Fed chair Kevin Warsh testifies on monetary policy in Senate Banking hearing

[0:00] especially to the general public. The decisions that the Fed makes affect [0:04] everyday life in South Carolina and around our country. For example, those [0:09] decisions affect the mortgage payment a couple is trying to afford, the credit [0:13] card bill a single mom is trying to pay down, and the decisions a small business [0:17] owner makes about whether they can afford a loan or not. Frankly, the Fed [0:22] even has impact on the interest rate environment, as you know. [0:25] The Reagan member and I spent over a year working on a housing bill that will [0:31] actually help us increase housing supply, help us expedite the process of building [0:37] a house through NEPA reform, it'll create more diversity in housing selection at [0:41] the end, the removal of the chassis requirement. These are important issues [0:46] that will make housing affordability incredibly easier, but it will never get [0:52] to the main point of interest rates. The interest rate is something that you [0:55] control that we don't control. We want you to follow the facts, however, because [0:59] that is really important for the long-term durability of our economy. But in North [1:03] Charleston, where I grew up, families do not talk about monetary policy, Kevin. They [1:08] just don't talk in those terms. But they fully understand the principle that when [1:13] prices rise faster than paychecks, it's really hard to make their ends meet. That [1:20] is why affordability must be at the center of our conversation. The Federal [1:24] Reserve has a mandate to pursue and promote a strong labor market through maximum [1:28] employment and stable prices. Those are serious responsibilities, and I'm glad that [1:33] you are the man for the job and you've taken it seriously. They require clear [1:36] thinking, steady leadership, and the commitment to follow the data, no matter the [1:41] political ramifications. It also requires understanding the forces shaping our [1:45] economy, including AI's impact on jobs, wages, productivity, and prices. Independence is not [1:54] a slogan. It is a responsibility. And the best way for the Fed to protect its [1:59] independence is to stay focused on its mission. For too many years, the Federal [2:04] Reserve drifted into issues outside of its core responsibilities, and America paid a price [2:11] for it. Mission Crete makes the Fed less accountable and undermines public trust. I am encouraged by [2:18] the steps that you are taking to reform our central bank. That starts with a more disciplined [2:24] approach to how the Fed communicates. Moving away from overly detailed predictions about [2:30] where interest rates might be going in the next several months is a helpful step to make [2:35] sure the Fed is able to adapt when conditions change. Families, small businesses, and markets [2:41] are better served when the Fed follows the data in front of them, not a forecast that may change [2:48] in an instant. Less guessing and more discipline will help the Fed stay flexible, credible, and [2:56] focused. The five independent task forces that you set up also sends a very important signal [3:04] that the Fed is willing to start from its core principles and pursue thoughtful reforms to [3:10] deliver on a statutory mandate. You and I had a quick conversation before walking in here [3:16] and I wanted to note that I think that the working groups are fantastic. Frankly, I think [3:20] the composition of the working groups is really important. One of the things that we talked [3:24] about was a balance sheet working group. I must concede that I'm a fan of Abraham Lincoln's [3:30] approach of these team of rivals and it seems like you have Jeremy Stein, you might know Jeremy [3:36] from Harvard, as well as the former governor of the India central bank, Mr. Rajan. They have very [3:43] nicely put competing approaches and philosophies about the balance sheet. But if you're going to be [3:49] intellectually honest, you need to have a serious debate about what direction to go and frankly, [3:55] how to get there. And so I'm really excited about what you're doing there and I look forward to [4:01] hearing how that works out for you for the Federal Reserve and more importantly for the American [4:05] people because unwinding a balance sheet the size that we have today is going to take a deliberate [4:12] effort that will have to be paced properly not to create instability and volatility in our market. So [4:18] thank you for taking that seriously. As AI reshapes the economy, the Fed should understand its impact on [4:26] jobs productivity and prices and the financial system without using technological change to expand its [4:32] mandate. That same discipline should guide the Fed's approach to bank regulation. The U.S. banking [4:38] system is sound and resilient, but we cannot take that for granted. Preserving that strength requires [4:44] regulation and supervision that are clear, appropriately tailored and focused on real risks. According to the July [4:53] 2026 monetary policy report, bank capital is near historically high levels. As the Fed finalizes Basel [5:00] III endgame and other capital rules, it should pursue better calibrated requirements that preserve [5:05] resilience without unnecessarily restricting lending. When capital is stuck on the sidelines, [5:11] a family in Emerald South Carolina may find it very difficult to get a mortgage. A small business may [5:17] find it hard to get a loan. A community bank may spend more time satisfying Washington [5:23] than serving its own customers. That is why this committee will continue pressing for regulations [5:29] that protect the system without cutting off access to credit. I want the Fed to be very successful. [5:36] We need the Fed to be successful. Prices become more stable when your job is done well, markets gain [5:44] confidence, wages grow, and more families have the opportunity to save, invest, buy a home, and live [5:52] their version of the American dream. Welcome today. Ranking Member, the floor is yours. [5:58] Thank you Mr. Chairman and welcome back Mr. Warsh. So about two months ago you appeared in front of [6:04] this committee for your nomination hearing and you refused to answer basic factual questions. I assume [6:12] because you were afraid of contradicting President Trump. Your answers during the hearing were so troubling [6:19] that this committee had a party line vote for Fed chair for the first time ever in our history. You [6:27] were confirmed by the Senate in the tightest vote for a Fed chair in U.S. history. So you now face an [6:34] uphill battle to show that you have the independence needed to run America's central bank and to serve [6:42] American families and not just President Trump and his billionaire friends. Now President Trump's corruption [6:50] and failed economic agenda is raising costs across the board. Inflation has kept real wages from growing [6:58] for the third consecutive month. That means in the Trump economy families are falling behind with less to spend [7:07] every day that goes by. High interest rates are making mortgages, auto loans, and credit cards more [7:14] expensive. More and more people are falling behind on their bills. 95 percent of Americans believe that the [7:23] U.S. is suffering an affordability crisis. While President Trump continues to call affordability a hoax, [7:31] telling Americans their concerns about the cost of living are made up. Lower interest rates [7:37] would provide some relief to families, but the Fed hasn't lowered interest rates and may be forced [7:43] to raise rates even more, all because of one man, President Trump. Now the President knows this, so [7:52] instead of changing course, he wants to take over the Fed. Installing you as Fed chair was a critical part [7:59] of his plan. You reportedly told the President exactly what he wanted to hear in your Oval Office interview, [8:06] and Trump confirmed it afterwards saying, quote, Warsh thinks you have to lower interest rates. Now for your [8:14] part, you were the only member of the last Fed meeting who declined to submit economic projections. [8:22] Projections that are supposed to show how the Fed's decisions under your leadership are likely to affect [8:28] American consumers and American workers. People might look at that and conclude that you don't want to tell the [8:35] truth about inflation under Trump. Trump may have you in his pocket, but he will not stop until he [8:44] controls the Fed. And he just needs one more seat to do that. And that's why he has had his Department of [8:50] Justice open bogus criminal investigations into both Governor Lisa Cook and former chair Jerome Powell. And that [8:58] is why he illegally tried to fire Fed Governor Cook. His own Supreme Court recently blocked the firing, [9:06] at least for now. But Trump has vowed to try again to fire Governor Cook. The fight for control is a fight [9:15] over interest rates. But it is also about corruption. President Trump likes to play king. And the Fed offers [9:25] many appealing opportunities for the president to enrich himself while he fleeces the American people. [9:33] Start with crypto. Trump's family crypto company is World Liberty Financial, the centerpiece of the crypto [9:40] federal enterprise that let him rake in 1.4 billion dollars in 2025 alone. Now it is currently applying [9:51] for a bank charter. After that charter is granted by Trump's own bank regulator, World Liberty could seek [9:59] special privileges from the Federal Reserve to juice its own profits like a master account that would give [10:07] Trump's own company direct access to the Fed's core payment rails. And there's more. If he can control [10:16] the Fed, Trump could threaten to revoke banks access to Fed services if they refuse to do his bidding. He could [10:23] hijack the Fed's extraordinary powers to bail out financial markets making sure that he rewards his friends and [10:31] punishes his enemies in a crisis. And you better bet that Trump will turbocharge the Wall Street deregulation [10:40] that is already underway. Juicing mega bank profits and CEO bonuses knowing that American taxpayers will be on [10:49] the hook once again if there's another devastating financial crash. Congress and the American people will be [10:57] watching closely whether you serve the public or whether you become yet another instrument of Donald [11:03] Trump's corruption. Thank you, Mr. President. Mr. Chairman. Thank you, ma'am. Chairman Warsh, thank you for [11:10] being with us. The floor is yours. Five minutes. Thank you very much, Mr. Chairman, Ranking Member Warren, [11:16] other members of the committee. Good morning. It's a privilege to join you. It's my first appearance [11:22] before this panel as chairman, and I'm particularly honored to represent my superb colleagues from across the [11:28] Federal Reserve System. In submitting the monetary policy report, I can't help but think of a long [11:35] line of central bank chiefs who came before the Congress in keeping with the Federal Reserve Act, [11:40] and I can't help but think of the best of the Fed's traditions. As a country, we just marked our 250th year, [11:48] and when Americans count our blessings, we can include an economy predicated on the brilliance of our [11:55] constitutional design and system of ordered liberty, an economy without equal in all it's done for human [12:03] flourishing. Some forms of communication, including some that the ranking member referenced, are [12:09] discretionary, but not this one, and for good reason. It's a prudent and wisely conceived obligation [12:16] designed to keep the Fed responsible, accountable, and faithful to the mandate that you gave us of full [12:23] employment and price stability. These obligations are of a piece with the Fed's rightful independence [12:31] in the conduct of monetary policy. Today, we're at a hinge point in history, and it's up to each of us, [12:37] myself included, to meet this moment. The Fed's number one objective is to get monetary policy right. [12:46] That's our clear and constant aim, the star by which we steer by. And if we get policy right, [12:53] and we will, the inflation surge of the last five years will be a thing of the past. [13:00] Just a month ago, I chaired my very first FOMC meeting. My colleagues and I recognize that high [13:07] inflation has been an undue burden on American households and businesses. And while monthly [13:14] fluctuations are inevitable, especially in an unsettled world, underlying inflation over longer [13:21] term horizons is determined largely by monetary policy. As I've said before, and will say today, [13:28] inflation is a choice. The members of our committee have no tolerance for persistently elevated inflation, [13:35] and we share a resolute commitment to restore price stability. That was our focus when we met a month ago, [13:42] at which we decided to hold the target range in the federal funds rate at three and a half to three [13:48] and three quarters percent. Naturally, our work at the Fed demands a proper reading of economic conditions. [13:55] As you might have seen in our report, economic activity is expanding at a solid pace, [14:00] showing resilience in the face of recent developments. Household consumption, growth is moderate, [14:07] and manufacturing output has moved up steadily this year. The housing sector, however, strikes a different note. [14:14] It gives a different picture and continues to lag. I want to highlight the most striking feature of our [14:20] economy right now, and its business investment. It is a surge in capital expenditures. Compare that to [14:27] what we've seen for a long, long period of financial engineering. This is a better situation. The rapid rate, [14:35] the rapid pace of CapEx, which appears to be accelerating, reflects in large part the construction of [14:41] infrastructure, including in and around AI and the immense demand for AI-related equipment and software. [14:49] Investment in equipment overall increased about eight percent for the year in the first quarter. [14:54] Within that category, high-tech spending logged an especially impressive growth rate of about 25 percent. [15:01] We don't yet know the extent to which the economy will benefit from this build-out, yet it seems [15:07] inevitable, at least to me, that what is now called AI investment will soon just be called investment. [15:15] Even so, new opportunities for the economy introduce new challenges for policymakers. We at the Fed are [15:21] monitoring the implications for the inflation and for the labor market. That brings me to the supply [15:27] side of the economy, a subject worthy of equal attention, where productivity growth has been strong. [15:34] And I'll note that this productivity growth predates gains from AI adoption. America's labor force appears [15:41] to be broadly stable. Job creation has kept pace with the workforce. The unemployment rate low and has [15:48] changed little, quite frankly, over the last year. We're seeing relatively few layoffs and only slight [15:54] variance in the rate of job vacancies. Solid growth in nominal wages, too. I've been heartened by the [16:01] welcome I've received and by the encouragement of my colleagues. We have a duty to point the institution [16:08] forward, to take a fresh look at current practices, to make sure we're serving our objectives and we're [16:16] going about it systematically. As the chairman referenced, I appointed a task force in each of [16:22] five areas that are central to the conduct of monetary policy. I'll just reference them and close. [16:28] First, Fed communications. Second, our balance sheet policy. Third, our use of existing data. Fourth, [16:37] productivity and jobs. And finally, the Fed's inflation