prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 1.

Report 1: The rise of e-commerce has contributed to a fundamental change in the market for counterfeit goods, according to our analysis of documents from CBP, ICE, and international organizations and our interviews with CBP and ICE officials  U S  agencies and international organizations have observed a shift in the sale of counterfeit goods from “underground” or secondary markets, such as flea markets or sidewalk vendors, to primary markets, including e-commerce websites, corporate and government supply chains, and traditional retail stores  Whereas secondary markets are often characterized by consumers who are knowingly purchasing counterfeits, primary markets involve counterfeiters who try to deceive consumers into purchasing goods they believe are authentic  This shift has been accompanied by changes in the ways in which counterfeit goods are sold  In the past, consumers could often rely on indicators such as the location of sale or the goods’ appearance or price to identify counterfeit goods in the marketplace  However, counterfeiters have now adopted new ways to deceive consumers  For example, as consumers increasingly purchase goods online, counterfeiters may exploit third-party online marketplaces to gain an appearance of legitimacy and access to consumers  When selling online, counterfeiters may post pictures of authentic goods on the websites where they are selling counterfeits and may post pseudonymous reviews of their products or businesses in order to appear legitimate  Additionally, by setting the price of a counterfeit at, or close to, the retail price of a genuine good, counterfeiters may deceive consumers, who will pay the higher price because they believe the goods are real or who believe that they are getting a slight bargain on genuine goods  According to CBP seizure data and CBP officials, the volume, variety, and methods of shipment of counterfeit goods seized by CBP and ICE have changed in recent years  CBP reports indicate that the number of IPR seizures increased by 38 percent in fiscal years 2012 through 2016  According to CBP data, approximately 88 percent of IPR seizures made during this period were shipped from China and Hong Kong  The variety of products being counterfeited has also increased, according to CBP officials  CBP and ICE officials noted that, while many consumers may think of luxury handbags or watches as the most commonly counterfeited goods, counterfeiting occurs in nearly every industry and across a broad range of products  In addition, according to CBP data we reviewed and officials we spoke to, the methods of importing counterfeit goods into the United States have changed in recent years  Specifically, express carriers and international mail have become the predominant form of transportation for IPR-infringing goods entering the United States, constituting approximately 90 percent of all IPR seizures in fiscal years 2015 and 2016, according to CBP data  In an attempt to illustrate the risk that consumers may unknowingly encounter counterfeit products online, we purchased a nongeneralizable sample of four types of consumer products—shoes, travel mugs, cosmetics, and phone chargers—from third-party sellers on five popular e-commerce websites  According to CBP data we reviewed and officials we spoke to, CBP often seizes IPR-infringing counterfeits of these types of products  As table 1 shows, the rights holders for the four selected products we purchased determined that 20 of the 47 items were counterfeit  We did not identify any clear reasons for the variation among the counterfeit and authentic items that we purchased based on the products that they represented, the e-commerce websites where we bought the items, or the third-party sellers from whom we bought them  For three of the four product types, at least one item we purchased was determined to be counterfeit, with results varying considerably by product  Representatives of the rights holders also could not provide a specific explanation for the variation among authentic and counterfeit goods that we received  They noted that the results of covert test purchases can fluctuate depending on enforcement activities and the variety of goods and sellers on a particular website on a given day  Rights-holder testing also showed that we purchased at least one counterfeit item and one authentic item from each of the five e-commerce websites  In addition, our analysis of the customer ratings of third-party sellers from whom we bought the items did not provide any clear indications that could warn consumers that a product marketed online may be counterfeit  For example, we received both counterfeit and authentic items from third- party sellers with ratings that were less than 70 percent positive as well as sellers with ratings that were up to 100 percent positive  Rights holders were able to determine that items we purchased were not authentic on the basis of inferior quality, incorrect markings or construction, and incorrect labeling  Some counterfeit items we purchased were easily identifiable as likely counterfeit once we received them  For example, one item contained misspellings of “Austin, TX” and “Made in China ” Other items could be more difficult for a typical consumer to identify as counterfeit  For example, the rights holder for a cosmetic product we purchased identified one counterfeit item on the basis of discrepancies in the color, composition, and design of the authentic and counterfeit items’ packaging  Counterfeit goods may also lack key elements of certification markings and other identifiers  For example, on a counterfeit phone charger we purchased, the UL certification mark did not include all components of the authentic mark  Figure 1 shows examples of these counterfeit items  The risks associated with the types of counterfeit goods we purchased can extend beyond the infringement of a company’s IPR  For example, a UL investigation of counterfeit iPhone adapters found a 99 percent failure rate in 400 counterfeit adapters tested for safety, fire, and shock hazards and found that 12 of the adapters tested posed a risk of lethal electrocution to the user  Similarly, according to a rights holder representative, counterfeits of common consumer goods, such as Yeti travel mugs, may contain higher-than-approved concentrations of dangerous chemicals such as lead, posing health risks to consumers  According to ICE, seized counterfeit cosmetics have been found to contain hazardous substances, including cyanide, arsenic, mercury, lead, urine, and rat droppings  Representatives of rights holders and e-commerce websites whom we interviewed reported taking independent action to try to protect IPR within their areas of responsibility  For example, both rights holders and e- commerce websites maintain IPR protection teams that work with one another and with law enforcement to address infringement issues  E- commerce websites may also take a variety of steps to block and remove counterfeit items listed by third-party sellers  These efforts rely on data collected through a variety of means, including consumer reporting of counterfeits, rights-holder notifications of IPR infringement, and corporate efforts to vet potential third-party sellers, according to private sector representatives  Our January 2018 report includes information on steps that consumer protection organizations and government agencies recommend consumers take to limit the risk of purchasing counterfeits online  These steps include, for example, buying only from authorized retailers online, avoiding prices that look “too good to be true,” and reporting counterfeit purchases  We identified a number of key challenges that the changes in the market for counterfeit goods can pose to CBP and ICE as well as to the private sector


