tv Politics and Public Policy Today CSPAN June 22, 2016 12:00pm-2:01pm EDT
money is worth nothing in the bank. when can they expect to see an increase in their rate of return? >> i can't give any guarantee on that, but if the economy progresses along the lines i expect, it will be appropriate to gradually raise rates further. >> you felt like we have made a lot of progress. yet seniors haven't seen any progress. i think that's one of the continuing problems that we have. i also want to ask. you mentioned and it's well known that the federal reserves objective is maximum employment. do y'all have kind of a handbook that you have put out how to achieve maximum employment? something that political candidates like maybe a candidate for president might say she's going to get rid of all the coal mining jobs. do y'all have a handbook that says if.
you're going to put pressure on the economy. when i look at the things that the government does, i see regulations that say the haze regulation is being implemented in the west. you can't see the difference in the haze in the air. you have to have a computer to measure it. but using that regulation, goal miners being sent make $60,000 a year. and they are going to then be on assistance level. do y'all put out a fact sheet that says if you increase minimum wage, burger king is going to put kiosks in. so the poor people are never going to get into the labor
market so the gap is going to increase because we have sent those jobs out of america that are on the low end of the scale that allow people to e get into the workforce. so i wonder if you all do that because if you are in charge, it seems like you'd put out a fact sheet so people sitting on this side of the desk could actually have some idea of what effect policies would have. i guess the answer is no they don't put out a fact sheet. >> not one of the type that you were describing. >> woe don't have the best practices. >> time of the gentleman has expired. the chair recognizes the gentle lady from alabama. >> thank you. chairwoman yellen, i apologize if you have answered this question. but as you know, 127 members of congress both senators and house members, i was one of them, last month sent a letter highlighting
the fact that the federal reserve act mandates that the president's and board of directors at the 12 regional federal reserve banks, quote, represent the public, unquote. despite this mandate, there's only one non-white regional bank president and he's the only non-white member of the fomc. men make up nearly three-fourths of those directorships. one-third of the 12 presidents are either former executives or trustees at goldman sachs. in response to the letter, you said that, quote, 45% of the directors are either women or minorities. meaning 55% are white males. does your response indicate that you believe the leadership at the federal reserve bank is fulfilling its mandate to represent the public with due consideration given the enormous
interest of our diverse nation? >> so let me start by saying that i believe that diversity is an extremely important in all parts of the federal reserve but i do want to distinguish two different things. there are and then a completely separate category of leadership are the directors of the federal reserve banks. i do believe we have made substantial progress in achieving diversity and improving our performance among directors at the reserve banks
in the branch boards. i believe the figure that you cited, the 45%, refers to those directors. at this point, we have 24% of those directors and minorities, an additional 30% are women. and in total, women or minorities come to the number that you cited. now among the reserve bank presidents, we're looking at 12 presidents, as you said, one is minority and then there are two women reserve bank presidents. i would very much like to see greater diversity at that level, too. and it's a goal that i hope we will make progress on in the coming years. the procedures for apointing those presidents are set out in the federal reserve act.
that are recommended by the directors of the reserve banks. we insist and make sure that the searches for those presidencies are national. that the candidate pool is diverse and the due consideration is given to diver diversity as an important goal. about possible candidates and we'll make sure sure that candidates who are suggested gain full consideration. >> i know it's been considered or suggested that they fill the
class seat directors on each regional banks board with at least one individual from an academic background, one from a consumer community base organization and one representative from the labor organization. what does a fed think about this recommendation and does the board of governors have a strategy for increasing the diversity of its leadership so that candidates are considered who have a variety of backgrounds not just solely that of wall street. >> so we track diversity not only in terms of gender and race but also in terms of experience. and i believe we have e made considerable progress in achieving the diversity you're discussing. on every bank branch there is an individual, might be an academic or someone who represents communities and non-profits and we're constantly trying to add
to our ranks of people who represent labor. >> the time of the gentle lady has expires. the chair recognizes the gentleman from georgia, mr. westmoreland. >> thank you, mr. chairman. first of all, i want to thank you for the inspector general going through your cyber security policies and i just wanted to thank you for that. the other thing is i want to make comments between the gentleman from wisconsin and gentleman from california. as far as the new regulations. there are approximately 3,000 new regulations last year with 81,000 pages of it. the gentleman from california said this was to explain these
pages he was thankful for them because they were there to explain the regulation. when it takes that many pages, something is way too kpli complicated. banks are being taken down with this. sometimes there are more compliance officers than they do with loan officers. so i guess my question to you is that this overly burdensome regulations that are on our small banks is it a priority of the federal reserve and for other members of the federal
financial institutions examination council, is it your priority to get these regulations off? >> it is our priority to do everything that we possibly can to reduce regulatory burden. i think we have already taken some significant steps. we're completing the review. i believe we will take more steps in light of that review. we are looking carefully at a very simplified capital regime that could apply to these community banks if they are well capitalized and managed. >> i feel like i have been asking this same question now since 2008 in my district. probably had more community bank failures than any other district in the united states. and we keep hearing this over
and over about we're looking a at regulations and so forth. so is there any way that you could give me some type of time line as to when something may come out about this? >> we have already put things in place. so it's not that everything is in the future. we have change d our examinatio process so examiners spend much less time in bank prem sis. we have made our examinations more risk based so that we focus on those risks that really are relevant to banks. we have taken a number of steps.
we meet regularly with twice a year with a group that is community banks to hear their perspectives and take their suggestions when we can. we have a special committee of the board that focuses on community banks and assesses ways to -- different ways to reduce burden. >> thank you and i hope you have been communicating with the community banks too about what you can do to actually help them. one other thing just to follow up. my district in georgia, we know what it's like to lose a bank. the federal government is focusing on economic policies for large banks, designating banks and nonbanks conducting stressest tests all the while these policies are creating this
notion that large banks are too big to fail. and so i guess my point is that somehow there's got to be a more distinct classification between banks and the size of banks. >> i agree with that. we want to tailor our regulations so that they are appropriate to the risks. we are likely to make changes to the stress testing regime that would reduce burden on some of the smaller banking organizations that are subject to that process. >> thank you. >> time of the gentleman has expired. the chair recognizes the gentleman from georgia, mr. scott. >> thank you, mr. chairman. chair yellen, when you visited here the last time, i raise the issue about the high rate of unemployment among african-americans. it's absolutely staggering. some of our communities,
particularly with african-american males between the ages of 18 and 37 is over 2 22% and in some communities it's as high as 50%. which leads to all kinds of problems. the crime problem. but more important to break down in that african-american family because these young men who are age 18 to 37, that's the childbearing age. so we have to look at this as a national crisis. and i ask you to do that. and you told me that i don't have the tools to do what you're asking. but i say to you, you do have the tools. you've got your voice. you've got your position. you have a dual mandate to curb inflation, but also to deal with unemployment. and we need you to use that
voice that this is a national crisis. it's the number one domestic problem that we've got in this country because of the devastation and the impact in the african-american community. but here's what really concerns me. since you say you don't have the tools, why are you so eager to change course on monetary policy and raise interest rates yourself when the unemployment level in the african-american community is so high. you said that your future rate increases depend on the data you have. to me, chairman, the data is telling a pretty clear story. one, we're well below the 2% inflation target and, two, growth abroad in places like
china and most importantly the dollar remains strong. so tell me, chairwoman, what harm do you see in holding the interest rate at its current level until we can get our hands around this problem and get some improvement in the african-american unemployment rate. >> so congressman, i do want to call attention to the material that we included in this monetary policy report and intend o to continue including that discusses the situation, the labor market situation of african-americans and other minority groups. it does document, as you said, the high unemployment rates of african-americans. but there has been improvement. >> what is so frustrating to me is that you're in the position to say something, to do
something. this is intolerable. you are the only agency with this dual mandate. >> we are doing something. we're doing something extremely important, which is putting in place some monetary policy that has brought down unemployment rates and improved the labor market for all groups in american society and there has been improvement and there will continue to be improvement and our policies are designed to make sure that we continue to have improvements in the labor market that will benefit the african-american community and others as well.
