.
        Mr. Foster. Okay. All right. So far you have not suffered
    through what Treasury has. Have you had any inquiries from
    other central bankers or commercial bankers from around the
    world about what can we--uncertainty about whether the Federal
    Reserve will be able to continue doing its job if you suffer
    the same sort of intrusion that Treasury did?
        Mr. Powell. I have not, no.
        Mr. Foster. You have not. Anyone called you up and said,
    what the heck is going on, do we have to defend ourselves
    against unknown software being installed on the system?
        Mr. Powell. I have not had any such calls.
        Mr. Foster. Okay. All right. Let us see. We have also seen
    resumption of calls to audit the Fed, all right, which as you
    can remember from that gentleman up on the wall there, this was
    a big theme. First off, the Fed does get audited, correct?
        Mr. Powell. We are audited in the sense that everyone
    understands that word to mean, which is we have a big four
    accounting firm who looks at our books and gives us an opinion,
    does an audit, and publishes that opinion. That is all public.
        Mr. Foster. Right, and it is my recollection that there
    have never been any big problems uncovered in that sense?
        Mr. Powell. No. We actually have quite a simple business
    model, although we have a large balance sheet where we are like
    a big community bank, only with no credit risk and very simple.
        Mr. Foster. In the ordinary sense, talk of auditing, the
    Fed is----
        Mr. Powell. Fully audited.
        Mr. Foster. It makes no sense, but what was really meant,
    certainly when we were talking a decade ago, I guess it was
    really all about micromanaging Fed monetary policy that they
    said we want to audit the monetary policy, which does not
    really make sense, since it is a policy thing. Do you have any
    indication of whether the resumption of calls to audit the Fed
    will be audits or some new effort to politically micromanage
    the monetary policy?
        Mr. Powell. I have no way of knowing. Really, what it is,
    is the Government Accountability Office (GAO) is free to work
    in every area of the Fed except monetary policy and does so. We
    have GAO reports all over the place, over many years, but they
    do not audit monetary policy. The threat would be, if that were
    to go away, you would have investigations into decisions on
    monetary policy, and that would be a different thing. I think
    it was designed by its designer, to be a step on the way to
    eliminating the Fed.
        Mr. Foster. That is correct, yes. The calls to end the Fed
    came from the same wing of the Republican Party and, I guess,
    still exists. I think we are up to something like 20 Republican
    sponsors of the end of the Fed bill.
        Let us see. I was sort of surprised to see that the word,
    ``tariff,'' only occurred twice in your monetary policy report,
    whereas, if you look at financial trade journals, it is
    mentioned 5 times above the fold for those of them that read
    hard copies. This must be a very hard thing for you to deal
    with because as you are aware, Trump's tariffs and other trade
    policies put us in a manufacturing recession a year before
    COVID hit. This is not a small thing if these resume, but you
    have to sort of filter out the chaotic noise and the guidance
    that varies hour by hour or week by week. How do you actually
    filter that? You say correctly, let us wait to see what the
    actual policies are, but then that depends if you listen one
    day you get these are the actual policies. At some point you
    have to feed these into your macro models of what happens, and
    how do you do that filtering when there is just so much random
    noise on the signal?
        Mr. Powell. I think it is straightforward now in the sense
    that no one knows pretty much what the exact policies will be.
    That is still evolving, and so you cannot really take action.
    You can do analysis of various hypothetical things, and we have
    been doing a lot of that, but ultimately, it matters what
    happens, what is tariffed for how long, are there substitutes.
    Many, many, many questions that will have to be answered, and
    even then, the question will be, how much of that will transfer
    to the consumer? As you know, that can fall on the exporter,
    the importer, or the retailer or the consumer.
        Mr. Foster. In my case, manufacturers are at both ends of
    this.
        Mr. Powell. Yes, so we really just do not know.
        Mr. Foster. If that sort of analysis----
        Chairman Hill. The gentleman's time has expired. The
    gentleman from South Carolina, Mr. Norman, is recognized for 5
    minutes.
        Mr. Norman. Thank you, Mr. Chairman. Thank you, Mr. Powell.
    I appreciate you coming and addressing our body.
        In 2011, Vice Chairman Yellen made a statement of concern
    about the long-term debt situation and the imbalance that we
    have with our budget. In the 4th quarter when she made the
    statement, the Federal debt held by the public as a percentage
    of GDP was 64.75 percent. Now the same debt-to-GDP, as
    identified by Congressional Budget Office (CBO), was 99 percent
    at the end of 2024. Do you express the same concern that Ms.
    Yellen had about the severity of where we are with our
    continued long-term imbalance?
        Mr. Powell. I have done so on many occasions, and,
    essentially, that the U.S.--we are on an unsustainable path,
    and the debt level is not unsustainable, but the path is
    unsustainable. Certainly, it is past time for Congress to work
    on that, but that is what I can say. I cannot say more than
    that.
        Mr. Norman. We are in the middle of the budget situation
    now, trying to debate particular reconciliation. What would you
    say is a benchmark, what level of cuts, in your opinion, would
    ease your concern over what we are doing with $37 trillion now,
    but when you add the agents, the mandatory spending we have on
    Social Security as examples, going bankrupt in 2035, Highway
    Trust Fund running a balance, what level do you think will give
    you, I guess, some assurance that we are going to get our house
    in order?
        Mr. Powell. I do not have a specific number--it would not
    be appropriate--but I will say this. In having looked at this,
    the successful programs to get back on the right track, they
    tend to make progress over a long period of time. In other
    words, you have to get to a place where the economy is growing
    faster than the debt, and then you need to stay on that path
    for 20 years. This is not the kind of thing where we can fix it
    overnight. We just need to be making progress. Right now, we
    are running very large deficits at a time of full employment,
    so we need to start moving. You are either making progress, or
    you are not. Right now, we are not. So, the key thing is for it
    to become a big issue and then people work together. The things
    that need to be done are things that can only be done on a
    bipartisan basis, only. These are the things that need to be
    dealt with, cannot be dealt with by one political party. I will
    leave you with that.
        Mr. Norman. It is going to be a tall order----
        Mr. Powell. It is.
        Mr. Norman [continuing]. to get bipartisan.
        Mr. Powell. It will only grow. It gets taller every year.
        Mr. Norman. Yes, it does. I say that is one of my issues we
    are having now. The level of growth, you would think with what
    President Trump is doing with giving Americans confidence, with
    the DOGE Commission, which is giving Americans hope that we
    would, we are seeing things that are being spent at the
    taxpayers' dollars that we never imagined, that we could not
    get to, now he is exposing that. What level of growth you
    think, with the confidence growing under Trump, that we will be
    able to reach this year and the years after because the 20
    years you are talking about, we have to have a pretty solid. It
    has to be, would you say 1.8, 2 percent growth of GDP?
