From: To: Subject: Date: Attachments: Hulse, Bill Chad Davis Response? Call Report Changes Friday, January 27, 2017 3:40:27 PM RH - Fed OCC FDIC - Call Report Rulemaking 11.10.16.pdf Chad – When can we expect a response to the attached letter? Thank you, Bill Bill Hulse Legislative Assistant U.S. Representative Randy Hultgren (IL-14) 2455 Rayburn Washington, DC 20515 Office: (202) 225-2976 Website Facebook Twitter @nngress of the illniteh acetates Washington. 33? 20515 November 10, 2015 The Honorable Janet L. Yellen Chair Board of Governors of the Federal Reserve System 20"1 Street and Constitution Avenue, NW Washington, DC 20551 The Honorable Thomas J. Curry Comptroller of the Currency Office of the Comptroller of the Currency too Street, sw Washington, D.C. 20219 The Honorable Martin J. Gruenberg Chairman Federal Deposit Insurance Corporation 550 17?? Street, nw Washington, DC 20429 Re: Short-Form Reports of Financial institutions Condition and Income Dear Chair Yellen, Comptroller Curry, and Chairman Gruenberg: On August 15, 2016, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation (the "Agencies") published a proposal to make changes to the Consolidated Reports of Condition and Income {the ?Call Report") for certain institutions.1 While we appreciate your willingness to consider changes to the Call Report, we have concerns that the regulatory relief provided to smaller financial institutions is not meaningful. According to the Federal Financial Institutions Examination Council the purpose of the Economic Growth and Regulatory Paperwork Reduction Act is to identify outdated, unnecessary, or unduly burdensome regulations and consider how to reduce regulatory burden on insured depository institutions while, at the same time, ensuring their safety and soundness and the safety and soundness of the financial system. With respect to the Call Report, we believe a stronger emphasis should be placed on providing regulatory relief, especially considering the substantial outreach and technical input provided to the Agencies on this issue to ensure safety and soundness is not undermined as a result of any regulatory relief. 1 PRINTED OH HECYCLED We have introduced legislation that would provide for a Short~Form Call Report. The Community Bank Reporting Relief Act (HR 4500), which is currently pending before the House Financial Services Committee, would require the Agencies to issue regulations allowing for a reduced reporting requirement for covered depository institutions when making the first and third report of condition for a year, assuming they are highly rated and well capitalized. To assist us in our legislative work, we would appreciate your response to the following questions: 1. Why have the Agencies maintained a "Short-Form" Call Report could not be used every other quarter for certain financial institutions? Do the Agencies have any information demonstrating statistically significant variations in the data from quarter to quarter? What are the safety and soundness justifications for not permitting a "Short-Form? Call Report considering this information will remain readily available to regulators through the supervisory process during the quarters in which it is not reported? 2. Would the safety and soundness concerns be eliminated, if not greatly reduced, if criteria for submission of a ?Short Form" Call Report was limited to institutions that are "highly rated and well capitalized," Rating of 1 or 2) as determined by the Agencies? 3. We understand the Agencies have raised concerns about the revelation of confidential supervisory information, such as an institution?s CAMELS Rating, through the use ofthe above mentioned eligibility criteria. Could this issue be resolved if all institutions are required to file a Short Form Call Report, which is made public, and institutions that are not ?highly rated and well capitalized" are required to additionally file a "Long Form" Call Report that is not made public? 4. Why did the Agencies set a $1 billion dollar asset threshold as one ofthe eligibility criteria in its August 15, 2016 proposal? 5. The Independent Community Bankers of America has proposed a "short form call report," to be submitted every other quarter include: Schedule RI Income Statement; Schedule Changes in Bank Equity Capital; and Schedule RC- Balance Sheet. Please detail why the Agencies have rejected this proposal, including any specific safety and soundness concerns. We would appreciate your response to these questions by November 30, 2016. Very Respectfully, WM 112mg TErri Sewell Blaine Luetkemeyej' Member of Congress Member of Congress From: To: Subject: Date: Hulse, Bill Chad Davis RE: Response? Call Report Changes Friday, January 27, 2017 4:04:53 PM Thanks so much. Since this language was in CHOICE last congress, we want to make sure we have all the appropriate info From: Chad Davis [mailto:chad.r.davis@frb.gov] Sent: Friday, January 27, 2017 3:49 PM To: Hulse, Bill Subject: RE: Response? Call Report Changes Hopefully very soon. I just checked on this and I’m told it is in the final clearance stage for the agencies. We will try to push that along, as well. From: Hulse, Bill [mailto:Bill.Hulse@mail.house.gov] Sent: Friday, January 27, 2017 3:39 PM To: Chad Davis Subject: Response? Call Report Changes Chad – When can we expect a response to the attached letter? Thank you, Bill Bill Hulse Legislative Assistant U.S. Representative Randy Hultgren (IL-14) 2455 Rayburn Washington, DC 20515 Office: (202) 225-2976 Website Facebook Twitter From: To: Subject: Date: Gilbride, Mark Jennifer Gallagher Variation Margin Requirements, March 1 Deadline Wednesday, February 22, 2017 12:37:43 PM Hey Jennifer, I recently took over for Jesse Walls as Congressman Stivers’ staffer for the Financial Services Committee. I have heard concerns from Ohio life insurers about the variation margin requirements scheduled for March 1st. Can you or someone at the Fed tell me whether they have heard similar concerns and whether an extension for the implementation is being considered? Thanks and I look forward to working with you, -Mark Mark Gilbride Legislative Assistant Congressman Steve Stivers (OH-15) 1022 Longworth House Office Building P: (202) 225-2015 From: To: Subject: Date: Goshorn, Rebekah Chad Davis FW: Agencies Release Swap Margin Guidance Thursday, February 23, 2017 10:33:08 AM Thanks Chad, Bryan forwarded me your email. We’ll be in touch if we have any questions. Thanks again, Rebekah Rebekah E. Goshorn Counsel Committee on Financial Services 3340 O’Neill Federal Building Washington, DC 20024 (202) 226-3969 direct From: Wood, Bryan Sent: Thursday, February 23, 2017 10:32 AM To: Goshorn, Rebekah Subject: FW: Agencies Release Swap Margin Guidance From: Chad Davis [mailto:chad.r.davis@frb.gov] Sent: Thursday, February 23, 2017 10:09 AM To: Wood, Bryan Subject: FW: Agencies Release Swap Margin Guidance Hi Brian, I received a bounce back message from Rebekah. I was trying to get this to both of you, per our conversation yesterday, and I’m sure I must have written the address down in correctly. Could you please send me her correct email or please forward this to her? From: Chad Davis Sent: Thursday, February 23, 2017 10:05 AM To: Chad Davis Cc: Brian Chernoff Subject: Agencies Release Swap Margin Guidance Hello, I just wanted to be sure that you saw this. As always, feel free to reach out with any questions. – Chad Agencies release swap margin guidance http://www.federalreserve.gov/newsevents/press/bcreg/20170223a.htm Released by the Board of Governors of the Federal Reserve System Board of Governors of the Federal Reserve System Farm Credit Administration Federal Deposit Insurance Corporation Federal Housing Finance Agency Office of the Comptroller of the Currency For release at 10:00 a.m. EST February 23, 2017 Agencies Release Swap Margin Guidance The Federal Reserve Board and the Office of the Comptroller of the Currency (OCC) on Thursday issued guidance explaining how supervisors should examine for compliance with the swap margin rule, which established margin requirements for swaps not cleared through a clearinghouse. The guidance explains that the Board and the OCC expect swap entities covered by the rule to prioritize their compliance efforts surrounding the March 1, 2017, variation margin deadline according to the size and risk of their counterparties. Margin requirements help ensure the safety and soundness of swap trading and help reduce risk to the financial system associated with non-cleared swaps. The final rule incorporated a phase-in period for swap entities to begin exchanging variation margin with their swap counterparties. The phase-in period gave markets and firms time to adjust to the new requirements, which were adopted in October 2015. The guidance explains that swap entities' compliance with counterparties that present significant credit and market risk exposures is expected to be in place on March 1, 2017, as laid out in the final rule. For other counterparties that do not present significant credit and market risks, the OCC and the Board expect swap entities to make good faith efforts to comply with the final rule in a timely manner, but no later than September 1, 2017. The Farm Credit Administration, the Federal Deposit Insurance Corporation, and the Federal Housing Finance Agency also administer the final rule for institutions under their jurisdiction, but currently have no swap entities affected by this guidance. However, they support the guidance issued by the Board and the OCC. The Board and the OCC will continue to monitor the implementation of the rule in accordance with the guidance issued today. SR Letter 17-03: Initial Examinations for Compliance with Minimum Variation Margin Requirements for Non-Cleared Swaps and Non-Cleared Security Based Swaps __________________ Chad R. Davis Board of Governors Federal Reserve System Washington, D.C. 20551 P: 202.452.3992 M: 202.713.8312 chad.r.davis@frb.gov Not Responsive/Internal Correspondence From: Edgar, Kevin [mailto:Kevin.Edgar@mail.house.gov] Sent: Thursday, February 23, 2017 11:16 AM To: Mark Libell Cc: kirsten.mork@mail.house.gov (External) Subject: Letter to Chair Yellen Mark: Attached please find a letter to Chair Yellen from Chairman Hensarling and the Republican Members of the Financial Services Committee. If you do have any questions about the letter, please contact me. Thank you Kevin Edgar Kevin R. Edgar Chief Counsel Committee on Financial Services U.S. House of Representatives (202) 226-3431 JEB HENSAHLING. TX, CHAIRMAN 1,1de ?attg flnum: Ell T?t??l't?tllt?fl?f? MAXINE WATERS, CA, RANKING MEMBER Gummittrr on ?nancial Earning 2m; Rayburn i?nusr @f?tr Building mashingtun. 130: 2051i February 23, 2017 The Honorable Janet Yellen Chair Board of Governors of the Federal Reserve System 20th Street and Constitution Ave, NW Washington, D.C. 20551 Dear Chair Yellen: Thank you for your February 15, 2017, testimony before the Committee on Financial Services. During your appearance, you testi?ed that the Federal Reserve would abide by the President?s regulatory freeze issued on January 30, 2017, and the President?s February 3, 2017, Executive Order on ?Core Principles for Regulating the United States Financial System.? In response to a question from Rep. Wagner, you indicated that the Federal Reserve has ?one possible rulemaking? that ?pertains to the stress tests and what is called the Stress Capital Buffer.? Absent an emergency, the Federal Reserve should neither propose nor adopt any new rules until the US. Senate con?rms a Vice Chairman for Supervision as required by Section 1108(a)(l) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. L. 111- 203). As you know, this position has remained vacant for the more than six years since Dodd- Frank was enacted due to the preceding Administration?s refusal to ful?ll its statutory reSponsibilities. If the Federal Reserve chooses to adopt rules prior to the confirmation of a Vice Chairman for Supervision, please be aware that we will work with our colleagues to ensure that Congress scrutinizes the Federal Reserve?s actions - and, if appropriate, overturns them pursuant to the Congressional Review Act.' Thank you for your attention to this important matter. Sincerely, HEN RLING RICK MCHENRY Chairman ce Chair 1 5 U.S.C. 601 et seq. BL LUET EYE Chairman Chairman Subcommittee on Capi a Markets, Subcommittee on Financial Institutions Securities, and Investment and Consumer Credit SEAN A RR Chairman Chairman Subcommittee on Housing Subcommittee on Monetary Policy and Insurance and Trade ?g WAGNER STEVAN EARCE Chairman Chairman Subcommittee on Oversight Subcommittee on Terrorism and andI 1trestigations Illicit Finance PETER EDWARD Member Member 4-) My FRANK LUCAS BILL POSEY Member Member STEVE STIVERS RANQX: Member Member DENNIS ROSS ROBERT 0" Member Member KEITH ESSER Member ember ?5 ETT TIPTON Member lav?Q :0 v1 1? BRUCE POLIQUIN Member FRENCH HILL Member LEE ZELDIN Member THOMAS MACA THUR Member may TED BUDD Member CLAUDIA TENNEY Member GER WILLIAMS Member MIA LO Rm Mir/m M181. TOM EMMER Member DAVID TROTT Member ALEXAND ONEY Member WARREN DAVIDSON Member 0% Member mm Member Not Responsive/Internal Board Email From: Brown, Chris [mailto:ChrisBrown@mail.house.gov] Sent: Thursday, May 04, 2017 2:34 PM To: Chad Davis Subject: FSC letter to Chair Yellen on CCAR Chad, Please find attached a letter from Chairman Luetkemeyer and 29 of his colleagues to Chair Yellen regarding CCAR. We look forward to the Chair’s response. Chris Chris Brown Chairman Blaine Luetkemeyer Subcommittee on Financial Institutions and Consumer Credit House Financial Services Committee ('Inngreaa of the ?niteh gamma 4301 20515 May 4, 2017 The Honorable .lanet Yellen Chair Board of Governors of the Federal Reserve System 20lh Street Constitution Ave. NW Washington, DC. 20551 Dear Chair Yellen: We write to you regarding the Federal Reserve Board?s (Board) Comprehensive Capital Analysis and Review (CCAR) process. While we support the use of stress testing in ?nancial regulatory oversight. we are concerned that the lack of transparency in the Board?s process and analyses has adversely impacted many ?nancial institutions? ability to adequately and ef?ciently comply with the CCAR requirements and policy goals. Under the current methods of testing and analysis, ?nancial institutions are driven to overcompensate in their diversion of resources to assess models and tests implemented by the Board without a clear understanding of what the board will consider. As a result of the inability to meaningfully assess the treatment of various asset classes, signi?cant amounts of capital that would have otherwise been available is ring-fenced, constricting lending and economic growth. This trend has been exacerbated by the pro-cyclical effect emanating from the Board?s punitive assumptions. These notions were highlighted in a hearing held last month in the Subcommittee on Financial Institutions and Consumer Credit. We would like to highlight the November 2016 Government Accountability Of?ce (GAO) report titled ?Additional Actions Could Help Ensure the Achievement of Stress Test Goals? which outlined many of the key issues regarding the Board?s stress-testing practices. We share many of the concerns expressed by GAO, particularly that a greater understanding of CCAR expectations is necessary for proper capital planning practices. Furthermore, we share the opinion that more transparency is needed in the Board?s scenario design process and analytical support. We note the report highlighted that the scenario design is not ?explicitly analyzed? with regard to the "impact on the cost and availability of credit? which could ultimately result in ?undesired economic effects from scenario design choices.?1 While we appreciate the Board?s limited step to reduce impact on certain ?nancial institutions, we ask you to consider whether additional steps are not advisable to further improve the ef?ciency and effectiveness of the process. In January 2017, the Board removed the qualitative assessment component from the CCAR process for large, noncomplex ?rms.2 2 PRINTED ON RECYCLED PAPER Among other things, we would encourage the Board to consider whether the time has come to extend such relief to all ?rms participating in CCAR. We also remain concemed that the general opacity of the process has further been perpetuated by the 2017 instructions. The Board?s assessment goes beyond capital and analyzes every activity in a ?rm. The result is potential failure based not on capital adequacy in a severely stressed environment, but on any number of reasons unrelated to capital. This is an irresponsible approach to capital stress testing. Fuithermore, we are concerned that the 2017 scenarios for stress exercises are, for some institutions, far more complex than the standard of years past despite no evidence of market conditions requiring such an increasingly complex approach. We believe it prudent that the Board take into account these concerns and work administratively to create a more transparent, streamlined approach to CCAR. Included in those reforms should be institution of a date-certain time frame for the annual release of CCAR instructions, in an effort to impart regularity upon the process, and coordination across agencies on all stress testing efforts, to ensure a consistent process for submission of testing results. The Board should also consider the number of annual scenarios ?rms are required to model, and whether or not there are tangible benefits to requiring two additional stress tests beyond the three scenarios required in the current law. Finally, we ask the Board to consider facilitating the release of, perhaps after a reasonable delay, and public comment on testing models. While we do not dispute the value of stress testing, we believe it is important for agencies responsible for ?nancial regulation to work to avoid any unintended damage to our ?nancial markets and American consumers. Increased transparency and a more efficient and appropriately-tailored process will be a major step toward that goal. As such, and given the number of current and anticipated vacancies, we again request that you refrain from adding to the Board?s supervisory activities. A full slate of Board members, including but not limited to the Vice Chair for Supervision, should have the opportunity to hear directly from stakeholders and provide input on current and future supervisory processes. appreciate your consideration of our concems and suggestions, and respectfully request a if esponse by May 18, 2017. Sincerely, 4% Blaine Lu Keith Rothfus Chairman Vice Chairman Subcommittee on inancial Institutions Subcommittee on Financial Institutions and Consu er Credit and Consumer Credit Sean Duffy Member of Congress Member of Congress m, rce nn Wagne Member of Congress Member of Congress 049 rench Hill David Kustoff Member of Congress Member of Congress Luke Messer Member of Congress D213. Trott ger Williams Member of Congress Member of Congress Robert Pittenger Wdermilk /Me1 of Congress/ $42? Scot ipton mber of Congress Member of Congre i Posey Member of Congr Frank D. Lucas Member of Congress 7010 Shaw ?3 Tom Emmer Member of Congress Randy gren Member of Congress Member of Congress eter King Member of Congress Dennis A. Ross Member of Congress x" Mia ove Member of Congress Bruce Poliquin Member of Congress 7 .1 Na '3 Ted Budd Member of Congress Steve Stivers Member of Congress Claudia Tenney Member of Congress Lee Zeldin Member of Congress From: To: Subject: Date: Chad Davis "Brown, Chris" RE: FSC letter to Chair Yellen on CCAR Thursday, May 04, 2017 2:37:14 PM Thanks, Chris. We will review and get back to the Chairman and his colleagues. From: Brown, Chris [mailto:ChrisBrown@mail.house.gov] Sent: Thursday, May 04, 2017 2:34 PM To: Chad Davis Subject: FSC letter to Chair Yellen on CCAR Chad, Please find attached a letter from Chairman Luetkemeyer and 29 of his colleagues to Chair Yellen regarding CCAR. We look forward to the Chair’s response. Chris Chris Brown Chairman Blaine Luetkemeyer Subcommittee on Financial Institutions and Consumer Credit House Financial Services Committee JEB HENSARLENG, TX, j?nimd 333351: 13f R??i?f?b?mtmg? MAXINE CA, RANKING MEMBER dammittrr rm Jtinanriai ?rmer-a -- .2.qu Ragtime tiara tattle: Building eat 20:71.5 February 23, 2017 The Honorable Janet Yeilea Chair Board ofGoyemor's of the Federal Reserve.- System 20th Street and Constitution Ave, NW Washington, DC. 20551. Dear Chair'Yellen: Thank you for your February 15, 2017', testimony-before the Committee on Financial Services. During your appearance you testi?ed that the Federal Reserve would abide by the Piesident?s regulatory freeze issued on anuary 30, 2017, and the President? 3 February 3, 2017, Executive Order on ?Core Principles for Regulating the United States Financial System? In response- to a question frOm Rep, Wagner, you. indicated that the. FederalResert/e has ?one possible rulemaking? that ?pertains to the stress tests and what is called the Stress Capital Buffer.? Absent an emergency, the Federal Reserve Should neither propose nor adopt any new rules until the US. Senate. con?rms a Vice Chairman fer Supervision as required by Section 1108(a)(1) of the Dodd?Frank Wall Street Reform and Consumer Protection Act (Pub. L. 11 1~ 203). AS you khow, this position has remained vacant for the more than six, years since Dodd~ Frank was enacted due. to. the presedin'g Administration?s refusal. to. ful?ll its statutory responsibilities. . If the Federal Reserve. chooses to adopt rules prior to. the. confirmation of a Vice Congress scrutinizesthe-Federal Resie?rve?s actions - and, if them ptirsuant to the CongreSSi'on'al Review Act..1? Thank youfbr your attention to this: important matter. Sincerely, as . p; Rick MCHENRY Chairman Vee Chair '15 {13.0. 601 et seq. .U NGA Chairman 3: Subpommi'ttee- on Capi Market's, Securities, and Investment SEAN Chairman . Subcommittee on Housing and Insurance Chairman . - Subcommittee on Oval-Sight and L113vestigatio. FRANK STEVE STIVERS Member DENNIS 3-3 Member. KEITH Member Member Chairman Subcommittee-0n Financial Institutions and CoriSumer Credit- Chairman Subcommittee on Monetary Policy and-Trade - S- EVAN 1 Chairman on Terrorism and Illicit Finance . gt} Ca EDWARD. Member M?mbe'r ROBERT PITTENGER. Member AM I Member. Memb e1"; .. .. FRENCH HILL I TOM EMMER Mamber . Membm? LEEZBLDIN AD TROTT Member Member ALEXAND Mmeer 14/ MACAHTHUR - WARREN DAVIDSON Member I, - Member I KUSTOFF. M?mbgr HOLLINGSWORT Member BUDDW Member CLAUDIA TENNEY .Member' BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN April 19, 2017 The Honorable eb Hensarling Chairman Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Mr. Chairman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy, The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and confirmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near-term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden-reducing, required by law, or non?controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Jeb Hensarling Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is new chairman of the CSR. As a long-time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, ?amerwd BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Patrick McHenry Vice Chairman Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Mr. Vice Chairman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near?term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden~reducing, required by law, or non?controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Patrick McHenry Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates.? For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth I and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long-time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, fairway BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 IANET L. YELLEN CHAIR April 19, 2017 The Honorable Bill Huizenga Chairman Subcommittee on Capital Markets, Securities, and Investments Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Mr. Chairman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibilityfor promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the U.S. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this reSponsibility continuously and under all circumstances. As I testified before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able tO carry out this responsibility, the Board would welcome action by the President and. the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation Of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to fulfill the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near-term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden-reducing, required by law, or non?controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Bill Huizenga Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with Our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long?time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, (grif?n BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Blaine Luetkemeyer Chairman Subcommittee on Financial Institutions and Consumer Credit Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Mr. Chairman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near-term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden~reducing, required by law, or non-controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Blaine Luetkemeyer Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our reSponsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long?time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 1 The Honorable Sean Duffy Chairman Subcommittee on Housing and Insurance Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Mr. Chairman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and confirmation of a Vice Chainnan for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near?term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden?reducing, required by law, or non?controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Sean Duffy Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is new chairman of the CSR. As a long?time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, . Wm BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Andy Barr Chairman Subcommittee on Monetary Policy and Trade Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Mr. Chairman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. - As I also noted in my testimony, our near?term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden?reducing, required by law, or non?controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Andy Barr Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long-time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, W??md BOARD OF GOVERNORS or THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Ann Wagner Chairman Subcommittee on Oversight and Investigations Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Madam Chairman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and confirmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemakin proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near?term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden-reducing, required by law, or non?controversial. I do not foresee any major ?nal regulatory actions in the near term and any pr0posals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Ann Wagner Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auSpices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Office of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long?time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, BOARD OF GOVERNORS or THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Stevan Pearce Chairman Subcommittee on Terrorism and Illicit Finance Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Mr. Chairman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is reSponsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?mlation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers Within the mandates established by Congress. As I also noted in my testimony, our near-term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden?reducing, required by law, or non?controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Stevan Pearce Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long-time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As Ihave indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Peter King Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As Itesti?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulernaking proceeding required to ful?ll the Board? 8 important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near-term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden-reducing, required by law, or non-controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a Signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Peter King Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long-time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated. in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Edward Royce Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ?il?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near~term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden?reducing, required by law, or non?controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Edward Royce Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of. Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long?time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon confirmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Frank Lucas Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the U.S. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. 'As Itesti?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint-and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to fulfill the Board? 3 important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near?term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden-reducing, required by law, or non-controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Frank Lucas Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is new chairman. of the CSR. As a long?time member of the committee and a Governor steeped with fmancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Bill Posey Committee on Financial Services House of Representatives Washington, DC 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking I Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near?term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burdenwreducing, required by law, or non?controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Bill Posey Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is new chairman of the CSR. As a long?time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, 14% BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Steve Stivers Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulernakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is reSponsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the U.S. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near?term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters'that are either burden?reducing, required by law, or non-controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Steve Stivers Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long-time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, BOARD OF GOVERNORS or THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Randy Hultgren Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and ccin?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near?term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden?reducing, required by law, 0r non-controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Randy Hultgren Page Two We will continue to design and implement rules in a manner that eliminates urmecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Office of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long?time member of the committee and 3. Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, WJW BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Dennis Ross Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near~term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden-reducing, required by law, or non?controversial. I do not foresee any major ?nal regulatory actions in the near term and any prOposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Dennis Ross Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long-time member of the committee and a Governor steeped with ?nancial services experience, Ibelieve Governor Powell will serve as an excellent chairman. As Ihave indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Robert Pittenger Committee on Financial Services House of Representatives Washington, D.C. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would?allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near?term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden?reducing, required by law, or non-controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. - The Honorable Robert Pittenger Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our reSponsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long?time member of the committee and a Governor steeped with financial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. SinCerely, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Keith Rothfus Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemaki'ngs in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this reSponsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulernaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near?term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden?reducing, required by law, or non-controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Keith Rothfus Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on cormnunity banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a longtime member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, . grin; pug-?r" . BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Luke Messer Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: . Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulernaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near-term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden-reducing, required by law, or non-controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Luke Messer Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in reSponse to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor ay Powell is now chairman of the CSR. As a long?time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our I supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, BOARD OF GOVERNORS OE THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Scott Tipton Committee on Financial Services House of Representatives Washington, D.C. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulernaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near-term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden-reducing, required by law, or non-controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Scott Tipton Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long?time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, BOARD or GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Roger Williams Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable financial system that supports the growth and stability of the U.S. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this reSponsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near-term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden?reducing, required by law, or non-controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Roger Williams Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback ?om community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (C SR). Governor Jay Powell is now chairman of the CSR. As a longtime member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, Without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Bruce Poliquin Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the U.S. economy. The Board as a Whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near-term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden-reducing, required by law, or non-controversial. I do not foresee any major ?nal regulatory actions in the near term I and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Bruce Poliquin Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auSpices of the Federal Financial Institutions Examination Council, recently'?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is new chairman of the CSR. As a long-time member of the and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, (gate. WV BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Mia Love Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congresswoman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As Itesti?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to fill the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. I As I also noted in my testimony, our near?term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden?reducing, required by law, or non?controversial. 1 do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a significant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Mia Love Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback ?om community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I Would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long?time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon continuation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable French Hill Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near-term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden?reducing, required by law, or non?controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable French Hill Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long?time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assarne the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Tom Emmer Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near~term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden?reducing, required by law, or non~controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Tom Emmer Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long?time member of the committee and a Governor steeped with ?nancial services experience, i believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Lee Zeldin Committee on Financial Services House of Representatives Washington; . C. 205 1 5 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the financial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near?term calendar Of fmal regulatory actions is relatively light and involves primarily routine matters that are either burden-reducing, required by law, or non?controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant Opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Lee Zeldin Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long-time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effectiVe, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. . Sincerely, Wanna BOARD or GOVERNORS or THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable David Trott Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and confirmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near?term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden?reducing, required by law, or non-controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable David Trott Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long-time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, WVW BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Barry Loudermilk Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near?term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden-reducing, required by law, or non?controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant Opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Barry Loudermilk Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long-time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman As I have indicated in testimony, upon confirmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, yaw?a?wd BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 IANET L. YELLEN CHAIR April 19, 2017 The Honorable Alexander Mooney Committee on Financial Services House Of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaldng proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near-term calendar Of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden?reducing, required by law, or non-controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant Opportunity for public comment as well as for new members Of the Board to help determine the appropriate outcome. The Honorable Alexander Mooney Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long-time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, an: i: BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Thomas MacArthur Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near?term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden-reducing, required by law, or non-controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Thomas MacArthur Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long-time member of the committee and a Governor steeped with financial services experience, I believe Governor Powell will serve as an excellent chairman. As Ihave indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, Wig/oxen, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Warren Davidson Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. A As Itesti?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near?term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden?reducing, required by law, or non-controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant Opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Warren Davidson Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where cOnsistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will} signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is new chairman of the CSR. As a long-time member of the committee and 3 Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, sz BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Ted Budd Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As Itesti?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near?term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden?reducing, required by law, or non?controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?Cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Ted Budd Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our reSponsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent .of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long-time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon confirmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, BOARD or GOVERNORS or THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable David Kustoff Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action 'by the President and the Senate to appoint and confn'm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near-tenn calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden~reducing, required by law, or non-controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable David Kustoff Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Office of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long-time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of. this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, W1W BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Claudia Tenney Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congresswoman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near?term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden-reducing, required by law, or non?controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a significant opportunity for public comment as Well as for new members of the Board to help determine the appropriate outcome. The Honorable Claudia Tenney Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Office of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long?time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Trey Hollingsworth Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulernakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and confmn a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. I As I also noted in my testimony, our near~term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden-reducing, required by law, or non?controversial. I do not foresee any major fmal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Trey Hollingsworth Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long-time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, ?aw? PATRICK T. MCHENRY 111mm writ-La; (3.113;: W'rlii? i1? Pooh?? fig, NW weigh 51;!er A 50in Gemini: Nnam CARDS (01-: HO. 8-15): 1330 {it} 25503 (innate-235' n?f Witch emits 2&3518 .. . 120,2: 22;?2676 3231111952. at illeprrarntatih rs arm Fax: [3.02) 325 0318 D38 Wit]! Mam lxvt?riui. Sum ?l 15 . . Gram-1:11 M?wl?? Patrick Mel-lenry Washington, ENE 205154?3310 imitates-T Fm: (7 8113 CirAiaMM. Gawain?rt: on Humans. Seaman's Remarks: ['11 ACK TOWN Hatt 160 MIDLAND Avema . Eli em: NC 23!] 1 January 31, 20.17 (325?: 51311?0600 The Honorable Janet L. Yellen ?94 18505 477-25?; Chair Board of Governors of the-Federal Reserve System 20?h Street and Constitution Avenue Washington, DC 20551 Dear Chair Yellen?: Iamwriting regarding the Federal Reserve?s continued participation in international forums on ?nancial regulation; De'spiteithe clear message delivered by President Donald Trumpin prioritizing America?s interest in intematiOnal negotiations, it appears that the Federal Reserve continues negotiating intemational regulatory standards for ?nancial institutions among global bureauerats in foreign lands without transparency, accountability, or theauthority to do so. This is unacceptable. Continued participation? in intematibnal forums Such as the. Financial Stability Board, the Basel Cemm'ittee on Banking and S?epervisiOn, and the International Association of Insurance supervisors is. predicated 0n achieving the objectives set by the new Administration That will likely require a comprehensive review of past agreements that unfairly penalized the American financial system in areas as varied as bank capital insurance,.derivatives, Systemic risk, and asset manmagement The secretive. structures of these international forums must also be reevaluated Agreements like the Basel Accords were negotiated and agreed to by the Federal Reserve with little notice to the American public and were the result of an opaque, denisionpmaking process.- The international standards were then turned into domestic regulations that foreed American: firms of various sizes to substantially raise their capital requirements, leading to slower economic growth here 111 America It IS upon all regulators to Support the U. S. eeonomy, and scrutinize international agreements that are killing American jobs Accordingly, the Federal Reserve must cease all attempts to negotiate binding standards burdenin'gAmerican business until President Trump has had an Opportunity to nominate and-appoint of?cials that 'pri?OritiZe America?s best interests. Sincerely, Vice Chairman Financial Services Committee 51133 i} i) 1in BOARD or GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR February 10, 2017 The Honorable Patrick McHenry Vice'Chairman Financial Services Committee House of Representatives Washington, DC. 20515 Dear Mr. Vice Chairman: Thank you for your letter of January 31, 2017, concerning the participation of the Board of Governors of the Federal Reserve System (Federal Reserve) in international forums on ?nancial regulation. Strong regulatory standards enhance the stability of the U.S. ?nancial system. The recent financial crisis showed that the standards in place before the crisis were not strong enough to constrain banks? risk?taking. Since the crisis, the Federal Reserve, working with the other U.S. bank regulatory agencies, has put stronger standards in place, notably for capital and liquidity. The United States now has a strong banking system that has earned back the market?s con?dence, allowing U.S. banks to expand their lending at a healthy pace in recent years. By participating in the development of international regulatory standards, the Federal Reserve can in?uence the standards in ways that promote the ?nancial stability of the United States and the competitiveness of U.S. ?rms. In some irnportant instances, U.S. agencies have used internationals forums to promote standards already determined domestically to be important for U.S. ?nancial stability. Beyond the bene?ts to our economy from strong standards in the United States, the ?nancial stability of the United States is also enhanced when foreign banks are subject to strong standards that cover their global consolidated operations. Strong international standards protect U.S. counterparties, including large and small U.S. businesses as well as consumers, in their transactions with foreign bar?ting organizations. Strong global standards also enhance the competitiveness of internationally active U.S. banking ?rms by creating a more level playing ?eld for all internationally active banking ?rms. In addition, it is less expensive for U.S. ?rms to adhere to a common global standard than to comply with many countries? individual standards. The Honorable Patrick McHenry Page TWO Importantly, standards discussed or recommended by international bodies are not binding in the United States. None of the policy actions recommended by international forums have any effect in the United States unless they are adopted by U.S. authorities, acting under U.S. laws and through a public notice and comment period. The Federal Reserve and the other banking agencies can, of course, adopt different standards in the United States than those discussed internationally, and we have often done so to better re?ect the nuances of U.S. ?nancial institutions and markets. In addition, the international forums on ?nancial regulation in which the Federal Reserve participates typically put their policy proposals through a public notice and comment process, similar to that of the rulemaking process in the United States, which provides additional valuable transparency. We will continue to coordinate with the Treasury Department, which is itself a member of several international forums related to ?nancial services, such as the Financial Stability Board and the International Association of Insurance Supervisors, as well as with the other.U.S. supervisory agencies that participate in various international forums. In exercising our long? standing authorities and responsibilities for consulting with our foreign counter?parts, we share the objective that the whole U.S. government must work constructively to ensure a strong, stable U.S. economy and financial system. We appreciate your interest in this matter. Sincerely, raw/Me Not Responsive/Internal Board Email From: Harney, Ben [mailto:Ben.Harney@mail.house.gov] Sent: Friday, February 10, 2017 4:56 PM To: Madelyn Marchessault Subject: Letter Hi Madelyn — Attached is a letter from my boss, Mr. King, Ms. Velazquez, Mr. Meeks, and Mr. Donovan to the banking regulators. Let me know if you have any questions. Ben Harney Financial Services Counsel Rep. Carolyn B. Maloney (NY-12) 2308 Rayburn HOB Phone: (202) 225-7944 Congress of the llititrh Eatatrc Washington, 230: 30-313 February 10, 2017 The Honorable Janet L. Yellen The Honorable Thomas J. Curry Chair Comptroller of the Currency Board of Governors of the Federal Reserve System Of?ce of the Comptroller of the Currency 20th Street and Constitution Avenue NW 250 Street SE Washington, DC 20551 Washington, DC 20219 The Honorable Martin J. Gruenberg Chairman Federal Deposit Insurance Corporation 550 in? Street NW Washington, DC 20429 Dear Chair Yellen, Comptroller Curry, and Chairman Gruenberg: We are writing with regard to the treatment of central bank reserves under the supplementary leverage ratio (SLR), and the impact of such treatment on the custody banking business model. Strong capital requirements are critical for the safety and soundness of the US. banking system, and we support your agencies? efforts to improve both the quantity and the quality of capital at US. banks. However, we are concerned that the inclusion of central bank reserves in the calculation of ?total leverage exposure" under the SLR is leading to unintended consequences for custody banks, which could harm the overall safety and soundness of the U.S. ?nancial system. As you know, custody banks provide asset safekeeping, settlement, and related administrative services to investors. As such, custody banks engage in hi gh-volume, low-risk ?nancial activities, and hold large amounts of low-risk, low-return, highly liquid assets, such as cash and Treasury securities. The SLR, however, treats all assets no matter how low-risk as equally risky, which disproportionately impacts custody banks that hold large amounts of low?risk assets. The SLR even requires custody banks to hold capital against cash held in the form of central bank reserves. As a result of this requirement to hold capital against central bank reserves, we understand that the SLR is causing custody banks to charge fees or reduce services that have long been available to their customers, such as pension funds and university endowments. When the agencies ?nalized the SLR on September 26, 2014, the agencies declined to exclude central bank reserves from the calculation of ?total leverage exposure,? which is the SLR denominator.I One of the principal reasons for this decision, according to the ?nal rule, was that including central bank reserves in the SLR ?better aligns the supplementary leverage ratio with the Basel leverage ratio, which promotes international consistency in the calculation of total leverage exposure.?2 See Regulatory Capital Rules: Regulatory Capital, Revisions to the Supplementary Leverage Ratio, 79 Fed. Reg. 57725 (September 26, 2014). 