and i have used my voice and will continue to do so. to try to identify interventions. >> let me identify something right here. we are in the midst legislatively, we are in the midst of doing things like building the keystone pipeline. why can't we target that so these young people can get on jobs or learn the basic skills as they work. earn as you learn. get them involved with labor unions that have skill programs. we just passed a bill to be able to lift the embargo on crude oil. that's going to spread out 200,000 jobs. i mean, we have to look at our economy u and point out areas where we can get
african-american young men into the wheel to learn these skills. >> this is for congress to consider. >> we have done that. and we have done our job. >> the time of the gentleman has expired. >> we need some leadership from you and this administration. >> the time has expired. the chair recognizes the gentleman from new jersey. >> let me follow up on the question that the gentleman was just talking about. about the negative disastrous impact that the fed has had on the african-american community and the poor in this country. last year you gave a speech on income inequality and said that the income gaps between the rich and poor has been an interest to you in the federal reserve and expressed concern kpp your comments were eerily similar. you lamented the problem that failed to admit to acknowledge that it's your actions and the fed and the government policies that can have a dramatic impact on expansion of the gap between rich and the poor.
we are reminded how low-income families have fallen behind in the last eight years. we have seen the greatest monetary expansion in history. i think there's no coincidence. let's look at your predecessor. the chair acknowledged that monetary policy has the effect of raising asset prices, in particular stock market, i'm sure you agree with him. the question we have is who does that really benefit? let me give you a number. 90% of households with incomes over 75,000 own stock. only 21% of households under 0 $30,000 own stock. so if your policies as ben bernanke indicated it does, raises asset prices, who are you benefitting? the rich. who are you hurting? the poor. so the stock market has been
beneficiary with incomes bo the national medium where the wealth is concentrated. so that's what the e gentleman is pointing out. leadership to lead in the other direction. not always helping the rich, but hurting the poor. and another area that we see is where you take the pattern of helping the rich and not the poor is where is the average poor person put their money? in the stock market, no, into savings accounts. the average rate of return is six basis points. at the same time you're paying wall street banks 50 basis points to park their money over there. why do you see the need to benefit the ceos of the world and pay them more than the small local banks on main street where my constituents have to invest their money? do you see a need to benefit the
rich continuous aly? why is that? >> i'm sorry. we're not trying to benefit the rich. >> so your statement is your intention is not to benefit the rich, but the facts of what you're nodding your head is your actions are benefitting the rich over the poor because of your monetary policy. is that correct? >> it is not correct. >> is gallup wrong when it says the rich are more likely to invest in the stock markets? >> that's true. >> is it not true that your easing also benefits asset purchases. >> 14 million jobs. >> excuse me. excuse me. i have the floor. i'm trying to find out which fact is wrong. the fact of the matter is that the rich own stock, you said yes. quantitative easing increases asset purchases, you said yes. the fact of the matter is you're indicating that that is
increasing the valuation of stock, you're indicating yes. for the average poor person, they are not in the stock market. you're saying yes. so all those facts are correct. >> houses are widely held by most families and low interest rates have also -- >> where most people have their investments. have also benefitted from rising house prices. >> although you admit here today that is not your intention to help the rich over the poor, what you're nodding yes on every point i raise is that the monetary u policy of the federal reserve over the last several years of your tenure benefits the rich over the poor and creates a greater expansion of income inequality. >> i only have a minute here. with regard to your balance, i can't get into the details as far as the significant increase over time u and the increase in the risk in the market. i understand the question was
raised whether you do a stress test on yourself and the answer was -- no? >> yes, we have. >> you do stress tests like you do on the banks? >> we have performed that exercise. >> and do you believe then that your portfolio is that a greater risk than it was before? >> we have no credit risk in your portfolio. we only have government in agency. >> you are immune to credit rate risk. >> u.s. treasury bonds are pretty safe investment. >> time of the gentleman has expired. the chair now recognizes the gentleman from minnesota. >> hello, chairwoman yellen. i appreciate you being here and all the work that you do. i'd like to commend the fed for its decision to keep interest rates low. i believe keeping interest rates low helps calm and strengthen our economy. i also wish that the fed had
chosen to act as assertively and creatively -- i wish congress chose to act as assertively as the federal reserve did. the truth is that without the federal reserve working, the fact is we have had absolutely no fiscal assistance around here at all. i think if you looked at the historic amount of obstruction that we have seen, it's really quite remarkable that anybody in congress would be shaking a finger at the fed given how little we have done to try to stimulate the economy and to help low income americans. lord knows our infrastructure is crumbling all around us.
we could really rebuild this economy if we would have taken fiscal action. i would like to ask you that. if the congress approved money for infrastructure development would that have a positive effect on employment. how would it impact wages, how would it impact our productivity if we had more improved infrainstruction. >> i can't give you a detailed assessment, but i would agree that productivity u growth has been very weak. we have had a shortage of invest me ment. that's one reason productivity growth has been so meager and generally having a stronger rate u of investment. there are other things as well. education and training make a difference here and supporting
research and development. but those would contribute to stronger productivity growth and faster wage growth. >> if you look historically on the amount of fiscal investment how does the era we have been in for the last five or six years compare with other periods of fiscal investment in our nation's history? >> i don't have the numbers. >> i'm not going to sue you. >> but i think the answer is low. >> you were here in february, you and i had an exchange on what the federal reserve could do to increase employment for african-americans. has the federal reserve been able to think about traditional policy tool kit to specifically consider investments and action
that might impact african-americans and low income people. to keeping interest rates low, are there more targeted tools that the federal reserve is considering or might recommend? >> so in terms of our general stance of monetary policy, we have seen a lot of improvement. it has benefitted african-americans in spite of the fact that there remains so much distress among african-americans and the labor market that concern us. nevertheless, there have been improvements we don't have tools in monetary policy to target particular groups. we want to make sure we have continued general improvement in the labor market in the context of price stability. we are quite focused on what we
can do to aid low and moderate income communities and trying to identify and promote programs that seem to work. in my travels, i have visited a number of workforce development programs that i think u are helpful in trying to match. often programs that link up workers and jobs and sometimes there's a need for workforce training. we have done work and tried to promote best practices in this area and more generally to low and moderate incomes. >> the chair recognizes the
gentleman from ohio. >> i appreciate you have a hard job and i wanted to ask you a couple questions. you said from the gentleman from minnesota that private investment is lacking and it is clear that you have reduced the interest rates in the economy, which is one factor when people choose to make an investment. at the same time, it appears that the increasing regulatory requirements that are passed through to consumers through banks, including capital surcharge on bigger financial firms that's nearly double the international average of 4.5%. a supplemental ratio that is double. a level that's more restricted and punishes certain asset classes and a total loss of
capital requirement that doesn't consider market that get capital in the economy. it makes america a less attra attractive place to place jobs, financial service jobs and other jobs. and i know you have commented that you want to try to take a look at all that. i really appreciate your will g willingness o to take a look at it. i know the european commission just did a call for evidence to review the ways that their financial regulations are actually working and recalibrate the rules to support liquidity
in markets and lending. do you have plans to do something similar given that our regulations are so far out of whack with the rest of the international community? >> i wouldn't comment on tax policy, but our regulations with respect to banking organizations are not really out of line with international standards. we have worked jointly with other countries to try to maintain a level playing field and to raise standards in tandem. we have really improved the safety and soundness of the banking system. we have a banking system that's extending lots of credit. credit is readily available to most corporations. loans have been growing and banks are eager to make loans. they are priced at low interest
rates given this environment. >> so interest rates aren't doing enough. that's kind of my point. >> so you didn't answer my question. are you going to be opening up the regulations for comments the way the european regulators have. because you have said you will, but i have not seen anything. will that happen or not? >> we're currently going through the process and looking at our regulations. i do want to compliment the governor for hi comments in "the wall street journal" that acknowledged that small and medium sized banks do not present the same systemic risk so he's going to try to reduce their u compliance costs. they are great to see in this "wall street journal." i'd love to see them happen. i want to compliment him on his willingness to say he's going to do that. i just want to encourage you to
encourage that to happen. because the office of financial research which is charged with doing the research on systemic risk. the sixth largest institutions have a majority of the risk in the financial system. those that generate the biggest risk and relief the folks that don't generation. so i was really pleased to see governor's comments. but i would urge you to actually implement those. we want to do everything we can to eliminate burden for those community banks. >> my time is almost expired,
but i know this is our monetary hearing. we have a regulatory hearing every six months as well. i know that l governor is an acting regulatory supervisor. he's not been confirm ed, but i would hope you'd bring him with you during that hearing coming up. thank you. >> the time of the gentleman has expired. the gentleman does not engage in an act of political negligence he will be granted an additional ten seconds if he wishes to cleveland's nba championship. >> thank you, mr. chairman. go cavs. i yield back. >> gentleman yields back. the chair recognizes the gentleman from south carolina. >> madame chairwoman, thank you so much. in your opening testimony you said the following quote. another factor that supports taking a cautious approach in raising the federal funds rate is that it's still near its effective lower bound.
