Thom Tillis Peppers Fed Chair Jerome Powell With Questions On US Banking System And Inflation Rates
During a Senate Banking Committee hearing prior to the Congressional recess, Sen. Thom Tillis (R-NC) spoke about the US banking system.
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NewsTranscript
00:02Senator Tillis is recognized.
00:04Thank you, Mr. Chairman.
00:05Thank you for being here.
00:06I want to be real quick on Basel III in-game,
00:10and I want to be mindful of time.
00:13Just simply, can I get a commitment from you
00:15on releasing the results of the QIS?
00:18We plan to release the results of the QIS.
00:22What time frame?
00:23Well, first we have to get agreement
00:25with the other banking agencies, but as soon as possible.
00:29Can you imagine any other banking agencies
00:32having a concern with releasing it?
00:34Or is it just a matter of pro forma?
00:36No, it's just a matter of the bigger picture
00:38of getting agreement on the revisions to Basel III
00:41and also how to proceed.
00:43That's great, and I really appreciate the feedback
00:47that I've received from you.
00:48I should have started by thanking you, again,
00:50for your continued accessibility
00:52and discussions outside of the committee.
00:54They're very productive, and I appreciate that,
00:56and your leadership at the Fed.
00:58I grew up in the 70s.
01:01Got my Social Security number in 1973
01:04when I was 12 years old.
01:05That's when I made my first payment,
01:07so I've been following the economy even as a youngster.
01:10And that was a really lousy time to enter in the workforce.
01:15Tell me, and I'm hearing discussions
01:17among some of our members now
01:18that would almost be reminiscent of discussions
01:21with prior Fed members saying,
01:23look, we gotta lower interest rates,
01:25and we've got unemployment out of control.
01:30So it sounds like we're taking some suggestions
01:33from some of my colleagues or plays from a playbook
01:36that didn't prove to be very effective back in the 70s.
01:40What can we learn?
01:42I'm not gonna ask you about where you go from here,
01:45but if we look back into a post-mortem
01:47on some of the decisions that were made
01:50when we had consistently high uninflation,
01:54inflation, I should say,
01:55we had consistently high unemployment,
01:58what lessons can we learn there,
02:00or what mistakes should we not necessarily repeat?
02:02And I know that this is a fingerprint of a challenge.
02:06It's not exactly like the stressors
02:09that we had back in the 70s.
02:11But what can we learn from the decisions,
02:13what I think are arguably the wrong decisions made back then
02:16when we were dealing with high unemployment
02:18and high inflation?
02:20What do we learn?
02:21I think the number one thing we learned
02:23was that it's up to the central bank to take it on
02:25and stick with it until it's done.
02:27And that doesn't sound controversial now,
02:30but it actually was back then.
02:31And so people didn't really get in there and get it done
02:35and inflation kept coming back.
02:38I also think there are significant differences this time
02:40to the questions a minute ago.
02:43This is a combination of a supply side
02:46that we had very significant supply shocks
02:49along with big demand shocks
02:52from the reopening of the economy
02:54and from all the other things that happened.
02:55So I think we have to,
02:57each one of these things is different in its own way.
03:00We try to learn the lessons of history though.
03:02Do you agree or disagree,
03:04any disconnect between inflation
03:07and inflation expectations from the 2% target
03:10should be addressed now and not at a later time?
03:12Absolutely.
03:14I like that answer.
03:16I wanna go to something different.
03:18I'm trying to go into a lightning round now
03:21and finish on time.
03:24We've seen the 2024 stress test results
03:27for the banking, U.S. banking system.
03:31It looks like to me by every objective measure,
03:35we've got a strong, we've got a banking system
03:37that's on strong financial footing.
03:40Do you agree?
03:42Yes.
03:45One last thing is the Fed considers making
03:47broad and material changes to the Basel III proposal
03:50back on that one.
03:53Can I urge you not to overlook the second order issues,
03:57important FBOs in certain regionals
03:59to ensure that banks are not unduly influenced?
04:04The current proposal, for example,
04:06the outsized operational risk costs were high.
04:10Are we gonna take care of that in any sort of re-proposal?
04:13Let me just say we're very conscious
04:15of the comments across the spectrum,
04:18foreign banks, domestic banks, small, medium-sized banks.
04:21Everyone's gonna get heard carefully
04:23as part of this process.
04:24That is our obligation.
04:26And I think in response to Senator Round's question,
04:29you did indicate that probably because of the nature
04:32of the likely changes from what Mr. Barr expected
04:36to what may ultimately come,
04:37we are gonna open it up to comment again?
04:39That's the strong view of the Federal Reserve.
04:41We're working on that question with the FDIC
04:45and the OCC to try to find a path to do that.
04:47But from our standpoint, that's essential.
04:49I think it's a strong view from at least several members
04:51on this side of the dais here
04:53that that would be very, very, very important
04:55because I think it's gonna materially change.
04:57Thank you, Mr. Chair.