framework. Our purpose here is to make better [16:43] decisions in the conduct of monetary policy and put these years of high inflation behind us. We are the [16:49] Federal Reserve, Mr. Chairman, and as determined as ever to fulfill our mission. Thank you and I welcome your questions. [16:55] Thank you, Chairman. Each member will have five minutes to ask questions and get answers and I'll start [17:01] that off. And I'll start off with your working groups. I think credibility equals transparency. [17:07] And the names that I've seen on your working groups, from Doug McMillian, former CEO of Walmart, [17:13] to Marc Andreessen on productivity and AI, tells me that you're serious about getting real-world experience [17:20] and expertise involved in making decisions at the Fed. I want to give you just a minute of my time to [17:27] to walk us through perhaps one or two pieces of that. As we talked about the importance of having [17:34] contrast on the committee, on the working groups, really important from my perspective. I think it [17:39] lends itself to having more confidence in the Federal Reserve. I want to give you a minute to talk about [17:45] one part of it. And then I want to move quickly to AI. All right. Let me let me be brief, Mr. Chairman, [17:51] but you're highlighting something that's awfully important. All institutions, including the Federal [17:56] Reserve, which I am so proud to lead, filled with great people. On occasion, we need to bring new ideas [18:04] to the fore. And after 63 months of inflation above the Fed's target, it struck me that any new leader [18:11] should arrive at this organization and look to the very best minds that we could find. There's a lot [18:16] of great ones at the Fed, but there's a lot of great ones that aren't even in economics profession. [18:20] And I reached out to 15 people who I have known and trusted with a diversity of views to see whether [18:27] they would take the most important questions that are going to be the determinants of monetary policy [18:32] and the determinants of the economy in the next five years and see if they could sharpen their pencils [18:37] and do their best work. It's a move towards transparency and new ideas. I'll just give [18:42] one example before turning it back to you. In the last couple of days, we've gotten data on consumer [18:49] price index today on the producer price index. Any central bank would be happy to have the data going [18:58] in the right direction. My view is these are all imperfect measures of the state of underlying inflation. [19:04] So one of the task force is going to see whether we can do better, have better data from external [19:09] sources and even better ideas as to how important organizations like the Bureau of Labor Statistics, [19:15] the Bureau of Economic Affairs might think about how they could do a better job in an evolving economy. [19:22] Thank you. We met just a few weeks ago with Dr. Phelan, who's slated to be the head of the [19:29] president's economic advisors. And we talked a lot about artificial intelligence and the impact that we'll have [19:34] on our economy on whether or not it will destroy jobs, create jobs. And ultimately, at the end of [19:38] the day, his conclusion was it'll create more jobs. Artificial intelligence has an opportunity to change [19:44] how we do so many things. And much of the debate for me can be bifurcated into automation. Things go away [19:50] and augmentation. People make more money because production goes up. And you've argued that perhaps [19:55] there's a way for us to see a reduction in interest rates because of the increase in productivity. [20:00] One of the things standing in the way of that conversation is what's happening in South Carolina [20:06] where data centers are meeting real headwinds. New York has basically banned them. We have a moratorium [20:12] in parts of South Carolina because of issues like electricity bills, water use, aesthetics. [20:19] So getting to the future that we're talking about and, frankly, beating China in this AI race might come [20:26] down to something as important as electricity bills and water usage, which could prevent us from having [20:34] a serious conversation about productivity gains. Thoughts? [20:38] Yeah. I can't think, Mr. Chairman, of a more consequential change to the U.S. and global economy [20:48] in my life in my adult lifetime than the surge of investment and the potential in around AI. [20:57] That's part of the reason why one of my task forces is to focus on what's the effect of this [21:01] general purpose technology on both parts of the Fed's mandate on ensuring stable prices, [21:08] but also on full employment. You gave us both parts of that. We don't have any legislative orphans [21:13] at the Fed. There's no disfavored part. I would say it is a huge opportunity, but it's not without [21:19] challenges. I'll make two other brief points. I think the United States is extremely well positioned [21:25] to be at the cutting edge and extract more productivity, which should be good for U.S. [21:30] companies and U.S. workers than any other country in the world. Any other country would exchange [21:36] positions with us in a moment. Second thing is I do want to make it clear that in the near [21:43] term, I think this investment is probably quite good for jobs as we're building out the infrastructure. [21:49] And over the long term, my best guess is that this will improve American productivity and will improve [21:57] the real wages and will help us on full employment. But between the short term and the long term, [22:03] it can have a disruptive effect. And we're attuned to that. And that's part of the reason why I wanted [22:08] to shed some new light on it with some outsiders. My time is up, but I will submit one [22:13] question for the record around the issue of indexing our regulatory thresholds. [22:19] We've seen so much growth in the last since 2019 that our institutions might need to see [22:25] a little recalibration on the thresholds that we have put upon them. Thank you, Mr. Chairman. [22:35] So the Federal Reserve has long been plagued by a culture of corruption and coziness with Wall Street. [22:43] Over the last five years, at least six senior Fed officials have been implicated in serious [22:50] epic scandals related to personal stock trading and self-dealing. But instead of trying to repair [22:58] this broken culture, I'm concerned that you seem to be embracing it. At the time of your nomination, [23:03] you owned more than a hundred million dollars worth of shares in private investment vehicles called [23:09] the Juggernaut Funds and THSDFS LLC. And you refuse to disclose the underlying assets to the Senate and [23:20] to the public. You say now that you've sold those shares. In other words, somebody wrote you a check [23:26] for more than a hundred million dollars days before you entered office. Chair Walsh, who wrote that check? [23:36] Senator Warren, this is a discussion you and I had in the public square seven weeks ago, [23:41] and I'm thrilled to tell you that I have fully honored the obligations I had under the [23:46] office of the agreement I had with the Office of Government Ethics. [23:49] Yeah, I'm glad you did. And there is continued disclosure, which I'm happy to make as consistent [23:53] with the agreement. I asked a very specific question. Who gave you a hundred million dollars [23:59] right before you were sworn in? Was it a billionaire who has business with the Fed? [24:05] Was it Stanley Druckenmiller, who's made billions of dollars betting on what the Fed does? Or was it a [24:11] different billionaire? Who gave you the money? I will fully comply with the Office of Government [24:18] Ethics. That's not an answer. Well, it is an answer, actually, Senator, because there are [24:22] obligations. It's a hundred million dollars that you got just before you were sworn in, [24:28] and you won't tell the American people where it came from. Let's go to another incident. As you know, [24:33] the Fed imposes a blackout period where senior Fed officials are prohibited from talking about [24:39] economic issues with outsiders. The idea is to, quote, reinforce the public's confidence in the [24:46] transparency and integrity of the monetary policy process. In other words, no one gets some special [24:53] insider information from the Fed. But shortly after your first FOMC meeting as chair, right in the [25:00] middle of the blackout period, the Fed's vice chair for supervision, Michelle Bowman, was reportedly the [25:08] featured guest at a secret dinner hosted by Bank of America for its hedge fund and Wall Street clients. [25:16] At this closed-door dinner, she reportedly spoke about both monetary policy topics and regulatory policy. [25:25] Now, I've called on the inspector general to review her conduct, but you're the guy in charge. As chair, [25:32] you set the tone on culture. Did Vice Chair Bowman provide any non-public information to the attendees [25:40] at that secret dinner or discuss any regulatory policy matters that are subject to open comment periods? [25:49] Senator, I agree with one of the premises of your question, which is I do set the culture. [25:55] Good. After my very first week at the Fed, I sent a letter to the 21,000 people at the Fed, [26:02] outlining our culture. I appreciate that, but we have very limited time and a very strict chairman. [26:07] So can you just answer the question about the vice chair and her secret meeting? [26:12] Sure. I'm happy to to the extent I can share it with you. The vice chair has been an excellent [26:18] colleague in my first seven weeks. I'm aware of the letter you sent to the inspector general [26:24] out of an enormous respect for him. His investigation, what he chooses to do with it, [26:29] I'm going to leave to him to do without trying to micromanage that. I'd be interested in the [26:34] judgments that he that he comes to. So you will support his investigation. [26:39] Have you made your own investigation? Did you ask her if she spoke at a secret meeting during the [26:44] blackout period? I agree with the suggestion that the inspector general is an independent actor, [26:51] and I'd be very interested in his decision. You just said you're the guy in charge. Did you ask her [26:57] about the secret meeting that took place? Did you ask her? I can answer a simple question, [27:04] which is I wasn't at the meeting. I don't know the facts, but I'd be very interested in the fact [27:11] finding being done by an independent inspector general. Did you care enough to ask how can you be [27:15] chair and not ask your own vice chair whether or not she violated the blackout period, violated the [27:23] law? I think it'd be inappropriate for me to prejudge facts that are being discovered by an independent [27:28] actor. I don't know how you prejudge them if you don't ask. Well, I don't know how to prejudge them if [27:33] I wasn't in the attendance of a meeting. Did you ask? She's been an excellent colleague. Did you ask? [27:39] I've asked her a lot of things about supervision and regulation because we've been busy doing a lot [27:45] of real work over the last seven weeks. I've got to say, I'm going to take the same time you did. [27:48] I just got to say. You hope so. The tone that you are setting is one that seems to invite [27:55] corruption, and that's going to be a real problem. We've had seven weeks, Senator [27:59] Warren, and we've set a tone of performance, accountability, responsibility, and integrity. [28:05] Senator Allen has the floor. Thank you, Mr. Chairman. Mr. Warsh, welcome to your first meeting. [28:12] Thank you, Senator. Let me give you an opportunity. I think [28:18] I've got some questions that I think are important with regard to the Basel III and what we're going to [28:22] do with it. But before we get into that, I think you've been basically harassed a little bit in terms [28:28] of making accusations to you. Let me give you just a minute to perhaps respond in a just straightforward [28:36] manner to some of this stuff. Anybody give you $100 million? No, Senator. No one did any such thing. [28:44] Possible that you may have had assets that were sold based upon an agreement that you had [28:51] as you became the nominee for the chairmanship? Yes, I had earned assets over a long period of time [28:58] and went over and above any ethics agreements and have sold, or in the process of selling, [29:04] have nearly completely sold everything that I had earned during that period and have rolled those [29:09] into the equivalent of cash and T-bills. So basically away from investments based upon [29:18] the market and back to treasuries. Yes, exactly right. I thought that that was the prudent thing to do, [29:26] given the responsibilities and the importance of setting the tone at the top. Culture is the big [29:32] driver of a lot of things. And in my first seven weeks, Senator, we're doing our very best in the [29:38] best of the Fed's traditions to get the culture right, to get the strategy right, and to get policy [29:43] right. And if we can do those things, all of which are to the left of the decimal point might not be of [29:48] such great interest to people that are trading on Wall Street. And I think the decisions we make to [29:53] the right of the decimal decimal point can be better. So we can do a better job of fulfilling the mandate you [29:59] gave us. Yeah. The ranking member had asked a question with regard to another member on the [30:05] committee, Nikki Bowman. And you indicated that if there was an accusation being made as to an [30:13] inappropriate meeting, that if the inspector general was doing it, that you were going to be [30:19] hands off on it. It seems to me that that's pretty appropriate. Because if you would have gotten involved [30:25] in it, the accusation from some members on this committee would have been that you were trying [30:28] to influence it. Yes. Can you talk a little bit about the logic? Am I on the right track with [30:34] regard to the reasoning that you have for allowing the inspector general to do the job that they were [30:39] asked to do in the first place by members on this committee? Yes, Senator, you're exactly on the right [30:45] track. I'll just say more broadly that my fellow governors, my reserve bank presidents, [30:52] they've received me incredibly warmly. I admit that I show up with a lot of ideas for reform [30:58] in monetary policy and supervision regulation and payments. I've only been there a short while for [31:03] seven weeks. But instead of an institution acting inert, what I've found is my colleagues are really [31:10] open minded to change. What I found is we're going to have a good family fight. I'm not imposing ideas. [31:16] That's part of the idea of the task force is the chairman reference. But we're going to try to be [31:20] better at our jobs, fulfill our mission, be accountable, be responsible, and do it all with [31:26] the utmost integrity. That's my intention. We're early into this. I don't want to prejudge outcomes. [31:32] We made a lot of progress in a short period of time. And frankly, I'm proud of it. I like the idea [31:37] that you're putting together working groups. I think that will give up give an opportunity for a [31:41] fresh look at a lot of things going on. As I shared with you in a phone call earlier, [31:45] it's not a matter of being necessarily vindictive or angry with previous chairs or previous members. [31:51] It's a matter of making things better for the American people. And that's really what we ought [31:54] to be talking about today. So let me just in the minute and 14 seconds that I've got left on mine, [32:00] let me talk a little bit about Basel III in particular. I think you and Vice Chairman Bowman and [32:06] the respective financial regulators, I think