what is the effective lower bound. >> well i meant zero. >> so we put that to bed. no negative rates in the fed's future. correct? >> it's not something we're contempla contemplating. >> i have a couple questions that deal with while we're not going negative, rates staying near zero. other countries have seen their rates go negative. that has an impact on the value of the dollar drive iing it up. you have taken a position that you thought a strong dollar was something of a doctoring or could be something of a drag on the economy, end quote. so my question for you is this. as you make your decisions regarding rates or even as you make your decisions regarding your guidance, what weight do you put on the fact that other count countries are going negative or approaching zero? how does that factor into your decision making? >> the situation of other countries is important in our decision making.
to the extent their rates decline or lower than ours, it does tend to put pressure on the dollar, which is a drag. but to the extent that their policies are successful in promoting stronger growth in those countries, then that boosts the demand for our exports. so we need to take both aspects of it into account and generally it may differ from situation to situation, but when kocountries take steps, including monetary policy steps to support demand, domestic demand in their own countries it has these mixed effects. nevertheless, we assess it and take it sbo account in setting our own policies. >> another issue regarding long-term at or near zero rates. in 2011 this body estimated that our interest payments this year, actually next year, would be about $600 billion.
the real number next year will be about $300 billion even though the actual debt today is greater than we thought it would have been five or six years ago. what pressure do you feel, if any, to maintain low interest rates in order to keep the governments from borrowing costs low. we all know what could happen if interest rates were to spike. the cost to the nation will go up dramatically causing a a fiscal crisis. do you factor that into your decision making on setting your guidance? >> we do not factor that into our decision make uing. that's an important reason why most countries have chosen to have their central banks have independence in making monetary policy because when financing the government becomes the focus of monetary policy, inflation can rise to highly undesirable
levels. the congress told us to focus on maximum employment and price stability and that is what we're doing and will continue to do. >> i'm sorry to cut you off, it's fair to say if your dual mandate required you to raise rate, you would do that even if it were to create difficulties on a fiscal standpoint in terms of paying our nation's debt? >> that is correct. that's congress's to consider. the cbo does projections for congress that assume an outlook with rising short-term interest rates and long-term interest rates. that factors into the information that you get. >> speaking of rising rates. a awhile asked about a question about a rising environment and the impact that might have on your emit tanss to the treasury. you said that while it was certainly contemplatable, that a
rising interest rate environment could load to net negative earnings at the fed. >> having high interest rates the problem was there was no growth. that's accurate. we have had periods in this country's recent history of high interest rates and low growth. >> that would be a much less sde sieshl situation. i did indicate that it is highly unlikely and would require a very unlikely set of circumstanc circumstances. >> it's possible a set of circumstances would arise where net earnings would go zero or negative. >> it is possible. >> time of the gentleman has expired. the chair recognizes the gentleman from north carolina. >> thank you, mr. chairman.
>> i would like to make a comment. he stated that you played the most important key role in the state of our economy in the increasing of jobs. you mentioned allotting 14 million jobs through accommodating policy. that comes out to about 160,000 jobs a month over an average around 90 months during this administration. the on to trast i would bring to you is we had high inflation, high unemployment, gas lines, as you recall. we were creating 300,000 and 400,000 jobs a month. don't you see that the clear contrast in terms of the regulatory burden that's been
put on our economy today and how it's not achieved the deviered impact that they have come to want. they are concerned. i see their green shirts and expressions of hope and yet frankly the very poll i sis seems to be counterproductive. that is my comment. now my question is related to the comprehensive capital review is the federal reserve's supervisory stress test for financial institutions. this month governor announced the fed would likely add the surcharge as a component of future exercises. i'm concerned that the fed has failed to consider if there is any benefit to adding this as a component. it currently contains two components unique to first only usg required to assume a scenario.
secondly, it's required to assume an instant tanous global market. both of these existing components already make up a significant portion of the surcharge calculation, including on issues of interconnectiveness and cross jurisdictional activity. chair yellen, doesn't inclusion of the surcharge on top of the current only components result in regulatory redundancy. do you believe it's a double tax on these risks? >> i think congress intended for stmic important firms to be more resilient than other firms and recognize that it's important that even in very adverse circumstances, those firms can go on serving the credit needs of the country continue to lend and in all the static
requirements, the leverage ratio, static capital requirements, we have added an extra level of higher requirements for those firms. i believe it's appropriate in the stress test. >> net added benefit of adding the surcharge as part of the exercise. what do you see the benefit to that? >> it's a forward looking exercise in which we look at how these firms would perform and in a circumstance. >> i think it's important that these firms be resilient. let me just say that we are doing a five-year review of the stress test and we'll probably make other changes as well that could be partially offsetting in terms of capital levels.
>> the federal reserve bank minneapolis president made comments regarding his contact with the community bank in seeking to get a loan. his comment was that he saw through an extraordinary painful process. this is his own personal experience. he went on to say that these community banks suffer under the new regime. he added that the notion of let's sofl too big to fail and relax those on not at risk he supports that philosophy. i want to emphasize again and some has been said today, the real issue of addressing these community banks, i served on board for a a decade. today there's not additional community banks that are being formed because they don't see that capability.
they don't see that ability to support the requirements of the regulatory burden. i would just emphasize that need to you. >> time has expired. the chair recognizes the gentle lady from new york. >> thank you very much, mr. chairman. chair yellen, when you were here in february, i asked you whether the e decline in inflation expectations to historically low levels had caused you to rethink the inflation projections. you said that it's something that you're evaluating closely, end quote. since february, however, inflation expectations have fallen even further. why do you think they have continued to decline? >> some measures have declined and others have not. serving measures like the michigan survey of households
has declined. professional forecaster surveys we don't see a decline. we are focused on that, but the decline we have seen in energy prices going back some time may be influencing households perceptions. we have also seen declines since i was here last in what's called inflation compensation, which is market based measures of the extra yield that investors require to hold longer dated treasury, nominal securities over tips and that's not a pure measure of inflation expectations. inflation risk and the value given the global risks that investors attach to treasuries
is a safe haven may be playing a role. we watch this carefully because it can feed into actual price setting, but it's running 1.6% over the last 12 months. it's moved up some. headline inflation is moving up as oil prices have come up some and stabilizes and as the dollar has stabilized. and we need to keep track of this. it is a risk. but inflations behaving largely as i would have anticipated. >> well, how long do we have to go without an increase in inflation expectations for you to reconsider your plan to gradually increase interest rates? >> we're watching inflation and inflation expectations. as i said in spite of some of these measures declining
further, actual inflation is moving up and roughly in the manner we expected and we're also watching the labor market as the labor market tightens and we see pressures developed there. we certainly are contemplating some further increases in short-term rates if things continue as we expect we want to make sure -- we want to get inflation back to 2%. that's our objective, we're committed to that. but we want to make sure that inflation doesn't rise to the point where we compromise price stability either. >> i'm very concerned about the recent cyber security breaches involving swift in which hankers successfully stole foreign bank's swift credentials and then initiated fraudulent funds.
i sent a letter last month asking what your agencies are plan i planning to do in response to these truly unprecedented attacks. can you give us an update on the banking response to these attacks? are you concerned that these cyberattacks could undermine confidence in the international payment system and even though the hackers have not successfully stolen the swift credentials of a u.s. bank, which would -- what effect could these attacks have on the u.s. banking system? it certainly rattled me that this happened. and as you know, the federal reserve is one of the ten central banks that collectively oversees swift. what has the fed done in its capacity as a regulator of swift to respond to these attacks? i must tell you, if i go to a foreign country that i'm not expected to be in, my bank stops my transaction until i tell them it's okay.