Report 2:  First, the increasing sophistication of counterfeits can make it difficult for law enforcement officers to distinguish between legitimate and counterfeit goods  Second, as the range of counterfeit goods expands, CBP has a wider variety of goods to screen, which requires CBP officials to have in-depth knowledge of a broad range of products and of how to identify counterfeits  Third, counterfeiters may break up large shipments into multiple smaller express carrier or mail packages to decrease the risk of losing significant quantities of merchandise to a single seizure  This shift toward smaller express shipments of counterfeit goods to the United States poses challenges to CBP and ICE because, according to CBP officials, seizure processing requires roughly the same amount of time and resources regardless of shipment size or value  The changing marketplace also presents challenges to the private sector, according to representatives from rights holders and e-commerce websites  For example, it is more difficult for rights holders and e- commerce websites to identify and investigate individual counterfeit cases, because e-commerce websites face a growing inventory from a larger registry of sellers  Tracking goods from known counterfeiters through various website fulfillment and delivery mechanisms is also a significant challenge for the private sector  Furthermore, the growth of e- commerce has accelerated the pace at which counterfeiters can gain access to consumers or reinvent themselves if shut down  CBP and ICE engage in a number of activities to enhance IPR enforcement; however, while ICE has assessed some of its efforts, CBP has taken limited steps to do so  CBP’s and ICE’s IPR enforcement activities broadly include detecting imports of potentially IPR-infringing goods, conducting special operations at U S  ports, engaging with international partners, and undertaking localized pilot programs or port- led initiatives  CBP and ICE have collected some performance data on activities we reviewed, and ICE has taken some steps to better understand the impact of its efforts, such as creating a process to track cases it deems significant  However, we found that CBP has conducted limited evaluation of its efforts to enhance IPR enforcement  Consequently, we concluded that CBP may lack information needed to ensure it is investing its resources in the most efficient and effective activities  We recommended in our report that CBP take steps to evaluate the effectiveness of its IPR enforcement efforts; CBP concurred with this recommendation  Our analysis showed that CBP and ICE interagency collaboration on IPR enforcement is generally consistent with the following selected key practices for effective interagency collaboration: (1) define and articulate a common outcome; (2) establish mutually reinforcing or joint strategies; (3) identify and address needs by leveraging resources; (4) agree on roles and responsibilities; and (5) establish compatible policies, procedures, and other means to operate across agency boundaries  For example, the agencies may leverage resources by collocating staff or sharing their expertise  CBP and ICE have also issued guidance and developed standard operating procedures to clarify roles and responsibilities  CBP and ICE also coordinate with the private sector in a variety of ways, such as obtaining private sector assistance to determine whether detained goods are authentic and to conduct training  Representatives of rights holders and e-commerce websites noted that information shared by law enforcement entities is critical to private sector IPR enforcement, such as pursuing civil action against a counterfeiter or removing counterfeit items from websites  In the Trade Facilitation and Trade Enforcement Act of 2015, Congress provided CBP with explicit authority to share certain information with trademark and copyright owners before completing a seizure  CBP officials stated that they share information about identified counterfeits with e-commerce websites and rights holders to the extent possible under current regulations  However, according to private sector representatives we spoke to, restrictions on the amount and type of information about seized items shared by CBP limit the ability of rights holders and e-commerce websites to protect IPR  CBP officials noted that there are legal limitations to the amount and type of information they can share, particularly if the e-commerce website is not listed as the importer on forms submitted to CBP  Several private sector representatives stated that receiving additional information from CBP would enhance their ability to protect IPR  Representatives of one website noted that information on the exterior of seized packages, such as business identifiers on packages destined for distribution centers, would be helpful for identifying groups of counterfeit merchandise from the same seller  However, according to CBP officials, CBP cannot provide such information to e-commerce websites  Representatives of one e-commerce website noted that ICE sometimes shares information related to an investigation, but that ICE’s involvement in the enforcement process begins only after CBP has identified and seized counterfeit items  Representatives of two e-commerce websites stated that, because of the limited information shared by CBP, they may not be aware of IPR-infringing goods offered for sale on their websites, even if CBP has seized related items from the same seller  According to CBP officials, CBP is reviewing options for sharing additional information with rights holders and e-commerce websites and is assessing what, if any, additional information would be beneficial to share with private sector entities  CBP officials stated that they have not yet determined whether changes to the amount and types of information provided to e-commerce websites would require regulatory changes or additional legal authorities  These officials also said that they have discussed differences in CBP’s and ICE’s information sharing with ICE officials  In our report, we recommended that CBP, in consultation with ICE, assess what, if any, additional information would be beneficial to share with the private sector and, as appropriate, take action to enhance information sharing where possible  CBP concurred with this recommendation  Chairman Hatch, Ranking Member Wyden, and Members of the Committee, this concludes my prepared statement  I would be pleased to answer any questions that you may have at this time  If you or your staff have any questions about this testimony, please contact Kimberly Gianopoulos, Director, International Affairs and Trade, at (202) 512-8612 or gianopoulosk@gao gov  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement  GAO staff who made key contributions to this testimony are Joyee Dasgupta, Kara Marshall, Katie Bassion, Kristen Timko, Reid Lowe, Sarah Collins, Neil Doherty, Ramon Rodriguez, Helina Wong, Julie Spetz, Kevin Loh, Wayne McElrath, Grace Lui, James Murphy, Mary Moutsos, Justin Fisher, Rachel Stoiko, and Sarah Veale  This is a work of the U S  government and is not subject to copyright protection in the United States  The published product may be reproduced and distributed in its entirety without further permission from GAO  However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately 