        Mr. Powell. You know, for a long time, people thought that
    U.S. potential growth was a little bit below 2 percent. I think
    we have had 5 years of good productivity growth, and we hope
    that will continue. If that does continue, then it might be 2
    or 2-and-a-quarter. If you are just talking about long-term
    budget assumptions, though, I would be conservative and say 2
    percent.
        Mr. Norman. You think that is doable?
        Mr. Powell. Two percent, yes.
        Mr. Norman. On another note, the stress tests that banks
    run and that the public has been given information on
    everything, but how that stress test relates to them. Most
    people do not understand what it is. Why is it not broadcast
    more, in your opinion?
        Mr. Powell. Why the stress tests?
        Mr. Norman. Correct.
        Mr. Powell. The theory from the beginning was not to
    disclose the whole models and the way that they work because,
    in a way that felt like giving the test in advance. This was a
    brand-new initiative that started coming out of the global
    financial crisis, very successful generally. Over time, the
    argument for not giving away the models, giving the models out
    has, I think, weakened, and also the law has moved. The Supreme
    Court has moved to reduce the level of deference given to
    agencies and increased our obligations to be transparent under
    the Administrative Procedure Act, and so it is time to expose
    the models.
        Chairman Hill. The gentleman's time has expired.
        Mr. Norman. Thank you so much.
        Mr. Powell. Thank you.
        Chairman Hill. I thank the gentleman. The gentleman yields
    back. The gentleman from Texas, Mr. Gonzalez, is recognized for
    5 minutes.
        Mr. Gonzalez. Thank you, Mr. Chairman, and thank you
    Chairman Powell for joining us this morning. As you know, the
    United Kingdom, European Union, Mexico, Brazil, India, and
    Japan all allow nonbank payment service providers access to
    their instant payment services. This allows improved access to
    liquidity for users by ensuring they can send and receive
    payments instantly without waiting multiple days, taxes, or
    money. I believe this is especially important for those who
    have tighter cash-flows and for those sending payments to loved
    ones abroad, both which happens quite frequently in South Texas
    and across the country. With that in mind, does the Federal
    Reserve plan to allow nonbank payment service providers access
    to FedNow payment rail?
        Mr. Powell. We do not plan that right now. What we really
    want to do is to have the consumer not care. The consumer can
    have access, but our payment rails go through the banks, and so
    you have to go through a bank.
        Mr. Gonzalez. There are no plans for changing that?
        Mr. Powell. No, not that I am aware of.
        Mr. Gonzalez. Okay. Getting on Consumer Price Index, what
    Consumer Price Index reading would cause you to cut rates? Is
    it 2 percent exactly, or is it a trend closer to 2 percent? How
    much more movement downward do you need to see in CPI for the
    Fed to start looking at rate cuts?
        Mr. Powell. Remember, we are looking at two things. We are
    looking at the labor market and inflation. Headline inflation
    last year was 2.6 percent, and we have said, assuming the labor
    market remains solid and strong, we want to see further
    progress. We did not actually make much progress on core PCE
    inflation last year for reasons that I can explain, but
    nonetheless, the progress was not there, so we want to see a
    resumption of progress. I am not going to put a really specific
    number on it. The truth is, the economy is strong, the labor
    market solid, and we have the luxury of being able to wait and
    let our restrictive policy work to get inflation coming down
    again, and that is what we are doing.
        Mr. Gonzalez. Is there any concern at the Fed that
    deporting millions of undocumented workers that do a lot of
    crucial work in the agriculture industry and construction, in
    hospitality business, will create upwardly pressure on
    inflation in this country?
        Mr. Powell. We do not have concerns about policies. We just
    look at the data. The new labor supply from immigration has
    actually come down quite sharply over the second half of last
    year, and there is every reason to think that will continue.
    Demand has also come down. The unemployment rate has actually
    been flat since July. We are going to look at supply and
    demand----
        Mr. Gonzalez. Will not taking a million workers out of the
    economy have a direct impact on it?
        Mr. Powell. It could. You will just have to see how supply
    and demand match up. In any case, we are not here to comment on
    immigration. We are here to achieve maximum employment----
        Mr. Gonzalez. Right. I totally get that. I am just
    figuring, if you take a million people out of the workforce,
    how do we make that up, and how would that have an upwardly
    inflationary pressure on our economy? Moving on, recently, the
    Cleveland Fed's New Tenant Rent Index tumbled to a negative 2.4
    year-over-year rate. Does that type of deflation in shelter
    make you more positive on future interest rate cuts?
        Mr. Powell. Yes, but the thing is, what we are really
    looking at is in the aggregate housing services--inflation--I
    believe that is a measure of current rents, so market rents
    that are happening and market rents have not been showing much
    inflation for a long time. Market rents do not make their way
    into rents until existing leases turn over and that has been
    the slow part of the process. We have seen a lot of progress on
    that, but we are not there yet. We are not back to levels of
    housing services inflation, which is what I described, but we
    are getting there. We are making clear progress.
        Mr. Gonzalez. You recently said that employment prospects
    are solid, and construction employment, which represents 6.1
    percent of all private employment, is falling significantly.
    Does this concern you?
        Mr. Powell. We look at the aggregate numbers. There are
    always industries that are growing and not growing. I think the
    last few job reports have been significant job creation. You
    saw the one here a week or so ago, which were vised up the last
    2 months and strong job creation. In fact, it looks like the
    job creation may actually have picked up a little bit around
    the end of the year, last couple months.
        Mr. Gonzalez. Thank you. Just very briefly, given that we
    had a business capital expenditure (CapEx) recession, the last
    time the economy faced uncertainty with large tariffs, are you
    monitoring CapEx developments closer this time around?
        Mr. Powell. We are monitoring them carefully, yes.
        Mr. Gonzalez. Thank you. I yield back.
        Chairman Hill. The gentleman yields back. The Chair of our
    Oversight and Investigation Subcommittee is recognized for 5
    minutes.
        Mr. Meuser. Thank you, Mr. Chairman, and thank you very
    much, Chairman Powell. Good to see you. I did recently chair an
    Oversight Subcommittee hearing on de-banking. During our
    hearing, we revealed evidence that the FDIC directly pressured
    banks to de-bank crypto. What do you think of that situation?