it is, to me, quite unbelievable that such a large amount of millions of dollars could be transferred to sites, including a casino in the philippines. i think this is a threat to the u.s. banking system. competence for it. >> let me just say, the new york fed systems weren't compromised, but they are looking at their processes, looking at what's best practices. looking at the possibility of enhanced monitoring for certain kinds of transactions. we expect the institutions, we supervise to make sure that they comply with procedures to control access to critical payment services. and to review and insure that they're meeting security requirements. we do participate in an oversight arrangement for swift
run by the -- >> the time of the gentle lady from new york has expired. the chair wishes to advise members in order to accommodate the witness's schedule, the chair intends to recognize three more members. currently, the queue would be mr. bar, mr. rothmous, mr. williams. >> thank you, mr. chairman. welcome back to the committee, chair yellen. william dudley recently acknowledged a link between post-crisis regulations and liquidity problems in treasuries, corporate bonds, and asset-backed securities. specifically, he stated that capital liquidity requirements for the largest securities dealers which have been raised significantly since the financial crisis have adversely impacted market liquidity. these regulatory changes have affected the dealer intermediation activities and consequencely the provision of market liquidity. do you agree that market
liquidity has declined since the implementation of these post-crisis regulations? >> it's really difficult to tell because by many measures, market liquidity remains quite adequate and hasn't deteriorated, but we certainly hear and have seen some evidence that under stress, liquidity may disappear. there are a bunch of different factors that we're looking at that may be relevant to that. regulations are on the list. i'm not precluding a role there, but there are changes in business models, high frequencely trading has become very -- >> let me just interject right there. do you agree with your colleague, mr. dudley, that volker risk retention key lack some of the supplemental ratio and some of the other
requirements have decreased trade sizes, have resulted in fewer active trading participan participants? there's a transfer of market making activities out of highly regulated banks and into the less regulated shadow banking sector which has less capacity to act as a liquidity provider. >> so i didn't know that he said that long list. >> i got a little more specific than he did. >> okay. >> but that's really what's happening according to a lot of the market participants. >> you put a lot of things on the list that i'm not aware of any research suggests or in any way relevant to this phenomenon. i'm not aware of research that documents what the role is of any specific regulation, but it is something we will look at. we are looking at -- >> let me follow up on a question, a specific question about this issue that i asked you in february. i asked you how the fed was reviewing and tailoring the
fundamental review of the trading book for the domestic market. that's a rule that increases capital held in the bank trading book by up to five times the amount already required under b basel 3, and they said it would become uneconomical if it's not tailored to the u.s. marketplace. that's a big deal because if it's uneconomical for morgan backed securities, auto loans, credit cards, loan obligations, and if banks pull out of the abs marketplace, that's a $1.6 billion source of consumer lending. that's 30% of all lending to u.s. consumers. so how is that going? you indicated to me four months ago that you were taking a look at that. how is that going? >> i need to get back to you with further details, and i'll do that. >> thank you for doing that. we need you to take a look at it. tailoring is very important.
and kind of to conclude, you know, in your prepared remarks, you indicated that business investment was surprisingly weak. surprisingly weak. maybe the reason why the fed is surprised and continued to miss on forecasts and the fed as the "washington journal" pointed out, estimated 2.4% growth in december, that had fallen to 2.2% by march. this month, it was down to 2%. and it follows the federal reserve's consistent record of forecasting error. from a standpoint of predicting stronger growth than is actually occurring. maybe the reason why the fed is missing out on these forecasts is that you continue to view fiscal policy as a, quote, small positive when it's obvious to everybody in the private economy that overregulation is producing illiquidity, drying up access to capital. you're very cognizant of keeping interest rates low.
you're putting off raising rates. it seems to me contradictory to the lack of attention that the fed seems to be giving to overregulation as an impediment to economic recovery. i would like you to comment on that. >> well, growth has been disappointing. i'm not sure of the reason, but our forecasts of the unemployment rate and progress in the labor market have been pretty close. and we have seen a lot of job creation, firms that are doing relatively little investing are doing a lot of -- are doing a lot of hiring. >> time of the gentleman has expired. the chair now recognized the man from pennsylvania. >> thank you, mr. chairman. chair yellen, my colleague, mr. foster, touched on the issue with custody banks. i want tafollow up a little bit. i asked you previously about custody banks and their ability to accept depause lts because of the supplementary leverage ratio
rule. is the fed studying or analyzing how the supplementary leverage rule is impacting the custody banks' ability to accept deposits? >> we will look at that. i'm aware of concerns around that. >> there's no current study that you're going to do or you're planning on doing it but you're not studying it today? >> we don't have a study under way, but you're talking about a handful of banks, and the impact this has on them, and we're aware of the concerns around this, and we'll look at it. >> if a bank is charging for a deposit, that's the equivalent of a negative interest rate, would you agree with that? >> would that bank for that class -- >> if custody banks are unwilling or unable to take client cash, where would the cash go? any idea where a customer might park that cash? >> they might put it in other
banks that are less constrained. or money market funtsds. >> purchase treasuries. >> or do other things, yes. >> as you know, both the proposed net stable funding ratio rule and the liquidity coverage rule use the same thresholds to determine whether and to what extent those rules apply to financial institutions. specifically, any institution with more than $250 billion in assets is subject to the full version of the rules. in prior testimony, though, you indicated that the full furvers of these rules should apply to those that are internationally active. yet in defining the term, you indicated that institution could be considered as such merely if it has more than $250 billion in total assets, even if it has no or limited foreign activities. could you explain why a bank should be considered internationally active even if it has no or very limited foreign activities? >> i'm not sure exactly what
firms you're referring to. i don't have enough detail on that to be able to -- to tell you the answer. i'll get back to you. >> i would appreciate it. we'll follow up with you. any firm with more than $250 billion being somehow deemed to be internationally active. that's what we would be curious to learn. i want to touch on, it's been talked a little bit about, with the head winds. you talked about headwinds the last time you were in, headwinds to the economy, headwinds today. the fed is not operating in a vacuum. there has been discussion about any number of issues that are going out there. you would agree that low interest rates themselves not a headwind, right? >> no. >> and in fact, with low interest rates, you would expect much more robust economic growth. >> that's correct. >> you expect -- you testified you expect the headwinds, to,
quote, slowly fade over time. i contend those headwinds like i did last time are regulatory and we had a discussion here today about some of the regulatory impact. a number of members have raised this issue because we're hearing it from our constituents back home, small businesses. i contend it's the regulatory and fiscal policies this administration has pursued which is not -- again, the fed is not operating in a vacuum. higher taxes, the affordable care act, epa, dodd/frank regulations that i contend are missing because dodd/frank missed the mark. would you consider any of these regulations or fiscal policies to be headwinds to the economy? >> i would say that productivity growth and growth in the economy's capacity to supply goods and services has been pretty meager. and we're really not sure what the cause is. i would point out that it is a global phenomenon. we're seeing this in many parts of the world.
>> but you also see other countries imposing other regulations on their economies as well. >> well, the reasons may not all be the same in different countries. i don't think we really have a very good handle on it. >> i'm concerned because you talk about the headwinds. yet you're not diagnosing the full scope of what the headwinds are. and as we look at the performance of this economy, which is sputtering, and looking at the constituents i talk to, have not seen raises in the small businesses are not accessing capital. i think we have to take a comprehensive look at what those headwinds truly are. i would encourage you to dethat. yield back. >> the chair is going to recognize now the last member who will be the gentleman from texas, mr. williams, recognized for five minutes. >> thank you, mr. chairman, and chair yellen, thank you for being here. i'm from texas. i'm a small business owner. i have been for 44 years. i appreciate your testimony. last july, we had a chance to chat about community-based financial institutions.
further ask you when i go back home, what should i tell the community bankers, the credit unions who feel they're being penalized even targeted for the financial collapse of our economy. you said you're trying to do everything you can to relieve burdens on community banks that have been through very difficult times. madam chair, one year later, community based financial institutions are still feeling the pain, i can tell you, and most of them don't see any relief in sight. now, recent research from the murqaeda center shows the dodd/frank act creates more regulatory restrictions. over 27,000 restrictions for all laws passed through 2014. clearly, someone around is not getting the message. so in your experience, is the more difficult for a small institution to comply with new regulatory mandates than it is for a larger institution? >> well, very small institution certainly would recognize there are burdens involved.