ground_truth: Technology companies are a major source of high-paying U.S. jobs, but some have questioned the sector's commitment to equal employment opportunity. EEOC provides federal oversight of nondiscrimination requirements by investigating charges of discrimination, and OFCCP enforces federal contractors' compliance with affirmative action requirements. GAO was asked to review workforce trends in the technology sector and federal oversight. This report examines (1) trends in the gender, racial, and ethnic composition of the technology sector workforce; and (2) EEOC and OFCCP oversight of technology companies' compliance with equal employment and affirmative action requirements. GAO analyzed workforce data from the American Community Survey for 2005-2015 and EEOC Employer Information Reports for 2007-2015, the latest data available during our analysis. GAO analyzed OFCCP data on compliance evaluations for fiscal years 2011-2016. GAO interviewed agency officials, researchers, and workforce, industry, and company representatives. The estimated percentage of minority technology workers increased from 2005 to 2015, but GAO found that no growth occurred for female and Black workers, whereas Asian and Hispanic workers made statistically significant increases (see figure). Further, female, Black, and Hispanic workers remain a smaller proportion of the technology workforce—mathematics, computing, and engineering occupations—compared to their representation in the general workforce. These groups have also been less represented among technology workers inside the technology sector than outside it. In contrast, Asian workers were more represented in these occupations than in the general workforce. Stakeholders and researchers GAO interviewed identified several factors that may have contributed to the lower representation of certain groups, such as fewer women and minorities graduating with technical degrees and company hiring and retention practices. Both the U.S. Equal Employment Opportunity Commission (EEOC) and the Department of Labor's Office of Federal Contract Compliance Programs (OFCCP) have taken steps to enforce equal employment and affirmative action requirements in the technology sector, but face limitations. While EEOC has identified barriers to recruitment and hiring in the technology sector as a strategic priority, when EEOC conducts investigations, it does not systematically record the type of industry, therefore limiting sector-related analyses to help focus its efforts. EEOC has plans to determine how to add missing industry codes but has not set a timeframe to do this. In addition, OFCCP's regulations may hinder its ability to enforce contractors' compliance because OFCCP directs contractors to set placement goals for all minorities as a group rather than for specific racial/ethnic groups. OFCCP also has not made changes to its establishment-based approach to selecting entities for review in decades, even though changes have occurred in how workplaces are structured. Without taking steps to address these issues, OFCCP may miss opportunities to hold contractors responsible for complying with affirmative action and nondiscrimination requirements. GAO makes 6 recommendations, including that EEOC develop a timeline to improve industry data collection and OFCCP take steps toward requiring more specific minority placement goals by contractors and assess key aspects of its selection approach. EEOC neither agreed nor disagreed with its recommendation, and OFCCP stated the need for regulatory change to alter placement goal requirements. GAO continues to believe actions are needed, as discussed in the report.

prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 2.

Report 1: The technology sector has major employment hubs across the country, including the San Francisco Bay area, the greater New York City region, and the Washington-Arlington-Alexandria region (see fig  1)  In addition, technology workers are employed at companies outside the technology sector, such as in the retail or financial services industries  For example, a large retail company may require technology workers to create and manage their online sales activities, but the company itself would be considered part of the retail industry  Private companies are generally prohibited by federal law from discriminating in employment on the basis of race, color, religion, sex, national origin, age, and disability status  Additionally, federal contractors and subcontractors are generally required to take affirmative action to ensure that all applicants and employees are treated without regard to race, sex, color, religion, national origin, sexual orientation, and gender identity, and to employ or advance in employment qualified individuals with disabilities and qualified covered veterans  EEOC is responsible for enforcement of federal antidiscrimination laws, and OFCCP enforces affirmative action and nondiscrimination requirements for federal contractors  EEOC and OFCCP have some shared activities and have established a memorandum of understanding (MOU) to minimize any duplication of effort  For example, under the MOU, individual complaints filed with OFCCP alleging discrimination under Title VII are generally referred to EEOC  In addition, on occasions when EEOC receives a complaint not within its purview, such as cases that involve veteran status, but over which it believes OFCCP has jurisdiction, it will refer the complaint to OFCCP  The EEOC, created by Title VII of the Civil Rights Act of 1964, enforces federal laws that prohibit employment discrimination on the basis of race, sex, color, religion, national origin, age, and disability  As the nation’s primary enforcer of antidiscrimination laws, EEOC investigates charges of employment discrimination from the public, litigates major cases, and conducts outreach to prevent discrimination by educating employers and workers  In fiscal year 2016, EEOC received about 91,500 charges, secured more than $482 million for victims of discrimination, and filed 114 lawsuits  According to EEOC, many states, counties, cities, and towns have their own laws prohibiting discrimination, usually similar to those EEOC enforces, as well as agencies responsible for enforcing those laws, called Fair Employment Practices Agencies  However, in some cases, these agencies enforce laws that offer greater protection to workers  An individual can file a charge with either the EEOC or with a Fair Employment Practices Agency  When an individual initially files with a Fair Employment Practices Agency that has a worksharing agreement with the EEOC, and the allegation is covered by a law enforced by the EEOC, the Fair Employment Practices Agency will dual file the charge with EEOC (meaning EEOC will receive a copy of the charge), but will usually retain the charge for processing  If the charge is initially filed with EEOC and the charge is also covered by state or local law, EEOC dual files the charge with the state or local Fair Employment Practices Agency (meaning the Fair Employment Practices Agency will receive a copy of the charge), but EEOC ordinarily retains the charge for processing  EEOC also pursues a limited number of cases each year designed to combat systemic discrimination, defined by the agency as patterns or practices where the alleged discrimination presented by a complainant has a broad impact on an industry, profession, company, or geographic location  EEOC can also initiate a systemic investigation under Title VII with the approval of an EEOC commissioner, called a “commissioner charge”, provided the commissioner finds there is a reasonable basis for the investigation  In addition, EEOC district directors can approve systemic investigations, called “directed investigations” which are initiated by EEOC field office directors under the Age Discrimination in Employment Act and the Equal Pay Act  Under Title VII, EEOC generally requires that large employers and non- exempt federal contractors file Employer Information