you've done a good job in terms of your roles with regard to [32:10] the Basel III re-proposal that was issued this March. The 2023 proposal would have substantially [32:16] increased common equity capital requirements for Category 1 and Category 2 banks by approximately 19 [32:22] percent, failing to strike a balance between maintaining resiliency of our banking system [32:28] and doing so without hampering lending. I think this is a really critical item. And next to what [32:35] artificial intelligence is going to do in terms of our productivity, I think it's one of the biggest [32:39] issues out there. With the June 18th comment deadline now behind us, are there any other [32:44] categories of feedback that you're weighing more heavily than others, such as the adjustments to [32:49] leverage ratios or anything along that line? And if I could, is there going to be a go-live date [32:55] this year sometime? Any idea when you might actually be able to talk about when this thing [33:01] is going to go public for us? Senator, well, thank you for your question on supervision regulation. [33:05] As I mentioned before, I've shown up with a lot of ideas for reform, not just in monetary policy, [33:11] but in supervision and regulation too. When I was before this committee some 20 years ago, [33:16] there was a debate about what the Basel process should be. Boy, we should get to the bottom of that [33:21] 20 years later, and we should end up with a set of reforms in the United States that makes our financial [33:27] system in our banks safer, sounder, and more competitive. It is that competition which provides [33:34] better and more agile credit to the real economy. The Basel endgame, Senator, is not America's endgame. [33:42] I am happy to work with international regulators to try to find common views, but we're going to do [33:48] the right thing for the U.S. economy. As you mentioned, we're out for public comment. I'll be very [33:52] interested in the comments before we go final with the proposed final rule. Let me just say this is [33:59] already off to a good start. We're going to stay around five minutes, period. Thank you. Senator [34:07] Reed, the floor is yours. Thank you, Mr. Chairman. Chairman Walsh, I want to see if I put a cap on this [34:14] discussion between Senator Warren and Senator Rounds. When will you disclose who brought your assets when? [34:22] I believe there's periodic requirements under the ethics laws and I'll fully comply with them. [34:27] I think the next reporting requirement is at some point next quarter or so. And you will fully [34:32] disclose who you sold your assets to? I'll fully comply with the with the law and the ethics agreement. [34:38] Thank you. AI is making a huge impact on everything we do, particularly the banking system. And as you're [34:46] aware, an interagency governmental group, commerce, treasury, energy, et cetera, has authorized the major [34:57] banks, the eight major banks, to use mythos to evaluate their security. Would you agree that it's [35:05] important for all financial institutions to have access to these types of AI tools so that they could [35:12] analyze their operations for cyber vulnerabilities? Yes, I think the broad financial system has new [35:21] vulnerabilities with these new technologies. I wouldn't want to just isolate mythos though. [35:26] The other large language models have rival products. The changes, the efficient frontier has changed even [35:32] in the last month. But as these new models find their way more broadly, our banking system and frankly, [35:38] the Federal Reserve needs to do all we can to patch any vulnerabilities that we have. [35:43] What are you doing to ensure that these midsize and smaller banking institutions have access to [35:51] whatever AI tools appropriate as quickly as possible? Yeah, so I share the sentiment, Senator Reid. [35:58] There is a, we are not the deciders as to who has access, but I have not been shy in sharing my views [36:05] with authorities across the government about the vulnerabilities and have been asking for access, [36:11] not just for the Federal Reserve, but for other institutions to a whole range of these new [36:17] artificial intelligence models so that they can protect themselves. If you said to me, [36:22] what worries you over the course of the next several months? I want to make sure that we're as protected [36:28] as we can be from foreign actors that want to do us harm. Well, let me change to stay with AI, [36:35] but change the focus a moment. Recently, Governor Waller and New York Fed President John Williams have [36:42] warned that AI investments may be increasing inflation, and many economists have similar warnings. So [36:50] are AI investments current drivers of inflation? This is one of the good family fights. Let me give my [36:58] own view on it, which might be somewhat nuanced from the way you just described it and some of my colleagues. [37:06] The shock of AI, the supply shock of AI, has an effect on demand and supply. We see the effect on [37:13] demand much more quickly. We see it in the capital investment I referenced. We see it in the prices of [37:18] chips that are going up. We're inferring, which is just a fancy word for guessing, when the effects will [37:24] happen on the supply side of the economy. I don't view a one-time change in prices as necessarily being [37:32] inflationary, because I think there's a supply response. In that way, this is different from [37:38] a foreign conflict and what it might do, which tends to reduce the supply side of the economy. [37:44] Will it increase measured prices over the course of the next 12 months? I suspect it will be. Whether [37:49] that's inflationary or not, that's up to the Federal Reserve and we're going to have something to say [37:54] about that. Okay. Now, one of the interesting things about our economy is becoming more and more [38:01] productive. But one of the disappointing things is that household pay is not rising relative to that [38:10] productivity. And we're seeing less benefit from productivity gains. So what's driving this trend? [38:18] Yeah, it's a great question. I don't have a perfect answer to it. Like you, we think a lot about [38:24] real take-home pay. The part that the Fed can do a lot about is the real part. If inflation were lower, [38:33] real take-home pay would be higher. That's just the arithmetic. Your other question is a broader one, [38:39] which is what are we going to see the productivity improvements lead to a surge in wages? Wages have moved [38:45] up at a reasonable pace, but it's likely that as productivity moves up more, we should see wages [38:52] move more. Getting that timing right, understanding when that happens, that's a puzzle and it's a puzzle [38:57] we're going to continue to work on. In the last 10 seconds, will AI eliminate jobs at a catastrophic [39:05] rate? So you're asking me to prejudge the task force. My short answer is over the long term, [39:12] absolutely not. I believe that this is a long-term job creator, but will it be disruptive and will [39:18] some people have their jobs at jeopardy because of the new technologies? On that, I can't offer any [39:23] sort of guarantee or comfort. Senator Britt. Thank you, Mr. Chairman. [39:28] Chair, thank you so much for being here with us today. Certainly appreciate the opportunity to have [39:33] a conversation and obviously so early in your tenure in this new role. In this year's monetary policy [39:42] report, one of the most encouraging themes is the increase in business investment that we're seeing [39:48] across the country. In Alabama and many places, we're seeing companies expand, manufacturers grow, [39:55] and communities are benefiting from that investment. I believe that these are good signs and that they're [40:01] also important for the future because they help us determine whether America remains the most [40:07] competitive economy in the world. My question for you is, as you look at the economy, what data tells [40:14] you that today's investments are laying the groundwork and the foundation for a stronger long-term growth [40:20] and greater American competitiveness? So it's a great question and thanks for highlighting the [40:26] capital investment boom. This is what most countries are searching for. This is the seed corn of the next [40:33] group of job creation and productivity. To be honest, over the last dozen or so years, we have been [40:40] waiting for the surge in business investment. I know in some academic accounting sense, this is leading to [40:45] a surge in prices in the next 12 months. I don't want to sound dismissive of it. The surge in prices is real, [40:51] but I'd sure rather the most successful companies in the world investing in property, plant and equipment [40:58] than doing a share buyback. So I'm encouraged by it. The trend is our friend here and this business [41:04] capital investment is contributing massively to the GDP we've seen in the last 12 months. My colleagues [41:11] know I'm not big for forward guidance, but I would guess that that trend continues. What gives me optimism [41:18] about it? Well, when the private sector deploys this amount of capital, they must see something shiny at [41:24] the other end of that rainbow. They must see a very good return on investment. That's why they're [41:29] taking this capital and they're putting it to work. I tend to think that private investment has a [41:35] multiplier way higher than one. I'll let you and others judge whether that's true of government spending [41:41] too. I'm going to go ahead and switch gears because I know we're on a tight timeframe today, which I [41:47] appreciate. And I'm going to follow up on a question that the chairman asked. I'd like to get you to kind of [41:54] dig into this. Some banks are already approaching and crossing into new tailoring categories and [42:00] they're making staffing and compliance and long-term business decisions based on thresholds that [42:06] haven't been updated since 2019. At the same time, the Federal Reserve continues to rely on those [42:13] categories and other regulatory frameworks. So my question is, how are you thinking about updating [42:18] these tailoring frameworks when it comes to what banks can expect to see and proposals in the future? [42:25] So it's a great question. One I take seriously to be candid with you and the chairman, the other [42:30] members of the committee. Monetary policy has distracted me a bit in the first seven weeks, [42:36] but the Federal Reserve chairman is supposed to be the chairman of monetary policy and payments and [42:42] consumer affairs and supervision regulation. But I can tell you this, [42:45] Vice Chairman Bowman has been working on these initiatives. She has briefed me about them. [42:51] And broadly, I'll step back and say modernizing our banking system, streamlining regulations so that [42:58] the rules that apply to the systemically important financial institutions are not one size fits all for [43:04] every other. The secret to the American economy is we have a few thousand banks and other providers of credit [43:11] who know their smaller markets bigger. I'd rather have that system than what most of our G20 peers [43:16] have, where they have a half a dozen institutions implicitly backed by their government. I think [43:21] reform is coming to supervision and regulation. I have my own ideas that might be as dramatic as I've [43:27] already shared on monetary policy here. And I think the sooner we can get to the bottom of it, the better. [43:33] If I could say one more thing, the reforms we've been putting in place over the last 15 years coming [43:38] out of Dodd-Frank, as we learned in the Silicon Valley Bank example, in the First Republic example, [43:44] they didn't work perfectly. My predecessors had very little choice but then to do another [43:50] overall bailout. We don't want that to happen again. So we want to tailor the rules and the capital so [43:55] they serve the best interests of the U.S. economy, which I'd describe as a system that is safe, sound and competitive. [44:02] And I just hope, given what you've said, we double down on reviewing the framework. We know how [44:09] important tailoring is and also just the need for regulatory certainty. So thank you for that. In my [44:16] last remaining seconds, I just want to say thank you for your commitment in the first seven weeks, [44:22] almost two months, you said it earlier, but to performance, to accountability, to responsibility, [44:28] and to integrity. Appreciate what you're doing and look forward to continuing to work with you. [44:33] Thank you, Senator. Senator Warner. [44:35] Thank you, Mr. Chairman. Chairman Walsh, it's good to see you again. Seven weeks in, [44:41] you got a hell of a job. Inflation is still too high. How you predict the president's chaotic [44:46] foreign policy wars in the Middle East. I'm going to come to an AI question, but let me be clear, [44:53] as I said to you yesterday, I didn't vote for you. But we're going to find a lot of common ground to work [44:57] together. I am going to hold you and I've been appreciative of your comments about inflation, [45:01] about the Fed's independence. But I think there are many, many common areas we can work together on [45:06] and look forward to that. I want to hit, you know, when one of the things that most impressed me in [45:10] our first meeting was your recognition that probably the biggest issue you're going to face is AI. [45:16] My two senses, I think it is going to have long term, I agree with you, going to be job creation. [45:21] Very short term, I think you may see some upsurge in terms of, you know, energy production and data [45:27] center build out. Years two through five, two through six, I think there could be massive economic [45:32] disruption, particularly towards new college grads. You know, it's policymaker's job, but if this is [45:38] going to have the potential effect, I hope I'm wrong, but I wouldn't, I'd take a bet with you that [45:42] three years out, we could see 30% recent college grad unemployment. If we see that, what do you see [45:49] as the Fed's role in terms of urging your actions, but also helping us sort that out? [45:54] Senator, first of all, I appreciate it. I promise. Don't say nice things about me. He's got me on a [46:02] clock. Answer my question. All right, good. Well, let me just say. I do indeed. Let me just say this. [46:08] I appreciate that you haven't given up me, given up on me. I haven't given up on you. I haven't given [46:14] up on your colleagues. I'm the independent head of a central bank. No matter how people voted, I'm going [46:19] to be serving all of you. This doesn't count against my time. [46:21] A.I., let me get to the core of your question. I am more confident that there will be a surge in [46:31] output because the U.S. is at the cutting edge of A.I. than any certainty about the effect on the labor [46:39] market in the next few years. The United States will be a winner. That is my informed judgment. [46:46] But this is a time filled with both challenges and risks. We take both parts of our dual [46:52] mandate seriously. Do I believe that the productivity improvements over time will be [46:57] structurally disinflationary? I do. I believe everything technology touches ultimately gets [47:03] cheaper. Your background, I think, would be consistent with that. What are going to be the [47:07] effect on the labor markets in years two through five? It's a fair question. The way I would frame it [47:12] to you on college graduates, if you're a new college graduate, A.I. is probably native to you. [47:19] You've been playing with A.I. effectively since your high school years. I feel as though you likely [47:25] have the skills and the intuitions the same way that people of my