2 79 Fed. Reg. 57729 (September 26, 2014). In August, the Bank of England?s Financial Policy Committee (FPC) announced that it was revising the UK. leverage ratio framework to exclude central bank reserves from the leverage ratio?s denominator.3 In announcing its decision, the FPC stated that ?this change to the exposure measure is appropriate because an increase in central bank reserves does not typically expose a ?rm to additional risks, if matched by liabilities in the same currency: as the ultimate settlement asset, central bank reserves are a unique asset class.?4 This followed an extensive review that the PFC undertook of the leverage ratio, the results of which were set out in the Bank of England?s July 2016 Financial Stability Reliant-t.5 As a result, including central bank reserves in the SLR denominator no longer unambiguously ?promotes international consistency.? As such, we ask that your agencies reconsider whether including central bank reserves in the SLR denominator is still appropriate in light of the fact that it is no longer necessary in order to maintain international consistency. Moreover, Federal Reserve Board Governor Daniel Tarullo stated on December 2, 2016 that the Federal Reserve is ?considering ways to address the special issues posed for the large custody banks by certain elements of our regulatory framework.?6 This is a welcome development, and we applaud the Federal Reserve for its ?exibility and willingness to address this pressing issue. We would appreciate knowing whether all of your agencies are coordinating on this effort to re- examine the application of the bank capital framework to custody banks, whether your agencies are planning to re-examine the inclusion of central bank reserves in the SLR denominator, and whether your agencies are considering an alternative SLR framework that is better tailored to the custody bank business model. Thank you for your consideration of this letter, and we look forward to working with your agencies to address this critically important issue. Sincerely, 4? .r Garciaemm, .. Carolylti Maloney Pieter T. King Member of Congress Member of Congress 3 Bank of England, Financial Policy Committee, Financial Policy Committee Statement ram its Policy Meeting, 25 July 20! 6 (August 4, 2016), available at Bank ofEngland?s Financial Policy Committee (FPC) has decided to exclude central bank reserves from the exposure measure in the current UK leverage ratio ??amework, with immediate effect?). 4 la! In addition, the FPC stated that its ?aim is to ensure that the leverage ratio does not act as a barrier to the effective implementation of policy measures that might lead to an increase in central bank reserves.? id. 5 See Bank of England, Financial Stability Report, at 34?41 (July 4, 2016), available at olfsriul 6.pdl'. 6 Daniel Tarullo, Financial Regulation Since the Crisis, at 16 (Dec. 2, 2016), available at M. Vel?zgez Gregg W. heeks Member of Congress Member of Congress 90? mate/~35 Daniel M. Donovan, Jr. Member of Congress Not Responsive/Internal Board e-mail From: Jeffers, Erika [mailto:Erika.Jeffers@mail.house.gov] Sent: Monday, March 06, 2017 3:52 PM To: 'erika.jeffers@mai.house.gov' Cc: Farnin, Scott Subject: Please "SAVE THE DATE" -- Upcoming Ranking Member Waters and Rep. Beatty OMWI Roundtable Importance: High Ranking Member Maxine Waters and Rep. Beatty would like the OMWI Directors from each of your agencies to participate in a roundtable to discuss workforce and supplier diversity matters on Tuesday, March 21, 2017, from 4 p.m. – 6 p.m. in Washington, D.C. While more detailed information about this event will be forthcoming in the near future, staff are emailing this informal “SAVE THE DATE/TIME” announcement to you now in an effort to ensure full participation by each of the OMWI Directors by providing as much advance notice as possible about the event. Thank you in advance for your assistance on this matter. Sincerely, Erika Jeffers Senior Policy Director FSC D Staff From: To: Subject: Date: Attachments: Sears, Glen Linda Robertson; Jennifer Gallagher; Chad Davis Letter from FSC Democrats Friday, March 10, 2017 2:26:57 PM FSC Dem Letter to Federal Reserve 031017.pdf Linda, Jenn and Chad, I hope this message finds you well. As you may know, I left Treasury in January and have joined Ranking Member Waters staff on the House Financial Services Committee. I look forward to continue working with you all in my new role, and please don’t hesitate to reach out if I can be of assistance. In addition, attached is a letter from Ranking Member Waters and 21 Democratic colleagues on the Committee to Chair Yellen. Please let me know if you have any questions, and have a good weekend! Sincerely, Glen -----------------------------------------Glen R. Sears Senior Policy Advisor House Financial Services Committee Ranking Member Maxine Waters 202-226-1215 direct democrats.financialservices.house.gov @fscdems JEB HENSARLING, TX. CHAIRMAN Hnlt?d gtgt?? $101151: Dr MAXINE WATERS, CA. RANKING MEMBER an :IFinanrial ?rming BIZ. 20515 March 10, 2017 The Honorable Janet Yellen Chair Board of Governors of the Federal Reserve System 20th Street and Constitution Ave., NW Washington, DC. 20551 Dear Chair Yellen: Thank you for your recent testimony before the House Committee on Financial Services to discuss the Federal Reserve?s semiannual Monetary Policy Report to Congress. The report and your testimony underscores the tremendous progress that has been made since the passage of the Dodd?Frank Wall Street Reform and Consumer Financial Protection Act (Dodd-Frank Act) to build a stronger ?nancial regulatory system that protects consumers, investors and taxpayers and promotes stable economic growth. It has come to our attention that some of our Republican colleagues recently asked you and your colleagues at the Federal Reserve Board to stop carrying out your duties under the law unless and until a Vice Chairman for Supervision is appointed and confirmed. Unfortunately, it is not a surprise to hear that request from Members who have not only strongly opposed the Federal Reserve?s robust regulatory agenda in recent years, but also seek to radically reform the institution you lead. But fortunately for the American people, the law provides no such regulatory freeze and we ask that you and your colleagues continue to carry out your regulatory responsibilities without fear or favor. As you know, the Dodd-F rank Act created a Vice Chairman for Supervision to lead the Board of Governors? efforts in supervising banks and ?nancial firms, most notably to develop supervisory and regulatory policy recommendations regarding these ?rms.I But the law does not transfer any of the rulemaking powers that reside with the Board of Governors t0 the Vice Chairman for Supervision; the full Board can consider the Vice Chairman?s recommendations, but it has the responsibility to act as it deems necessary. This fact has been borne out by the Federal Reserve Board?s active and ongoing regulatory efforts despite not having a Vice Chairman for Supervision the past six years. This distinction regarding the Board?s authorities compared to the Vice Chairman for Supervision?s is important because there is more work to do. As the Federal Reserve Board demonstrated a few weeks ago, there are additional steps that can be prudently taken to better tier and tailor rules for various sized banks based on their risk profile. We were pleased to see that the Federal Reserve Board issued updated stress testing rules so that smaller, less risky banks were not subject to the strictest requirements that should be reserved for the largest, riskiest banks.2 I See Section 1108 of the Dodd-Frank Act. 2 See Federal Register, ?Amendments to the Capital Plan and Stress Test Rules; Regulations and (February 3, 2017), available at The Honorable Janet Yellen Page 2 March 10, 2017 In addition, the Federal Reserve Board has worked with other bank regulators over the past few years to review all of its regulations under the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA). The purpose of the EGRPRA review, as you know, is to identify outdated, unnecessary, or unduly burdensome regulations and consider how to reduce regulatory burden on insured depository institutions while, at the same time, ensuring their safety and soundness and the safety and soundness of the ?nancial system. Unlike our Republican colleagues, we do not believe this important regulatory review should stOp and prevent the Federal Reserve Board from taking the appropriate steps identi?ed to re?ne compliance rules, particularly for small community banks that are safe and sound and fully comply with consumer ?nancial protection laws. We will closely monitor the Federal Reserve Board?s actions in the coming weeks and months to ensure that the duties Congress has tasked it with by law are fully and appropriately carried out. The Federal Reserve Board must not wait to exercise its proper regulatory authority to impose the strictest standards on the largest, most complex banks that pose the greatest risk to our ?nancial system while reducing any unnecessary compliance requirements for community banks throughout the country. Sincerely, Q9051 32.754 MK 06h? The Honorable Janet Yellen Page 3 March 10, 2017 Not Responsive/Internal Correspondence From: Jeffers, Erika [mailto:Erika.Jeffers@mail.house.gov] Sent: Monday, March 13, 2017 2:51 PM To: Madelyn Marchessault ; Ola Williams Cc: Farnin, Scott Subject: RM Waters-Beatty OMWI Roundtable (Federal Reserve Invitation) Attached is a scanned copy of the invitation letter from RM Waters and Congresswoman Beatty to the Federal Reserve’s OMWI Director to participate in upcoming OMWI Roundtable. Thanks, Erika Jeffers Senior Policy Director JEB HENSARLING, TX, CHAIRMAN ?t?tt? 3}}me DI MAXINE WATERS, CA, RANKING MEMBER inmmittrr an :Jt?inantial ,?Erruirts 212g ?Ragnar? tauuar ?l?tt Building 330. 20515 March 13, 2017 Sheila Clark Director, Of?ce of Diversity and Inclusion Board of Governors of the Federal Reserve System 1625 Street NW. Washington, DC. 20006 Dear Ms. Clark: We invite you and other Directors of the Offices of Minority and Women Inclusion (OMWI) to participate in a public roundtable with the Federal ?nancial services agencies on Tuesday, March 21, 2017, from 4:00 pm. to 6:00 pm. in room ofthe Capitol Visitor Center in Washington, DC. This event will give Members from the Tri?Congressional Caucus, and other interested stakeholders, a chance to engage in a robust discussion with the OMWI Directors regarding how they are promoting workforce and supplier diversity in all levels of business and activities within their respective agencies. We appreciate the OMWI Directors? work in understanding and identifying challenges to increasing diversity and inclusion at their agencies, as outlined in their annual reports submitted over the last several years. However, Members and the public are all eager to learn about the new and innovative solutions that agencies haveladopted, and are likely to be implemented going forward. We have received feedback from various organizations, including women and minority trade associations, regarding implementation of section 342 of the Dodd?Frank Wall Street Reform and Consumer Protection Act, as well as section 1116 of the Housing and Economic Recovery Act. Based on the aforementioned feedback, we anticipate that there will be considerable interest. We expect that the OMWI Directors will be prepared to provide detailed responses about their agency?s specific efforts to increase the utilization of women, minorities, and women- and minority?owned businesses at all levels within their agency, including procurement, insurance, and other types of contracting opportunities. We hope that the OMWI Directors share our view that it is important to conduct broad and on- going outreach to both build awareness about their roles within the agencies, in addition to ensuring that their activities are achieving desired outcomes. For this reason, we plan to conduct a moderated discussion between 4:00 pm. and 5:30 pm. However we would like all OMWI Directors to remain at the event until 6:00 enabling Members and external stakeholders to interact with them on a more informal basis. Sheila Clark March 13, 2017 Page 2 Please RSVP for this roundtable no later than noon by Wednesday, March 15, 2017, by contacting Erika Jeffers, with the Financial Services Committee Democratic staff, or Scott Famin, with Congresswoman Beatty?s staff, Scott.Famin@mail.house.g0v. Sincerely, MAXINE WATERS . 0 Member of Congress ember of Congress cc: Honorable Janet Yellen, Chair, Board of Governors, Federal Reserve System From: To: Cc: Subject: Date: Attachments: Jodel Jeremie Allison, Terrie Tranise Garland; Madelyn Marchessault QFR Submission Thursday, April 20, 2017 10:19:00 AM JLY to Rep. Emmer _follow up to 021517 hearing_Q.3.pdf JLY to Rep. Hill_follow up to 021517 hearing.pdf Good Morning Terrie, I have attached 2 QFRs that will be delivered to congressional offices today. These were all submitted to Chair Yellen following her February 15, 2017 hearing. ͻ :>z ƚŽ ZĞƉ͘ ,ŝůů ;Ăůů ƋƵĞƐƚŝŽŶƐͿ ͻ :>z ƚŽ ZĞƉ͘ ŵŵĞƌ ;ƋƵĞƐƚŝŽŶ ϯ ʹ ƌĞŵĂŝŶŝŶŐ ƌĞƐƉŽŶƐĞƐ ĨŽƌƚŚĐŽŵŝŶŐͿ Thank You, :ŽĚĞů :ĞƌĞŵŝĞ Jodel Jeremie Congressional Liaison Office Board of Governors Federal Reserve System Washington, D.C. 20551 Tel: (202) 452-6418 jodel.j.jeremie@frb.gov BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 20, 2017 The Honorable Torn Emmer House of Representatives Washington, DC. 20515 Dear Congressman: Enclosed is my response to question 3 that you submitted following the February 15, 20171, hearing before the Committee on Financial Services. A copy has also been forwarded to the Committee for inclusion in the hearing record. A response to the remaining question will be forthcoming. Please let me know if I can be 'of further assistance. Sincerely, Enclosure 1 Questions for the record related to this hearing were received on February 15, 2017. Questions for The Honorable Janet L. Yellen, Chair, Board of Governors of the Federal Reserve System from Representative Emmer: 3. Can you give the Committee some insights on the current positioning of the Fed?s balance sheet and thinking on retention at current levels and the potential for reducing holdings? As noted in recent Federal Open Market Committee (F OMC) statements, the Committee has indicated that it expects to continue its current policy of reinvestments until the process of normalizing the level of the federal funds rate is well underway. However, the Committee has not established a formal linkage between a particular level of the federal funds rate and a change in its reinvestment policy. The FOMC conducts monetary policy to promote its longer?term objectives of maximum employment and stable prices. Consistent with this overarching principle, the FOMC will reach a judgment about reinvestments and the balance sheet based on its assessment of the economic outlook and the prospects for continued progress toward its longer run objectives. This process will include an evaluation of the anticipated trajectory for the economy as well as the risks to the economic outlook. As noted in the minutes of the March 2017 FOMC meeting, provided that the economy continued to perform about as expected, most participants anticipated that gradual increases in the federal funds rate would continue and judged that a change to the Committee?s reinvestment policy would likely be appropriate later this year. As noted in the statement of Policy Normalization Principles and Plans, the Committee intends that the Federal Reserve will, in the longer run, hold no more securities than necessary to implement monetary policy efficiently and effectively. Moreover, in the longer run, the FOMC intends to hold primarily Treasury securities. As always, the Committee is prepared to adjust the details of its approach to policy normalization in light of economic and ?nancial developments. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 20, 2017 The Honorable French Hill House of Representatives Washington, DC. 20515 Dear Congressman: Enclosed is my reSponse to the written question that you submitted following the February 15, 20171, hearing before the Committee on Financial Services. A copy has also been forwarded to the Committee for inclusion in the hearing record. Please let me know if I can be of further assistance. Sincerely, Enclosure 1 Questions for the record related to this hearing were received on February 15 2017. Questions for The Honorable Janet L. Yellen, Chair, Board of Governors of the Federal Reserve System from Representative Hill: 1. In reSponse to Mr. Williams question regarding what is currently stepping the Federal Reserve from winding down its balance sheet, you stated that the federal funds rate range was now between 50 and 75 basis points and that you wanted ?a bit more buffer? in order to reach normalization so that the Fed could then begin to contract the size of its balance sheet. What range constitutes ?a bit more buffer?? In other words, speci?cally at what range does the federal funds rate need to reach for the Fed to start running off its balance sheet? As noted in recent Federal Open Market Committee (FOMC) statements, the Committee has indicated that it expects to continue its current policy of reinvestments until the process of normalizing the level of the federal funds rate is well underway. However, the Committee has not established a formal linkage between a particular level of the federal funds rate and a change in its reinvestment policy. The FOMC conducts monetary policy to promote its longer?term objectives of maximum employment and stable prices. Consistent with this overarching principle, the FOMC will reach a judgment about reinvestments and the balance sheet based on its assessment of the economic outlook and the prospects for continued progress toward its longer run objectives. This process will include an evaluation of the anticipated trajectory for the economy as well as the risks to the economic outlook. As noted in the minutes of the March 2017 OMC meeting, provided that the economy continued to perform about as expected, most participants anticipated that gradual increases in the federal funds rate would continue and judged that a change to the Committee's reinvestment policy would likely be appropriate later this year. From: To: Cc: Subject: Date: Attachments: Tranise Garland Allison, Terrie Jodel Jeremie; Madelyn Marchessault; Jennifer Gallagher QFR Submission Friday, April 28, 2017 9:51:56 AM Y-24, 17-0752 Rep. Loudermilk to JLY_follow up to 021517 hearing.out.pdf Y-29, 17-0757 Rep. Hultgren to JLY_follow up to 02152017 hearing_Q.2.out.pdf Good morning Terrie – Attached are two QFR submissions following Chair Yellen hearing on monetary policy. Please let me know if you have any questions. • • Rep. Loudermilk, all questions Rep. Hultgren, question 2 (remaining questions forthcoming) Thank you, Tranise Tranise Garland Congressional Liaison Office Board of Governors Federal Reserve System Washington, D.C. 20551 Tel: (202) 475-6301 tranise.e.garland@frb.gov BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 28, 2017 The Honorable Barry Loudermilk House of Representatives Washington, DC. 20515 Dear Congressman: Enclosed is my response to the written question that you submitted following the February 15, 20171, hearing before the Committee on Financial Services. A copy has also been forwarded to the Committee for inclusion in the hearing record. Please let me know if I can be of further assistance. Sincerely, Enclosure Questions for the record related to this hearing were received on March 21, 2017. Questions for The Honorable Janet L. Yellen, Chair, Board of Governors of the Federal Reserve System from Representative Loudermilk: As you know, Congress has conducted oversight into reports of more than 50 cyber breaches that took place at the Federal Reserve between 2011 and 2015.1 I understand that the Federal Reserve?s cybersecurity efforts to protect sensitive data, including consumers? personally identifiable information (PII), are ongoing. a. What are the most pressing cybersecurity challenges that the Federal Reserve is currently working to address? The Federal Reserve Board (the Board) is keenly aware of the risks and threats within cyberspace. The Board follows the National Institute of Standards and Technology (NIST) Risk Management Framework as required by the Federal Information Security Modernization Act to manage its information security including cyber risks. Current areas of focus include ensuring sensitive information, such as personally identifiable information (P11), is being protected and handled appropriately, and protecting against advanced hacking techniques from nation states and other advanced actors, insider threats, and Distributed Denial of Service (DDOS) attacks. To address these challenges, the Board has implemented and continues to enhance our Data Loss Protection (DLP) program. The Board is also enhancing information handling policies; implementing data at rest technologies, including for databases containing enhancing incident response processes; and continually improving Advanced Persistent Threat and DDOS protection and detection capabilities. In addition, the Board is in the process of implementing the Department of Homeland Security?s Einstein suite of advanced intrusion detection capabilities. The Board and the Reserve Banks, which also follow an information security program based on NIST standards adapted to their environment, use a comprehensive defense in?depth approach whereby multiple layers of security controls are implemented to protect sensitive information as well as vigilantly monitoring probes and attacks on an ongoing basis. It is important to acknowledge, however, that no defense is foolproof. Early detection of attacks is just as important as prevention through multiple layers of defense. Hence, we continually work to identify and remediate attacks before any damage occurs. The Federal Reserve also recognizes the systemic risk posed by cyber threats to the ?nancial system. The global financial services sector has a heightened level of exposure to cyber risk due to the high degree of information technology intensive activities and the increasing interconnection between firms in the sector. As such, cyber risk mitigation and cyber resiliency initiatives continue to be high priorities for the Federal Reserve. To strengthen risk management practices across the sector and reduce the impact of a cyber?related incident, the Federal Reserve works independently and in collaboration with other agencies, public/private partnerships, and international authorities, to introduce and participate in programs to share information and benchmark from best-practices that combat the increasingly frequent and sophisticated emerging cybersecurity threats. . 1 Jason Lange Dustin Voiz, Fed Records Show Dozens of Cybersecurity Breaches, Reuters, Jun. 1, 2016, available at b. What steps is the Federal Reserve taking to strengthen its protection of and other sensitive information? We are continually improving our information handling policies and processes. Protecting sensitive information throughout its lifecycle from creation to destruction is a vital component of our overall cybersecurity strategy. In addition to working aggressively to minimize access to sensitive information based on ?least privilege necessary? and ?need to know? criteria, we have implemented and are enforcing email classi?cation and labelling, as well as require document labeling. Additionally, we continue to enhance our DLP program while also implementing of databases containing PII as well as other sensitive/mission critical data consistent with the requirements of the Federal Cybersecurity Enhancement Act. e. What steps is the Federal Reserve taking to protect against insider threats? Information handling processes and data loss protection capabilities are fundamental building blocks in strengthening our ability to identify and respond to insider threats. We continue to expand the use of automated solutions to assist us in ensuring that only authorized individuals have access to information and to prevent the movement of information to unauthorized locations including limiting the use of mobile data storage devices. We are also increasingly utilizing Operational analytics to identify and respond to threats. Our insider threat protection strategy is consistent with our layered protections strategy and focuses on people, processes, and technology. Our ongoing training and awareness program reinforces the importance to our employees of the need to safeguard sensitive information entrusted to them and the importance of using systems and data for authorized purposes only. Security processes associated with insider threats are focused on limiting access to sensitive information based on the tenets of ?least privilege necessary? and ?need to know? criteria. We strive to continually improve our investments in security technologies to enable us to detect early signs of anomalous activities indicative of insider or other forms of cyber threats. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET YELLEN CHAIR April 28, 2017 The Honorable Randy Hultgren House of Representatives Washington, DC. 20515 Dear Congressman: Enclosed is my response to question 2 that you submitted following the February 15, 20171, hearing before the Committee 011 Financial Services. A copy has also been forwarded to the Committee for inclusion in the hearing record. Responses to the remaining questions will be forthcoming. Please let me know if I can be of further assistance. Sincerely, Enclosure 1 Questions for the record related to this hearing were received on March 21, 2017. Questions for The Honorable Janet L. Yellen, Chair, Board of Governors of the Federal Reserve System from Representative Hultgren: 2. An April 2016 GAO report found that the Fed. ?should revise the resolution plan rule?s annual ?ling requirements to provide suf?cient time not only for the regulators to complete their plan reviews and provide feedback but also for companies to address and incorporate regulators? feedback in subsequent plan ?lings.? It suggests extending the annual ?ling cycle to every 2 years. a. Does the Fed plan to adjust its living wills ?ling cycle to be in line with the recommendation? If so, when? b. If not, why does the Fed disagree with the recommendations of the Government Accountability Of?ce? The Federal Reserve supports the Government Accountability Of?ce?s (GAO) recommendation to lengthen the current one?year resolution plan ?ling cycle and is consulting with the Federal Deposit Insurance Corporation (FDIC) on potential revisions to the regulation requiring annual resolution plan submissions. The Federal Reserve also has taken a number of actions since the GAO report to extend ?ling deadlines and reduce reporting requirements of resolution plan ?lers. In April 2016, the Federal Reserve and the FDIC (agencies) permitted domestic global systemically important banks to provide a progress report in October 2016 on their efforts to address shortcoming and de?ciencies identi?ed by the agencies in lieu of a full resolution plan due in July 2016. In June 2016, the agencies permitted 84 ?rms with limited US. operations to ?le resolution plans with signi?cantly reduced informational content for three years. In August 2016, the agencies extended the deadline from year?end 2016 to year?end 2017 for the resolution plan submissions of certain smaller ?rms and non?bank organizations. In March 2017, the agencies granted certain large foreign banking organizations a one?year extension to incorporate guidance provided by the agencies for their next plans. From: To: Cc: Subject: Date: Attachments: Tranise Garland Allison, Terrie Jodel Jeremie; Madelyn Marchessault; Jennifer Gallagher QFR Submission correction Friday, April 28, 2017 11:55:54 AM JLY to Rep. Emmer _follow up to 021517 hearing_Q.3_CORRECTED.pdf JLY to Rep. Hill_follow up to 021517 hearing_CORRECTED.pdf Hello Terrie – I am attaching two QFRs that we previously transmitted in April. While reviewing records I noticed that these two had an incorrect date on the footnote of the cover letter. Please let me know if you have any questions. We will also provide this correction to the appropriate congressional offices. Thank you, Tranise Tranise Garland Congressional Liaison Office Board of Governors Federal Reserve System Washington, D.C. 20551 Tel: (202) 475-6301 tranise.e.garland@frb.gov BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C.20551 JANET L. YELLEN CHAIR April 20, 2017 The Honorable Torn Emmer House of Representatives Washington, DC. 20515 Dear Congressman: Enclosed is my response to question 3 that you submitted following the February 15, 2017,1 hearing before the Committee on Financial Services. A copy has also been forwarded to the Committee for inclusiOn in the hearing record. A response to the remaining question will be forthcoming. Please let me know if I can be of further assistance. Sincerel i?xko? Enclosure 1 Questions for the record related to this hearing were received on March 21, 2017. Questions for The Honorable Janet L. Yellen, Chair, Board of Governors of the Federal Reserve System from Representative Emmer: 3. Can you give the Committee some insights on the current positioning of the Fed?s balance sheet and thinking on retention at current levels and the potential for reducing holdings? As noted in recent Federal Open Market Committee (F OMC) statements, the Committee has indicated that it expects to continue its current policy of reinvestments until the process of normalizing the level of the federal funds rate is well underway. However, the Committee has not established a formal linkage between a particular level of the federal funds rate and a change in its reinvestment policy. The FOMC conducts monetary policy to promote its longer?term objectives of maximum employment and stable prices. Consistent with this overarching principle, the FOMC will reach a judgment about reinvestments and the balance sheet based on its assessment of the economic outlook and the prospects for continued progress toward its longer run objectives. This process will include an evaluation of the anticipated trajectory for the economy as well as the risks to the economic outlook. As noted in the minutes of the March 2017 FOMC meeting, provided that the economy continued to perform about as expected, most participants anticipated that gradual increases in the federal funds rate would continue and judged that a change to the Committee?s reinvestment policy would likely be appropriate later this year. As noted in the statement of Policy Normalization Principles and Plans, the Committee intends that the Federal Reserve will, in the longer run, hold no more securities than necessary to implement monetary policy efficiently and effectively. Moreover, in the longer run, the FOMC intends to hold primarily Treasury securities. As always, the Committee is prepared to adjust the details of its approach to policy normalization in light of economic and ?nancial developments. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN - CHAIR April 20, 2017 The Honorable French Hill House of Representatives Washington, DC. 20515 Dear Congressman: Enclosed is my response to the written question that you submitted following the February 15, hearing before the Committee on Financial Services. A copy has also been forwarded to the Committee for inclusion in the hearing record. Please let me know if I can be of further assistance. Sincerely, L?q? Enclosure 1 Questions for the record related to this hearing were received on March 21, 2017. Questions for The Honorable Janet L. Yellen, Chair, Board of Governors of the Federal Reserve System from Representative Hill: 1. In reSponse to Mr. Williams question regarding what is currently stepping the Federal Reserve from winding down its balance sheet, you stated that the federal funds rate range was now between 50 and 75 basis points and that you wanted ?a bit more buffer? in order to reach normalization so that the Fed could then begin to contract the size of its balance sheet. What range constitutes ?a bit more buffer?? In other words, speci?cally at what range does the federal funds rate need to reach for the Fed to start running off its balance sheet? As noted in recent Federal Open Market Committee (FOMC) statements, the Committee has indicated that it expects to continue its current policy of reinvestments until the process of normalizing the level of the federal funds rate is well underway. However, the Committee has not established a formal linkage between a particular level of the federal funds rate and a change in its reinvestment policy. The FOMC conducts monetary policy to promote its longer?term objectives of maximum employment and stable prices. Consistent with this overarching principle, the FOMC will reach a judgment about reinvestments and the balance sheet based on its assessment of the economic outlook and the prospects for continued progress toward its longer run objectives. This process will include an evaluation of the anticipated trajectory for the economy as well as the risks to the economic outlook. As noted in the minutes of the March 2017 OMC meeting, provided that the economy continued to perform about as expected, most participants anticipated that gradual increases in the federal funds rate would continue and judged that a change to the Committee's reinvestment policy would likely be appropriate later this year. From: To: Cc: Subject: Date: Attachments: Tranise Garland Allison, Terrie Jodel Jeremie; Madelyn Marchessault; Jennifer Gallagher QFR Submission Monday, May 01, 2017 9:26:53 AM JLY to Rep. Emmer _follow up to 021517 hearing_Q.2.pdf Good morning Terrie – Attached is another QFR submission from the Chair’s monetary policy hearing. • Rep. Emmer, question 2 (remaining question forthcoming) Thank you, Tranise Tranise Garland Congressional Liaison Office Board of Governors Federal Reserve System Washington, D.C. 20551 Tel: (202) 475-6301 tranise.e.garland@frb.gov BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR May 1, 2017 The Honorable Tom Emmer House of Representatives Washington, DC. 20515 Dear Congressman: Enclosed is my response to question 2 that you submitted following the February 15, 2017,1 hearing before the Committee on Financial Services. On April 20, 2017, I provided a response to question 3. A copy has also been forwarded to the Committee for inclusion in the hearing record. A reSponse to the remaining question will be forthcoming. Please let me know if I can be of further assistance. Sincerely, arr/4646M Enclosure 1 Questions for the record related to this hearing were received on March 21, 2017. Questions for The Honorable Janet L. Yellen, 'Chair, Board of Governors of the Federal Reserve System from Representative Emmer: 2.- In one of your previous appearances before this committee, I asked you about the impact that raising the Fed Funds rate could have on farmers and agriculture af?liated businesses. You mentioned that the Fed has studied this impact, however, given the very pessimistic outlooks for our farm economy and the continued strength of the US. dollar, I am interested to see if the Fed has revisited and reexamined this issue at all? In the time since our earlier exchange on this topic, the ?nancial situation has not changed greatly. The Federal Open Market Committee (FOMC) increased the target range for the federal funds rate by 25 basis points in late 2015??right around the time of our earlier exchange; by - another 25 basis points in late 2016; and by a third increment of 25 basis points at its meeting in March of this year. The current target range-which extends from 3/4 percent to 1 percent-?is still low by historical standards. As of early 2016, when I last wrote to you, I noted that the FOMC was anticipating ?modest increases in interest rates,? and that has certainly been the outcome in terms of the policy rates that we set. In agriculture, bank lending rates have also increased by about 70 basis points on average since late 2015. Although farmers? interest expenses are anticipated to be about 12 percent higher in 2017 than in 2015, interest expenses on farm debt still account for less than 6 percent of total fann sector expenses. With regard to the effects of the dollar, the foreign exchange value of the dollar has increased only modestly since 1ate 2015, and the value of US. agricultural exports have actually increased by about 5 percent over the past year compared with the prior 12 months. However, U.S. agricultural commodity prices have generally remained suppressed since 2015, re?ecting several consecutive years of strong production. Some farmers have faced greater ?nancial pressure in this environment, but on average farm loan delinquencies remain at historically low levels. From: To: Cc: Subject: Date: Attachments: Tranise Garland Allison, Terrie Jodel Jeremie; Madelyn Marchessault; Jennifer Gallagher QFR Submission Wednesday, May 03, 2017 12:56:32 PM JLY to Rep. Sherman _follow up to 021517 hearing.pdf Hi Terrie – Attached is a QFR submission for Rep. Sherman following the MPR hearing. Thank you! Tranise Garland Congressional Liaison Office Board of Governors Federal Reserve System Washington, D.C. 20551 Tel: (202) 475-6301 tranise.e.garland@frb.gov BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR May 3, 2017 The Honorable Brad Sherman House of Representatives Washington, DC. 20515 Dear Congressman: Enclosed is my response to the written question that you submitted following the February 15, hearing before the Committee on Financial Services. A copy has also been forwarded to the Committee for inclusion in the hearing record. Please let me know if I can be of further assistance. Sincerely, Enclosure 1 Questions for the record related to this hearing were received on March 21, 2017. Questions for The Honorable Janet L. Yellen, Chair, Board of Governors of the Federal Reserve System from Representative Sherman: 1. The latest round of Basel capital rules established punitive risk weightings for mortgage servicing rights (MSR), which may have caused banks to rethink whether to own these assets. Ultimately, these punitive standards may impact American borrowers through higher rates or reduced access to mortgage credit. What are your thoughts about strict conformity with the international Basel framework, and do you think it is appropriate to ensure that the U.S. rules are implemented or amended in a fashion that addresses possible harm to consumers and businesses, speci?cally on the MSR issue, and more generally where the framework puts U.S. banks and their lending activity at a competitive disadvantage? The Board of Governors of the Federal Reserve System (Board), Office of the Comptroller of the Currency, and Federal Deposit Insurance Corporation (federal banking agencies) have long limited the inclusion of mortgage servicing assets (MSAs) in regulatory capital in light of the high level of uncertainty regarding the ability of banking organizations to realize value from these assets, especially under adverse ?nancial conditions. These regulatory capital limitations help protect banks from sudden ?uctuations in the value of MSAS and from the inability to quickly divest these assets at their full estimated value during periods of financial stress. in the July 2016 Report to the Congress on. the E?ect ofCap-ital Rules on Mortgage Servicing Assets, I the federal banking agencies together with the National Credit Union Administration noted that MSA valuations are inherently subjective and uncertain because the valuations rely on assessments of future economic variables. As a member of the Basel Committee on Banking Supervision (BCBS), the Board works with other BCBS members to develop minimum international regulatory capital standards that promote consistency across the largest banking organizations in BCBS member jurisdictions and avoid a race?to?the?bottom in international prudential regulation. Before adopting any changes to its regulations, the Board invites public comment and considers any unique features of the U.S. economy and financial sector. After inviting public comment on a revised capital treatment of MSAs that was based on work conducted by the Board and other members of the BCBS, in 2013 the Board and the Office of the Comptroller of the Currency adopted a ?nal rule that modified the capital treatment of MSAS to better address the risks associated with these assets. The Board recognizes community banks? concerns with respect to the burden and complexity of the U.S. regulatory capital framework. The Board, along with the other federal banking agencies, recently committed to address such concerns in their report on the review of the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA report), which emphasized the ?goal of reducing regulatory burden on community banks while at the same time maintaining safety and soundness and the quality and quantity of regulatory capital in the banking system.? As described in the EGRPRA report, the federal banking agencies are jointly developing a proposal to simplify certain aspects of the regulatory capital framework, including the treatment of MSAS. From: To: Cc: Subject: Date: Attachments: Tranise Garland Allison, Terrie Madelyn Marchessault; Jodel Jeremie QFR Submission Tuesday, January 31, 2017 3:21:08 PM JLY to Rep. Luetkemeyer_HFSC 09.28.16 hearing_Q. 8-9.pdf Hi TerrieI am attaching the QFR submission for Chair Yellen to Rep. Luetkemeyer from the September 28, 2016 hearing. Please note that the date of the QFR is for this Thursday, which is the day the congressional office will receive a courtesy copy. This constitutes completion of all questions received following the hearing. Thank you, Tranise Tranise Garland Congressional Liaison Office Board of Governors Federal Reserve System Washington, D.C. 20551 Tel: (202) 475-6301 tranise.e.garland@frb.gov BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR February 2, 2017 The Honorable Blaine Luetkemeyer House of Representatives Washington, DC. 20515 Dear Congressman: Enclosed are my responses to questions 8 and 9 that you submitted following the September 28, 20161, hearing before the Committee on Financial Services. On January 13, 2017, I provided a response to questionlO through 13. Additionally, on December 22, 2016, I provided a response to question 4 and on December 8, 2016, I provided responses to questions 1 through 3, and 5 through 7. A copy has also been forwarded to the Committee Clerk for inclusion in the hearing record. This constitutes completion of my responses to all of your written questions submitted. Please let me know if I may be of further assistance. Sincerely, Enclosure 1 Questions for the record related to this hearing were received on October 17, 2016. Questions for The Honorable Janet L. Yellen. Chair, Board of Governors of the Federal Reserve System from Representative Luetkemever: 8. The Federal Reserve?s recommendations made pursuant to the Section 620 Study rest upon an assumption that an environmental risk?s costs will exceed a subsidiary?s capitalization, and that claims will then be made against a ?nancial holding company by ?piercing the corporate veil.? However, the Federal Reserve notes in its recent notice of proposed rulemaking that such instances are an ?exception to the general rule in corporate law that a parent company is not liable for the acts of its subsidiaries, and may be applied when the af?liated entity exercises a high degree of control over the liable company.? Did the Federal Reserve conduct an analysis as to whether corporate ?veil piercing? is more likely to occur in the context of merchant banking? In recommending the repeal of merchant banking authority, the Federal Reserve Board (Board) considered the risks of the activity and whether the activity could have a negative effect on safety and soundness, as well as the appropriateness of the activity. As part of its review of merchant banking, the Board considered the risk that a ?nancial holding company could be held liable for the acts of a portfolio company through a veil piercing action. The Board considered whether the factors that contribute to a court?s decision topierce the corporate veil may also be present in merchant banking. See also response to question 9. These factors, many of which are described in response to question 9 below, are not prohibited under the Gramm?Leach?Bliley Act. Therefore, a ?nancial holding company (F HC) may engage in activities under merchant banking authority that increase the likelihood that the corporate veil between the FHC and a company it holds under merchant banking authority would be pierced. For example, involvement in the day-to?day operations of a portfolio company increases the risk that a ?nancial holding company will be held liable for the acts of a portfolio company. Under the Gramm?Leach-Bliley Act, a ?nancial holding company may routinely manage or operate a portfolio company as may be necessary or required to obtain a reasonable return on the resale or disposition of the investment. 9. Can you provide speci?c examples of when claimants against a ?nancial holding company affiliate have pierced the corporate veil in the merchant banking context? Please cite the speci?c factors that you believe would need to be present for such veil piercing to occur. Staff is not aware of a successful veil piercing claim against a financial holding company for the actions of a company held under merchant banking authority. The tests and various factors courts consider in an action to pierce the corporate veil vary from state to state. One key factor courts consider is the level of control evidenced by a dominant shareholder over the corporation. Such domination may be evidenced by control over ?nances, policy and business practice of the corporation, including whether (1) the shareholder sought to be charged owns all or most of the stock of the corporation, (2) the corporation is inadequately capitalized, (3) the shareholder uses the property of the corporation as its own, (4) the directors or executives of the corporation act independently in the interest of the corporation or simply -2, take their orders from the dominant shareholder or act in the latter?s interest, and (5) the formal legal requirements of the corporation are observed.l 1 See Fletcher Cyclopedia of the Law of Corporations 41:10-30 (rev. ed. 2006). Not Responsive/Internal Board Email From: Allison, Terrie [mailto:Terrie.Allison@mail.house.gov] Sent: Tuesday, March 21, 2017 5:17 PM To: Tranise Garland Subject: 2/15/17 Transcript and QFRs Hi Tranise: I have attached for editing a copy of our 2/15/17 hearing with Chair Yellen as well as questions for the record from Reps. Hill, Hultgren, Loudermilk, Luetkemeyer, Moore, and Sherman. Thanks! Terrie Allison Committee Editor Financial Services Committee (202) 225-4548 HBA046.0DO PAGE 1 1 MORNINGSIDE PARTNERS, LLC 2 RPT. PIACENTE 3 HEA046000 4 MONETARY POLICY AND THE STATE OF THE ECONOMY 5 Wednesday, February 15, 2017 6 House of Representatives, 7 Committee on Financial Services, 8 Washington, D.C. I 9 The committee met, pursuant to call, at 10:02 in 10 Room 2128, Rayburn House Office Building, Hon. Jeb Hensarling 11 [chairman of the committee] presiding. 12 Present: Representatives Hensarling, McHennry, King, 13 Royce, Lucas, Pearce, Posey, Luetkemeyer, Huizenga, Duffy, 14 Hultgren, Ross, Pittenger, Wagner, Barr, Rothfus, Messer, 15 Tipton, Williams, Poliquin, Love, Hill, Emmer, Zeldin, Trott, 16 Loudermilk, Mooney, MacArthur, Davidson, Budd, Kustoff, 1? 'Tenney, Hollingsworth, Waters, Maloney, Sherman, Meeks, 18 Capuano, Clay, Scott, Green, Cleaver, Perlmutter, 19 Himes, Foster, Kildee, Delaney, Sinema, Beatty, Heck, Vargas, 20 Gottheimer, Gonzalez, Crist, and Kihuen. HEA046.UOO PAGE 2 21 Chairman HENSARLING. Without objection, the chair is 22 authorized to declare a recess of the committee at any time, 23 and all members will have 5 legislative days within which to 24 submit extraneous materials to the chair for inclusion in the 25 record. I 26 This hearing is for the purpose of receiving the 27 semiannual testimony of the chair of the Board of Governors 28 of the Federal Reserve System on the conduct of monetary 29 policy and the state of the economy. 30 I now recognize myself for 3 minutes'to give an opening 31 statement. 32 After 8 years of the largest monetary policy stimulus in 33 our history and the most unconventional monetary policy in 34 our history, Americans recently received disappointing 35 economic news yet again. It is official: The economy grew 36 at a measly 1.6 percent in 2016 when our historic norm is 37 twice that. That makes 8 years of sub?par growth, 8 years of 38 stagnant paychecks, and 8 years of unreplenished savings. 39 Notwithstanding good intentions at the Fed and 4D notwithstanding good personnel, after 8 years there is zero 41 evidence that zero interest rates and a bloated Fed balance 42 sheet leads to a healthy economy. 43 What also hasn't changed in 8 years is that the Fed 44 continues to unlawfully pay above?market interest rates to 45 some of the nation's largest banks in order to prop up select HBAD46 . 000 PAGE '70 credit markets. This very well could be fueling asset bubbles and is certainly harming the ability of market participants to accurately price risks. This foray into fiscal policy clearly threatens the Fed?s monetary policy independence, which should be preserved. What also hasn't changed in 8 years is that on the regulatory side the Fed figuratively, if not literally, is taking up seats in bank boardrooms. This means that unelected Washington bureaucrats can literally direct who gets credit in our society, as opposed to competitive markets. I will continue to say it: We must be vigilant to ensure that our central bankers do not one day become our central planners. Fortunately, there is something big that has changed in the last 8 years, and that is an intervening election, and with it the prospect of three new members of the Board of Governors. The National Federation of Independent Business reports that optimism on Main Street soared in the wake of the election, with the Small Business Optimism Index jumping up to a 12?year high. Likewise, the number of Americans who say the nation is now on the right track has risen by 15 percent since the election. Clearly Americans have a newfound expectation that our economy will grow healthier with different policies coming out of Washington. I believe the last 8 years have shown HEA046 . 000 PAGE 4 71 that no amount of monetary policy stimulus can make up for 72 the fiscal policy headwinds of a cumbersome failed regulatory . 73 state, an uncompetitive tax code, Obamacare, and Dodd?Frank. 74 All of these must be remedied and changed if we are to have a 75 healthy economy for all and bank bailouts for none. 76 Building that healthier economy for all clearly requires 77 changes at the Fed. We must have a more predictable, 78 disciplined, and transparent monetary policy. 79 The Fed's so?called data?dependent monetary policy of 80 today says nothing about which data matter, let alone how 81 they matter. This severely compromises the kind of policy 82 transparency and predictability that is necessary for 83 household wealth to grow and American companies to create 84 jobs. 85 Something else that has changed in the last 8 years is 86 the introduction of the reforms included in the Financial 87 Choice Act, which would begin to restore the Fed's 88 independence and promote economic growth. 89 Several Nobel Prize?winning economists, former treasury 90 secretaries, and former senior economic policy officers have 91 said when they endorsed the Financial Choice Act: These 92 reforms would ensure a monetary policy framework that is 93 truly data?dependent, consistent, and predictable. The 94 Financial Choice Act will help consumers and investors make 95 better decisions in the present and form better expectations HBAU46.UDD PAGE 5 96 about the future, and I look forward to its passage. 97 I now recognize the ranking member for 4 minutes for an 98 opening statement. 99 [The statement of Chairman Hensarling follows:] 100 COMMITTEE INSERT HEAD-46 . 000 PAGE 6 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 Ms. WATERS. Thank you, Mr. Chairman. And thank you, Chair Yellen, for testifying here today. Each day as a new episode of chaos unfolds at the Trump White House working families across the country are reminded that our hard-fought gains to create more than 16 million private sector jobs, lift wages, stabilize the housing market, rein in Wall Street?s abusive practices, and make affordable health care accessible are in jeopardy. Trump has already shown America that??what he is really all about. He has taken steps to roll back the Dodd?Frank Wall Street reform law based on the false premise that businesses do not have the ability to get loans, ignoring the National Federation of Independent Businesses survey showing that 96 percent of small businesses said their borrowing needs are satisfied. In addition to rolling back financial protections, Trump has moved to eliminate safeguards that protect Americans planning for retirement from being ripped off by financial advisers, repealed a plan to cut mortgage insurance premiums that would have saved homeowners $500 a year, called for tax cuts for the rich at the expense of the poor and middle class, vowed to eliminate health insurance for 28 million people, aligned himself with Republican leaders in Congress in cutting Social Security and Medicare, threatened a trade war with two of our largest trading partners, and adopted an HBAO46 . 000 PAGE 7 I 126 anti?immigrant agenda. 12? Taken all tOgether, these policies will shrink our 128 economy, worsen inequality, lift inflation, reduce exports, 129 eliminate jobs, explode Federal budget deficits, and 130 ultimately steer us in the direction of another Great i 131 Depression. Simply put, the Trump agenda is bad for America. 