        Mr. Powell. I think we are all struck at the number of
    complaints and the breadth of them and want to understand. We
    want to take a fresh look at this area. We are not telling
    banks that they cannot bank certain people from certain
    institutions, anything like that. Nonetheless, we are hearing
    these things, and I take at least some of are real. We need to
    understand it and stop it from happening, because if you look
    at what the banks are saying, they are really saying that a lot
    of this is that the enforcement of any money laundering is so
    tough, that at any sign, any flag at all that gets raised, they
    just cut people off, and they cannot explain. That may be part
    of it, but I think we need to do some work, get to the bottom
    of it and address this.
        Mr. Meuser. Thanks, Chairman. There were hundreds of
    letters, by the way, that were pretty clear that----
        Mr. Powell. Yes.
        Mr. Meuser [continuing]. banks should avoid doing business
    with crypto companies. No such pause letters as they refer to a
    communication of this coming from the Fed?
        Mr. Powell. Not that I am aware of. No, it has not been our
    policy. Our banks are doing business with crypto companies, and
    they are doing crypto inside the bank, some of them are. We
    have been a little bit careful with it, but I really do not
    think we have been telling people they cannot do it.
        Mr. Meuser. I think a lot of people, including us, would
    appreciate it if you keep doing a careful review of that. The
    banking industry itself is concerned that there is no vice
    chair for supervision to provide clarity on multiple issues
    from Basel III to Reg II and de-banking. Do you expect to have
    an acting vice chair for supervision? When do you expect to
    have an acting vice chair?
        Mr. Powell. We need to have a confirmed vice chair if we
    are going to have a vice chair. There is no such thing as
    acting for us, but I do not know. That is up to the
    administration. I will tell you the way we look at it is, we
    are going to do our jobs, and I think there are a number of
    things that can be done that will be very constructive. If
    there is a new vice chair for supervision, I will welcome that
    person and do everything I can to make them successful.
        Mr. Meuser. Okay. Thank you. Yesterday, you noted that
    Basel III Endgame could be finalized fairly quickly, given last
    year's extensive public comments. Will you ensure the rule does
    not restrict access to capital and fully incorporates industry
    feedback? As you stated, you felt that the capital reserves for
    banks were about right, so I would imagine you not looking for
    anything too drastic there?
        Mr. Powell. No, that is right. Yes, that is correct.
        Mr. Meuser. Okay. Great. The CPI this morning came in a
    little hotter than expected at 3 percent. Did this surprise
    you?
        Mr. Powell. The CPI reading was above almost every
    forecast, but I would just offer two notes of caution on this.
    One is, we do not get excited about one or two good readings,
    and we do not get excited about one or two bad readings. The
    second thing, though, is we target PCE inflation because we
    think it is simply a better measure of inflation, and so you
    need to know the translation from CPI to PCE, and we get more
    data on that. Tomorrow, we will get the Producer Price Index. I
    think it is always wise, and the people who follow us closely
    know this, we will know actually what the PCE readings are late
    tomorrow.

        Mr. Meuser. Okay. In the past, as you well know, you called
    inflation transitory, then the Fed signaled three rate cuts for
    2024, and the markets priced in six. Now that you are saying
    that there is no rush to cut rates, do you find this forward
    guidance stabilizing markets or fueling volatility?
        Mr. Powell. This is the summary of economic projections,
    the dot plot, and I think markets like it. It is the forward
    guidance that we give. We do not really mean it as forward
    guidance, but markets do take it. Sometimes they take it too
    seriously. I think most market participants understand that it
    is highly conditional and dependent on what actually happens in
    the economy.
        Mr. Meuser. That is the feedback that you do receive----
        Mr. Powell. Yes. Yes. When we talk about getting rid of it,
    market participants will tell you, please do not do that.
        Mr. Meuser. Okay. If DOGE found a trillion dollars in
    wasteful, unnecessary spending--the Department of Government
    Efficiency, of course--and would not that have a positive
    effect on inflation, allowing you to perhaps lower interest
    rates and of course, reduce our deficit spending?
        Mr. Powell. This is if a trillion dollars of spending were
    eliminated. You have to run that through a model but ultimately
    hard to say exactly how it would affect the economy.
        Mr. Meuser. Okay. You got a $6 billion budget at the Fed.
    Would you welcome DOGE to have a look under the hood?
        Mr. Powell. We have not heard from them, and I have nothing
    for you on that today.
        Mr. Meuser. Thank you, Chairman. I yield back, Chairman.
        Chairman Hill. The gentleman's time has expired. The
    gentleman from Illinois, Mr. Casten, is recognized for 5
    minutes.
        Mr. Casten. Thank you, Mr. Chair. Chair Powell, always a
    pleasure to see you again. I want to start there, and I do not
    expect you to comment on the policy here, but there has been a
    number of actions from the Trump Administration of scrubbing or
    limiting data that the private sector has historically relied
    on to understand the direct and indirect impacts on the
    economy, public health data, information about breaking things
    down by gender, by race, that we need to understand granular
    shifts in the economy. I realize that you do not rely
    exclusively on government data, but has there been anything
    that has happened since the Trump White House was sworn in that
    has limited the Fed's access to information you need to fulfill
    your dual mandate?
        Mr. Powell. Not that I am aware of, no.
        Mr. Casten. If there was, will you commit to sharing it
    with Congress so that we can fulfill our oversight
    responsibilities?
        Mr. Powell. Sure.
        Mr. Casten. Okay. When you were here in July, I asked you
    this question, and I just want to confirm that you still feel
    the same way. Is it still your view that, the Federal Reserve,
    climate change constitutes an emerging threat to U.S. financial
    stability?
        Mr. Powell. I guess I would say it this way, I would not
    say that climate change is currently a threat to U.S. financial
    stability.
        Mr. Casten. An emerging threat?
        Mr. Powell. I would say that it may emerge over time as
    such.
        Mr. Casten. Okay, so $250 billion of losses in California.
    We have now got multiple States where the insurer of last
    resort is insolvent, reporting today that California is having
    to bail it out. I know we have a difference of opinion on
    Network for Greening the Financial System (NGFS). I do not want
    to go into that, but is the Fed monitoring what is happening to
    our financial system as those insurers pull out, as insurance
    rates go up, and people's both access to property insurance and
    the cost of insurance are going up? Are you monitoring what is
    happening systemically in our economy as a result of that?
        Mr. Powell. Yes. If the question is, is it a threat to the
    financial stability of the United States, that is really the
    question, and, of course, we are following that very, very
    carefully.
        Mr. Casten. Okay. If you are monitoring it, where is the
    risk that was being backed by the insurance industry moving?
    Where in the economy does that risk now live?
        Mr. Powell. Insurance companies, as you know, can cancel
    policies and not issue them, and they can leave States, and
    they are doing a lot of that. Where do those risks fall? They
    fall on homeowners and other beneficiaries, and they fall on
    State Governments and to some extent, the Federal Government.
