tomorrow, i believe, or maybe wednesday, chairwoman lummis will be having her first hearing on market structure in the senate, in her subcommittee. but one barrier, you asked about barriers, and one legitimate barrier is that the senate has not had a four year robust work environment. >> you can continue watching this program if you go to our website, c-span.org. live on capitol hill, federal reserve chairman jerome powell is set to testify on monetary policy before the senate banking committee. live coverage on c-span three. chair scott: this is a necessary first step towards ending the politicization of bank supervision and it certainly is a step, in my opinion, in the right direction, but it isn't enough to change a policy on paper.

examiners need to implement it in practice, and i hope they do. i will say that i was a little surprised when we were talking on monday that you didn't bring it up in that conversation, since it happened a few minutes later, but it was good to see, nonetheless. the fed plays a central role in the stability of our financial system. with that role comes responsibility. to be accountable to the american people, independent of political pressures, and transparency. over the last few years, many americans have lost confidence in the fed. since 2020 one families have endured persistent inflation, rising interest rates, a tightening squeeze on their wallets. a college student trying to cover tuition and food with a part-time job is finding that everything costs so much more it in credit costs have doubled. a senior citizen trying to downsize is watching mortgage rates skyrocket and fixed incomes fall behind. yet during this time of

hardship, the fed has spent billions on lavish renovations to d.c. offices. we are talking about rooftop terraces, custom elevators opening to vip dining rooms, white marble finish, and a private art collection. all of it costing two point 5 billion, a 32 percent increase from the original $1.9 billion price tag at the time when the fed hasn't turned a profit since 2020 two. we can all agree that updating aging infrastructure is a legitimate need. but when senior citizens can barely afford formica countertops, it sends the wrong message to spend public money on luxury upgrades that feel like they belong in versailles than a public institution. at the same time, the role of the fed as an independent a political institution is being questioned. the central bank joined a global

organization to green the financial system under the leadership of president biden, only to exit it as soon as trump took office. that's not neutrality. that's drifting. turning to supervision at the fed, which at times is unduly burdensome. the fed must right size the regulatory framework for banks to eliminate unnecessary burdens , especially community banks. i am encouraged that the fed has taken the important first steps on capital and i look forward to seeing what comes from board meetings today on revisions to supplementary leverage ratio standards. more work needs to be done to make sure capital rules don't choke off access to credit for entrepreneurs and working families. that is why i want to underscore the importance of empowering the newly confirmed vice chair of supervision, governor bowman. governor bowman has been a consistent voice for

transparency, accountability, and plain old-fashioned sanity. i expect her to lead and i expect you as chairman to afford her the same stature as her predecessors. i look forward to hearing from you and your testimony. ranking member warren, you are now recognized. sen. warren: thank you, mr. chairman. when he ran for president, donald trump repeatedly promised to lower costs on day one. his words. since trump became president, families have been more financially stressed than ever. since january, consumer sentiment has plummeted. since january, household debt and delinquencies continue to climb. since january, workers worry over layoffs have climbed. since january, businesses big and small have been paralyzed by uncertainty and have hit the brakes on investments and hiring. the cause of these problems has been the chaos caused by one person, president trump.

chaotic trade policies, massive cuts to family health care coverage to fund tax giveaways to the wealthy, and wholesale deregulation of our financial system that will unleash fraudsters and conmen on the middle class. first, trade. trump continues to play his lose lose game of red light green light on tariffs. when this administration slaps tariffs on everything from food to clothing to electronics, working families pay the price. this is bad for the middle-class class and bad for main street. tariffs like these mean higher prices on essentials for consumers and small businesses, while large corporations and the wealthy find ways to shield themselves from the impact. second, tax cuts for the wealthy. trump's one big beautiful bill that republicans are jamming through congress represents one

of the largest transfers of wealth from working people to millionaires and billionaires in american history. how are trump and republicans paying for part of those $4 trillion in tax giveaways? by kicking 16 million people off of their health care coverage, cutting food assistance for more than 2 million children, and raising monthly student loan payments for millions of borrowers just after delinquencies have skyrocketed. in addition to raising costs for lower income americans, taking money right out of their pockets , this bill will choke economic growth. this is in tax policy, it is economic warfare against the american people. even when they throw out 16 million people off the health care, the republicans still can't pay for the lavish tax giveaways to billionaires.

so, instead of just saying that you should pay a in taxes, they put the costs of the billionaire tax cuts on the national credit card. the national debt. the republicans plan to run up the national debt by another $4.2 trillion and expect our children and our grandchildren to pay for it. finally, deregulation. this administration is systematically dismantling the safeguards that policy papers put in place after the 2008 financial crash to prevent wall street from creating another crisis. less than two weeks ago, the fed board decided to lift the wells fargo asset cap. you couldn't even wait until they managed to make it one whole year without being caught in a major financial scandal. in just the past six months,

they have been caught and confessed to cheating its customers, cheating its investors, and cheating its workers. the trifecta. for the fed to give them a gold star and tell them that it's ok to expand the number of customers, investors, and employees they can sheet, that's an outrageous giveaway to one of wall street's most derelict banks. and today you will leave this hearing and go directly to a meeting where the fed is expected to vote to lower capital requirements for j.p. morgan, goldman sachs, and the other too big to fail banks at a time when the economic data are flashing red. these shortsighted changes will increase the likelihood that these megabanks will once again tank the economy and then come back here, begged congress for bailouts when their risky bets go bust. to sum up, the trump economic

agenda is chaos and pain for the middle class, even more power up -- profits for the powerful. american families will face higher costs and new risks to that -- to health care and their bank accounts. unemployment will take up, economic growth will slow. that's not just me saying this, it's exactly what the latest fad economic projections indicate. i hope that my republican colleagues will wake up to the chaos around us. it falls to congress to stop the trump trade war and kill this big, ugly bill. chair powell, it falls to you and the fed board not to pile additional risk onto the trump existing chaos by dismantling the safeguards that protect american families from another wall street meltdown. thank you, mr. chairman. chair scott: today we will hear from the chair of the federal reserve, jerome powell, on the

semiannual monetary report to congress. thank you for your testimony, you have five minutes. mr. powell: thank you. members of the committee, i appreciate the opportunity to present the feds semiannual monetary policy will the federal reserve remains squarely focused on achieving to mandate goals of maximum employment and stable prices for the benefit of the american people. despite elevated uncertainty, the economy is in a solid position. unemployment is low, the labor market is at or near maximum employment. inflation has come down a great deal and has been running about our long-term objective in we are attentive to the risks of both sides of the dual mandate. i will review the current economic situation before turning to monetary policy. incoming data suggests the economy remains solid, following growth of 2.5% last year. gdp was reported to have edged down, reflecting export swings ahead of potential tariffs.

the unusual swing has complicated gdp measurement. pdf peak grew at a solid 2.5% rate. within it, group -- growth moderated while investment in equipment and intangibles remounted from weakness in the fourth quarter. surveys of households and businesses however reported a decline in sentiment in recent months and elevated uncertainty over economic outlook reflecting trade policy concerns. it remains to be see how it could affect your investment. in the labor market, payroll job gains average a moderated $124,000 per month in the first five months of the year. the unemployment rate, at 4.2 percent, remains low and has stayed in a narrow range for the

past year with a wage growth moderating and outpacing inflation. overall, a wide set of indicators suggest conditions in the labor market are broadly in balance and consistent with maximum employment. the labor market is not a source of significant inflationary pressures. strong labor market conditions have helped to narrow long-standing disparities in employment earnings across demographic groups. inflation has eased significantly from the highs of mid-2022 but remained somewhat elevated related to the long-term goal. estimates based on the consumer price index and other data indicate total pce in prices rose 2.3% over the 12 months ending in may and that excluding the volatile food and energy categories, core pce prices rose 2.6 percent. near expectations have moved up over recent months as reflected in market and survey-based

measures. respondents to surveys of consumers, businesses, and forecasters point to tariffs as the driving factor. be the next year most measures of long-term expectations remain consistent with the 2% inflation goal. our monetary policy actions are guided by the dual mandate to promote maximum employment and stable prices for the american people. with the labor market at or near maximum employment and inflation remaining somewhat elevated, the market committee has maintained a targeted range of 4.5 to four point 25% since the beginning of the year. we have also continued to reduce our holdings of treasury and agency backed mortgagor -- mortgage securities and in april slow that pace to facilitate a smooth transition to apple reserve balances. we will continue to determine the appropriate stance of monetary policy based on the incoming data, evolving outlook, and a balance of risks.

policy changes continue to evolve and their effect on the economy remains uncertain. the effective tariffs will depend among other things on their ultimate level. expectations of that level and related economic effects of peak and have since declined. even so, tariff increases this year are likely to push up prices and weigh on economic activity. the effects could be short-lived, reflecting a one-time shift in the price level, but it is also possible that they could be more persistent. avoiding that outcome will depend on the size of the tariff effects and how long it takes for them to pass fully into prices and ultimately on keeping longer-term inflation expectations anchored. the fomc obligation is to keep longer-term inflation expectations well anchored and prevent a one-time increase from becoming an ongoing inflation problem. as we act to meet the obligation we will balance the price stability mandates, keeping in mind that without price

stability we cannot achieve long and strong labor market conditions to benefit all americans. for the time being we are well-positioned to wait to learn more about the likely course of the economy before considering adjustments to the policy rate. to conclude, we understand our actions affect communities, families, and businesses across the country. everything that we do is in service to our public mission and we will do everything we can to achieve maximum employment and price stability. thank you, i look forward to your questions. chair scott: i will be keeping us to a pretty strict five minutes, we have a lot of senators who want and deserve time with the chair of the fed. senator rounds, we will start with you. senator rounds: thank you for the courtesy. chairman powell, first of all let me chuck -- touch base, i'm curious, a couple of items on housekeeping nature. with regard to wells fargo, was

that asset cap, removing it, that was a unanimous vote by all seven fed governors, as i recall? mr. powell: yes. it was. sen. rounds: ok. thank you. i really appreciated the chairman bringing up the fact that you have identified reputational risk and have addressed it. that was a really important item for the fed to do following up on the occ and fbi see actions. as you know, past fed materials like the supervision and regulation report often embedded reputational risk within the management component of the system without clear metrics or accountability. that kind of ambiguity can chill activity and distract from your core mission, monitoring capital liquidity and operational resilience. now that the fed is moving towards a more objective and disciplined approach to supervision, how will you make

sure the change is fully implemented at the examiner level? more broadly, what other regulatory updates can we expect? mr. powell: on the superfund, following through on supervision, the vice chair for supervision brings in unusual background to this work, she is a former supervisor. she speaks that language and relates to their work. i think that if anyone can have an effective relationship with them and work with them successfully, it would be vice chair bowman, so i'm confident about that. thinking about the things that are going on in the pipeline, i would point to a few things. basel three and game. we are going to look at the ratings system. we are going to be actually voting to put out for comment something on supplemental leverage ratios this afternoon. we are looking at our merger policy. stress tests are a big thing.