we have also tried to tailor our regulations so that there is less burden and many fewer rules applied to smaller institutions. there has been an increase in the capital standards that apply to those institutions, but most of the things we have discussed today stress tests, t-lac, other things, liquidity regulations, don't apply to those institutions at all. as i said, we have tried to make many efforts and will continue looking for ways to simplify the regulatory regime and the capital regime for those institutions. >> have the number of regulatory changes affected the community financial institutions ability, you think, to offer products and services to consumers more than
it has affected larger institutions? >> i don't know that it's affected smaller institutions more than larger institutions. >> well, i would submit that it has. i wish you would take a look at it, because to be honest, i don't really know how you start a business -- like i say, i'm a business person. i don't know how you start a business in this economic environment. i don't know how a new business even secures capital. or is able to remain profitable. one thing you said earlier is that corporations can secure credit. they can secure capital. but i'm a main street person. and i can tell you, i don't see that opportunity being able to get capital and start a business right now with main street. so let me just close by saying this, madam chair. i ask these questions because the federal reserve is responsible for the regulatory oversight of that 5,000 bank holding companies, 850 depository institutions. i personally have heard from banks in my district of the
disproportionate impact of the regulatory burden is contributing to increased industry consolidation. my question would be, would you explain -- would you please explain the negative consequences that result from consolidation and effects of consolidation on the local and national economy? >> well, community banks are very important in supplying kinds of services to their communities that may not be readily available from larger institutions. and i certainly agree that it's important that they remain healthy and vibrant and able to thrive and contribute to the growth of their communities. >> reducing regulations would help that. so please take a look at it. main street america is hurting. there is a difference between main street and wall street. mr. chairman, i yield my time back. >> gentleman yields back. i wish to thank chair yellen for
her testimony today. without objection, all members will have five legislative days within which to submit additional written questions to the witness, to the chair, for which will by forwarded to the witness for her response. i ask chair yellen to please respond as promptly as you are able. without objection, all members will have five legislative days within which to submit extraneous materials. this hearing stands adjourned.
the fed chair janet yellen's second day on capitol hill as she testified yesterday before the senate banking committee. that chair normally testifies kwies a year to update lawmakers on the state of the economy and monetary policy. you can watch this hearing along with her testimony yesterday before senate banking on our website at c-span.org. the issue of gun legislation has taken center stage in the house today. about 40 house democrats, we understand, have gathered in the well of the house. they gathered there at the end of the morning hour speeches and started a protest over congressional inaction on gun legislation. georgia congressman john lewis started the protest with a speech and shortly afterwards, members began a sit-in. this tweet from congressman lewis from newtown to charleston, how long will it take for congress to act? we have to occupy the house until there is more action. also, maryland congresswoman donna edwards tweeted out, she tweeted out the time to occupy the house to demand action.
understand members are still in the well. the house did go into recess as they typically would, but then they gavelled in at their scheduled time, which was noon here today, to get legislative way under way, and that group of house democrats were still all gathered in the well of the house. the prayer and pledge of allegiance were offered, as usual. members then continued with chants and protests, after which the house went into recess. subject to the call of the chair. now, we understand this is all still going on. we would love to show you what's happening on the floor of the house right now, but you should know we have no control over the cameras in the house or in the senate. understand again members still there giving speeches and demanding congressional action to stop gun violence. house minority whip steny hoyer released a statement that said today house democrats are staging a sit-in on the floor of the house to demand a vote on legislation to address gun violence after the unspeakable slaughter of 49 innocent people in orlando. it's unconscionable that house republicans would continue to block a vote, even on
commonsense safeguards. at least one senator has joined the house protest, dick durbin, minority whip in the senate. it is at this point unclear when the house will come back into session or what will happen next, when members do return, you will be able to watch it on c-span. >> we'll go live now to remarks from labor secretary thomas perez, started just a couple moments ago. he's the luncheon speaker at the national press club today. >> before we can talk about the best america, it's critical to understand that america is doing remarkably better than we were back in 2009. all those people who say optimism is uncool frequently deny some of the facts. despite what the eyour caucus wants you to believe, we have come a long way since the depths of our economic crisis. thanks to the grit and determination of the american people combined with the leadership from the private sector, sound policy decisions, by the obama administration, tough votes to enact the
stimulus bill, we are back on our feet as a nation. in the three months before the president took office, we lost 2.3 million jobs. the auto industry was on life support and there were a number of people saying pull the plug. the unemployment rate was inching toward 10%. weekly first-time claims for unemployment were over 600,000. today, the unemployment rate is below 5%. we're in the middle of the longest streak of private sector graub growth on record. 75 consecutive months to the tune of 14.5 million jobs. initial claims for unemployment benefits have remained under 300,000, less than half of those 2009 levels for 67 consecutive weeks. that's the longest streak since 1973. according to the latest data, job opening are as high as they have ever been since we started keeping track of this data. 5.8 million jobs. in the depths of the recession, roughly seven seekers for every
job opening. today, 1.4 job seekers for every job opening. the auto industry is back and stronger than ever. the auto industry has added nearly 670,000 jobs since mid-2009. and auto sales were at a record high last year. our auto exports are 85% above 2009 levels. and yet, despite this progress, there are some who have found it expedient to tell you and make the argument that we're worse off than when the president took office. that famous newspaper, the onion, president obama turns 50, over republican opposition. you might hear from some, and i have heard from some that the unemployment rate is something like 40%. not what it really is. well, i guess that true if you counted your 98-year-old grandmother or the 11.9 million americans over 80. your high school freshman, i had one coming up, the 20.7 million
americans age 10 to 14. you might hear that other countries are choosing to invest elsewhere. you might hear that putting a republican in the white house is the only way to create jobs. well, frankly, you know, facts matter. and the facts prove that the eyore caucus wrong every single time. in the first five years of the recovery, the u.s. put nearly twice as many people back to work as uk, germany, france, and japan combined. the affordable care act turned out not to be that job killer that so many folks predicted. quite the contrary, since march of 2010, we have added 1.8 million jobs in health care while transforming and saving even more lives. after five years of the affordable care act, more than 16 million americans have gained coverage. the uninsured rate is the lowest ever recorded and we just had a meeting of the social security and medicare board of directors today on which i serve. the medicare trust fund is more
solvent today because the aca continues to bend the cost curve. we remain a magnet for investors. study after study, boston consulting group, shows a majority of business leaders say america is the best place in the world to invest. and to claim that job creation under president obama has been anemic, once again, let's do the math. if you go all the way back to 1981 and add up all of the private sector jobs that have been added under republican and democratic presidents, i'm talking about net new job growth. jobs gained minus jobs lost, under the leadership of clinton and obama, which is 15 years and change. the change is 212 days. i don't know whether the 20th counts as half a day. american businesses have added a net of 31.3 million jobs compared to 15.8 million net new jobs added under presidents reagan, bush i and bush ii.
20 years of republican rule, 15.8 million jobs. 15 years and change of democratic rule, 31.3 million jobs. nearly double the number of jobs created under a democratic administration. and these are good jobs, too. exactly what we would expect in a solid, sustained recovery. the jobs that have been created in recent years we have seen strong growth in middle and high-wage jobs. and my house calls affirmness good news. we have the greatest and most rezil ypt work force in the world. remarkably innovative business leaders and they give us the tools we need and we have the tools we need to succeed and prosper. i truly believe america is at its best when we make sure we offer a hand to working people who have gotten knocked down. and undeniably millions got knocked down. people like catherine hackett who i met, and when i met her, she had done everything right. single mother of two.