    They do not cause large financial institutions to fail.
        Mr. Casten. Are you seeing shifts in mortgage servicers,
    their willingness to provide loans to homes as those insurance
    rates go up or disappear?
        Mr. Powell. Implicitly. If you cannot get insurance, then
    there will not be a mortgage. I cannot point to episodes where
    that is happening, but that is certainly where this looks like
    it is headed.
        Mr. Casten. Okay, because there have been reports going
    back several years now that the more prone your property is to
    flood risk, to fire risk, the more likely you are as a bank to
    offload that on to Fannie and Freddie, right? We have seen that
    data happening. That then raises the question of, and this is
    maybe just purely academic and wonky. If you own a set of cash-
    flows and you want to sell them to me, we both have full
    information. I am only going to buy them from you at an
    accretive value to you to the extent that I have a lower cost
    of money than you do, right? Just, Sort of like ECON 101,
    right? If we own Fannie and Freddie, right now because they are
    in receivership and they are throwing off a string of cash-
    flows to the Treasury, setting aside the nuances of how the CBO
    scores all these sorts of things, is not the sale of Fannie and
    Freddie on the assumption that the buyer and seller have
    perfect information, the same information on both sides of that
    transaction? If that is accretive to the American taxpayer,
    does not it implicitly assume that we have to sell to somebody
    with a lower cost of capital than we do?
        Mr. Powell. I followed your logic there, yes.
        Mr. Casten. Okay. That would only not be true to the
    extent, I suppose, either that the buyer violates every rule I
    had in my mergers and acquisitions (M&A) career of paying for
    upside, as they say, or that the buyer lacked information that
    the seller had, right?
        Mr. Powell. Fair.
        Mr. Casten. Okay. What I would like to understand is, does
    that create a conflict of interest for the U.S. Government,
    because if we have information about climate change being
    scrubbed from our data sets and we have a White House that
    would like to sell Fannie and Freddie, are we committed to
    efficient markets that depend on accurate, transparent
    information, or are we committed to making a quick buck, in
    which case we might want people not to be uninformed? Is the
    Fed committed to transparent markets, I guess is the first
    question, and then the second one, do you feel that conflict?
        Mr. Powell. I think we are getting a little away from our
    mandate at the Fed. The idea of privatization is to get this
    off the balance sheet of the Fed and get private capital
    backing it up.
        Mr. Casten. Sure, and there would be good reasons for that,
    but if that is coming at the expense of value to the American
    taxpayer, we need to be transparent about it.
        Chairman Hill. The gentleman's time has expired.
        Mr. Powell. Right, but we have private sector banks. All
    credit could be made cheaper if offered by the central
    government, right.
        Mr. Casten. I yield back.
        Chairman Hill. The gentleman yields back. The gentleman
    from South Carolina, Mr. Timmons, is recognized for 5 minutes.
        Mr. Timmons. Thank you, Mr. Chairman, and thank you to
    Chair Powell for joining us today. Yesterday in an exchange
    with Senator Warren on stress testing, you said that the Fed is
    having to change their approach ``because the ground has
    shifted very substantially in administrative law.'' While, yes,
    the ground has certainly shifted since last year, I am slightly
    confused, because after reading up on the banking industry's
    lawsuit against the Fed, I do not see a direct connection
    between their case and the loss of Chevron deference. Their
    case seems to center on the Fed not complying with the long-
    established process laid out by the Administrative Procedures
    Act. While some at the Fed may not classify stress tests as a
    rulemaking. When they require banks to alter their capital
    levels, they have the effect of rulemaking.
        Chair Powell, I am hoping you can clear this up for me. Is
    this a matter of adapting to a post-Chevron world, or was this
    the Fed unlawfully using stress tests as a back door to
    increase capital requirements on banks without issuing a formal
    rulemaking and having to go through the legally required notice
    and comment Administration Procedure Act (APA) process?
        Mr. Powell. Pretty good chance that the next sentence I say
    would be evidence in the court case that we are having, so I am
    not going to get into debating what the law is because we are
    in litigation. I will say it is not just Chevron, though. I
    think it is clear from other cases that expectations under the
    Administrative Procedure Act are also raised, just generally
    speaking, and so we felt that, overall, that really has changed
    the playing field.
        Mr. Timmons. Any changes in capital requirements are very
    disruptive, and having a more predictable process is helpful
    for long-term stability of the U.S. economy.
        On to the next question. Foreign banks, many of which are
    smaller than their domestic counterparts, play a larger role in
    providing financing in the Treasury market. U.S. banks, on the
    other hand, are less involved than they could be, primarily
    because regulators have made this activity less profitable for
    them. Stricter capital requirements, liquidity buffers, and
    compliance costs stemming from regulations, like Dodd-Frank,
    make it more costly for U.S. banks to engage in Treasury market
    operations, particularly in repo and securities lending. As a
    result, foreign banks facing fewer regulatory hurdles have
    stepped in to take on this crucial role, providing the
    liquidity and financing needed. This shift has significantly
    altered the market landscape with foreign institutions now
    holding a larger share of financing operations, that were once
    dominated by U.S. banks.
        My question is this. Why are we setting up a system where
    the U.S. Treasury market needs to rely so much on foreign banks
    for proper functioning, and do you see that as a national
    security threat?
        Mr. Powell. The trend that I see is that we have very
    significantly raised the capital costs of supporting market
    activity, especially for low-risk activities that are low risk,
    low return. What has happened is the amount of Treasuries has
    grown much greater than the capital that is allocated to
    intermediate it. That is why you see low intermediation and
    relative lack of liquidity, and I think it is appropriate to do
    something about that. That is something that we will be looking
    at is to reduce the enhanced supplemental leverage ratio to
    account for that. This is something that we proposed before,
    which, I think, is intended to increase liquidity in the
    capital markets for banks subject to it.
        Mr. Timmons. Thank you for that. I want to end on a
    positive note. I want to discuss the optimism among the
    American public. Small business optimism experienced its
    largest increase in 40 years following President Trump's recent
    election, with continued positive momentum in the months since.
    This surge reflects growing confidence in the economy spurred
    by expectations of favorable policies and reduced regulatory
    burdens for small businesses. The index is not only well above
    its 50-year average but also reached its highest point in
    December since late 2018. This shift has caught the attention
    of many across the economic landscape. Back home in South
    Carolina, I frequently speak with small business owners who are
    enthusiastic about the future and eager to help their
    businesses thrive under the new administration. My question is
    this. How do you see this significant jump in optimism
    translating into tangible outcomes in terms of investment,
    hiring, and overall growth for small businesses?