132 Chair Yellen, on top of all of this and despite your 133 important contributions to our economic recovery, my 134 Republican colleagues continue to attack your policies, 135 deflecting from their own failure to provide a fiscal 136 stimulus that would have complemented rather than undermined 137 the Fed's bold efforts in recent years. 138 Now Republicans are doubling down on their efforts to 139 inject partisan politics into Fed decision?making. Indeed, 140 Republicans on this committee have sought to weaken the 141 independence of the Fed and have called for chaining policy 142 decisions to a mathematical formula that would hamper the 143 Fed?s ability to support the economy amid a severe and 144 persistent shock. 145 Their agenda makes you wonder: Do Republicans not 146 remember the 11 million Americans who lost their homes, the 147 $13 trillion taken from the savings of hardworking Americans, 148 the nearly 9 million Americans who lost their jobs, and when 149 the unemployment rate hit 10 percent? While our economy has 158 made significant gains, hardworking American families simply HEAD46.000 PAGE 8 151 152 153 154 155 156 157 158 159 160 161 162 163 164 can't afford another Great Recession. Despite the progress we have made, many communities across America continue to struggle, particularly minority communities, which were disproportionately hit by the crisis. On average, African?American households lost 52 percent of their wealth, Hispanic households lost 66 percent, and white households lost 16 percent. In these tumultuous times and with more progress that must be made for vulnerable communities, your steady leadership and an independent Fed that advocates for the interests of all Americans is now more important than ever. Mr. Chairman, I yield back the balance of my time. [The statement of Ms. Waters follows:] COMMITTEE INSERT HEA046.000 PAGE 9 165 166 167 168 169 170 171 172 173 174 175 176 177 178 179 180 181 182 183 184 185 186 187 188 189 Chairman HENSARLING. Gentlelady yields back. The chair now recognizes the gentleman from Kentucky, Mr. Barr, the chairman of our Monetary Policy and Trade Subcommittee, for 2 minutes. Mr. BARR. IThank you, Mr. Chairman. In November the American people delivered a loud and clear message that they want major changes in Washington. With Governor Tarullo?s resignation, President Trump will have an opportunity to make major changes at the Fed, filling three vacancies on the Board of Governors, including the vice chair of supervision. Many financial institutions in my district and around the country are concerned that the Fed may cram through a new wave of regulations before these new governors are confirmed. Given the avalanche of red tape produced by Dodd?Frank and the disproportionate costs imposed on small community banks, it is imperative that the Federal Reserve refrain from issuing any new regulations until the new governors are confirmed. he important, new Fed governors mean a new opportunity to examine the Fed?s unconventional monetary policies. Since the beginning of the recovery in 2009, the Fed's improvisational policies, including near?zero interest rates, three rounds of quantitative easing, and a $4.5 trillion balance sheet, have failed to deliver their predicted result. HBA046.000 PAGE 10 190 191 192 193 194 195 196 197 198 199 200 201 202 203 204 205 206 207 203 209 210 211 212 GDP growth during the Obama administration averaged a mere 1.8 percent, well below the growth forecast by the Fed and not even close to the 3.5 percent to 4 percent growth average during previous recoveries. The American people are ready for a change??a change from the Fed's unconventional and unpredictable policies, a Change from the Fed's inaccurate projections of growth, and a change from disappointing economic results. It is time for the Fed to begin prudently shrinking its balance sheet; end its easy-money policies that have fueled government borrowing; and shift to a more firmly grounded, strategy?based policy that will assure price stability, facilitate commerce wherever it shows promise, and create the conditions for strong economic growth. To paraphrase Milton Friedman, it is time we stop assigning to monetary policy a larger role than it can perform, asking it to accomplish tasks that it cannot achieve, and as a result preventing it from making the contribution that it is capable of making. I look forward to your testimony, Chair Yellen, and I thank you for your time. [The statement of Mr. Barr follows:] COMMITTEE INSERT HEAU46 . 000 PAGE 11 213 Chairman HENSARLING. Chair now recognizes the gentleman 214 from Michigan, Mr. Kildee, the vice ranking member of the 215 committee, for 1 minute. 216 Mr. KILDEE. Thank you, Mr. Chairman, and Madam Ranking 21? Member. 213 And welcome, Chair Yellen. 219 The new administration enters with a tailwind of 220 economic growth at its back. with 83 months of continuous 221 private sector job growth and an unemployment level of 4.8 222 percent, we do have a strong economic foundation to continue 223 to build upon. 224 So_it is important that the growth of the last 8 years 225 is not put at risk through wholesale repeal of the 226 legislative framework that has protected consumers, 227 strengthened the financial system, and helped our economy 228 find its footing after the greatest financial crisis since 229 the Great Depression. 230 So I look forward to hearing from you about how the 231 Federal Reserve will continue to set monetary policies that 232 will expand our economic progress and allow for growth in 233 areas such as workers' wages that have been more slow to 234 recovery, and in particular to address the uneven nature of 235 growth. The United States still has pockets of poverty in 236 urban and rural communities. 23? And I look forward to hearing your comments and HBA046.00U 238 239 240 241 242 appreciate your attendance here at the committee. back. With that, I yield back. [The statement of Mr. Kildee followe:] COMMITTEE INSERT PAGE Welcome 12 HBAO46 . PAGE 13 243 Chairman HENSARLING. The gentleman yields back. 244 Today we welcome the testimony of the Honorable Janet 245 Yellen. Chair Yellen has previously testified before this 246 committee on numerous occasions, so I certainly believe she 24? needs no further introduction. 248 Welcome, Madam Chair. Without objection, your written 249 statement will be made part of the record, and you are now 250 recognized to give an oral presentation of your testimony. HBA046.000 PAGE 14 251 STATEMENT OF HON. JANET YELLEN, CHAIR OF THE BOARD OF 252 GOVERNORS OF THE FEDERAL RESERVE SYSTEM 253 Mrs. YELLEN. Thank you. 254 Chairman Hensarling, Ranking Member Waters, and other 5 255 members of the committee, I am pleased to present the Federal 256 Reserve's semiannual monetary policy report to the Congress. 25? In my remarks today I will briefly discuss the current 258 economic situation and outlook before turning to monetary 259 policy. 260 Since my appearance before the committee last June, the i 261 economy has continued to make progress toward our 262 dual?mandate objectives of maximum employment and price 263 stability. In the labor market, job gains averaged 190,000 264 per month over the second half of 2016, and the number of 265 jobs rose an additional 227,000 in January. Those gains i 266 bring the total increase in employment since its trough in 267 early 2010 to nearly 16 million. 268 In addition, the unemployment rate, which stood at 4.8 268 percent in January, is more than 5 percentage points lower 270 than where it stood at its peak in 2010 and is now in line 271 with the median of the Federal Open Market Committee 272 participants' estimates of its longer-run normal level. A 273 broader measure of labor under?utilization, which includes 274 those marginally attached to the labor force and people who HEAO46.DOO PAGE 15 275 are working part time but would like a full?time job, has 276 also continued to improve over the past year. 277 In addition, the pace of wage growth has picked up 278 relative to its pace of a few years ago, a further indication 279 that the job market is tightening. Importantly, improvements 280 in the labor market in recent years have been widespread, 281 with large declines in the unemployment rates for all major 282 demographic groups, including African?Americans and 283 Hispanics. Even so, it is discouraging the jobless rates for 284 those minorities remain significantly higher than the rate 285 for the nation overall. 286 Ongoing gains in the labor market have been accompanied 287 by a further moderate expansion in economic activity. U.S. 288 real gross domestic product is estimated to have risen 1.9 289 percent last year, the same as in 2015. Consumer spending 290 has continued to rise at a healthy pace, supported by steady 291 income gains, increases in the value of households' financial 292 assets and homes, favorable levels of consumer sentiment, and 293 low interest rates. Last year's sales of automobiles and 294 light trucks were the highest annual total on record. 295 In contrast, business investment was relatively soft for 296 much of last year, though it posted some larger gains towards 297 the end of the year, in part reflecting an apparent end to 298 the sharp declines in spending on drilling and mining 299 structures. Moreover, business sentiment has notably HBA046.000 PAGE 16 300 301 302 303 304 305 306 307 308 309 310 311 312 313 314 315 316 317 318 319 320 321 322 323 324 improved in the past few months. In addition, weak foreign growth and the appreciation of the dollar over the past 2 years have restrained manufacturing output. Meanwhile, housing construction has continued to trend up at only a modest pace in recent quarters. And while the lean stock of homes for sale and ongoing labor market gains should provide some support to housing construction going forward, the recent increases in mortgage rates may impart some restraint. Inflation.moved up over the past year, mainly because of ?the diminishing effects of the earlier declines in energy prices and import prices. Total consumer prices, as measured by the personal consumption expenditures, or PCE, index, rose 1.6 percent in the 12 months ending in December, still below the FOMC's 2 percent objective, but up 1 percentage point from its pace in 2015. Core PCE inflation, which excludes the volatile energy and food prices, moved up to about 1.75 percent. My colleagues on the FOMC and I expect the economy to continue to expand at a moderate pace, with the job market strengthening somewhat further and inflation gradually rising to 2 percent. This judgment reflects our view that U.S. monetary policy remains accommodative and that the pace of global economic activity should pick up over time, supported by accommodative monetary policies abroad. RAGE 17 325 Of course, our inflation outlook also depends 326 importantly on our assessment that longer?term inflation 327 expectations will remain reasonably well anchored. It is 328 reassuring that while market?based measures of inflation 329 compensation remain low, they have risen from the very low 330 levels they reached during the latter part of 2015 and the 331 first half of 2016. 332 Meanwhile, most survey measures of longer?term inflation 333 expectations have changed little on balance in recent months. 334 As always, considerable uncertainty attends the economic 335 outlook. Among the sources of uncertainty are possible 336 changes in U.S. fiscal and other policies, the future path of 337 productivity growth, and developments abroad. 338 Turning to monetary policy, the FOMC is committed to 339 promoting maximum employment and price stability, as mandated 340 by Congress. Against the backdrop of headwinds weighing on 341 the economy over the past year, including financial market 342 stresses that emanated from developments abroad, the 343 committee maintained an unchanged target range for the 344 Federal funds rate for most of the year in order to support 345 improvement in the labor market and an increase in inflation 346 toward 2 percent. 347 At its December meeting the committee raised the target 348 range for the Federal funds rate by one?quarter percentage 349 point to 0.5 to 0.75 percent. In doing so, the committee HBA046.00D PAGE 18 I 350 recognized the considerable progress the economy made toward 351 the dual objectives. The committee judged that even 352 after this increase in the Federal funds rate target, 353 monetary policy remains accommodative, thereby supporting 354 some further strengthening in labor market conditions and a 355 return to 2 percent inflation. 356 At its meeting that concluded early this month, the 357 committee left the target range for the Federal funds rate 358 unchanged but reiterated that it expects the evolution of the 359 economy to warrant further gradual increases in the Federal 360 funds rate to achieve and maintain its employment and 361 inflation objectives. As I noted on previous occasions, 362 waiting too long to remove accommodation would be unwise, 363 potentially requiring the FOMC to eventually raise rates I364 rapidly, which could risk disrupting financial markets and i 365 pushing the economy into recession. Incoming data suggest 366 that labor market conditions continue to strengthen and 367 inflation is moving up to 2 percent, consistent with the 368 committee?s expectations. 369 At our upcoming meetings, the committee will evaluate 370 whether employment and inflation are continuing to evolve in 371 line with these expectations, in which case a further 372 adjustment of the Federal funds rate would likely be 3?3 appropriate. 324 The committee?s view that gradual increases in the HBA046.000 PAGE 19 375 Federal funds rate will likely be appropriate reflects the 376 expectation that the neutral Federal funds rate?-that is, the 377 interest rate that is neither expansionary nor contractionary 378 and that keeps the economy operating on an even keel??will 379 rise somewhat over time. 380 Current estimates of the neutral rate are well below 381 pre?crisis levels, a phenomenon that may reflect slow 382 productivity growth, subdued economic growth abroad, strong 383 demand for safe longer?term assets, and other factors. The 384 committee anticipates.that the depressing effect of these 385 factors will diminish somewhat over time, raising the neutral 386 funds rate, albeit to levels that are still low by historical 38? standards. .388 That said, the economic outlook is uncertain and 389 monetary policy is not on a preset course. FOMC participants 390 will adjust their assessments of the appropriate path for the 391 Federal funds rate in response to changes to the economic 392 outlook and associated risks, as informed by incoming data. 393 Also, changes in fiscal policy or other economic policies 394 could potentially affect the economic outlook. 395 Of course, it is too early to know what policy changes .396 will be put in place or how their economic effects will 39? unfold. While it is not my intention to opine on specific 398 tax or spending proposals, I would point to the importance of 399 improving the pace of longer?run economic growth and raising HEAO46.DOD PAGE 20 400 American living standards with policies aimed at improving 401 productivity. - 402 I would also hope that fiscal policy changes will be i 403 consistent with putting U.S. fiscal accounts on a sustainable I 404 trajectory. 405 In any event, it is important to remember that fiscal 406 policy is only one of the many factors that can influence the 40? economic outlook and the appropriate course of monetary 408 policy. Overall, the monetary policy decisions will 409 be directed to the attainment of its congressionally mandated 410 objectives of maximum employment and price stability. 411 Finally, the committee has continued its policy of 412 reinvesting proceeds from maturing treasury securities and 413 principal payments from agency debt and mortgage?backed 414 securities. This policy, by keeping the committee?s holdings 415 of longer?term securities at sizable levels, has helped 416 maintain accommodative financial conditions. 417 'Thank you. I would be pleased to take your questions. 418 [The statement of Mrs. Yellen follows:] 419 INSERT HBA046.000 PAGE 21 420 Chairman HENSARLING. Thank you, Madam Chair. 421 The chair now yields himself 5 minutes for questions. 422 Madam Chair, as I know you are aware, on February 3rd 423 President Trump issued an executive order of core principles 424 to regulate the United States' financial system. Section 425 one, paragraph says, "Foster economic growth and vibrant 426 financial markets through more rigorous regulatory impact I 427 analysis." I 428 You were quoted yesterday in your Senate testimony 429 saying that you agree with these core principles. Were you 430 quoted accurately? 431 Mrs. YELLEN. Yes. I agree with the core principles 432 that the President enunciated. - I i 433 Chairman HENSARLING. Well, as you probably know, to i 434 date Dodd?Frank has promulgated at least 22,000 pages of 435 regulations as part of its 400 rules, I think only roughly 436 three?quarters of which have been finalized, and certainly 437 the weight and the volume, the complexity and the cost is one 438 of the headwinds that we are facing now. 439 I know that as an independent agency you are not 440 necessarily subject to the jurisdiction of the executive 441 order, but we have had testimony in this committee for years i 442 about the challenges of the Volcker Rule and its deleterious 443 impact on market illiquidity. 444 On December 22nd of last year, just weeks ago, the HBAU46.000 PAGE 22 445 Federal Reserve released a staff paper, an abstract of which 446 says, quote, "We document that the illiquidity of stress 44? bonds has increased after the Volcker Rule. Since 448 Volcker?affected dealers have been the main liquidity 449 providers, the net effect is that bonds are less liquid 450 during times of stress due to the Volcker Rule." It goes on 451 to say that the Volcker Rule may have serious consequences 452 for corporate bond market functioning in stress times. 453 Do you agree with the staff paper of the Federal 454 Reserve? 455 Mrs. YELLEN. So this was the work of a particular staff 456 member and not a finding of the board as a whole. 45? Chairman HENSARLING. I understand.l I am just trying to 458 figure out, do you agree or disagree with these conclusions? 459 Mrs. YELLEN. I think the evidence on this matter is 460 conflicting, and I think this paper did find evidence of an 461 impact in one particular area. This is an important 462 question. It is one we continue to look at. And there are a 463 number of factors-- 464 Chairman HEMSARLING. You have been looking at it for 465 years, though, haven?t you, Madam Chair? Haven?t you been 466 looking it for years now? 467 Mrs. YELLEN. Yes, we have been-- 468 Chairman HENSARLING. Still no conclusion? 469 Mrs. YELLEN. It is difficult to come to a conclusion HBAO46.000 PAGE 23 470 because by most metrics liquidity in corporate bond markets 471 still remains healthy, but there is?? 472 Chairman HENSARLING. So after a couple of years, not i 473 drawing a conclusion yet, I??then I guess I assume that there 474 is no particular action the board intends to take based upon 475 the evidence of this paper. Is that correct? 476 Mrs. YELLEN. There is no action that we intend to take 477 based on that?? 478 Chairman HENSARLING. Okay. 479 Madam Chair, in the January 25th edition of the Wall 480 Street Journal Ms. Nellie Liang,.who I assume you are 481 acquainted with, stepped down as the director of your 482 Financial Stability Division. In this article she said that, 483 quote, "Congress should provide clarity for regulators on how 484 to balance the safety of the financial system with economic 485 growth." 486 Please know that Congress does not believe that you have 487 found the proper balance and that the Volcker Rule is an 488 incredibly important channel to fund jobs in America. Again, 489 I don?t know how much stronger the evidence has take action, but please know the proper balance has 491 not been struck. 492 On January 12th of 2017 the Financial Stability Board 493 released its policy recommendations to address structural 494 vulnerabilities from asset management activities. Governor HBA046.000 PAGE 24 495 Tarullo was quoted as saying the policies, quote, "will 496 better prepare asset managers in funds for future stress 49? events." Many cannot See any association whatsoever with the 498 terms "systemic risk" and ?asset management." 499 So my first question is: Are you aware of anybody in 500 the administration directing either you or Governor Tarullo 501 to negotiate with the Financial Stability Board on asset 502 management regulation? 503 Mrs. YELLEN. It is done in negotiation with the 504 Financial Stability Board. Any regulation that is put into 505 effect in the United States has to go through a rulemaking 506 process. 50? Chairman HENSARLING. I understand that, but the 508 question was has there been any contact with the new 509 administration authorizing the Fed to carry on any 510 negotiations with respect to the asset management question 511 with the Financial Stability Board? 512 Mrs. YELLEN. Well, we participate regularly as part of 513 our established responsibilities in discussions with 514 colleagues in the?? 515 Chairman HENSARLING. As you know, Governor Tarullo was 516 never confirmed by the Senate. Are you aware of any specific 51? statutory authority he has to negotiate on behalf of the 518 United.States on the matter of asset management and systemic 519 risk? HBA046.000 PAGE 25 i 520 Mrs. YELLEN. I don't think it is a negotiation. The i 521 SEC is involved; treasury takes part in those discussions. I 522 There are a number of U.S. 523 Chairman HENSARLING. Do you believe that the new 524 administration should have the ability to nominate a vice 525 chair for supervision and, if confirmed, they would be the i 526 ones to be officially tasked with these duties? I 527 Mrs. YELLEN. We look forward to a nomination to the 528 position of vice chair for supervision and?- 529 Chairman HENSARLING. Don?t we all, Madam Chair. Don't' 530 we all. 531 My time has eXpired. I now recognize the ranking member 1 532 for 5 minutes. 533 Ms. WATERS. Thank you very much. 534 Madam Chair, we have frequently heard from members on 535 the opposite side of the aisle that Dodd-Frank has had a 536 significant adverse impact on our economy. To fact check I 53? some of this gloomy rhetoric I ask that you provide some 538 brief responses to some of the following questions. 539 Since passage of the Wall Street reform law, has 540 business lending by commercial banks expanded or contracted? 541 Mrs. YELLEN. Expanded. 542 Ms. WATERS. Roughly how many private sector jobs have 543 been added to our economy? 544 Mrs. YELLEN. Roughly 16 million since the trough in HBA046.000 PAGE 26 545 employment in early 2010. i 546 Ms. WATERS. Have wages increased or decreased in the 54? past year? 548 Mrs. YELLEW. They have increased, by most measures. 549 Ms. WATERS. Has the trend in aggregate household net 550 worth_been positive or negative? 551 Mrs. YELLEN. Positive. 552 Ms. WATERS. Has the trend in Federal budget deficit 553 risen or fallen over the past few years? i 554 Mrs. YELLEN. Deficits have declined since the financial 555 crisis and its aftermath. 556 Ms. WATERS. After the economy hit bottom, have the 557 number of foreclosures increased or decreased in recent 558 years? 559 Mrs. YELLEN. They are, I believe, decreasing now. 560 Ms. WATERS. What, in your view, are the key factors and 561 policies that have contributed to these positive trends in 562 the economy? I 563 Mrs. YELLEN. The economy is recovering from a very 564 severe crisis. We have put in place stronger financial 565 regulation that has armed four~star banks to build up their 566 capital buffers to deal with problem loans and to strengthen 567 themselves to the point where they have been able to support 568 economic growth and recovery in our economy. The U.S. 569 economy has recovered more quickly, for example, than the PAGE 27 570 571 572 573 574 STE 576 577 578 579 580 581 582 583 584 585 586 587 588 589 590 591 592 593 594 euro economies have in the aftermath of the crisis. And the Federal Reserve has put in place highly accommodative monetary policies meant to spur spending in the economy and restore low unemployment or to achieve the goal of maximum employment and price stability that have been assigned to us by Congress. As I indicated in my remarks, I believe we are coming very close to achieving those objectives and that monetary policy still remains accommodative. Ms. WATERS. Thank you. Chair Yellen, as the nation?s leading economist can you discuss how unraveling the fabric of our social safety net, such as through cuts to food assistance programs for families in poverty, eliminating access to affordable health care, eliminating the earned income tax credit and the child tax credit, cutting unemployment insurance benefits, and cutting funding for housing assistance programs could impact the short?term and long?term health of our workforce and our economy? Could these types of cuts do permanent damage to our economy?s ability to fulfill its potential? How would cuts to these programs impact inequality and the chance that families have to escape poverty? Mrs. YELLEN. Well, I don?t want to give detailed guidance to Congress on these particular programs. But I HBAD46.DOD PAGE 28 595 would say that the trend of rising inequality and the fact 596 that, although low?income households have done well over the 597 last couple of years as the economy has improved relative to 598 before the crisis and even looking back a number of decades, 599 they have clearly faced very severe problems that have left 600 many American households struggling, and these kinds of 601 programs are helpful, I think, in dealing with such distress. 602 Ms. WATERS. Could you just give me a few more minutes 603 on the earned income tax credit? Do you think that is 604 important? 605 Mrs. YELLEN. I think it does serve to support the i 606 incomes of many lower?income families. 60? Ms. WATERS. And what about the child tax credit in 608 particular? 609 Mrs. YELLEN. That works in the same direction. 610 Ms. WATERS. So, as you said, you don?t wish to tell 611 Congress what to do, but these programs are important. And 612 would you include in that cutting the unemployment insurance 613 benefits as being beneficial to helping lift families out of 614 poverty? 615 Mrs. YELLEN. Well, I think unemployment insurance 616 benefits are important for families that face real distress 617 in the labor market and they also serve as automatic 618 stabilizers that support spending in a the downturn and make 619 our economy less subject to the fluctuations of the business HBA046.000 PAGE 29 i 620 cycle. 621 Ms. WATERS. Thank you very much. 622 I yield back. 623 Chairman HENSARLING. Time of the gentlelady has 624 expired. 625 The chair now recognizes the gentleman from Kentucky, 626 Mr. Barr, chairman of our Monetary Policy and Trade 627 Subcommittee. I 628 Mr. BARR. Thank you, Mr. Chairman. 629 And, Chair Yellen, welcome back to the committee. This 630 is the first time I have had an opportunity to visit with you 631 as the new chairman of the Monetary Policy and Trade 632 Subcommittee, and I look forward to visiting with you on a 633 more informal basis to get your thoughts about monetary 634 policy and your supervisory responsibilities. i 635 My intention is to be fair?minded in our oversight and i 636 also encourage an exchange of differing viewpoints, but we 637 are also going to ask tough questions because the American I 638 people do deserve a Federal Reserve System that is 639 transparent, accountable, and predictable. 640 According to your monetary policy report from a couple 641 of years ago, Chair Yellen, the Federal Open Market Committee 642 expected that, quote, "with appropriate policy accommodation, 643 economic activity would expand." The FOMC certainly pursued 644 that accommodative policy, holding the Fed funds rate to near HBAD46.DOD PAGE 30 645 zero for almost a decade and growing the Fed?s balance sheet i 646 to one quarter of the size of our economy. I 647 You noted in your prepared testimony that labor market 648 conditions are strengthening and that we are moving toward 649 that inflation target of?2 percent. But despite all of the 650 extraordinary measures and the unconventional policies, 651 economic activity has still fallen short of FOMC expectations .652 and has done so throughout the recovery. What does the 653 serial failure of the Fed?s forecasts tell us about the 654 efficacy of Q.E. and the ballooning balance sheet? 655 Mrs. YELLEN. So the Congress? instructions to the 656 Federal Reserve are to try to achieve maximum employment and 657 price stability. We have focused on those-objectives??not 658 economic growth per se, but maximum employment. 659 The economic growth performance has been quite 66D disappointing and growth is falling short of our 661 expectations, but unemployment has come down substantially 662 and we are quite close, I would say, to achieving our labor 663 market objectives. 664 Now, the reason for this is that productivity growth in 665 the U.S. economy, which is what really determines in the long 666 run the pace of growth-- 66? Mr. BARR. Right. 668 Mrs. YELLEN. ??our economy is capable of, has been very 669 disappointing. HBAD46.0DO PAGE 31 670 Mr. BARR. Right. I understand that and also recognize 671 that we have seen a repetitive failure for??of the Fed to 672 actually achieve the expected growth rates. . 673 And really my question that I am getting at is, doesn?t 674 this underscore the failure of unconventional policies to 675 deliver the expected results? And if you are a reasonable 676 person looking at this, wouldn?t a reasonable person say, 677 "You know, maybe we shouldn?t be expecting so much from 678 unconventional policies, near zero interest rates, three 679 rounds of Q.E., a $4.5 trillion balance sheet"? 680 Mrs. YELLEN. Well, my reading would be that putting in 681 place those policies has enabled us to add 16 million jobs to 682 the U18. economy?? 683 Mr. BARR. And yet, Chair?? 684 Mrs. YELLEN. ??bring the unemployment rate down to 4.8 685 percent-? 686 Mr. BARR. Sure, and I acknowledge that and the ranking 687 member made a big point of the declining unemployment rate. 688 But we also have to recognize that almost 15 million people 689 remain unemployed or underemployed 8 years after the 690 recession. The labor participation rate is the lowest it has 691 been since 1978. 692 Mrs. YELLEN. The labor?? 693 Mr. BARR. President Obama is the only President in U.S. 694 history since Herbert Hoover to not preside over a single HBAD46.000 . PAGE 32 695 year of 3 percent growth. And median household income 696 remains nearly $1,000 lower than the pre?recession levels. 697 So we have a bit of a different viewpoint on that. 698 And I recognize that you believe that the unconventional 699 strategy has worked. But if it has worked so well, why are 700 we still reinvesting and why are we not shrinking the balance 701 sheet? 702 Mrs. YELLEN. We are beginning to remove monetary policy 703 accommodation and we expect to continue to do so, and we have 704 decided that the best way to do that is by raising overnight 705 interest rates??short?term interest rates??by raising our 706 Federal funds rate target. We are committed to shrinking our 707 balance sheet but consider it best, from the standpoint of 708 sustaining the recovery, to do that in a gradual and orderly 709 way. 710 Mr. BARR. And I respect that, given the taper tantrum, 711 and I recognize that viewpoint. But yesterday in the Senate 712 Banking Committee you said you wouldn't start to shrink the 713 Fed?s balance sheet until the Fed funds rate was high enough 714 that it could be reduced again in the event of economic 715 turbulence. What is high enough? 716 Mrs. YELLEN. It depends. There is no unique level that 717 is high enough. It depends on the strength of the recovery 718 and how robust it is, how worried we are about downside risk 719 to the economy. The Federal Open Market Committee in our HBAD46 . 000 PAGE 33 I 720 coming meetings will be discussing reinvestment policy in 721 greater detail, and I hope to be able to provide?? 722 Mr. BARR. Thank you, Chair. I look forward to 723 continuing to discuss that discretionary policy and the 724 uncertainty it is creating. 725 Chairman HENSARLING. Time of the gentleman has expired. 726 The chair now recognizes the gentleman from California, 727 Mr. Sherman. 728 Mr. SHERMAN. Mr. Chairman, we have had the~?obviously I 729 did not intend my picture to be up there on the board. My 730 staff has--I will ask them to take this down. This is a beta 731 version and we will go back to the??okay. 732 I have always envied-the majority with their national 733 debt clock. The gentleman from Kentucky tells us that he 734 wants to blame the Fed for low interest rates, and that is 735 why we have a national debt. 736 We all know that the amount we??of the deficit is set by 737 the spending. That is in Congress. It is set by the taxes. 738 That is set by Congress. And in a pitiful attempt to deflect 739 responsibility for the fact that we have a large national 740 debt, we are told that the blame goes to the Fed because you 741 haven?t charged us enough for the cost of borrowing. 742 The national debt would be even higher if our interest 743 rates were higher and if our cost of financing the national 744 debt were higher. HBAD46 . ODD PAGE 34 745 We are also told to blame Obama for the fact that the 746 catastrophe he inherited has not been rebounded enough. That 747 is like blaming the firefighter for the fact that there was a 748 fire. He found this country in freefall, we are now on the 749 upswing, and those who were here at the time that the 750 policies were set that created the freefall are saying, 751 "Well, why isn't the upswing bigger?" 752 Finally, thank you for your large balance sheet. That 753 creates a huge profit. That money goes to the general fund. 754 So your low interest rates and your huge balance sheet are 755 keeping that national debt clock that the majority puts up 756 from turning much, much faster. 757 Now, I do want??at the next meeting we will have the 758 technology done properly. We will have the national trade 759 deficit clock. 760 It stands at over $11 trillion of accumulated trade debt 761 since 1980, and that is including both goods and services. 762 It would be higher if.we just looked at goods. That clock is 763 often turning faster and that clock is as a result of the 764 terrible trade policies that have been embraced by both sides 765 of Avenue from time to time. 766 Eric Holder pointed out that he hesitated to engage in 767 criminal prosecutions of the biggest banks because of 768 the~-because they were so large that he feared for the effect 769 on the national economy. You have been here before and I HEAD-46 . 000 PAGE 35 770 771 I772 773 774 775 776 777 778 779 780 781 782 783 784 785 786 787 788 789 790 791 792 793 794 have urged you to break up the too big to fail institutions. You have said you are going to achieve those goals through another means. So can you assure the current attorney general that we can enforce the criminal law fairly, we can let the chips fall where they may, and the economy will be just fine no matter how big the institution that faces criminal prosecution and no matter how big the figures are that are put in jail? Can you tell us that as of today no one is too big to jail? Mrs. YELLEN. Certainly, I agree that the Justice Department should pursue any criminal indictments?? Mr. SHERMAN. Would the downfall of any one or two institutions have an adverse effect on our economy that should give a reasonable attorney general some pause before taking action? Mrs. YELLEN. So through the process that we have put in place, the living will process, the strengthening of the capital and liquidity positions of the largest firms?? Mr. SHERMAN. Yes or no? Can we feel free to engage in criminal prosecutions of even the largest one Or two institutions without an adverse economic effect? Yes or no? Mrs. YELLEN. I believe there is a very reasonable chance we would be able to-- Mr. SHERMAN. One last question. The battle in HBAO46.000 PAGE 36 T95 Dodd?Frank is basically a battle to reduce the amount of 796 capital that the big banks have to face. The Wall Street 797 Journal reported that moved against it 798 that that would liberate about $100 billion that the banks T99 could pay out in dividends or share buybacks. 800 Would it increase or decrease the risk that a giant 801 institution would need a bailout if we told them that they 802 should have less capital on hand and were free to take some 803 of the capital they have and pay it out in dividends now? 804 Mrs. YELLEN. So we believe very strongly in high 805 capital levels, especially for the largest and most systemic 806 institutions, and we think it will support their ability to 807 supply credit to U.S. households and businesses even in a 808 very adverse scenario. It strengthens their resilience and 809 vastly reduce their odds of failing. 810 Chairman HENSARLING. Time of the gentleman has expired. 811 The chair now recognizes the gentleman from New Mexico, 812 Mr. Pearce, chairman of the Terrorist and Illicit Finance 813 Subcommittee. 814 Mr. PEARCE. Welcome, Chair. Thanks for being here. I 815 always appreciated your viewpoints. 816 Now, as I read your report that you just gave to us, on 817 page one you are talking about the progress towards maximum 818 employment. And so you give--I am just trying to get the 819 flow here in my mind here correctly. HBAD46 . 001:} PAGE 37 820 So you have made progress and then later, then, you say 821 that FOMC believes that unemployment is pretty well at its i 822 normal level. That is, it is where it needs to be. Labor 823 under?utilization is a little bit of a concern but it is kind 824 a marginal concern, that it is these pockets of maybe 825 minorities or things. 826 Is that more or less kind of the summary? Am I reading 827 your report correctly? 828 Mrs. YELLEN. We think that the economy is?? 829 Mr. PEARCE. No. I didn?t ask about the economy. 830 Mrs. YELLEN. The labor market?? 831 Mr. PEARCE. I was talking the labor force and?? 832 Mrs. YELLEN. I 833 Mr. PEARCE. -?employment and the unemployment seems to 834 be where you think it ought to be. 835 Mrs. YELLEN. Essentially. There are?? 836 Mr. PEARCE. Essentially, okay. 837 Mrs. YELLEN. As you said and as we say in the report, 838 there are pockets of~- 839 Mr. PEARCE. Yes. I understand, but basically you are 840 given a fairly glowing, stable report. Okay. 841 Mrs. YELLEN. Well-- 842 Mr. PEARCE. Now, my point~- 843 Mrs. YELLEN. But let me be clear, I am not saying that 844 all workers or all individuals?? HBAO46 . 000 PAGE 38 845 Mr. PEARCE. You give those reservations there. We have 846 got pockets. We have got, see, large declines in employment 847 for major demographic groups, but we have got discouraging 848 jobless high for minority. I give you your balancing 849 statements there. 850 My point is that this stable position that you have i 851 established that we are pretty??done pretty well, then we 852 have got some pockets that we need to improve on, is highly 853 discouraging because four out of 10 people that could be in 854 the workforce are not. And for the 60 percent are it tells 855 us that the highest economic body in the country says it is i 856 okay that you 40 percent are not there, that we don't draw 85? attention to the 62 percent labor force participation rate. 858 It is just ignored and things are fairly stable according to 859 your report and according to our questions. 860 So yesterday in the New York Times an article 861 quoted?~and I am trying to get at this if it is 862 accurate~?said Mrs. Yellen and other Fed officials have 863 suggested that the central bank would seek to offset such 864 measures??that is Mr. Trump calling for stimulating economic 865 growth through tax cuts??but that you would seek to offset 866 that because the Fed judges the economy to be growing at 867 roughly the maximum sustainable pace already. 868 Is that accurate news? Is that accurate, that you 869 believe that we are pretty close to the maximum sustainable HBAD46.000 PAGE 39 870 pace already? 871 Mrs. YELLEN. I have urged Congress and the 872 administration to focus on measures that would raise the 873 potential of the economy to grow, that would increase 874 productivity growth and the capacity?? 8?5 Mr. PEARCE. So this statement in the New York Times is 876 incorrect?? 877 Mrs. YELLEN. It is not?? 878 Mr. PEARCE. ??that you all do not believe??you do not-- 879 Mrs. YELLEN. It is not quite accurate and I didn?t?HI 880 don't believe that that accurately reflects my words. 881 Mr. PEARCE. So this would be some of the fake news 882 coming out from the New.York Times yesterday. 883 Mrs. YELLEN. I think that there are policy measures 884 that Congress and the administration could consider?? 885 Mr. PEARCE. Okay. 886 Mrs. YELLEN. ??that would boost the capacity of the 887 U.S. econom 888 Mr. PEARCE. So is there a maximum rate at which you all 889 do become concerned about economic growth? 890 Mrs. YELLEN. I think faster economic growth, if it is 891 supported by either faster labor force growth or_productivity 892 growth?? 893 Mr. PEARCE. The question is, is there a maximum? I am 894 kind of running out of time. Is there a position at which HBA046 . 000 PAGE '40 895 you-uthe Fed gets uncomfortable with economic growth? Is 896 there a number at which you get uncomfortable? If it goes to 897 7.4 percent you are going to be okay with that? 898 Mrs. YELLEN. No. I think we would like to see fast 899 growth, but we do have to control price inflation~- 900 Mr. PEARCE. You would do things, then, to offset??this 901 idea that you would offset fast economic growth, then that 902 has an element of truth to it? 903 Mrs. YELLEN. Only if we think that it is demand~based 904 and threatens our inflation objective?? 905 Mr. PEARCE. Yes. So let me wrap up here if I cann- 906 Mrs. YELLEN. ??has assigned to us. 907 - Mr. PEARCE. Let me wrap up here, because when I look at 908 employment figures and 16 million, it indicates that all jobs 909 are created equal. And frankly, a retail job is not going to 910 pay as well as a refinery job. And when the President is 911 talking about expanding the economy and I see comments that 912 indicate you all from the Fed might do things to sidetrack 913 that growth rate when he is going to increase infrastructure 914 and the $60,000 a year jobs, I worry about that. i 915 I worry about it being considered that small business 916 growth is not as good as or maybe it is even equivalent as . 917 the economic growth by international corporations. So again, 918 I worry when I see these things. 919 I would yield back the balance of my time, Mr. Chairman. i HBA046.0DO PAGE 41 920 Thank you. 921 Chairman HENSARLING. Time of the gentleman has expired. 922 The chair now recognizes the gentleman from New York, 923 Mr. Meeks. i 924 Mr. MEEKS. Thank you, Mr. Chairman. - 925 Madam Chair, it is good to see you. And I can?t believe i 926 my ears as I stand here, or sit here, because I--you know, I i 927 guess I am hearing revisionist history, and I wonder about my i 928 colleagues who claim that they are worried now. 929 But if I recall correctly??and I think I do because I 930 got elected in 1998, I came here in 2000??at that time we 931 were talking about balanced budgets and a moving economy. 3 932- And in 2000 election we had a Republican majority in the i 933 House, a Republican majority in the Senate, and a Republican 934 President, similar to what we have right now. 935 And as I recall, during that period of time all of a .936 sudden we were not talking about balanced budgets anymore, we 93? were talking about rising deficits. Democrats clearly had 938 nothing to do with that because we had no control over 939 anything, as it is right now. And we moved forward and we 940 ended up in the greatest recession since the Great 941 Depression. 942 The fact of the matter is??and these are not alternative 943 facts?-the fact of the matter is that when Barack Obama 944 became President of the United States of America, we were HBAO46.UOO PAGE 42 945 losing. You talk about slow growth??I figure, you can 946 correct me if I am wrong-?we were losing about jobs a 949 month, not gaining anything. Not because of Democrats. 948 Barack Obama wasn?t the President. 949 So he inherited a economy that was falling. I can 950 remember the secretary of treasury coming over to the House 951 Ibegging Democrats to do something at the time because even 952 the Republicans wouldn?t do anything, asking for our help to 953 get something passed to save this economy. 954 I mean, that is not revisionist history; those are facts 955 that took place. 956 And under Barack Obama we have made tremendous progress 957--from where we were. To the fact that as opposed to losing 958 jobs, as we were beforehand, I think you testified we have 959 now gained over 16 million jobs. I think that should be 960 something that all of us as Americans should be applauding 961 and not criticizing because we have come a mighty long way 962 from an economy that was in the tankscertain things because we didn't want 964 to get back there ever again. We wanted to make sure that we 965 didn't put the hmerican people, the workers--whether you are 966 Democrat, whether you are Republican, whether you are 967 independent, whether you are black, whether you are white, 968 whether you are Hispanic?-we didn?t want people to be put in 969 that position again. So we had to come up with some new HBAO46.000 PAGE 43 970 laws. 971 One of them was.ca11ed Dodd-Frank. And as a result of 972 Dodd?Frank we saw some stabilization in institutions and we 973 began to move forward and we began to create jobs again. 'And 974 here we are now creating some of the same kind of 975 uncertainty. 976 So let me just ask a question because I believe??I don?t 977 know, maybe I am wrong, but I think that in the Fed?s 978 monetary policy report you did with that, uncertainty hurts 979 you with your report as well as it affects employers and 980 business owners. And when you have uncertainty, whether or 981 not it is dealing with immigration, whether or not it is 982 -dealing with trade, whether or not it is dealing with 983 regulatory policy, that causes problems in the economy. Is 984 that not correct? 985 Mrs. YELLEN. It can be. That is for many years a 986 problem that businesses have cited that has made them 987 reluctant to make commitments. It is hard to quantify just 988 how important that is. 989 Mr. MEEKS. One of the things that I do know, over the 990 last 14 days we certainly have had not anything certain with 991 this current administration. In fact, every day that we wake 992 up it is something new and uncertain dealing with this 993 administration. Every day. Every day. I don?t know one day 994 when we have not woken up and looked and read the papers or HBAU46 . 000 PAGE 44 995 looked at the television or something and it has been 996 something new. 997 Now, there has been some excuses??but the fact of the 998 matter is we have had anything but certainty for the last 14 999 days in this?-in the United States of America. We have had 1000 none, and that thereby will have an effect overall on the 1001 average everyday worker in the united States of America, our 1002 businesses, our small businesses, our banks, our regulations, 1003 and even, in fact, our credibility. 1004. Because guess what? In the current administration they 1005 don?t even trust one another. We have got a situation where 1006 the Vice President don?t trust this one, and the President 1007 has already said, "It is a matter of trust; I got-to get rid 1008 of thisu?rid of that one." 1009 And then you have the situation where one person comes 1010 in and says, "Oh look, the President didn?t do this; the 1011 person resigned by themselves." Then the next hour someone 1012 says, "Oh, the President fired them." i 1013 Uncertainty. Our country is in a uncertain.position i 1014 right now, which will affect our economy and, unfortunately, 1015 the gains that we have made. So I am hoping that there is 1016 something that changes immediately so the gains that we have 1017 made over the last 8 years, we don't go back to where we 1018 .were, where we were losing jobs. 1019 My time is up and I yield back. HBAO46.000 PAGE 45 1020 Chairman HENSARLING. Time of the gentleman has expired. 1021 The chair now recognizes the gentleman from North 1022 Carolina, Mr. McHenry, vice chairman of the committee. 1023 Mr. MCHENRY. Chair Yellen, thank you so much for being 1024 here today. 1025 And, you know, I support the Federal Reserve's function 1026 as an independent policymaker when it comes to our monetary 1027 policy. I think independent Federal Reserve, for the . 1028 purposes of monetary policies, is very important. i 1029 You are also a regulator. And as I have asked you 1030 before, that is really what I am interested in what you do in 1031 terms of regulation. 1032 And so let me?just ask, do you think it is appropriate 1033 for Congress to have oversight of the Federal Reserve's 1034 rulemaking and regulatory policies? 1035 Mrs. YELLEN. Of course. 1036 Mr. MCHENRY. Okay. That is good. So do you think 103? Congress should have oversight over the Federal Reserve's 1038 regulatory discussions with international bodies, as well? 1039 Mrs. YELLEN. Congress has assigned the various 1040 regulatory agencies responsibilities, and in carrying those 1041 out-? 1042 Mr. MCHENRY. And I am asking you as 1043 Mrs. YELLEN. n?we have, and I believe should have, 1044 discussions with our international colleagues. HEAD-46.000 PAGE 46 1045 Mr. MCHENRY. I will get to that question. I certainly 1046 understand that because Congress has given you this authority 1047 and given you this directive, should Congress not also have 1048 oversight over that authority in which we have given you? 1049 Mrs. YELLEN. Congress of course has oversight over our 1050 conduct. 1051 Mr. MCHENRY. So you agree both domestically and 1052 internationally we should have oversight over those 1053 rulemaking activities. Okay. 1054 So, in accordance with that I sent you a letter from a 1055 couple weeks ago, and thank you for the reply. I don?t 1056 actually like the contents of it, but thank you for replying 1057 -in a timely fashion before.the hearing. 1058 And so I asked for your assurance that--about your 1059 participation in these international agreements, for you to 1060 pause until the new administration, who has a markedly 1061 different approach to these standards, has actually got their 1062 appointees in.before you finalise any discussions 1063 internationally. Ande- 1064 Mrs. YELLEN. Congressman, you know that nothing is a 1065 rule that is effective in the United States until regulatory 1066 agencies have gone through a normal rulemaking process, and 106? nothing in these international discussions binds the 0.8. 1068 regulatory agencies, including the Fed, to carry out 1069 agreements in our own rulemakings in the United States. HBAU46 . 000 PAGE 1070 Mr. MCHENRY. I certainly understand that. 1071 Mrs. YELLEN. And we have, in important cases, indicated 1072 that we don't agree with the outcomes of international 1073 discussions and have no intention of putting in place?? 1074 Mr. MCHENRY. In other cases we can't even surmise 1075 whether or not your representative from the Fed has voted in 1076 the affirmative or in the negative on these agreements that 1077 we are then, as your agency comes back and foists upon us an 1078 international agreement that has not been apparently voted on 1079 because we can?t surmise if you voted yes or no. 1080 And so there is a lot??a great deal of?opacity with 1081 that, and what we want is transparency in this. And 1082 transparency has been severely lacking. 1083 So my question is very simple: When it comes to the 1084 Basel IV package, do you intend to wait to see if the new 1085 administration has an opinion on these matters before you 1086 would make some agreement on the Basel IV package? 1087 Mrs. YELLEN. These are all ongoing discussions in which 1088 U.S. regulators participate and, as I said, nothing is 1089 effective in the United States unless we go through a 1080 rulemaking process here. I 1091 Mr . MCHENRY . Okay. So? 1092 Mrs. YELLEN. It is important?? 1093 Mr. MCHENRY. will summarize that-- 1094 Mrs. YELLEN. It is important for U.S. HBA046.000 PAGE 48 1095 Mr. MCHENRY. ??as probably not, that you will probably 1096 not wait for the new administration to put regulators in 109? place even if those new regulators are in place and move to 1098 counteract exactly what you have achieved within an 1099 international agreement. 1100 So yesterday before the Senate Banking Committee you 1101 seemed to endorse the core principals of President Trump's 1102 financial regulation executive order. And so what steps are 1103 you taking to comply with the executive order directive to 1104 advance America?s interests in international forums, 1105 specifically as it relates to international standards like 1106 the net stable funding ratio and international insurance 110? regulation? 1108 Mrs. YELLEN. In the case of the international insurance 1109 regulation we have indicated that the capital standard that 1110 was proposed is not one that we think is suitable to be put 1111 in place in the United States, and I think that is a good 1112 example of the fact that matters that are discussed and may 1113 be agreed on by others are not effective in the United States 1114 unless we have gone through a full rulemaking process with 1115 opportunity for comment and response. 1116 Chairman HENSARLING. Time of the gentleman has expired. 1117 The chair now recognized the gentleman from 1118 Massachusetts, Mr. Capuano. 1119 Mr. CAPUANO. Thank you, Mr. Chairman. HBAU46.000 PAGE 49 1120 Thank you, Madam Chair, for being here today. 