there are a number of things that we are looking at that we have announced and will be moving to in time. mr. powell: -- sen. rounds: thank you. the central pillar of the postcrisis framework, since of transition away from the scarcity model in 2000 eight, where the reserves were tightly managed to handle the federal funds rate, the fed has relied on an ample reserves regimes using administered rates like interest on reserves to maintain control over short-term rates. as of february of 2025, nearly 19% of the $18 trillion in bank assets were effectively loans to the federal reserve earning interest. given this structural shift, how feasible would it be for the fed to return to a scarcity based framework, where reserves earned little or no interest? and if interest was eliminated,

what would be the impact that that would have on the ability of the fed to unwind their balance sheet and manage policy rates? mr. powell: we are in an ample reserve framework now. that is a good thing, a result of the global financial crisis and the desire to have lots and lots of liquidity and large liquidity requirements for our largest banks in particular. that's a good thing that enables banks to keep lending through stress. if you wanted to go back to a scarce, it would be long, bumpy, and volatile. i would not recommend we undertake that. it wouldn't save any money. there is an illusion that it would save money. that's not the case. and it would not make credit more available. in effect, having a lot of liquidity in the system, which is what goes with ample reserves , make sure banks can continue to lend. we think it works. i think that unwinding it is a policy choice that could be

executed, but it would take years and be challenging and volatile. sen. rounds: thank you. i've got about 35 seconds left, but i wanted it touch on one item that i think it's important. you didn't mention it in your opening statement, but would you talk a bit about what is happening with your building? when you are having an overrun and billions in costs, i think it's appropriate for you to explain what's going on. would you take a few minutes and explain what's going on with the value of the building and why the costs seem to be sort of so exorbitant. mr. powell: i would be glad to if we can have that time. thank you for the letter, we will provide a more detailed response. just generally, i would say that we do take seriously our responsibility as stewards of public money. the other thing i would start with is -- no one in office wants to do a major renovation

of a historic building during their term, you would much prefer to leave that to your successors. this is a great example why. let alone two historic buildings and needed a lot of work. but we decided to take it on because, honestly, when i was the administrative governor before i was the chair, i came to understand how badly the building had needed a renovation. never had one, wasn't safe, wasn't waterproof, that kind of thing. so, we took it on. i would also say that the media reports that you accurately quoted are misleading and inaccurate in many respects. i would point out there is no vip dining room. there's no new marble. we took down the new marble -- took on the old marble and we putting it back up. there are no special elevators. they are just old elevators that have been there. no new water features. there are no beehives and there is no roof terrace garden.

all of that inflammatory stuff that the media carried are either not in the current plan or are just inaccurate. notwithstanding that, the costs overruns are what they are. chair scott: we are well over the five minute mark. i'm happy to give you time to talk about that. i'm happy that there are no beehives, let's figure out what they are. anyways. senator warren? sen. warren: thank you. chair powell, the fed released an updated economic projection last week. i appreciate your summary. i want to look at the trendlines . the fet outlook on inflation, the labor market, and gdp growth have all gotten worse. compared to your economic projections from december, the latest numbers show the fed is projecting higher inflation, from 2.5% in december to know 3.1%. higher unemployment, 4.3% to 4.5%. lower economic growth, 2.1%,

projected six months ago, to 1.4% you are now projecting. chair powell, what has changed in the last six months that has caused the fed to forecast substantially higher inflation, somewhat higher unemployment, and lower economic growth than in december? mr. powell: some of it is just taking signal from data reports we have seen. some of it is people working in the possible effects in the short term tariffs. we have no view on the longer-term wisdom of trade policy, that's not our job. i should add that our forecasts are generally very similar to outside forecasts. sen. warren: i understand, i'm just using you as the gold standard. i know that it is consistent. you mentioned tariffs being one of the things that has changed in the last six months. donald trump became president and the economy headed down.

not only does the fed data now show slower growth and higher prices this year, it sees slower growth and higher prices over the next two years as well. the fed sees no longer-term boost to the economy or drop in inflation. in other words, no upside to the chaotic tara for four other economic policies. let's talk for a minute about what is under the hood of the fed economic forecast. chair powell, i know a lot of different factors influence the trajectory of interest rates. it is one of those factors how quickly the federal debt grows relative to the growth in the economy? mr. powell: not directly, no. we don't look at that as a factor that helps us to set monetary policy. mr. powell: -- sen. warren: so, you are not watching that ratio?

i think i have quotes from you saying last year, "we don't need to pay down the debt, we don't need to balance the budget, we just need the economy to grow faster than the debt." are you saying something different now? mr. powell: no, when asked and pressed i stay the same thing as my predecessors, we are on an unsustainable path. i will say this, we do not look at federal financial policy and deficits as something that affects our month-to-month monetary policy decisions. sen. warren: i'm trying to get the overall projection of what happens in the economy. so, for example, i think you have made a point that if we spend on things like childcare, which can boost labor participation in gdp, that may be a time when you offset the debt that you incur to do that. but if there are not investments like that and we are simply running up the debt, what is the

impact of increasing the national debt? so, i understand that you don't comment on fiscal policy. but it does affect your job, keeping inflation under control and maximizing employment. if certain policies would materially drive up the national debt and increase the debt to gdp ratio over time, could that make it more likely that we would see inflation, all else being equal? mr. powell: theoretically, sure, fiscal policy can add to inflation, but that is not something we comment on. sen. warren: i understand it you don't comment on it, but i appreciate your acknowledgment of the math. the joint committee on taxation projects that the one big beautiful bill would increase federal deficits by $4.2 trillion. according to analysis by the

congressional budget office and the yell budget laboratory, -- gail budget laboratory, it increases debt to gdp by 24%, slows economic growth, increases inflation, reduces real wages. two of the signature trump policies, tariffs and his tax bill, will increase costs for american families. what america borrows money, it should be for investments americans need like health care, housing, things that would boost economic growth and lower costs america should want take away health care for the millions that need it and then borrow trillions just so that a handful of billionaires in giant corporations can get richer. thank you, mr. chair. chair scott: yes, ma'am. chair, banks are facing a record number of regulations. small community banks are especially burdened by

compliance costs capital requirements should be appropriate calibrator's capital on the sidelines americans was small businesses. i was pleased to cease -- to see the fed was performing the supplementary ratio. the slr is supposed to act as a backstop. too often, it acts as a binding requirement. would you agree that adjusting it would free up capital for banks to invest more in capital markets and other at-risk assets beneficial to families and businesses across the country? mr. powell: i would agree, yes. chair scott: the vice chair recently acknowledged that regulators tend to review individual elements of the framework within isolation without considering whether the proposed changes are sensible

and where all components work together effectively. do you agree with that assessment? how are you looking at that capital mr. powell: we are looking at the two big pieces now, the leverage ratio. i am confident we will move on both of those in the relatively near future. they fit together as we discussed. the leverage ratio was always supposed to be a backstop rather than a binding -- we want risk based capital to be binding. that's how they work together. chair scott: as you look at the -- i hope a redrugs of -- reintroduction of basil 3, obviously over the last several years we talked about this on monday. the requirement was about right although that capital requirement has been going up every year. as you look at that coming back

and being reintroduced, what do you forecast? mr. powell: we very much look forward to working with our colleagues at the fdic on the end game and i would agree we are going to take a fresh start at that. the former -- the last proposal was actually well above minimums. it was the ways in which it was gold plated rather than the requirements which were very significantly exceeded. chair scott: giving us an opportunity to go back to the spending at the fed for the construction and you said that the items that were listed are not happening. i will say that the national capital planning commission website, anyone can take a look at it for themselves, not just listening to "the new york post," not just "wall street

journal" but page 129 of the final plans reflect a rooftop garden terrace. page 127 and 129 were where we found the ornate plans, new elevators that dropped board members at the v.i.p. suite, white marble pages 40, 41, 61. i would welcome your staff coming in to walk my staff through what is happening there as opposed to what we have only read in "the new york post" and "the wall street journal" but also at the national capital planning commission's website. we would welcome that opportunity to have a -- mr. powell: can i state some of those are flatly misleading. the idea of elevators, it's the same one that's been there since the building was built. that's a mischaracterization. some of those are no longer in the plans. that's earlier. the plans have continued to

evolve. chair scott: one of the questions i asked my staff in preparation, assuming your response would be to refute some the things that were happening was to ask the question, since the articles came out in april, have the plans changed since april as a result of the media attention to it or was that just never in the plan? i would just say that having an understanding, clear understanding of what is going to be and when it changed would be helpful for us. i will note that having confidence in what we hear is incredibly important, and i would give you the opportunity to bring your team in and/or accepted your team over so that we can have that conversation, that would be helpful. mr. powell: look forward 0 doing that. if you will allow me to say one more sentence, none of those were the cost drivers. the real thing is what were the cost drivers that cause the spending to increase? those are not the things that did that. look forward to the conversation. chair scott: i don't want to eat