        Mr. Powell. We know that sentiment really matters. It is
    really hard to model it, but you do think about it. When you
    are thinking about your forecast, you think about optimism and
    that kind of thing because that is what supports investment.
    All the investments that companies make--they have to have on
    some level, optimism that it is worth shelling out this money
    to do what it is they are doing. It is a key part of how
    economies work.
        Mr. Timmons. Given the potential for increased investment,
    are there specific policy adjustments or economic factors that
    you are watching closely to ensure that this optimism leads to
    sustainable growth in the long-term?
        Mr. Powell. Best thing we can do is achieve price stability
    and also full employment, maximum employment, and then create a
    stable environment where businesses and households cannot worry
    about inflation and we have steady, sustainable growth.
        Mr. Timmons. As one of the millions of Americans about to
    get a mortgage, interest rates going down would be helpful.
    Thank you, Mr. Chair. I yield back.
        Chairman Hill. The gentleman yields back. The gentlewoman
    from Massachusetts, Ms. Pressley, is recognized for 5 minutes.
        Ms. Pressley. Chairman Powell, we are at an inflection
    point and we need leaders who are courageous enough to speak
    truth, and who are committed to helping every person who calls
    this country home. There are many who wrongfully justify
    Trump's presidency and the lawless work of DOGE as good for the
    economy. Chairman Powell, you actually know something about the
    economy. The Federal Reserve has a dual mandate--maximizing
    employment and stabilizing prices--and it is clear to me that
    Donald Trump and Elon Musk's actions are impeding your work.
    The threats of tariffs against our allies are not helping the
    Fed do its job, nor will they help people across our country.
    The Boston Federal Reserve put out a report last week, which
    estimated tariffs would be inflationary and raise prices.
        Chair, I ask unanimous consent to enter into the record the
    report titled, ``The Impact of Tariffs on Inflation.''
        Chairman Hill. Without objection.

        [The information referred to was not received prior to
    printing.]

        Ms. Pressley. Additionally, Donald Trump has threatened
    mass deportations. He seeks to terrorize immigrant communities
    and separate families, claiming it will help the economy. I do
    not think so and neither do the Peterson Institute for
    International Economics, who estimated that employment would
    drop 7 percent.
        Chair, I ask unanimous consent to enter into the record the
    report titled, ``Mass Deportations Would Harm the U.S.
    Economy.''
        Chairman Hill. Without objection.

        [The information referred to was not received prior to
    printing.]

        Ms. Pressley. Now, Chairman Powell, I want the Federal
    Reserve to be successful, so if Elon Musk and his DOGE bros
    were to walk into the Federal Reserve, intimidate staff, access
    classified data and take control of the Agency the same way
    they did USAID and the Consumer Financial Protection Bureau,
    would that help or hurt our economy?
        Mr. Powell. We do not have that happening. I am not going
    to speculate.
        Ms. Pressley. On your own website, it says, ``The Federal
    Reserve is accountable to the public and the U.S. Congress,''
    so I would like to see a clear answer on this. Your staff are
    watching, Wall Street is watching, Donald and Elon are
    certainly watching, and we all want to know. What is your view
    if DOGE does to the Federal Reserve what it has already done to
    other independent agencies?
        Mr. Powell. What we are going to do at the Fed is keep our
    heads down and keep working, wait to see what new policies
    emerge, and try to make a thoughtful, sensible set of policies
    on our part once we understand the implications of those.
        Ms. Pressley. All right. If Elon Musk or anyone from DOGE
    attempts to access the Federal Reserve's private data, will you
    immediately alert the members of this committee?
        Mr. Powell. Sure.
        Ms. Pressley. Thank you. This is as clear to me as night
    and day. Donald Trump and Elon Musk are not trying to help
    working-class people. They are trying to help themselves. They
    want the Fed to be a tool that helps the rich get richer, banks
    get bigger, and regulations disappear altogether, but that is
    not your mandate. The Fed must maintain its independence and
    integrity. At the interest of the public before Elon Musk, the
    world's richest man, does not care about the price of eggs. He
    does not have to when he has already bought the presidency. I
    yield back.
        Chairman Hill. The gentlewoman yields back. The gentlewoman
    from California, Mrs. Kim, recognized for 5 minutes.
        Mrs. Kim. Thank you, Chairman Hill, and, Chairman Powell,
    thank you for joining us today, and I want to commend you again
    for ignoring the outside noise and staying true to Fed's dual
    mandate. Chairman Powell, it seems the advent of artificial
    intelligence and other emerging technologies has helped the
    United States increase productivity when compared to other
    countries around the world, that makes our country more
    competitive and envy of economic growth. Do you believe that
    this boom in productivity is sustainable in the long term, and
    if so, how does that increase in productivity affect your
    models to forecast inflation, therefore, monetary policy?
        Mr. Powell. We have had a boom in productivity. It is most
    welcome, and, of course, it would be great if it were
    sustained. I think if you look at the candidates that try to
    explain it, some of them are kind of one-time things and some
    of them could be more sustained. You mentioned technology and
    artificial intelligence (AI). To the extent that is part of it,
    that could be a sustainable increase in the rate of growth and
    productivity. To the extent it was more about job reallocation,
    people switching jobs coming out of the pandemic, that is kind
    of a one-time thing.
        Also, we had a wave of startups, a wave of early-stage
    companies, that also tend to be linked to productivity. That,
    too, could just be a one-time increase in productivity.
    Literally, no one has the record of being able to successfully
    forecast productivity for very long, but again, it is going to
    depend on many things. As long as we have this increased
    productivity, it is most welcome and important.
        Mrs. Kim. Thank you. Over the past decade, we have seen Fed
    intervene with more regular frequency to maintain the orderly
    functioning of the U.S. Treasury market. Much more than decades
    before, it seemed like the private sector was able to manage
    this without too much Fed intervention pre-financial crisis,
    and a longstanding and growing bipartisan consensus that the
    SLR and other regulations may be causing this. If so, what do
    you think the solution is to reduce the need for frequent Fed
    intervention?
        Mr. Powell. I do think we need to work on Treasury market
    structure, and part of that answer can be, and, I think, will
    be reducing the calibration of the supplemental leverage ratio,
    as you mentioned. That is something that I have long supported
    and for the reason that the quantity of Treasuries has grown
    really significantly and the capital allocated to
    intermediating trades in Treasuries, in fact, has shrunk. We
    need a liquid Treasury market, and this is one of the things
    that we can and should do: is to reduce the calibration of that
    measure.