1121 You said earlier, and it has been referenced now a 1122 couple times, that you agree with the core principals 1123 enunciated in the President?s executive order. I just want 1124 to read a couple of them: to empower Americans to make 1125 informed choices, to prevent taxpayer?funded bailouts, to 1126 foster economic growth and vibrant financial markets, to 1127 restore public accountability. 1128 Everybody agrees with those core principals, but I don?t 1129 see anything in here that specifically says that Dodd?Frank 1130 has been a failure and needs to be repealed. Did I miss it? 1131 I didn?t see anything here that said any specific regulation 1132 in any level needs to be repealed or amended. Did I miss 1133 that? Is that in the core principals? 1134 Mrs. YELLEN. The executive order asks the treasury 1135 secretary, working with 1136 Mr. CAPUANO. Just to do these things? 1137 Mrs. YELLEN. ??members to conduct a review. 1138 Mr. CAPUANO. So this is all about motherhood, apple 1139 pie, and puppy dogs. We all love this stuff, and therefore 1140 the executive order, though wonderful and very powerful, 1141 means nothing. 1142 Let me read a little bit more from it: It is to promote 1143 the financial stability of the United States by improving the 1144 accountability and transparency in the financial system, to HBAO46.DDO PAGE 50 1145 end too big to fail, to protect the American taxpayer by 1146 ending bailouts, and to protect consumers from abusive 1147 financial practices??financial service??oh, oh, excuse me. I 1148 was reading the wrong thing. That is actually the preamble 1149 to the Dodd~Frank bill. 1150 Sounds very familiar, doesn?t it? I could have mistaken 1151 that for the President?s executive order because, again, who 1152 could oppose any of that? 1153 So that is wonderful. I am glad we all agree that the 1154 President?s executive order is very powerful. By the way, 1155 don't you love Greg Meeks? 1156 [Laughter.] 1157 He hit that nail so hard and so well, that ball is still 115B flying over the Fenway Park, I will tell you. It was a great 1159 way to lead this in, and I have almost nothing further to 1160 say, but I will try. 1161 Just out of curiosity, Madam Chair, do you or any of 1162 your high-ranking staff own any banks? 1163 Mrs. YELLEN. NO. 1164 Mr. CAPUANO. Do you own any stock in any banks? 1165 Mrs. YELLEN. No. 1166 Mr. CAPUANO. Do any of your immediate family members 1167 own any banks or any stock in any banks? 1168 Mrs. YELLEN. No. 1169 Mr. CAPUANO. So therefore, you have??I don't know if it HBAD46.00U PAGE 51 1170 is formal or informal-?you have no emoluments coming in to. 1171 anybody at the Federal Reserve. Is that?? 1172 Mrs. YELLEN. We have a stringent set of ethics 1173 requirements that we adhere to. 1174 CAPUANO. So you think it would be unethical if you, 1175 any of your high?ranking staff, or any of your family members 1176 were to financially benefit from the work that you do? 1177 Mrs. YELLEN. It would be conflict of interest for us 1178 and?? 1179 Mr. CAPUANO. That is good to hear because?? 1180 Mrs. YELLEN. ~~we have rules in place to?? 1181 Mr. CAPUANO. ??apparently, not everybod H- 1182 Mrs. YELLEN. ??prevent that. 1183 Mr. CAPUANO. ??agrees with that approach, and to me it 1184 has been a little troubling. I am glad to know that you and 1185 your staff and your family have high ethical values. I wish 1186 everyone tried to do that, but I guess that is another 1187 discussion for another day. 1188 I also want to ask you, I know there have been a lot of 1189 concerns about making these banks??getting rid of all these 1190 regulations so they can get rid of all of that capital money 1191 that they are just sitting there doing nothing, which, of 1192 lcourse, is not right, but that is okay. I will take that. 1193 As I understand the capital requirements?~and correct me 1194 if I am wrong-?if I go to a bank and deposit $100 in my HBAD46.00U PAGE 52 1195 checking account that I will come?-I know there will be some 1196 dollar fees here and there that I have to pay, but i 1197 effectively, pursuant to the general regulation, the bank is 1198 then required to pretty much hold six of those dollars in a 1199 capital account, roughly 6 percent of what I have deposited. 1200 That doesn't mean it is just sitting there, but that is what 1201 they have to do. 1202 So if the bank goes belly up and there is a run, or if I 1203 just want my money back, the bank says?Hif they have a 1204 problem, they have made bad choices, the economy has gone 1205 south, something?-maybe there is a President who cut taxes 1206 too much or got involved in too many wars that he didn?t want 1207 to pay for. But if anything happened and I went to that bank 1208 and there was a run, I could only get six of my dollars back 1209 based on those capital requirements. 1210 Do you think that is sufficient that 6 percent of their 1211 assets are held in capital? 1212 Mrs. YELLEN. Let?s see. We have liquidity 1213 requirements, which would take some of your deposit and 1214 require them to hold it in?H 1215 Mr. CAPUANO. But my $100 isn?t it. They don't have to 1216 sit on my $100 or, even 90 of those dollars, or 80 or 70 or 1217 50 or 20. 1218 Mrs. YELLEN. What we want to make sure of is that the 1219 loans that the bank makes are?~ HBA046.000 PAGE 53 1220 Mr. CAPUANO. Right, but you think six??and I am not 1221 arguing. You are the professional. You think roughly $6 is 1222 sufficient to cover their needs in real times of crisis. 1223 Mrs. YELLEN. Well, we have a number of different ways 1224 to gauge how much capital they should have?? 1225 Mr. But apparently some people on the other 1226 side are saying, "My God, that is too much. We can?t keep 1227 that The heck with those depositors." I 1228 Thank you, Madam Chair. 1229 Chairman HENSARLING. Time of the gentleman has expired. 1230 The chair now recognizes the gentleman from Missouri, 1231 Mr. Luetkemeyer, chairman of our Financial Institution 1232 Subcommittee. 1233 Mr. LUETKEMEYER. Thank you, Mr. Chairman. 1234 And, Chair Yellen, thank you so much for being here 1235 today. Just kind of a refresher course. Some of my friends 1236 across the aisle have been talking about how wonderful and 1237 rosy things are. If you look at the GDP growth for the last 1238 several years, every year it is less than it was the year 1239 before. And if I recall, my high school math teacher called 1240 that a negative trend line, which means you are going the 1241 wrong direction fast. 1242 So along that line, yesterday, Chair Yellen, your 1243 testimony in the Banking Committee over in the Senate tried 1244 to paint a very rosy picture of lending in the United States, HBAU46 . 000 PAGE 54 1245 especially for small business, and you cited independent 1246 national~?the National Federation of Independent Business 1247 study confirming that thought. 1248 But what you have failed to mention was that 65 percent 1249 of the businesses that responded to the survey had no 1250 intention of borrowing. Why? 1251 Why did they not want to borrow any money? That is the 1252 question. That is the concern. 1253 Mrs. YELLEN. I think that is a legitimate concern that 1254 small businesses haven?t seen rapid enough growth in their 1255 sales and in business overall that they feel the need to 1256 borrow. Of course that is a concern. 1257 Mr. LUETKEMEYER. As I go home every weekend and I talk 1253 to my small business folks, I mean, for the last several 1259 years it has been regulatory onslaught for them, and part of 1260 it is banking regulation, which makes it difficult to get 1261 access to credit. And I will just give you a small??one 1262 quick example. '1263 A banker friend of mine sold his bank to a larger bank 1264 and the executive officer stayed in the bank, and over the 1265 last year they made three loans. Three loans in the entire 1266 bank where be normally made 30 per month. That is the kind 1267 of restriction of credit that is going on in the real world. 1268 So I guess a question to you is, when is the last time 1269 you talked to a small business owner? Do you talk small HBAU46.00D PAGE 55 1270 1271 1272 1273 1274 1275 1276 1277 1278 1279 1280 1281 1282 1283 1284 1285 1286 1287 1288 1289 1290 1291 1292 1293 1294 business owners at all? Mrs. YELLEN. We do talk to small business owners. Mr. LUETKEMEYER. When was the last time you personally talked to a small business owner? Mrs. YELLEN. We have groups that come in regularly to meet with me and other board members. Mr. LUETKEMEYER. When was the last??can you give me a date? Last week? Last month? Last year? Mrs. YELLEN. Probably within the last several weeks. Mr. LUETKEMEYER. Okay. Have you talked to a farmer lately? Mrs. YELLEN. Talked to whom? Mr. LUETKEMEYER. Have you talked to a farmer lately? He is a small business person. Mrs. YELLEN. Not recently. Mr. LUETKEMEYER. Okay. You know, one of the other concerns that I have is because of this onslaught of regulations, and especially in the banking community, you are one of the regulators, there is obviously other groups of them here that are?~in my mind are problematic with the onslaught of rules and regulations. In my home state of Missouri at the end of 2015, which is the year before last??I haven't got the numbers for last year yet??but there were 44 banks total that totaled under $50 million. Those are the little bitty guys, but they HBAO46.DDO PAGE 56 1295 service a community, a very important small community 1296 someplace in my state. Twenty?six of those lost money. 1297 Twenty-six of the 44 lost money in 2015 of those small banks. 1298 Now, those are all targets for either closure or a 1299 merger, and that is very concerning because, as I just 1300 stated, you wind up with a small bank being absorbed by a 1301 larger bank. It cuts the ability of small businesses in 1302 those communities to be able to have access to credit as well 1303 as every consumer, whether it is home loans or what. 1304 And so that gets me then to my next concern, which is 1305 the clearinghouse came up with a study??a report on your 1306 CCAR. And in there it makes the statement that the Fed's 1307 -prooess-?CCAR process??is restricting lending and thwarting i 1308 economic growth, particularly in small business and mortgage 1309 lending. What would your response be to that? 1310 Mrs. YELLEN. I think that is a highly flawed study and 1311 I would?? 1312 Mr. LUETKEMEYER. A highly flawed study?- 1313 Mrs. YELLEN. Yes, and I would disagree with its 1314 findings. I could go into detail about what some of the 1315 flaws are with the methodology?~ 1316 Mr. LUETKEMEYER. No. Give me an example, please. 1317 Mrs. YELLEN. ??that was used. 1318 Well, one flaw is that the clearinghouse estimates 1319 effective risk weights produced by stress tests by looking at HBAO46.000 PAGE 57 1320 the average quality of bank portfolios and not the quality of 1321 marginal or new loans. And that is a huge difference because 1322 the existing loan portfolio often has loans that were 1323 originated that are encountering problems and?? 1324 Mr. LUETKEMEYER. I don?t disagree with you on risk 1325 weightingrisk weighting either, and 1326 as I go through the chart here it is amazing to me, you wound 1327 up having to have more capital when you risk weight for small 1328 business loans than you do for commercial industrial loans. 1329 Can you explain that? 1330 Mrs. YELLEN. Well, our stress testing methodology tries 1331 to take a forward?looking and institution?specific approach 1332 and capture-- 1333 Mr. LUETKEMEYER. Okay. Let me reframe the question. 1334 If you have got a small business loan at $50,000 and you have 1335 got a large industrial loan at $50 million, 100 times more in 1336 size??larger in size, tell me where the most risk is to the 1337 bank. 1338 Mrs. YELLEN. Well, I don?t think that that is the 1339 difference in risk weights implicit in our stress test. 1340 Mr. LUETKEMEYER. I yield back. 1341 Chairman HENSARLING. Time of the gentleman has expired. 1342 The chair now recognizes the gentleman from Missouri, 1343 Mr. Clay, ranking member of the Financial Institutions 1344 Subcommittee. HBA046.000 PAGE 58 1345 Mr. CLAY. Thank you, Mr. Chairman. 1346 And thank you, Mrs. Yellen, for your appearance today. 1347 You know, President Trump's proposals would have i 1348 far?reaching negative consequences for the economy. These 1349 harmful policies--rolling back the PodduFrank Wall Street 1350 Reform and Consumer Protection Act, cutting taxes for the 1351 wealthy, curtailing immigration and deporting undocumented 1352 immigrants, adopting a protectionist trade policy, 1353 eliminating the Affordable Care Act, and cutting back the 1354 social safety net for vulnerable population. 1355 And the President has also reversed a planned Federal 1356 Housing Administration mortgage insurance premium cut that 1357 would have saved homeowners $500 a year.' May not be much to 1358 some, but for a lot of moderate?income Americans that means 1359 something to them. 1360 I consider the Trump agenda to be harmful to hardworking 1361 American family and ultimately would be catastrophic for the 1362 whole economy. 1363 Here is my question: After the recession of 2008, 1364 bringing in some kind of regulation over??and 1365 responsibility-Hover our financial institutions, including 1366 creation of the CFPB, have we not learned anything since 1367 2008? 1368 And now we have this effort to roll babk these 1369 regulations. What do you think the impact will be on our HBAD46 . 000 - PAGE 59 1370 economy if we do this in a willy?nilly way? 1371 Mrs. YELLEN. So looking back, I think we know that 1372 consumer abuses in lending and in securitization mortgage 1373- lending were an important contributor to the financial crisis 1374 and can be a source of financial instability in the future if 1375 we are not attentive to those areas and potential abuses. i 1376 Mr. CLAY. Do you believe that the Consumer Financial 1377 Protection Bureau has done a pretty good job of protecting 1378 our consumer, of getting them money back, and has been like 1379 the backstop for our consumers? Let me hear your opinion 1380 about CFPB. 1381 Mrs. YELLEN. So, I mean, it is really for you to 1382 evaluate your judgment on their performance; But they have 1383 had a broad agenda and taken on attempts to regulate in many 1384 important areas. 1385 Mr. CLAY. Thank you for that response. 1386 And, you know, I know that unemployment is down; 1387 however, I think more work still needs to be done to reverse 1388 decades-long inequality that has left middle?class workers, 1389 low?income families, and minority communities behind. 1390 Generational and systemic inequities continue to distort 1391 progress and opportunity for tens of millions of Americans. 1392 What can we do to address some of those concerns? 1393 Mrs. YELLEN. I mean, I agree with that, and I think 1394 this ongoing inequality is something that Congress should. HBAO46.000 PAGE 60 1395 focus on. 1396 I think there are many public policies that are 139? relevant. They are largely not in the domain of the Fed, but i 1398 they would, for starters, involve focus on education, 1399 training, community development, and, you know, other things 1400 that would improve the chances for success of communities 1401 that have had historically serious labor market problems. 1402 Mr. CLAX. And I appreciate that-response, which tells 1403 me that Congress should be about helping this economy and 1404 going about the business of job creation and not looking to 1405 roll back regulations that are there to protect the American 1406 consumer. 1407 My time is up. Thank you so much for your engagement. 1408 Mrs. YELLEN. Thank you. 1409 Chairman HENSARLING. Chair now recognizes the gentleman 1410 from Michigan, Mr. Huizenga, chairman of our Capital Markets 1411 Subcommittee. 1412 Mr. HUIZENGA. Thank you, Mr. Chairman. 1413 And, Chair Yellen, good to see you. This is my first 1414 time not being able to engage you as chair of the Monetary 1415 Policy and Trade and now chairing the Capital Markets. I 1416 want to move on to a number of issues, but real quickly, do 1417 you plan to have lunch with Secretary Mnuchin as often as you 1418 did with Secretary Lew? 1419 Mrs. YELLEN. Yes, absolutely. I look forward to a very HBAO46.00D PAGE 61 1420 strong working relationship with him?- 1421 Mr. HUIZEMGA. Right. That is something that we had 1422 talked about previously. We pulled your public calendar, and 1423 over the last 3 years?~34 months, actually-ethere were 68 1424 official meetings that you had had with Secretary Lew. You 1425 had 32 meetings with members of Congress, including eight 1426 with the ranking member, two with the chairman, one with 1427 myself as chair of Monetary Policyr and I think that is one 1428 of the reasons why I have certainly advocated for you to come 1429 more often, and as part of the FORM Act we had put in place a 1430 requirement to come up four times a year rather than two 1431 times a year. 1432- I know some on the other-side have thought that was 1433 burdensome and intrusive. I think it is good communication. 1434 So I appreciate you being here today. 1435 Does the economy still need improving? 1436 Mrs. YELLEN. Well, that is a very broad question and it 1437 goes?? 1438 Mr. HUIZENGA. And it would seem either yes or no. 1439 Mrs. YELLEN. In many dimensions, yes. 1440 Mr. HUIZENGA. Okay. I will take that. 1441 Mrs. YELLEN. Many disappointing aspects of U.S. 1442 economic performance-- 1443 Mr. HUIZENGA. Okay. I will take that. We have seen a 1444 lot of rosy scenarios painted by some. And I will fully HBAD46.00U PAGE 62 1445 1446 1447 1443 1449 1450 1451 1452 1453 1454 1455 1456 1457 1458 1459 1460 1461 1462 1463 1464 1465 1466 1467 1468 1469 admit, there is incongruent data points here. The conflicting information that comes, it brings about a couple of jokes to mind. Have you ever seen a one?handed economist? No. You know, there are liars, damned liars, and statisticians. You know, you can make a_1ot of numbers say a lot of different things, and I think we have heard some of those. But I am curious, what is the U6 unemployment rate right now? Mrs. YELLEN. I believe it is 9.4 percent. Mr. HUIZENGA. Yes. That is the information that I have, as well, and you talk about that on page one. You don?t talk specifically about it. You do talk about the unemployment rate being 4.8 percent. You don't mention that the??it is the 9.4. You-do use a, I guess, charmingly phrased description here of those marginally attached to the labor force to describe the U6. I think that is quite problematic. And isn?t it true, Chair Yellen, that we are in the slowest, shallowest, and most tepid recovery in the modern era since World War Mrs. YELLEN. It took a long time for the economy to remove labor market slack and get unemployment down and close?? Mr. HUIZENGA. Okay. That sounds like a yes, and for-? HBAO46.DOO PAGE 63 1470 Mrs. YELLEN. ??growth has been slow in the process. 1471 Mr. HUIZENGA. -?and for an economist that is pretty 1472 direct. Okay. 1473 And is it not true that the Obama administration is the 1474 first administration since World War II in the modern era 1475 which has not returned the economy to pre?recession levels? 1475 Mrs. YELLEN. Well, I would say that the economy is at 1477 pre-recession levels now in terms of the unemployment rate 1478 and other measures of the labor market?? 1479 Mr. HUIZENGA. Well, unemployment, not U6, according to 1480 the numbers that I have seen. And is it not true that there 1481 have been 30 quarters?~not months??30 quarters of recovery? 1482 Mrs. YELLEN. Yes. 1483 Mr. HUIZENGA. Right? Okay. I think that was talked 1484 about. But pretty tepid recovery, don?t you think, that it 1485 has taken 30 quarters to recover to the??to that level, even 1486 if it is close? 1487 Mrs. YELLEN. Well, we have had a very deep downturn. 1488 Mr. HUIZENGA. I fully understand that. But isn't it 1489 true that the labor force participation rates are at record 1490 lows? 1491 Mrs. YELLEN. The labor force participation rate is 1492 largely declining because we have an aging population?? 1493 Mr. HUIZENGA. Whoa, whoa, whoa. That-- 1494 Mrs. YELLEN. ??and it will continue to do so. HBAD46.00D . PAGE 64 1495 Mr. HUIZENGA. Hold on. Hold on. Hold on. I got to 1496 throw the flag on that one because there is an MIT economist 1497 report that just came out that recently found that younger 1498 workers are not entering the labor force but older workers 1499 are, and that that is the only growth area and the only 1500 demographic which is seeing increases is older workers. 1501 You are starting to sell a little flimflam here on, "No, 1502 no, it is because we are an aging demographic." But that 1503 only demographic that is entering the workforce, according to i 1504 this study, is the older worker. 80-9 1505 Mrs. YELLEN. The labor force participation rate of 1506 older workers is rising, but their prevalence?-they work very 1507 much less, although they work more than previous generations 1508 did. Labor force participation?? 1509 Mr. HUIZENGA. They are hard workers. I am the product 1510 -of one of those. 1511 Mrs. YELLEN. ?~falls??it falls dramatically when people 1512 get into the retirement years?- 1513 Mr. HUIZENGA. Well, in my-? 1514 Mrs. YELLEN. ??and their fractions in the U.S. 1515 population-u 1516 Mr. HUIZENGA. Okay. 1517 Mrs. YELLEN. ??are increasing. 1518 Mr. HUIZENGA. In my remaining 10 seconds here I just 1519 want to know, isn?t it not true that if we would throw off HBA046.000 PAGE 65 1520 the shackles of unreasonable regulation that we would have i 1521 had a faster, steeper recovery? I 1522 Mrs. YELLEN. I mean, I would not generally agree with i 1523 that. 1524 Mr. HUIZENGA. You would not generally agree with that. 1525 So more regulation would have caused faster recovery? 1526 Mrs. YELLEN. By cleaning up our financial institutions 1527 and requiring them to build their capital buffers?? '1528 Mr. HUIZENGA. I did use the word "unreasonable." 1529 [Chairman HENSARLING. Time of the gentleman has expired. 1530 Mr. HUIZENGA. ~?unreasonable regulation. 1531 I yield back. 1532 Chairman The time of the gentleman has 1533 expired. 1534 The chair now recognizes the gentleman from 1535 Massachusetts, Mr. 1536 Mr. Good morning, Madam Chair. 1537 Thank you, Mr. Chairman and ranking member. 1538 Madam Chair, welcome back to the committee. I do want 1539 to talk about a couple of the statements coming out of the 1540 White House that are similar to statements made by the 1541 chairman in his bill, the Financial Choice Act. There have 1542 been extensive complaints that the level of regulation 1543 created in Dodd?Frank has prevented small businesses and 1544 other businesses from getting loans. HEA046.0DO PAGE 66 1545 Now, I am in Massachusetts. I realize it is a??it may 1546 be an outlier. We have a very strong economy and the lending 1547 institutions there, I would say the environment is very 1548 robust. 1549 But is there any evidence??I talk to my colleagues from 1550 around the country. Is there any evidence that folks aren't 1551 getting loans? Because that-~I have not run into any 1552 evidence of that. 1553 Mrs. YELLEN. Well, loans, core loans, and Gel lending 1554 has certainly increased at solid pace in recent years. 1555 Survey evidence that I have cited from small business owners 1556 suggests that they do not see inadequate access to credit as 1557 -a significant problem?? 1558 Mr. Can you talk about those surveys? 1559 Mrs. YELLEN. So the National Federation of Independent 1560 Business, their most recent survey shows that only 4 percent 1561 of business owners regard themselves as not having all of the 1562 loans available to them that they would ideally like. I 1563 can?t remember the exact wording. 1564 Mr. So 96--that would imply?? 1565 Mrs. YELLEN. So 96 percent are quite?~fully satisfied 1566 with their access to credit. And on1y~? 1567 Mr. That would seem good to me. I don?t know, 1568 am I missing something? 1569 Mrs. YELLEN. No. And only 2 percent list inadequate HBA046.000 PAGE 57 1570 access to credit as their most significant problem. 1571 Now, I think for some small businesses they do access 1572 credit, for example, not by taking out traditional business 1573 loans but, say, by borrowing against a home equity line of 1574 credit. 1575 Mr. Okay. 1576 Mrs. YELLEN. And I think that the decline in 1577 properties?~residential property prices may have impaired 1578 that borrowing route for some small businesses. It wouldn?t 1579 show up in these numbers, but generally access to business 1580 loans looks to me by most metrics to be quite adequate. 1581 Mr. Thank you. 1582 One of the other efforts in the Dodd?Frank repeal in the 1583 Financial Choice Act would be repeal of the orderly 1584 liquidation authority that was included in Dodd?Frank to 1585 preclude taxpayer bailouts in the future. I actually voted 1586 against?~consistently against the bailouts for our banks 1587 because people in my district that didn't even have bank 1588 accounts were being asked to bail out the banks who had put 1589 our economy in the toilet. 1590 What do you think about removing the orderly liquidation 1591 authority in Dodd?Frank? 1592 Mrs. YELLEN. I would not want to see it removed, 1593 although I do think that bankruptcy should be the main 1594 vehicle for resolving a firm in distress. We have put in HBAD46 . PAGE 68 1595 place protections that both make it much less likely that a 1596 firm would fail, would ensure that if it did that there would 1597 be sufficient debt and equity to recapitalize the firm. 1598 I know that the Choice Act proposes changes to the 1599 bankrUptcy code that I think would be helpful in making 1600 bankruptcy work as a preferred option, but I think orderly 1601 liquidation is a backup procedure. We don?t know what the 1602 circumstances might be in which a firm might fail. 1603 An issue in bankruptcy is that firms commonly need 1604 liquidity; they need access to the equivalent of 1605 debtor?in?possession financing. Title II provides that kind 1606 of liquidity and puts the burden on the financial sector 3 1607 itself, not U.S. taxpayers, for bearing any burdens that may I 1608 be incurred. 1609 And I do continue to worry with bankruptcy. Although we 1610 are working closely with firms to make sure they have 1611 liquidity plans that would enable an orderly bankruptcy, that 1612 is always a concern. 1613 Mr. Thank you. 1614 Mr. Chairman, my time has expired. I yield back. 1615 Chairman HENSARLING. Time of the gentleman has expired. 1616 The chair now recognizes the gentleman from Wisconsin, 1617 Mr. Duffy, chairman of our Housing and Insurance 1618 Subcommittee. 1619 Mr. DUFFY. Thank you, Mr. Chairman. HBA046.000 PAGE 69 1620 Chair Yellen, welcome. 'You have a wonderful poker face. 1621 You testify well, but I must say that your staff behind you 1622 does not. 1623 It is interesting to watch your staff as the political 1624 shots are taken. You can?t see them because they are behind 1625 you, but as the political shots are taken from the other side 1626 of the aisle the little smiles and joy that they take behind 162? you and the grimaces that come from our side. I just want to 1628 point that out. They do not have the poker face that you do. 1629 You talked briefly about regulation. I will just make 1630 this point, not a question. You don?t necessarily see 1631 regulation as a problem today with regard to economic growth. 1632- -However, you did, in the last time you testified, answer 1633 questions to me that you did note that they were a headwind 1634 to economic growth. 1635 So I am seeing a little difference in your testimony. I 1636 don?t know if that has anything to do with the election and 163? Mr. Trump's executive order to wind back some of the 1638 over?burdensome regulation or not. Just an observation. 1639 But a question for you: The size of a bank?~is there 1640 any correlation fromH?with large banks and systemic risk, in 1641 your opinion? Or can there be a correlation between the size 1642 of a bank and systemic risk? 1643 Mrs. YELLEN. It is not the only measure of systemic 1644 risk?? HBAU46.0DD PAGE 70 1645 Mr. DUFFY. Right. 1646 Mrs. YELLEN. --but it is generally true that the 1647 largest banks give rise to the greatest systemic risk. 1648 And I would like to just clarify, I think we should be 1649 concerned, and I am concerned with regulatory burden. And if 1650 I haven?t made that clear that is an oversight on my part. 1651 I didn?t agree that regulation was the key factor 1652 resulting in slow growth, but we are concerned about 1653 regulatory burden. I am committed to doing everything that 1654 we can?? 1655 Mr. DUFFY. Thank you for the clarification, yes. 1656 Mrs. YELLEN. -?to reduce it, and I do want to clarify 1657 and make that clear. 1658 Mr. DUFFY. Thank you for the clarification. I 1659 appreciate that. 1660 How, so you will acknowledge it is a factor, the size of 1661 a bank as it relates to systemic risk. Since Dodd?Frank has 1662 passed have the largest banks in America gotten bigger or 1663 smaller? 1664 Mrs. YELLEN. Probably bigger. 1665 Mr. DUFFY. It is easy. Bigger, that is right. 1666 Have we seen an increase in the number of small 166? community banks that dot rural parts of the country, like 1668 from where I come from, or have we seen a contraction of 1669 smaller community banks and credit unions? HBA046.000 PAGE 71 1670 Mrs. YELLEN. Well, there is a consolidation?? 1671 Mr. DUFFY. There is a consolidation, right. So since 1672 Dodd?Frank we have seen big banks get bigger and we have seen 1673 a consolidation or an eradication of small community banks 1674 and credit unions. 1675 Question for you in regard to the crisis: Did mortgages 1676 have anything to do with the 2008 crisis, mortgage?backed 1677 securities have anything to do with the 2008 crisis? 1678 Mrs. YELLEN- Of course. 1679 Mr. DUFFY. Of course they did. And do you know what 1680 reform came from Dodd?Frank in regard to mortgage?backed 1681 securities, Fannie Mae, and Freddie Mac? Was there any 1682- reform to Freddie Mae??Fannie Mae and Freddie Mac? 1683 Any GSE reform in Dodd-Frank to address the??one of the 1684 great causes of the crisis, which was mortgage?backed 1685 securities? Did Dodd-Frank address 1686 Mrs. YELLEN. It remains an open matter. 1687 Mr. DUFFY. It remains an open question. Right, because 1688 one of the main drivers of the crisis, GSEs, weren't even 1689 addressed. They did nothing. On the root driver of the 1690 crisis they left it alone, which is concerning for us. 1691 Now, hopefully in the next year and a half we are going 1692 to be able to address our GSEs, but the promises were great 1693 about all the good that would come from Dodd?Frank, but 1694 you?-we can?t underestimate what has happened since it has HBA046.000 PAGE 72 1695 1696 1697 1698 1699 1700 1701 1702 1703 1704 1705 1706 1707 1708 1709 1710 1711 1712 1713 1714 1715 1716 1717 1718 1719 been passed, where big banks have gotten bigger and we have seen the small community banks that serve my community??it is nearly impossible for them to survive, let alone thrive, with the regulatory burden. I want ask you?~I was going to ask you about the labor participation rate based on Mr. Huizenga's questions, the lack of this President hitting 3 percent--or not this?~the last President, President Obama, hitting 3 percent growth. not since Hoover has that happened. But with the conversation about border adjusted tax--border adjustment tax, do you have any opinions on the conversation that is now taking place in the House and the -Senate and the White.House on what that does to bring jobs back to America, what that does to the economy? Mrs. YELLEN. So I don't think it is appropriate for me to weigh in in detail on a specific fiscal measure~~ Mr. DUFFY. So 30,000 feet. Not specifics, but 30,000 feet. Good idea? I mean, well over 100 countries have some border adjustment, right? Mrs. YELLEN. It is a complicated policy, the effects of which?? Mr. DUFFY. But many countries have this? Mrs. YELLEN. Yes. Mr. DUFFY. YES. Mrs. YELLEN. In connection with VAT taxes. HBA046.000 PAGE 73 1720 Chairman HENSARLING. The time of the gentleman has 1721 expired. I 1722 The chair now recognizes the gentleman from Georgia, Mr. 1723 Scott. 1724 Mr. SCOTT. Thank you. 1725 Welcome, Chair Yellen. First of all, I want to say 1726 thank you. I want to thank you for our work over the past 2 1727 years together in dealing with and addressing this alarming 1728 high unemployment rate in the African?American community, and 1729 that is especially rampant within the African-American 173D community of young African?American men ages 18 to 39. 1731 I also appreciate your suggesting to us when we 1732 discussed that??I will forget what you told me?-inf1ation and 1733 unemployment is, indeed, your dual mission, but when it comes 1734 to targeted unemployment like this you have only a blunt 1735 instrument. And what we should do is go and develop 1736 legislation. And in response to Mr. Clay earlier you again 1737 reiterated that. 1738 So now we have done that, and we have two very important 1739 pieces of legislation that address that by myself and my 1740 co?Sponsors, Kevin Cramer of North Dakota, Republican; my 1741 good friend, Reverend Emmanuel Cleaver, Democratic co?sponsor 1742 from Missouri; Mia Love, of Utah; Mrs. Beatty, of Ohio. And 1743 certainly, we believe??along with Pete Sessions, who is at 1744 the Rules Committee. ml HBA046 .000 PAGE 74 1745 But here is our issue right now: We need some help in i 1746 getting a meeting with the President of the United States. 1747 This is why, as you know, the job component and training will 1748 be attached to his efforts to rebuild the crumbling 1749 infrastructure. 1750 Secondly, the administration of this part of our 1751 legislation will be through his secretary of labor. And then 1752 on our education piece, in which we are asking for $95 1753 million to help these struggling, hardworking 1754 African?American 1890s land grant institutions, like Tuskegee 1755 University and Florida Fort Valley, Prairie View in 1756 Texas, Lincoln University up in Missouri. But we have been 1757--unable to get any meeting. 1758 We are at dead water, and I call upon you to ask 1759 President Trump if he would be kind enough just to give me 1760 and my co?sponsors an opportunity to come over to the White 1761 House and talk to him about these bills, because it has to be 1762 a partnership here. His administration would have to 1763 administer it; we can only produce the policy. But if we 1764 can't get a chance to get in to talk to the President, how 1765 are we going to get his buy?in? 1766 Chair Yellen, you know, President Bush said on numerous 1767 occasions he wanted to help the African?American community. :1768 "What the hell you got to lose?" he said over and over. 1769 Well, give us that chance. ?l HBA046.DOO PAGE 75 1770 I ask you to put the unemployment side of your mission i 1771 hat on. Nobody, no Federal agency has unemployment as a I i 1772 mandate as the Fed does. So you have good credit to be able 1773 to go to President Trump and say, "President, I am not- 1774 endorsing any legislation over there, but there is a very 1775 good package of bipartisan legislation that goes to the heart 1776 and the soul of the most devastating issue facing the 1777 African?American community today." 1778 Tell him that we now have more African?American young 1779 men ages 18 to 39 in the prisons or on probation or parole 1780 with felony convictions. All hope is gone for them. But the 1781 problem is there is a train leading more and more of these 1782 young men there. But if we can get those scholarships into 1783 these African?American colleges for these kids??the 1784 agricultural business and science and technology is reaching 1785 out. 1786 And I thank you for your efforts in doing that. 1787 Thank you, Mr. Chairman. 1788 Chairman HENSARLING. Time of the gentleman has expired. 1789 The chair now recognizes the gentlelady from Missouri, 1790 Mrs. Wagner, chairman of the Oversight and Investigation 1791 Subcommittee. 1792 Mrs. WAGNER. Thank you, Mr. Chairman. 1793 Chair Yellen, thank you for joining us today. I, too, 1794 noticed yesterday before the Senate Banking Committee that HBA046 . 000 PAGE 76 1795 you agreed with the core principles that were part of 1796 President Trump's executive order calling for a review of the 1797 U.S. financial regulatory framework, and I thank you for 1798 that. 2 1799 I hope that you will work with newly confirmed Treasury I 1800 Secretary Mnuchin on identifying some of the regulations on 1801 the books that conflict with these principles. We have had a 1802 robust discussion about regulations. 1803 This E.O., this executive order, requires you to consult 1804 with Treasury. What are you doing specifically, Chair 1805 Yellen, to identify the regs that inhibit these core 1806 principles? 1807 Mrs. YELLEN. Well, we look forward to working with the 1808 treasury secretary on this project and we will cooperate 1809 fully once it is underway. I think he has only been in 1810 office for a day. The process is not yet established, but we 1811 look forward to participating in it. 1812 Mrs. WAGNER. We look forward to hearing about that 1813 process as it goes forward and how you will be participating 1814 and coordinating with him. 1815 As you know, President Trump has signed a few other 1816 additional executive orders relating to regulations??most 1817 notably, an executive order issuing a regulatory freeze and 1818 an order repealing two regulations for each new regulation 1819 prOposed. HBAU46.DOD PAGE 1820 I understand that the Federal Reserve, as an independent 1821 agency, is exempt from these executive orders. However, 1822 Chair Yellen, do you plan on volunteering to comply in any 1823 capacity with these orders? I 1824 Mrs. YELLEN. Well, in the past when there have been 1825 similar freezes put in place the Fed has~?when it has had a 1826 rulemaking that has been well telegraphed, underway for a 1827 long time, it has continued with the regulatory process, and 1828 I would expect that~?there is nothing that we have-put in 1829 place recently that was not well understood or ready, or most 1830 of what we would be looking at would be notices of proposed 1831 rulemaking where there would be plenty of opportunity for 1832 -comment by those who might be appointed to our board, members 1833 of Congress and others. 1834 Mrs. WAGNER. I thank you for that. I hope that you 1835 will be willing to voluntarily comply with these orders as 1836 you go forward when it comes to any additional rule?letting. 1837 As you know and has been discussed in this hearing and to 1838 that point, the position of the Fed vice chair for 1839 supervision has remained vacant since the passage of 1840 Dodd?Frank, and I hope that our President will be nominating 1841 a capable person to fill that position. 1842 Since Governor Tarullo has--who has been performing many 1843 of the regulatory coordination functions of that role in the 1844 meantime, he indicated that he is going to be resigning in HEA046.0DO PAGE 78 1845 1846 .1847 1848 1849 1850 1851 1852 1853 1854 1855 1856 1857 1858 1859 1860 1861 1862 1863 1864 1865 1866 1867 1868 1869 April. What remaining regulatory agenda items, since we are discussing that, are being planned until he leaves? Mrs. YELLEN. We have a relatively light schedule. We do have one possible rulemaking. Mrs. WAGNER. And what is that, ma?am? Mrs. YELLEN. I don't know what the timetable would be. Pertains to our stress tests and what is called the Stress Capital Buffer that came out of our 5?year review.- I don't know just what the timetable is for~~it has been in the works 'a long time and I think the financial community is aware?? Mrs. WAGNER. Do you think that there is some benefit, ma?am, theta?in waiting until we are able to nominate and confirm a vice chair for supervision to weigh in before pressing on with further regulatory initiatives? Mrs. YELLEN. If we were to come out with it it would be a notice of proposed rulemaking and a new vice chair for supervision would certainly have a chance, along with others, to weigh in on that. Mrs. WAGNER. Thank you, Chair Yellen. On my limited time I applaud the Federal Reserve for recently providing some limited relief to financial institutions from the qualitative, I will say, portions of stress tests, or CCAR. As you know, the GAO issued a report late last year with several criticisms and recommendations regarding the stress HBAD46.DOU PAGE 79 1870 testing process, particularly, in regards to transparency. 1871 What are the Fed's plans for considering and implementing the 1872 GAOs recommendations, ma?am? 1873 Mrs. YELLEN. We certainly value and accept those 1874 recommendations and intend to implement them in our?? 1875 Mrs. WAGNER. Thank you. Does the Fed have any plans on 1876 doing a more comprehensive review of how it conducts stress 18?? tests? 1878 Mrs. YELLEN. Well, we are completing a 5-year review 1879 that is comprehensive, and those changes that you mentioned 1880 that relieved burden for a large number of medium or larger 1881 size banking organizations, that in one of the outcomes of 1882 that. 1883 Mrs. WAGNER. I thank you, Chair Yellen. 1884 I yield back my time. I 1885 Chairman HENSARLING. Time of the gentlelady has 1886 expired. 1887 The chair now recognizes the gentleman from Texas, Mr. 1888 Green. 1889 Mr. GREEN. Thank you, Mr. Chairman. 1890 And thank the ranking member, as well. 1891 And thank you, Madam Chairlady. It is an honor to have 1892 you with.us. You have done an outstanding job, in my 1893 opinion, and you have tried as best as you can to help us to 1894 maintain your mandate. HEA046.000 PAGE 80 i 1895 I would just like to mention initially that President i 1896 Obama has made efforts, and many members of Congress-?David I 1897 Scott, the member from Georgia, just mentioned his efforts to 1898 bring down unemployment as it relates to African?Americans,? 1 1899 more specifically African?American males. Congressman Jim I 1900 Clyburn has a plan that he calls 10?20?30. The President had 1901 a JOBS Act. We have tried to have summer job training 1902 programs. So there have been efforts made to try to bring 1903 down the high rate of unemployment in the African?American 1904 community as well as in other communities. 1905 But it seems that some of the obstacles include this 1906 process or premise that we can engage in expansionary fiscal 190? contraction and that will eliminate some of the problems. 1908 There is a fiscal austerity program that has been implemented 1909 by my colleagues on the other side. And these things have 1910 actually, in my opinion, been a hindrance. 1911 So, given that Congress has not acted appropriately and 1912 given that there is this high rate of unemployment in the 1913 African?American community, I am calling on the Fed to do a 1914 little bit more. And I ask that you do this because I have 1915 received an executive summary that I would like to share with 1916 you. It is styled "Experiences and Perspectives of Young 1917 Workers." 1918 This is from December 2016, and this summary gives me 1919 information, including the following: "The Federal Reserve HBAD46.0DO PAGE 81 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 conducted its first survey of young workers over November and December 2013 to develop a deeper understanding of the forces at play," meaning the reasons why young workers may be having employment problems. "In December 2015 the Federal Reserve conducted a second survey of young workers to further explore market issues and trends among this population." You go on with this report to indicate some of the outlook expectations. Young adults with a paid job.are more optimistic than those without a paid job. Among young adults, steady employment remains more important than higher pay??steady employment, important. You go on to indicate that many young adults gain early -work experience during high schooly college, or'both.? Early employment develops a good work ethic. And then full?time employment is also correlated with a positive outlook and job satisfaction. So what you have done with this survey, this report, is get some sense of what is happening with young adults. I have not seen a similar report for the African?American community. Does such a report exist? If it does, I would like to peruse it. If it does not exist I believe, Madam Chair, that you have the mandate and the authority to produce such a report. At some point we have to study and given empirical evidence as to why African?American unemployment is almost HBAO46.UDU PAGE 82 1945 always twice that of white unemployment. Pick any period of 1946 time, pick any President, pick any administration, and this. 1947 is a consistent number that you will find._ Twice as much as 1948 white unemployment. 1949 We need the empirical evidence so that we can use that 1950 here in Congress to promote better legislation. Possibly we 1951 have not given the proper legislative answer. 1952 Can the Fed do this?- If it has already done it, I would 1953 love to read the report. 1954 Mrs. YELLEN. I am not aware that we have already done 1955 it, but we have a great deal of research going on in the Fed, 1956 and I would encourage people at the Fed and will discuss it 1957 with them, trying to look more carefully at this. 1958 Mr. GREEN. Let me assure you that this will be a 1959 quantum leap forward to receive empirical evidence from the 1960 Fed as to why we pave this constant number of two times white 1961 unemployment. Two times, or two times white employment. 1962 That.would be a quantum leap forward. 1963 I am going to beg, Madam Chair, that you do what you can 1964 to get this done such that maybe when you are back the next 1965 time we can discuss some of these issue related to why 1966 African?American unemployment is so high. 1967 And I would also add this: Much of what I read here 1968 explains some of what is happening in the African?American 1969 community??no summer jobs, no jobs early in life, not an HBA046.000 PAGE 83 1970 opportunity to develop work ethic. These things are 1971 important, and I beg that you help us. Thank you. 1972 Chairman HENSARLING. Time of the gentleman has expired. 1973 The chair now recognizes the gentleman from New York, 1974 Mr. King. 1975 Mr. KING. Thank you, Mr. Chairman. 1976 Chair Yellen, I am concerned about proposals that would 1977 change the composition of the FOMC by removing the vice 1978 chairman position and the New York Fed?s permanent voting 1979 status. Strikes me as misguided since the New York Fed has 1980 responsibilities that no other district bank has, including 1981 carrying out our country?s monetary policy on behalf of the 1982 FOMC and the entire Federal Reserve System. 1983 Could you discuss some of the differences between the 1984 New York Fed and the other district banks? And would you say 1985 that the New York Fed has unique institutional knowledge of 1986 the financial markets? 1987 Mrs. YELLEN. Well, the New York Fed has long had a 1988 special and important role in the Federal Reserve System. It 1989 has long been the bank that is involved in the markets for 1990 us, conducts our open market operations, plays an important 1991 role in gathering market intelligence and understanding 1992 financial market trends, and because so many especially large 1993 banks are headquartered in New York, has very large 1994 supervisory staff that plays an important role in our - HBA046 . DUO PAGE 84 1995 supervision program. 1996 And the decision that the president of the New York Fed 199? should serve as the FOMC vice chair and vote at every meeting 1998 reflects that traditional role. I think it is something that 1999 has worked well. 2000 Mr. KING. Not to put you on the spot, but the 2001 presidents of the Federal Reserve Banks of San Francisco, 2002 Atlanta, Chicago, and Cleveland have all publicly stated that 2003 they support the current structure of the FOMC and a 2004 permanent seat for New York. Do you agree with that? 2005 Mrs. YELLEN. I think we have a structure that works 2006 well, and I am not seeking changes to that aspect of it. 2007 Mr. KING. I will not push my luck, and I will accept 2008 that answer. 2009 I yield back. 2010 Chairman HENSARLING. Gentleman yields back. 2011 The chair now recognizes the gentleman from Missouri, 2012 Mr. Cleaver, ranking member of our Housing and Insurance 2013 Subcommittee. 2014 Mr. CLEAVER. Thank you, Mr. Chairman. 2015 Thank you, Madam Chair. 2016 Two Saturdays ago in Kansas City, Missouri, where I 2017 reside, I held a town hall meeting-wthe media said 1,000; it 2018 was probably about 1,100 showed up??on the proposed??or the 2019 executive order on immigration, and people showed up with HBA046 . 000 PAGE 85 2020 great fear. And this past Saturday I was in Baltimore 2021 Saturday evening and all of a sudden my cell phone started 2022 ringing just one call after another, and there was widespread 2023 panic in Kansas City in the clergy community. 2024 Across the board Catholics, Protestants were all 2025 concerned--there is a pastors? phone chain, so people were 2026 calling each other~-that ICE would be at churches on this 2027. past Sunday arresting immigrants-Hundocumented immigrants. 2028 It was such a big deal that if your staff or if any of my 2029 colleagues? staff would like to check, it is a front~page 2030 story in the Kansas City.Star on the rumor. All three??well, i 2031 four?~networks did stories, and so they were calling asking 2032 me, "Do you know??I mean, how many ICE agents are coming in," 2033 and so forth. 2034 It was just an awful kind of a thing, and I felt 2035 terrible because I was in Baltimore and was unable to be 2036 there. 203? How this connects with you is I am just wondering if 2038 there is some success at deporting 11 million immigrants, do 2039 you think that will have any kind of impact on the U.S. 2040 economy? If we were able to just get rid of all of the 2041 undocumented workers, you know, by next Thursday, do you 2042 think there would be any impact on this economy? 2043 Mrs. YELLEN. Well, immigration has been an important 2044 part of labor force growth in the united States for some time HBAO46.000 PAGE 86 2045 now. We are in a period in which one factor responsible for 2046 slowing growth is slower labor force growth, and a radical 2047 change in immigration would certainly affect the potential of 2048 the economy to grow. 2049 Mr. CLEAVER. And I will convey that. I mean, and the 2050 preachers were concerned because they had read about a guy 2051 who said, was a stranger and you took me in." It was in a 2052 book. And so they??based on that, they thought-they had an 2053 obligation to respond affirmatively. 2054 The other thing is that I think 2012??2011, I am not 2055 sure?~2012 the Fed did a study on the housing collapse that 2056 we experienced that triggered the 2008 economic recession. 2057 And over the years, for whatever reason, the GSEs have been 2058 blamed for the economic collapse, that they set policies that 2059 allowed them to give loans--actually they don't give loans; 2060 they were-?they are buying loans. But they were blamed for 2061 the economic collapse. 2062 Your study says otherwise. Can you shorten that into a 2063 paragraph? 2064 Mrs. YELLEN. So a wide range of problems in the 2065 mortgage market, I think, led to the crisis, and_the GSEs 2066 were probably not the critical part of what caused it. 206? Mr. CLEAVER. I have so many?~too many questions. You 2068 know, there is??in all??in the effort to repeal Dodd?Frank 2069 there is a section in there that the wording is not as strong HBA046.000 PAGE 87 2070 as I am saying it, but they are essentially saying we are 2071 going to give oil companies the right to bribe elected 2072 officials or officials in company--in countries. So we are 2073 removing a section of Dodd?Frank so that??so bribery is now a 2074 part of??or it is again a part of the way in which 0.8. 2075 companies operate in foreign countries. 2076 My time ran out. I apologize. 2077 Chairman HENSARLING. Time of the gentlemen has expired. 2078 The chair wishes to advise members that I intend to 2079 recognize Mr. Royce, Mrs. Beatty, and Mr. Pittenger, and then 2080 declare a 10uminute recess. 2081 The gentleman from California, Mr. Royce, chairman of 2082 the House Foreign Affairs Committee, is recognized. 2083 Mr. ROYCE. Well, thank you very much, Mr. Chairman. 2084 And, Chair Yellen, good to see you. 2085 I would like to follow up on a question here about 2086 capital. We know on the one hand that over?leveraged 2087 institutions are vulnerable to market shocks, and we remember 2088 the consequences. If you look back at the over?leveraging of 2089 the investment banks, for the large ones 40?to?one. And if 2090 you look at the GSEs that were leveraged at that time, over 2091 100?to?one. And that was in the lead?up to the financial 2092 _crisis. 2093 And so we can see that capital standards must play a 2094 role in building resilience in the 0.8. financial system. On HEA046.00D PAGE 88 2095 the other hand, raising capital also has a cost to the 2096 economy and a cost in terms of what it does to the potential 209? for growth. 2098 So what we have here is a classic cost?benefit test. 2099 There is a benefit to higher capital standards. They reduce 2100 the risk of a future financial crisis and bailouts as well as 2101 potentially increasing tax revenues. 2102 And while the cost will be borne by borrowers in the 2103 form.of higher funding costs and the economy as a whole with 2104 less capital formation and a lower GDP, you have got that on 2105 the other side of the equation. 2106 So as you have said in the past, the cost?benefit 2107 analysis is difficult work. And I agree. It is not easy. 2108 But it is not impossible and it is important. And so in 2109 2010 the Basel Committee did some work on this subject, and 2110 also researchers at George Mason recently published a paper 2111 on the benefits and costs of a higher bank leverage ratio. 