generation or younger were native [47:31] to the Internet. If you've already been in the workforce for a while and you're a little resistant [47:36] to change, that's where the encouragement needs to be to think about how these skills can make you [47:41] more productive. These are fair questions. I don't have easy answers, but I do have a task force. [47:46] We have to work together on it because if we hit this bump, and I think it's going to come, [47:52] we've got to collaborate. Now, Senator Reid asked a very good question about mythos, and I 100% agree. [47:57] Mythos is already yesterday's news because these models are coming out so quickly and they pose such [48:03] security risks. I think it's incumbent because of the risk it provides to our financial system [48:09] that at some point you're going to be, and I'm asking you now, I think personally I believe we need [48:15] some level of mandatory testing be pre-release because of the potentially draconian and dramatic [48:21] effects. Now, how long, who's on that panel is critical, but what do you think about pre-testing [48:28] release regime going forward, more than just the voluntary willingness of a company to come forward? [48:33] Yeah, so two things. First, these models and their capabilities are growing at an exponential rate. [48:41] In technology, we would say hyper Moore's law. It wasn't long ago people sitting in my position [48:47] thought that the U.S. was a time of secular stagnation. All the good stuff had been invented. [48:52] Boy, that seems awfully anachronistic. We're moving fast, so what can we do? I don't have, [48:58] as it currently structured, decision rights as to who has access, but I do have a bully pulpit, [49:03] as you mentioned, and I'm unafraid to share my views with the Treasury Secretary and others. [49:09] The cutting edge is moving very quickly. Key institutions are vulnerable. The sooner they can [49:16] mitigate their vulnerabilities, the better. I'm looking forward to- [49:19] Well, I hope that you will be willing to advocate moving on beyond a voluntary regime, [49:23] because the downside risk. 12 seconds. You know, quickly address the role of [49:30] all of the Federal Reserve Banks and your vision of what the role they should play. [49:33] So very quickly, I'll just say this. We should be good stewards of taxpayer money. We should be [49:39] consolidating functions where we can, but my mental model, Senator, as I mentioned to you yesterday, [49:44] is we should have 12 Centers of Excellence. I've got more than 12 problems on my plate, [49:49] and if each Reserve Bank were to develop an expertise on something that matters to our remit, [49:53] and the American economy, I'd encourage them to develop that advantage. [49:57] Senator Ricketts. [49:58] Thank you, Mr. Chairman. Chairman Warsh, great to see you. Thank you for being here, [50:03] and congratulations on your first semiannual report. Good to see you here again. [50:08] We got some good news this week. Inflation was down, and that's progress. [50:13] Progress under this administration and under your new leadership at the Fed. [50:17] During the Biden administration, we saw reckless spending that drove prices up [50:22] and left Nebraska families to foot the bill. In 2019, the federal deficit was roughly 900 billion [50:28] dollars, and by 2024, that was 1.9 trillion dollars. And we saw inflation go up 20 percent, [50:34] really stressing Nebraska families at the grocery store. Cleaning out this mess is going to take [50:41] discipline, and it's going to take reform. Chairman Warsh, we discussed in our meeting also how to implement [50:48] some reforms, such as process improvement. We talked specifically about Lean Six Sigma, [50:53] and the opportunity there. You promised to have a reform-oriented Federal Reserve, [50:58] and we're willing to break up or, you know, make a break from some of the mistakes of the past. [51:03] I commend you for that, and want to work with you to see it through. One of the most important places [51:08] to start is with the Fed's balance sheet, an issue I've consistently raised with other Fed governors. [51:14] The Fed expanded its balance sheet dramatically during the pandemic, peaking at nearly nine [51:19] trillion dollars. Since 2022, the Fed has shrunk it down to about 6.5 trillion in December 2025, [51:26] and I'm glad to see that the Fed was making progress over the last few years, but the balance sheet [51:32] is still not down to pre-COVID levels. Actually, the balance sheet is rising again and now stands at [51:37] around 6.7 trillion dollars today. Chairman Warsh, do you see the balance sheet increasing again as a trend [51:44] in the right direction or the wrong direction? Senator, thank you for the question. I've been [51:49] focused on the Fed's balance sheet, frankly, since my last day at the Fed some 15 years ago into the [51:55] present. I don't want to prejudge the conclusions of this balance sheet task force, where, as the [52:01] chairman said, I put together a team of rivals to fiddle with it, to evaluate it, to come up with their own [52:09] judgments. But I'll give you my predilections. Monetary policy is made currently through at least [52:16] two material instruments, interest rates and the balance sheet. In fact, we grew the balance sheet, [52:22] created quantitative easing when I served the last time in the darkest days of the crisis, because we'd [52:28] already cut rates to zero. So expanding the balance sheet had the intent of helping markets clear, but [52:34] it was also another tool of monetary policy. I still believe that is true. Wasn't that supposed to be [52:38] temporary? Indeed, that was our entry principle, was that we would get out of that business. The [52:45] central bank has not, for a whole range of reasons, gotten out of that business. My general view is, as we [52:51] think about inflation risks and we think about the conduct of monetary policy writ large, we have two [52:57] instruments that we should be thinking about. The balance sheet is one of them. I'll make only one other [53:01] point. Monetary policy needs to be architected, needs to be designed by the policy makers around the FOMC. [53:12] The plumbing, the operations, how we do that is conducted by the New York Fed. I want the architecture [53:19] to drive the plumbing, not the plumbing to drive the architecture. We're going to make a monetary policy [53:24] decision with respect to the balance sheet. I'm very open-minded to changes and any changes we make will [53:30] be well discussed, well shared, and I think quite deliberate. And the financial markets who have seen [53:36] the balance sheet grow effectively for a generation, they'll have plenty of time to adjust if we make [53:41] changes. I know you said you just wanted to make that one comment, but I'm going to push you to ask [53:46] for a little more. What do you believe is the smallest balance sheet that the Fed could operate with? [53:52] My predilection, my inclination, is interest rate policy should be the driver of monetary policy. [54:01] The balance sheet should be as small as practicable to conduct operations. And the balance sheet can [54:07] expand when there's a crisis. The balance sheet can also expand if an institution needs liquidity. [54:13] That's part of the reason why we've created a discount window. But a permanently large balance sheet [54:20] with the duration of assets that are larger than the duration of assets of treasuries, for example, [54:26] that are held in the broader public markets. Boy, that sure seems a little bit more like fiscal [54:31] policy that I'm comfortable with. So I would like us to have a leaner, meaner balance sheet, [54:37] but it's a discussion for my colleagues. And I've got three real pros that are going to help us think [54:41] it through. All right. Well, I have run out of time and I'm sure the chair will be happy. I'm going to [54:46] maybe get done before it reaches zero. But I do have a question I'll follow up with for the record [54:51] on scams, because this is something that the banking industry is telling me they're increasingly seeing [54:56] and is costing people who have deposits a lot of money. So I'll follow up with that. Senator, [55:01] we're opposed to scams, but I'm happy to follow up. Good to hear. Good to hear. Senator Van Halen. [55:10] Thank you, Mr. Chairman. And Mr. Chairman, we agree on that point. Let me turn to the headline [55:17] inflation numbers that came out yesterday at 3.5% above the Fed's 2.2% target. Prices are too high [55:27] for families and we need to get them down. I think we can agree on that. At your press conference a few [55:32] weeks ago, you said that higher inflation in part, and I quote, reflects supply shocks that have driven [55:38] price increases in certain sectors, including energy, unquote. In other words, a reason that [55:44] we're seeing prices go up is that the supply of products and services has dropped in some areas [55:51] of the economy, right? Yes. And I do think it's important that the public understand the causes [55:59] of some of these supply shocks. You would agree, would you not, Mr. Chairman, that the war in Iran has [56:04] caused a supply shock in the energy markets? Yeah, the military conflicts have caused the price of oil [56:10] to be higher than it otherwise would. Absolutely right. And Americans are paying the burden of that [56:16] as we go. We've also seen supply shocks in other areas. Last year, your colleague, Austin Goolsbee, [56:24] President of the Chicago Fed, said that, and I quote, a tariff is like a negative supply shock, [56:30] unquote. And we've seen plenty of tariffs. Obviously, we have the Supreme Court decision that [56:34] may bring those down over time, the impact of it. But the negative supply shocks have been real and can [56:41] be traced to the Trump administration agenda. So when you say that supply shocks are part of the reason [56:50] prices are going up, you would acknowledge that they're the result of decisions that have been made [56:55] by the president, like going to war with Iran, right? So what I'd say is particular price shocks [57:01] happen to particular prices that we don't have control over. But I don't want to suggest we don't [57:05] have control over inflation in the medium term. That's our job. But screw worm affects beef prices, [57:11] other things affect oil and oil prices and milk prices. And I understand that has an effect on [57:17] people's household household budgets. Indeed, it does. And I think we've seen the price of energy go up [57:24] by billions and billions of dollars. And the American people are essentially paid for that [57:29] at the at the pump and other places in their pocketbooks. As you know, your your predecessor [57:35] as chairman was regularly harassed and berated by the president United States on social media with [57:42] respect to interest rates, at least so far, you seem to have escaped that that fate. But I do think it's [57:51] important that we have an understanding of whether or not the president is trying to [57:55] influence Fed conduct. I know you were asked recently at your last press conference about [58:04] any communications with the president. I think your response was on the president. I don't have [58:08] anything for you. Mr. Chairman, was that a yes or no with respect to whether you've had [58:12] communications with President Trump? So I like what I said the first time, Senator, [58:16] I don't have anything for you. I will say this, though, I do meet with the Treasury Secretary weekly. [58:21] I talk to him often between that and I'll make my own decision. I just want to understand the answer. [58:30] Have you or have you not had communications with President Trump since you took this position? [58:34] I just don't want to be in the business of sharing discussions that the president and I have. [58:40] I will tell you what I've said to the president repeatedly instead of the Treasury Secretary. [58:46] They chose an independent guy to do an independent job. And that's exactly what I plan on doing. [58:50] And I'd like to think over the last seven weeks, given the decisions we've made and the things [58:55] we've done, that it's not just words, it's actions now to start to demonstrate. So so, [58:59] Mr. Chairman, I mean, I think it's important I take from your answer. You had communications, [59:03] you don't want to disclose the content. Will you commit to do what your predecessor did, [59:08] which was to release your appointment schedule and conversations with President Trump? [59:13] Well, I don't know what the past practice was. I will be in full compliance with the law. As I [59:20] understand it, there's an ongoing FOIA request on my calendar and I will share it consistent with the [59:24] law. Well, this is the first one's already come out. I think this was a this wasn't in response to, [59:29] you know, any legal requirement forced by FOIA. It was a question of transparency. And I do think, [59:35] given the president's past record of trying to influence fed behavior via social media, [59:43] with respect to your predecessor, if he's trying to influence fed behavior through private conversations [59:49] with you, I think that needs to be something the public is aware of. And I'm asking you whether [59:55] you will commit to disclosing when you have conversations with the president of the United [1:00:00] States. Senator, I can offer you this assurance. The president has not, before I took this office, [1:00:07] before I raised my right hand, he has not tried to influence the conduct of monetary policy. And if [1:00:13] he tried to, I would continue to keep my head down and do the job. I don't have a long record, [1:00:18] but I've got a seven week record. And before that, I had a 25 year record. And I think that should [1:00:22] count for something. I appreciate that. I hope you'll just follow the precedent your predecessor. [1:00:26] Senator Kennedy, the floor is yours. Well, Senator Van Hollen's my buddy. So I don't, [1:00:35] this is not meant toward him, but I always get a kick out of my democratic friends talking about [1:00:43] transparency, you know, toward the end. God bless him. You could, you could bake a Thanksgiving turkey [1:00:54] in the time that it took President Biden to walk across the stage. And they kept it quiet. [1:01:01] Until they couldn't. I'm sorry he was in that condition, but this transparency stuff [1:01:09] cuts both ways. What's wrong with you talking to the president of the United States? [1:01:17] So Senator, I've got a wide lens. I'm interested in hearing points of view from a whole range of [1:01:22] people. We have a narrow remit. I'm interested what's happening in the world. [1:01:25] But I mean, is there anything wrong with it? Do you have to, when you do it, [1:01:29] do you have to like go out and look for the last phone booth in Washington and put a bag over your [1:01:35] head and sneak in there and call him or return his calls? Anything wrong with that? I certainly don't [1:01:41] feel uncomfortable receiving a call from the chairman of this committee or the president of the United [1:01:45] States. Okay. Do you think Ben Bernanke ever talked to the president? When I was a governor, [1:01:51] I recall several conversations and frequent meetings. How about Alan Greenspan? When I was a young [1:01:56] staffer in the White House, I remember being honored by him coming into the White House and meeting with [1:02:01] the president and the president's advisors quite frequently. Okay. I think what would give me [1:02:08] concern, and I think it's the basis for my colleague's concern, is that you just do whatever [1:02:15] the president says, but you're not going to do that, are you or are you? Senator, I'm going to call it [1:02:20] the best I see it. The president never asked