        Mrs. Kim. Thank you. I want to go back to March 2023, in
    response to the fallout of Silicon Valley Bank. It is my
    understanding that the Fed is analyzing ways to create a more
    efficient process for financial institutions to access the
    discount window. One issue that has come up is that it can take
    extended periods of time to assess and determine the lendable
    value of collateral, potentially denying the institution's
    ability to access liquidity quickly. Is the Fed looking at ways
    to streamline the process to assess and determine the value of
    collateral at discount window?
        Mr. Powell. We are. There are sort of impediments to the
    efficiency of the discount window and those are things we can
    work on, we are working hard on. There is also the question of
    stigma, though, that banks are reluctant to use it because of
    the so-called stigma of using it, and that is a very hard
    problem to solve. We are also working on that one.
        Mrs. Kim. Regarding the Fed's review of the discount window
    operations, can you give us an update on what problems the Fed
    was able to identify, what solutions you are pursuing, and what
    the estimated timeline is for any action?
        Mr. Powell. The study is ongoing right now, the work is
    ongoing, but essentially, you touched on some of this. It is
    inefficient, slow, and we need to have collateral processes
    that are very quick and very efficient because they need to be
    quick and efficient in a crisis, so that is part of it. Just
    general modernization, investing in technology, modernizing the
    discount window, that is part of it. The harder part is really
    turning it into something that banks are comfortable using
    because they feel it is not stigmatized, and we are working on
    that, too.
        Mrs. Kim. Opening the discount window 24/7 could really
    help the banks in California, especially the State that I
    represent, the Southern California that I represent. Thank you.
        Mr. Powell. Thank you.
        Chairman Hill. The gentlewoman yields back. The gentleman
    from New York, Mr. Torres, is recognized for 5 minutes.
        Mr. Torres. Thank you, Mr. Chair. President Donald Trump
    asserting among the most aggressive and expansive claims of
    presidential power that we have seen in our Nation's history
    has taken the unitary executive theory to new extremes. He is
    claiming to have the authority to defund whatever agency he
    wishes, to abolish whatever agency he wishes, and to fire
    whomever he wishes, even if it means violating an act of
    Congress. Mr. Chairman, suppose for a moment the President were
    to ignore the congressional statute that establishes the
    independence of the Federal Reserve. What economic consequences
    would result from the Fed losing its independence?
        Mr. Powell. I think research over many, many years in many,
    many jurisdictions shows that some degree of independence is
    very important in keeping inflation under control, and the
    connection is obvious. If politicians are going to want to be
    reelected and things like that, they are not going to be
    focused on the longer term. We have the mandate to remain
    separate from all of that, to stay out of all of that so that
    we can just focus on, not on election cycles or helping or
    hurting any political party or politician, but just on serving
    the public as a whole. That is essential, and it is uniform, I
    think, across all advanced economy central banks.
        Mr. Torres. Much like the Bureau of Fiscal Service, the
    Federal Reserve, has highly sensitive payment systems.
    President Trump and Secretary Bessent granted Elon Musk and his
    team of outsiders access to the central payment system of the
    Federal Government, a system that is often described as
    America's checkbook. Would you as the Federal Reserve Chair
    ever grant a team of outsiders access to the Fed's central
    payment system without sufficient vetting and sufficient
    security clearance?
        Mr. Powell. No, but let us remember, we are the Treasury's
    fiscal agent. Everything we do is under their direction. There
    are Treasury payment systems and then there is our side of the
    wall, which is the actual payment to the recipients, and so we
    control access to that very, very carefully.
        Mr. Torres. The Treasury issues the payments and then you
    process them?
        Mr. Powell. They order us to pay someone, and we just pay.
    We do not question payments. We just make the payments, and we
    control access to those payment systems very carefully.
        Mr. Torres. What would be the danger of lightly granting
    access to the Fed's payment system to outsiders without
    sufficient vetting? Like, what could go wrong?
        Mr. Powell. The reason why we are so careful about it is,
    just for one thing, the possibility of mistakes and someone
    coming in and changing the code, and things like that, so we
    have very careful access. Another one is just you open it up to
    more cyber risk and things like that. I think all really
    important computer programming is subject to very, very careful
    access restrictions, and we are no exception.
        Mr. Torres. Right. You believe, as I do, that granting an
    insufficiently vetted team of outsiders access to the payment
    systems of the Treasury or the Fed would radically raise the
    risk of a cyber breach at the hands of foreign adversaries,
    like China and Russia?
        Mr. Powell. We are talking hypothetically here, right? I
    can tell you that we can speak to the systems that the Treasury
    has asked us to operate on their behalf, and that has not
    happened in those systems.
        Mr. Torres. Okay. I represent one of the poorest
    congressional districts in America. I have cash-strapped
    constituents who pay exorbitant fees simply to transfer their
    own money, often to loved ones abroad. Access to Fedwire could
    play a role in radically reducing the cost of remittances and
    payments for the lowest-income Americans. What is your position
    on expanding Fedwire access for the purpose of reducing the
    cost of remittances and payments?
        Mr. Powell. Fedwire is really between banks. These are very
    large wholesale transactions. It is one of the world's most
    important, if not the most important, financial market utility.
    I do not think we are looking to open it up to retail
    customers. I think faster retail payments, and particularly
    cross-border payments, are a subject of a lot of work in the
    international sphere, and I think we all understand it is
    important to lower the costs and the risks of those.
        Mr. Torres. The commercial real estate, do you feel that
    continues to be a ticking time bomb within the financial
    system? What is your sense of----
        Mr. Powell. I would not say that. We have been saying, and
    I think it is still true, that this is a problem that has been
    with us, and it is going to be with us for a while. If I can
    say something modestly constructive, it does not seem to be
    getting worse.
        Mr. Torres. Okay.
        Mr. Powell. There are a lot of embedded losses, a lot, and
    they are just going to need to be realized. We are working with
    financial institutions to make sure they have a plan and
    understand their losses and can manage them.
        Mr. Torres. Okay. I see my time has expired. Thank you.
        Chairman Hill. The gentleman yields back. The gentleman
    from Florida, Mr. Donalds, is recognized for 5 minutes.
        Mr. Donalds. Thank you, Mr. Chairman. Chair Powell, good
    seeing you again. I want to start with just a broad-based
    conversation. I know the Fed has been making adjustments to the
    Fed funds rate over the last several months, and what we have
    noticed is, although there has been movement on short-term
    rates, there really has been minimal impact on, in my view,
    intermediate to long-term rates. Can you expound on why you
    think this phenomenon is starting to exist with respect to Fed
    rate monetary policy versus the general borrowing rates for
    businesses and consumers?