Reports (EEO-1 reports) annually, which collect employees’ demographic data by business location on sex, race, and ethnic group for 10 occupational job categories  According to EEOC documentation, EEO-1 data are used in investigations of Title VII violations, litigation, research, comparative analyses, class action suits, and affirmative action plans  The OFCCP is responsible for ensuring that the nearly 200,000 federal contractor establishments comply with federal nondiscrimination and affirmative action requirements  Under Executive Order 11246 and other federal laws and regulations, covered federal contractors and subcontractors are prohibited from discriminating in employment on the basis of race, color, religion, sex, sexual orientation, gender identity, or national origin and are required to take affirmative action to help ensure that all applicants and employees are treated without regard to these factors  In general, OFCCP’s regulations require covered contractors to comply with certain recordkeeping and reporting requirements, and provide for enforcement procedures such as compliance evaluations and complaint investigations to assist OFCCP in ensuring federal contractor compliance with these regulations  Among other provisions, OFCCP’s regulations generally require that covered contractors prepare and maintain an affirmative action program (AAP)  Under OFCCP’s regulations, an AAP is a management tool that is designed to ensure equal employment opportunity, with an underlying premise that the gender, racial, and ethnic makeup of a contractor’s workforce should be representative of the labor pools from which the contractor recruits and selects  Companies must create an AAP for each business establishment—generally, a physical facility or unit that produces the goods or services, such as a factory, office, or store for the federal contractor  An AAP will also include any practical steps to address underrepresentation of women and minorities, such as expanding employment opportunities to underrepresented groups  Covered contractors must also comply with certain recordkeeping requirements, including records pertaining to hiring, promotion, lay off or termination, rates of pay, and applications, among other records  OFCCP’s enforcement program represents the majority of the agency’s activity and is carried out primarily by using compliance officers, who evaluate contractors’ compliance with various requirements, according to agency officials  In addition to conducting compliance evaluations, OFCCP also conducts investigations in response to complaints  In 2016, we reported that according to OFCCP officials, responding to complaints accounted for close to 16 percent of OFCCP’s enforcement activities  OFCCP selects contractor establishments for evaluations based on a number of neutrally applied factors, such as employee count at the establishment, contract value, or contract expiration date  We previously found that OFCCP reviews, on average, 2 percent of federal contractor establishments annually  As we previously reported, as part of its compliance evaluations, OFCCP is to review the selected contractor’s hiring, promotion, compensation, termination, and other employment practices to determine whether contractors are maintaining nondiscriminatory hiring and employment practices  OFCCP conducts evaluations at the establishment level  When a contractor establishment is selected for evaluation, OFCCP sends the contractor a “scheduling letter” requesting the AAP and supporting data, such as the percentage of women and minority staff at the workplace by job group  Then, a compliance officer is to conduct a desk audit, which is an off-site review of the submitted materials  If necessary, the compliance officer may also conduct an on-site review or further off-site analysis to make a final determination as to whether the contractor is in compliance  In addition to looking at whether federal contractors maintain nondiscriminatory hiring and employment practices, which can result in finding discrimination violations, OFCCP also frequently finds other types of violations, such as failure to keep necessary records or conduct annual reviews of equal employment and affirmative action efforts  These findings by the agency often require administrative changes on the part of the contractor, such as improved record-keeping  There are many different forms of remedies for discrimination violations, including financial, employment, and organizational change remedies  Although rare, under some circumstances, OFCCP may bar a contractor from doing business with the government  From 2005 to 2015, the estimated number of workers in the technology workforce—people who worked in mathematics, computing, or engineering occupations—increased at a higher rate (24 percent) than the estimated number of workers in the general workforce (9 percent), according to ACS data  In 2015, the technology workforce comprised an estimated 7 5 million workers, an increase of slightly over 1 4 million workers since 2005  (For a complete list of the occupations we include as technology occupations, see appendix II)  Most technology workers have a college degree and have a higher median income than workers in the general workforce  Specifically, in 2015, an estimated 69 percent of technology workers held at least a bachelor’s degree, compared to 31 percent of workers in the general workforce  In 2015, the estimated median income for technology workers was $81,000 compared to $42,000 for the general workforce  From 2005 to 2015, the percentage of women in the technology workforce remained flat and women remained a smaller proportion of the technology workforce compared to their representation in the general workforce  In 2015, women represented 22 percent (about 1 6 million workers) of workers in technology occupations, compared to 48 7 percent of workers in the general workforce (see fig  2)  Although the estimated percentage of minority technology workers as a whole had grown since 2005, we found that this trend did not apply to Black technology workers  Specifically, from 2005 through 2015, although the number of Black workers increased as the technology workforce grew, there was no statistically significant change in their representation as a percentage of the entire technology workforce  In contrast, from 2005 to 2015, Hispanic and Asian technology workers had statistically significant increases in their representation in the technology workforce  Even with the increase in their numbers in the technology workforce, Black and Hispanic technology workers remained a smaller proportion of these workers compared to their representation in the general workforce  In contrast, Asian workers were an increasing share of the technology workforce, where they remained more represented than they were in the general workforce (see fig  3)  We found that when we examined gender representation for each minority group, both Black and Hispanic men and women were less represented in the technology workforce compared to their representation in the general workforce  The same was true for White women, whereas White men, Asian men, and Asian women were more represented in the technology workforce compared to their representation in the general workforce (see fig  4)  We defined the technology sector as those companies that have the highest concentration of technology workers and are in such industries as computer systems design and software publishing  Companies categorized as outside the technology sector, for example, retail or finance companies, may still employ some technology workers  However, we found differences in median incomes for technology workers within and outside the technology sector  In 