into bernie morino's time because he is cranky when i do. i would suggest that when i hear that things are completely and wholly inaccurate and then i hear ha they weren't quite the way they were, those are two very different framings of the conversation. i only read page 129 and page 127, page 65, i could be wrong without question, but i don't want to be misled. that's different. next would be senator reed. senator reed: thank you, chairman. thaw, chairman powell. many times you have been asked about the status of fed independence from the president, his constant harangues about interest rate policy, etc but over the past year, we have also seen judicial pressure on the federal reserve's

independence. the chevron case, which dramatically eliminated the deference to agency decisionmaking, also extended the limitation -- statute of limitations on the procedure act and there is a strong sense they're about to overturn humphries case which will eliminate the independence of practically all agencies. what is your judgment on the cumulative effect of these judicial actions with respect to the federal reserve's ability to do its job? mr. powell: the net effect of all of those will be to make courts substantially less deferential to agency decisions, and so that's just the new world we live in. we will continue to do our jobs and obviously we will respect the law as it is. that is the way the law has been evolving though. senator reed: but there is increasing pressure on the

independence from the white house and do you believe that if humphries case is decided in a way that gives the white house more additional authority, that will be invoked against the federal reserve? mr. powell: i would rather not speculate if i may, senator. senator reed: that's quite all right. the u.s. dollar. i remember when the phrase was sound as a dollar. that phrase is getting less used these days. in fact, bloomberg reported last week that foreign companies are demanding to be paid not in u.s. dollars but in euros or chinese currency. first, what benefits does a strong dollar have for us and how will we suffer if the dollar is no longer considered to be the currency of world record?

mr. powell: so there are enormous benefits to having the dollar be the most important reserve currency in the world. it remains such and for very long standing and continuing reasons, which is our rule of law, our democratic institutions, our commitment to price stability, our open capital markets. all of those things remain intact and i think being the reserve currency doesn't last forever, but it's a durable ecosystem and i expect we have -- that we would be the world's reserve currency for a long time to come. senator reed: but you are seeing indications that confidence in our currency is eroding in some places. is that -- mr. powell: i wouldn't say that. i think it's a fundamental foundation, the role of the dollar, markets move around. markets are digesting

information that's sometimes challenging to digest. i wouldn't -- i would be reluctant to come to any conclusions about things that fundamental this quickry. -- this quickly. senator reed: i would suggest you would keep your eye on it going forward. income inequality and lower rates are two of our biggest challenges and you have also indicated that this is probably beyond the fed in terms of dealing with this. these are more legislative issues. and i would concur, so i was disheartened to read a report from the congressional budget office which is an independent agency that the recently house-passed reconciliation bill will take approximately $1600 per year from the lowest income americans and give approximately $12,000 to the wealthiest

americans. that seems to be directly contradictory to a society who is committed to raising the income and opportunities and increasing upward mobility. do you think that's a fair estimate mr. powell: i don't know and i would be very reluctant to comment on the reconciliation bill even indirectly. senator reed: your wisdom and sagacity has preserved you and i hope it continues to do so. i must commend you finally by two or three years ago, everyone around here was predicting or guessing how deep the recession would be. and because of your leadership at the fed and other policies, we have avoided a decree cessio. in fact until recently we have been growing faster than every other economy and you deserve credit for that. thank you.

chair scott: to reiterate my opening comments, chair powell has a hard out today. therefore i am going to do my best to keep us at five minutes each. senator kennedy. senator kennedy: thank you, mr. chairman. thank you, mr. chairman. mr. chairman, did i understand you to say that the reconciliation bill is the most extraordinary legislation you have ever seen? did i hear that correctly? mr. powell: may have been some lost in translation there. senator kennedy: tell me what the bond market is telling you. mr. powell: bond market is fine now. functioning well. it's reacting to economic news. there is adequate liquidity. rates have come down significantly from where they were a couple months ago. i think inflation expectations have come down a bit from april and in general the bond market

is functioning well. senator kennedy: explain to me why we have seen in the last few months weakness in the dollar. mr. powell: that's a great question. of course, the treasury department has the job of -- is responsible for the role of the dollar. so i just -- i don't know. i think i would go back to the thought that markets have been digesting an unusally challenging set of circumstances, and you know, have reacted the way they've reacted. the market has moved back up in the last couple of weeks a bit. there are plenty of people still writing that the drar is -- dollar is overvalued. we don't have a view but i wouldn't really have an opinion on exactly why it is where it is. senator kennedy: clearly there is a lot of joe yoa -- geopolitical risk right now.

which would lead people to believe people would be flocking to the dollar. mr. powell: you have seen some of that in the last few days, but again i don't really have an official view i would like to share on that. i think there are possible explanations, multiple possible explanations, one of which is some people still feel the dollar is highly valued, but we will see. senator kennedy: i want to talk for a few minutes about tariffs and inflation. what does history tell us about tariffs and its impact on inflation or deflation? mr. powell: the thing is, we have been through a long period in which tariffs were going down since world war ii really it's been a process of lowering tariffs globally. there isn't a lot of modern

learning on that. i think people look at the incidence of tariffs during the president's first term but those were like 1/6 the size of what people are estimating now and they do find some effects on inflation. but remember, in 2019 when those tariffs were put into place, the economy was slowing. we cut rates three times. inflation was running at 1.5%. it was a very different time. this is different. one of the reasons why it's so challenging is there isn't a modern precedent and i think we have to be humble about our estimates and we are very open to the possibility that transmission through into inflation will be less than we think or maybe more than we think, which is why we are in a position of wanting to take our time and make a smart decision as we see how this unfolds. senator kennedy: obviously size of the tariffs makes a difference, does it not? mr. powell: it does. senator kennedy: we don't know yet the size of the tariffs. mr. powell: we don't. we don't have a few on any of

the merits. our job is inflation as you know and maximum employment. senator kennedy: will it also matter -- assume that there is upward price pressure. would it matter how much businesses decide to pass on versus just eat? does that make sense? mr. powell: yes, that is what matters. the question is, who is going to pay for the tariffs? originally it's the importer, but it gets passed along through the distribution chain to some extent to the consumer. how much does show up in inflation and honestly it's very hard to predight that -- predict that in advance. we are watching to see what shows up in measured inflation. senator kennedy: if the president's trade negotiators pursue reciprocity, which i define as both sides reducing in a quid pro quo reducing trade

barriers as much as possible, ideally in a perfect world, we would end up with two sides with zero tariffs and zero trade barriers. would that be inflationary? mr. powell: no, not at all. senator kennedy: that would cause the economy to roar, wouldn't it? mr. powell: i think it would be -- senator kennedy: thank you, mr. chairman. i appreciate your endorsement of the reconciliation bill. chair scott: senator warner. senator warner: i didn't interpret his comments that way. i would also say that let me echo what senator reed said, thank you for your independence and doing the job. i think tariffs are a tax and they're going to hit, i think, starting next quarter. again, i think the reciprocity argument would be a nice goal. i hope we can then explain to

the australians, who are a strong ally of us, who we have a free trade agreement so dwoant have tariffs, who we have a trade surplus with, who i am hoping we will be able to build joint submarines why they are all those things still got whacked with a 10% tariffs. it doesn't seem rational to me. but let me get to -- i have been very concerned about some of the trump administration's i think mismanagement of the federal work force. i can tell you some of the doge approaches in national security and intel world, cuts are having dramatic effects. but today i want to mention something that frankly doesn't get a lot of attention, a very small entity, the bureau of labor statistics. u.s. economic data, which has always been independent, it's been used as the gold standard across the globe and frankly the b.l.s. data often is the

guidepost that investors use regularly. b.l.s. helps us get information about cost of living increases, policymaking for you guys, it's used to adjust payments on the $2 trillion in treasury bonds. the truth is that b.l.s. data shouldn't be degraded on any basis. yet the administration is so dramatically cut back the staffing at b.l.s. that the b.l.s. has had to significantly cut back on the collection of critical price and inflation data. normally b.l.s. staff when you don't have all the data checked about estimate -- will estimatee c.p.i. now they've had to estimate close to 30%. that means faultier data.

how can we grapple with this and what does the undermining and staffing shortages mean in terms of your ability at the fed to do your job? mr. powell: we can still do our job. i would not want anyone to think that the data have deteriorated to a point where it's difficult for us to understand the economy as well as we can understand it, which is not perfectly. but the direction of travel is concerning. the u.s. has been a leader globally in investing in how to measure the output of a modern economy which is something that we have led the world in for a long time, and it really helps not just policymakers but also businesses if we have accurate information about what is going on in the economy. you are making decisions based on the economy, not just the fed, not just you but private co well. i think it's a -- it's something we should continue to invest in and i don't like to see any

deterioration in the public data which has been the gold standard, b.l.s. and others have really been the bedrock that people really do look to as solid data that tells us what is happening in the economy. senator warner: these people who do this analysis, they are experts. they are not fungible, fire one, hire another. there is an expertise here that has been being undermined. again you look at the fact, if you have to do your estimates from about 10% estimate to a 30% estimate, that is not good for the markets. let me move to one other topic in my last minute. stress tests, really important. those of us who are involved in dodd-frank really important as we try to think about the most significant banks. but there has been concern, i have shared this concern, that the stress test process was so opaque that while the regulators

may not have understood, sometimes the banks being regulated didn't understand fully the criteria. i know you are taking a look at how we can bring more transparency to the process. when do you think we will see this? mr. powell: later this year, we have said we will fully disclose the models and that's the main thing. if you are going to set -- it's like the i.r.s. if you are going to charge people taxes, you have to have the transparency about what that is. it's going to be the same as that. we are going to show how the calculations are made, and we are working on all of that right now. we are also going to -- we have a proposal out to sort of smooth the results of this, of the test from year to year. so this is something we are working on hard and expect to have important progress later this year when we publish the models. senator warner: thank you, mr. chairman. senator ricketts: as we are talking about tariffs, the senator talked about australia.