        Mr. Powell. Right, so you are right. Of course, we have
    lowered the Federal funds rate, and as sometimes happens,
    longer rates have gone up. They have gone up and come down and
    gone back up. They moved around, but they are higher, and the
    reason is that we do not control long-term rates. They react to
    a whole bunch of different things, including a sense of more
    deficit spending coming, including expectations of more growth
    and risk of higher inflation. Markets are not pricing in higher
    inflation, but maybe pricing that the risk of that is there,
    and that could be a reaction to new policies or not.
    Ultimately, though, the increase in longer-term rates is really
    mostly not about Fed policy or our job of maintaining price
    stability. It is about other things, the term premium, in
    particular. I would be happy to meet with you and go through
    this in a lot of detail, more than you can do here.
        Mr. Donalds. No, I would love to do that. One of the
    concerns I have, as well as a lot of my colleagues up here on
    the Hill, is there is about so much that the Fed can do with
    respect to rate policy, and I fully acknowledge that one to get
    your views on that, but I think it is also the desire in this
    conversation happening right now, obviously, with DOGE and Elon
    Musk, and the desires for efficiencies, but then also stability
    in Federal spending and even bending the cost curve. Fiscal
    policy from Capitol Hill, do you think that would yield
    positive results in medium and long-term rates, borrowing
    rates, not just for the Federal Government, but for the
    American consumer?
        Mr. Powell. When you say, ``fiscal policy,'' you mean
    fiscal policy that would reduce deficits over time?
        Mr. Donalds. Yes, fiscal policy that will reduce deficits,
    fiscal restraint. I would say fiscal common sense over the
    intermediate and long-term for the United States.
        Mr. Powell. Yes. I think part of what market participants
    think about when they buy Treasuries is how much more of this
    is coming, are we going to get on a sustainable path, and they
    want to get paid. If the answer to that is, we do not have a
    lot of confidence in that, so the term ``premium,'' the so-
    called term premium goes up for that reason, and there is no
    question if we were on a more sustainable path, I do think
    rates would be lower.
        Mr. Donalds. No, and I appreciate that testimony because
    one of the things that, while we do talk about, obviously, tax
    policy and another committee regulatory policy throughout the
    entire Federal Government, I think it is important for the
    American people to know that Washington does have to be
    fiscally responsible, and if we are not--and I say all of
    Washington--if we are not, then the risk premium, so to speak,
    for borrowings in the marketplace are going to increase, not
    because of the American consumer, not because of the strength
    of the American engine, but simply because the amount of
    Treasuries that we are putting out to market are just demanding
    a higher premium for every new dollar that we borrow because
    simply people want to be paid back.
        It is just something where, Chairman, you do not have to
    comment on that, just something, I think, is important for the
    American people to understand that is the major issue, if you
    will, over the next 10 to 20 years for the Federal Government,
    that we have to get our fiscal House in order if we are going
    to give the American consumer who might be poor, trying to make
    a way in this country, middle income, trying to just take care
    of their children and figure out what the next stage in life is
    going to look like, people who are in the upper middle class,
    who are now forming businesses, building some real wealth for
    themselves and for their family. All of that is at risk if the
    U.S. Government does not take its fiscal health as serious as
    any other family and any other business would do.
        Real quick, Chairman. You said yesterday that as long as
    you are chairman, the United States will never have a central
    bank digital currency. Is the Federal Reserve or any of its
    member banks currently conducting any studies on CBDCs, either
    for retail or wholesale purposes?
        Mr. Powell. We are not doing any work that is designed to
    lead to a retail CBDC. That is not happening, and we do not
    support one, we do not have legal authority to do one, so no.
    The notion of a wholesale CBDC is really not one that we think
    about or accept. Take Fedwire, Fedwire is a real-time digital
    process of trillions of dollars every day between banks. Is
    that a CBDC? Some people would say that----
        Chairman Hill. The gentleman's time has expired.
        Mr. Donalds. Thank you, Chairman. I yield back. Thank you,
    Chairman.
        Chairman Hill. The gentleman yields back. The gentlewoman
    from Texas, Ms. Garcia, is recognized for 5 minutes.
        Ms. Garcia. Thank you, Mr. Chairman, and, Chairman Powell,
    thank you so much for being here today. It is always a pleasure
    visiting with you. I am going to talk about a topic that both
    Congressman Gonzalez and Representative Pressley brought up,
    which is something that, I think, does impact our Federal
    economy, but I know certainly does impact my district in Texas.
    I am really concerned about President Trump's mass deportations
    efforts and their impact on your dual mandate.
        I believe the last time you were in front of this
    committee, I asked you about the impact immigration had on
    monetary policy given last year's Congressional Budget Office
    estimates. As a reminder, the report estimated that the labor
    force in 2033 will be larger by 5.2 million people, largely due
    to the immigration surge. Since then, there have been more
    reports and research about the impact immigration has on our
    economy, both in maximizing employment and stability in our
    prices. For example, immigrants are fulfilling lower-paying and
    oftentimes dangerous jobs more frequently than U.S.-born
    workers. They earn more money, pay taxes, invest back in our
    economy for everyday goods and services, and help create even
    more jobs. A study done by the National Academies of Science,
    Engineering, and Medicine found that foreign-born workers, or,
    as some people say, immigrants, pay $237,000 more in taxes over
    their lifetime than they receive in benefits. Let me say it
    again, $237,000 more. These mass deportations will have a
    massive impact on both our economy and workforce, leading to a
    drop in production and spending. We are already seeing some of
    that in my district.
        Chairman Powell, I recognize that the Federal Reserve does
    not weigh in on policy, and so before you say that in your
    response, I already know that. However, immigrants impact our
    economy, does impact both the unemployment and prices, as
    Representative Gonzalez detailed, in terms of some of the work
    that they do. Does the Federal Reserve account for immigrants
    in its interest rate decisions?
        Mr. Powell. Indirectly, yes. We are looking at the labor
    market, and part of what drives growth in the labor market is
    population growth, and part of what drives population growth is
    immigration. Sure, it can matter and sometimes it matters a
    lot.
        Ms. Garcia. Right, and do you look at the Consumer Price
    Index in terms of the immigrants as consumers, and if they are
    afraid to go out because they may get deported, they are buying
    less. That is what I am hearing from businesses in my district.
        Mr. Powell. I think things like that would show up in the
    aggregate data, but we do not single out any particular group
    for that.
        Ms. Garcia. Okay. Can you quickly list some of your Federal
    Reserve responsibilities, and do you have capacity to assume
    the role of being our consumer watchdog as the President now is
    focused on getting rid of the Consumer Financial Protection
    Bureau?