me to do anything inappropriate, and if he did, [1:02:25] I wouldn't do it. Okay. I'm going to follow the law and do my best to follow the remit you gave us. [1:02:29] Okay. So in the last year or so, recent past, I'll say the Fed cut rates three times because they were [1:02:36] worried about the labor market. Is that a fair assessment? That's my sense of what they did before [1:02:41] Mr. Robyn. And it worked. It worked, correct? Well, that's a longer discussion. Well, is the labor [1:02:47] market in a mess today? The labor market's in good shape, but I wouldn't want to draw the causal connection. [1:02:53] So I don't have much time, Mr. Chairman. I love you like a taco, but you don't feel a buster on me. [1:03:02] So it worked. Okay. Now we have inflation. Okay. What caused it in 20 seconds? In 20 seconds, [1:03:12] inflation is caused when a one-time change in price is broadened out. I know what inflation is. [1:03:18] And the Federal Reserve. Tell me what caused it. Monetary policy, sir. Okay. Well, [1:03:23] I would say what is causing it is AI, the conflict with Iran, duh, and probably the residual effect of [1:03:37] the fact that some imports have become more expensive. Okay. And I think any fair-minded [1:03:44] person would conclude that. There was a lot of economists said, oh, you know, the impact [1:03:52] of inflation on the rise of the cost of imports would be a one-shot deal. You know, you can teach [1:03:57] that one round or flat. I don't know. I think it's probably had a residual effect. Okay. Is it temporary? [1:04:03] Is it permanent, the inflation? It's not going to be permanent under my watch, Senator. Okay. What are you [1:04:09] going to do about it? So we're going to do three things. One is for those people in markets that [1:04:15] think the Fed really was comfortable with a higher level of inflation, we're doing our best to disabuse [1:04:20] them. Okay. You're going to talk about it. What's the second thing you're going to do? We're going to [1:04:24] take ownership of it. We're going to say we have the power to do something. Okay. You're going to own it. [1:04:28] That's right. What's the third thing you're going to do? We're going to look at our tools in the [1:04:33] changing economy, both balance sheet and interest rate, and see whether we need to adjust policy to take it [1:04:38] head on. You're going to look at your tools. That's the third thing. I'm not asking you what action the [1:04:46] Fed's going to take. That would be improper, Mr. Chairman. I wouldn't do that, and you wouldn't tell [1:04:49] me anyway. Specifically, like you're talking to a 10th grader, okay? What are your options? Leave it [1:05:04] alone, right? Leave rates alone. Is it one option? That is an option, Senator. Raise rates. Another option. [1:05:13] Cut rates. A third option. A non-exclusive list of options, but yes. And a lot of it depends on [1:05:20] whether it's temporary or permanent. So how do you decide whether it's temporary or permanent? I got [1:05:26] that in with six seconds left. Well done. You use five task forces to get to the big and hard [1:05:32] questions instead of trying to paper it over with policies that have not been proven as successful. [1:05:38] Senator Cortez Vasto. Thank you, Mr. Chairman. Chairman Marks, good to see you again. Thank you for [1:05:45] meeting with me. Thank you. You've talked about the task forces. What's the timeline for getting [1:05:49] reports from the task forces? So I'm not a very patient person. People have said that to do all [1:05:57] this good work, you'll need years. I gave them six months. Wonderful. Thank you. And that will be made [1:06:01] public? Yeah. The details, even much of the deliberations, I want to do that in the public square [1:06:08] because we all own these decisions at the end of the day. Ultimately, decisions will be made by my [1:06:15] FOMC colleagues. I think they'll start to get briefings on some of the early reports from the [1:06:20] task force, early indications, hopefully as early as September. With my expectation, hope by year end, [1:06:26] we're going to hear their conclusions and decide what to do with it. Thank you. And then just for [1:06:31] clarification, in January of 2025, do you recall the inflation rate? It was about 3%, correct? [1:06:38] I'm going to have to take your word for the precise number, but I knew inflation was still [1:06:42] well above target. Yeah, it was about 3%, and that's when Joe Biden left office. And the current [1:06:47] inflation rate right now is about 3.5%, is that correct? There are various measures. I'm confident [1:06:53] in telling you it's been above target for 63 months. Is it above 3%? By some measures, by other [1:07:00] measures, it's not. But I don't want to suggest I'm happy with any of those measures. I'm not. [1:07:04] Okay, I appreciate it. Let me talk a little bit about an area that is important for me, [1:07:10] and I think many states that deal with a hospitality tourism industry. Unfortunately, under this [1:07:18] administration, we've seen significant declines in the number of international visitors to the US. [1:07:23] The current situation has actually led to our travel trade deficit in this country, [1:07:29] going from a $51 billion surplus in 2019 to a $72 billion deficit today. How does the Federal [1:07:40] Reserve governors consider the specific impact of higher unemployment, lower wages, and reduced economic [1:07:48] activities in communities with large tourism economies like Las Vegas? [1:07:52] So we are consumers of this information. We are keenly interested in the good side of the economy and [1:08:00] the services side of the economy. My view, which is not universally shared in the economics profession, [1:08:07] is that there's no limit to what this economy can grow. Productivity-led growth can move higher, [1:08:13] and that doesn't tell me it's inflationary. But we care about the services part of the economy, [1:08:17] and we're trying to take that into account when we try to make decisions about the dual mandate. [1:08:22] Well, I appreciate that because you're right. Your dual mandate is maintain stable prices and full [1:08:27] employment. Let me tell you what's happening in the hospitality industry because of the policies of [1:08:31] this administration. When you talk about full employment, it is not happening. What I am hearing [1:08:36] from people in my state is that it's not necessarily full employment with good wages and livable wages. [1:08:44] They're patching together multiple low-wage jobs because they are taking down from full employment [1:08:50] to part-time employment. Do you consider that in your analysis going from full-time employment to part-time [1:08:56] and many individuals having several part-time jobs? How do you calculate that into your analysis? [1:09:01] So we think hard about it. You heard in my opening statement the clear judgment of my colleagues and me, [1:09:10] which is the labor market broadly looks in balance. But I don't want to make that sound like it's easy for [1:09:15] hard-working Americans in your state and other places. There's a lot of dynamism happening in the economy. [1:09:21] There's a lot of structural change. And during periods of transition, it's often true that the labor markets [1:09:29] in aggregate look better than people feel in different parts. And during disruption, [1:09:34] they try to recreate a job they had before through the gig economy and other means. We take it into [1:09:41] account. Overall, I would say the labor market part of our mandate looks pretty good. The price [1:09:48] stability part of our mandate looks less good. All right. And I am concerned because not just Las Vegas, [1:09:55] but many tourism-based industries and hospitality, what we're seeing is lower full employment. And I would [1:10:02] hope, and this is a conversation I've had with previous chairs as well, I would hope that you're [1:10:07] considering that it is a large sector of employment across the country. And I know you made a statement [1:10:13] that rise in prices is not necessarily inflationary, correct? At what point do you consider it to be [1:10:19] inflationary? Is there a timeline associated with that? So when an increase in prices in a particular [1:10:26] category like oil or like milk or eggs, when we see that broaden out and affect the generalized price [1:10:32] level, that's something we can do something about. That's what the way I think of inflation. [1:10:37] When prices go up, I know it hits your constituents every day. I'm not trying to sound dismissive of it, [1:10:42] but I also don't want to say that there's much that we can do about cattle prices or milk prices today. [1:10:48] But there's a lot we can do to make sure that the entire grocery aisle doesn't have higher prices. [1:10:52] And that's what we're committed to do. Thank you. Senator Haggerty. Thank you, Mr. Chairman. [1:10:58] Chairman Warsh on July 18th, almost a year ago today, President Trump signed my legislation, [1:11:03] the Genius Act into law. A thorough rulemaking process is absolutely vital to ensure that U.S. [1:11:09] dollar dominance exists here in the digital age. And I look forward to seeing the Federal [1:11:13] Reserve's ongoing work in this matter. I just want to make that point clear. It's important, [1:11:17] needs to be done, and very much appreciate the Fed's attention to it. I want to turn now, [1:11:20] though, to a broader concern. And that has to do with the independence of monetary policy. You've [1:11:25] had a number of conversations with my colleagues about this. I want to emphasize something that I [1:11:29] think is quite important. The special insulation that the Fed receives with regard to monetary policy, [1:11:37] I think as far as I'm concerned, it shouldn't extend to every other function of what the Fed does. [1:11:42] I think it should be limited to monetary policy. For example, you think about bank regulations and [1:11:48] supervision. That's entirely distinct from monetary policy. Regulation requires normative policy [1:11:54] judgments about capital, about credit availability, about risk, economic growth, the structure of the [1:11:59] banking system. All of these considerations need to roll into it. And you think about what's happened [1:12:04] in recent years, regulation has even strayed far afield. You think about what's happened with respect [1:12:09] to climate policy, or Michael Barr's failed Basel III proposal. These decisions are not the same as [1:12:16] setting interest rates or managing the Fed's balance sheet. And quite simply, I think they're [1:12:21] forms of executive regulatory power. The Supreme Court has clarified, for example, that the FDIC [1:12:26] is subject to ordinary principles of executive accountability. Comparable regulatory functions [1:12:31] that the Fed shouldn't be held to a different standard, in my view, simply because they sit within [1:12:35] the central bank. So my question is this, Mr. Chairman, do you agree that the Federal Reserve's [1:12:40] independence should be narrowly tied to its monetary mandate? Senator, thank you for the question. [1:12:47] Like you said, independence is at its peak in the conduct of monetary policy. I believe that when I [1:12:53] showed up at the Fed in 2006, I believed that my confirmation hearing seven or eight weeks ago, [1:12:59] I believe it now. In the conduct of bank and regulatory policy on things like the Genius Act, [1:13:06] my general view is we should be working with our bank regulators, the other bank regulators, [1:13:12] the OCC and the FDIC, see if we can't put out our rules together. What I don't think we want is any [1:13:17] kind of regulatory arbitrage where firms are trying to game who's got the lightest regulation and race [1:13:23] there. I don't think there's anything wrong with us working together with other bank regulators to try [1:13:28] to figure out what's the best policy. I've got some extraordinary colleagues at the Fed. They've been able [1:13:33] think hard about these issues. I think those discussions should happen and do happen. [1:13:37] I disagree at all with that. And I like I like your approach in terms of coordination, [1:13:41] but there's something deeper that I'm concerned about, Mr. Chairman. And that is then just make [1:13:45] make an example. Let's suppose a future Congress decides to embed some sort of regulatory function [1:13:52] inside the Fed seeking to insulate it from our supervision, from our oversight. In some way, [1:13:58] that could become a backdoor that I don't think any of us want to see. And what I'm trying to [1:14:02] make clear is that beyond monetary policy, you know, I'm just I'll ask you the question, [1:14:08] do you think that this special installation applies to other regulatory and supervisory types of [1:14:12] functions? So I spent eight weeks as a summer associate law firm, so I'm probably not best [1:14:18] best position to to opine on the Supreme Court. Senator Warren could do a better job than I. I do recall [1:14:24] in the most recent opinion a footnote from the majority that says we are not suggesting that if other [1:14:31] things went to the Federal Reserve, it would it would get any insulation. Beyond that, I'm on shaky [1:14:37] ground and trying to opine on what the Supreme Court opinion means perspective. I wasn't looking [1:14:42] for your legal opinion. But I do just think as a matter of common sense, I wanted to get that on [1:14:45] the record that there is a real distinction here. And I appreciate that. I'm going to turn to another [1:14:52] important matter. And that's the monetary policy report that that that you work with the most recent [1:14:58] monetary policy report added a new aggregate to the to the measurements, the M2 aggregate. And I just [1:15:04] wanted to ask you to explain why this metric is useful and why why it's been added. Thank you, [1:15:09] Senator. That was an Easter egg that we hid in there to see if anyone read these monetary policy [1:15:14] reports. So I'm encouraged that you did. There is there are there is almost a page talking about M2 and [1:15:21] monetary aggregates that was done with a purpose. I do not show up here as a monetarist. I do not show [1:15:30] up and say the secret to inflation is if we only knew M2, everything would be swell. But monetary [1:15:37] aggregates had been taken out of the monetary policy report probably about a decade ago, maybe a bit [1:15:42] longer. My view is that a modern central banker should have a mosaic of information and should not be [1:15:48] allergic to any data that happens to be inconsistent with dogma that he or she might have been taught in [1:15:54] econ one. I have this old fashioned view that monetary policy has something to do with money. [1:16:02] I remember an old professor of mine that said who was a proper Keynesian economist, he said, [1:16:08] well, I don't understand how to how to think about inflation in a place like Zimbabwe without talking [1:16:14] about money. So I think money matters. What we witnessed when we looked at some of the monetary [1:16:20] aggregates is they are not perfect. We don't measure money very well. We don't measure the velocity of [1:16:24] money very well. But it's a pretty good crosscheck. And had we seen the surge and paid attention to the [1:16:30] surge in inflation and money in 21-22, we might have seen this problem sooner. I apologize. Senator Smith. [1:16:38] Thank you, Mr. Chair and Ranking Member. Chair Warsh, welcome to the committee. [1:16:43] So you may know that Minnesota Senator Hubert Humphrey, who's once held the seat that I now [1:16:50] occupy for Minnesota, led the charge in Congress to include maximum employment as part of the Fed's [1:16:57] dual mandate. And we can probably agree that keeping these two goals of maximum employment and stable [1:17:03] prices within the confines of the monetary policy power that the Fed wields, that just makes sense [1:17:10] because it's a strategy that delivers stable prices. You know, a strategy, excuse me, a strategy that [1:17:16] delivers stable prices while working people can't find jobs or can't afford their lives. I mean, [1:17:22] that's not a healthy economy. I expect you to agree with that. And I do. Thank you. So I was very [1:17:27] interested in the task forces that you established last month to advise you on reform and modernization. [1:17:34] And I want to just ask you about one of them particular. You've created a task force looking [1:17:39] at productivity and jobs. And that's really good, it seems to me. This task force should be able to [1:17:46] get at the power of the Fed's dual mandate and ask also some of the big questions that everyone is [1:17:51] asking about the power and the impact of AI on wages and people's income and employment. So let me just [1:18:00] ask about this particular task force on productivity and jobs. So as I understand it, it is led by three [1:18:07] people. I'm venture capitalist and investor Mark Andreessen, who's made billions from AI and is a major [1:18:13] Trump donor. I'm another tech executive who recently laid off thousands of people and then an academic [1:18:19] economist from my alma mater, Stanford University, who is currently on leave to do research at Anthropic. [1:18:27] So I want to ask about this. Is there anyone on the task force who has experience in the labor market [1:18:35] or somebody who can bring the perspective of an employer rather than an investor to the questions [1:18:42] that are going to be asked and hopefully answered by this task force? So if I could say two things, [1:18:48] one is those three people you referenced are three of the smartest people that I know. And I've been [1:18:54] I'm not disputing that. I'm wondering how you intend to bring into this work the perspective of people [1:19:02] who are working people, bring in the perspective of labor and not just investors. I think it's a fair [1:19:08] question. I've got 18 colleagues who are going to join me and consume the deliberations they have in [1:19:14] the report. And we're the ones that have the dual mandate. And as I said to your colleague, there is no [1:19:19] disfavored part of our mandate. And we're awfully focused on full employment. So that's my commitment [1:19:26] to you. We haven't outsourced this decision to three people. We've outsourced to is a bunch of [1:19:30] thinking about this massive technology shock. And I'll only note one other thing. Chad Jones, [1:19:36] that professor that you mentioned, his academic work, he's an academic, I'll admit that. But I'm not [1:19:41] opposed to that. I'm just trying to. But his academic work has been very, very focused on what is the [1:19:47] effect of the labor markets of these technology shocks, both the good and the bad. And I think [1:19:52] that history he can bring to bear to the work of the task force. So can you can you understand why [1:19:58] a task force that is led by people in large part who are likely to get richer by AI might not be the [1:20:06] most credible people to folks on the ground who are doing the work who are worried about what impact this [1:20:13] AI is going to have on their jobs? And there's the concern, of course, is that the the productivity [1:20:19] that is expected to be delivered by AI, if that actually happens, that the benefits of that productivity [1:20:25] are going to accrue to capital and not to labor. And that it seems to me the credibility of this task [1:20:32] force rests on hearing the perspective of working folks in in their deliberation. To take both parts [1:20:40] of our dual mandate in consideration of their output. I think the issues, sir, their output. I think the [1:20:45] issues, sir, is that when there are the big guys sitting at the table, is there anybody sitting at the [1:20:52] table who's bringing the perspective of working people to those really important questions? There are [1:20:56] labor leaders, there are labor economists, they are folks that whose expertise is in issues around [1:21:02] wage stagnation and how that impacts working people. And I would ask you to consider bringing [1:21:07] that perspective, not to be heard on the side, but to be actually at the table with the with the big guys. [1:21:14] I think that is a credibility issue that you could address very easily. Thank you, Mr. Chair. [1:21:19] Thank you, Senator. Good morning. Good morning. I think you're doing a great job today. I appreciate your [1:21:29] composure. Mr. Warsh, a quick question on just immigration. You know, some people are proudly [1:21:38] discussing how we had almost net zero immigration in the last quarter, but we're starting to look a [1:21:47] little bit like China, Japan, European countries in terms of our replacement rate, in terms of a [1:21:54] natural replacement rate. So if net immigration were to remain near zero for an extended period, [1:22:02] how would that change your estimates on GDP, the neutral interest rate, and the amount of [1:22:08] non-inflationary job growth the economy can sustain? And in some ways it touches on, I think, Senator [1:22:14] Cortez Mastos, this population growth problem. If we don't, these are policies, then how does that make [1:22:23] your job more difficult if we were to sustain the current trajectory? The way those decisions affect us [1:22:28] is it affects potential GDP. The biggest, hardest decision we make is what can this economy produce? [1:22:35] How fast can we grow? Potential GDP is a function of two things. How many hours are we working? People in [1:22:43] this country working. But just in a word, because I want to ask a few other questions. And then second, [1:22:47] productivity. If the worker hours are constant, we need a productivity boom. Just a real quick [1:22:53] question. Would you be thrilled to know that we could guarantee zero net growth for the next decade, [1:22:58] because that would make your job easier? We're going to take the number of hours the American people [1:23:04] and your policies produce, and we're going to do it the best we can. We got a problem. You can't fix it. [1:23:09] But what I'm saying is if we're trying to make your job easier, having this on the agenda is not going [1:23:14] to make your job easier. And I understand the position you have to take. But I want to point to [1:23:19] something that people are high-fiving and talking about net zero immigration growth as if it's a good [1:23:25] thing. It's only a good thing if you want to repeat the mistakes of Western Europe, Japan, China, and other [1:23:30] nations that didn't get their replacement rate right. You know, bringing in great people that may have been [1:23:35] born in Columbia and aspire to become a senator, for example, those sorts of things. [1:23:42] I mean, you didn't get it right every time, but no. And Mr. Warsh, I told you also, [1:23:50] and just for the American people, do you have a magic wand where you can just walk in and [1:23:54] convince seven people of the FOMC to vote exactly the way you want them to? [1:23:59] Perhaps I wish I do, but I do not have such a wand. [1:24:02] So you are one of a body where you have to gain consensus to make an interest rate move, [1:24:08] right? Monetary policy move, right? Yes, and it's a consensus-led organization. [1:24:13] And based on some of the comments from even [1:24:16] Governor Waller, who we'd consider to be pretty hawkish just this week, he's not guaranteeing [1:24:22] that we're going to be able to lower interest rates anytime soon based on data-driven decisions. [1:24:27] Did that just occur this week in a speech, I think, up in New York? [1:24:30] There are a diversity of views. I wouldn't want to dwell on any one of them in particular. [1:24:34] No, it's okay. But what I've tried to explain to people who think the president can give you a call, [1:24:38] you make a decision, it happens, that never happens. Wouldn't have happened under Powell, [1:24:42] wouldn't happen under you, wouldn't happen under anybody who's responsible chairman. [1:24:48] I just wanted to make that point. The last thing, if you could just tell me, [1:24:51] I know you don't want to get in. I think Senator Britt asked you some questions. [1:24:55] I love the fact that you're doing reform. I would like to see the program, [1:24:58] the project charter for the task forces, if you have that, if people are managing this, [1:25:03] milestones, any sort of dashboard you have, the things that any well-put-together set of task [1:25:09] forces would have assembled for a six-month project. I'd like to just track it. Not necessarily for the [1:25:15] record, but if you could commit to have a meeting with the people running it with me, I'd like to [1:25:19] see that just to watch the mechanics play out over the next six months. [1:25:22] And then lastly, if you can, I believe Silicon Valley Bank is a classic example of why the Fed [1:25:33] needs to have its independence on monetary policy, but on bank examination and supervision. I believe [1:25:38] a U.S. senator should minimally be able to go into a SCIF and understand why banks like Silicon Valley [1:25:45] Bank had multiple matters requiring attention and then matters requiring immediate attention well [1:25:52] before they failed. And nobody knew except some examiner and likely people in San Francisco, [1:25:59] in the San Francisco Fed. That stuff has got to change. I don't see any rational basis for that [1:26:05] independence. And we've got some legislation I'd like to talk with you about. Thank you, Mr. Chair. [1:26:09] Thank you. The chair recognizes Mr. Warnock. Well, thank you so very much, Madam Chair. The American [1:26:25] economy is heavily leveraged on the success of artificial intelligence. And this is an issue that [1:26:33] I'm very interested in, been engaging and talking to folks in the industry and folks outside of the [1:26:39] industry, various stakeholders. According to a Bloomberg analysis, AI spending most recently climbed to [1:26:45] about 8% of the U.S. gross domestic product, driving the country's economic growth. Chair Walsh, you have [1:26:54] long been bullish on AI. However, up to now, despite investors betting big on them, none of the major AI [1:27:03] models have been meaningfully profitable. What are the consequences to our economy if none of these [1:27:10] companies ever become profitable? So if they were to disappoint investors, I think the capital markets would [1:27:19] dry up for them and some of that capital investment would be curtailed. I guess that's one way of [1:27:27] putting it. I guess I'm getting at where ordinary folks are in the midst of that. The markets behind [1:27:35] the markets are real people, you know, who have retirement savings and who are trying to make their [1:27:42] present as well as their future work. American retirement accounts are increasingly tied to AI. [1:27:50] And so there's the human issue driven by massive increases in the stock prices of chip and AI [1:27:59] companies. You might talk about the current markets and it was sort of as it's tall and narrow. Let's [1:28:07] imagine if we are in an AI bubble, an AI bubble, what would happen to our economy and more specifically [1:28:16] Americans retirement savings if that bubble popped? So I think it's a fair question, Senator. I take it [1:28:24] seriously. I'm not in the business of providing a Wall Street newsletter, but I'll say broadly to your [1:28:30] question about the effects on the economy. Booms and busts do not help the real economy and they [1:28:37] don't make the central bank's job easier. What the central bank is trying to achieve is price stability, [1:28:43] full employment, all in the context of financial stability. On the question of these AI companies, [1:28:49] certainly the surge in their investment and the surge in their valuations is notable. But I'll also [1:28:56] note one of the things, Senator. Over the course of the last couple of months, we've seen the market [1:29:01] cap both of the public companies and of private companies under some pressure. At the overall indices, [1:29:08] we do seem to see a broadening out. Now, why is that? Because earnings now for the last several quarters [1:29:14] more broadly are moving up. I don't want to suggest that that should give us any complacency. But what [1:29:20] the Fed's looking for is economic strength to broaden and the inflation that we talked about earlier to [1:29:27] become more narrow. So I'd be worried about a massive economic slowdown, you know, the impact of Wall [1:29:39] Street on Main Street, and I'd be worried about job losses. Stock prices tumbling would mean Americans [1:29:46] could not retire as planned. And I don't want to see taxpayers holding the bag should this AI bubble pop. [1:29:55] I'm not against AI. AI is not going anywhere. It has both promise and peril. I just want us to be [1:30:01] thinking critically about this from all angles. Earlier this month, you announced a new task force [1:30:08] to assess the effect of AI on productivity and jobs. The three individuals you chose for the task force [1:30:16] are tech executives who have directly worked for or with AI labs, all three of them. Yes or no, [1:30:24] will the Fed include anyone on this task force with an alternative viewpoint on AI? For example, [1:30:32] anyone who represents the workers whose lives may be upended by increased adoption of AI tools and [1:30:39] technology? So Senator, it's a fair question. As I mentioned to your colleague a few moments ago, [1:30:45] what I'd say is one of the people on those task force is an academic. Now, I don't want to suggest [1:30:50] that the academic is representing some- You don't want to suggest that the academic [1:30:56] is being academic? I don't want to suggest that, but this isn't a faculty lounge discussion. What I do [1:31:01] want to suggest is that academics work has spent a lot of time talking about prior technology shocks [1:31:07] and the displacement that it has on labor. The assurance I can give you is that these three people on that [1:31:13] task force like the other task forces, they're not the deciders. You're talking to one of the deciders. [1:31:18] Right. The 19 of us around the FOMC with a breadth of backgrounds and interest, [1:31:23] we're going to decide what we think of their conclusions. As a decision maker, I always want [1:31:28] various viewpoints. I certainly have nothing against an academic expertise. I think, you know, [1:31:34] that that's important and it's too often ignored in some of the appointments that we've seen around here [1:31:40] lately. But here's my problem. Americans are worried about what AI will be with the economy. [1:31:44] I'm wrapping up, sir. And I'm worried that this viewpoint isn't represented [1:31:49] at the Fed and I would look to broaden. Senator Lummis, your time is yours. [1:31:53] Thank you so much. Thank you, Mr. Chairman, and welcome, Mr. Chairman. [1:31:59] I have a couple of questions about bank supervision before we go to monetary policy. The first one is [1:32:06] Vice Chair Bowman has ordered an independent review of the supervision of Silicon Bank and signature [1:32:15] banks. And I think that's a really good thing. I applaud her and support her efforts there. So [1:32:22] have you instructed your staff, including the attorneys in the legal division, to cooperate with [1:32:30] this independent review? Yeah. So thank you, Senator Lummis. This call for a review, [1:32:37] of what happened around Silicon Valley Bank preceded my time at the Fed. But I'm certainly aware of the [1:32:43] ongoing investigation. And my general rule is that we should be cooperative, do investigations, [1:32:51] and we should try to get