2112 So how do we get to the right number? Should it be 5 2113 percent? The 10 percent in the Choice Act? 23.5 percent, as 2114 proposed by the Minneapolis Fed President? 2115 There is quite a range there. And I don?t expect you to 2116 say a number today, but can?t you agree that a cost?benefit 2117 analysis could help us more effectively require that capital? 2118 And I will start with that question. 2119 Mrs. YELLEN. So I do agree that in deciding on the HBA046.000 PAGE 89 2120 appropriate level of capital standards we are weighing costs i 2121 and benefits-?the benefit of a lower probability of a 2122 financial crisis that has incredible high costs against the 5 2123 cost of higher intermediation and borrowing costs. 2124 And as you indicated, Basel was partly informed by the 2125 Basel Committee?s analysis of those costs and benefits, and 2126 the Federal Reserve participated in producing that analysis. 2127 And I think it did inform our views as to what a reasonable 2128 level of capital requirements would be. 2129 The Minneapolis Fed study that you mentioned also 2130 contains cost-benefit analysis and draws the line 2131 differently. 2132 Mr. ROYCE. So from my standpoint it seems to me that 2133 the Fed would be best suited to conduct the analysis and the 2134 research on this. And as you are explaining here, we have 2135 such a range of opinion, although we agree on the basic 2136 concept here. 2137 So my question would be, short of us mandating the Fed 2138 do it, would there move forward 2139 and approximate what that ratio should be? 2140 Mrs. YELLEN. So through different aspects of it. As I 2141 said, we did do cost-benefit analysis, and it informed our 2142 judgments at the time. You have referred several times to a 2143 leverage requirement?? 2144 Mr. ROYCE. Right. HBAD46.000 PAGE 90 2145 2146 2147 2148 2149 2150 2151 2152 2153 2154 2155 2156 2157 2158 2159 2160 2161 2162 2163 2164 2165 2166 2167 2168 2169 Mrs. YELLEN. -?and I think our understanding of the risks facing banks lead us to think that a simple leverage requirement would not be an adequate way to determine capital. In particular, a simple leverage requirement treats the risk associated with the U.S. Treasury and a junk bond identically, and we think that capital requirements need to be risk?sensitive with a leverage ratio serving as a backup?? Mr. ROYCE. No, I understand. It might not be sufficient, but in terms of having it be a component, it seems to me that??well, there is another question I wanted to ask you, too, and that is yesterday you told Senator Crapo that the goal of bringing private capital back into the mortgage market is important and that you hope that if there are guarantees in the secondary mortgage market that they would be recognized as priced appropriately. It is my understanding, then, that you believe that the pre?GSE model of private gains and public loses did not price the government backstop appropriately. Mrs. YELLEM. I think that is correct. Mr. ROYCE. Thank you. Chairman HENSARLING. Time of the gentleman has expired. The chair now rec0gnizes the gentlelady from Ohio, Mrs. Beatty. Mrs. BEATTY. Thank you, Mr. Chairman and ranking member. HEAD-46.000 PAGE 91 2170 And thank you so much for being here, Chair Yellen. In 2171 the form of me trying to be consistent with questions, I 2172 would like to repeat a question that was asked by me before. 2173 Certainly, as you know, I have a strong interest in making 2174 sure that we have equality and equity as it relates to 2175 employing women and minorities. 2176- So I want to start with first thanking you for 2177 responding in writing, and not only in writing but detail, to 2178 that question. I know in the Senate hearings that Senator 2179 'Brown also posed some questions as we look at the Federal 2180 Reserve Bank and what is happening. 2181 I know we have a couple openings since our last 2182 conversation here, but let me just say if there is any 2183 additional things for the first part--I have two 2184 questions??that hopefully you can share we are, if we are 2185 making any headway. Because I also pulled some facts, and 2186 according to the Fed Up campaign at the Center for POpular 2187 Democracy, it states that the board of directors were 83 2188 percent white and 70 percent male. 2189 Under the Federal Reserve Act the Board of Governors has 2190 the authority to appoint class directors. Can you describe 2191 that process for appointing class directors or give me any 2192 brief update on where we are? Because I am thinking about 2193 reintroducing my bill that was patterned after the Rooney 2194 Rule with the Beatty Rule, that if there is an opening all we HEA046.000 PAGE 92 2195 2196 2197 2198 2199 2200 2201 2202 2203 2204 2205 2206 220? 2208 2209 2210 2211 2212 2213 2214 2215 2216 2217 .2218 2219 are asking is that you have a pool of candidates in there. Mrs. YELLEN. So we are very focused on achieving diversity in our class directors-?more broadly. on the boards of directors of all of the Federal Reserve banks and their branches. We engage in ongoing at least yearly evaluations of the progress of the reserve banks in achieving diversity. We insist on recommendations from the reserve banks that will enhance diversity; make sure that there are adequate representation.of women and of minorities; that we have sectoral diversityIr as well; that consumers. labor. nonprofits are represented. And it is a constant focus and we give feedback to the banks to inform their search for directors. I do believe we have made progress on it and achieved greater diversity. I will say that it is a very high priority for us. Mrs. BEATTY. Thank you very much. Chair Yellen. I just learned that last month you did something which seems unique or different. The Federal Reserve held a teachers town hall meeting. And I thought that very interesting and very pleasing because financial literacy is something that I have dedicated probably the last 2 decades of my career to. And I am very pleased to say, Mr. Chairman and ranking member, that I have been appointed as the new co-chair of the Financial and Economic Literacy Council, with my Republican 1 HBA046.000 PAGE 93 i 2220 colleague, Steve Stivers. 2221 Was there anything in this town hall that you can share 2222 as it relates to the financial literacy or it relates to 2223 something we should be looking at? And maybe this could be a 2224 bipartisan thread and we could get your staff to laugh or 2225 smile with that because it would be so positive that we would 2226 have a Democrat and a Republican working together. 2227 Mrs. YELLEH. So perhaps we can give you some more 2228 detailed feedback if that would be helpful. I mainly 2229 answered questions.that a group of economics educators had 2230 for me about what they should be teaching their students 2231 about the Federal Reserve. I was asked about diversity in 2232 the economics profession and what could be done to foster '2233 diversity and shared some thoughts on that topic and why it 2234 is that perhaps women and minorities are not attracted into 2235 economics, even as a major in college, in the numbers that 2236 one would want and expect. 2237 But on financial literacy, maybe we can give you some 2238 more detailed feedback. 2239 Mrs. BEATTY. Okay. Thank you so much. 2240 Mr. Chairman, I yield back. 2241 Chairman HENSARLING. Gentlelady yields back. 2242 The chair now recognizes the gentleman from North 2243 Carolina, Mr. Pittenger. 2244 Mr. PITTENGER. Thank you, Mr. Chairman. HBAO46.000 PAGE 94 2245 2246 2247 2248 2249 2250 2251 2252 2253 2254 2255 2256 2257 2258 2259 2260 2261 2262 2263 2264 2265 2266 2267 2268 2269 Good afternoon, Chair Yellen. Chair Yellen, there has been much said today regarding the different economies, what is-?I heard my good friend Mr. Meeks in his performance, and basically a diatribe of market?driven economies and lauding the highly regulatory policies of this last administration. But, you know, in North Carolina we kind of have a way of conveying this. It is like trying to dress up a pig and put perfume on it. It doesn?t really look as good as it is. The outcomes really-reflect something different. He had mentioned that there had been 16 million jobs created from this economy. And when you look at 8 years, that is 200,000 jobs a month. So comparing that, the time that I lived in Washington back in the 1980s when Ronald Reagan was President, he inherited an economy that was very weak. There was 20 percent interest rates, high inflation, high unemployment. And after 2 years with an independent Fed, reduced regulatory burden, reduced tax threshold, the economy grew and began to grow exponentially??300,000 then 400,000 and 500,000 jobs a month; 1 month a million jobs. And we were growing at one point at 6 percent growth. You know, we look now at an economy that hasn?t even reached 3 percent economic growth, the only administration since World War II that hasn?t been able to achieve that HEB-1046.000 PAGE 95 2270 objective. 2271 I would say to you, Chair Yellen, given that and really 2272 the number of American people who are just living at the 2273 margins, you know, just around the kitchen table, they are 2274 struggling. They came out in droves in this last election 2275 because they are upset.? It hasn?t worked. 2276 Do you feel that there are different policies that 2277 should have been made in hindsight, that you missed 2278 .something? You know, in.business we have a way of assessing a 2279 what we do right and what we do wrong. But have we missed 2280 the mark? 2281 Have we not--we clearly didn?t achieve the objectives 2282 that were intended. Low-income, minority people, frankly, 2283 that demographic group have moved the least up the economic 2284 ladder than any group in the country. And certainly that was 2285 a focus of the folks you were trying to help. 2286 So I would really like to get your analysis of what we 2287 missed. And, you know, is there something in our monetary 2288 policy we could have done different? How about regulations 2289 and oversight? What would you do different today if you were 2290 given the chance? 2291 Mrs. YELLEN. I think that the trends that you described 2292 that have left so many Americans feeling frustrated with the 2293 labor market and their economic circumstances and success 2294 date back to well before the financial crisis, probably back HBAD46.000 PAGE 96 2295 to the mid?to late 1980s. And we saw the character and 2296 composition of jobs changing in the United States. 2297 Mr. PITTENGER. Well, in all due respect, Chair Yellen, 2298 if I could interrupt, we don?t have a lot of time. You know, 2299 this recession, the President, he was only in recession 2 2300 months out of his 32 months. So, I mean, he had a chance. 2301 And these policies had a chance, and yet they didn?t work. 2302 I would like to ask you a couple of other things, 2303 though. 2304 Relative to community banks, you made the statement that 2305 you are concerned about what has happened with community 2306 banks in this country. In North Carolina we have lost 40 2307 percent of our banks since 2010. That is a major impact on 2308 our economy and access to capital and credit. 2309 Do you believe that there should have been or should be 2310 today-Hwould you advise us to reduce the regulatory burden on 2311 these community banks? 2312 Mrs. YELLEN. Yes. And I think we should be heavily 2313 focused on using every tool available to us to reduce 2314 regulatory burden on those banks. 2315 We ourselves and with other banking agencies have taken 2316 a number of important steps, and I think it is??and we will 2317 continue?? 2318 Mr. PITTENGER. But you would advise the Congress to be 2319 fully engaged in trying to?? HBAU46 . 000 PAGE 97 2320 2321 2322 2323 2324 2325 2326 2327 2328 2329 2330 2331 2332 2333 2334 2335 2336 2337 2338 2339 2340 2341 2342 2343 2344 Mrs. I would be, yes. Mr. PITTENGER. Yes, ma'am. Thank you very much. Chair Yellen, Secretary Lew argued that China has become more, in his words, more adept at communicating its policy path in its analysis of its own economy. That will avoid confusion and instability the in global economy. Do you agree with Secretary Lew on his assessment of China? Mrs. YELLEN. So I am not privy to all the detail that he may have given?? Mr. PITTENGER. Well, but in principle. Mrs. YELLEN. -?on that. Mr. PITTENGERJ The principle is there. I mean, the greater oversight, communicating policies. Do you think that is a healthy thing? Mrs. YELLEN. I do think it is a healthy thing, Mr. PITTENGER. In like manner, would you say that if it is true for China that it should be true also for our country, for our Fed, that maybe we could be more up front and the public could understand our policies? We have the FORM Act that lays out commonsense steps to achieve this, and I would just like to know your perspective on that. There are many Federal Reserve officers who concur, Nobel Peace Prize winners that agree, as well. Mrs. YELLEN. Transparency is an important objective, and we are always looking for additional steps. I think it HBAU46.0DO PAGE 98 2345 has been improved. I_think, as you know, I am not a 5 2346 supporter of the FORM Act that would chain the_Fed to a 2347 simple rule. I think that would result in poor economic 2348 performance. And while understandability and predictability 2349 are important goals?? 2350 Mr. PITTENGER. My time has expired, Chair Yellen. 2351 Mrs. YELLEN. ??what matters most at the end of the day 2352 is economic performance?? 2353 Chairman HENSARLING. Time of the gentleman has expired. 2354 The chair will-now call a recess of the committee for 10 2355 minutes. Members are advised that we anticipate reconvening 2356 in 10 minutes. 2357 We intend on adjourning the hearing at approximately 2 2358 o'clock and we anticipate one intervening vote series. The 2359 committee stands in recess. 236D [Recess.] 2361 Chairman HENSARLING. The committee will come to order. 2362 Members are requested to take their seats. 2363 Chair now recognizes the gentleman from Connecticut, Mr. 2364 Himes. 2365 Mr. HIMES. Thank you, Mr. Chairman. 2366 And, Chairwoman Yellen, thank you for being with us 2367 today. Always appreciate your testimony and the very good 2368 work that is done and summarized in this report to us. 2369 I have a couple of questions for you, starting with I HBAO46.00D PAGE 99 2370 want an opportunity just to sort of reflect on and maybe ask 2371 a question about the economic narrative that we are getting 2372 and that we have gotten for so long from the majority. 2373 I was here 8 years ago when??and sworn?in in a month 2374 when the economy lost almost three?quarters of a million 2375 jobs. We were handed??I think the technical economic term 2376 would be a dumpster fire of an economy, and took a number of 2377 measures, including the Recovery Act and then regulatory 2378 methods??measures to stabilize the financial sector, which 2379 was on its knees. Every single one of those measures, of 2380 course, opposed by my friends on the other side of the aisle. 2381 My question, though, is, we are now accused of??you are 2382 accused and we are accused, and I think we are probably 2383 properly accused of not doing enough to spur economic growth. 2384 The Fed certainly is. And we have heard that. 2385 Apparently, growth of 2 percent is not the 4 percent 2386 promised by President Trump. And apparently we could have 2387 done better. 2388 I guess my question to you is--my memory of economics is 2389 that economic growth in the end is a function of population 2390 growth and productivity growth. So I guess my question 2391 is-Hand I have looked at other industrialized countries? DECD 2392 growth rates, and actually the growth of 1.9 percent over 2393 time is not inconsistent with other industrialized countries. 2394 So I wonder, as an economist, whether you agree that our HBAD46.DDO PAGE 100 2395 growth rate has been in some way artificially held back or 2396 whether we are just sort of operating the way economies i 2397 operate, growing at just below 2 percent? 2398 Mrs. YELLEN. So when an economy suffered a deep 2399 recession and unemployment is very high, output is well below 2400 the economy?s potential, and it can grow more rapidly than 2401 the pace dictated by population or labor force and 2402 productivity. But once the economy is operating at its 2403 potential and unemployment is inlthe neighborhood of full 2404 employment, as it is now, then I would certainly agree that 2405 it is labor force growth and productivity that dictate the 2406 pace of growth. - 2407 Unfortunately, that looks like it is a little bit under .2408 2 percent for the U.S. economy. Labor force growth has 2409 slowed and productivity growth has been very disappointing. 2410 And to speed that up we would have to see an improvement in 2411 one or both of those things. i 2412 Mr. HIMES. I have been reading these reports since I i 2413 _have been here, and the reports have always listed factors 2414 that have perhaps dampened growth. And I remember the 2415 housing hangover was cited some years ago, uncertainty, and 2416 issues of aggregate demand. 2417 This report has never highlighted regulation as a 2418 material??and I do mean material; I understand that 2419 overregulation can, in fact, have a quashing result?-but this HBAU46.0DO PAGE 101 2420 report has never cited regulation as a material factor in 2421 dampening U.S. growth. 2422 Is it the opinion of the economists at the Federal 2423 Reserve that regulation has really been a material brake on 2424 the U.S. economy in the last 8 years? 2425 Mrs. YELLEN. So investment spending has been quite low, 2426 and we have tried to understand what some of the factors are 242? that are responsible for it. Businesses in surveys do cite 2428 regulation, taxes, uncertainty as factors that are holding 2429 back investment. 2430 So we understand it could be contributing to slow growth 2431 in investment spending, but there are also other factors, 2432 namely the economic growth overall has been slow, sales 2433 growth for those firms have been slow, and that, I think, has 2434 been important as well. 2435 Mr. HIMES. Thank you. I i 2436 Last question, I don't have a lot of time. I am a big 243? believer in preserving monetary independence or independence 2438 for the monetary authorities. You have been vocal on this, 2439 most notably in your letter of NOvember of 2015. 2440 I wonder, in my remaining time can you talk a little bit 2441 about some of the initiatives??Audit the Fed, the FORM Act in 2442 particular, GAO access to the Fed? Do you think that these 2443 initiatives could over time compromise the independence of 2444 the FOMC and of our monetary policy? HBAO46.000 PAGE 102 2445 Mrs. YELLEN. Yes, I do. And this goes beyond the issue 2446 of a rule in the FORM Act. It goes to asking the GAO to come 2447 in on a real-time basis and make policy judgments that would 2448 second guess the decisions of the FDMC. 2449 I think that involves very detailed intervention in 2450 monetary policymaking the compromises independence, and I 2451 think central banks all over the world have recognized that 2452 an independent central bank that can focus on the long-run 2453 health of the economy, maintaining low and stable inflation 2454 and steady employment growth, gives rise to a better economic 2455 environment and has been?? 2456 Chairman HENSARLING. Time of the gentleman has expired. 2457 The chair now recognizes the gentleman from Florida, Mr. 2458 Ross. 2459 Mr. ROSS. Thank you, Mr. Chairman. 2460 Chair Yellen, good to see you again. And I want to put 2461 in a word, as I have-done in the past, with you concerning 2462 the mom?and?pops, the fixed?income people who have really 2463 suffered a lot in their savings and eating into principal. 2464 And I am hoping that monetary policy will be such that they 2465 will have an opportunity that they can survive again and not 2466 just those on Wall Street. 2467 My question to you is, and following up on my colleague 2468 Mr. Himes, you know, in the FORM Act we passed the Centennial 2469 Monetary Commission Act, which I am sure you are familiar HBAO46.000 PAGE 103 2470 with. It was Chairman Brady's idea to have the commission to 2471 overlook oversight of the Fed. In fact, the committee would 2472 highlight opportunities for improvement. 2473 Given our economy's somewhat unconventional and anemic 2474 recovery over the last 6 years, would you agree that it might 2475 be a nice idea to have such a commission as a centennial 2476 commission for oversight? 2477 Mrs. YELLEN. I don?t think such a commission is needed. 2478 It is, of course, up to Congress to decide if you want to 2479 look at the structure of the Federal Reserve, but my own 2480 assessment is that the Federal Reserve has performed well. 2481 We have adapted to changes and?? 2482 Mr. ROSS. And if they have there is nothing really to 2483 be concerned about an independent commission reviewing. I 2484 mean, if you have set this on-~the Fed on the path that you 2485 have chosen, then I think that this would just confirm your 2486 suspicions that you are on the right path, would it not? 2487 Mrs. YELLEN. Well, it is a decision that is up to 2488 Congress if you want to make that. I would.urge you to 2489 decide what the problem is that needs to be addressed, and I 2490 believe we have a structure that works well. 2491 It was one that was decided on by Congress, and I think 2492 we have adapted to changes in the economy over 100 years. So 2493 our structure is not broken, but it isn? 2494 Mr. ROSS. So you don't think it is a good idea to have PAGE 104 2495 an extra pair of eyes, just to see? 2496 Mrs. YELLEN. We have lots of pairs of eyes and lots 2497 of?H 2498 Mr. ROSS. How far they can sees? 2499 Mrs. YELLEN. all over who are looking at the 2500 Fed structure, and it is not a tepic that hasn't received a 2501 great deal of attention. 2502 Mr. ROSS. Yet. 2503 Let me move on to another topic with regard to state 2504 insurance regulation. You know, despite its proven track 2505 record, our state?based insurance regulatory structure has 2506 faced many challenges in recent years, especially with 2507 dealing with the IAIS and international standards. 2508 Today we are faced with a potential more intrusion in 2509 insurance regulation by the Federal and international 2510 financial regulators. With your engagement in international 2511 negotiations, I have just a few questions. 2512 One, would you agree that our state?based form of 2513 regulation in insurance, risk?based capital, is probably .2514 doing its job and is doing a good job? 2515 Mrs. YELLEN. State-based regulation is very important. 2516 Its focus has always been on protecting policy holders, which 2517 is one important focus?? 2518 Mr. ROSS. In fact, we have had probably, I think, 2519 recognized as the best system of regulation in the insurance BEAU-46.000 PAGE 105 2520 industry through our state?based programs. Would you agree? 2521 Mrs. YELLEN. I think those programs have been 2522 successful. But we certainly saw in the financial crisis 2523 that we had a large insurance company that was heavily 2524 involved in capital market activities that were a source of 2525 systemic risks. And I do think?? 2526 Mr. ROSS. And that was a federally regulated subsidiary 2527 of AIG, though, that had that problem, and not necessarily 2528 state??I mean, we have never seen a run on insurance 2529 companies, so I guess that is my concern is because we have a 2530 good system in place. 2531 And with that in mind, you have a seat at the table of 2532 the International Association of Insurance Supervisors and 2533 the Financial Stability Board. Are'you now working with 2534 state regulators, insurance regulators, commissioners to 2535 develop a consensus before entering into negotiations on an 2536 international basis? 253? Mrs. YELLEN. They all participate in that forum, as we 2538 do, and our participants meet and confer with them and try to 2539 understand what is in the interest of U.S. insurance firms 254D and to try to influence?- 2541 Mr. ROSS. And I would hope that you take the position 2542 as an advocate on behalf of our insurance regulation system. 2543 Mrs. YELLEN. We are always trying to see other 2544 countries establish regulatory frameworks-- HBA046.000 PAGE 106 2545 Mr. ROSS. Similar to ours? 2546 Mrs. YELLEN. m-that will be consistent with ours and 2547 result in strong regulation, but a level playing field for 2548 our firms. 2549 Mr. ROSS. Thank you, Chair Yellen. I appreciate that. 2550 And I yield back. Thank you. 2551 Chairman HENSARLING. Gentleman yields back. 2552 The chair now recognizes the gentleman from Maryland, 2553 Mr. Delaney. 2554 Mr. DELANEY. Thank you, Chair Yellen, for being here 2555 and for your wonderful service to the country. 2556 Mrs. YELLEN. Thank you. 255? Mr. DELANEY. I have three questions. I will try to get 2558 them out all up front so you can think about them. 2559 The first is if policies coming out of Washington across 2560 this next several years fall into the category of 2561 protectionist by nature, putting through unpaid?for tax 2562 reductions that increase the deficit and foreign policy that 2563 might cause foreign investors to recalibrate down their 2564 investment in the United States, how much of an 2565 impact??negative impact??do you think that will be on 2566 long-term economic growth? That is my first question. 256? My second question is about the labor market. Do you 2568 think the biggest issue in the labor market is employment, or 2569 jobs, or is it pay? Like what is the real structural problem HBA046.0UU PAGE 107 2570 with the labor market right now? Is there not enough jobs or 2571 is the pay not good enough, in your opinion? 2572 And my third question is as you think about the Fed 2573 balance sheet and running off the mortgage investments that 2574 you have, has there been discussions within the Fed about 2575 considering other asset classes, such as infrastructure asset 2576 classes, if eligible bonds were to be created that perhaps 2577 the Fed could invest in? 2578 So those would be my three questions. 2579 Mrs. YELLEN. Your first question pertained to 2580 protectionism, the deficit in capital flows and what impact 2581 they would have on growth? 2582 Mr. DELANEY. Yes. 2583 Mrs. YELLEN. And honestly, without knowing more about 2584 the details of the policies it is really difficult for me to 2585 render a judgment. 2586 In general, we understand that many different economic 2587 policy shifts are under consideration, that they may well 2588 affect economic growth, inflation, have repercussions for our 2589 policy stance. But without knowing something more about the 2590 timing, composition, details of those changes, I honestly??I 2591 can?tu?there are many different effects both positive and 2592 negative. 2593 On labor, in some sense I think we have enough jobs, and 2594 that is what a 4.8 percent unemployment rate tells you is we HBA046.000 PAGE 108 2595 have created a lot of jobs, but pay in real terms is not 2596 rising rapidly. And the composition of those job over many 2597 decades and even more recently continues to shift in ways 2598 that are leaving particular classes of workers disadvantaged. i 2599 Mr. DELANEY. So if I could, Chair, so this is my view, I 2600 that we have more of a pay issue than a jobs issue and when 2601 you look at what is happening to the labor market, i 2602 particularly the effect of technological innovation, do you I 2609 see this pay issue being a persistent enduring issue that we 2604 really do need to think differently about? 2605 Mrs. YELLEN. So we have had very slow growth in real i 2606 income. And going back to the late 1980s, the 2607 bottom--probably the bottom half of the income distribution 2608 in terms of pay have seen no real wage increases. I 2609 Disproportionate gains have gone to those at the high I 2610 end.of the income distribution. That goes to the composition 2611 of jobs and the trends that different jobs have in terms of 2612 pay, and I think it is a serious problem and what we are 2613 hearing from dissatisfied Americans. 2614 Mr. DELANEY. And then as it relates to the Fed's 2615 balance sheet, which you don?t really need to shrink 2616 theoretically. You are not structured like a normal bank, 261? and as you run off your mortgage investments in your current 2618 portfolio have you thought about other asset classes for the 2619 Fed to invest in that might be more?? HBAO46.DDU PAGE 109 2620 Mrs. YELLEN. So we are restricted to treasury and 2621 agency debt. We have not?? 2622 Mr. DELANEY. Have you ever discussed internally what i 2623 other investments might allow you to pursue your mandate? 2624 Mrs. YELLEN. Well, I have mentioned that other central 2625 banks have broader authority to purchase different assets and 2626 have sometimes used that authority. We have not. We are not 2627 asking for that authority. I have said that if Congress were 2628 to ever to consider changing that authority there would be 2629 both costs and benefits to consider. 2630 So I do want to be clear, it is not something the FOMC 2631 is looking?? 2632 Mr. DELANEY. Has it been successful in other countries, I 2633 do you think? 2634 Mrs. YELLEN. Excuse me? I 2635 Mr. DELANEY. Has it been a successful policy in other i 2636 countries that have done it, pursued it? 2637 Mrs. YELLEN. You know, I have not seen detailed I 2638 studies, but arguably yes, it may have been. i 2639 You know, these are only policies that are used in I 12640 exceptionally difficult times. It is not normal monetary 2641 policy in countries like Japan or the euro area that have 2642 used it-~have done it in times that called for exceptional 2643 monetary policy accommodation. 2644 Mr? DELANEY. Great. Thank you, Chair. 1 HBAO46.DDO PAGE 110 2645 Chairman HENSARLING. Time of the gentleman has expired. . 2646 The chair now recognizes the gentleman from Oklahoma, 2647 Mr. Lucas. 2648 Mr. LUCAS. Thank you, Mr. Chairman. 2649 Chair Yellen, I, probably along with maybe a half a 2650 dozen of my colleagues here, date back to the old days of 2651 when this was the Banking and Urban Affairs Committee. And 2652 we used to have these great glorious discussions about Karl 2653 Marx and Adam Smith. It was just awesome in the old days. 2654 But you know, it has always been my policy to try and 2655 focus on the issues that have a direct impact on the 2656 constituents and the people I serve back home. So in that 2657 spirit, I would like to ask you a question, and if you can 2658 answer it I would be most appreciative. 2659 I would like to turn to the Fed?s role in uncleared 2660 swaps markets for a moment since Dodd?Frank had an effect on 2661 that above and beyond the jurisdiction of the committee, but 2662 also the Financial Services Committee. 2663 On March 1 of this year participants in that market will 2664 be required to post variable margin with each other. 2665 Updating those existing swap agreements for these variable 2666 margins involve a complicated process according to market 2667 participants. It takes a lot of time. 2668 I saw a figure that only 0.16 percent, less than 2669 two?tenths of a percent, of all swap agreements have been HBA046.000 PAGE 111 2670 2671 2672 2673 2674 2675 2676 2677 2678 2679 2680 2681 2682 2683 2684 2685 2686 2687 2688 2689 2690 2691 2692 2693 2694 updated to meet these various margin requirements. And that is with a deadline only 2 weeks away. That instability concerns me because many of the smaller end users enter in the swaps markets to legitimately hedge against the market and thus confronting these legal puzzles with few resources. Turning to your role in this process, 2 days ago the CFTC instituted a temporary grace period, and under that relief market participants affected by these requirements have a 6-month period for compliance. They must be ready by September 1. In addition, regulators in Asia have provided a similar grace period and the European regulators, it seems, have stated they are open to similar wiggle room on the March 1 deadline. With all of that, can you share with me whether the Fed intends to coordinate with the CFTC on providing relief to entities under its jurisdiction that are a part of this market? Mrs. YELLEN. So we are aware of the problems that you describe. We have been monitoring trends in compliance very closely. We are in touch with some of the firms that are involved, and we will be in discussions with other banking regulators to discuss what response may be needed to this. Mr. LUCAS. But it is being analyzed that the circumstances are evolving as they are and the potential impact on the participants. From my perspective, it is those HBA046.000 PAGE 112 2695 2696 2697 2693 2699 2700 2701 2702 2703 2704 2705 2706_ 2707 2708 2709 2710 2711 2712 2713 2714 2715 2716 2717 2713 2719 end users that matter to me. And I guess I would have to say thank you for taking that note, and I hope, like CFTC and the Asian regulators and perhaps our European friends, we will see a similar response. With that, I think, Mr. Chairman, in the brevity I will yield back the balance of my time. Chairman HENSARLING. The gentleman yields back. The chair now recognizes the gentleman from Washington, Mr. Heck. Mr. HECK. Thank you, Mr. Chairman. Chair Tellen, thank you so much for being here. Let?s talk housing. Often??in fact I would say usually??the housing market is kind of the big swing industry in the economy. In recessions you cut interest rates and that leads more people to buy homes, developers cut ground, building trades hire up to engage in all of that. The people who buy the homes go into the local Lowe's and buy furniture or whatever, and it usually has a materially simulative effect on the economy. Not this time, certainly compared to the past. Housing starts are now the same they were at the depth of the 2001 recession; and in fact, they are near where they were at the bottom of the great savings and loan crisis about a quarter of a century ago. So my question, Chair, is as you raise rates do you HBAO46.000 PAGE 113 2720 worry about_choking off an already weak housing recovery, or 2721 do you think housing is just less sensitive to interest rates 2722 Ithan it was pro?bubble? 2723 Mrs. YELLEN. Well, I think there is still sensitivity 2724 there of housing to interest rates. And of course, this was 2725 a very different cycle in which it was housing?related 2726 problems that were part and parcel of the crisis. And so 2727 when we cut rates we.didn't get the usual response that you 2728 would have of housing quickly responding positively to the 2729 rate cut. 2730 So, as I mentioned in my testimony, higher interest 2731 rates??and mortgage rates have gone up some over the last 2732 several months??may play a retarding role in restricting the 2733 recovery of housing. But the other positive side of it is we 2734 have got good employment growth, income growth; consumer 2735 spending is solid; house prices have been rising. And all of 2736 those are positives. 2737 So on balance, we have seen a very slow but continued 273B recovery in housing, and I would expect that to continue even" 2739 in the context of somewhat rising mortgage rates. And they 2740 are very low, by historic standards. 2741 Mr. HECK. So you mentioned wages in passing. I will 2742 mention before I ask my next question, wages have ticked up 2743 in growth, but only to about 2.5 percent. 2744 The last recovery they were at 4 percent. -I think HBA046.000 PAGE 114 i 2745 America is still wanting to know when they are going to get a 2746 raise, but that is not my question. 2747 One of the things about the housing market that I find 2748 really confusing is that prices seem to be rising in markets 2749 all over the country. In many cities they have even eclipsed 2750 where they were pre the bubble. 2751 The chair?s home state, where, frankly, some would 2752 characterize land as infinite and home prices have 2753 historically always followed inflation, we are now seeing 2754 significant real increases. 2755 It used to be that markets would more quickly balance 2756 supply with demand, and now they seem to have sustained 2757 imbalances. Prices keep rising. 2758 I am privileged to chair a task force that is going to 2759 take a look at this more closely, and I am really interested I 2760 in your perspective. Basic question is why. Why we are i 2761 seeing such weak home construction, despite the fact that we 2762 have rising prices? 2763 Mrs. YELLEN. So that has been a surprise as well, why 2764 construction remains so weak with house prices?? 2765 Mr. HECK. And the answer is? 2766 Mrs. YELLEN. We do have robust growth in multifamily. 2767 Many young people, millennials, are delaying buying homes, 2768 and I think that has impacted single?family construction. We i 2769 have seen very depressed pace of household formation, a HEAO46.DUO PAGE 115 2770 remarkably large fraction of young people that continue to i 2771 live with their families. I 2772 And even as the economy has recovered, household 2773 formation has remained quite depressed for reasons that are 2774 difficult to understand. 2775 Mr. HECK, You seem to be implying that they are?~they 2776 want to be living in the basement, as opposed to they are 2777 unable to get out of the basement. 2778 Mrs. YELLEN. Well, we have seen that continue even as 2779 ,the job market has strengthened and unemployment rates have 2780 come way, way down. So it is historically low. From 2781 builders we hear about shortage of workers, their skilled 2782 workers, and buildable lots. And there may be some supply 2788 issues there, as well. 2784 Mr. HECK. I yield back, Mr. Chair. 2785 Chairman HENSARLING. The time of the gentleman has 2786 expired. 2787 The chair now recognizes the gentleman from Illinois, 2788 Mr. Hultgren. 2789 Mr. HULTGREN. Thank you, Mr. Chairman. 2790 Thank you, Chair Yellen. I appreciate you being here 2791 today. 2792 I know we are in agreement on the need to prevent 2793 bailouts of our nation's financial institutions from ever i 2794' happening again. However, the Fed has implemented some HBA046.000 PAGE 116 2295 controversial policies that I am concerned may have some 2796 unintended consequences that, in fact, could increase 279? systemic risk. 2798 AEI Resident Scholar Paul Kupiec was noted 2799 coordinating??excuse me??has noted coordinated supervisory 2800 stress tests encourage a group?think approach to risk 2801 management that may increase the probability of a financial 2802 crisis. If the systemically important banks are all 2803 following the same capital requirements, and they all are 2804 being tested against the same stress scenarios, then isn?t 2805 the Fed creating a herd of banks that can easily be pushed 2806 off the cliff? Don?t we want a mechanism that is truly 2807 capable of increasing financial resilience, such as 2808 real~market discipline? 2809 Mrs. YELLEN. So I haven't read Paul's work, but I think 2810 that that is an issue. We don't want group?think in 2811 management of risk at banks. 2812 We want banks to be focused on understanding their own 2813 risks and modeling it. And one reason to avoid 2814 what we would refer to as a model mono?culture, which is this 2815 sort of herd approach, we have consistently resisted sharing 2816 with the banks subject to stress tests our models. 2817 One consideration, gaming it is, you know, changing 2818 their portfolios so that they look good on our models is one 2819 reason-? HBAO46.DDO PAGE 11? 2828 Mr. HULTGREN. I want to ask you about that, real quick, 5 2821 if I could. 2822 Mrs. YELLEN. ?~but we want to make sure that they don't 2823 all say, "Okay, this is the way to manage your risk." We 2824 want them to develop their own models. 2825 Mr. HULTGREN. Yes. Governor Tarullo has emphasized the 2826 Fed does not want banks to game the model, as you say, for 2827 Fed stress tests. 2828 Can you give us an example of how a bank would game a 2829 stress test? 2830 Mrs. YELLEN. Well, understanding what the particular 2831 areas of risk and scenarios might look like and how we would 2832 evaluate them in our models could induce banks to understand 2833 that they could make portfolio changes that would enable them 2834 to fare better. 2835 Mr. HULTGREN. II guess, following up on that some more, 2836 if banks were able to game the Fed?s stress test, wouldn't 2837 they have to change their risk profile in a manner that 2838 addresses the very concerns that you and your colleagues have 2839 about systemic risk? And don?t you want them to make chose 2840 changes? 2841 Mrs. YELLEN. No, not necessarily, because banks have 2842 their own individual sources of risk. 2843 Mr. HULTGREN. It seems ironic to me. It would seem 2844 transparency in how stress tests are designed would help you HBAO46.000 PAGE 118 2845 achieve your objective while at the same time reducing 2846 regulatory costs. i 2847 Since the enhanced supervisory framework of financial I 2848 institutions was put in place, what analysis, if any, has the 2849 Fed done to determine if the increased compliance costs to 2850 financial institutions is commensurate with the risk? And 2851 how about an analysis on the ability of these banks to 2852 provide access to credit? 2853 . Mrs. YELLEN. So are you talking about with the stress 2854 tests? 2855 Mr. HULTGREN. Right. 2856 Mrs. YELLEN. So we have completed a 5?year review of 2857 our stress tests. The GAO-has also done a review of our 2858 stress testing methodology. And, as was noted earlier today, 2859 we recently finalized a rule that takes over 20 smaller 2860 institutions and exempts them from the qualitative portion of 2861 our program. 2862 We did conclude that the regulatory burden exceeded the 2863 benefits and changed our rule to diminish regulatory burden 2864 in what I think is a significant and responsive way. 2865 Mr. HULTGREN. Also earlier in the hearing today you 2866 said that the Fed is thinking about incorporating a 2867 surcharge in CCAR before Governor Tarullo departs. A new 2868 vice chairman for the supervisory nomination is likely weeks 2869 away, so why is the Fed moving ahead on these changes before HBA046.000 PAGE 119 2870 the nomination and confirmation of this individual? 2871 Mrs. YELLEN. Well, I don?t know what the timing is 2872 going to be of those changes. I think we would want to make 2873 sure that we had notice out and an ability to finalize such i 2874 changes probably before our 2018 stress tests go into effect. 2875 We look forward the appointment of a vice chair. If we 2876 go at it with the-? I 2877 Mr. HULTGREN. I think it makes sense to hold off some, 2878 just-- i 2879 Mrs. YELLEN. ??with the notice of proposed rulemaking-? 2880 Mr. HULTGREN. I have got 20 seconds left. Let me ask 2881 one more real quick. 2882 There are currently three White House orders affecting 2883 potential new rulemakings. Additionally, last year the GAO 2884 found deficiencies with stress testing already affecting 2885 growth. Do you agree that the Fed should act cautiously . 2886 regarding any CCAR changes? 2887 Mrs. YELLEN. I am sorry. What? 2888 Mr. HULTGREN. Do you agree that the Fed should act 2889 cautiously regarding any CCAR changes? . 2890 Mrs. YELLEN. In line with GAD recommendations, did you 2891 say? 2892 Mr. HULTGREN. Well, last year the time is 2893 expired. We will follow up with a letter. 2894 Chairman HENSARLING. Time of the gentleman has expired. HBA046.000 PAGE 120 2895 I wish to inform members votes are currently pending on 2896 the floor. I anticipate clearing two more members, having a 289? brief recess, and then reconvening. Members are encouraged 2898 to come back after votes. 2899 The gentleman from Mr. Rothfus, is 2900 recognized. 2901 Mr. ROTHFUS. Thank you, Mr. Chairman. 2902 Chair Yellen, last year I asked you about the custody 2903 banks and their concerns about the supplementary leverage 2904 ratio. As you acknowledged, these institutions face unique 2905 challenges in meeting requirements like the SLR. . 2906 Former Governor Tarullo has made similar statements 290? acknowledging the problem. At a conference in December he 2908 stated that, quote, "As part of our efforts to tailor our 2909 regulations according to the business models of firms we are 2910 considering ways to address the special issues posed for the 2911 large custody banks by certain elements of our regulatory 2912 framework." 2913 I appreciate the Fed?s understanding of the unique 2914 regulatory issues custody banks face, and I would like to 2915 continue to work with you on the issue. Can you tell me what 2916 progress the Fed has made on addressing this issue over the 2917 last year? 2918 Mrs. YELLEN. So I can't give you details but I can tell 2919 you that we have continued to engage in conversation with HBAO46.000 PAGE 121 2920 those banks to try to understand the--in detail the issues 2921 they face and possible strategies that they or we could 2922 undertake to mitigate some of those burdens. 2923 Mr. ROTHFUS. Thank you. 2924 Mrs. TELLEN. I promise we will continue to work with 2925 them. 2926 Mr. ROTHFUS. Thank you. 2927 As you know, the President recently issued the executive 2928 order laying out core principles for regulating the U.S. 2929 financial system. This order includes a list with the 2930 following core principles: enable American companies to be 2931 competitive with foreign firms in domestic and foreign 2932 markets, and advance American interests in international 2933 financial regulatory negotiations and meetings. 2934 When Senator Crapo asked you about the core principles 2935 yesterday you expressed support, saying, quote, certainly 2936 do agree with the core principles. They enunciate very 2937 important goals for our financial system and for supervision 2938 and regulation of it, and I look forward to working with the 2939 treasury secretary and other members of FSOC to engage in 2940 this review." 2941 I appreciate your support for the principles, but I 2942 would like to get a better understanding of how you foresee 2943 the Fed putting them into action. Specifically, how should 2944 the U.S. alter its approach to international insurance HBAO46.DOU PAGE 122 2945 2946 2947 2948 2949 2950 2951 2952 2953 2954 2955 2956 2957 2958 2959 2960 2961 2962 2963 2964 2965 2966 2967 2968 2969 regulatory discussions in response to these core principles?- Mrs. YELLEN. Well, we have been involved with state regulators, the NAIC, the Federal Insurance Office, and others in international?? Mr. ROTHFUS. What about with designating Would allowing a firm that is not a SIFI in the U.S. to be designated as a globally systemically important insurer be consistent with American interests? Mrs. YELLEN. Our designation of firms for special supervision for SIFI status in the U.S. takes account of their threats to U.S. financial stability. In foreign countries where those firms operate the regulators are also concerned about their impact on financial stability in their countries. And the two perspectives may not always line up. Mr. ROTHFUS. You testified earlier today that the FORM Act would, quote, "chain the Fed to a simple rule," close quote. But the FORM Act permits the Fed to deviate from the rule, does it not? Mrs. YELLEN. Every deviation involves review by GAO of our decision-making?? Mr. ROTHFUS. Wouldn't every deviation, though, provide an opportunity to educate the American people and members of Congress as to what you are doing? Mrs. YELLEN. I believe it is important to provide that educationtestimony, and press PAGE 123 2970 conferences, and our minutes, and our monetary policy report. 2971 Mr. ROTHFUS. And you could do that as explain your 2972 deviation from the rule. Because right now we are looking at 2973 the policy over the last 6, 7, 8 years, and it is like, you 2974 know, I blew up the balance sheetyears 2975 of substandard growth. 2976 Mrs. YELLEN. You know, I am prepared to explain our 2977 policies. And as I have said previously, we routinely look 2978 at rules as useful guidelines, but--and I recently gave a 2979 speech just a few weeks ago at Stanford where I explained in 2980 detail??I would really recommend it to you?~reasons why the 2981 recommendations of some simple rules would not have been a 2982 good guide for us over the last several years or currently. 2983 Mr. ROTHFUS. But you would still be permitted to 2984 deviate from them. 2985 Mrs. YELLEN. I think that bringing GAO into routine 2986 real-time reviews of our policy decisions is??simply 2987 compromises the independence of monetary policy. 2988 Mr. ROTHFUS. Let me shift gears a little bit. The CFPB 2989 receives its funding from the Fed, correct? 2990 Mrs. YELLEN. I am sorry? 2991 Mr. ROTHFUS. The CFPB receives its funding from the 2992 Fed? 2993 Mrs. YELLEN. Yes. 2994 Mr. ROTHFUS. Does the Fed have any oversight HBAO46.0DD PAGE 124 2995 responsibility for the 2996 Mrs. YELLEN. No. I 2997 Mr. ROTHFUS. Has the Fed ever denied a disbursement 2998 request for the 2999 Mrs. YELLEN. NO. 3000 Mr. ROTHFUS. I guess I am running out of time, but you 3001 talked about the 2 percent target for inflation. And we 3002 talked a little bit about some financial literacy; you had a 3003 teachers? town hall. 3004 I am curious, do you teach??do teachers in financial 3005 literacy teach that a six?pound-?or a pound of ground beef at 3006 six bucks is going to cost $6.60 in 5 years, or a gallon of 300? milk that costs four bucks now is going to cost $4.40 in 5 3008 years if you hit that target? 3009 Mrs. YELLEN. I don't know what?? 3010 Chairman HENSARLING. Time of the gentleman has expired. 1 3011 Mr. ROTHFUS. Yield back. - 3012 Chairman HENSARLING. The chair now recognizes the 3013 gentleman from Colorado, Mr. Tipton. 3014 Mr. TIPTON. Thank you, Mr. Chairman. 3015 Chair, thank you for taking the time to be able to be 3016 here. 3017 When we previously had an opportunity to be able to 3018 visit you had cited in the past that you recognize the 3019. trickle-down effect of regulations that are going on. And I HBA046.DOO PAGE 125 3020 have got a primary concern of community banks. And I believe i 3021 we share??you believe that community banks are important for I 3022 the economic health of the country? 3023 Mrs. YELLEN. I do. 3024 Mr. TIPTON. And in recognizing that, and in view of 3025 your past statements, I will speak actually to my colleague, 3026 Mr. Himes', comment when he was referring to your report. He 3027 had noted that.he is concerned that you are not addressing or 3028 you have not addressed regulatory burden in regards to your 3023 report. You had recently had a meeting in St. Louis, I 3030 believe in September, being able to meet with a variety of '3031 people in the banking industry, and they had cited and 3032 discussed with you at this conference the number one reason 3033 for community banks to stop offering some products was an 3034 ongoing concern of the regulatory burden. 3035 So I guess my question to you is, you have stated to us 3036 in the past you recognize the trickle?down effect. You have 303? heard from community bankers that you cite or is important to 3038 our economy and the country. What is the Fed doing to 3039 actually help resolve some of the challenges that they face? 3040 Mrs. YELLEN. So we have taken many steps that I think 3041 community bankers, based on my meetings??regu1ar meetings 3042 with community bankers??see as quite positive. 3043 We are coming into many banks less frequently, extending 3044 exam cycles. We have heard from them that having large HBA046.000 PAGE 126 3045 groups of examiners on their premises for long periods of 3046 time is burdensome, and so we are doing much more work, 3047 giving them the opportunity to let us do much more work off 3048 site. We are risk?focusing our exams so that for 3049 well-managed, well?capitalized firms we are spending less 3050 time and focusing on real sources of risk to those banks. 3051 We are reducing the frequency of consumer compliance 3052 exams for well?run and well?managed banks. We have gone 3053 through the AGRI PR process. There are a number of changes 3054 that are going to come out of that that will simplify burden. 3055 We are looking at reducing?? 3056 Mr. TIPTOW. If I may, since we are going to run i 3057 out??and I appreciate the extensive list that you are putting 3058 out, but I have to be able to look actually at the results. i 3059 When we go back to the September meeting that you had had i 3060 with community bankers they are still citing regulatory 3061 compliance. 3062 Just received an e-mail yesterday from a small bank on 3063 the western side of Colorado. And going a little bit to your 3064 unemployment numbers, I guess the good news is they created 3065 three jobs. The bad news is for that small community bank it 3066 is all in compliance. 3067 So are we really seeing the results for the community 3068 banks in terms of everything that you were just citing? We 3069 continue to hear out of our community banks it is regulatory HEAD-46.000 PAGE 127 3070 burden that is inhibiting their ability to be able to provide 3071 the liquidity, to be able to grow the communities, and to be 3072 able to create jobs. 3073 Mrs. YELLEN. Well, community banks labor under a number 3074 of burdens, not all of which reflect compliance burden. Hut 3075 I think that if you?- 3076 Mr. TIPTON. But it is the number one thing that they 3077 cite to us. 3078 Mrs. YELLEN. So we do meet regularly with a council, 3079 so?called CDAC, community development, community banks, and 3080 discuss with them their??how they experience our supervision. 3081 And I would say-? 3082 Mr. TIPTON. Can we look at maybe just some outcomes? 3083 How many new bank charters were requested last year? 3084 Mrs. YELLEN. There are virtually no new bank charters. 3085 Mr. TIPTON. No new bank charters. How many 3086 consolidations were there? 3087 Mrs. YELLEN. There are a lot. They are a fundamental?? 3088 Mr. TIPTON. How many shut down? 3089 Mrs. YELLEN. I don?t know the numbers of how many shut 3090 down. 3091 Mr. TIPTON. So I, like I say, and I hope you can 3092 appreciate, I know that you understand the problem. I guess 3093 what I am questioning is are the results actually yielding 3094 the desire result? HBA046.000 PAGE 128 3095 You know, we have got the lowest labor participation 3096 rate in this country in decades. We have got more small 309? businesses that are shutting down. You had cited that NFIB 3098 report, hey, they aren't really even asking for loans. 