2015, technology workers employed in the technology sector earned an estimated median income of $89,000 compared to median incomes of $78,000 for those working outside the technology sector  We also compared the characteristics of technology workers within the technology sector and outside the technology sector, and found male and Asian technology workers were relatively more represented in the technology sector than outside the technology sector  Similar to the lower representation of female, Black, and Hispanic technology workers in technology occupations, we found technology workers from these groups were also more likely to work outside the technology sector than in the technology sector  For example, according to our analysis of 2015 ACS data, women represented an estimated 18 percent of all technology workers employed in the technology sector, compared to 25 percent of all technology workers employed outside the technology sector (see fig  5)  White technology workers were also more represented outside the technology sector than within the technology sector  Companies in the technology sector also employ non-technical workers such as sales people, and the lower representation of women and certain minorities in the technology sector was also present in such non-technical job categories  According to our analysis of EEO-1 data, women were less represented across the full range of management and non- management positions at companies within the technology sector, including at leading technology companies, compared to their representation in companies outside the technology sector  We determined this by comparing specific occupations at companies both within and outside the technology sectors using 2015 EEO-1 data  For example, women held about 19 percent of senior-level management positions at companies in the technology sector compared to nearly 31 percent of such positions at companies outside the technology sector in 2015  Women were also less represented in all of the remaining job categories (mid-level managers, professionals, technicians, and all other jobs) in the technology sector  (See fig  6 ) Comparing EEO-1 data at three points in time for 2007, 2011, and 2015, we found women’s representation in management positions as well as among professionals and technicians at companies within the technology sector remained at about the same level, and decreased for “all other jobs” (see table 1)  Similar to women, Black and Hispanic workers were less represented across multiple job categories in companies within the technology sector compared to those outside the technology sector (see fig 7)  For example, 1 8 percent of senior level managers in the technology sector were Black compared to 3 4 percent of senior level managers in all other sectors  Appendix IV provides percentages for each minority group in different job categories within and outside the technology sector  The lower representation of Black workers in the technology sector relative to their representation in other sectors was consistent across all job categories (mid-level managers, professionals, technicians, and “all other jobs”)  Hispanic workers were less represented in the technology sector compared to outside the technology sector across all job categories (senior and mid-level managers, professionals, technicians, and “all other jobs”)  Compared to their representation across job categories within the technology sector in general, Black and Hispanic workers had slightly greater representation at the leading technology companies in senior management and technician categories, and lower representation among mid-level managers, professionals, and holders of “all other jobs ” Asian workers comprised a greater proportion of managerial and professional roles in the technology sector than in other sectors, according to our analysis of 2015 EEO-1 data  Asian workers represented 11 0 percent of senior level managers in the technology sector compared to 4 3 percent in industries outside the technology sector  This higher representation of Asian workers in the technology sector was consistent among mid-level managers, professionals and technicians  Asian workers were more represented in the same categories at the leading technology companies  However, a lower proportion of Asian workers held senior management positions compared to their representation in professional positions in both the technology sector and leading technology companies  Further, the proportion of Asian workers in mid-level management positions was also lower than their representation in professional positions, from which mid-level managers might be selected, in both the technology sector and leading technology companies  In contrast, a higher proportion of White workers were in senior and mid- level management positions compared to their representation in professional positions in both the technology sector and leading technology companies  Comparing EEO-1 data at three points in time—2007, 2011, and 2015— we saw varied representation across job categories in the technology sector by race/ethnicity  For example, Black workers decreased in their representation in all job categories in the technology sector from 2007 to 2015  In contrast, Hispanic and Asian workers increased in their representation in all job categories we examined from 2007 to 2015 (see table 2)  Several factors may contribute to the lower representation of female, Hispanic, and Black workers in the technology workforce and at companies in the technology sector, based on research and interviews with researchers and representatives from workforce and industry organizations and technology companies  These include the lower diversity of degree earners in technology-related fields, and company- based factors such as hiring practices and retention of women and underrepresented minorities  The smaller proportion of women in the technology workforce may reflect the number of women earning technology-related degrees  Slightly over two-thirds of technology workers report having earned their bachelor’s degree in a computer, engineering, mathematics, or technology field  However, according to our analysis of 2014 IPEDS data, the percentage of technology-related bachelor’s and master’s degrees earned by women is far less than for men, although women were comparable to men in their receipt of science, technology, engineering, and math (STEM) degrees, and surpassed men in obtaining degrees in all other fields  In 2014, about 60,000 women were awarded technology-related bachelor’s or master’s degrees (compared to about 50,000 in 2004) and about 190,000 men were awarded such degrees (compared to about 147,000 in 2004)  (See fig  8 ) An estimated 218,000 technology workers were added to the technology workforce in 2015, according to our analysis of 2015 American Community Survey data from the U S  Census Bureau  In addition, technology degrees are also issued at the associate’s level  Two researchers told us that women often have the academic preparation to enter into technology-related degree programs, but they may choose not to pursue such degrees because of instances of gender bias within technology classes  Our prior work reported on studies that found women leave STEM fields at a higher rate than their male peers, citing one study that found women leave STEM academic positions at a higher rate than men in part due to dissatisfaction with departmental culture, faculty leadership, and research support  Further, a 2012 consulting firm report found that businesses viewed as male-dominated tended to attract fewer women at the entry level  In addition, according to our analysis of 2014 IPEDS data, three minority racial or ethnic groups each constituted 10 