to the bottom of the facts on regulatory and supervisory issues. [1:32:57] You know, there are rumors that there may have been destruction of records [1:33:03] records by some of the staff at the Division of Bank Supervision. And of course, that's a crime. [1:33:12] So if records relating to the supervision of these banks were intentionally deleted by staff before you [1:33:21] were at the Fed, before you ever became chairman, will you order your staff to assist in recovery of [1:33:28] these records and cooperate with law enforcement? Yeah. So I made a bold statement to one of your [1:33:34] colleagues before that I was opposed to scams. I can make a bold statement I'm opposed to criminal [1:33:38] activity. I have no reason to believe there's any criminal activity here. But I think we want to get [1:33:43] to the bottom of of an investigation. If there's an ongoing investigation and investigators generally [1:33:50] want access to things, there's no reason why they shouldn't have access. Thank you. I want to turn [1:33:57] to a proposed rule that is being considered and ask for your thoughts on the proposed rule. And it has to [1:34:06] do with the Federal Reserve Board's payment accounts. Skinny master accounts is kind of a term that's used. [1:34:15] You know, my staff has told me that if a doctor submits statements to an insurance company, they have [1:34:26] two choices. They can pay five percent in bank fees or wait 90 to 120 days for a paper check. It seems to me [1:34:37] that the Federal Reserve is really on to something by trying to join other countries [1:34:45] that restrict access to the payment system to consumer facing banks. We're the only major country [1:34:58] in the world that restricts access to the payment system to the consumer facing banks. So I think [1:35:06] the you're on the right track to expand the opportunities to serve consumers. And I'm curious [1:35:15] about what your thoughts are about the proposal, how it's going, when you expect the rule to be [1:35:22] finalized. Yeah. So as I understand it, this skinnier account, skinnier master account proposals out for [1:35:29] comment. It was sent out before I arrived, but I'm keenly interested in what the comments are. My mental [1:35:36] model is that the critical infrastructure, the rails that the Fed runs should be available to those that are [1:35:44] applicable, that can comply with our rules and regulations. If I were to draw a hard distinction, [1:35:50] this is a public good, and it's a public good that should be used by intermediaries. I don't want [1:35:56] the public good to be used by consumers, by people that are on the front lines. But if financial [1:36:02] institutions, new and old, want to comply with our regulations and take advantage of this public good, [1:36:08] my general predilection is to encourage it. Well, I think that's admirable and important. [1:36:15] So it's out for comment now. Do you anticipate finalizing sometime this year? [1:36:21] I owe you a better answer on the timeline from here, and I pledge to give it to you. [1:36:26] Thank you. Thank you. [1:36:27] Thank you. [1:36:28] I share a concern that was expressed by my colleague, Mr. Haggerty, that monetary policy [1:36:36] should enjoy the committee not having to be as transparent about its process. [1:36:48] Yes. I agree with Senator Haggerty also that the bank supervision component should not enjoy that same [1:36:57] level of non-scrutiny. I think we need to scrutinize bank supervision. I'm concerned that [1:37:05] that area was sort of hidden from public view for too long. And so I want to just echo what Mr. Haggerty [1:37:13] said. Thanks, Mr. Chairman. Yes, ma'am. Senator Kim. Yeah, thank you, Chairman. And [1:37:18] Chairman, thank you for coming on out. I actually wanted to build on something that Senator Warnock [1:37:22] was going into about AI. And I guess I wanted to ask you, you know, I've seen some public reporting [1:37:29] that there was a report produced by Treasury staff for Secretary Bess in the Federal Reserve and other [1:37:36] financial regulators that outlines the risks associated with the AI boom. Are you familiar [1:37:43] with this report? I can't say that I've read that report, but it's certainly a discussion that the [1:37:49] Secretary and I have had. Is that something we can follow up on, get a sense of where the status of [1:37:55] this report is? Yeah, I'd be happy to both engage in the report and share with you my views. Yeah. But, [1:38:00] you know, regardless of the report itself, from what I understand, it's raising concerns that [1:38:08] that much of our financial system right now rests upon AI meeting expectations for protected [1:38:14] productivity gains as profitability and as well as raising concerns about the concentration [1:38:21] in a small number of firms that are heavily reliant on private market financing, [1:38:27] specifically invested in data centers in particular. I want to just get a sense. Do you agree with these [1:38:32] underlining economic risks or do you believe that that analysis is overstating the risks? [1:38:39] So I think this is the most important change in our economy in my adult lifetime. I think it has [1:38:46] plenty of opportunities and also plenty of risks and I take both of them seriously. [1:38:50] Yeah, I mean, it's something I'm trying to grapple with too. So, you know, I'm not expecting that you [1:38:54] have a fully baked answer right now, but I hope we can work on this together. Because I do think when we're [1:38:59] looking at that future, trying to think through the data, I'm trying to think through what data is [1:39:04] going to allow us to understand how exposed we are, you know, what the concerns are. And I guess [1:39:09] I would just ask you as you're looking at the data, how would you assess our economy, the state of our [1:39:15] economy, if you were to isolate out AI? You know, which I know is driving so much of our growth right [1:39:21] now. How is the rest of our economy doing? So it's a fair question. We can start to [1:39:26] do a little bit of that. So I mentioned in my opening statement, the importance of capital [1:39:31] expenditures to aggregate GDP. A good share of that CapEx boom is broadly in around infrastructure [1:39:39] related artificial intelligence. Not exclusively, but it's part of the real story here. If I were to [1:39:47] fast forward 12 months, whether these AI models continue to grow in their efficacy on some exponential [1:39:54] curve or not, most of this CapEx is going into things like data centers, new sources of energy. [1:40:00] And let's say there was a disappointment on the returns and what AI could do. Many of these [1:40:05] investments have alternative uses. But if the if the question is really how much productivity do we [1:40:13] expect to ultimately get from AI? The answer is I don't know. But I'm optimistic that over a longer time [1:40:20] horizon, it'll be quite good for the United States and good for both parts of the dual mandate, lower [1:40:25] prices and a stronger labor force. Well, I hope we can work on this together and try to get a clearer [1:40:32] understanding of just how much risk there is. And look, I'm glad to hear about this, you know, this task [1:40:38] force that you're putting together about the productivity side. I will just say the concern amongst [1:40:44] young people in particular is very potent and very real. And and we we we have to come up with an [1:40:52] answer to them to help them feel reassured right now because I get it. They are, as you said, more [1:40:58] native in the technology. But that doesn't necessarily help them when the companies themselves are saying [1:41:04] we don't need to hire as many, you know, junior associates or or or, you know, or other jobs, [1:41:11] especially on the entry, more entry level side of things, no matter how much native fluency that [1:41:16] they have or tech or or understanding and skills, if the businesses are saying, you know, we don't need [1:41:22] as many people at the younger lower end. And so as you're dealing with this task force, I hope it's [1:41:28] something that can interact with this committee. I hope we have a chance to be able to talk to some of [1:41:32] them and hear from them in that capacity. But I also say, you know, we need to make sure we're speaking human [1:41:39] about this and not just getting kind of caught up in this. I just wanted to flag that for you. [1:41:44] One last thing I wanted to just touch base on is, you know, Senator Reid mentioned the concerns about [1:41:52] whatever we want to call a mythos proofing or AI proofing using AI to be able to shore up our [1:41:57] vulnerabilities. You know, we've a number of us have been talking to some of the financial sector, other [1:42:02] critical infrastructure. I guess I just want to ask you, does it does the Fed have all it needs [1:42:06] to be able to kind of shore up our vulnerabilities, patch up any vulnerabilities? Has that been a [1:42:13] process that you all feel have confidence in so far? Also to a yes or no answer. Yeah, I'm working [1:42:19] on it. And I look forward to working with you on it as well. Let us know how we can help. Yeah. Thank [1:42:22] you. Senator Moreno. Thank you, Mr. Chairman. And thank you to you, Chairman Warsh for being here. [1:42:28] It is such a pleasure to have you here compared to your predecessor. I can't explain to you in words [1:42:36] the feelings that I had when your predecessor testified versus the feelings of having you here. [1:42:40] So truly appreciate the hard work. So quick questions. You obviously take we have a whole [1:42:46] regulatory structure around banks. What's happened to deposits in American banks since last August? [1:42:53] Have they gone up, stayed the same or gone down? Generally speaking, there are differences, but [1:42:57] generally speaking, deposits held in banks is moving positively over that period. And you worry about [1:43:03] that. Of course, you watch that because if you had a massive deposit flight, that would be a problem, [1:43:06] correct? I worry about it. But I also use it as a helpful input. When average deposit balances are up, [1:43:13] sometimes that could be for good or bad reasons. My sense of the underlying growth [1:43:17] is more good than bad. Right. But as a banker, the bankers want deposits to go up. They sure do. [1:43:23] And I just find that interesting as a data point, Mr. Chairman, because we've talked about, [1:43:27] well, we've had testimony anecdotally from the bank CEOs saying that stable coins were going to drop [1:43:35] deposits in banks. And I just want to point out for the record that the exact opposite has happened. [1:43:41] So as they say, that was a bunch of blankety blank argument. Okay. You have two mandates. Let's talk [1:43:48] about full employment for a second. If we have incentives that we put in place here legislatively [1:43:56] for Americans not to work. Does that round counter to your objective of full employment? [1:44:01] It doesn't make doesn't make the feds life any easier. Right. So we say if we actually incentivize [1:44:07] somebody from actually participating and being productive in the workforce, that's not good. [1:44:12] Things like, for example, we did the working families tax cuts last year, which is to put in [1:44:17] place where you have to verify twice a year whether you're working, volunteering, or studying would be a [1:44:23] positive demotivator for not working, correct? Meaning it encourages work. [1:44:28] I can't opine on the policies you make, but for the implications of the Fed, we're in the business [1:44:34] of assessing potential growth. The more hours that are worked and the more productive those hours are, [1:44:40] the stronger the economy can be. Which is good when you're mandated. And if you had tens of millions of [1:44:46] people entering the country illegally, it makes your challenge of full employment more difficult also, [1:44:52] correct? I'm going to steer clear from immigration policy and leave it with you and the administration. [1:44:57] So pretend they're just naturally grown humans on the soil of America. If you have dramatically more [1:45:04] humans in the United States looking for work, by definition, it makes full employment more difficult, [1:45:09] correct? So if those people are employed and are working and are productive, that's a good thing. No, [1:45:16] if they're not employed. Well, that can be a challenge to one, if not both parts of our mandate. [1:45:23] Okay, let's talk about data centers really quick. So if you felt where the Federal Reserve felt that data center [1:45:29] investment was driving inflation, what is the tool that you could use to combat that? So I think that investment in data [1:45:41] centers and in AI generally do affect the demand side of the economy. And we can see it and we can [1:45:47] see prices move up. But unlike some of these other shocks with a lag, it also affects the supply side. [1:45:52] No, but what I'm saying is if you felt that you had to do something about it, would it be accurate to [1:45:56] say really, you don't have a lot of tools? I think some of my colleagues think that you do have a magic wand. [1:46:02] But ultimately, you'd have to raise interest rates. The idea would be you're going to make it more expensive [1:46:07] to borrow money to build these things. Ultimately, that's basically the tool that you have, [1:46:11] just roughly speaking, correct? We have powerful tools to deal with what we deem to be [1:46:17] inflation above target. Right. So you would raise interest rates if you really is the tool that you'd [1:46:22] use. Does it make any sense for us to be thinking that inflation is being caused by data center investment? [1:46:29] And the answer would be to look to the Fed to raise interest rates, when in reality, you have government [1:46:34] that's providing tax subsidies, which is lowering the cost and thus encouraging more irrational [1:46:40] investment. Doesn't it make more sense to say, let's not do any tax subsidies? Now, we can't do that [1:46:47] here at the federal level, because a lot of these subsidies are coming from cities, counties and states. [1:46:51] I actually believe, I think, Chairman, we should think about providing 100 percent federal tax [1:46:56] on these subsidies, so that if a company wants to take subsidies from some state, tax it at the [1:47:03] federal level 100 percent to discourage it. Because I think it is absolutely insanity for us to use [1:47:08] taxpayer dollars to subsidize multi-billion dollar companies. And by the way, those incentives don't [1:47:12] exist. Would you agree that that seems reasonable? Fiscal policy is your decision. I'm going to let you [1:47:19] guys fight that one out. Good. Early. Thank you. Senator Alson Rose. All right. Thank you so much, [1:47:27] Chair Scott and Ranking Member Warren for holding today's hearing. And Chairman Warsh, it's good to see [1:47:33] you again. Before we talk about the economy, I want to briefly return to your confirmation hearing. [1:47:40] We're under questioning from Senator Gallego and myself. You said that the president never, quote, [1:47:46] generally or specifically instructed you to lower interest rates. And your testimony at the time [1:47:52] did contradict reporting by the Wall Street Journal. So Senator Gallego and I sent you a letter on April [1:47:58] 26th clarifying your testimony. And we have we have not yet received a response. So as you as we stated [1:48:06] in our letter, President Trump told the Wall Street Journal that he thinks you have to lower his quote [1:48:12] was he thinks you have to lower interest rates. And under your sworn testimony in this committee, [1:48:17] you said that the president never generally or specifically instructed you on interest rates. [1:48:22] And