3099 But you cited earlier today that they are looking for 3100 alternative methods, going to second mortgages on homes, to 3101 be able to get a loan out of the bank. So is this impacting 3102 the economy, job creation, and the overall health for rural 3103 America, which is of deep concern to me? 3104 Chairman HENSARLING. Time of the gentleman has expired. 3105 The committee stands in recess. 3106 [Recess.] 3107 Chairman HENSARLIWG. The committee will come to order. 3108 The chair now recognizes the gentleman from Texas, Mr. 3109 Williams. 3110 Mr. WILLIAMS. Thank you, Mr. Chairman. 3111 And thank you, Chair Yellen, for your testimony this 3112 morning. 3113 Mr. Chairman, before I begin my questioning I wanted to 3114 briefly discuss Chair Yellen?s testimony from yesterday's 3115 Senate Banking hearing and some comments by Senator Elizabeth 3116 Warren, who, I might add, must live in a different business 3117 climate environment than I do; and also, for the record, 3118 remind my college on the other side that when we talk about 3119 hitting homeruns out of Fenway Park, the fences are very HEAD46.UUO PAGE 129 3120 short in Fenway Park. 3121 [Laughter.] 3122 Senator Warren, in an exchange with chair??with you, 3123 Chair Yellen, noted that, and I quote, "Our banks have 3124 thrived since we passed Dodd?Frank. Both big banks and 3125 community banks are literally making record profits." 3126 Now, Chair Yellen, while I don't know about the big 3127 banks and their record profits, what I do know is this: I am 3128 a Main Street America_guy; I am a small business owner. Main 3129 Street America is hurting. Community financial institutes 3130 are hurting. And they both see no relief in sight. 3131 So I would be interested to hear what Texas community 3132 bankers would say to Senator Warren's comments. I would also 3133 like to know what Senator Warren would say to the 126 banks 3134 in the home state of Texas that have closed since 2010. What 3135 would she say to the community bankers who have, since 2007, 3136 been hit with over 150 new regulations with over 100 rules 313? still to be considered? 3138 In.fact, every time a rule is changed these same 3139 community financial institutions incur a cost. Even the 3140 simplest change can cost thousands of dollars and hundreds of 3141 man?hours to comply with. 3142 Sure, some community financial institutions have 3143 consolidated to survive, swallowed by the larger banks. Hut ?3144 others have not been so lucky. According to the FDIC, more PAGE 130 i 3145 than 1,200 counties in the United States, encompassing 16.3 3146 million people, would have limited physical access to Main 314? Street banking without a presence of a community bank. As 3148 someone who represents a large rural district in Texas, that 3149 is a large section of my constituency. 3150 So, Chair Yellen, while I do not expect my college from 3151 Massachusetts to understand Main Street America's burdens, I 3152 truly hope that you do understand those, that the position of 3153 many of these community banks, financial institutions find 3154 themselves in, and that you stay true to your word in finding 3155 a way to provide meaningful relief. 3156 So now I wanted to briefly go back and touch on the 3157 Federal Reserve?s balance sheet. You seem to have indicated 3158 yesterday that the Fed was in no hurry to reduce its massive 3159 $4.5 trillion balance sheet, and you said that today. 3160 So the following up on some questions from Mr. Barr is 3161 the following: We have heard a lot of talk the last couple 3162 days from you and others on the strength of the economy and, 3163 again, how banks are making record profits, but you also 3164 stated that the Fed wouldn?t reduce the balance sheet until 3165 it has confidence the economy is on a solid course. 3166 So I guess my question to you is, which is it? And if 5 3167 our economy is headed in the right direction, as you have 3168 said, why wouldn't the Fed reduce its balance sheet? So my 3169 question would be, what is stopping the Fed.from naturally HEAD-46.000 PAGE 131 3170 winding down its balance sheet, let alone offering a clear 3171 and credible strategy for doing so? 3172 Mrs. YELLEN. So I think the economy is doing well, but 3173 it has required a highly accommodative policy from the Fed to 3174 accomplish that. So our overnight Federal funds rate at 50 3175 to 75 basis points remains quite low. If the economy were-to 3176 now be hit by a negative shock-unot something I expect, but 3177 we have to prepare for??we would not have a great deal of 3178 scope to support the economy by cutting that overnight rate. 3179 My colleagues and I have said we want to wait to start 318D running.off our balance sheet until normalization is well 3181 underway. That means we would like to have a bit more buffer 3182 room to cut our overnight rate in the event that there is a 3183 negative shock because once we start running off the balance 3184 sheet it creates some drag, and we want to make sure that the 3185 economy is robust enough and we have enough policy space. 3186 Mr. WILLIAMS. My next question is, in terms of 3187 opportunities that American households have gone without 3188 during this lackluster recovery, does the Fed?s oversized and 3189 distortionary balance sheet, as well as the uncertainty that 3190 follows from the lack of a credible exit plan, create an 3191 unacceptable economic risk? And should it? 3192 Mrs. YELLEN. Well, what do you mean by economic risk 3193 from our balance sheet? 3194 Mr. WILLIAMS. Well?? HBA046.000 PAGE 132 3195 3196 3197 3198 3199 3200 3201 3202 3203 3204 3205 3206 3207 3208 3209 3210 3211 3212 3213 3214 3215 3216 3217 3218 3219 Mrs. YELLEN. I think our balance sheet??we added to our balance sheet to push down interest rates and spur spending to ease financial conditions at a time when the economy was very weak, and it has strengthened substantially. And I think we have made a contribution to that, so I don?t think that is a significant risk. And we have indicated that we intend to contract our balance sheet substantially, but in a gradual way that is not risky. Mr. WILLIAMS. Okay. Thank you. I yield back. Chairman HENSARLING. Time of the gentleman has expired. The chair now recognizes the gentleman from Maine, Mr. Poliquin. Mr. POLIQUIN. Thank you, Mr. Chairman, very much. And thank you very much, Chair Yellen, for being here. You know, we got about two foot of snow, Chair, in Maine on Monday and we have another two or three feet coming.this weekend, so if you haven't made your vacation plans for the great state of Maine, this is something you ought to consider, especially since it is Valentine's Day yesterday, and I am sure your husband would love to go up there with you. and we need the business. Mrs. YELLEN. I am sure. Thank you for the invitation. Mr. POLIQUIN. Yes, ma?am. Chair, across my district and across America we have HBAD46. 000 PAGE 133 3220 been very concerned about the weakest economy we have had in 3221 decades??and the recovery, I should say. You know, the GDP 3222 is growing at about 1.5 percent roughly instead of 3, which 3223 has been the average. Folks are living paycheck to paycheck 3224 in my district. They are having a hard time to save. 3225 Millions of folks have given up just looking for work. 3226 And earlier in this hearing I remember, in response to a 3227 question from Mr. Huizenga, I believe what you said is that 3228 our labor participation rate has been so high because there 3229 are so many people that are aging out of the workforce. 3230 Well, let me tell you a little story if I may, Miss Chair, 3231 with all due respect. 3232 Mrs. YELLEN. It has been falling for that reason. 3233 Mr. POLIQUIN. Beg your pardon. 3234 A few months ago I was at a shoemaker in Lewiston, 3235 Quoddy Shoes, one of the greatest shoemakers still left in 3236 America, and I ran into a fellow who was working part time, 3237 80 years old??BD years old he is making shoes. And he was 3238 very concerned about running out of money before he ran??runs 3239 out of time. 3240 Now, I happen to think, Chair Yellen, that we ought to 3241 do everything we can to grow this economy because that is 3242 just not fair and it is not right. 3243 Now, I am sure you look at the same data we do. In 3244 December we saw that consumer confidence is at a 15?year HBAD46 .000 PAGE 134 3245 high. Now, I know it ticked down a little bit in January, i 3246 but it is at a 15?year high. Business confidence is at about i 3247 a 2?year high. And so this is all good when people are 3248 buying and businesses are investing and creating jobs, and we 3249 have more opportunity for our families. 325D . And I talk to job creators all the time. That has been 3251 my background. And I will tell you why they are so confident 3252 is because they are no longer worried about another layer of 3253 regulations and taxes falling on their shoulders that is 3254 making it hard for them to succeed and create jobs. 3255 So can?t we agree, Chair Yellen, that this 3256 overregulation that we have seen in.this economy for the past 3257 7 or 8 years has been stifling growth and opportunity? 3258 Mrs. YELLEN. Well, we even noted in our FOMC statement 3259 the pickup we have seen in recent months in business and 3260 consumer confidence. That is very real and~? 3261 Mr. POLIQUIN. Would you attribute that in part to 3262 overregulation or going in a different direction now? Less 3263 regulations, lower taxes, more confidence, more Spending, 3264 more jobs. 3265 Mrs. YELLEN. Well, I think we should do everything we 3266 can to relieve regulatory burden, and I pledge to do so and 3267 to focus intensely with it to work with the new 3268 administration. 3269 Mr. POLIQUIN. Thank you for that. HBA046.000 PAGE 135 3270 II noticed yesterday'in front of the Senate you mentioned 3271 that it-?you were very supportive of adjusting financial 3272 regulations, especially for small community banks, and I am 3273 thrillEd about that. 3274 But you know, it is not only the financial regulations 3275 that you folks are responsible for that permeate our economy, 3276 but it is also regulations at the EPA. For example, we have 3277 a great paper mill in Skowhegan with 850 jobs, and they are 3278 worried about biomass energy being carbon neutral or not and 3279 the additional regulations that come with it. 3280 So it is in all different sectors of the economy, Chair 3281 Yellen. 3282 During your June 22nd testimony, and I-quote when??this 3283 is a question asked to you by Representative Barr about the 3284 economy being underperforming, our growth has been-?I quote, 3285 quote "Growth has been disappointing. I am not sure the 3286 reason why." 3287 Now, can't we agree here today that part of the reason 3288 is overregulation and that you and everybody else in a 3289 position of influence in this town can support what is going 3290 on now, which is less regulation, more jobs? 3291 Mrs. So productivity growth has been quite weak 3292 for the last 6 years, and even going back before the 3293 financial crisis. It seems as though there has been a step 3294 down in the pace of productivity growth. It is not only HBA046.000 PAGE 136 3295 something that we have seen in the aftermath of the crisis. 3296 So I think there may be deeper trends there that are 3297 depressing productivity growth than just regulations. 3298 Mr. POLIQUIN. Let me shift a little bit my remaining 3299 time, Chair Yellen. 3300 We now have almost $20 trillion in debt. The interest 3301 payments on that debt with rates at a historic low are about 3302 $240 billion a year, which is about twice what we spend on 3303 veterans' benefits. 3304 Do you think, Chair, if this town can ever get its 3305 spending act together, balance the books, and start paying 3306 down the debt, it will give us additional confidence in the 330? business community and among our consumers, which will lead 3308 to a growing economy and more jobs? 3309 Mrs. YELLEN. I am not sure what the bottom line would 3310 be, but we have had a looming problem of an unsustainable-? 3311 Mr. POLIQUIN. Do you think if we are able to balance 3312 our books, ma'am, and start paying down our debt that that 3313 would help our economy grow? 3314 Mrs. YELLEN. It could. 3315 Mr. POLIQUIN. Thank you very much. 3316 Chairman HENSARLING. Time of the gentleman has expired. 3317 As the chair advised members earlier, we plan to adjourn 3318 this hearing in approximately 30 minutes. If any member 3319 wishes to utilize less than their 5 minutes of allotted time, HBAO46.DOD PAGE 137 3320 I am sure other peeple further down the dais would be 3321 appreciative. 3322 Chair now recognizes the gentlelady from Utah, Mrs. 3323 Love. 3324 Mrs. LOVE. Thank you, Chair Yellen, and thank you for 3325 being her today. You know, I always find myself pinching 3326 myself whenever we are in a hearing with you because of the 3327 importance of what we are doing here. And so I want you to 3328 know how sincere I am with??in aspect to the questions and 3329 the answers that we get here. So thank you for being here. 3330 Mrs. YELLEN. Thank you. 3331 Mrs. LOVE. In creating the Federal Reserve in 1913, 3332 Congress charged the new central bank with the authority to 3333 set monetary policy, with the objective of ensuring price 3334 stability?~that is, avoiding inflation that could undermine 3335 economic growth. I 3336 In 1938 the Humphrey Hawkins Act expanded the Fed's 333? mandate to include goals of maximum employment, stable 3338 prices, and moderate longaterm interest rates. And of 3339 course, along with its responsibilities over monetary policy, 3340 the Fed also enjoys very significant powers and 3341 responsibilities with regards to bank supervision and now 3342 also systemic stability. 3343 This array of powers has left Congress, the markets, and 3344 the public looking to the Fed for progress and assurance on' HBAO46.000 PAGE 138 3345 3346 3347 3348 3349 3350 3351 3352 3353 3354 3355 3356 335? 3358 3359 3360 3361 3362 3363 3364 3365 3366 3367 3368 3369 nearly every conceivable topic having to do with the nation's financial and economic wellbeing. So just listening to the range of questions that you have been asked and, you know, the Humphrey Hawkins hearing shows that it is true, including questions about topics like income inequality with African?American unemployment. This is my question to you: Do you agree with my observations in how much the Fed is doing, along with Representative Barr's observations and his testimony, to the extent in which Congress is looking to the Fed for answers and guidance? Mrs. YELLEN. -So I do see that and we have, as you pointed out, a huge range of important responsibilities which we try to carry out as best we can. It is also important for you to understand that there are limits on what we can do. Mrs. LOVE. Mrs. YELLEN.I We are not able to address every problem. If there is slow productivity growth in the United States that is not something that the Fed has much ability to address. Mrs. LOVE. Do you think?? Mrs. YELLEN. If there is income in equality, that is??or the composition of jobs?? Mrs. LOVE. HEAD-46.000 PAGE 139 3370 Mrs. YELLEN. ??has changed in an adverse way?? 3371 Mrs. LOVE. I get it. 3372 Okay, do you think that we are looking to the Fed for 3373 too much, in your opinion? 3374 Mrs. YELLEN. Well, sometimes I do feel that, yes. 3375 Mrs. LOVE. If so, how do you think we can pare down our 3376 expectations of the Federal Reserve? 3377 Mrs. YELLEN. Well, you have set forth your expectations 3378 in legislation very clearly and you described them. You said 3379 our responsibility for monetary policy is stable prices, 3380 maximum employment, and moderate long?term interest rates?? 3381 Mrs. LOVE. Do you think that there is a??do you think 3382 that there is room here to pare down or to eliminate the dual 3383 mandate that is set on?? 3384 Mrs. YELLEN. No, I don?t think that would be a good 3385 idea. Those two goals of maximum employment and stable 3386 prices are rarely in conflict?- 3387 Mrs. LOVE. Okay. So we talked about a couple of 3388 things. One of the things that we have talked about was our 3389 regulation and the burden of??the regulatory burdens. 3390 Here is my problem: In April of 2011 the Fed predicted 3391 a 3.25 percent annuals?real annual growth rate. Actual real 3392 GDP growth rate for the??for that year was 1.6 percent, 3393 according to official BEA data. 3394 Fed forecasts for 2012 and 2013 were both close to 4 HBAU46.UUO RAGE 140 3395 percent. Actual for 2012 was 2.2 percent; 2013 fell even _3396 further short of original predictions. I can go on and on. 339? Annual growth came in far less, at 1.9 percent in 2016, 3398 when it was predicted at 3 percent. So I am asking if you 3399 think??do you think that these numbers underscore the 3400 failures of unconventional policies to try and deliver 3401 expected results? 3402 Is there.too much going on? Is there a way that through 3403 both paring down the dual mandate and also paring down 3404 regulations that we can actually bring that growth rate up? 3405 Mrs. YELLEN. Our unemployment rate forecasts prove much 3406 closer to being accurate. You have asked us to focus on 340? maximum employment. -We have, and I believe we have succeeded 3408 in meeting Congress? goal for us. 3409 Mrs. LOVE. But we are still looking at-- 3410 Mrs. YELLEN. The fact that economic growth?? 3411 Mrs. LOVE. We-e 3412 Mrs. YELLEN. --has been so disappointing, been so low?? 3413 Mrs. LOVE. Okay. I have like 2 seconds, and I just 3414 wanted to say that we are still not happy with the rate of 3415 employment when it comes to African?Americans. We can do a 3416 lot better. We can do a lot better in our-~ 3417 Mrs. YELLEN. As you just recognized, there are limits 3418 on what the Fed can accomplish?? 3419 Chairman HENSARLING. Time of the gentlelady has HBAO46.000 PAGE 141 3420 expired. 3421 The chair now recognizes the gentleman from Arkansas, 3422 Mr. Hill. 3423 Mr. HILL. Thank you, Mr. Chairman. 3424 Chair Yellen, nice to have you back before the 3425 committee. Thank you for your patience today. 3426 One of the great compromises back in 1913 on the 3427 formation of the Federal Reserve regarded the importance and 3428 political decision to.have the district banks, how they were 3429 owned, how they were spread around the country, and that??do 3430 you agree generally that they provided a good, diverse, 3431 strong voice in both supervisory and monetary policymaking 3432 over that 10 decades?- 3433 Mrs. YELLEN. So with respect to monetary policy I feel 3434 it has been very good to have the diversity, the input from 3435 around the country, and a large group of people with diverse 3436 views trying to form a consensus. That has been very 343? healthy. 3438 On supervisory policy, the reserve banks execute a great 3439 deal of supervision. They have responsibility, particularly 3440 for community banks. But it is the Board of Governors that 3441 is charged with setting supervisory policy and putting 3442 regulations into effect, and so that policy guidance comes 3443 from the Board of Governors that is carried out in the 3444 reserve banks. HBAO46.DOO PAGE 142 3445 Mr. HILL. But you do believe the Board of Governors 3446 listens to the members of the boards of the district banks, 3447 even on their supervisory suggestions, don't you? 3448 Mrs. YELLEN. I am sorry, the members of the board or?? 3449 Mr. HILL. The members of the Board of Governors in 3450 Washington, they do listen to the views of the district bank 3451 board members as it relates to supervisory policy, do they 3452 not? 3453 Mrs. YELLEN. The directors of the reserve banks don't 3454 weigh in on bank supervision and-- 3455 Mr. HILL. Should they? 3456 Mrs. YELLEN. ??that supervision policy. 3 3457 Mr. HILL. Should they have that added to their list of 3458 suggestions? You have?? 3459 Mrs. YELLEN. No. I think that the directors, 3460 especially given the role of banks on the boards and the fact 3461 that there are bank directors, it has been important to wall 3462 them off from?~ 3463 Mr. HILL. There are a lot of bank--there are a lot of 3464 district bank directors that are not bank directors. They 3465 are citizens, just from various industries. 3466. Mrs. YELLEN. Yes. 3467 Mr. HILL. Do you think that the supervisors in the 3468 district banks have a good handle on their banks, their 3469 bankers, their bank asset quality, their bank supervision HBA046.0UO PAGE 143 3470 within the confines of their district? 3471 Mrs. YELLEN. Yes. 3472 Mr. HILL. So wouldn?t it be a good idea to try to have 3473 merger and acquisition applications and expansion?type 3474 applications and business combination applications all 3475 handled at the district bank level? 3476 Mrs. YELLEN. Well, the board has responsibility 3477 ultimately for those decisions, and much of the work on them 3478 is done at the reserve banks. But in some cases, the board 3479 has legal authority to make decisions. 3480 I Mr. HILL. Well, do you think it is a decent policy to 3481 defer to the local reserve bank as a general statement and 3482 only in special instances have decisions come to the Board of 3483 Governors level for approval? 3484 Mrs. YELLEN. I think in many cases decisions are 3485 routine, and the recommendations to the board come from the 3486 reserve banks. I wouldn?t favor changing the governance 3487 structure around that. 3488 Mr. HILL. Thank you. 3489 On the subject of Mr. Williams? questions about the size 3490 of the Federal Reserve balance sheet, obviously during the 3491 crisis you owned a lot of nontraditional assets as a function 3492 of getting through the crisis period. 3493 And you have, through the payment of reserves, built a 3494 large portfolio of government securities. It looks like you HBAO46.000 PAGE 144 3495 have 40 percent of the mortgage?backedn?your portfolio is 40 3496 percent in mortgage?backed securities; you have got 20 3497 percent of the balance sheet with a maturity greater than 5 3498 years in treasuries; and that you, at last count I saw, owned 3499 15 percent of the world's total supply of U.S. treasuries. 3500 Do those numbers sound generally right? 3501 Mrs. YELLEN. I don't have them in front of me, but they 3502 sound generally right. 3503 Mr. HILL. You know, when banks have to go through a 3504 bank examination there is a section of the CAMELS rating that 3505 has an for interest rate sensitivity. And it would seem to 3506 me that you have a very substantial concentration of risk in 3507 that balance sheet and the size that it is and a significant 3508 sensitivity to risk because you have extended duration. 3509 When I was looking at the numbers I was reminded of two 3510 of my favorite quotes. One was old??Mr. Oakley Hunter, who 3511 used to be the CEO of Fannie Mae back in the late 1970s, and 3512 he described his own company when he was president as the 3513 world?s largest crap game. And then Mr. Buffett in 2008 3514 described the Federal Reserve as the??as history?s greatest 3515 hedge fund. 3516 And so my concern is that through Operation Twist, as 3517 you try to undo the portfolio, that you have got a real 3518 interest rate sensitivity problem. I hope you will address 3519 that and move quickly to reduce the size of the Fed?s balance HBAO46 . DOD PAGE 145 3520 sheet. 3521 Thank you, Mr. Chairman. 3522 Chairman HENSARLING. Time of_the gentleman has expired. 3523 The chair now recognizes the gentleman from Texas, Mr. 3524 Gonzalez. 3525 Mr. GONZALEZ. Thank you. 3526 I have a couple of questions. 3527 Chair Yellen, President Trump has stated he intends to 3528 create 25 million new jobs. However, given Trump's 3529 anti?immigrant status?Fstance, where would the President get 3530 25 million people to fill these jobs? 3531 Mrs. YELLEN. So immigration has been a very important 3532 source of labor force growth. I would estimate that with the 3533 economy having a 4.8 percent unemployment rate, looking 3534 forward job growth mainly has to come from additions to the 3535? labor force. There might be some increase in labor force 3536 participation, but we would need labor force growth. 3537 Given our projections on labor force growth, something 3538 like 75,000 to 125,000 jobs a month would be consistent with 3539 a stable unemployment rate. And so if immigration were to 3540 reduce labor force growth, the pace of job growth consistent 3541 with our staying with roughly 4.8 percent unemployment would 3542 move down, not up. 3543 - Mr. GONZALEZ. Right. What role does immigration into 3544 the United States have on the growth and competitiveness of HBAO46.00U I PAGE 146 3545 our economy? 3546 Mrs. YELLEN. So that is a broad question I am not sure 3547 that I can answer, but it has been an important support for 3548 labor force growth, and it has been important in many 3549 sectors. 3550 Mr. GONZALEZ. Thank you for your response. 3551 Chairman HENSARLING. Gentleman yield back? 3552 Gentleman yields back. 3553 The chair now recognizes the gentleman from Michigan, 3554 Mr. Trott. 3555 Mr. TROTT. Thank you, Mr. Chairman. 3556 And, Chair Yellen, thank you for your time today and for 355? your service. 3558 I want to follow up on a question that Mr. was 3559 asking earlier regarding the OLA under Title II of 3560 Dodd-Frank. And I think you said that you preferred a 3561 bankruptcy alternative but wanted to maintain the OLA just in 3562 case there was a scenario that couldn?t be anticipated. 3563 I think you also said, though, that under OLA that the 3564 taxpayers wouldn?t be put at risk. Did I misunderstand, or 3565 do you stand by that statement? 3566 Mrs. YELLEN. Yesthat if the 3567 FDIC realized any losses they would be passed onto the 3568 banking industry, which would chip in to compensate. 3569 Mr. TROTT. So if the FDIC borrows trillions of dollars HBAD46.DOO PAGE 147 3570 to compensate creditors it is not going to put taxpayers at 3571 risk? 3572 Mrs. YELLEN. I am sorry, if the what? 3573 Mr. TROTT. FDIC borrows trillions of dollars to I 3574 compensate creditors, the bank, it is not putting taxpayers 3575 at risk? 3576 Mrs. YELLEN. Well, I think there is a limit on what 357? they can borrow and it wouldn't be trillions of dollars. 3578 Mr. TROTT. But taxpayers would be a risk under that 3579 scenario if they were borrowing, wouldn?t they? 3588 Mrs. YELLEN. It is structured so that the costs would 3581 be borne by the financial sector. I I 3582 Mr. TROTT. Okay. 3583 You know, in December I was back home and I went to a 3584 holiday party for??at the Bank of Birmingham. And it is a 3585 community bank in Birmingham, Michigan. And the CEO pulled 3586 me in his office and he said, just want to let you know we 3587 are selling. We can't continue." And they have since sold 3 3588 to the Bank of Ann Arbor. 3589 So I would like to know what you are doing today and 3590 what we can do to help save our community banks. Because I 3591 really see it as an obstacle to growth in our economy, and I 3592 really believe it is one of the reasons why no one is 3593 starting small businesses and young people under 30 aren?t 3594 owning businesses. And the lack of credit for small business HEA046.000 PAGE 148 3595 is a big issue, and I would like to hear your thoughts on 3596 that. 3597 Mrs. YELLEN. So small businesses don't by and large 3598 report in surveys when they are asked that lack of access to 3599 loans or credit is one of the significant problems that they 3600 face, and we have seen pretty solid growth of credit overall 3601 from the banking sector, including small business loans. 3602 So banks are under a great deal of pressure for a number 3603 of different reasons. We have a low interest rate 3604 environment. Their net interest margins have been compressed 3605 and that tends to reduce profitability. 3606 Still, I believe community banks in the United States 3607 last year made profits of something like $5.5 billion. But 3608 there are banks that are under pressure and, of course, 3609 consolidation is a trend. 3610 For our part, I have emphasized repeatedly today that 3611 regulatory burdens on community banks need to be reduced. I 3612 would be very pleased to see Congress take steps in that 3613 direction, and we will also do all that we can to cooperate 3614 in reducing those burdens. 3615 Mr. TROTT. Great. 3616 And now I want to save some time for my colleagues, so 3617 my last question is, you know, we have heard a lot of nice 3618 speeches from my friends on the other side of the aisle today 3619 about all the problems that President Trump has created in IHBAU46.000 PAGE 149 3620 the last 25 days. Why is the stock market doing so well? 3621 Why do we have a record high in the stock market? 3622 IMrs. YELLEN. Well, I think market participants likely 3623 are anticipating shifts in fiscal policy that will stimulate 3624 growth and raise??perhaps raise earnings, maybe tax cuts that 3625 will boost earnings. We have seen longer?term interest rates 3626 go up and the dollar strengthen, and that is consistent with 3627 expectations of an expansionary fiscal policy. 3628 Mr. TROTT. So would it be fair to say then, the 3629 prospect of easing the regulatory burden created by 3630 Dodd?Frank is causing investors and businesses to feel more 3631 optimistic about our economy? 3632 Mrs. YELLEN. So I have no idea what portion Dodd-Frank 3633 plays in that. I have no way of knowing that. 3634 Mr. TROTT. I yield back. 3635 Thank you, Chair. 3636 Chairman HENSARLING. Gentleman yields back. 363? The chair now recognizes the gentleman from Georgia, Mr. 3638 Loudermilk. 3639 Mr. LOUDERMILK. Thank you, Mr. Chairman. 3640 Chair Yellen??excuse me~?as many have discussed here 3641 today, the Fed currently holds about trillion worth of 3642 mortgage?backed securities, which, surprisingly, equates to 3643 about 21 percent of all the mortgage?backed securities. This 3644 has been unprecedented because the decades before the 1 HEA046.0UD PAGE . 150 3645 recession the Fed had virtually zero mortgage-backed 3646 securities on its book. 3647 But yesterday at the Senate Banking Committee hearing 3648 when this issue was brought up, why such a large number of 3649 mortgage?backed securities are currently on the books of the 3650 Fed, you stated that quote, "After the financial crisis, at a 3651 time when the economy was very depressed, unemployment was 3652 very high, inflation was running below the Fed?s objectives 3653 and extraordinary support was needed." 3654 And that is why you explained why you purchased so many 3655 mortgage?backed securities when prior you had none. 3656 Mrs. YELLEN. Treasury securities. 3657 Mr. LOUDERMILK. Right. 3658 'Mrs. YELLEN. Both. 3659 Mr. LOUDERMILK. However, todayh we have heard from you 3660 and some others in here of how well we are doing now. The 3661 economy is going well, that there is??unemployment is going 3662 down. 3663 If the reason that you bought those, and you said that i 3664 you are going to divest yourself of those via attrition over 3665 time, but my question is just last week the Fed purchased 3666 $8.5 billion of mortgage?backed securities. i 3667 Mrs. YELLEN. All we do is reinvest proceeds of maturing 3668 principal to keep the size of our balance sheet unchanged. 3669 We are not doing any net purchases of either treasuries or HBAO46.UOD PAGE 151 3670 mortgage?backed securities. 3671 Mr. LOUDERMILK. But is this in any way divesting 3672 yourself? 3673 Mrs. YELLEN. We have not started the process of 3674 divesting ourselves. We are maintaining at a constant level 3675 the size of our portfolio and leaving the composition 3676 unchanged for now. But we anticipate at some point beginning '3677 the process you described of allowing maturing principal?~we 3678 will stop reinvesting it and our balance sheet will gradually 3679 shrink. 3680 Mr. LOUDERMILK. So what you are telling me is the 3681 Reuters report that came out on Thursday that reported that_ 3682 you bought $8.5 billion worth of mortgage?backed securities 3683 isn?t exactly accurate? 3684 Mrs. YELLEN. If we had I don?t know the details, but to 3685 the extent we have principal repayments on mortgage-backed 3686 securities, we would take that??those principal repayments 3687 and reinvest in mortgage?backed securities to keep our 3688 holdings at a constant level. 3689 So that is our reinvestment. We are reinvesting 3690 maturing principal and it might have amounted to the number 3691 that you cited. I don?t know for sure. 3692 Mr. LOUDERMILK. $8.5 billion, that is a pretty 3693 significant number, especially holding 21 percent of all 3694 mortgage?backed securities. HBA046.000 PAGE 152 3695 Mrs. YELLEN. We are not?? 2 3696 Mr. LOUDERMILK. Does that not put you and the taxpayers 3697 at a significant risk? 3698 Mrs. YELLEN. We are not adding to our holdings of 3699 mortgage?backed securities. We are maintaining our holdings 3700 unchanged in dollar terms. And these are securities that 3701 have essentially no credit risk. And of course, there is 3702 interest rate risk in our portfolio~- 3703 Mr. LOUDERMILK. And can you remind me, what was the 3704 significant factor in causing the crash in 2008? Wasn't it 3705 the same idea that these have very little credit risk, but 3706 yet, that was the impetus with what brought us into the 3707 recession? 3708 Mrs. YELLEN. These are government?guaranteed mortgages. 3709 And we are entitled, again, in the terms of our charter to 3710 invest in treasury and agency debt, and these are agencies~- 3711 Mr. LOUDERMILK. In your opinion, then this doesn?t put 3712 the American taxpayer at risk of the Fed at significant risk 3713 by holding 21 percent of mortgage?backed securities, and you 3714 are not divesting at this time? 3715 Mrs. YELLEN. I don?t see that there is significant 3716 risk. A central bank operates in a very different way than a 3717 normal commercial bank. Our ability to conduct monetary 3718 policy, which is our prime responsibility, doesn't depend if 3719 they reflect?~the value of those securities may fluctuate, HBAO46.0UU PAGE 153 3720 3721 3722 3723 3724 3725 3726 3727 3728 3729 3730 3731 3732 3733 3734 3735 3736 3737 3738 3739 3740 3741 3742 3743 3744 but that has no impact on our ability to conduct monetary policy. We could have unrealized losses in those portfolios, but we have no intention and we have stated for a long time that we do not intend to sell mortgage?backed securities so we would not realize those losses. Our holdings of them have swelled since the financial crisis. The payments that.we are making to the treasury that positively impact the Federal budget??prior to the crisis our payments to the treasury ran around $20 billion to $25 billion, and last year they came close to $100 billion. And?? Chairman HENSARLING. Time?~ Mrs. YELLEN. --we have supported growth in the economy. Chairman HENSARLING. Time of the gentleman has expired. The chair wishes to advise members that currently I intend to recognize the gentleman from Ohio, Mr. Davidson, and the gentleman from North Carolina, Mr. Budd, and we will adjourn at that time. The gentleman from Ohio, Mr. Davidson, is recognized. Mr. DAVIDSON. Thank you, Mr. Chairman. Thank you, Chair Yellen. It is an honor to speak with you, and thanks for taking a big chunk of time to talk with us today. What we have raised on the screen here is a HBAO46.00D PAGE 154 3745 trade?weighted U.S. dollar index. And for an extended period 3746 of time, your time as chair??chairwoman of the Fed, you have 3747 emphasized a desire to raise rates. To what extent has 3748 currency appreciation impacted your ability to do that? 3749 Mrs. YELLEN. Well, I think the appreciation at the 3750 dollar partly reflects market expectations that we would be 3751 raising rates faster than many other advanced countries. Our 3752 economy has been growing more strongly and we have had 3753 stronger economic performance. 3754 The expectation that rates would diverge with the U.S. :3755 moving to higher rates than other counties has induced 3756 capital inflows, which have served-to push up the dollar, as 3757 your chart influences shows. And that is one of the ways in 3758 which monetary policy normally works. 3759 Mr. DAVIDSON. Right. 3760 Mrs. YELLEN. Of course, it has tended to diminish net 3761 export. It has had a negative effect on our exports. It has 3762 diminished spending in the economy, and it is part of how a 3763 tighter monetary policy or perceptions that there will be 3764 works to slow aggregate demand. 3765 Mr. DAVIDSON. Right. And so in that sense, it is 3766 holding down the same pressures that you would hope to do, so 3767 the strong dollar is doing some of the same things you would 3768 hope to do with the rate appreciation. 3769 Mrs. YELLEN. 7That is right. HBAD46 . 000 . PAGE 155 3770 - Mr. DAVIDSON. But the effect for the saver, then, with 3771 the currency appreciating, is that rates are still low, so 3772 time, value, and money, the rates are still held low, and it 3773 has an impact on hardworking families trying to save for 3774 retirement. While it might have a similar effect for 3775 monetary policy, the effect on Americans in the domestic 3778 economy. Would you agree with that? 3777 Mrs. YELLEN. Yes. I mean how the dollar moves is a 3778 factor. As I say, it is part of a response to monetary 3779 policy, but it is not mechanical and that does affect the 3780 interest rate path we put in place that is appropriate. 3781 Mr. DAVIDSON. Thank you for that. 3782 Now, one of the things that you had talked about as??you 3783 were commenting on policy so I won't ask you a specific 3784 policy question, but in theory, if there were an adjustment 3785 that had an effect of raising the cost of imports by, say, 20 3786 percent, and there was something that had the effect of 3787 lowering the cost of exports, would the currency market fully 3788 clear? Do you believe that that would happen? And if so, 3789 would that still resolve in a net change in our balance of 3790 trade? 3791 Mrs. YELLEN. So I note that there have been discussions 3792 and academic work in connection with border??the border tax 3793 that suggests that an appreciation of the dollar could fully 3794 offset, as you have said, a tax change that raised the cost . 1 HBA046.000 PAGE 156 3795 of important and provided a comparable export subsidy. And 3796 in principle that could provide a full offset. 379? The problem is there is great uncertainty about how, in 3798 reality, markets would really respond to these changes, and a 3799 strong set of assumptions is needed to believe that markets 3800 would fully offset those changes. 3801 It is very difficult to know just what would happen. 3802 There is more than trade that affects a country's exchange 3803 rates. 3804 Market participants' expectations matter and there is a 3805 great deal of wealth. There would be shifts in wealth. The 3806 value of UQS. assets held in foreign currencies would be 3807 greatly diminished by that?? 3808 Mr. DAVIDSON. Thanks. I think you anticipate my next 3809 question, which is, you know, $2?plus trillion of 0.8. assets 3810 held offshore, one of the desires would be to see some of 3811 that put to work in the U.S. economy. 3812 To what extent over the past several years of high 3813 appreciation of the U.S. dollar does that affect the value of 3814 the repatriation, and do you feel that currency would have an 3815 impact in the present context of relatively high rates in 3816 anything we would do policy-wise with fiscal policy to drive 3817 those balance of payments? 3818 Mrs. YELLEN. So I am not sure I have got--that was a 3819 complicated question and I am not sure I have?? HBA046 . 000 PAGE 157 i 3820 Mr. DAVIDSON. Sorry. And you have been answering them 3821 for a long time, so the net effect of the currency i 3822 appreciation on repatriation. Is there a fiscal policy that 3823 we would do that you feel that would be offset by the strong 3824 dollar? What would happen in that context? 3825 Mrs. YELLEN. I am not sure I have got a simple answer 3826 for you to that complicated question. 382? Mr. DAVIDSON. My time is expired. 3828 Chairman HENSARLING. Time of the gentleman has expired. 3829 The chair now recognizes the gentleman from North 3830 Carolina, Mr. Budd. 3831 Mr. BUDD. Thank you, Chair Yellen, for joining us 3832 today. 3833 So I will shorten the question. Something has changed 3834 since??in our economy since 2009, and I want to know if you 3835 think that the last 8 years the expansionary monetary policy 3836 or the financial regulations--if they have played a role in 383? the growing populations of both the poor and the very wealthy 3838 by hurting middle?class savers? 3839 Mrs. YELLEN. So are you referring to the fact that we 3840 have had low interest rates and it has hurt middle?class 3841 savers? 3842 Mr. BUDD. I would say that combined with the financial 3843 regulations and how it has had an effect on those 3844 middle-class savers, if you see a correlation there. HBAU46.000 PAGE 158 3845 Mrs. YELLEN. So I am not sure I see how??I think 3846 financial regulation has resulted in a stronger financial 3847 system and less risk substantially than we have had before 3848 the crisis. I think it has enabled us to have stronger 3849 growth and a faster recovery than some other advanced 3850 nations, including European nations. And in that sense, I 3851 _think it has been beneficial. 3852 But, of course, savers have been impacted by the low 3853 interest rate environments, and I hear from them every day, 3854 as I am sure you do. They would welcome higher interest 3855 rates, and if the economy continues to move along a solid 3856 path it is my hope that we will be able to raise interest 3857 'rates more rapidly and they-will see some of that pass 3858 through to their savings earn higher returns on them. 3859 Mr. BUDD. Thank you. So the next part of that??so when 3860 I do talk to the community banks in my district they keep 3861 telling me that the fastest-growing department in their 3862 business, in their bank, is the compliance department. So 3863 this seems to be borne out of the fact that we are now near 3864 zero as far as it comes to new bank charters, where it used 3865 to be hundreds of new bank charters a year; 3866 Do you think the fact that banks have had to massively 3867 increase their spending on regulatory compliance, that is 3868 helpful or harmful to banks' abilities to make loans for 3869 individuals and small businesses? HBA046.000 PAGE 159 3870 Mrs. YELLEN. I agree with everyone this morning who has 3871 expressed concern about regulatory burdens on community 3872 banks, and I pledge to do everything in our power to attempt 3873 to look for ways to mitigate those burdens. 3874 Mr. BUDD. Thank you. 3875 I yield back my time. 3876 Chairman HENSARLING. Gentleman yields back. 3877 I would like to thank Chair Yellen for.her testimony 3878 today. 3879 Without objection, all members will have 5 legislative 3880 days within which to submit additional written questions for 3881 the witness to the chair, which will be forwarded to the 3882 witness for her response. 3883 I would ask, Chair Yellen, that you please respond 3884 as you are able. 3885 This hearing stands adjourned. 3886 [Whereupon, at 2:11 the committee was adjourned.] Hearing on “Monetary Policy and the State of the Economy” Date: 2/15/2017 Member: Rep. Tom Emmer (MN-06) Witness: The Honorable Janet Yellen, Chair of the Board of Governors of the Federal Reserve System 1. In addition to monetary policy, the Federal Reserve also plays an important role regulating and supervising the financial industry. As part of those activities, the Federal Reserve has “gold plated” international capital regulations, specifically the Supplementary Leverage Ratio or SLR. In February 2016 when you testified before this committee you were asked about the SLR, its effect specifically on custody banks, and the harm a higher SLR for custody banks might create for pension funds, mutual funds, and the financial system as a whole. At that point you said that the SLR was a “crude” tool and you were looking into the concerns raised about the rule’s application to custody banks. I appreciated your answer last year as well as Federal Reserve Governor Dan Tarullo’s statement in December on making changes to capital standards that would reflect custody bank’s needs to provide services to their clients. In December, Governor Tarullo specifically said that, “as part of our efforts to tailor our regulations according to the business models of firms, we are considering ways to address the special issues posed for the large custody banks by certain elements of our regulatory framework.” In light of that statement, can you provide some more details on what steps the Federal Reserve is taking to tailor regulations to the custody bank business model, and when we will see those reforms rolled out? 2. In one of your previous appearances before this committee, I asked you about the impact that raising the Fed Funds rate could have on farmers and agriculture affiliated businesses. You mentioned that the Fed has studied this impact, however, given the very pessimistic outlooks for our farm economy and the continued strength of the U.S. dollar, I am interested to see if the Fed has revisited and reexamined this issue at all? 3. Can you give the Committee some insights on the current positioning of the Fed’s balance sheet and thinking on retention at current levels and the potential for reducing holdings? Rep. French Hill “Monetary Policy and the State of the Economy” February 15, 2017 Questions for the Record Representative French Hill to Janet Yellen Chair of the Board of Governors of Federal Reserve System In response to Mr. Williams question regarding what is currently stopping the Federal Reserve from winding down its balance sheet, you stated that the federal funds rate range was now between 50 and 75 basis points and that you wanted “a bit more buffer” in order to reach normalization so that the Fed could then begin to contract the size of its balance sheet. Question: What range constitutes “a bit more buffer”? In other words, specifically at what range does the federal funds rate need to reach for the Fed to start running off its balance sheet? Financial Services Committee Hearing entitled, “Semi-Annual Testimony on the Federal Reserve’s Supervision and Regulation of the Financial System” February 15, 2017 Questions for the Record from Congressman Hultgren (R-IL) The Honorable Janet Yellen, Chair of the Board of Governors of the Federal Reserve System Question One The Financial Crimes Enforcement Network ("FinCEN") recently exempted banks from its new Customer Due Diligence Rule for accounts established to finance insurance premiums, where loan proceeds are remitted directly by the bank to an insurer. FinCEN agreed with the industry "that these types of accounts present a low risk of laundering" and represent a "poor vehicle" for money laundering. Despite FinCEN’s finding of negligible Anti-Money Laundering (“AML”) risk, the Federal Reserve Board has been requiring banks to apply another AML measure, customer identification programs (“CIP”), to premium financing accounts. This may put bank-affiliated lenders at a competitive disadvantage with non-bank companies, which are not obligated to apply such programs, and could be driving bankaffiliated premium insurance business out of the market. This would in turn make it more difficult for small businesses and others that rely on this kind of lending. A. Will the Federal Reserve confirm that it will work with FinCEN and the bank-owned premium finance industry to also exclude it from CIP requirements, making use of exemptive authority as needed? Absent such confirmation, please explain the rationale, if any, for not using these agencies’ exemptive authority or other authority to exclude bank-owned premium finance lenders from CIP requirements. B. If the Federal Reserve sees risk in certain sectors of the premium finance industry, are there specific types of premium finance, for example with respect to property and casualty insurance that might be fully or partly exempted? Question Two An April 2016 GAO report found that the Fed “should revise the resolution plan rule’s annual filing requirements to provide sufficient time not only for the regulators to complete their plan reviews and provide feedback but also for companies to address and incorporate regulators’ feedback in subsequent plan filings.” It suggests extending the annual filing cycle to every 2 years. A. Does the Fed plan to adjust its living wills filing cycle to be in line with the GAO’s recommendation? If so, when? B. If not, why does the Fed disagree with the recommendations of the Government Accountability Office? Question Three This month, a report was published by Harvard University paper titled The Financial Regulatory Reform Agenda in 2017 by Robin Greenwood, Samuel G. Hanson, Adi Sunderam, and former Federal Reserve Governor Jeremy C. Stein that makes some criticism of the Supplementary Leverage Ratio. 1 The paper states, “The problem with the current implementation of the SLR, however, is that it has been calibrated too aggressively. As a result, it has distorted risk choices, discouraging some banks from investing in the safest assets. These distortions have already had an adverse effect on the functioning of the Treasury market. We would urge that the SLR be dialed back, so that it serves only as a secondary backup to the risk-based capital regime, and is not among the primary regulatory constraints that banks face.” I was encouraged when I saw remarks from Governor Tarullo last December stating, “And as part of our efforts to tailor our regulations according to the business models of firms, we are considering ways to address the special issues posed for the large custody banks by certain elements of our regulatory framework.” 2 A. Does the Federal Reserve Board plan to tailor the Supplementary Leverage Ratio (SLR) to acknowledge that deposits at the Fed are low-risk off-balance sheet exposures? In other words, can we expect these deposits will be removed from the calculation of the SLR? B. If so, will this be done via rulemaking? When will the Fed (and other banking regulators) propose a rule change? Question Four I want to follow-up on the answers you provided to my Questions for the Record regarding the treatment of segregated customer margin in the U.S. implementation of the Basel leverage ratios for your last appearance before the House Committee on Financial Services. You answered a fundamentally different question on the treatment of on-balance sheet cash in the denominator of leverage ratio calculation rather than address my question on the exposure reducing effect of segregated customer margin for off-balance sheet exposures. You noted that the Supplementary Leverage Ratio (“SLR”) “requires a banking organization to hold a minimum amount of capital against on balance sheet assets and off-balance sheet exposures, including with respect to segregated customer margin, regardless of the risk associated with the individual exposure.” I was not disputing this application or the purpose of the SLR. This is not a question of “excluding select categories of on-balance sheet assets” as discussed in your response. Therefore, I would like to clarify the question. A. Why is segregated customer margin for cleared derivatives not recognized as reducing the offbalance sheet exposure you mention? By its very nature, the customer margin received and segregated by a bank-affiliated clearing agent reduces the bank’s exposure to guarantee the debt owed by its customers to the clearinghouse. 1 Greenwood, R., Hanson, S. G., Stein, J. C., & Sunderam, A. (2017). The Financial Regulatory Reform Agenda in 2017. Harvard University. 2 Federal Reserve Board Governor Daniel K Tarullo. Federal Reserve Bank of Cleveland and Office of Financial Research Financial Stability Conference. December 2, 2016. Note: Governor Tarullo recently announced he will retire soon. https://www.federalreserve.gov/newsevents/speech/tarullo20161202a.htm Question Five I am also not certain you understood the intention of my second question concerning the U.S. implementation of the Basel leverage ratios. You responded to my question suggesting that fewer bankaffiliated clearing firms will continue this line of business by stating, “the swap margin rule, issued in October 2015, incentivized firms to clear through central counterparties.” I am not disputing that clearing via central counterparties is increasingly required and/or “incentivized” by various regulations. As increased clearing takes hold, I am concerned that agents tasked with fulfilling the very rule you mention – those who act as intermediaries between the firms now “incentivized to clear” and the central counterparty – will find it increasingly unappealing to continue this service. A. How will the new clearing requirements coming into effect be impacted as consolidation among those who guarantee customer clearing obligations with the central counterparty (sometimes bank-affiliated clearing members) exit the business or reduce such services available to customers? These are customers who now more than ever need access to central clearing. House Committee on Financial Services Full Committee Hearing: “Monetary Policy and the State of the Economy” February 15, 2017 Questions for the Record from Congressman Barry Loudermilk (GA-11) The Honorable Janet Yellen, Chair, the Board of Governors of the Federal Reserve System x As you know, Congress has conducted oversight into reports of more than 50 cyber beaches that took place at the Federal Reserve between 2011 and 2015. 1 I understand that the Federal Reserve’s cybersecurity efforts to protect sensitive data, including consumers’ personally identifiable information (PII), are ongoing. o What are the most pressing cybersecurity challenges that the Federal Reserve is currently working to address? o What steps is the Federal Reserve taking to strengthen its protection of PII and other sensitive information? o What steps is the Federal Reserve taking to protect against insider threats? 