ly point out that australia has -- we bought about $28 billion worth of australian beef and they've bought exactly zero of ours. so there is an opportunity to be able to improve that trade relationship. that's one of the things i hope will come out of the trade negotiations. senator warn clern we have a trade surplus. >> that is chrebet. we would like to sell more beef to them. that's an opportunity. following up on senator kennedys' line of questioning, if a tariff was put in place, prices went up, wouldn't that be a one time event? after that, it would be baked in. it's a one time thing. mr. powell: might well be, as i indicated, it might be a one time event. but that isn't a law of nature. we would want to make sure of that. we were more sure of that back in 2018 because we had had 40 years of low inflation. coming off of a global inflation

episode where we haven't fully returned to 2%, it's something -- it's a question we will approach carefully. >> if the tariff is only put in once, how can that be inflationary in the second year? mr. powell: it could be a process of many years. couple of things, one is if it comes in quickly and it's over and done, then yes, very likely it's a one time thing like an oil shock where the price comes back down. it goes through the system. it doesn't raise inflation. it raises prices once. but if you have a process that goes on multiple shocks for years for example, or if the shocks are very large, that kind of thing and again we have to be conscious of the current situation which is people haven't seen 2% flat inflation for some years now. it's different from what it was in 2018 when we had tariffs earlier. when we cut rates. i am not saying we are not reacting at all. it's a risk we feel like as the people who are supposed to keep stable prices for the benefit of

the american people we need to manage that risk too. that's all we are doing. we are not deciding what to do yet. senator ricketts: senator warner's comment that tariffs are a tax, would that imply taxes could be inflationary? mr. powell: no. senator ricketts: what is the difference between a tariff and a tax or do you disagree with senator warner? mr. powell: i wouldn't disagree but that's not the language i would use. as i say, one time could be the base case but in a situation like this where the process could go on for a long time where the effects could be large or small, it's just something you want to approach carefully in a world where inflation is not back to 2%. that's our job. if we make a mistake here, people will pay a benefit, will pay the costs for a long timing. we are just approaching the question carefully. that's all we are doing. a majority of my committee has said they do expect to cut rates between now and the end of the year. so it's not that we are taking a strong view that it will be

inflation and not a one time cost increase. it's just that we are going to take a careful approach to that very critical question. senator ricketts: let me switch gears on you a little bit. communist china is our single greatest threat to national security and financial independence. now more than ever, we must assure against china's malign influence. the homeland security released a report identifying efforts by communist china operatives to infiltrate the federal reserve system. tactics used to target pedestrian fed -- fed fd officials. in late january a senior advisor was arrested on charges that he conspired to steal federal reserve trade secrets to benefits communist china's interests. this "wall street journal" article from may details the potential ramification of his actions, the kind of secrets he shared could allow china to manipulate the u.s. marring and

gain advance knowledge of changes to the funds rate. it could provide communist china with an advantage when selling or buying u.s. bonds. chairman, has the fed reserve made any changes to strengthen its internal counter intelligence and security protocols since the development of these incidents? mr. powell: so that's an incident and i would say we take it very seriously. we have quite elaborate and serious and strict provisions around staff access to information, serious protections for confidential information. we have background checks. we have annual training. we have many of those things. i don't know that we have made any fundamental changes, but we are certainly sorry, very sorry to see something like this having taken place, and we are certainly looking at the protections we have in place. another question and we will submit it as a q.f.r. the chairman says you have a hard out so i will yield back my

time. thank you, mr. chairman. chair scott: thank you. senator van hollen. senator van hollen: thank you, mr. chairman and chairman powell, good to see you. i want to start by acknowledging the continued uptake of the fed now, real payment system. i know i have raised the development of rollout with that system with you in many hearings over many years. we are now about two years after launch. i want to continue to work with you and your colleagues to encourage expanding -- expanded adoption of the capacity, capability and capacity so that customers have real-time access to their money. i would ask that we continue to work on that together. do you agree? mr. powell: i do. senator van hollen: i thought you might. thank you. so i want to ask you about the student loan situation in the country, and you've talked about this in the past. you've talked about how it can be a drag on the economy, especially when it gets to be very high in terms of balances

that cannot be paid. according to the new york fed student loan balances grew by 16 billion to reach $1.63 trillion in the first quarter of this year. data shows an uptick in the student loan delinquency rate overall, the age of delinquent borrowers and number of newly delinquent borrowers. department of education meanwhile restarted debt collection activities last month and starting in july, nearly two million bow owe -- borrowers could see their wages being garnished. meanwhile, here in the senate, president trump and republican senators are working to pass this piece of legislation that would limit affordable loan repayment options and make it harder for borrowers to responsibly repay their debt and get back on a path toward

financial health. so mr. chairman, you said before in your testimonies that student loan debt can negatively impact borrower's ability to fully participate in our economy and that it can weigh down on the economy overall. is that still your view? mr. powell: yes, it is. mr. van hollen: and could you just share your assessment just from a factual perspective about how this problem seems to be growing at this point in time and what would happen if we allow all of these borrowers to default? mr. powell: the point i was making, i try hard not to comment on things that aren't fed policy. but i broke that rule in this case many years ago, so i will say what i said then, which is you can make all kinds of investments and you can discharge if you can't pay back the loan, you can discharge it

in bankruptcy. the one exception we make is student loans. i ask whether that is wise national policy. people borrow to invest in their education, that we do not forgive. it seems like something for congress to consider. that's all. it's none of the fed's business really ultimately. it's not a big mac row economic thing but i've said it before. i say it again. senator van hollen: i appreciate you breaking your rule before and now. mr. powell: won't do it again. senator van hollen: i could not agree with you more in the anomaly of the ability to discharge a debt in bankruptcy. the idea that a student loan sort of is the one category of debt that we don't allow to be discharged is confounding. i think unfortunately so far it's been a sign of the power of some of the companies involved in that area. i just came from another committee where i am the ranking member, so i apologize if you already talked about the tariff

situation. but i know this was obviously a factor that you all had to consider in making decisions about changes in the interest rates. obviously there is a lot of uncertainty in the economy. i hear it every day from marylanders. we have the port of baltimore, lots of small businesses that rely on tariffs. you are an economist. you know that increasing tariffs is like increasing taxes across the board. but can you just speak to the uncertainty component of all of this and how that is weighing on people's decisions? mr. powell: surveys show very widely that people feel uncertain about the economy and they do point to tariffs in that answer. i will say that that actually peaked back in april and has come down a little bit. if you talk to businesses, i talk to an unusally large number of businesspeople in the last couple of months and the feeling is a little better now than it was. they're getting on with it and

feeling -- i would say surveys are still showing depressed sentiment but it's moved up from where it was. senator van hollen: i would say, mr. chairman, that may be the case at this moment but we all know that we could wake up any morning and see another tweet and that could change dramatically. so i appreciate your efforts to try to do what you can to meet your objectives at the fed. thank you. chair scott: senator lummis. senator lummis: thank you, mr. chairman. thanks to chairman powell for being here today. as you know, what always vexes me and has for the last 4 1/2 years about the federal reserve is the bank supervision function as opposed to the monetary policy function. so i am going to focus on bank supervision. first of all, i do want to thank you and vice chair bowman for ensuring reputation risk has been removed from the bank

supervision process. it was very abtemporarily use -- arbitrarily used by those who were supervising on january 27, 2023. i would call it the high watermark for operation choke point 2.0. the federal reserve board in coordination with president biden's white house executedded a coordinated attack to isolate the digital asset industry from the banking system. while the fed has taken steps to adopt a more baldz approach -- balanced approach to digital assets which i appreciate, the legacy of january 27, 2023, remains with us today. way like you to look at this quote. it says issuing tokens on open public and/or decentralized networks or similar systems is

highly likely to be inconsistent with safe and sound banking practices. my first question is do you recognize this quote? mr. powell: yes. not super clearly but yes, i do. senator lummis: because it's from the federal reserve board's policy statement on section 913 of the federal reserve act which was formally adopted by the board on january 27, 2023. so now, chairman powell, i want to show you another statement and i am sorry if you can't see it clearly. i will read it to you. it's from the genius act which just passed the senate by a vote of 68-30 last week. it takes the opposite position to the board's policy statement on issuing stable coins on an open public distributed ledger. so my question is, what has

changed about the risk of stable coins since the board adopted its policy in 23023 -- 2023 and now that the congress has weigh, the senate has weighed in and sent this act to the house, does the board plan to withdraw the policy statement on section 913? mr. powell: so i think what has changed is if you go back, that's a couple years ago, that was the period of high profile failures and fraud and that kind of thing. what has happened is i think the industry is maturing, our understanding of it is improving, and in a sense it's becoming much more mainstream. so all of us are revisiting the things that were done during that era and i think the current view is that it's appropriate

for -- it's always been appropriate for banks to choose their customers and be able to undertake activities as long as they're safe and sound. i have to get back to you on 9/13. it's a broader thing that has nothing to do with crypto, but that was a piece of it. we are looking at and withdrawing many of our pieces of crypto-guidance from that era. senator lummis: i appreciate that. i hope that by withdrawing the guidance that you are also instructing and admonishing your bank supervisors to -- when there are efforts to regulate banks that provide too much discretion to bank regulators to pick winners and losers from among the customer lists, the loan portfolios of banks.