both her kids are serving in the u.s. military. walked into work one day, told her services were no longer needed. when i met her, she told me she wore a winter coat in her home in connecticut because she had to turn the heat down to 58 degrees. she talked about what she referred to, and these are herwards, not mine, her poverty of spirit because the dignity of work is more than simply a paycheck. it's everything that comes with it. and her spirits were lifted from the assistance she got from the work force system. i often return to the department of labor as match.com. we match job seekers who want to punch their ticket to the middle class with employers who want to grow their business, and using some of those tools, she got back on her feet, and i love visiting her a year or so ago with governor dan malloy from connecticut. not only is she thriving. she's been promoted. she's back on her feet. america is at its best when workers get a chance to share in the prosperity they helped to create. in a town i have to talk about a new york story, in new berlin, new york, you can visit the
chobani yogurt factory. we contribute a lot to their success in my family. and their ceo, he grew up in a small village in turkey, and came to america to study english and take a few business courses. looks like he could teach a few business courses, my friends, because with almost no experience in 2005, he took a big risk, he purchased a yogurt factually that was being closed by kraft foods and over the ensuing years, he and a loyal group of employees grew chobani into the top selling yogurt brand in the united states. and earlier this year, he announced that their 2000 workers would receive shares worth up to 10% -- excuse me, 10% of the company when it goes public or is sold. to state the obvious, that ain't pocket change. chobani is believed to be worth billions of dollars, and reflecting on that decision -- bless you, bless all of you for that matter -- he said i built
something that i never thought would be a success. i cannot think of chobani being built without all of these people. and he isn't the only adherent to the stakeholder model. everywhere i go, i meet business leaders who think long term and reject the false choice that you either take care of your worker or you take care of your shareholder. they understand that shareholders are best served when all stakeholders, including but not limited to your workers, are well served. it's no accident that glass doors best places to work out perform the overall market year after year. according to the most recent reports, the companies on the list beat the return on the s&p 500 by as much as 122% between 2009 and 2014. the high road is indeed the smart road, my friends. america is at its best when we look ahead instead of fighting yesterday's battles. understanding that change is a
constant in america. i saw this first hand when i visited eastern kentucky with a loss of coal jobs continues to create challenges for so many generationally employed families. as a kid who grew up in buffalo, new york, i understand what they're going through, but there's a high-tech industry starting to emerge. they call it the silicon holler. and there's bit source, training former coal miners to write coat a code and to thrive in these software jobs. one guy i met that week, he got a call the week before i was there from the coal mine saying come on back. we have a job for you. he told them no. because you know what? i've got a future here at bit source because we are going from coal to code. that's their motto. i met another person there who had a screen saver shot of his 1-year-old, and he said, you know what, when that son of mine comes to me and says, tom, i -- dad, i can't do something, i'm going to tell him, i couldn't
turn a computer on a few years ago and now i'm a coder. you can do anything you put your mind to. that's why i am optimistic. i meet people all the time, every corner of this country, who have grit and determination, businesses who are forward leaning. and i meet so many businesses who understand that america is at its best when we give people a second chance. the story shows us that the right resources at the right time can transform a life and a community. that's why the administration has invested so much in innovative programs to help people get out of the criminal justice system. and i made a house call to montgomery county correctional facility up in pennsylvania. they have a behind the fence program for inmates if they can get a chance at a good job upon release. the best way to reduce recidivism in this country, my friends, is to make sure that people coming out of correctional facilities have the skills to compete when they get out. and i met a young man there
named scott who took advantage of the program and got a great job at anv mechanical when he got out. he's back on the pathway to success and self-sufficiency, and there's remarkable bipartisan consensus emerging around easing former inmates' re-entry to the work force. you may not have heard as much about it because it's not flashy, so the reality, though, is they brought together van jones, the koch brothers, newt gingrich. when you have done that, you might be on to something. and criminal justice reform, i think, is an issue that is at long last meeting its moment. i firmly believe that america is at its best when everybody has a voice in the workplace. innovators like sarita gupta are getting us there. she leads two organizations that are all about helping workers speak up together for better wages and benefits. through her efforts at jobs for justice and caring across generations she reminds us the work of caregivers is truly the
work that makes all other work possible. everyone in the industry deserves to say in the decisions that affect them. and those of us in the obama administration could not agree more, and that's why one of the things i'm most proud of in this job is when we issued a final rule to extend minimum wage and overtime protections to nearly 2 million home health care workers, the overwhelming majority of whom are women of color on food stamps. doing god's work, but not getting paid a fair wage. we are also at our best when people get the tools they need to succeed at work and at home. i have seen it in many house calls i have made to the florida avenue grille, both in my official capacity as a secretary of labor and in my personal capacity as someone who loves great food and loves to spend his money at a place where i know the owner takes care of his workers. and puts his workers at the
center of his universe. he's here with me today. what i love about him is he rejects the fiction that food service has to be a low-wage no-benefit industry. he pays well above the minimum wage. he offers paid sick leave. he told me today that he's initiated a 401(k) program. he hires team who have been involved in the criminal justice system. and by the way, he is a nice guy, but he doesn't do it because he just wants to be a nice guy. it's inenlightened self interest and he figured out attrition has a real cost. when you voa loyal work force, you have a productive work force. and finally, america is at its best when we fully enforce the laws that protect workers. i don't have to make a house call to be inspired by the dedicated public servants at the department of labor. i have spent the majority of my career in the federal enforcement business. doj, hhs, and dol. the dedicated career staff at all of these places are truly
the backbone of these organizations. and it frosts me to no end when politicians go after the dedicated career professionals who work in federal, state, and local government. every day, they help millions of people punch their ticket to the middle class. since 2009, we have recovered in our wage and hour division alone, nearly $1.6 billion in back wages for more than 1.7 million workers. and in just the last few months, we have completed historic rule making on issues of the heart of what it means to be middle class in america. worker safety, wages, retirement security. the rule that limits worker exposure to deadly silica dust has been quite literally decades in the making. francis perkins convened a national conference on it in 1938. you can hear her talk in 1938 about the dangers of silica, and
here we were in 2016 finally public policy caught up with the science. because you know what, we're protecting 2.3 million workers who are exposed to crist alean silica. and we have also updated our overtime rules so more people get extra pay for extra work. when i grew up in buffalo, new york, my friends whose parents were managers, those were middle-class jobs. and middle-class jobs should pay a middle-class wage. and our rule has more than doubled the celery threshold helping 4.2 million people become eligible for overtime and it will raise americans' pay by an estimated $12 billion over the next ten years. and by the way, and there were a few folks, and i'm using fdr's turn when he refer today the fair labor standards act, he said this will be the end of the world as we know it, the total pay roll increases associated with this rule are well under .1%. this rule, again, stands for the
idea that low wages and no benefits are not, and i repeat, not the cost of doing business in the 21st century america. our conflict of interest rule established a fundamental principle of consumer protection in the american retirement marketplace. your best interest should come before your adviser's financial interests. the three most important decisions we make, medical, legal, and financial in our lives. when you go to your doctor or lawyer, they have a legal and ethical obligation to put your interest first. financial advisers should have the same obligation, and they do now as a result of this rule, which is akin to a $20 billion tax cut for working families who are trying to save for retirement. traveling around the country and meeting these people and keeping a close eye on these economic indicators absolutely shows me america at its best, but as i said earlier, i also see an america that can and must do better, because for all the
hamdis that understand that prosperity must be broadly shares, there are still some who are trapped in what business leader called the quarter by quarter result vortex. they refuse to make investments in the long term because it won't show up in the balance sheet right away. another ceo once told me a renegade share holder who wasn't interested in thinking long term and when she tried to reason with him by telling that person that this would be good for the company because we will be wealthy in the long term, instead of thinking short term, and he said, and i quote, i would rather be rich than right. for all the sarita guptas and chris owens from the national law program who are fighting for people to have a voice at work, we have to be honest. there are a lot of folks who are seeking to quash it. last year, a prominent conservative was caught on tape boasting that he wakes up every
morning trying to figure out how to screw with unions. when you screw with unions in my opinion, you screw with the middle lass and with the livelihoods of millions of working people across the nation, because for all the leaders like imar who are provided paid leave and mic microsoft and nestle and spotify, there are way too many people out there when faced with the untenable choice between the job they need and the family that they love, and you shouldn't have to win the boss lottery to get access to paid leave or a decent wage or the geographic lottery. i met a woman in connecticut named careen. she gave birth via c-section. she's a bus driver. and because of the absence of paid leave, her only choice was to go back on that school bus a couple weeks after her child was born and put that newborn on the front row, and all the little kids who have the sniffles were getting on that bus as well. we can do better than that. i met a woman named alicia in
detroit, she works a full-time job, but she's barely making ends meet. she slept in her car with her three children the night before i met her. we can do better. we can do better by all of these people. and in the year 2016, it is unconscionable that we're still having these debates. we must move forward, but regrettably, we have not had a dance partner in the republican congress. and that's why the obama administration has used every tool in our tool kit to make change. i believe the question before us is whether we can sustain and scale this progress that we have made during the obama administration, or whether we're going to turn the clock back. and you know, as i reflect on history, the isis not the first time we have been at a crossroads like this. we have seen this movie before. i remember the know nothing movement of the 19th century which ran on a platform of nativist fear, anti-catholic,