1 Jason Lange & Dustin Volz, Fed Records Show Dozens of Cybersecurity Breaches, REUTERS, Jun. 1, 2016, available at http://www.reuters.com/article/us-usa-fed-cyber-idUSKCN0YN4AM. Questions for the Record Rep. Blaine Luetkemeyer (MO-03) “Monetary Policy and the State of the Economy” Committee on Financial Services February 15, 2017 To Chair Yellen: 1. As you know, Congress in statute and the Fed through regulation appropriately carved the business of insurance out of the Volcker Rule’s restrictions. However, in the final rule, insurance companies which are also savings and loan holding companies because of a subsidiary thrift must meet unnecessarily burdensome compliance requirements that are based on total consolidated assets of the insurance company, rather than being limited to the size of financial subsidiaries that are subject to the Volcker Rule’s prohibitions. This does not comport with congressional intent and the spirit of the Volcker Rule, which was not targeting, and specifically exempted, insurance company activity. Do you agree that insurance assets should be excluded from consolidated assets for purposes of Volcker compliance, since the business of insurance was carved out of the rule? Questions for Record Of Representative Gwen Moore “Humphrey-Hawkins” Hearing House Financial Services Committee 2/15/2017 1. I have been an advocate of the Orderly Liquidation Facility (OLF) for its ability to streamline liquidation of G-SIFIs in certain circumstances. Do you believe that Wall Street requires a government determination to figure out if a firm is systemically significant? Do you believe that repealing the OLF would create uncertainty and contagion in the event of another crisis? 2. Dodd-Frank created greater transparency and stability by directed more trades through market utilities, including for derivative trades. Title VIII (8) established a framework to assessing systemic risk associated with these utilities and granted the Fed, CFTC, and SEC enhanced regulatory authority over these utilities. Do you agree that if Title VIII of Dodd-Frank were removed, as is contemplated in the CHOICE Act, the potential for systemically significant market events might increase due to the resulting absence of enhanced supervision of CCPs, as well as the absence of emergency liquidity facilities and risk-free accounts for customer margin? How might American consumers and workers be impacted by the return of greater systemic risk? Congressman Brad Sherman Question for the Record Financial Services Committee Hearing “Monetary Policy and the State of the Economy” February 15, 2017 Question for The Honorable Janet Yellen, Chair of the Board of Governors of the Federal Reserve System: The latest round of Basel capital rules established punitive risk weightings for mortgage servicing rights (MSR), which may have caused banks to rethink whether to own these assets. Ultimately, these punitive standards may impact American borrowers through higher rates or reduced access to mortgage credit. What are your thoughts about strict conformity with the international Basel framework, and do you think it is appropriate to ensure that the U.S. rules are implemented or amended in a fashion that addresses possible harm to consumers and businesses, specifically on the MSR issue, and more generally where the framework puts U.S. banks and their lending activity at a competitive disadvantage? From: To: Cc: Subject: Date: Allison, Terrie Jodel Jeremie Tranise Garland; Madelyn Marchessault RE: QFR Submission Thursday, April 20, 2017 1:08:08 PM Thank you! From: Jodel Jeremie [mailto:jodel.j.jeremie@frb.gov] Sent: Thursday, April 20, 2017 10:20 AM To: Allison, Terrie Cc: Tranise Garland; Madelyn Marchessault Subject: QFR Submission Good Morning Terrie, I have attached 2 QFRs that will be delivered to congressional offices today. These were all submitted to Chair Yellen following her February 15, 2017 hearing. ͻ :>z ƚŽ ZĞƉ͘ ,ŝůů ;Ăůů ƋƵĞƐƚŝŽŶƐͿ ͻ :>z ƚŽ ZĞƉ͘ ŵŵĞƌ ;ƋƵĞƐƚŝŽŶ ϯ ʹ ƌĞŵĂŝŶŝŶŐ ƌĞƐƉŽŶƐĞƐ ĨŽƌƚŚĐŽŵŝŶŐͿ Thank You, :ŽĚĞů :ĞƌĞŵŝĞ Jodel Jeremie Congressional Liaison Office Board of Governors Federal Reserve System Washington, D.C. 20551 Tel: (202) 452-6418 jodel.j.jeremie@frb.gov From: To: Cc: Subject: Date: Attachments: Tranise Garland Allison, Terrie Jodel Jeremie; Madelyn Marchessault; Jennifer Gallagher QFR Submission Friday, May 05, 2017 10:47:39 AM JLY to Rep. Moore_follow up to 021517 hearing_Q.2.pdf Hi Terrie – Attached is a QFR submission for Rep. Moore from the Chair’s monetary policy hearing. The remaining question will be forthcoming. Thank you, Tranise Tranise Garland Congressional Liaison Office Board of Governors Federal Reserve System Washington, D.C. 20551 Tel: (202) 475-6301 tranise.e.garland@frb.gov BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 IANET L. YELLEN CHAIR May 5, 2017 The Honorable Gwen Moore House of Representatives Washington, DC. 20515 Dear Congressman: Enclosed is my response to question 2 that you submitted following the February 15, 2017,.1 hearing before the Committee on Financial Services. A copy has also been forwarded to the Committee for inclusion in the hearing record. A response to the remaining question will be forthcoming. Please let me know if I can be of further assistance. Sincerely, Enclosure 1 Questions for the record related to this hearing were received on March 21, 2017. Questions for The Honorable Janet L. Yellen, Chair, Board of Governors of the Federal Reserve System from Representative Moore: 2. Dodd-F rank created greater transparency and stability by directed more trades through market utilities, including for derivative trades. Title (8) established a framework to assessing systemic risk associated with these utilities and granted the Fed, CFTC, and SEC enhanced regulatory authority over these utilities. a. Do you agree that if Title of Dodd?Frank were removed, as is contemplated in the CHOICE Act, the potential for systemically signi?cant market events might increase due to the resulting absence of enhanced supervision of CCPs, as well as the absence of emergency liquidity facilities and risk?free accounts for customer margin? Title of the Dodd?Frank Wall Street Reform and Consumer Protection Act (Dodd?Frank Act) creates an enhanced framework for the supervision of ?nancial market utilities (FMUs), - including central counterparties that have been designated as systemically important by the Financial Stability Oversight Council. This enhanced supervision framework allows the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Board of Governors of the Federal Reserve System (Board) to prescribe enhanced risk management standards for FMUs and provides mechanisms for information? sharing and coordination among the supervisory agencies. Title provides the Board with the ability to obtain a certain level of insight across all designated FMUs through examination participation and notification of material rule changes and also provides the Board with certain limited enforcement authority. Effective risk management of FMUS enhances the stability of the ?nancial system, more broadly. It is important that be overseen consistently, and in a manner that focuses on the safety of the system as a whole and not just its individual components. The role given to the Board under Title allows for such a systemic View of FMUs and assists the supervisory agencies in promoting consistency across the various designated FMUs. The SEC, CFTC, and Board have each adopted regulations that have materially raised the expectations to which systemically important FMUs are held and that have improved credit and liquidity risk management frameworks and enhanced their operational resilience. Further, the CFTC, SEC, and Board? respective requirements for FMUs designated under Title require these ?rms to manage their risks by relying on private?sector resources only, without any assumption of reliance on public funds during times of market stress. Title permits the Board to authorize a Federal Reserve Bank to establish an account for and provide services to a designated FMU. Conducting money settlements using central bank money, where available, is consistent with strong risk management practices. It is likely that that the provision of accounts and services to certain designated FMUs has reduced risk in the system by minimizing credit and liquidity risk associated with holding margin payments and contingent liquidity resources in commercial bank accounts. -2- Title also permits the Board to authorize a Federal Reserve Bank to provide discount and borrowing privileges to a designated FMU only in unusual or exigent circumstances, upon an af?rmative vote of a majority of the Board of Governors then serving, after consultation with the Secretary of the Treasury, and upon a showing by the MU that it is unable to secure adequate credit accommodations from other banks. The variety of tools created by Title have provided effective mechanisms for highlighting the importance of risk management to MUs and for the agencies to oversee and coordinate the implementation of FMU risk-management policies and procedures. Collectively, these activities have resulted in a reduced likelihood of market stress, which may have systemic implications, and have enhanced the ability of FMUs and supervisory agencies to respond to those stresses should they occur. These results are consistent with the principle of reducing reliance on public funds in response to market stress or a ?nancial crisis. b. How might American consumers and workers be impacted by the return of greater systemic risk? Over the past three decades, the ?nancial system has evolved to rely more and more on MUS that connect banks, broker-dealers, ?nancial advisers, and other ?nancial institutions, as well as in many cases farmers and businesses of all sizes as they try to reduce the risks associated with their core business activities. FMUs generally reduce the credit risk faced by the parties that rely on these entities as connection points to facilitate the exchange of cash and securities of all kinds, and also can materially reduce the amount of liquidity needed to complete such transactions. As discussed above, Title of the Dodd?F rank Act has strengthened the supervisory framework over FMUs as well as raised the expectations for the risk management standards for designated MUS. If Title were repealed and this structure removed, the likelihood for disruptions that might impact a wide set of ?nancial institutions, small businesses, and farmers who rely on FMUs on a daily basis may increase. As seen after the ?nancial crisis of 2008, such market stress and disruptions can propagate across the ?nancial system and have real consequences for the economy, including households and businesses. From: To: Cc: Subject: Date: Attachments: Tranise Garland Allison, Terrie Jodel Jeremie; Madelyn Marchessault; Jennifer Gallagher QFR Submission Wednesday, May 10, 2017 8:59:06 AM JLY to Rep. Luetkemeyer_follow up to 021517 hearing.pdf Hi Terrie, I am attaching a QFR submission for Rep. Luetkemeyer following Chair Yellen’s monetary policy hearing. Thank you, Tranise Tranise Garland Congressional Liaison Office Board of Governors Federal Reserve System Washington, D.C. 20551 Tel: (202) 475-6301 tranise.e.garland@frb.gov BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR May 10, 2017 The Honorable Blaine Luetkemeyer House of Representatives Washington, DC. 20515 Dear Congressman: Enclosed is my response to the written question that you submitted following the February 15, 2017,1 hearing before the Committee on Financial Services. A copy has also been forwarded to the Committee for inclusion in the hearing record. Please let me know if I may be of further assistance. Sincerely, WKWO Enclosure 1 Questions for the record related to this hearin were received on March 21, 2017. Questions for The Honorable Janet L. Yellen, Chair, Board of Governors of the Federal Reserve System from Representative Luetkemever: 1. As you know, Congress in statute and the Fed through regulation appropriately carved the business of insurance out of the Volcker Rule?s restrictions. However, in the ?nal rule, insurance companies which are also savings and loan holding companies because of a subsidiary thrift must meet unnecessarily burdensome compliance requirements that are based on total consolidated assets of the insurance company, rather than being limited to the size of ?nancial subsidiaries that are subject to the Volcker Rule?s prohibitions. This does not comport with congressional intent and the spirit of the Volcker Rule, which was not targeting, and Speci?cally exempted, insurance company activity. Do you agree that insurance assets should be excluded from consolidated assets for purposes of Volcker compliance, since the business of insurance was carved out of the rule? Section 619 of the Dodd?Frank Wall Street Reform and Consumer Protection Act (the statutory provision known as the ?Volcker Rule?), which. added a new section 13 to the Bank Holding Company Act of 1956 (BHC Act), generally prohibits any banking entity from engaging in proprietary trading, and from acquiring or retaining an ownership interest in, Sponsoring, or having certain relationships with a covered fund, subject to certain exemptions. Under the terms of the statute, the Volcker Rule applies to any company that controls an insured depository institution, and any af?liate or subsidiary of any such entity. As a result, the Volcker Rule and the implementing rules issued by the Federal Reserve, the Of?ce of the Comptroller of the Currency, Federal Deposit Insurance Corporation, Securities and Exchange Commission, and Commodity Futures Trading Commission (the ??Agencies?) apply to savings and loan holding companies and their af?liates and subsidiaries. Section 13 0f the BHC Act requires the Agencies to implement rules ?to insure compliance with this section.? The Federal Reserve Board?s (Board) rules provide that each banking entity must establish a compliance program, with enhanced minimum standards applicable to institutions that meet certain additional criteria set forth in the rules. These enhanced minimum standards apply to banking entities with the most signi?cant covered trading activities or those that meet a speci?ed threshold of total consolidated assets. However, the Board?s rules expressly provide that with regard to the compliance program established by a banking entity, the ?terms, scope and detail of the compliance program shall be appropriate for the types, size, scope, and complexity of activities and business structure of the banking entity? (12 CFR Therefore, each institution subject to the enhanced minimum compliance program requirements, including a large savings and loan holding company with signi?cant insurance~related assets, has ?exibility under the rule to tailor its compliance program based on the nature of its activities. From: To: Subject: Date: Falaschetti, Dino Chad Davis RE: CCAR Release Monday, January 30, 2017 4:58:55 PM Thank you, Chad! Dino Dino Falaschetti, PhD, MBA Chief Economist U.S. House Committee on Financial Services 2129 Rayburn House Office Building Washington, DC 20515 Mobile (Work) 202-306-0026 From: Chad Davis [mailto:chad.r.davis@frb.gov] Sent: Monday, January 30, 2017 4:32 PM To: Chad Davis Subject: CCAR Release Below is a link to information regarding the finalized a rule adjusting its capital plan and stress testing rules, effective for the 2017 cycle. https://www.federalreserve.gov/newsevents/press/bcreg/20170130a.htm __________________ Chad R. Davis Board of Governors Federal Reserve System Washington, D.C. 20551 P: 202.452.3992 M: 202.713.8312 chad.r.davis@frb.gov 1.1111001151101100. 1'11". 0110111111111: 111! {Ed 3,1111% 31131186 BI REDFESZMRUUES MAXINE- WATERS, CA, RANKING 1110010511 - 0511111111111? 111'- 01111110111 3011111? 1111 - 11311111111111. 1.15:. 111151 March; 101. 2017' The Honorable; 3.1.10.1 YeIlI'e'n Chair Board of (10110111013 01" the FederalReserve System Street and (30113111111100 Washington, DC. 205 5 1' IID'ea'ri ChaIiI-i' Yellen: 112.1111: before. the Hetise Committee on Financial. Services 100100.053 the Ted'elal'Reserve?s semiannual Monetarnyoliey Rep01t to (301101035. The 100.011 and your testimony 11111101 seores the tremendous pro'gm's's that has been 11111011 311100 ?the." passage 0f "the 011k Wall Street Re1o1'111 "and Consumer Financial Protection. Act. (Dodd "Frank Act) to build .a smug-12111111111031 regulatory that protects. 0011311111013 investors and taxpayers and promotes stable 000110111120 It has 001110 to 0111-. attemion that 501110 of 0111' Republican colleagues recently asked. you. and. your colleagues at. the Federal R'e'serVe Board to Stop 1011me 0.1113101110111101 11111101 the; 101211" 0111058- and 111.1111 21 Vie'e. Chairman fo'rI 80001111310018 appointed and 001111111100 is not a 3011111501011100'1' that request from _Members- who" have" _110t3 01113? strOngly opposed" the Feder0l Resery'e 10131151 regulatory agenda. 111' recent. years but: also seek-Ito ladieally. tefoun the institution you lead. But: fortunately 101' the American people. the law prowdes.? .110 such 1.e'gulato'1y 110.020..an We. ask that you 011de 320111 .eoIlea'gue's 0011111111010. oarry out. you't. 1011111010151 Without. fear. 01'faV01'. As you 101012111110 Dodd' Actoreated a'Viee Chairman for Supervision. to lead the Board of G0Vem01:s effo1ts in 30130111131110 bariks and. ?nancial 11111.13 11103211010111}! 'to' deVeIop superv1301y and regulatory poliey 1ecomn1endatlons togardmer "these 1111119 Bot the 1.1003 1101' 1101.1st any of the. "11110111aldng 00111101311101. Les'id'e With the BI'oatd 0f GoVer'110rs- to the" Vice (31101101011101 81113002131011 the full 800010.011 consider the Vice Chairman" recommendations but it has the. responsibility to 001' as "it deems. necessaly. This fact has been borne out by the Federal Reserve. Boa1d??s 0011110 and ongoing 1'.egt1lat'01y' 6110113; desptte not having a Vice Chanman for Supervis'ion' the "past six y'eats This "distinction regarding Ithe s' authorities" 001111301001. to: the Vice" (3110111113111 101 Supervision'is is impmtantbeeause 11101013 morework to {1.0.1 _As "the Federal "Reserve'Board 0011101130. ated a' few weeks ago there are additional steps. "that to better tier- 11.101111011111123 for Various sized banks based on 11101111311 "pro?le". We Were pleased to see "that the: Federal Board is'stir'ed updated stress; testing rules '30. that smaller__ 1033 risky 11011113 Wrere not. subject to the strictest10001101110103 that." 011011111 be reserved?fOr 1110101003": 1?iSkiest. banks}- 80.0 80011011 11.03 01:21:51: Dodd?Frank Act 2See Tedelal Register ?5A111etidtnents'toth'e 02113110113011 0110.811050 Test "11111113; Regulations and (Febiuery 3.. 2017), available. at. 11111151110011! fetletaheetstel 0011111132017" {331157; The Honorable Janet: Yellen Page 2 March 10, 2017 111. 111111111011 11113 Fede131 Rese1?ve Bead has wedged with other bank 1eg11lato1s 031131 the past few yeats to 1eview all of 113 regulations under the. Economic 'G'reWth and Regulatow Paperwork Reduction Act (EGRPRA) The purpOSe of 111C EGRPRA 111111611111, 3330111111011; 1310. identify 0111112111211 unnecessalyg '01 1111110131 burdensome 1139113110115 and eons1de1h0W? 10. iedu'e'e regulatory burden 011 insured 31 the same and soundness and. the'safety a11d'seund11ess0f1he ?nancial system Unlike 0111 Republican c?olleagues we tie-.1101 beheve this 1111130113111: 1egulatory review should step and p1eVe1111?l1e Federal Reserve B03111 ?om taking the appropriate steps ide11t111e?l to r'e1111e compliance rules 1331118111311}: 1131311313111 (1011111111111'ty'b31?cs' that are Safe andseundendfully comply. w1th 0011311111111 11113110131 protection laws. 1110111113 to ensure 1113111113 (11111135 Congress has tasked 11 11.11111 13y13w 3111-1111113! 311d 3131310131131er earned out T111: Federal Reserve 'Boa't'd' 1111181 not Wait to. 'e'Xef?eise. its pioper reguiatory authority to '1111p036'?1e strictest 0'11 the largest 1110.31 Complex banks that page the 115k 10 0111? 11113110131 system While leduCing 3113f 11111160635313! Compliance 1equi1e111e11?ts; for community banks throughejut the 001111113! 311103311, The: Hianorable Janet Ye?en Page: .3 March .1 0,2017 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Maxine Waters Ranking Member Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congresswoman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among theduties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulernaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near-term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden?reducing, required by law, or non?controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Maxine Waters Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a . number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is new chairman of the CSR. As a long-time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As Ihave indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, Without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, Maw BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Al Green Ranking Member Subcomittee on Oversight and Investigations Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers Within the mandates established by Congress. As I also noted in my testimony, our near?term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden?reducing, required by law, or non-controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant Opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Al Green Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will significantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking Organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long-time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Bill Foster Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the U.S. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board Would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and confirmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near-term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden-reducing, required by law, or non-controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Bill Foster Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For exanmle, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of. statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is new chairman of the CSR. As? a long-time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Brad Sherman Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is reSponsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As Itestified before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to fill the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near-term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden?reducing, required by law, or non?controversial. I do not foresee any major final regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Brad Sherman Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in reSponse to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long?time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, {Mi/gran BOARD or GOVERNORS or THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Carolyn Maloney Ranking Member Subcommittee on Capital Markets and Government Sponsored Enterprises Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congresswoman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near?term calendar of final regulatory actions is relatively light and involves primarily routine matters that are either burden?reducing, required by law, or non-controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Carolyn Maloney Page we We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auSpices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long?time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, Wig/Draw BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Daniel Kildee Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near-term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden?reducing, required by law, or non?controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Daniel Kildee Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Office of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long-time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon confnmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable David Scott Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations fornew rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As ltesti?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near?term calendar of fmal regulatory actions is relatively light and involves primarily routine matters that are either burden-reducing, required by law, or non?controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable David Scott Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is new chairman of the CSR. As a long-time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, War, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 IANET L. YELLEN CHAIR April 19, 2017 The Honorable Denny Heck Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near?term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden-reducing, required by law, or non-controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Denny Heck Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long-time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Ed Perlrnutter Ranking Member Subcommittee on Terrorism and Illicit Finance Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the U.S. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. AS I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and. the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near?term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden?reducing, required by law, or non~controversial. 1 do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Ed Perlmutter Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound financial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long?time member of the committee and a Governor steeped with fmancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, Wryogg?/ BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Emanuel Cleaver Ranking Member Subcommittee on Housing and Insurance Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near?term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden?reducing, required by law, or non-controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a significant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Emanuel Cleaver Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long?time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Gregory W. Meeks Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near-term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden?reducing, required by law, or non-controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Gregory W. Meeks Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Office of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is new chairman of the CSR. As a long-time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to-continually reviewing and improving our supervisory practices to ensure that they are effective, Without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, 174/Kafi BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Gwen Moore Ranking Member Subcommittee on Monetary Policy and Trade Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congresswoman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of. the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promOting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and confmn a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. AS I also noted in my testimony, our near?term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden-reducing, required by law, or non-controversial. I do not foresee any major final regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Gwen Moore Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long-time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, {gate pf. M, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable James A. Himes Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to fill the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board? 3 important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near?term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden?reducing, required by law, or non?controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appr0priate outcome. The Honorable James A. Himes Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long?time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, Without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, ?a?w BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable John Delaney Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near?term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden?reducing, required by law, or non-controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable John Delaney Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long?time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, Via-a?wj BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Joyce Beatty Committee on Financial Services House Of Representatives Washington, DC. 20515 Dear Congresswoman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) eXpectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is reSponsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation Of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to fulfill the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near?term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden-reducing, required by law, or non?controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public coMent as well as for new members of the Board to help determine the apprOpriate outcome. The Honorable Joyce Beatty Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long-time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Juan Vargas Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter conceming the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able tO carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near-term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden~reducing, required by law, or non?controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Juan Vargas Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long-time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, WKW BOARD or GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Keith Ellison Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to fulfill the Board? important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near?term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden?reducing, required by law, or non-controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Keith Ellison Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long-time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing urmecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, z. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Michael Capuano Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this re3p0nsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers Within the mandates established by Congress. As I also noted in my testimony, our near?term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden~reducing, required by law, or non?controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Michael Capuano Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks'in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently finalized a new, streamlined Call Report for community banks that will signi?cantly reduce-the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long-time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As Ihave indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, WVW BOARD or GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Nydia Velazquez Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congresswoman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near?temi calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden?reducing, required by law, or non-controversial. I do not foresee any maj or ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Nydia Velazquez Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update. you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long?time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, (grieve/174% BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Ruben Kihuen Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board? 3 important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near?term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden?reducing, required by law, or non?controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Ruben Kihuen Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Office of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is now chairman of the CSR. As a long?time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable Stephen Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulemakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a Whole is charged with this important duty and is held accountable by Congress and the taxpayer for carrying out this responsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near-term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden-reducing, required by law, or non?controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable Stephen Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor ay Powell is new chairman of the CSR. As a long?time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, fee Wm; BOARD OF GOVERNORS or THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR April 19, 2017 The Honorable William Lacy Clay Ranking Member Subcommittee on Financial Institutions and Consumer Credit Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Congressman: Thank you for your recent letter concerning the Federal Reserve Board?s (Board) expectations for new rulernakings in light of the Administration?s executive orders to Executive Agencies on regulations. Among the duties assigned by Congress to the Board is responsibility for promoting a safe, sound, and stable ?nancial system that supports the growth and stability of the US. economy. The Board as a whole is charged with this important duty and is held accountable by Congress and the taXpayer for carrying out this reSponsibility continuously and under all circumstances. As I testi?ed before the House Financial Services Committee and the Senate Banking Committee several weeks ago, in order to better be able to carry out this responsibility, the Board would welcome action by the President and the Senate to appoint and con?rm a Vice Chairman for Supervision as well as to ?ll the other vacancies on the Board. The prompt selection and con?rmation of a Vice Chairman for Supervision and other Board members would allow these members to participate fully in any rulemaking proceeding required to ful?ll the Board?s important duty to protect the ?nancial system, businesses, consumers and taxpayers within the mandates established by Congress. As I also noted in my testimony, our near?term calendar of ?nal regulatory actions is relatively light and involves primarily routine matters that are either burden-reducing, required by law, or non?controversial. I do not foresee any major ?nal regulatory actions in the near term and any proposals that the Board suggests are likely to provide a signi?cant opportunity for public comment as well as for new members of the Board to help determine the appropriate outcome. The Honorable William Lacy Clay Page Two We will continue to design and implement rules in a manner that eliminates unnecessary regulatory burden consistent with our responsibility to help ensure a safe and sound ?nancial system. Indeed, the Board has tailored its rules to reduce burden on community banks in particular Where consistent with our statutory mandates. For example, in response to feedback from community banks collected in our regulatory review process under the Economic Growth and Regulatory Paperwork Reduction Act that the Call Report is overly burdensome, the Federal Reserve and the other banking agencies, acting under the auspices of the Federal Financial Institutions Examination Council, recently ?nalized a new, streamlined Call Report for community banks that will signi?cantly reduce the length of the Call Report and remove approximately 40 percent of the data items from the Call Report. We are also reviewing a number of our other reports in accordance with the Of?ce of Management and Budget policies for a triennial review and renewal of those reports. We have also recommended that Congress consider additional measures to allow the tailoring of statutory requirements that apply to community banks and large banking organizations alike. Finally, I would like to update you on the leadership of the Federal Reserve Board?s Committee on Supervision and Regulation (CSR). Governor Jay Powell is new chairman of the CSR. As a long?time member of the committee and a Governor steeped with ?nancial services experience, I believe Governor Powell will serve as an excellent chairman. As I have indicated in testimony, upon con?rmation, the new Vice Chairman for Supervision will assume the chairmanship of this committee. The Federal Reserve remains dedicated to continually reviewing and improving our supervisory practices to ensure that they are effective, without imposing unnecessary costs and burdens. We look forward to working with you on these matters and appreciate your interest. Sincerely, z. (74% 333 Cannes Hones Dave:? Sonatas JOYCE BEAT-TY Wasameroa, DC 20515 3m {292} {232) 2125-? 88:1 FAX ON seavzces ?f m??ig? ?statsg 471 is not: on Houston insurance {82% 3?33 083'; Pal?15w SUBGOMMITTEE es Ovenstoar mo Eweenssnoss - E?u?g at ?33179; ggnti?ib ?5 4) Bea?yhonsegov statesman. as 20515-3503 March 16, 2017 The Honorable Jeb Hensarling Chairman Committee on Financial Services House of Representatives Washington, DC. 20515 Dear Chairman Hensarling: in light of the historic selection of Raphael Bostic for President of the Federal Reserve Bank of Atlanta this week, i am writing to respectfully request consideration of my bill, Ensuring Diverse Leodersth Act of 2017, HR. 485, for inclusion in the next slate of bills to be marked-up by the Committee on Financial Services or any other relevant mark-ops. This bill seeks to remedy the disparities amongst the leadership of the twelve Federal Reserve Banks in the Federal Reserve System by requiring at least one gender diverse candidate and one racial or ethnically diverse candidate to be interviewedduring the search for a new President of a Federal Reserve Bank. Modeled after the National Football League?s ?Rooney Rule,? this bill would utilize proves diversity hiring techniques from the private sector and applies it to an institution in desperate need of an injection of diverse leadership. Prior to today, there had never been an A?ican~American Federal Reserve Bank president. While this announcement Was a major step forward in eliminating gender and racial disparity within the Federal Reserve System, there is still a long way to go. Of the 134 Federal Reserve Bank presidents in the history of the Federal Reserve System, excluding Mr. Bostic, there has never been an African-American or a Latino to serve in those roles. Likewise, there have only been 6 women to ever serve as president. We have stood idly by for 104 years while minorities and women have been systemically closed off from consideration for these important positions, and the time to take action is long overdue. respectfully request that you include the ?Ensuring Diverse Leadership Act of 20] HR. 485, in the next mark-op before the Comittee on Financial Services or any other relevant mark?ups. Thank you in advance for your consideration. Sincerely, oi ce Beatty ember of Congress (OH-03) cc: The Honorable Maxine Waters, Ranking Member cc: The Honorable Janet, Yellen, Chair of the Board of Governors of the Federal Reserve cc: Mr. Raphael Bostic, Incoming President, Federal Reserve Bank of Atlanta PRINTEB Oh! RECYCLEE) PAPER BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D. C. 20551 JANET L. YELLEN CHAIR March 27, 2017 The Honorable Joyce Beatty House of Representatives Washington, DC. 20515 Dear Congresswoman: Thank you for copying me on your letter of March 16, 2017, in regard to your request that your bill, HR. 485, ?Ensuring Diverse Leadership Act of 2017? be included in the next or any relevant mark-up by the Committee on Financial Services. I appreciate being kept apprised on this issue of importance to you. Sincerely, ?ght/ex 9?ng v.1, TX. {liar-i ?raifg il?ilgi u" iv?f?iil'il. file". :1 commits an jmunnal brands 2m] "(tankersEmma ?elding; mastitigmn, 3330: mm March 31, 2017 The Honorable Janet Yellen Chair Board of Governors of the Federal Reserve 20th Street and Constitution Avenue NW Washington, DC 20551 Dear Chair Yellen: Re: Committee Intent to Control Congressional Records I write on behalf of the Committee on Financial Services of the US. House of Representatives (?Committee?) to inform you and the Board of Governors of the Federal Reserve (?Agency?) of the Committee?s practices and procedures during the 115th Congress. As you may be aware, the Committee has legislative and oversight jurisdiction over the Agency, pursuant to US. House of Representatives Rule Accordingly, the Committee?s Members and staff may communicate with you and your Agency in connection with various legislative, oversight, and investigative matters. Because of the often sensitive and con?dential nature of such communications, and in order to ensure the unfettered flow of information necessary to assist the Committee in performing its important legislative and oversight functions, the Committee intends to retain control of all such communications, and will be entrusting them to your agency only for use in handling these matters. Likewise, any documents created or compiled by your agency in connection with any responses to such Committee communications, including but not limited to any replies to the Committee, are also records of the Committee and remain subject to the Committee?s control. All such documents and communications constitute congressional records, not ?agency records,? for purposes of the Freedom of Information Act, and remain subject to congressional control even when in the physical possession of the Agency. As such, they should be segregated from agency records, and access to them should be limited to Agency personnel who need such access for purposes of providing information or assistance to the Committee. Additionally, such congressional records are subject to the absolute protections of the Speech or Debate Clause of the Constitution, US. Const. art. I, 6, cl. 1. The Hon. anet. Yellen March 31,2017 Page 2 Accordingly, the Committee expects that the Agency will decline to produce any such congressional records in response to a request under the Freedom of Information Act or any other provision of law or agreement, on the grounds that such documents are not the Agency?s documents to produce, and (ii) are constitutionally privileged, in addition to any other grounds the Agency may assert. It is the Committee?s policy to include a legend on its legislative, oversight, and investigative correspondence to the Agency re?ecting its intent to retain control of all such communications and responsive documents. The legend is included as a matter of best practice, but accidental failure to include the legend on a particular legislative, oversight, or investigative communication is immaterial, because the Committee intends to retain control over all such communications and any documents created or compiled in response thereto. To ensure that the Agency and the Committee ef?ciently communicate in the future regarding the maintenance, confidentiality, and disposition of the Committee?s congressional records, by no later than April 28, 2017, please respond to the Committee in writing to con?rm that your Agency will decline to produce any congressional records in response to a request under the Freedom of Information Act or any other provision of law or agreement, that your Agency will discuss said request with the Committee, that your Agency has policies and procedures in place to address this issue, and that these policies and procedures have been shared with appropriate Agency personnel. If you have any questions regarding this request, please have your staff contact Brett Sisto of the Committee staffat (202) 225-7502. We look forward to working with them in the future. Sincerely, Chairman cc: The Honorable Maxine Waters, Ranking Member Not resopnsive/internal Board e-mail From: Huston, John [mailto:John.Huston@mail.house.gov] Sent: Friday, March 17, 2017 2:43 PM To: Ola Williams Subject: letter to Chair Yellen from Rep. Messer Hi Ola— Attached is a letter to Chair Yellen from Rep. Luke Messer and a letter we received from a bank in our district that is referenced in the letter to the Chair. Let me know if you have any questions! -John Huston Senior Policy Advisor House Republican Policy Committee Chairman Luke Messer (IN-06) 202-226-5539 District, Indiana Republican Policy Committee Luke Messer . . Washington Office: 1230 Longworth House Office Building Washin ton, DC 20515 Chairman 1202 225?3021 Committee on Financial Services . . . . Congress of the United States Of?ces Committee on Education Re resentatives . ?d Hvizgg?i: tonp DC 20515 51.315331?? mam i {31714214704 Deputy Whip 1855} 341-8196 107 West Charles Street Muncie. IN 47305 17651 747-5566 March 17, 2017 50 North Street. 2" Floor Richmond, IN 47374 {765] 962-2883 Chair Janet Yellen Board of Governors of the Federal Reserve System Constitution Ave NW 20th Street Northwest Washington, DC 20551 Dear Chair Yellen: On May 15?, 2015, Mutual First Financial, Inc. which is headquartered in my district in Indiana, sent an application to the Federal Reserve Bank of Chicago to engage in a nonbanking activity under Regulation to provide information security control audit services to other ?nancial entities. According to Mutual First, these information security audits would allow other entities to utilize the information security control expertise at the bank. On June 9, 2015, the Chicago Federal Reserve told Mutual First that it ?is Board staff?s opinion that information security consulting would not be considered an audit matter,? pursuant to the regulation. The email went on to state, ?you can provide these services so long as the total annual revenue derived from those services does not exceed 30% of the company?s total annual revenue derived from management consulting services as provided in Subsequently and pursuant to this guidance, in March of 2016, Mutual First incorporated a subsidiary named Mutual Risk Advisers to provide information security audits with the intention of ensuring that the wholly owned subsidiary revenue would not exceed more than 30% of total revenue. On February 16, 2017, Mutual First had an informal discussion over the phone with three individuals from Federal Reserve Bank of Chicago in the supervision, legal and applications division. According to Mutual First, the Federal Reserve of?cials told the bank that their information security subsidiary was not permissible activity for a bank holding company. -How did the Federal Reserve determine, initially, that the activity would be permissible if the revenue generated by the information security audits stayed below 30% of overall revenue? How did the Federal Reserve determine the maximum permissible revenue threshold would be 30%? -Why did the Federal Reserve reverse its earlier decision? -Why is this type of information auditing not permissible activity under 12 CFR since it is not explicitly prohibited in such regulation? MESSER.HOUSE.GOV Printed on Recycled Paper - Presumably, changes in Federal Reserve policy are rarely if ever made exclusively over the phone. Why wasn?t Mutual First given formal and written guidance about the change? -In issuing this policy change, why didn?t the Federal Reserve go through the normal rulemaking process? -Does the Federal Reserve intend to reimburse Mutual First for the costs associated with closing the subsidiary, given that Mutual First would not have formed the subsidiary absent the guidance declaring the activity permissible in certain circumstances? -Have other bank holding companies contacted the Federal Reserve to inquire about providing information security audits? If so, how were they advised? When and how were they noti?ed of the change in Federal Reserve policy that, presumably, occurred on February 16, 2017? -If the Federal Reserve does not believe a policy change was made during the February 16, 2017 phone call, did Federal Reserve staff make an error in interpreting the regulation in notifying Mutual First on June 9, 2015 that this activity is permissible if the revenue generated from the activity does not exceed 30% of overall revenue? -If an error was made, how does the Federal Reserve handle staff errors of this type? If staff errors are made, does the Federal Reserve generally assume ?nancial liability created as a result? Enclosed is a letter I received from Mutual First detailing the events discussed in this letter. Thanks for your prompt attention to this request. If you have any questions about this request, please feel free to reach to John Huston in my of?ce is you have any questions at 202-225-3021 or at ggy. March 14, 2017 Congressman Luke Messer indiana 6th District 1230 Longworth House Office Building Washington, DC 20515 RE: MutualFirst Financiai Information Security Subsidiary Congressman Messer, Thank you for taking the time to meet with me on March 8, 2017, to discuss MutualFirst Financial?s creation of an information security subsidiary to provide information security audits to increase clients? awareness and to reduce the likelihood of cyber?crimes impacting our community. This letter provides a summary and a timeline on this subsidiary and the hurdles we have encountered. MutuaiFirst Financial (MFSF) is a Financial Holding Company, headquartered in Muncie, indiana, subject to Bank Holding Company regulations. MFSF reviewed Regulation Y, 12 C.F.R. which states that a permissible activity for a bank holding company is ?Providing management consulting advice on any financial, economic, accounting, or audit matter to any other company.? Our interpretation was that MFSF could provide information security audit services based on this regulation. To verify, MFSF sent the Federal Reserve Bank of Chicago (FRBC) on May 1, 2015 a letter to explain the proposed subsidiary and also provide a business plan. After correspondence with the FRBC, MFSF sent a letter on May 15 and May 26, 2015, to clarify items at the request of FRBC. (Appendix A - Regulation Appendix 3 letters to FRBC) On June 9, 2015, MFSF received an email stating, ?It is Board staff?s opinion that information security consuiting would not be an audit matter, pursuant to That being said, you can provide these services so long as the total annual revenue derived from those services does not exceed 30% of the company?s total revenue MFSF interpreted this as an approval to proceed, as long as the total revenue derived from this subsidiary was not more than 30% of its total revenue. (Appendix email from FRBC) In March of 2016, MFSF incorporated Mutual Risk Advisors (MRA) to provide information security audits and training services to clients. MRA does not manage any client networks, it audits client?s networks and provides improvements to heip clients better protect their computer systems from cyber-attacks. MFSF wholly?owned subsidiary, MutualBank has seen many instances where customers? accounts are hacked, which leads to fraud activity and losses for the Bank or for their customers. MRA was developed to help customers protect their information and reduce losses in the financiai industry. MutualBank has been given accolades for information security and examiners stated that MutualBank is Christopher D. Cook Senior Vice President, Treasurer and Chief Financial Officer MFSF loanitvvithmutualcom R0. Box 551 Muncie, EN 47308~0551 - Phone 765-747-2945 in ?er 9.19 i) ahead of the curve in how it is protecting its technology environment. The banking environment today is more technoiogically advanced than ever before. Many customers and financial institutions taik to each other through technology, which may be susceptible to cyber?attacks. MFSF believes offering information security. audit services to the community enhances the Bank?s information security platform by reducing the risk between customers and the Bank through technological communications. MFSF believes that information security is a iarge part of the banking environment today. On February 16, 2017, MRA had a phone conversation with three individuals from the Federal Reserve in supervision, legal and applications. MFSF was toid that the information security subsidiary was not a permissible activity for a bank holding company. The Federal Reserve of Chicago stated that this was discussed at the staff levei in Chicago and Washington DC and all of the written opinions supported that audits would be financial in nature. They did state that information security consulting could be done, but would be limited to 30% of the subsidiary revenue. The problem is that all of the subsidiary?s revenue is from information security audits and for MFSF does not believe it should be consulting on what the FRBC deems as permissible activities. MRA suspended its activities until determining how to proceed. Since inception, MRA has helped community libraries, credit unions, manufacturers and others with doing audits to protect their systems. MRA has also been contacted by larger financial institutions in our footprint to see how MRA can provide services and benefits to protect their systems. IVIFSF believes that the banking industry is held to a high standard to protect the data it is entrusted with and could be a benefit to its community by providing information security audits and training. MFSF believes updating or clarifying this regulation to include information security as a permissible audit activity could improve cyber?security throughout the financial industry and in our communities. Our attempt to go above Federal Reserve staff level employees to discuss this idea has not happened. Our goal is to discuss this idea with a Federal Reserve official who can influence reguiation compared to those that are interpreting regulation. We are also open to other ideas that may heip us in creating this subsidiary. Any help your office couid provide would be greatly appreciated. Please feel free to reach out to me for further information. Sincerely, SVP, Treasurer and Chief Financial Officer MutualFirst Financial, inc. Appendix A: BHC Regulation ?225.28 Code of Federal Regulations ecfr. 564083 0fb5 f486bfeb9a7efd34bt3 10f10 ELECTRONIC CODE OF FEDERAL REGULATIONS data is entrant as of Fabraary 23, 2317 Title 12 Chapter ll Subchapter A Part 225 Subpart ?225.28 Title 12: Banks and Banking PART HOLDING AND CHANGE lN BANK CONTROL (REGULATION Y) Subpart C?Nonbanking Activities and Acquisitions by Bank Holding Companies ?225.28 List of permissible nonbanking activities. Closely related nonbanking activities. The activities listed in paragraph of this section are so closeiy related to banking or managing or controlling banks as to be a proper incident thereto, and may be engaged in by a bank holding company or its subsidiary in accordance with the requirements of this regulation. (in) Activities determined by regulation to be permissible?