percent or fewer of bachelor’s and master’s degree earners in a technology-related field  Specifically, among the 202,200 earners of degrees in a technology-related field in 2014, there were about 20,000 Hispanic recipients, 13,000 Black recipients, and 18,000 recipients who were Multiracial or other race, which includes American Indian or Alaska Native, Other or Unknown Race, and Two or more Races, i e  respondents who selected one or more racial designations  Among all minority groups, Asian students, including Pacific Islander, earned the highest proportion of technology- related degrees (about 24,000 individuals)  (See fig  9)  One barrier to entry into technology degree paths for Black and Hispanic students may be lower likelihood of access to preparatory academic programs in secondary school  In 2016, we reported that the K-12 public schools in the United States with students who are mostly Black or Hispanic offered disproportionately fewer math and science classes for their students  One researcher told us some colleges and universities, to help these students be academically successful, provide additional academic support such as tutoring to help bridge knowledge gaps  To address the uneven access to preparatory math and science classes, representatives from five technology companies told us they have started to invest in exposing Black and Hispanic children to technology occupations by, for example, developing online resources targeted to them and their parents and creating partnerships with secondary schools to improve their academic preparation in computer science  However, we have previously also reported that the number of students graduating with STEM degrees may not be a good measure of the supply of STEM workers because students often pursue careers in fields different from the ones they studied  For example, a lower percentage of women who obtained technology-related degrees became technology workers compared to men who earned the same degrees, according to our analysis of 2015 ACS data  Specifically, among women who earned technology degrees, an estimated 33 percent worked as a technology worker compared to 45 percent of men who earned technology degrees  Several representatives we interviewed from workforce and industry organizations and technology companies told us that recruitment practices may also have affected diversity in the technology workforce  For example, representatives from three workforce and industry organizations said technology companies tend to recruit from a select number of universities and colleges, thereby limiting their pool of potential applicants  To address this, representatives from several of the technology companies we interviewed told us they had changed recruitment practices and offered internships targeted to underrepresented groups  For example, representatives of four technology companies told us that their companies had expanded recruitment to include more schools  Representatives from two companies told us they offer programs such as summer and semester internships for which the company actively recruits from Historically Black Colleges and Universities and other specific schools to increase its pool of diverse candidates  In addition, representatives from workforce organizations and technology companies discussed concerns and strategies to address companies’ hiring practices and internal cultures that may limit workforce diversity  For example, one of these representatives said that technology companies often offer financial incentives to current employees to make referrals for new hires, which can result in reliance on social networks  These networks may be largely comprised of the same race and this practice therefore makes it harder for potential candidates from demographically different groups to have their resumes reviewed  Another workforce organization representative reported that some hiring managers filter out eligible candidates if their background and qualifications are not the same as those of previously successful employees  To address these concerns, representatives from one technology company told us that they had moved away from depending on referrals since this practice may result in leaders hiring people within their own networks, which generally does not increase diversity of gender or race/ethnicity  In addition, representatives from another company said they plan to begin reviewing resumes with names removed to limit bias by the reviewer  Further, representatives we interviewed from three technology companies told us they offer training to employees to help employees identify their own, unconscious biases  Other factors may affect retention of women and underrepresented minorities  For example, a representative from a workforce organization said that women leave technology occupations at a higher rate than men because they feel as if they have not been given the same opportunities for promotion and advancement within the company  A 2016 study that examined women in engineering and science found that women’s concerns about pay and promotion are often an issue in male-dominated fields regardless of the industry  Further, this study found that retention difficulties become more severe as the share of men in the workforce increased and that affected women’s pay and promotion  Representatives from one company told us another challenge is the lack of Black workers at the top levels, which might make it more difficult for Black employees in particular to see a leadership path  Representatives we interviewed from five technology companies told us they had implemented efforts to increase retention and promotion rates among minority and female workers, for example, by developing a diversity and inclusion newsletter, employee resource groups with executive sponsors, and internal training and classes for employees to improve their readiness to be promoted  Representatives from five technology companies told us that commitment of top leadership is an important factor that can help women and underrepresented minorities in the technology sector  For example, representatives from one company told us that top management support for diversity efforts, such as setting hiring goals, can help move a company in the direction of achieving representation goals and that leadership is very important to this effort  Representatives from several companies told us that there is often a business case for such changes: These companies work in a diverse, global environment and strive to make better products for diverse users  However, our prior work on workforce diversity in the financial services sector found that some diversity initiatives faced challenges gaining the "buy-in" of key employees, such as the middle managers who are often responsible for implementing such programs  According to EEOC officials, EEOC primarily oversees compliance with equal employment opportunity requirements by investigating workers’ individual charges of employment discrimination filed against companies  EEOC has publicly acknowledged the low levels of diversity in the technology sector  However, we were unable to identify a specific number of charges received by EEOC against companies in industries that are part of this sector because EEOC does not require investigators to record the industry of the charged company  EEOC’s database of charges and enforcement actions—the Integrated Mission System (IMS)—has a data field for the North American Industry Classification System (NAICS) industry code, the standard used by federal statistical agencies in classifying business establishments  However, we found that it is completed for only about half the entries in the system  EEOC officials in both the San Francisco and