it's antithetical to the american system of banking, and i do think that there was that kind of discretion unleashed on banks and it had a negative impact, a real chilling impact on banks as they selected and banked certain industries and then debanked other industries and other people during the last four years. so taking the guidance documents and policy statements out is important, but also guiding the people that there are changes now and that they can no longer use their own subjective biases

towards d.e.i. and other things in supervising the banks is also a critical component of bank regulation. mr. powell: i agree completely and as you know, vice chair bowman is a former bank supervisor, so she's very well placed to make that happen. senator lummis: i realize that she as vice chair is directly involved in bank supervision. i hope that you will use your road to punctuate the importance of those changes within the bank supervision function at the fed. chair scott: we have to move on. i am assuming your answer is yes. senator smith. senator smith: thank you, mr. chair. good morning, chair powell. welcome to the committee. so chair powell, a few months

ago, you issued a warning about the trajectory of our national debt speaking at "new york times" event, you said the u.s. federal budget is on an unsustainable path. the debt is not only as an unsustainable level but the path sun sustainable. we know we have to change that. would you still agree that that is true? mr. powell: yes, that's the one thing i would always say and that my predecessors say and that's the only thing we say about fiscal policy. senator smith: exactly. i would agree at a time when americans are struggling to figure out how to afford their lives and have low confidence in the economy to add to the deficit now is the big beautiful bill does strikes me as unsustainable. i am not asking you to moderate between republican and democratic policy differences on the big, beautiful bill, but would you agree that the big, beautiful bill adds to the deficit based on the data that you have seen? mr. powell: i am not going to comment on the reconciliation. senator smith: i will point out to my colleagues that the c.b.o.

says it adds to the deficit. the joint committee on taxation says that it adds to the deficit. the yale budget lab says that it adds to the deficit. the committee for responsible federal budget says that it adds to the deficit. the penn wharton budget model says that it adds to the deficit. even some of my republican colleagues, senator johnson, senator paul, say that it adds to the budget and as senator johnson says, it's wrong and immoral. so i appreciate that you won't comment on any of this, but let me ask you an economic question. can you talk a bit about what impact a rising deficit has on our goal of lowering costs for americans, especially in the trump tariff environment that we are in right now? mr. powell: i am sorry. senator smith: what impact does a rising deficit have on our goal of lowering costs on americans particularly when we are in this trump tariff environment, unpredictability of that? mr. powell: i think it's likely

that when markets are pricing longer term treasury securities, there is something baked into that in the markets thinking about interest rates. what should be the appropriate interest rate? but it's hard to unpack that with any precision. senator smith: dhees are factors that lots of interplay among one another. mr. powell: yes. senator smith: chair powell corks you comment briefly about sort of the potential risks of stagflation where we have slower growth and higher inflation? i know this is something the fed guards against and could you comment a bit on the risks of that and what it means for regular americans trying to afford their lives. mr. powell: we not seeing that now, and it isn't really the base case that we are going to see but that's a difficult thing because stagnant economy wants more stimulus but an economy with more inflation wants less stimulus. it puts the central bank in a hard place. we have warned of it, but it's

honestly not something we expect to face, but it's something we are monitoring is what is happening. senator smith: thank you. i want to follow up on a question i asked you the last time you were before the committee. i asked about the impact of severe weather events otherwise known as climate change on home insurance costs and you testified that i think you said if you fast-forward over 10 or 15 years, there will be regions of the country where you can't get a mortgage because of the -- because of the impact of the challenges of insurance companies not being able to provide that. since february when i asked you that question, home insurance rates have continued to climb. a recent analysis about climate risk from first street found that financial burdens from severe weather are driving up household costs and triggering increased mortgage defaults. it said it's at 8% now but they project by 23035 -- 2035, 30% of

foreclosure losses would be related to climate impacts which is stunning. i realize this is a complicated issue because insurance is regulated primarily at the state level. though there are exceptions, flood insurance and terrorism insurance are exceptions. but i wonder if you would comment on this, i am thaig lot about what im-- thinking a lot about what impact this has on housing costs, which is a big component of inflation and a place where housing costs are rising higher than the general inflation rate right now. mr. powell: many things are driving up housing costs. it's of course mortgage rates, but it's also zoning costs and things like this for properties that are near the water particularly for example we spend some time in florida. property insurance just gets more and more expensive to the point where it almost makes sense to self-insure. that's because of just big

losses, companies are putting that in their models, and they're charging what they need to charge to make a return. if they can't get that, they'll get out of that state. so that seems to be what is happening. senator smith: i am out of time. thank you. chair scott: you are always polite. thank you. senator smith: that's why they call me the velvet hammer, sir. chair scott: i didn't say you weren't harsh as well. you are just nice when you do it. like right now. senator morino, remind me not to give tina a compliment. >> chairman powell, want to make certain i understand this correctly. control inflation and maximize employment. that's it. two things. correct? mr. powell: yes. senator moreno: maximize employment, do you care if every american makes minimum wage or makes a livable wage? is that something that factors into your thought process?

we have full employment but most americans are in substandard wages, does that change your calculus? mr. powell: does it change my what? senator moreno: full employment is full employment. every american has a job. but they're making minimum wage versus having a family sustaining wage. does that matter to the federal reserve? mr. powell: it would matter to the country a lot. >> does it matter to the federal reserve? mr. powell: we don't really have the actuals to -- tools to affect that. >> that's different than us. the people of this country elect us to make certain that their wages are higher than inflation. by the way, let the record show that real wages are up this year. so we have done that, not the federal reserve. second piece of it is let's talk about inflation first. mr. powell: we have helped control inflation which is part of that. >> we will jump into the inflation conversation. there are different kinds of inflation. there's different causes. there's not witnesses to inflation. there's key actors to inflation. would you agree?

mr. powell: sure. senator moreno: did you comment during covid lockdowns that that was a bad idea meaning your shutting down the economy? it's not a button. you can hear me. it's on and off. covid wasn't that. we just shut down the economy. any comments on that? mr. powell: of course not. >> ok. vaccine mandates, something my democrat colleagues loved. if you dote get the vaccine are you a terrible human being. you can't go to work. in fact, joe biden was overruled by the supreme court because he said that if you work in a company with more than 100 employees and you don't get vaccinated the company has the ability to fire you, fire you unless you prove that you are negative on covid. that is a supply chain shock, wouldn't you agree? if i am running an asimably line and i have to put my people six feet apart and now i have people not coming to work, that's a supply chain shock. wouldn't you agree? mr. powell: it's a medical thing

that you -- >> it's a supply chain thing. i am asking you to make a fed decision. mr. powell: way outside anything we would comment on. >> but it affects inflation. mr. powell: it didn't. >> are you saying supply chain shocks don't affect inflation? mr. powell: they do but they didn't. >> that's clearly one. if you ban the export of liquid natural gas, which is going to cause the commodity price to go up, would that supply shock not also cause inflation? mr. powell: potentially could. senator moreno: the ranking member loves to talk about approximatelyaire -- billionaire corporations that will get away with paying taxes. who pays corporate taxes? is it like some obscure wizard of oz character behind the curtain that is a corporate entity that pays taxes? mr. powell: ultimately it's shareholders and customers. >> i will read you a line. it's not possible to know in advance precisely how the costs will be shared for taxes.

i added that. but it is highly likely that consumers will pay a meaningful share. meaning if the ranking member has her way, let's tax corporations at 100%. why not? it would be fantastic. nobody would want to start a company. but that aside, that cost would be added to consumer products, correct? mr. powell: a tax or a tariff, what are you talking about? >> the income tax for american corporations goes up. they will share that tax burden with their consumers, true or false? mr. powell: ultimately. >> so taxes do raise inflation. but you don't comment on that. but you don't -- mr. powell: not freu true. >> the chairman will beat me up in 56 seconds of the you sent me a nice letter which says the federal reserve plays no role in commenting on trade policy. so you don't comment on supply shocks. you don't comment on tax policy which clearly affects inflation.

you don't comment on -- you just said now that we should forgive student debt. why is a person that goes to harvard, a gender studies major, pays harvard an obscene amount of money because professors are grossly overpaid there, is that person better than a working class ohioan that is a plurm plumber but can't afford a car because interest rates and car prices have gone up? why don't we forgive that perp's car loan instead of forgiven their student loan? you don't comment on that of the you comment on tariffs. mr. powell: i don't comment on frifs at all -- tariffs at all. >> you have only commented on tariffs. mr. powell: i haven't commented on the wisdom of tariffs. >> i will show you a chart. this is car prices. this is car prices since this year. car prices are down. car prices are down. inflation in america is down. we got elected by millions of voters. you got elected by one person, he doesn't want you to be in

that job. you are costing this government $400 billion a year by refusing to lower interest rates. nobody in this chamber has that kind of power to have a $400 billion impact on this economy. on our deficit. i think you should consider whether you are really looking at this from a fiscal lens or political lens because you don't like tariffs. chair scott: senator warnock is next. senator warnock: thank you, chair scott. thank you, chair powell. goods to see you. the united states national debt currently exceeds $36 trillion. last year we paid nearly $1 trillion in interest on the debt alone, more than the federal government spent on educating and feeding our children. chair powell, how does the fed consider rising national debt levels during discussions about adjusting interest rates? mr. powell: we really don't. we take fiscal policy as

completely -- we look at the data coming in but we don't, never going to take into account budget deficits and things like that. senator warnock: here is my concern. maybe congress should be thinking about it. the world is losing faith in america's ability to repay our debt. we have seen a sell-off in the bond market, the united states dollar has lost more than 10% of its value against the euro and pound and is down against nearly every single major currency in the world back in may, moody's downgraded the u.s. credit rating because of sinking confidence and lawmakers' willingness to address this issue. historically high debt pushes up interest rates slowing economic growth and setting up a dangerous debt cycle where both interest rates and debt continue to rise. chair powell, how does the size and the trajectory of the national debt affect the federal