(1) Extending credit and servicing loans. Making, acquiring, brokering, or servicing loans or other extensions of credit (inciuding factoring, issuing letters of credit and accepting drafts) for the company's account or for the account of others. (2) Activities related to extending credit. Any activity usual in connection with making, acquiring, brokering or servicing loans or other extensions of credit, as determined by the Board. The Board has determined that the foilowing activities are usual in connection with making, acquiring, brokering or servicing ioans or other extensions of credit: Real estate and personal property appraising. Performing appraisals of real estate and tangible and intangible personal property, including securities. (ii) Arranging commercial real estate equity financing. Acting as intermediary for the financing of commercial or industrial income-producing real estate by arranging for the transfer of the title, control, and risk of such a real estate project to one or more investors, if the bank holding company and its af?liates do not have an interest in, or participate in managing or developing, a real estate project for which it arranges equity ?nancing, and do not promote or sponsor the development of the property. Check-guaranty services. Authorizing a subscribing merchant to accept personal checks tendered by the merchant?s customers in payment for goods and services, and purchasing from the merchant validly authorized checks that are subsequently dishonored. (iv) Collection agency services. Collecting overdue accounts receivable, either retail or commercial. 2/27/2017 4:00 PM Code of Federal Regulations 20f10 Credit bureau sen/ices. Maintaining information related to the credit history of consumers and providing the information to a credit grantor who is considering a borrower's application for credit or who has extended credit to the borrower. (vi) Asset management, servicing, and collection activities. Engaging under contract with a third party in asset management, servicing, and coilection3 of assets of a type that an insured depository institution may originate and own, if the company does not engage in reai property management or real estate brokerage services as part of these services. 3Asset management services include acting as agent in the liquidation or sale of loans and collateral for loans, including real estate and other assets acquired through foreclosure or in satisfaction of debts previously contracted. (vii) Acquiring debt in default. Acquiring debt that is in default at the time of acquisition, it the company: (A) Divests shares or assets securing debt in default that are not permissibie investments for bank hotding companies, within the time period required for divestiture of property acquired in satisfaction of a debt previously contracted under 4For this purpose, the divestiture period for property begins on the date that the debt is acquired, regardless of when legal title to the property is acquired. (B) Stands only in the position of a creditor and does not purchase equity of obligors of debt in default (other than equity that may be coliateral for such debt); and (C) Does not acquire debt in default secured by shares of a bank or bank holding company. Real estate settlement servicing. Providing real estate settlement services.5 5For purposes of this section, real estate settlement services do not include providing titie insurance as principal, agent, or broker. (3) Leasing personal or real property. Leasing personal or real property or acting as agent, broker, or adviser in leasing such property if: The lease is on a nonoperating basis;?5 6The requirement that the tease be on a nonoperating basis means that the bank holding company may not, directly or indirectly, engage in operating, servicing, maintaining, or repairing leased property during the lease term. For purposes of the leasing of automobiles, the requirement that the lease be on a nonoperating basis means that the bank holding company may not, directly or indirectly: Provide servicing, repair, or maintenance of the leased vehicle during the lease term; (2) purchase parts and accessories in buik or for an individual vehicie after the lessee has taken delivery of the vehicle; (3) provide the loan of an automobile during servicing of the leased vehicle; (4) purchase insurance for the iessee; or (5) provide for the renewal of the vehicle's license merely as a service to the lessee where the lessee could renew the license without authorization from the lessor. The bank holding company may arrange for a third party to provide these services or products. (it) The initiai term of the lease is at least 90 days; 2/27/2017 4:00 PM Code of Federal Regulations 30f10 In the case of leases involving reai property: (A) At the inception of the initial lease, the effect of the transaction wilt yield a return that will compensate the lessor for not less than the iessor's fuil investment in the property pius the estimated total cost of ?nancing the property over the term of the lease from rental payments, estimated tax bene?ts, and the estimated residual value of the property at the expiration of the initial tease; and (B) The estimated residuai vaiue of property for purposes of paragraph of this section shall not exceed 25 percent of the acquisition cost of the property to the lessor. (4) Operating nonbank depository institutions--(i) Industrial banking. Owning, controlling, or operating an industrial bank, Morris Plan bank, or industrial ioan company, so long as the institution is not a bank. (ii) Operating savings association. Owning, controiling, or operating a savings association, if the savings association engages only in deposit?taking activities, lending, and other activities that are permissible for bank holding companies under this subpart C. (5) Trust company functions. Performing functions or activities that may be performed by a trust company (inciuding activities of a ?duciary, agency, or custodial nature), in the manner authorized by federal or state law, so long as the company is not a bank for purposes of section 2(0) of the Bank Hoiding Company Act. (6) Financial and investment advisory activities. Acting as investment or ?nancial advisor to any person, including (without, in any way, iimiting the foregoing): Serving as investment adviser (as de?ned in section 2(a)(20) of the investment Company Act of 1940, 15 U.S.C. to an investment company registered under that act, inciuding sponsoring, organizing, and managing a closed?end investment company; (ii) Furnishing general economic information and advice, generai economic statistical forecasting services, and industry studies; Providing advice in connection with mergers, acquisitions, divestitures, investments, joint ventures, leveraged buyouts, recapitalizations, capitai structurings, ?nancing transactions and similar transactions, and conducting ?nancial feasibility studies? studies do not include assisting management with the pianning or marketing for a given project or providing general operationai or management advice. (iv) Providing information, statistical forecasting, and advice with respect to any transaction in foreign exchange, swaps, and similar transactions, commodities, and any forward contract, option, future, option on a future, and simiiar instruments; Providing educational courses, and instructional materials to consumers on individuai ?nancial management matters; and 2/27/2017 4:00 PM Code of Federal Regulations 64083 0be f4 86bfeb9a7efd34bf3 4of10 (vi) Providing taxuplanning and tax~preparation services to any person. (7) Agency transactional services for customer investments--(i) Securities brokerage. Providing securities brokerage services (including securities clearing and/or securities execution services on an exchange), whether alone or in combination with investment advisory services, and incidentai activities (including related securities credit activities and custodial services), if the securities brokerage services are restricted to buying and selling securities solely as agent for the account of customers and do not include securities underwriting or deaiing. (ii) Riskless principal transactions. Buying and seliing in the secondary market all types of securities on the order of customers as a ?riskless principal? to the extent of engaging in a transaction in which the company, after receiving an order to buy (or seil) a security from a customer, purchases (or sells) the security for its own account to offset a contemporaneous sale to (or purchase from) the customer. This does not include: (A) Selling bank-ineiigible securities8 at the order of a customer that is the issuer of the securities, or seiling bank-ineligible securities in any transaction where the company has a contractual agreement to place the securities as agent of the issuer; or 8A bank?ineligible security is any security that a State member bank is not permitted to underwrite or deaf in under 12 USS. 24 and 335. (B) Acting as a riskless principal in any transaction involving a bank?ineligible security for which the company or any of its af?iiates acts as underwriter (during the period of the underwriting or for 30 days thereafter) or dealer.9 9A company or its af?iiates may not enter quotes for speci?c bank-ineligible securities in any deaier quotation system in connection with the company's riskless principal transactions; except that the company or its at?iiates may enter ?bid? or ?ask? quotations, or publish ?offering wanted? or ?bid wanted? notices on trading systems other than NASDAQ or an exchange, if the company or its does not enter price quotations on different sides of the market for a particular security during any two-day penod. Private placement services. Acting as agent for the private placement of securities in accordance with the requirements of the Securities Act of 1933 (1933 Act) and the rules of the Securities and Exchange Commission, if the company engaged in the activity does not purchase or repurchase for its own account the securities being placed, or hold in inventory unsold portions of issues of these securities. (iv) Futures commission merchant. Acting as a futures commission merchant (FCM) for unaf?iiated persons in the execution, clearance, or execution and clearance of any futures contract and option on a futures contract traded on an exchange in the United States or abroad it: (A) The activity is conducted through a separately incorporated subsidiary of the bank holding company, which may engage in activities other than FCM activities (inciuding, but not limited to, permissible advisory and trading activities); and (B) The parent bank holding company does not provide a guarantee or otherwise become liable to the exchange or ciearing association other than for those trades conducted by the subsidiary for its own account or for the account of any af?liate. 2/27/2017 4:00 PM Code of Federal Regulations 50f10 Other transactional services. Providing to customers as agent transactionai services with respect to swaps and similar transactions, any transaction described in paragraph of this section, any transaction that is permissibie for a state member bank, and any other transaction invoiving a forward contract, option, futures, option on a futures or similar contract (whether traded on an exchange or not) relating to a commodity that is traded on an exchange. (8) Investment transactions as Unden/vriting and dealing in govemment obligations and money market instruments. Underwriting and dealing in obiigations of the United States, general obligations of states and their political subdivisions, and other obligations that state member banks of the Federal Reserve System may be authorized to underwrite and deai in under 12 U.S.C. 24 and 335, inoiuding banker's acceptances and certi?cates of deposit, under the same iimitations as would be applicable if the activity were performed by the bank holding company's subsidiary member banks or its subsidiary nonmember banks as if they were member banks. (ii) Investing and trading activities. Engaging as principal in: (A) Foreign exchange; (B) Forward contracts, options, futures, options on futures, swaps, and similar contracts, whether traded on exchanges or not, based on any rate, price, ?nancial asset (including gold, silver, platinum, pailadium, copper, or any other metat approved by the Board), non?nancial asset, or group of assets, other than a bank-ineligible security,10 if: 19A bank?inetigible security is any security that a state member bank is not permitted to underwrite or deai in under 12 U.S.C. 24 and 335. (1) A state member bank is authorized to invest in the asset underlying the contract; (2) The contract requires cash settiement; (3) The contract allows for assignment, termination, or offset prior to delivery or expiration, and the company? Makes every reasonable effort to avoid taking or making delivery of the asset underiying the contract; or (ii) Receives and instantaneously transfers title to the underiying asset, by operation of contract and without taking or making physical delivery of the asset; or (4) The contract does not ailow for assignment, termination, or offset prior to delivery or expiration and is based on an asset for which futures contracts or options on futures contracts have been approved for trading on a U.S. contract market by the Commodity Futures Trading Commission, and the company- (1) Makes every reasonable effort to avoid taking or making delivery of the asset underlying the contract; or (ii) Receives and instantaneously transfers title to the underlying asset, by operation of contract and without taking or making physical delivery of the asset. (0) Forward contracts, options,11 futures, options on futures, swaps, and similar contracts, whether traded on exchanges or not, based on an index of a rate, a price, or the vaiue of any ?nanciai asset, non?nanciai asset, or group of 2/27/2017 4:00 PM Code of Federal Regulations http://wwecfr. 564083 0fb5f486bfeb9a7efd34bt3 60f10 assets, if the contract requires cash settlement. 11This reference does not include acting as a dealer in options based on indices of bank-ineligible securities when the options are traded on securities exchanges. These options are securities for purposes of the federai securities laws and bank-ineligible securities for purposes of section 20 of the Glass-Steagail Act, 12 U.S.C. 337. Similarly, this reference does not Include acting as a dealer in any other instrument that is a bank-ineligible security for purposes of section 20. A bank holding company may deal in these instruments in accordance with the Board's orders on dealing in bank-ineligible securities. Buying and selling bullion, and related activities. Buying, selling and storing bars, rounds, bullion, and coins of gold, silver, platinum, palladium, copper, and any other metal approved by the Board, for the company's own account and the account of others, and providing incidental services such as arranging for storage, safe custody, assaying, and shipment. (9) Management consulting and counseling activities?(i) Management consulting. (A) Providing management consulting advice:12 12In performing this activity, bank holding companies are not authorized to perform tasks or operations or provide services to client institutions either on a daily or continuing basis, except as necessary to instruct the client institution on how to perform such services for itself. See also the Board's interpretation of bank management consulting advice (12 CFR 225.131). (1) On any matter to unaf?liated depository institutions, including commercial banks, savings and loan associations, savings banks, credit unions, industrial banks, Morris Plan banks, cooperative banks, industrial loan companies, trust companies, and branches or agencies of foreign banks; (2) On any ?nancial, economic, accounting, or audit matter to any other company. (B) A company conducting management consulting activities under this subparagraph and any af?liate of such company may not: (1) Own or control, directly or indirectly, more than 5 percent of the voting securities of the client institution; and (2) Allow a management of?cial, as de?ned in 12 CFR of the company or any of its af?liates to serve as a management of?cial of the client institution, except where such interlocking relationship is permitted pursuant to an exemption granted under 12 CFR 212.4(b) or otherwise permitted by the Board. (C) A company conducting management consulting activities may provide management consulting services to customers not described in paragraph 1) of this section or regarding matters not described in paragraph of this section, if the total annual revenue derived from those management consulting services does not exceed 30 percent of the company's total annual revenue derived from management consulting activities. (ii) Employee benefits consulting services. Providing consulting services to employee bene?t, compensation and insurance plans, including designing plans, assisting in the impiementation of plans, providing administrative services to plans, and developing employee communication programs for plans. Career counseling services. Providing career counseling services to: 2/27/2017 4:00 PM cCFi} Code of Federal Regulations Otb5f486bfcb9a7cfd34bt3 7of10 (A) A ?nancial organization13 and individuais currently employed by, or recently displaced from, a ?nancial organization; 13Financial organization refers to insured depository institution holding companies and their subsidiaries, other than nonbanking af?liates of diversi?ed savings and loan holding companies that engage in activities not permissible under section of the Bank Holding Company Act (12 U.S.C. 1842(c)(8))_ (B) Individuals who are seeking employment at a ?nancial organization; and (C) Individuals who are currently employed in or who seek positions in the ?nance, accounting, and audit departments of any company. (10) Support services?(i) Courier services. Providing courier services for: (A) Checks, commercial papers, documents, and written instruments (exciuding currency or bearer-type negotiable instruments) that are exchanged among banks and ?nancial institutions; and (8) Audit and accounting media of a banking or ?nancial nature and other business records and documents used in processing such media.14 14See also the Board?s interpretation on courier activities (12 CFR 225.129), which sets forth conditions for bank holding company entry into the activity. (ii) Printing and selling MICR-encoded items. Printing and selling checks and related documents, including corporate image checks, cash tickets, voucher checks, deposit slips, savings withdrawal packages, and other forms that require Magnetic Ink Character Recognition (MICR) encoding. (11) Insurance agency and underwriting?(i) Credit insurance. Acting as principai, agent, or broker for insurance (including home mortgage redemption insurance) that is: (A) Directly related to an extension of credit by the bank holding company or any of its subsidiaries; and (B) Limited to ensuring the repayment of the outstanding balance due on the extension of credit15 in the event of the death, disability, or involuntary unemployment oi the debtor. 15[Extension of credit includes direct loans to borrowers, loans purchased from other lenders, and leases of real or personal property so long as the leases are nonoperating and full?payout leases that meet the requirements of paragraph of this section. (ii) Finance company subsidiary Acting as agent or broker for insurance directly related to an extension of credit by a ?nance company16 that is a subsidiary of a bank holding company, if: ?Finance company includes all non-deposit?taking ?nancial institutions that engage in a signi?cant degree of consumer tending (excluding tending secured by ?rst mortgages) and all ?nancial institutions speci?cally de?ned by individual states as ?nance companies and that engage in a significant degree of consumer lending. 2/27/2017 4:00 PM Code of Federal Regulations ec?. 564083 0be f486bfeb9a7efd34bf3 (A) The insurance is limited to ensuring repayment of the outstanding balance on such extension of credit in the event of loss or damage to any property used as collateral for the extension of credit; and (B) The extension of credit is not more than $10,000, or $25,000 if it is to ?nance the purchase of a residential manufactured home17 and the credit is secured by the home; and 17?These limitations increase at the end of each calendar year, beginning with 1982, by the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers published by the Bureau of Labor Statistics. (C) The applicant commits to notify borrowers in writing that: (1) They are not required to purchase such insurance from the applicant; (2) Such insurance does not insure any interest of the borrower in the collateral; and (3) The applicant will accept more comprehensive property insurance in place of such single?interest insurance. Insurance in small towns. Engaging in any insurance agency activity in a place where the bank holding company or a subsidiary of the bank holding company has a lending of?ce and that: (A) Has a popuiation not exceeding 5,000 (as shown in the preceding decennial census); or (B) Has inadequate insurance agency facilities, as determined by the Board, after notice and opportunity for hearing. (iv) Insurance-?agency activities conducted on May 1, 1982. Engaging in any speci?c insurance-agency activity18 if the bank holding company, or subsidiary conducting the speci?c activity, conducted such activity on May 1, 1982, or received Board approval to conduct such activity on or before May 1, 1982.79 A bank holding company or subsidiary engaging in a speci?c insurance agency activity under this clause may: 18Nothing contained in this provision shaii preclude a bank holding company subsidiary that is authorized to engage in a speci?c insurance-agency activity under this ciause from continuing to engage in the particular activity after merger with an af?liate, if the merger is for iegitirnate business purposes and prior notice has been provided to the Board. 19For the purposes of this paragraph, activities engaged in on May 1, 1982, inciude activities carried on subsequently as the result of an appiication to engage in such activities pending before the Board on May 1, 1982, and approved subsequently by the Board or as the result of the acquisition by such company pursuant to a binding written contract entered into on or before May 1, 1982, of another company engaged in such activities at the time of the acquisition. (A) Engage in such speci?c insurance agency activity only at locations: (1) in the state in which the bank holding company has its principal place of business (as de?ned in 12 U.S.C. 1842(d)); (2) in any state or states immediately adjacent to such state; and (3) in any state in which the speci?c insurance?agency activity was conducted (or was approved to be conducted) by 8 of 10 2/27/2017 4:00 PM eCFg Code of Federal Regulations gov/ cgi?bin/text?idx?SIDm8 564083 0f05f486bfeb9a7efd34bt3 9of10 such bank hoiding company or subsidiary thereof or by any other subsidiary of such bank holding company on May 1, 1982;and (8) Provide other insurance coverages that may become available after May 1, 1982, so long as those coverages insure against the types of risks as (or are othenuise functionaily equivalent to) coverages sold or approved to be sold on May 1, 1982, by the bank holding company or subsidiary. Supervision of retail insurance agents. Supervising on behalf of insurance underwriters the activities of retail insurance agents who sell: (A) Fidelity insurance and property and casualty insurance on the real and personal property used in the operations of the bank holding company or its subsidiaries; and (B) Group insurance that protects the employees of the bank holding company or its subsidiaries. (vi) Small bank holding companies. Engaging in any insurance-agency activity if the bank holding company has total consolidated assets of $50 million or less. A bank holding company performing insurance-agency activities under this paragraph may not engage in the sale of life insurance or annuities except as provided in paragraphs and of this section, and it may not continue to engage in insurance-agency activities pursuant to this provision more than 90 days after the end of the quarteriy reporting period in which total assets of the holding company and its subsidiaries exceed $50 million. (vii) Insurance-agency activities conducted before 1971. Engaging in any insurance-agency activity performed at any location in the United States directly or indirectly by a bank hoiding company that was engaged in insurance-agency activities prior to January 3, 1971, as a consequence of approval by the Board prior to January 1, 1971. (12) Community development activities?(i) Financing and investment activities. Making equity and debt investments in corporations or projects designed primarily to promote community welfare, such as the economic rehabilitation and development of low-income areas by providing housing, services, or jobs for residents. (ii) Advisory activities. Providing advisory and related services for programs designed primarily to promote community welfare. (13) Money orders, savings bonds, and traveler?s checks. The issuance and sate at retail of money orders and similar consumer-type payment instruments; the sale of US. savings bonds; and the issuance and sale of traveler's checks. (14) Data processing. Providing data processing, data storage and data transmission services, facilities (including data processing, data storage and data transmission hardware, software, documentation, or operating personnel), databases, advice, and access to such services, facilities, or data?bases by any technological means, it: (A) The data to be processed, stored or furnished are ?nancial, banking or economic; and (B) The hardware provided in connection therewith is offered only in conjunction with software designed and marketed for the processing, storage and transmission of ?nancial, banking, or economic data, and where the general purpose hardware does not constitute more than 30 percent of the cost of any packaged offering. 2/27/2017 4:00 PM eCFt} Code of Federal Regulations (ii) A company conducting data processing, data storage, and data transmission activities may conduct data processing, data storage, and data transmission activities not described in paragraph of this section if the total annual revenue derived from those activities does not exceed 49 percent of the company's total annual revenues derived from data processing, data storage and data transmission activities. [Reg Y, 62 FR 9329, Feb. 28, 1997, as amended at 68 FR 39810, July 3, 2003; 68 FR 41901, July 16, 2003; 68 FR 68499, Dec. 9, 2003] Need assistance? 10 of 10 2/27/2017 4:00 PM Appendix B: MutualFirst letters to Federal Reserve Bank of Chicago May 1, 2015 Thomas J. Frey Team Leader - Applications Federal Reserve Bank of Chicago 230 South LaSaile Street Chicago, Illinois 606044413 Dear Mr. Frey, This letter is a request for MutualFirst Financial, Inc. to submit an application for a subsidiary pursuant to Regulation Y. The regulation permits bank holding companies to engage in closely related nonbanking activities. The specific activities deemed to be permissible include providing management censuiting advice on any matter to unaffiliated depository institutions1or on any financial, economic, accounting, or audit matter to any other company,2 as long as the management consulting services are advisory and the bank holding company does not control the company to which the services are provided. The proposed subsidiary would offer information technology and information security management consulting services. This would include, but not be limited to, information security controls audits, vulnerability assessments, penetration testing, general information security consulting, and other services directly related to assessing the security management of the client?s computing environment. We believe that this is a permissible nonbanking activity under the regulation, as the audit services offered are directly related to management of the information security function of the client. Further, we believe that leveraging the internal information security resources from MutualBank would positively impact our customer base. The subsidiary would not perform these services as independent services for MutualBank or any other subsidiary of MutualFirst Financial or MutualBank. Please review the attached business plan and pro-forma for further details. if you should have further questions, please contact myseif at (765) 747-2945. Sincerely, Christopher D. Cook, CPA, MBA Senior Vice President, Treasurer and CFO MutualFirst Financial, Inc. 1 See Regulation Y, 12 C.F.R. 2 See Regulation Y, 12 C.F.R. Business Plan Executive Summary In the past two years, the pace of software and hardware vulnerabilities discovered is on an accelerating trend, pushing businesses to maintain a responsive and current security program. As a bank holding company, MutualFirst is well aware that customer security has a significant value to not only other financial institutions, but entities which hold personally identifiable and/ or proprietary information. According to several information security industry publications, breaches will continue to occur as this gap widens. As businesses seek to evaluate and verify the effectiveness of their information security strategies, demand for independent information technology audit services will grow. For MutualFirst Financial, this is an opportunity to leverage internal knowledge and expertise to increase revenue without additional capital and with limited increase in professional liability. Given MutualBank?s history, reputation of stability, and the expanding market for helping clients identify and risk weight their vulnerabilities, now is an opportune time to leverage the history, reputation, and existing relationships to carve out a spot in the audit space. Company Overview The bank holding company subsidiary would offer the following core concentrations: 0 Information security audits gap assessments . Information security controls reviews . Vulnerability assessments a Social engineering testing . Penetration testing 0 Misc. IS consulting services 0 Wireless network (802.11) security assessments - Security awareness training 0 Physical security assessments Industry Analysis There are a limited number of Indiana based companies that offer similar services. The two listed below are vendors of MutualBank. The Mako Group has approximately 4 employees in Ft. Wayne, Detroit, and Indianapolis. They would be the closest competitor known in size and offerings as the subsidiary. Infotex also offers similar audit services and managed security services for their clients. Customer Analysis The concentration of potential customers would consist of: . Financial institutions 0 Start out with smaller banks and credit unions that don?t have a dedicated information security staff. Healthcare 0 Hospital 0 Pharmaceutical companies 0 Physician offices Accounting practices Law offices 0 Companies that store or transmit personally identifiable or payment card information. Competitive Analysis There are several Fortune 100 companies that offer similar services. It is an industry norrn to hire entry level employees and attempt to train them up to the necessary skill level. This can result in a substandard product because the technician doesn?t have the real world experience as a foundation to apply to the client?s audit. One significant competitive advantage would be the subsidiary?s employee?s knowledge and experience. Only individuals with a proven track record in the areas of concentration would be considered for employment. The subsidiary?s manager, Owen LaChat, has several years of audit and information security experience within the public and private sectors in the areas of the subsidiary?s core concentrations. His prior experience as the Cyber Security Technical Team Leader of a specialized section of a D.O.D. contractor gives him a unique perspective of both the offensive and defensive realms of information security. It?s often very difficult to properly defend against cyber-attacks, when the person doesn?t have a deep knowledge of offensive techniques. The subsidiary?s reputation is an extremely important part of business development. MutualBank is a known, stable, and trusted resource within its footprint. The subsidiary would leverage the reputation and experience of its staff and the ownership position by MutualFirst Financial. Marketing Plan Marketing efforts would consist of: . Attending and/ or presenting at IS conferences. 0 Mega (an Indiana Banker?s Conference). 0 Indiana Banker?s Association. 0 Regional information security conferences. 0 Self?hosted forums/ conferences . Word~of?mouth references from clients. - Leverage MutualBank?s current vendor relationships. 0 Some organizations rotate IS auditors every few years. The ISO and others at MutualBank have helped a few of their vendors improve some of their business processes significantly within the last two years. These relationships could be leveraged for additional business development opportunities from their client base. 0 Cold calling potential clients that may be in need of services that fall within the core concentrations of the subsidiary. (30?6115 0 Short Term 0 Build the subsidiary?s reputation by offering services to select clients at reduced rates to build trust and a brand. a Long Term 0 Increase profitability. 0 Define the subsidiary?s reputation for delivering a quality product from a recognized expert in the area for a fair price. If the subsidiary grows too large too quickly, it could lose some of its competitive advantage by being unable to offer its experts? knowledge to each client. 0 The subsidiary could potentially leverage the internal knowledge of other MutualBank departments such as Compliance and offer assessment services from the respective areas. Management Team Owen LaChat would manage the subsidiary and initially have one to two direct reports. These direct reports should be mid-to-upper level technical positions. The management position and the direct reports would be shared with the Information Security function at MutualBank. The manager of the subsidiary would report to the SVP of Risk Management and the subsidiary?s Board of Directors. The executive oversight of the subsidiary will be controlled by subsidiary?s Board of Directors. As the subsidiary grows, there may be a need to add an additional auditor and/or a technical researcher. Shared time estimations will be as follows for initial implementation: 0 ISO MutualBank 50-60% Manager for subsidiary - 40-50% 0 Subsidiary - Concentrate on business development for the subsidiary and act as the initial technical auditor for client business. - Build the audit framework templates and the proprietary testing methodology. 0 MutualBank . Continue ISO duties for MutualBank. 0 Additional technical hire for MutualBank 40% subsidiary auditor 60%. Subsidiary - Assist the Manager with template and methodology design. .. Assist on engagements. . Act as primary on some engagements. MutualBank II Review patching progress. . Review vulnerability scans for false positives. i Daily technical research. . Assist the ISO with continuous daily tasks. Initial Investment . Subsidiary startup costs 0 Incorporation costs 0 Accounting I payroll 0 Legal counsel 0 Web presence 0 Initial marketing I advertisement . Budget for initial supplies and equipment (~520~25k). . Rent, utilities, and etc. (~520k/year) If located offsite. Additional Investment After Year 1 0 Salary for one additional shared employee between MutualBank IS and the subsidiary. $60-80k range, including benefits (78k-104k). 0 Software subscriptions (~510k) Risks ?o Liability can arise in several of the core concentrations offered by the subsidiary. . Legal counsel would be retained to create client agreements favorable to the subsidiary. - Financial examiner acceptance of the subsidiary?s audits, given they are new to the market. Revenue Proiection Revenue is directly dependent on the size and timeline of the client engagement. Some services for smaller customers will be cheaper than the same service for a larger customer, based on the amount of time involved. When the subsidiary begins to take on regular engagements, changes to the compensation model should include variable compensation. Pro?Forma Analysis ?Balance Sheet MutualFirst Financial, Inc. would initially capitalize the subsidiary with $100,000 of excess cash at the holding company. This would provide enough cash and capital to make the initial investments of approximately $25,000. The remaining funds would be held in cash and be working capital for the start-up of the subsidiary. Pro-Forma Analysis ~lncome Statement A pro-forma income statement is included with projections based upon the business plan above. An agreement would be executed between MutualBank and the subsidiary to make sure any shared expenses were properly expensed at the appropriate entity. . . mm lame statement?Prensa?sups:a1:aaji . i . EReyenue .. . .. (1) 3 75:000. 5 . 200:00'0 .. 3501000 sn/Bf (2)500000 soo s" zoom 5" Depreciation ii4) 50005000 5.00.0 Software/Misc t5) . 100001000010000 (El) Year one will be a startup year that is expected to have less revenueE Expect to run subsidiary with current staff in year 1, but will Eincrease in year 2 as needed. Expense sharing agreement would be in (3) Office expense would be charged to the subsidiary as well as other Eexpensesina _expensesharing agreement ifcurrent offices were used. (E4) Depreciation on intial equipment purchases, assuming Syears to . ?depreciate. .. 3(5) Expected additional software. . May 15, 2015 Thomas J. Frey Team Leader - Applications Federal Reserve Bank of Chicago 230 South LaSalle Street Chicago, illinois 60604?1413 Dear Mr. Frey, This letter is additional information requested from our original letter dated May 1, 2015 for MutualFirst Financial, Inc. to submit an application for a subsidiary pursuant to Regulation Y. The regulation permits bank holding companies to engage in closely related nonbanking activities. The specific activities deemed to be permissible include providing management consulting advice on any matter to unaffiliated depository institutions1or on any financial, economic, accounting, or audit matter to any other company,2 as long as the management consulting services are advisory and the bank holding company does not control the company to which the services are provided. The proposed subsidiary would offer information security consulting services. This would include, but not be limited to, information security controls audits, vulnerability assessments, penetration testing, general information security consulting, and other services directly related to assessing the security management of the client?s computing environment. MutualBank?s Information Security Officer has experience managing the evaluation of information security systems in both private and public sector entities. His opinion and expertise is sought by other information security consultants as well as firms seeking such services. This subsidiary will enable us to leverage his expertise to create depth within our internal information security resources and at the same time provide services that assist companies in meeting industry standards. The intent would be established a Corporation owned 100% by MutualFirst Financial, Inc. and enter into a tax sharing agreement with MutualFirst Financial. Please review the attached pro-forma balance sheet for further details. If you should have further questions, please contact myself at (765) 747-2945 or Chris.cook@bankwithmutual.com. Sincerely, Christopher D. Cook, CPA, MBA Senior Vice President, Treasurer and CFO MutualFirst Financial, Inc. 1 See Regulation Y, 12 C.F.R. 2 See Regulation Y, 12 C.F.R. Pro?Forma Analysis -Balance Sheet MutualFirst Financial, Inc. would initially capitalize the subsidiary with $100,000 of excess cash at the holding company. This would provide enough cash and capital to make the initial investments of approximately $25,000. The remaining funds would be held in cash and be working capital for the start-up of the subsidiary. The following is a three year pro-forma balance sheet. I I I Ysarl sears EmAssets .. EqUIpmentnet__ . 25.000 .. .. 20.000 . 15.000 10.000 TotaIAssets 100.000 5 40,000 :25 50.00055 170,000 ??R-?itainedii?imnss 70000. .. 1.00.000; 100,000 TtiLabilitzesand E000 100000 40000 5500030 1702000? May 26, 2015 Thomas 1. Frey Team Leader Applications Federal Reserve Bank of Chicago 230 South LaSalle Street Chicago, Illinois 60604?1413 Dear Mr. Frey, This letter is in response to your May 18, 2015 request for additional information in order to determine whether MutualFirst Financial, lnc.?s proposed information technology/information security management consulting services meet the requirements of Regulation Y, The referenced section of the regulation permits a bank holding company or its subsidiary to provide management consulting advice to an entity that is not a depository institution if the advice is on ?any financial, economic, accounting, or audit matter.? MutualFirst Financial, lnc.?s proposed subsidiary would provide management consulting services in the form of information technology and information security audits. Audit services would be offered to unaffiliated depository institutions as well as non?depository institution entities. With regard to the services provided to non-depository institution entities, many of these audits would be similar in nature to the annual iT Controls testing that financial institutions undergo each year. For example, the information security controls for a healthcare facility should be comparabie to that of a financial institution, so a similar IT Controls audit framework could be used for both industries. We anticipate the specific types of audit services offered by the proposed subsidiary would include, but not be iimited to: a General lT controis Vulnerability scanning 0 User access 0 Application lifecycie 0 Patching - Digital forensic - Business Continuity/ Disaster Recovery 0 Risk Management Audit assessments would be performed within a few to several days, depending upon the type of audit work contracted. A report including results and recommendations wouid be generated based on the audit and provided to the client?s management personnei. The subsidiary would not provide ongoing management or maintenance work for its client base. We believe that the proposed subsidiary?s activities would fall squarely under the classification of an "audit matter" permissible under The term "audit? is not specificaliy defined within Regulation Y. However, the IT Examination HandBook lnfoBase defines a security audit as independent review and examination of system records and activities to test for adequacy of system controls, ensure compliance with established policy and operational procedures, and recommend any indicated changes in control, policy, and procedures.?1 The Information Systems Audit and Control Association (ISACA) defines an audit as a "formal inspection and verification to check whether a standard or set of guidelines is being followed, records are accurate, or efficiency and effectiveness targets are being met? and notes that an audit ?may be carried out by internal or external groups.?2 Based on either of these definitions, the management consulting services provided by MutualFirst Financial, lnc.?s proposed subsidiary would be considered audit work. Further, the proposed subsidiary?s manager has various IT audit and computer forensic certifications, including Certified Information Systems Auditor which is earned through ISACA, and AccessData Certified Examiner (ACE). The manager also has experience performing IT audits for both public and private sector entities. In light of the above, we believe that our proposal meets the requirements of Regulation Y, We appreciate the opportunity to provide these additional details for your consideration. Should you require further information or clarification to make a determination in this matter, please do not hesitate to contact me at (765) 747-2945, or chris.cook@bankwithmutuai.com. Sincerely, Christopher D. Cook, CPA, MBA Senior Vice President, Treasurer and Chief Financial Officer MutuaIFirst Financial, Inc. 1 IT Examination HandBook InfoBase. Available online at: auditaspx. 2 Glossary. Available online at: Appendix C: Email from Federai Reserve Bank of Chicago Cook, Chris I From: Lucherini, Henry Sent: Tuesday, June 09, 2015 12:17 PM To: Cook, Chris Subject: RE: MutuaiFirst Financial, Inc., Muncie, IN Section 4(c)8 Request Revised to Correct Citation 225.28 Henry Lucherini Supervision Regulation Federal Reserve Bank of Chicago 230 S. LaSalie St. Chicago, Illinois 60604 312.322.2541 From: Cook, Chris Sent: Thursday, June 04, 2015 7:56 AM To: Lucherini, Henry Subject: Re: MutualFirst Financial, Inc., Muncie, IN - Section 4(c)8 Request Revised to Correct Citation 225.28 Henry, Thanks for the update! Ch?sCook Sent from my iPhone On Jun 4, 2015, at 8:39 AM, Lucherini, Henry wrote: Good Morning Chris, I wanted to let you know that we are stiil attempting to get guidance from Board - Legal on whether such services may be permissible under I will let you know as soon as possible. Thanks Henry Henry Luchermi Supervision Reguiation Federal Reserve Bank of Chicago 230 S. LaSalle St. Chicago, Illinois 60804 312.322.2541 From: Cook, Chris Sent: Tuesday, May 26, 2015 8:01 AM To: Lucherini, Henry Cc: Ward, Jeanette Subject: RE: MutualFirst Financial, Inc., Muncie, IN - Section 4(c)8 Request Revised to Correct Citation 225.28 Henry, Here is our response to the request below. Please let me know if you have any questions. I will forward the original to Thomas] Frey. Thanks, Chris Christopher 0. Cook, CPA, MBA, Senior Vice President, Treasurer and CFO 110 East Charles Street . Muncie, 47305 phone: 765-747-2945 - 800-382-8031 cell: 765-749?2048 fax: 765~213?298?i From: Lucherini, Henry Sent: Monday, May 18, 2015 3:27 PM To: Cook, Chris Cc: Ward, Jeanette Subject: RE: MutualFirst Financial, Inc., Muncie, IN - Section 4(c)8 Request Revised to Correct Citation 225-28 Good Afternoon Chris, Please accept this revised request for additional information to account for incorrect citation. We have considered your proposal and require additional information. Although section of Regulation indicates that providing management consulting advice is permissible on any matter to unaffiliated depository institutions etal., as it pertains to any other (non- depository institution) company, section 225.28 limits providing management consulting advice on any financial, economic, accounting, or audit matter. Your proposal to offer information technology and information security management consulting services to other non-depository institution entities may not meet the more specific requirements of section 225.28 In order to make a determination, please provide a more detailed description of the proposed consulting advice contemplated for ciients that are not unaffiliated depository institutions. After receiving this information, we will make a determination as to whether these activities meet the requirements of section 225.28 If you have any questions, please contact me. Best regards, Henry Henry Lucherini Supervision Regulation Federal Reserve Bank of Chicago 230 S. LaSalle St. Chicago. illinois 60604 From: Lucherini, Henry Sent: Monday, May 18, 2015 2:21 PM To: 'Cook, Chris' Cc: Ward, Jeanette Subject: MutualFirst Financial, Inc., Muncie, IN - Section 4(c)8 Request Good Afternoon Chris, We have considered your proposal and require additional information. Although section of Regulation indicates that providing management consulting advice is permissible on any matter to unaffiliated depository institutions etat, as it pertains to any other (non~ depository institution) company, section 225.28 limits providing management consuiting advice on any financial, economic, accounting, or audit matter. Your proposal to offer information technology and information security management consulting services to other non?depository institution entities may not meet the more specific requirements of section 225.28 in order to make a determination, please provide a more detailed description of the proposed consulting advice contemplated for ciients that are not unaffiliated depository institutions. After receiving this information, we will make a determination as to whether these activities meet the requirements of section 225.28 If you have any questions, please contact me. Best regards, Henry Henry Lucherini Supervision Reguiation Federal Reserve Bank of Chicago 230 S. LaSaile St. Chicago, illinois 60604 312.322.2541 From: Cook, Chris Sent: Friday, May 15, 2015 1:02 PM To: Lucherini, Henry Subject: RE: Test Henry, Here is the letter that we will be sending to TJ. Thanks for your input and advice. I hope it works for what you need. Let me know if you have any questions. Thanks, Chris Christopher D. Cook, CPA, MBA, Senior Vice President, Treasurer and CFO 110 East Charles Street - Muncie, IN 47305 phone: 765-747-2945 - 800-382-8031 cell: 765-749-2048 fax 765-213-2981 i bankwithmutuaf.eom From: Lucherini, Henry Sent: Thursday, May 14, 2015 11:08 AM To: Cook, Chris Subject: Test Henry Luchermi Supervision Regulation Federal Reserve Bank of Chicago 230 S. LaSalle St. Chicago. illinois 60604 312.322.2541 This e-mail message, including attachments, is for the sole use of the intended recipient(s) and may contain con?dential or proprietary information. If you are not the intended recipient, immediately contact the sender by reply e-mail and destroy all copies of the original message. 4 The information contained in this communication is con?dential, may be privileged, may constitute inside information, and is intended only for the use of the addressee. It is the property of MutualBank. Unauthorized use, disclosure or copying of this communication or any part thereof is strictly prohibited and may be unlawful. If you have received this communication in error, please notify us immediately by return email or by e-mail to and destroy this communication and all copies thereof, including all attachments. Email messages are retained in accordance with regulatory requirements and retention policies. This e?mail message, including attachments, is for the sole use of the intended recipient(s) and may contain con?dential or proprietary information. If you are not the intended recipient, immediately contact the sender by reply e-mail and destroy all copies of the original message. The information contained in this communication is con?dential, may be privileged, may constitute inside information, and is intended only for the use of the addressee. It is the property of MutualBank. Unauthorized use, disclosure or copying of this communication or any part thereof is strictly prohibited and may be unlawful. If you have received this communication in error, please notify us immediately by return e-mail or by e?mail to and destroy this communication and all copies thereof, including all attachments. Email messages are retained in accordance with regulatory requirements and retention policies. This e?mail message, including attachments, is for the sole use of the intended recipient(s) and may contain con?dential or proprietary information. If you are not the intended recipient, immediately contact the sender by reply e-mail and destroy all copies of the original message. The information contained in this communication is confidential, may be privileged, may constitute inside information, and is intended only for the use of the addressee. It is the property of MutualBank. Unauthorized use, disclosure or copying of this communication or any part thereof is strictly prohibited and may be unlawful. If you have received this communication in error, please notify us immediately by return e-mail or by e-mail to administrator@bankwithmutual .com, and destroy this communication and all copies thereof, including all attachments. Email messages are retained in accordance with regulatory requirements and retention policies. This e-mail message, including attachments, is for the sole use of the intended recipient(s) and may contain confidential or proprietary information. If you are not the intended recipient, immediately contact the sender by reply e-mail and destroy all copies of the original message.