so I wonder whether you will just commit to responding to our letter. Sure. I I stand by [1:48:29] every word that I said at my confirmation hearing. And now I have a seven week track record subsequent to [1:48:35] that. And you can judge not just my words, but my actions. And I'm happy to continue the discussion [1:48:41] with you about this topic. If you think it's it's fruitful. I will say I've spent seven weeks doing [1:48:46] a lot of hard business of reform, but I'm happy to continue to engage. Okay. And you will respond [1:48:51] to the letter that Senator Gallego and I sent to you. I'm happy to find the letter. I think it came to [1:48:58] me before I was confirmed to the Fed. I'm happy to to find it and and and work with you and and your [1:49:04] colleagues and answer any questions you have. Okay. Thank you. Now, federal governor Christopher Waller [1:49:09] recently announced a framework to radically transform the Fed systems of 12 regional reserve [1:49:17] banks and Congress deliberately created a centralized system of 12 regional banks to ensure that regional [1:49:23] economies and communities are represented when the Fed makes consequential decisions. The Federal [1:49:29] Reserve Bank of Richmond, which serves Maryland, employs over 100 of my constituents at the bank's [1:49:34] Baltimore branch. And I share our ranking members concerned that these changes are being pursued [1:49:40] without consideration of Congress. And so do you agree that regional presidents and board directors [1:49:45] are responsible for day to day operations under the Federal Reserve Act and not the Federal Reserve [1:49:50] Board in Washington? So I I love the structure of the Board of Governors and the Reserve Banks [1:49:57] in the Federal Reserve Act. And I love the Humphrey Hawkins testimony. I am obligated to do to give it to [1:50:03] you as the Federal Reserve Act makes clear, as you know, is the Reserve Banks run operations and their [1:50:11] budgets are reviewed and approved by approved by the Board of Governors. With respect more broadly to the [1:50:17] proposal you suggested, I think we we need to try to do two things at the same time. Be good stewards of taxpayer [1:50:24] money and continue to drive efficiencies throughout the system. And at the same time, respect the [1:50:30] independence of the Reserve Banks so that they can show up in Washington at an FOMC meeting and feel [1:50:36] as though they have the resources at their disposal to argue their point of view. My addition to the to [1:50:43] what's already been said publicly is my view is the 12 Reserve Banks should be 12 centers of excellence. [1:50:49] And if there is some savings that we're necessarily driving through consolidation of [1:50:54] overlapping functions, they should at the same time be able to build out capabilities and solve [1:51:00] any of a number of problems of economic policy that are inside of our remit. I've encouraged the 12 [1:51:05] Reserve Banks to think about what they could do to have a center of excellence. So Mr. Chair, [1:51:09] so you your answer is yes, you do agree that the regional presidents and board directors are [1:51:14] responsible for day to day operations under that act. I do believe that subject to the oversight of the [1:51:20] board of governors and the statute. Okay, just one last question. You've suggested that artificial [1:51:25] intelligence will generate productivity gains that will reduce inflation and help lower interest rates. [1:51:31] And I'm optimistic as well about the promise of AI, but we need to be really clear-eyed, I think, [1:51:37] in considering the the whole economy and the impact there. The Fed has two mandates, a low inflation and [1:51:43] maximum employment. And you've spoken often about AI's impact on prices and inflation, but inflation is [1:51:49] still high. So it's important that the Fed also addresses the employment piece of this mandate and [1:51:54] just as urgently the Fed should consider who benefits from AI. So some economic models for AI as economic [1:52:03] effects foresee gigantic returns for capital holders, but stagnant wages and job losses for workers. So as it [1:52:10] relates to AI, what specifically is the Fed doing studying or preparing for under your maximum [1:52:17] employment mandate? So I endorse both parts of the dual mandate, and I don't want to suggest that [1:52:23] productivity and the AI wave only impacts one part of it. We've got no legislative orphans, [1:52:30] and I think that the effect on the labor markets is real and something we're thinking long and hard about [1:52:35] short-term, medium-term, and long-term. Okay, thank you. Senator Banks. Thank you, Mr. Chairman. [1:52:40] Chairman Warsh, welcome back to the committee for the first time as the chairman of the Federal [1:52:46] Reserve. I was proud to vote for your confirmation back in May, and it's great to have you come back. [1:52:50] I understand we do this on the committee, Mr. Chairman, twice a year. I'm looking forward to [1:52:55] continued dialogues with you and before this committee for many years to come. You're very [1:53:00] familiar with my state, Indiana. We've talked about Indiana a great deal. There's no state in America that [1:53:06] has a stronger manufacturing base than Indiana. Manufacturing jobs are the biggest share of our [1:53:14] workforce and our state and accounts for about a quarter of our state's economy. For decades, though, [1:53:20] policymakers here in Washington have turned a blind eye as foreign countries erode our manufacturing base [1:53:28] and rely on artificially cheap labor. But under President Trump, [1:53:32] we have a renewed focus on fighting back and protecting America's manufacturing edge. In addition [1:53:40] to President Trump's tariffs, we are helping American companies compete against foreign competition by [1:53:46] investing in new technologies that help American workers make better quality goods more efficiently than [1:53:53] countries that rely on cheap labor. Mr. Chairman, business investment in the U.S. is surging right now. [1:54:00] Fixed investment grew at a rate of 10.1 percent in the first quarter of 2026. Can you talk more about [1:54:08] that and about how rising investment in new technologies like AI and robotics can strengthen [1:54:14] America's competitive position against the rest of the world, especially when it comes to manufacturing? [1:54:20] So thank you, Senator Banks. The CapEx surge is remarkable. This is a CapEx investment boom [1:54:27] that the country hasn't seen in more than a generation. It is the seed corn for productivity and GDP [1:54:36] improvement over the next decade. The way these waves typically go historically, which doesn't mean [1:54:42] it has to happen this time, is a surge in CapEx with some lag leads to stronger economic potential, [1:54:49] stronger growth, higher wages and more productivity. This surge is different. It's happened faster. It's [1:54:56] probably going to be bigger and it's accelerating in real time. The effect on the Fed's mandate is [1:55:02] something we're taking very seriously. But I would far rather have capital expenditure boom than have [1:55:09] large corporate profits go back into share buybacks and dividends. Investing here is a good thing and all [1:55:16] other things being equal, it's going to have fruits for the American economy. Good. Later this year, [1:55:22] bank regulators are expected to finalize new rules covering capital and stress testing. The Fed's new [1:55:29] rules are a world away from the harmful basal endgame proposed proposal that the Biden regulators tried [1:55:36] to jam through, which would have hit working families in Indiana with a hidden tax on every mortgage and [1:55:43] small business loan. But the transition still has to be handled well. These capital rules touch every part of [1:55:50] a bank's planning. Implementing the new rules with clear and organized with a clear and organized [1:55:56] timeline is critical. Will you commit to coordinating the rollout of these new rules across all major bank [1:56:02] regulators so community banks especially can rely on clear guidance to follow? Yeah, I think, [1:56:07] Senator, I think clarity here is really important. These rules, as you know, are out for comment. [1:56:12] I'm keenly interested in the comments as they come in. And I think it is a very good thing if the bank [1:56:19] regulators can speak with one voice. What we saw going into the 08 financial crisis was a lot of [1:56:25] regulatory arbitrage where institutions were choosing the regulator that best served their needs. [1:56:30] I would love to have one standard and I'm committed to work with the other regulators to see if we can [1:56:35] achieve it. I'll just make one other point. You referenced the stress tests. The stress tests were [1:56:40] a design and idea that we came up with one dark evening in the 08 financial crisis. Stress tests have [1:56:46] been used from that year till this year. I'm open-minded to reforms around the stress tests. So the stress [1:56:52] tests aren't merely a compliance exercise but help reveal both to the regulator and institutions what [1:56:58] would really happen under a series of stresses. Good. When you were here during the confirmation hearing, [1:57:03] you and I talked about the China threat, something that you focused on for years. I know you're only two [1:57:10] months into the job as chairman, but any updates on how you can assess the threat that China poses to [1:57:16] the dollar's role as the world's reserve economy? So they're a pacing power. They are the AI, the fight [1:57:24] over AI is one of a proxy fight between these two economies that are striving for significance and [1:57:30] influence over the next decade. I think we are on the front end of those technologies, but I don't want to [1:57:36] sound complacent about it. And like with all technologies, they can be used by friends or [1:57:42] adversaries. And so if there's a subject upon which I've been focused related to this in my first seven [1:57:48] weeks is making sure the institutions we regulate and the Fed itself is aware of our vulnerabilities. [1:57:55] And I still think we've got some work to do on that. Good. Thank you. I yield back. Senator Blot. [1:58:00] Blotchester. Thank you, Mr. Chairman. And thank you, Ranking Member Warren. [1:58:05] It's good to see you, Chairman Warsh. I will tell you, I've been in and out of the room because I have [1:58:12] four committees happening at the exact same time. And so going back and forth, and I know a lot of the [1:58:19] things that I wanted to talk about are questions I wanted to ask. Some of have already been asked, [1:58:24] so I may not use the whole time. But when we talked before during your confirmation hearing, [1:58:31] I raised questions about primarily three things. One was the independence of the Federal Reserve. [1:58:39] And you've spoken a lot about that today in the hearing. I talked about transparency around reforms, [1:58:48] and what does regime change mean? And how does this connect with our regional Federal Reserve Boards? [1:58:58] And then I also shared with you just my real deep concerns about the impact of AI, as well as the [1:59:08] opportunities for AI and just the changing landscape, particularly when we talk about that mandate of [1:59:17] full employment, maximum employment. And lastly, I would also say, really important to me, [1:59:26] and I shared that with you as well, is that the focus primarily a lot of times what is talked about [1:59:33] is the Wall Street side and not the Main Street side. And so how Main Street has equal footing to Wall [1:59:40] Street. And so a lot of the questions that have come, one of the things that you shared in your testimony [1:59:46] was about the task forces that you have established, which I think is a really good idea. And I think [1:59:53] the choices of things that you're focused on from communication, you know, to AI and influence, [2:00:05] all of those things are really important. And I think some of my other colleagues might have asked [2:00:09] questions. I was on the AI one in particular, I hope that there will be the inclusion of other voices [2:00:17] beyond economic experts and tech individuals, but actually, families, businesses, people that are [2:00:28] actually both consuming and impacted by AI. So if you could talk a little bit more about the makeup of [2:00:37] that one in particular, and how you will include people both in the task force, [2:00:42] and how you will include Main Street in your ongoing work at the Fed, because before we had the Fed [2:00:51] listens tours, we had, and I heard positive from both folks on the Federal Reserve side, as well as [2:00:57] the community side. So could you talk about the inclusion of Main Street on the task forces, [2:01:04] and then ongoing in your work? How will you include Main Street? [2:01:08] Yeah, so let me address both those questions, Senator. First, on the task forces, [2:01:14] we have 15 people across five task forces. I think there's a breadth of views, perspectives, [2:01:21] expertise, they're all fantastic. They aren't decision makers, you're talking to one of the [2:01:27] ultimate decision makers. And I believe like you do in the reserve banks, the reserve bank presidents [2:01:33] bring a breadth of views from their communities, from their businesses, and they and we are going to be [2:01:37] the deciders about what to do with these. I don't want you to think that I've outsourced anything to [2:01:42] these task forces other than coming up with new ideas. Which is fine. My question is more related to [2:01:48] the makeup. One of the concerns I have, even on technology, we've seen incredible advances where [2:01:54] voices were not included of other folks, and so therefore we had technology that mistakenly [2:02:02] we took a black judge and thought that he was a criminal based on bad input of how the technology. [2:02:10] So I'm talking about the input in the task forces as well as your ongoing input. I don't know if you [2:02:18] continue will continue with like Fed Listens or any of those things, but how will you get feedback from [2:02:25] community organizations, small businesses, consumers? Yeah, I don't mean to give you an excuse. [2:02:33] I've been here seven weeks. We've been pushing for reforms, but you have my commitment. The focus [2:02:39] under my chairmanship at the Fed is what's happening in the real economy. And by the way, there are plenty [2:02:44] of people on Wall Street who are upset with me already that I'm somehow not feeding them all the [2:02:50] information they've gotten before. And if they only had my dot, everything would be swell. My message [2:02:55] to them is play the ball, don't play the Fed. By that I mean figure out what's happening in the real [2:03:01] economy. Respond to data that's happening in the real economy rather than somehow suggest that we're [2:03:07] going to be focused on Wall Street. So you have my commitment to focus on Main Street because it [2:03:11] matters mostly to our dual mandate. Well, I appreciate the time. I will also follow up with questions for [2:03:17] the record and also particularly on the data piece as well. And I yield back, Mr. Chairman. [2:03:23] Thank you, ma'am. For senators who wish to submit questions for the hearing record, please do so by [2:03:28] Wednesday, July 22nd. The chairman will have 45 days from that day to submit your responses to [2:03:35] questions for the record. This has been a great hearing. Thank you. Well done so far so good. We look [2:03:42] forward to even more time that we could spend together. And I frankly believe that the American [2:03:50] people will have their trust restored under your leadership as relates to the Federal Reserve. [2:03:56] Thank you, Mr. Chairman. Absolutely.