New York district offices told us that, while they cannot readily identify individual charges against technology companies, they believe they have received far fewer charges against technology companies than they would have expected given the public attention to the issue of diversity in the technology sector  In terms of systemic cases, according to EEOC, as of June 2017, the commission had 255 systemic cases pending since fiscal year 2011 involving technology companies (13 of these were initiated as commissioner charges and 8 were directed investigations involving age discrimination or pay parity issues)  Officials from the New York region reported that they had seen an increase in systemic cases against technology companies in the past 3 years, largely involving practices of information technology staffing firms  Several EEOC officials we interviewed noted that technology workers may be initiating few complaints at the federal level due to factors such as fear of retaliation from employers or the availability of other employment or legal options  According to EEOC officials, fear of retaliation can affect charges across sectors and, given the growth in the technology workforce, an individual who feels discriminated against may simply leave the company because there are many other opportunities for individuals with technical skills  They also said that technology workers may generally have greater wealth and can afford to hire private attorneys to sue in state court rather than go through the EEOC  Moreover, they said that some states, including California, have stronger employment discrimination laws that allow for better remedies than federal laws, which could lead employees to file charges at the state level rather than with the EEOC  In addition, EEOC has acknowledged in a 2016 report that binding arbitration policies, which require individuals to submit their claims to private arbiters rather than courts, can also deter workers from bringing discrimination claims to the agency, leaving significant violations in entire segments of the workforce unreported  The report stated that an increasing number of arbitration policies have added bans on class actions that prevent individuals from joining together to challenge practices in any forum  The report concluded that the use of arbitration policies hinders EEOC’s ability to detect and remedy potential systemic violations  Researchers report that the use of such clauses has grown and data on federal civil filings for civil rights employment cases reflect a marked reduction in the number of such filings  Beyond pursuing charges, EEOC has taken some steps to address diversity in the technology sector including research and outreach efforts  In May 2016, citing the technology sector as a source for an increasing number of U S  jobs, EEOC released a report analyzing EEO-1 data on diversity in the technology sector in tandem with a commission meeting raising awareness on the topic  In addition, EEOC’s fiscal year 2017- 2021 Strategic Enforcement Plan identified barriers to hiring and recruiting in the technology sector as a strategic priority  EEOC has also been involved in outreach efforts with the technology sector  For example, the EEOC Pacific Region described more than 15 in-person or webinar events since 2014 in collaboration with OFCCP and local organizations focused on diversity in the technology sector  The topics of these events included equity in pay and the activities of these two agencies in enforcing nondiscrimination laws  Finally, in fall 2016, EEOC initiated an internal working group to identify practices to help improve gender and racial diversity in technology, but as of June 2017 had no progress to report  OFCCP’s regulations require covered federal contractors to take proactive steps to ensure equal employment opportunity  OFCCP annually conducts routine evaluations of selected federal contractors, which includes those in the technology sector, for compliance with federal nondiscrimination and affirmative action requirements  To the extent that technology contractors are selected for evaluation through OFCCP’s normal selection process, these contractors are assessed for compliance with nondiscrimination and affirmative action laws as are other selected contractors  While evaluation of technology contractors occurs in the course of OFCCP’s routine activities, OFCCP does not currently use type of industry as a selection factor, according to officials  We also found that few (less than 1 percent) of OFCCP’s 2,911 closed technology contractor evaluations from fiscal years 2011 through 2016 resulted in discrimination violations, though 13 percent resulted in other violations, such as record- keeping violations and failure to establish an affirmative action program (AAP)  An AAP is a key tool OFCCP requires contractors to complete to ensure equal employment opportunity  The remaining 86 percent of evaluations either found no violations or ended in administrative closure  Technology contractor evaluations that had discrimination violations resulted in back pay, salary adjustments, or other benefits totaling more than $4 5 million for 15,316 individuals (averaging about $300 per award) for fiscal years 2011 through 2016  The vast majority of discrimination violations were on the basis of gender or race/ethnicity rather than disability or veteran status  Corrective actions OFCCP identified for federal technology contractors over this timeframe also included requiring contractors to fill a total of 410 job vacancies as they arise with applicants who had been denied employment on the basis of discrimination  In addition, OFCCP recently filed three complaints against technology companies  According to our analysis, OFCCP conducted evaluations on 36 of the 65 leading technology companies from fiscal year 2011 through fiscal year 2016  During this timeframe there were 272 reviews of establishments— physical business locations—affiliated with these 36 companies  Based on these evaluations, 15 of the 36 companies had administrative violations, and 2 of the 36 also had discrimination violations  As a result of the discrimination findings against these leading technology companies, 541 individuals received monetary benefits totaling $783,387 (an average of $1,448 per award)  In terms of other steps to conduct oversight of the technology sector, OFCCP officials in the Pacific Region said they are hiring compliance officers with legal training to be better able to address needs for reviews in the technology sector, such as responding to lawyers representing technology contractors  Officials in both the Pacific and Northeast regions work closely with statisticians and labor economists on their cases, an effort officials said has increased over the past few years  OFCCP has also requested funding in its fiscal year 2018 congressional budget justification to establish centers in San Francisco and New York that would develop expertise to handle large, complex compliance evaluations in specific industries, including information technology  We found that by not requiring an industry code in its investigations data, EEOC cannot analyze charge data by industry to help identify investigation and outreach priorities, in contradiction to EEOC strategic planning documents and EEOC Inspector General reports, which have emphasized the importance of doing so  By not requiring the use of the NAICS code for each entry in IMS, EEOC is limited in its ability to use these data for the purposes of identifying charges by industry sector and conducting sector-related analyses  Officials were aware of substantial gaps in coding of charges by industry and acknowledged limitations in the commission’s ability to analyze