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Statement by
Janet L. Yellen
Vice Chair
Board of Governors of the Federal Reserve System
before the
Committee on Banking, Housing, and Urban Affairs
U.S. Senate
November 14, 2013

Chairman Johnson, Senator Crapo, and members of the Committee, thank you for this
opportunity to appear before you today. It has been a privilege for me to serve the Federal
Reserve at different times and in different roles over the past 36 years, and an honor to be
nominated by the President to lead the Fed as Chair of the Board of Governors.
I approach this task with a clear understanding that the Congress has entrusted the
Federal Reserve with great responsibilities. Its decisions affect the well-being of every
American and the strength and prosperity of our nation. That prosperity depends most, of
course, on the productiveness and enterprise of the American people, but the Federal Reserve
plays a role too, promoting conditions that foster maximum employment, low and stable
inflation, and a safe and sound financial system.
The past six years have been challenging for our nation and difficult for many
Americans. We endured the worst financial crisis and deepest recession since the Great
Depression. The effects were severe, but they could have been far worse. Working together,
government leaders confronted these challenges and successfully contained the crisis. Under the
wise and skillful leadership of Chairman Bernanke, the Fed helped stabilize the financial system,
arrest the steep fall in the economy, and restart growth.
Today the economy is significantly stronger and continues to improve. The private sector
has created 7.8 million jobs since the post-crisis low for employment in 2010. Housing, which
was at the center of the crisis, seems to have turned a corner--construction, home prices, and
sales are up significantly. The auto industry has made an impressive comeback, with domestic
production and sales back to near their pre-crisis levels.
We have made good progress, but we have farther to go to regain the ground lost in the
crisis and the recession. Unemployment is down from a peak of 10 percent, but at 7.3 percent in

-2October, it is still too high, reflecting a labor market and economy performing far short of their
potential. At the same time, inflation has been running below the Federal Reserve’s goal of
2 percent and is expected to continue to do so for some time.
For these reasons, the Federal Reserve is using its monetary policy tools to promote a
more robust recovery. A strong recovery will ultimately enable the Fed to reduce its monetary
accommodation and reliance on unconventional policy tools such as asset purchases. I believe
that supporting the recovery today is the surest path to returning to a more normal approach to
monetary policy.
In the past two decades, and especially under Chairman Bernanke, the Federal Reserve
has provided more and clearer information about its goals. Like the Chairman, I strongly believe
that monetary policy is most effective when the public understands what the Fed is trying to do
and how it plans to do it. At the request of Chairman Bernanke, I led the effort to adopt a
statement of the Federal Open Market Committee’s (FOMC) longer-run objectives, including a
2 percent goal for inflation. I believe this statement has sent a clear and powerful message about
the FOMC’s commitment to its goals and has helped anchor the public’s expectations that
inflation will remain low and stable in the future. In this and many other ways, the Federal
Reserve has become a more open and transparent institution. I have strongly supported this
commitment to openness and transparency, and will continue to do so if I am confirmed and
serve as Chair.
The crisis revealed weaknesses in our financial system. I believe that financial
institutions, the Federal Reserve, and our fellow regulators have made considerable progress in
addressing those weaknesses. Banks are stronger today, regulatory gaps are being closed, and
the financial system is more stable and more resilient. Safeguarding the United States in a global

-3financial system requires higher standards both here and abroad, so the Federal Reserve and
other regulators have worked with our counterparts around the globe to secure improved capital
requirements and other reforms internationally. Today, banks hold more and higher-quality
capital and liquid assets that leave them much better prepared to withstand financial turmoil.
Large banks are now subject to annual “stress tests” designed to ensure that they will have
enough capital to continue the vital role they play in the economy, even under highly adverse
We have made progress in promoting a strong and stable financial system, but here, too,
important work lies ahead. I am committed to using the Fed’s supervisory and regulatory role to
reduce the threat of another financial crisis. I believe that capital and liquidity rules and strong
supervision are important tools for addressing the problem of financial institutions that are
regarded as “too big to fail.” In writing new rules, however, the Fed should continue to limit the
regulatory burden for community banks and smaller institutions, taking into account their distinct
role and contributions. Overall, the Federal Reserve has sharpened its focus on financial stability
and is taking that goal into consideration when carrying out its responsibilities for monetary
policy. I support these developments and pledge, if confirmed, to continue them.
Our country has come a long way since the dark days of the financial crisis, but we have
farther to go. Likewise, I believe the Federal Reserve has made significant progress toward its
goals but has more work to do.
Thank you for the opportunity to appear before you today. I would be happy to respond
to your questions.