anti-immigrant, and it failed because it was fundamentally un-american. in the 1880s, that passed a law called the immigrant act. every time we have been at these cross roads, we have appealed to our better angels of inclusion and opportunity and optimism, and we have returned to those first principles. one of my favorite people is walter isaacson, and he's a remarkable storyteller. he tells a story of albert einstein who came to the u.s. from germany the year hitler took power. and during the mccarthy era, he tells the story of a letter thattithat i einstein wrote to this son because he was worried about the direction of this nation, the united states. he felt like mccarthy was no different than hitler. he said he had seen it before and he was worried he was going to see it again because that brand of hysteria was all too familiar. then as the movement fizzled, he wrote another letter to his son, and he said, and i quote, there's something amazing about
america's democracy. it's got a gyroscope, and just when you think it's going to go off the cliff, it rights itself. but here's the thing about the gyroscope, my friends, it doesn't kick into high gear by accident. the gyroscope recenters us only when we come together. it takes all of us standing together to help keep america moving toward the best america. it takes the collective power of we, the two letter word barack obama rightfully calls the most important word in a democracy. over the last seven years, we materially improved the lives of working families, millions of them. we have been able to bounce back from the worst economic crisis of our lifetime. we have been able to extend overtime protections. we have been able to protect people in their retirement space. but we in the administration didn't do it alone. we had partners in this room, partners across america, and we can't do it alone. i'm so appreciative of so many leaders in the business community that supported our
conflict of interest rule, people like jack, who said you know what i learned in the business? when i put my customer first, it's great for my customer, and it's great for business. he knows a little bit about the retirement space. i met so many business leaders who understand the importance of the stakeholder model of governance. people like the ceo of the container store who is one of the leaders in the conscious capitalism movement. we need leaders like kit and imar and so many others to be the rule and not the exception. we have to scale the progress that i see across the country and the progress that our evidence, our fact base notes. that's why i spend time talking to tomorrow's leaders about the fact that we can do better as a nation. you don't have an obligation to genuflect at the alter of quarterly earnings. the gyroscope runs on that leadership and takes innovation,
forethought, fearlessness and that leadership that involves thinking long term, rejecting the false choices and understanding that idealism and pragmatism are not mutually exclusive. where have seen that work done by my former boss, senator kennedy. i see that work done by my current boss, barack obama, on so many issues. innovation meaning moving forward without leaving anyone behind. innovation we have known to be america's middle name, and the key to long-term success is to make sure that innovation is indeed inclusive innovation with benefits to everyone. innovation, i see in people like dan, who founded a start-up managed by q. the quintessential 21st century start-up, an odemand app for office management. dan insists all of his employees be w-2s, have access to training opportunities and get stock options. that's what it's about. he understands that culture matters in every workplace, and he has built that culture of
inclusion into a very, very successful business model. forethought means seeing around corners. it means playing chess instead of checkers. it means not allowing the challenges of today to bind your ability to investigation a better tomorrow. i saw that forethought when i visited ford. they were in at existential crisis in 2007, but coming together, ford and the uaw were able to develop a vision of shared prosperity, shared sacrifice, in the days of the great recession that led to shared prosperity. i had the privilege recently of spending some time with the cwa and ibew and the folks at verizon, and verizon and its workers understand that they are stronger together. it was a tough 13 days, but we got through it. collective bargaining can sometimes be a little messy. but you know what? i believe to my core that collective bargaining is one of the single most important forces that has brought us middle class
prosperity in our nation's history. and we need to keep being that way. we need to keep being fearless. fearlessness is craig bowen, the ceo of the heb grocery chain, a $23 billion grocery chain competing in a low-margin industry, and craig was one of the strongest supporters of our overtime rule. and he supported it because he understands that his workers are at the center of his business model. he understands that because he believe believes that the low road is a dangerous road. we need to take the high road. all of these people fuel my chronic optimism. but people will also tell me that, you know what, you need to be impatient as well. i'm chronically impatient as well as chronically optimistic. i'm chronically impatient because i meet a lot of people every single day who are running out of time. alicia in detroit, so many others, and i am confident that as we approach the crossroad and
choose our path, that when we summon and continue to summon our leadership, innovation, forethought, and fearlessness, we can move forward and scale and sustain our progress because that's what it's all about. building upon the foundation, scaling it, and sustaining it and make sure that we build an america that works for everyone. an america of shared prosperity for all, not simply prosperity for a few at the top. that's the unfinished business of this recovery. i got 212 days to keep working on it, and i'm ngoing to try my hardest to wake up making sure we're helping on that road to shared prosperity. thank you so much. i look forward to your questions. [ applause ] >> thank you, mr. secretary. it almost seems like you're running for a certain job out there. but we'll get to that in a few minutes. wanted to ask you first starting off, many states and cities have raised the minimum wage, a
significantly already, what has been the impact so far? >> well, you know, what's interesting is a few years ago, if you talked about the fight for $15 movement, people laughed about it. that's just out in washington state. well, that brushfire turned into a prairie fire that's been an out and out wildfire. now roughly 20% of the u.s. population lives in a state or locality that either has passed or is about to pass a $15 minimum wage. i talked to a lot of my republican friends here in d.c., and i say, boy, that $10.10 you refused to pass kind of looks like pocket change now, doesn't it? we need a federalfora, and a federal floor which vindicates the principle of the fair labor standards act that nobody who works a full-time job should have to live in poverty. and the proposal from bobby scott and patty murray does just that. then we need to have the
opportunity for state and local governments to go higher than that floor to reflect what's happening in their communities. and we have been actively involved at the president's direction with state and local efforts to go above the federal floor. it's unfortunate that our politics are broken here because the minimum wage historically has been a bipartisan issue. every president except two since fdr has signed an increase in the minimum wage. and i hope the president will not make it to the third person on that list, and we're going to try like heck to make sure we pass one this year. >> thank you. let's say it's friday morning. you wake up and learn the united kingdom voted in favor of brexit. what do you do next? are there white house emergency meetings planned for friday to handle a brexit exit? >> first of all, i believe the premise of that question will be wrong. because i believe that in moments like this, it's not simply people here in the united states that summon our better angels of inclusion and
opportunity and come together as opposed to tearing apart. the country that just elected the first muslim mayor of london is the country that will send an important message to the world. we have obviously been monitoring it very carefully. the folks in the uk need to make those judgments. and i am confident that in the end of the day, they are going to make a judgment that we're stronger together. and that's why while again we're preparing for the worst, we believe that the worst will not come to bear. >> okay. let's say you're wrong. what does a brexit leave vote do to american workers? >> well, we have to -- we'll have to examine all of that. there's a lot of relationships, trade relationships. it's not just american workers but what does it do to folks in the adjoining countries to the uk? and that's why i think we're going to succeed.
because again, the reason the know-nothing movement fizzles is we were able to summon our better angels. this is not the first time in world history or in our nation's history that we're going through a moment like this. and i think that gyroscope is going to calibrate in a positive direction in the uk and elsewhere. >> thank you. law 368, legal publisher in new york recently agreed to drop noncompete agreements with its employees. how important is this decision for working people and what types of broader change would you like to see going forward on noncompete agreements? >> i have real issues with noncompete agreements. let me give you one example. jimmy john's. you know, they sell sandwiches. they have a noncompete that every employee, so you're making a sandwich at jimmy john's and you leave because subway will pay you more. you signed a noncompete with jimmy john's.
i rest my case, your honor. they are not right. we need to make sure that we have leveled the playing field for workers. and i can't for the life of me understand either that one or really any of the others, and what we have right now is a patchwork quilt of state laws, in some states you can do this and other states you can't. in every state where i think they do have one, it creates an ublevel playing field for workers. >> what do you think of the trend for employers to ask employees you're about to lose their jobs to sign an agreement not to sue? job loss is usually accompanied by a one-time payment? >> well, you know, when you are about to lose your job, you are not exactly in a position of advantage. and when you then add insult to injury by saying you can't sue me, you know, that borders on unfairness as a matter of law. and so i have real issues with
that. and sometimes there will be a settlement that is an arm's length settlement and both parties agree to it, and a nonsuit is part of the settlement. so that may be useful in some context, but i just in the work i have done over the course of the last 20 years seen too many examples of somebody who had no choice and the inequality of bargaining power at that point really tilts the playing field against workers. >> talk about something in the news today. the house is expected to vote to override the president's veto of a resolution to kill the fiduciary rule. although the override isn't likely to succeed, there is a clear divide. democrats support it, republicans oppose it. why has this issue become partisan? >> you'll have to ask paul ryan and others. i speak to folks -- the interesting thing -- by the way, they're going to have another
vote, and the president's veto will be sustained. when this came up the first time, every single democrat voted the right way. and by the way, we're not going to have a vote today on flint. you know, we're not going to have a vote today on the minimum wage. we're not going to have a vote today on so many other issues that are pressing in america, but we're going to have another vote on this. i don't know if they're going to schedule another aca, you know, vote number 65. i mean, we have a controlled experiment, my friends, that has been going on across america for decades, which is that there are some financial advisers like the one my wife and i use, who already hold themselves as fiduciaries, certified financial planners. they're already doing it. the hypothesis that making an adviser put your best interests first is going to dry up the industry and result in everyone going to heck in a hand basket, if that's correct, it should have happened. but the financial planners and
others have been able to move forward and to thrive because you know what, when you do put your customers' best interest first, it's great for your customers and it's great for business. and go look at the marketing materials that the businesses put out. we put your interests first. and our rule simply says it's no longer a marketing slogan. it's the law. and i don't think that's too much to ask. there's five lawsuits now, and one of them, my favorite claim is it infringes on their first amendment freedom. i have four siblings that are all considdoctors. i said if you ever get sued for malpractice, assert a first amendment right to give crappy advice to your patient. see how far it gets you. >> you just referenced the five lawsuits. you said before it's going to withstand legal and legislative scrutiny. you remain confident none of the points in all five are going to stand up? >> i'm very confident for two reasons. number one, the process.