reserve's ability to manage inflation in good economic times and spur investment and hiring in slower economic times? mr. powell: i am happy to say that today those things do not affect our ability to do our job. the concern really is that if we don't do something, there will come a time at which it will be a problem, not for us but for the country. at this time, it does not interfere in any way with our ability to do our job. senator warnock: that is a realistic concern in future because of increasing debt. it's something i am concerned about and maybe because it's in the future, maybe that's why folks who have power aren't as concerned about it as perhaps the congress should be. i am concerned about it as a father, of a 6-year-old and an 8-year-old. i am concerned that my republican colleagues are planning to ram forward a bill that kierdzing to the congressional budget office will

increase the deficit by $4.2 trillion. so i want us to think about that. we are taking food out of the mouths of hungry children. had bill could cut -- this bill could cut as many as 16 million americans off of health care. when we think about medicaid, 71% of the medicaid recipients in georgia are children, so we taking their health care and then we are saying to these children that you will have to deal with these trillions of dollars in debt one day. $4.2 trillion. senate republicans are trying to use a budget gimmick to claim the bill only costs a fraction of that by simply not counting things they don't want to count. if they don't like the math, they change the formula. but the markets and those investing in our country don't care about these budget tricks. i don't think it will help my 6-year-old and my 8-year-old when the bill comes due on this. they know the truth and they

will react based on the truth, the big ugly bill will put the united states on a disastrous fiscal path and it will be catastrophic for our economy. even worse, the big ugly bill is cutting people off of their health care and for what purpose, to give tax cuts to the wealthiest. this is an interesting moment for me for someone who didn't know i would end up in politics, who paid attention to politics over the years. they're getting ready to create a whole lot of pain for a lot of people, and the question is for what purpose? to give billionaires a tax cut. i think we ought to work together to prioritize extending tax cuts for the works class. we shouldn't be cutting their health care. we ought to save the country trillions of dollars by not giving more tax breaks to the richest americans. if we try to work together, we can save our economy from this

disaster and still protect working families from a tax hike. i believe in tax cuts. i think working class americans ought to receive them and we ought not be burdening our children with all of this debt. with that, i yield and the chairman should take note that the baptist preacher is done with three seconds left. chair scott: the people said amen. senator hagerty. senator hagerty: thank you, chairman scott for holding this meeting. chairman powell, good to see you here again. chairman powell, i wants to talk with you about inflationary and deflationary trends in our economy and how they impact our thinking. i understand based on your testimony and recent statements you are sensitive to the inflationary risks of our administration's trade policy. though i note that it's not the fd's -- fed's responsibility to

attempt to offset that policy in any way, i look at that, i look at your perspective, but i also look at many other developments in our country that i think present the opposite risk, which is a disinflation risk. let me dig into this a bit. we are witnessing artificial intelligence adoption at breakneck speed that will bring about productivity gains in nearly every aspect of our economy. we are about to pass a tax bill, that tax bill will encourage capital expenditures and long overdue upgrades to our manufacturing capacity, again increasing productivity. if you think about the con is certsed effort being undertaken by our federal government now to reduce waste and bloated government payrolls, all of these point to disinflationary productivity gains. so given the competing sources of uncertainty that we are talking about, it feels to me like the fed is far more focused

on tariffs on the deflationary impact of the points i just mentioned. so if uncertainty around tariffs is the primary reason that impacts your thoughts, how do you bring into account these disinflationary trends that i just i mentioned? mr. powell: we do look at the overall picture. what has been happening is services inflation has been coming down and that's been covering what we see so far, small increases in goods, inflation. i would mention a factor you didn't mention which is regulation which is an area which could also be over time disinflationary. we -- i try to say that it's the broad sweep of policies and broader economy that matters for inflation. i get asked about tariffs a lot and that's the one where we -- all forecasters are expecting a

significant increase between now and the end of this year. we don't know how big it will be. we don't know when it's going to come, but it's something that we are waiting to see more information on so we can make a better decision on interest rates. that's all it is. senator hagerty: i hear the discussion about not knowing the timing of the trade talks and the resulting tariffs that will ensue. it does seem to me there is a bias towards viewing this as more inflationary and i would like to ask you this. if the ambassador is successful in bringing together trade deals soon, what would that do to your perspective on rates? would that put you in a position to think more aggressively about lowering rates? mr. powell: yes potentially it would. realliry deucing uncertainty would help and also what will be the final tariff rate and getting that settled and i think that's the path we are on. senator hagerty: that's welcome news. the markets will wem that. i believe we are on the path as you are about to say of having some significant resolution in

trade uncertainty. we have lived in an unbalanced world where the united states has had the lowest tariff barriers in the word and other nations have taken advantage of that. scott bessent and his team, the president, everyone is making an effort to fix this. one other area i wanted to touch on because it's touching close to home and that is legislation that this committee has passed out and we have just passed in the senate, has to do with the genius act, we passed it last week. it provides an you are gentsly needed framework for payment stable coins and it requires that they're backed one to one by cash or short dated u.s. treasuries. over the last five years the toll value of outstanding stable coins has increased to $2 billion today. one market participant has predicted if a traim work like the genius act is adopted total issuance of stable coins could reach nearly $4 trillion by the end of the decade.

so i wanted to get your perspective, mr. chairman, what impact would this source of demand for bills have on short term rates? mr. powell: so more demand is going to have a tendency to drive down rates. i don't really have a sense of how big that effect would be of course and let me say that it's a great thing we are making progress toward a stable coin framework. senator hagerty: thank you, mr. chairman. the direction clearly is it will drive rates down. it is positive for our economy. i appreciate your response there, mr. chairman. thank you very much. chair scott: senator cortez masto. senator cortez masto: thank you, mr. chairman. chairman powell, thank you for being here. i want to follow up on about data deterioration. i concerned that the trump

is ending dozens of research studies business and government leaders rely on. are there specific research projects the bureau of labor statistics provided that they no longer provide which federal reserve researchers cannot replicate on their own or through other sources? chair powell: i'm not aware of any. it doesn't mean they don't exist. usually editors -- it is the regular database supply and they have cut back on the size of the survey. reppo cortez masto if there is other data or data you aren't getting or if there is another source for the data, please, share that with the committee. thank you. sen. cortez masto: during the biden it motor -- administration, to improve access to the discount window for banks. what is the status of that collaboration with the fhfa?

chair hound: we are looking carefully at modernizing the discount window. sen. cortez masto: but we aren't there yet? chair powell: it is a project that will take time. the discount window needs to be updated through a technological standpoint so people can access it readily. it is still a little behind in that respect. sen. cortez masto: do you have a timeframe you're looking at? is there a funding impediment? chair powell: we are moving ahead with it. sen. cortez masto: in march of the federal reserve, and occ announced you intend to appeal the 20 23 community reinvestment rule -- reinvestment act proposed rule. i would prefer the proposed rule

because it would've better address the needs of states like nevada that don't have headquarters of large banks. how will you ensure new cre gardens improves access to financial services, to loans, to investments? in underserved, rural, and tribal communities? chair powell: i am march we announced we are putting out for, and a proposal to withdraw the proposed guidance which had been the subject of litigation. and, in the meantime, we are going back to the old cira rules and i think that is where we will be. i don't have more with what we might change with respect to the old rules. sen. cortez masto: so the default is it old rules. chair powell: cre as it existed before the proposal. sen. cortez masto: community banks benefited from high deposits during the pandemic. since then, the net interest margin for community banks has fallen.

what specific challenges do you see for community banks, if any? chair powell: community banks are very important. we want a banking system that has all different sizes and shapes of banks. community banks are critical. they know it is going on in communities. in a way where the big banks can't possibly, they are a critical part of our infrastructure. they have been under pressure. regulatory -- fixed costs of regulation have gone up. the number of banks has been going down steadily. it is not something we are trying to foster. it is a long-run trend over the last 30 years. we try not to add to a secular trend. we think they are important. sen. cortez masto: thank you for being here. chair powell: thanks. chair warren: who is next?

senator britt. sen. britt: chair powell, thank you for being with us today. i want to start by echoing the comments of senator cortez masto when it comes to community banks. i believe community banks and credit unions and financial institutions that serve everyday americans in main streets across the great state of alabama and our country are critically important to people being able to actually achieve the american dream. i know we have talked about this the last few times you have been in front of this. we have talked about long-term debt, a ton of things. we have talked about my concern that nobody was looking at the cumulative impact of those things and the trickle-down effect. i want a commitment from you that if you are looking at rulemaking across the board you will consider and make sure to make the perspective of the smallest u.s. banks and nonfinancial industries like the agriculture sector who did not

maybe have a seat at the table and a previous administrations, give them a seat at the table and make sure you are thinking about the impact on those individuals and those they serve. chair powell: i'm happy to make that commitment. sen. britt: an issue brought up today briefly by another colleague of mine is about childcare. when we look at the childcare crisis in the country we know our economy loses about $122 billion per year because of affordability, accessibility, reliability of childcare. it is said anyone who has a child between the ages of zero and five spends 22% of their income on childcare. we have done the studies. we looked at the numbers. 59% of stay at home parents say they would like to reenter the workforce. but committee affordability or accessibility is an impediment to do that. as we look to build back america

and create opportunity and bring things to fruition, would you agree taking a look and being able to address -- not asking you to comment on any specific proposal -- but addressing shortfalls related to accessibility and affordability of childcare would have a positive long-term impact on the economy. chair powell: there is quite a bit of research showing exactly that and we really saw it during the pandemic, as you pointed out. it is not an issue we play a role on, but clearly, it would contribute -- childcare would contribute to participation in the labor force by many. sen. britt: as alabama looks at our labor participation rate it is five points lower than the national average and we continue to look for ways to get people reengaged in the workforce. we know addressing this head-on will help us achieve that. i look forward to continuing to work to get that done. there has been some angst

vocalized about the reconciliation bill and the president's trade policies. from my perspective, much of that skepticism is both unfair and premature. market resiliency and recent economic data continues to reflect confidence in the u.s. economy. look at the recent treasury auction, that was notably successful and saw stronger than expected demands for 30 year bonds and a stable, even slightly declining, yields. to me, this it demonstrates investors view the u.s. debt as an attractive asset regardless of ongoing policy discussions and debates and forging a pathway forward. the fundamentals of the economy remain strong. would you agree the components of our economy remain quite strong? how does the fed to consider this kind of strong option performance -- auction performance in the context of market expectation and monetary

policy discussions. chair powell: the treasury market is working fine. liquidity is adequate. bond prices are responding to economic events. the bond market is in good shape. in terms of the strength of the economy, i strongly agree. the labor market is in a solder place. the lamer market is growing. inflation is in a good place, much closer to 2%. it is a very solid economy. we are watching the labor market closely, as we always do. a couple things in particular. one is a very low hiring rate. it goes with a low layoff rate. if we were to see layoffs we would see unemployment go up quickly. we are watching that carefully. the labor market have remained solid. i agree with your overall characterization. sen. britt: i appreciate you being here today. >> senator kim.