        Mr. Powell. Before Dodd-Frank, the Office of the
    Comptroller of the Currency (OCC), the FDIC, and the Fed all
    conducted consumer exams and enforcement for the banks that
    they regulate and supervise: for us, it is State member banks
    and for the FDIC; State non-member banks and for the OCC,
    national banks. Dodd-Frank took all banks over $10 billion in
    assets away just for purposes of consumer examinations and
    enforcement and gave them to the CFPB. Statutorily, you could
    give that back to us or not, but it is certainly possible to
    restate the old order, but that would have to be something
    that's a matter for Congress.
        Ms. Garcia. No, I realize you have also said that your team
    will be there to get the job done. You have your nose to the
    grind, so----
        Mr. Powell. We sent a bunch of people over to CFPB. We
    would need those people back. We do not have the people now who
    could take that over. They moved many people from the Fed and
    the OCC, and the FDIC moved----
        Ms. Garcia. There would have to be a reallocation of
    resources?
        Mr. Powell. Yes.
        Ms. Garcia. Okay. All right. It sounds like you are
    obviously willing to do it, and we may have to convince the
    President to make that reallocation of resources, so thank you
    for that.
        Mr. Chairman, now I would like to ask for unanimous consent
    to submit for the record three articles, one, Brookings, ``The
    Labor Market Impact on Deportations,'' and the other, ``The
    Federal Reserve Bank of Dallas: Migration to Texas Fills
    Critical Gaps in Workforce,'' and third one on, ``President
    Biden's Immigration Policies Have Helped Boost Job Growth in
    the United States''
        Chairman Hill. Objection.

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

        Ms. Garcia. I yield back with 2 seconds.
        Chairman Hill. The gentlewoman yields back. The last member
    to question the chairman today will be the gentleman from New
    York, the Vice Chairman of the Subcommittee on Capital Markets.
    Mr. Garbarino, and you are now recognized for 5 minutes.
        Mr. Garbarino. Thank you, Mr. Chairman. Chairman Powell, it
    is good to see you again. After the last Open Market Committee
    meeting, you said that the labor market conditions remain
    solid, unemployment has stabilized, and conditions in the labor
    market are balanced. This comes on the heels of the jobs report
    this past Friday that indicated the economy added 140,000 jobs
    during the month of January. Yet, when you peel back this data
    and look at recent employment data for the smallest of small
    businesses, the mom-and-pop shops to firms not with 100
    employees, like those included in the jobs report, you see that
    small businesses are actually consistently losing jobs. In
    fact, the latest Intuit QuickBooks Small Business Index showed
    that employment for U.S. small businesses with 1 to 9 employees
    decreased by 42,000 jobs compared to January. Last month in my
    home State of New York, small business employment decreased by
    0.33 percent and revenue decreased by 0.62 percent, which is a
    decrease of $350 per small business on average. Do you believe
    that we are seeing the same economic and business trends
    between companies with fewer than 10 employees and larger
    companies?
        Mr. Powell. I guess not, no. I think it is always the case
    that there are differences between sectors and size of
    companies and all that, and we are really left with looking at
    the aggregate numbers.
        Mr. Garbarino. Do you take into account the current
    macroeconomic trends of the smallest of the small businesses
    when setting policies?
        Mr. Powell. We do.
        Mr. Garbarino. You do?
        Mr. Powell. Yes. For one thing, we read the same data you
    do. The Reserve Bank Presidents come in, talk about their
    districts at length, and if you read the Beige Book, they are
    going to talk about small businesses, probably nonprofits,
    everything, so we look at everything. At the end of the day
    there is only one national unemployment rate, but there are
    many, many subtle changes in the data that we monitor, too.
        Mr. Garbarino. We all know small businesses drive the
    economy, and I know a company in my district, Brickman
    Hardware, 40 years ago, they started with less than 10
    employees. Now they have over 200, so they are able to grow,
    and they do great work, but I think just making sure monetary
    policy really does focus on helping small businesses grow is
    key to making sure the economy continues to grow.
        I would like to move on to a topic that we have discussed
    on a few different occasions, Basell III Endgame. It is well
    known that I had some serious concerns with the initial
    proposal. One of those concerns that we have not discussed is
    how the proposal would have impacted the securitization
    framework. At the time of the proposal, there was no narrative
    explanation, data, quantitative analysis, or financial modeling
    rationale for why the P-factor was doubled. While I understand
    that Mr. Barr promised we would see an economic analysis to
    support the proposed change, I believe that was never released.
    Chairman Powell, I am wondering, in your opinion, have you seen
    any market pressures or changes that would have necessitated
    such an increase in the P-factor?
        Mr. Powell. I cannot point to anything. I will say that we
    are going to look at all that, again, when we get together
    again with the other agencies and try to move this forward.
        Mr. Garbarino. Okay. The proposed doubling of the P-factor
    would significantly increase the amount of capital required for
    securitization exposures, making securitization more expensive
    for banks to participate in and raising the cost of limiting
    the availability of credit for households and businesses. I
    appreciate that you will look at that, but given how this
    proposed change may negatively impact a bank's ability to act
    as market makers in the securitization markets, when looking at
    this again, like you just said you would, can you commit to
    review this substantial increase given its outsized impact?
        Mr. Powell. Sure.
        Mr. Garbarino. I appreciate that, Chairman. I just want to
    expand on one other topic that my colleague, Representative
    Lucas, brought up earlier. Over the past decade, we have seen
    the Fed intervene with more regular frequency to maintain
    orderly functioning of the U.S. Treasury market, much more so
    than decades before. It seems like the private sector was able
    to manage this without too much Fed intervention, pre-financial
    crisis. Do you think regulation, like supplemental leverage
    ratio, which some of your colleagues have commented on, is
    causing this, and if so, what do you think the solution is
    which will reduce the need for frequent Fed intervention?
        Mr. Powell. I think part of the answer is going to be to
    reduce the calibration of the supplemental leverage ratio.
    There are a number of things that probably need to happen with
    Treasury market structure, but that is one of them.
        Mr. Garbarino. That is one of the solutions, but you think
    there are other things, and you will all work on that?
        Mr. Powell. I do, yes.
        Mr. Garbarino. Okay. I appreciate that, Chairman. Thank you
    very much for being here today, and I yield back.
        Chairman Hill. The gentleman yields back. I want to thank
    Chairman Powell for being with us today. Thank you for your
    testimony.
        Without objections, all members will have 5 legislative
    days to submit additional written questions for the witness to
    the chair. The questions will be forwarded to the witness for
    his prompt response. Chairman Powell, please respond no later
    than March 31, 2025.

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

        Chairman Hill. This hearing is adjourned.

        [Whereupon, at 1:03 p.m., the committee was adjourned.]

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