we had a very, very inclusive and deliberate process. and one of the most frequent things we heard after the final rule from industry was thank you for listening. number two, we got the outcome right. we no longer live in the leave it to beaver, ozzy and harriet world where you work 30 years in the same place and you retire and you had a party and a defined benefit plan. you know, 401(k) was a hereal highway in missouri, and uncle ira was your very nice 75-year-old uncle. and now in today's world with iras and 401(k)s, the consumers, workers have to make those choices. and so we need a 21st century regulatory landscape to reflect 21st century reality. >> question from the audience. how do you reconcile the fact that the fiduciary rule will have a disparate impact on smaller advisers unlike larger firms? >> it actually doesn't. i heard that time and time
again. and i got so many calls from people who are already fiduciaries. small and mid-sized and larger. who said when people say i won't be able to stay in the business as a result of this rule, could you do me a favor, tom? could you give them my e-mail? and my phone number, because i'm going gang busters. technology is a remarkable advantage in this world. go on the website of wealth front. they're going gang busters because they have been able to help people of all means move forward. and as one person in the industry said, you know, the market rewards those who are innovative. it rewards those who put their customers first. and that's why jack vogel, who has been in this world, in this space for 60-plus years, van gua guard's a pretty large company. that's why they have been able
to succeed. >> one more on the fiduciary rule. wondering about for millennials who often change jobs, will this help or hurt them rolling 401(k)s to iras? >> it's particularly important. people look at the rule and say this just applies to me when i retire. every time you leave a job if you have a 401(k) or an ira, this rule is very relevant. a big part of the leakage is when people, the 24-year-olds been with a company for three years, they leave, and it's entirely permissible and sometimes the best idea just to keep your money parked where you just were. and what happens right now is people come at you because they see you have left and say give your money to me, roll it over with me and i'll take care of you. unbeknownst to you, you just paid a huge fee. by the way, do me one favor. go to john olver. watch his show from about ten days ago, if you want to learn
why this matters. because i thought he had a pretty good summary of what was going on. 20 minutes of his show was about this rule. you kind of know where it leans. >> any thoughts on the coming retirement of a huge number of baby boomers and what that's going to do and how that's going to affect the labor market. >> sure. our skills opportunities right now are in no small measure a function of the grain of the marketplace. i visited boeing a couple years ago. their plant in washington. and 30% of the work force is within five years of retirement. so that's a tremendous opportunity. and one of the few bipartisan bills that have been passed in congress, 18 months or so ago, was the work force innovation and opportunity act. it is incumbent upon us to build the skills highway of the 21st century. the good news is this is one of
those areas where there's bipartisan consensus. we have invested a lot of money and energy in apprenticeship. more money than ever before. we're building that 21st century skill superhighway because the grain of the population, tom, presents tremendous opportunities. the most important, the most frequent thing i hear from employers is this. tom, i'm bullish about the future. i want to grow my business. the thing that keeps me up as much as knngz at night is i have to make sure i have the skilled workforce to compete. that's why we invest so much in the skill space, in partnership with business, in partnership with state and local government, and in partnership with labor unions and other key stakeholders. >> thanks. let's turn to politics for just a few moments. >> i know nothing about politics. >> thank you, mr. vice president, i mean, mr mr. secretary, excuse me. do you know if you're being vetted by the hillary clinton campaign and how do you feel about being vetted? >> you'll have to ask the campaign if i'm being vetted.
what i know is that i love my work right now, and i have 212 days left of that work. i'm going to make sure i do everything possible to leave the department of labor better and access to the opportunity. >> leave yourself out of this for a second. who do you think would be the strongest vice presidential candidate for hillary? >> i will leave that to the campaign to decide. >> if you are not selected as secretary clinton's running mate, what will you do next? >> i have no idea. one of the things i don't like about washington is when people have the privilege of doing jumps like this, they immediately pivot to how do i leverage this for the next job? if i had a two-hour lunch, that's two hours i can't get back. two hours where i can't help
alicia who slept with her kids in her car. i have a deep faith that whatever will happen will happen. my further taught me if you work hard and have a deep faith, things will work out. that advice has proven to be pretty good. i will think about that when the time comes. i don't want to think about that on the clock. i will be doing a disservice to the taxpayers. >> have you met with anyone from the clinton campaign? >> again, i am continuing to do my best on and off the clock to build an america that works for everyone. >> do you practice that? the mirror often? >> we are making a ton of progress. >> for those of us who are longer in that reagan-mondale debate, are you better off now than four years ago, that is an
appropriate question. is the nation better off than we were in the end of 2008? the answer is absolutely. are we where we need to be? the answer is absolutely not. we have a lot of unfinished business. the journey of american history has been about the journey to build a more perfect union. it's a timeless journey. there never has been a president that had no unfinished business. there is a lot of it. i want to make sure that to use a phrase of the former speaker, we clear out the barn as much as we can so there is more and more opportunity. >> back to politics. what would youing is hillary clinton do to address white
working class men without college degrees. >> what i can tell you is that something i said at the out set which is zip code should never determine destiny. this president has an every zip code strategy. when i went to eastern kentucky, i spent time with harold rogers. a fundamentally dent person with integrity and accomplishment. i grew up in buffalo, new york. i saw what happened when the steel mills shut down. i understand the steel work was not simply a way to get the paycheck. it was part of the identity as coal has been generational. i often refer to myself as buffalo min can. i am proud of my roots from buffalo. what i learned from buffalo is
that every person has talent and moving forward, this president has continued to emphasize. leading that charge. we have to expand opportunity to every zip code and expand broad pant. if we want to build the jobs of tomorrow, we have to have the broad canned. >> let's talk about the other impact. what impact would a donald trump presidency have on latino citizens. >> because i am here in my official capacity, i won't comment on any particular candidate, but what i will say is that america is at its best when we marshall the power of we. i remember going down to selma a year and a half ago or so to celebrate and mark the 50th
anniversary of bloody sunday. the period said the most important word in a democracy is we. when we come together as a nation, we do great things. when we come together business and labor working together, we do great things. those who wish to divide us understand the flip side as well. to divide us is to defeat us. the reason why the know nothing movement fizzles is because we had opportunity and optimism and stick-to-itiveness. the reason we gave the right to vote for women with the 19th amendment was the same. we marshalled the power of we. that's when america is at its best. >> as labor secretary, what advise would you give the candidates when it comes to
workers's rights and minimum wage, etc. >> i don't want to pretend to give advice in my official capacity, about you what i can say to candidates, that is, i can say what i have said many times. henry ford got it right. he doubled the wages of people on the assembly line. he did it because he had attrition that was over 300%. he understood that consumption is two thirds of gdp. he understood that the folks who were making this product ought to be able to afford to buy his product. when we pay people a decent wage, we create a virtuous cycle and that is what we need do as a nation. nobody who works a full time job should have to live in poverty. a $7.25 an hour minimum wage is
not a liveable wage. it's a poverty wage. why we subsidize the business models of so many large companies in this country is something i don't understand. i say to conservative commends about the minimum wage, we can can save billions of dollars and remove people from the roles of food stamps by doing something that is not going to raise your taxes. it just raises the minimum wage. this henry ford economics is why it has been bipartisan since the passage of the fair labor standard. >> before i ask the last question, i have a few announcements. the national club is the world's leading professional organization for joushl journalists and
journalists. www.press.org. i would like to remind you about upcoming programs. on june 30, national transportation safety board chairman chris for heart will address the club. on july 14th, mike roger, the director of the national security agency will speak. i would ask that you respectfully stay in the seats until our speaker leaves the room. i would like to give the traditional national press club the mike. >> my last question, do you watch the show "veep" and have you learned lessons from it? >> when i said at the out set of
my parks, the story about it's uncool to be an optimist and pop cult sur not my strength, one ramification is i watched "veep" i think once and my favorite memory was at the correspondent's dinner when they had the five-minute video of joe biden and "veep." the real "veep" and the mythical "veep" riding together. that was a lot of fun when the first lady caught them eating unhealthy food in the white house mess. >> we will send you a dvd if you would like. thank you, everyone. [ applause ] >> the staff of the journalism institute and i ask you to