sen. kim: thank you for coming before us today. you have set out in the past when it comes to monetary policy that this is something you are having to try to assess the data before you. chair powell: i am thinking about this because we have both -- sen. kim: we have the federal open market committee fomc five-year review when you are talking about tariffs and the uncertainty of the moment. how do you balance assessing between the backwards-looking data you are able to look at more tangibly in that way and also addressing forward-looking models to understand where things are heading? chair powell: that is the challenge all forecasters have. really, monetary policy needs to be forward-looking. at the same time, we need to be humble about how hard it is to forecast. particularly in times of high uncertainty, which i would include now, you want to look at the real data and take signal

from that and not be too brave about what your forecast might be because it will be highly uncertain. sen. kim: you say in times of greater uncertainty in some ways it makes you more interested in the backwards looking data to guide you? chair powell: yes, but i would almost flip it and say at a time like that you don't want to be giving a lot of forward guidance and acting as if you have a lot of certainty about the path forward. it makes sense to move more slowly in most situations if there is more uncertainty. there are situations where it would not make sense to move slowly. in most cases you want to move slowly. sen. kim: interesting i talked to constituents back home and this is one conversation i had that stuck with me. a woman was telling me there is so much uncertainty right now in the world. certainly, in her life. she says it is hard for her to even breathe sometimes. she feels the weight upon her chest.

i think, what can we do to alleviate that anxiety for people? you can see it right now. whether it is about what is unfolding in the middle east, the fragility of what comes next. when i look at the reconciliation bill before us in the senate i worry not just about the deficit, as some of my colleagues have mentioned, but the potential of significant job loss we are seeing whether in the health care industry, whether in the energy industries. certainly, when it comes to tariffs, trying to think through what comes next whether it deals are struck and what -- at what levels. are you taking into account the data by an issue based -- is that by an issue based level or looking at global instability in terms of different crises out there? is that factoring into how we are talking about legislation here? i know you want to go to policy, per se. but if there is the potential for significant job disruption, is that something you are

looking into as your forecasting? chair powell: yes. we obviously pay great attention to global events. in an effort to understand what is going on in the economy globally. we pay close attention to all those things and we track them. ultimately, we are looking at the u.s. economy. what are the fundamental drivers here? then, making a judgment based on all that. mainly, this is a big economy. we are geographically separated from most other big economies in the world and we have a smaller external sector than most of the european -- all of the european economies, for example. we are looking at the u.s. and what is happening here. sen. kim: in central banks and other countries including the bank of england and european central bank they have begun modeling the potential macroeconomic effects of artificial intelligence. they are thinking about how they can use ai to do some of the

forecasting to think through what comes next. i want a sense of where the federal reserve is thinking about similar work in the ai space. chair powell: we have lots of people doing work on ai and, more than that, monitoring research going on everywhere in the world. speaking of uncertainty. it's very clear it has the potential to make very dramatic changes in our economy, in our workplace, in the jobs of workers and how companies work and all those things. there is tremendous uncertainty about the timing of that and what the ultimate consequences will be and what the medium-term consequences will be. sen. kim: i was wondering if the fed is evaluating ai credit models and how that could deepen disparity in credit access or violate fair lending standards? is the fed looking to potentially affirm industry standards on this? chair powell: it is something we have been aware of a long time.

there's a lot of research that has been done before generative ai came along. it is also just machine learning and technologically generally. there are implicit biases that can appear. there is something we are well aware of. we work with people to try to make sure that does not happen. >> thank you, senator banks. sen. banks: chair powell, can you talk about how our interest rates compared to other first-class countries around the world? chair powell: at the higher end. sen. banks: how does that affect the united states? chair powell: it reflects a couple things. one is the u.s. economy has been stronger than others. i don't want to pick on any other nations. many other nations have had much lower growth. now they have lower inflation. or they have pretty low growth. the u.s. economy has been the

outstanding performer and remained that until this day implying somewhat higher rates. >> you say attire than most first-class countries? can you talk about, historically, where we have matched up with other countries? chair powell: let's go back to when the pandemic hit, for example. we had very low rates during that era. they were by far the highest in the developed world because the u.s. economy was the strongest. of the european union have negative rates and i think the bank of england was at 75 basis points. we were at 2.4%, meaningfully higher. it was a time when our growth was higher. their growth was lower. there inflation was lower. our inflation was fine. probably about the same. we have generally had a little bit higher rates than those countries because they have slower growth in older populations and lower productivity and those kinds of

things. we have the strongest economy in the world. sen. banks: have interest rates in this countries globally gone up as well. chair powell: all countries have their rates go up quite a bit during the global pandemic inflation. as you know, many have been cutting their rates. we had been too. at some point we will resume that. we are 100 basis points lower than we were. take the european union and bank of england and they have both cut a little more than that. sen. banks: how recently? chair powell: recently. you have probably read that they are either at or close to the end of their cutting cycles. sen. banks: bear -- there has been a lot of talk today about deficits and the national debt. how much does a tax policy affect the economy of the u.s.? chair powell: it has big effects

over time but it is not really something that drives what we do. text policy plays, long term, a huge role incentivizing investment to affect growth and things like that. long run, more important than monetary policy. sen. banks: with a $4 trillion tax increase on middle-class americans affect the economy? chair powell: here we are getting into the bill. sen. banks: i'm asking how that would affect the economy according to your data. chair powell: i'm trying to not make any direct comments on the bill today, if you will forgive me. but i take your point. sen. banks: i am trying to make a point, but there has to be data that you sit on somewhere that would suggest large tax increases would affect the economy, would star economic growth in the u.s.. chair powell: you can certainly get that out of a motto if you wanted to.

i will inevitably be commenting on the bill if i answer that question. sen. banks: a lot of talk today about inflation. you agreed inflation is down from where it was one year ago. would you say, steadily declining. chair powell: yes. i have more than agreed to that. i am very pleased by that. sen. banks: all of the experts and so-called experts tell us tariffs lead to inflation but you suggested already inflation is, if not under control, close to being under control. chair powell: inflation is in a really good place, definitely. we have a forecast. so does every other brand name forecaster in the country. is that there will be some inflation from tariff coming. not yet but over the course of the coming months and it is reasonable to expect that.

it is hundreds of billions of dollars of tariffs we are taking in and some of it will fall on the consumer. not all of it will fall on foreign manufacturers. this is the only insight we have and we are waiting to see more data. sen. banks: traded deficits with china, the eu, canada, and mexico have dropped significantly. what does the data tell us about how that would in fact -- affect inflation? chair powell: i don't know if it has implications for inflation but it obviously reflects the tariffs. recently you have seen chinese imports come down quite a bit. >> senator blunt rochester. sen. blunt rochester: thank you. chair powell, welcome back. inflation has come down meaningfully from its peak. there are signs of moderation in the broader economy. prices for rent and other

essential services remain high. the outlook is still uncertain. wage growth remains strong. productivity trends are mixed. demand for places to live is high but borrowing costs and material shortages are making it holder -- harder for builders to keep up, adding to affordability pressures. at the same time, while i know this is not something you would say, while our republican colleagues are pushing for tax cuts for the wealthiest americans that would expand the deficit, the administration's trade and immigration policies are also introducing uncertainty that may not yet been fully reflected in the economy. for families i represent, the cost of living remains painfully high. premature easing could have unintended consequences that undo the progress we have made. later this year the fed will

update its monetary policy framework to respond to today's inflationary environment and after years of supply shocks, housing inflation, and fiscal volatility i hope you will remain strength and that the fed's ability to navigate the more uncertain economy. as you undertake this update, can you talk about how you are adapting the framework to these realities while preserving the fenced's commitment to full -- the fed's commitment to full employment? chair powell: we make changes in 2022 are framework meant to take on board the special circumstances a central bank faces with extraordinarily low interest rates, never far from zero. we barely got away from zero when we had to cut back to zero. the feeling is if we had any kind of a shock we would be back at zero for years on end and that is not a good thing because the economy can become very

stagnant. so since then, the interest rates are back to more normal levels. our policy rate at 4.3% does not feel like it is particularly restrictive. rates have moved way back up. the effect of lower bound is less of a problem. the changes we made in 2020 or less relevant. but they are not completely irrelevant. we have made modifications we will be discussing inside of our committee between now and the next meeting and in the next meeting that will return to forecast more to what it was before the 2020 cycle. sen. blunt rochester: we had a chance to talk in the past about my focus on jobs and the economy and labor. i wanted to follow up on senator kim's questioning where the focus was on the changing technology landscape and artificial intelligence, generative ar, its impact on the economy and labor market. how would you describe ai's

impact on the economy so far and how is the fed measuring it? chair powell: the effects of ai are probably not great at this time. generative ai. of the question is, how great will they be? how big will they be? how quickly will that happen? anyone who has been exposed to what ai is capable of has to be pretty stunned. and this is even the early days too. experts tell us in two years, these things that you are doing will be nothing. it has enormous capabilities to make significant changes in the economy and labor force. it can either augment people's productivity or replace people. or can do a little bit of both. it will be something. sen. blunt rochester: you preempted my question. i saw a recent article with the ceo of nai company who said ai

could "wipe out half of all entry-level white-collar jobs and spike unemployment to 10% or 20%. " i think he said in a matter of a year or two. do you think this is a reasonable perspective? how would ai driven productivity gains or worker displacement affect the fed defines -- how the fed defines full employment? chair powell: i don't know. i'm not the person to say how quickly that will happen. what has happened before with technology as it seems to take a long time to be implemented. there is what it is capable love and what it actually does when implemented. the last phase takes longer than people expected. will it happen with ai? probably. in terms of maximum employment, the fed does not have the tools to really address the social issues and labor market issues that will arise.

we just have interest rates. we will always be able to balance the labor market so supply and demand are in balance. but, things like what ai doesn't what other things to from the outside, we just have to take them as they come. >> senator tillis. sen. tillis: thank you for being here. since ai came up, first off, we need to welcome it, exploit it, and benefit from it. i have had my staff try and go back and look at some of the congressional hearings and the time -- in the times of the industrial revolution and other instances where we had the threat of displacement and it worked out ok for us. the key is this is a global competition and other countries are going to implement it. it will drive down cost and it will make us less competitive if we don't meet the challenge and become the innovator. but i think the transition is important to note. i want to talk about slr.

you indicated the balance sheet will continue to shrink. we want to get to pre-covid levels. -- we will not get to pre-covid levels somewhere around $4 trillion. the question is, you guys expect to hold higher levels of central banks to hold higher levels of central bank reserves then we have in previous years, do you agree? chair powell: i don't think we will get all the way back to where we were, but we are still shrinking. >> showed the slr be updated to show the evolving presence? it cost 545 million dollars. chair powell, i have never really liked fed now. this is probably not a friendly question. but, spent $545 million to implement it now. you are expecting to spend another $245 million in 2025. the total price tag is $1 billion.

as you know, the money control act required the fed to cover all the direct and indirect costs incurred. can you give me an idea of what we will see? a fee structure that will generate and pay for the implementation including the expected operational cost? chair powell: our obligation under the law is to have it be self funding. we have a period under which that is supposed to happen. uptake has been steady, but not rapid. >> is it your sense that the fee structure based on the take rate will be achievable? chair powell: it is achievable. i'm not 100% clear we will achieve it very soon. sen. tillis: that is my concern. i wonder if the pricing is there given private-sector options. if you will ever be able to get

there. just an editorial comment. one thing i did want to mention. i am excited to see some of my comments on the other side of the dais concerned about that. the last time i change her there were the four years president biden was in office. we had the american rescue plan that cost $2 trillion. we had the inflation reduction act. it cost $1 trillion. we had the pact act. i was one of nine republicans that did not vote for it. it also cost $1 trillion. i am excited to see my colleagues on the other side of the aisle want to get serious about spending within our means. i did have a question. my staff wanted to ask about -- sorry. i just want to get my notes right. actually, i wanted to go -- i don't have it before me -- what is the current status, in your view, on wells fargo's capital

requirements? chair powell: do you mean on the growth cap? sen. tillis: yes. chair powell: we voted unanimously to remove that after many years of having it in place. they did satisfy the requirements we put in place and we removed the cap along with other agencies. sen. tillis: you stand by it? chair powell: i do. sen. tillis: very good. chair powell: walmart on april 9, i think, withdrew their gardens. they indicated the reason they were doing that is there was uncertainty. it seems to be sometimes uncertainty around trade. i would suggest for my colleagues, and i don't know if you can respond or not, i don't want to ask you a tax question, because i really want to but i know you what your answer will be. you are a good dancer. i think it is fair to say that if there is going to

-- prices, and walmart having made the decision is probably the best estimate they know they may have to deal with the cost and inflationary uncertainties. would you characterize that as a reason they withdrew their guidance? chair powell: it might be. i saw that they had, i did not have a chance to check why. >> if you tease through the language, it seems their input costs would go up and they needed to manage margins. we just need to be realistic that if you have a major household name withdrawing guidance because of uncertainty, they've got a lot of experts probably suggesting there may be some inflationary risk. we haven't realized it yet, but we need to keep our eyes open and not look past it so we can go to management if it comes to pass. there should not be a problem. the last thing i want to mention is you can't respond to this,

but i will tell you that the democrats succeed in preventing us from avoiding the biggest tax hike in the history of this country, it would cause great damage to the people who can least afford it. you don't get to respond to this. >> i did not realize the senator was here. but we need to be open. we need to understand you will have something to fix if we fail to continue the tax cuts. >> thank you sir. >> thank you so much to chair scott and ranking member warren, thank you for hosting today's hearing. thank you, chairman powell for your tremendous service to our country. i very much enjoyed the meeting we had earlier this year and look forward to working with you. many of my colleagues have been listening to this hearing and rightly discussed concerns regarding how tariffs are

affecting consumers and businesses. i would like to highlight a specific business in maryland that encapsulates the harms i believe this administration is inflicting. also the resilience of a proud maryland small business. a successful pet brand based on ken island. one found by barton o'brien, a marine veteran who served three combat tours overseas. he's calculated if he were to make his prophets in the united states, he would have to raise prices for hundred percent just to break even. the tariffs he believes are a burdensome tax that can put companies like his out of business. the damage doesn't stop there. thousands of other brick-and-mortar stores across the country all locally owned small businesses who similarly have to raise prices to pay the president's tax. mr. ryan started planning for this one president trump started talking about tariffs during the

campaign, he stockpiled inventory and has committed to keeping his prices stable. but they're asking what is he to do if the tariffs are in place next year? mr. o'brien has calculated he will not have to just raise prices, he will likely have to cut staff to stay in business. there are 34 million small businesses in america. one for every 10 people. small businesses have to lay off staff or go out of business altogether. what would that due to unemployment in this country and what effect will it have on the broader economy? >> just mechanically, i don't want to comment on particular tariff policies, but if companies go out of business, that willter a. >> and what we will see, and we have so many small businesses, what we are facing is the very prospect that we will have so many -- the inflation cause by

the tariffs will have it -- a very negative impact. if this is the case, what will it mean for american workers? >> the tariffs are still in motion. it is premature to say where they are going to land. we are withholding judgment until we see more. we have not made a decision. the situation evolves day by day. >> in another question, in our meeting and in your most recent monitor repulsed report you spoke of the long-term challenge of housing supply not meeting demand. and i look at this issue the same way as the county executive where i fought hard to leverage private and public sector dollars to bring more housing to communities that needed it. maryland has a shortfall of nearly 100,000 homes.

the pathway to build wealth is narrowing. estimates of the over $200 billion invested annually in housing in recent years, only a fraction supports affordable homes for working-class families. would you speak to the need to incentivize private investment into affordable housing construction? working with stakeholders and legislation, i wanted to know if you could comment on that? >> interest rates are slightly restrictive at this point, modestly restrictive. that is winning and he got mike activity in the housing market sector. but you are really talking about a different problem. it is not when the fed can really address. we have a longer run housing shortage. many other countries have this, too. it is not our tool. our tools don't really work to affect that. it is elected people, you saw

this as county executive, things the legislature do can address that. not us. it is not interest rates. >> i understand one of her issue, the fed is evaluating the leverage ratio rules regarding the amount of capital required to be held by banks to withstand unforeseen risk. i'm hoping you can then provide some insight as to what potential changes this framework is meant to achieve. on the other hand i understand access to capital is paramount, particularly for communities i represent. i understand concerns a change in these requirements could affect the resilience of the banking sector. i know you cannot speak to the specifics of the coming proposal. would you share some insights into what problem the proposed rulemaking is meant to solve and are you concerned it could lead to a deterioration of resilience of the banking sector? chair powell: i would be glad to. the idea behind it is we want

risk-based capital to be the binding capital requirement because we want the binding capital requirement -- we want banks to be sensitive to the risks we are taking. if the leverage ratio is not risk sensitive it treats every acid is equally risky. if that is binding, that interferes with banks incentives to and discourages them to take on low risk activities. we have always wanted the risk-based capital to be the binding one and the leverage ratio to be the backstop. this proposal we have that we will be meeting on in a couple of hours is out for comment, a proposal to restore the backstop characteristics of the leverage ratio. we think it should make for -- it will not in any way diminish the soundness of the financial system and allow for banks to undertake low risk. >> thank you.

>> senators who wish to submit questions for the hearing record, they are due one week from today, wednesday, you have 41 days to submit your responses to the questions for the record. thank you for being here. this committee is adjourned.

>> federal reserve chairman jerome powell wrapping up testimony before the senate banking committee policy in the u.s. economy. a seventh day of testimony on capitol hill answering lawmaker questions regarding the fed's position on interest rates and the impact of the trump administration's tariffs. if you missed any of the hearing, watch it in full tonight at 8:00 eastern on c-span. -- p.m. eastern. >> looking to contact your members of congress? c-span is making it easy for you. with our 2025 congressional

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>> in a nation divided, a rare moment of unity. this fall, c-span presents cease fire. where the stops and the conversation begins. in a town where partisan fighting prevails. one table, two leaders, one goal. to find common ground. this fall, cease fire. on the network that doesn't take sides. only on c-span. >> up next, veterans affairs secretary doug collins testifies on his department's 2026 budget request. he spoke about proposed service and staffing cuts as well as policies that could potentially impact veterans benefits. the senate appropriations committee hearing is just under two hours.