its investigations data by industry  However, officials expressed concern that routinely creating more complete records of the companies against which charges had been filed would require investigators to divert attention from their efforts to investigate charges  EEOC officials explained that the charging party provides initial information on the respondent company and requiring EEOC personnel to generate this information would slow down the process  They said their priority is to investigate individual charges, not to address larger trends or target specific industries  “The Strategic Enforcement Plan recommends using EEOC data to allow our enforcement and outreach efforts to focus on areas of significant concern  This might include tailoring outreach efforts for industries that experience greater likelihood of certain charges or informing enforcement decisions based on knowledge that certain industries have persistent problems, such as harassment  The data maintained in IMS provide a rich resource of information that can be used to explore the characteristics of industries that appear to have higher levels of certain allegations than comparative industries ” In addition, reports completed by the Urban Institute for the EEOC Office of Inspector General in 2013 and 2015 similarly recommended analysis of charge data, including by industry, to help identify priorities and measure performance  While EEOC has plans to review a year of IMS data to clean it and determine how best to add missing industry codes, among other objectives, officials could not provide a specific timeframe for when this review would begin and end  Standards for internal control in the federal government state that management should use quality information to achieve the agency’s objectives and objectives should be defined in specific terms so they are understood at all levels of the entity  This involves clearly defining what is to be achieved, who is to achieve it, how it will be achieved, and the time frames for achievement  Efforts to scrub these data and identify missing codes could help EEOC determine how to collect industry information on an ongoing basis for all entries  Doing so would also help EEOC determine the level of NAICS code that would be feasible and useful for investigators to identify and input into IMS  Without analyzing its data on charges across industries, EEOC’s ability to proactively identify priorities for its outreach and enforcement resource use is limited  We found that OFCCP also faces challenges that may hinder the agency’s oversight of technology companies  Specifically, OFCCP reported facing delays in receiving information from federal contractors, including technology companies, but has not yet evaluated whether its own policies and practices also impede its efforts to hold federal technology contractors responsible for the legal requirements to take affirmative action and not discriminate against protected groups  In addition, OFCCP regulations do not require federal contractors to disaggregate data for the purpose of determining placement goals for hiring, which may hinder contractors’ efforts to implement effective affirmative action programs  OFCCP has not analyzed delays in obtaining information from contractors OFCCP officials told us that they face delays in obtaining complete, accurate, and timely documentation from federal contractors, including technology companies, as part of the compliance review process  They said this limited their access to critical information and hindered OFCCP’s ability to determine whether discrimination had occurred  Officials in the Pacific Region reported that when issues are identified during OFCCP’s initial review that will require additional data, the data requests can be extensive  Consequently, technology contractors are taking longer to submit complete and accurate data that are needed to conduct analyses of the contractor’s workforce  In addition, officials in both the Pacific and Northeast regions reported that companies may not provide raw data as requested, or provide access to employees for OFCCP to interview, which is part of the compliance review process  Using 2015 OFCCP compliance evaluation data, we previously reported that close to 85 percent of contractor establishments across all sectors did not submit an AAP within 30 days of being scheduled for an OFCCP compliance evaluation, as required by OFCCP policy  Officials told us of the potential need for a more flexible set of investigatory tools or sanctions, such as subpoena power to speed up data-gathering or penalties for delays in providing information, in order to obtain accurate and timely information  In the case of incomplete data, OFCCP officials said one option is to enter into an agreement with the contractor whereby the contractor will gather the missing data, and OFCCP will monitor the contractor’s efforts and review detailed records at a later date  However, they said that such an agreement could give the contractor an opportunity to modify the data in the contractor’s favor  Currently, OFCCP’s primary sanction is the threat of debarment, which makes a company ineligible to receive future federal contracts  At the same time, OFCCP officials acknowledged there may additionally be delays in their own review processes  In prior work, we’ve reported concerns by contractors and industry groups about lengthy and expansive OFCCP evaluations  However, OFCCP has not analyzed its data on closed evaluations to assess the cause of delays, which would help determine whether changes should be made to its internal processes or if stronger sanctions to obtain information from contractors are needed  Internal control standards state that management should identify, analyze, and respond to risks related to achieving its objectives  Further, it states that management should design appropriate mechanisms to enforce its directives to achieve those objectives and address related risks  Without more information on the root cause of the delays, these delays may continue, straining resources and inhibiting OFCCP’s efforts to identify potential discrimination  “An affirmative action program is a management tool designed to ensure equal employment opportunity  A central premise underlying affirmative action is that, absent discrimination, over time a contractor’s workforce, generally, will reflect the gender, racial and ethnic profile of the labor pools from which the contractor recruits and selects  Affirmative action programs contain a diagnostic component which includes a number of quantitative analyses designed to evaluate the composition of the workforce of the contractor and compare it to the composition of the relevant labor pools  Affirmative action programs also include action- oriented programs  If women and minorities are not being employed at a rate to be expected given their availability in the relevant labor pool, the contractor’s affirmative action program includes specific practical steps designed to address this underutilization ” “The placement goal-setting process       contemplates that contractors will, where required, establish a single goal for all minorities  In the event of a substantial disparity in the utilization of a particular minority group or in the utilization of women or women of a particular minority group, a contractor may be required to establish separate goals for those groups ” According to OFCCP officials, a contractor may be required to establish separate goals for particular minority groups as part of a compliance review  We found, however, that OFCCP’s regulations do not require federal contractors to disaggregate demographic data for the purpose of establishing placement goals in their AAP  This may hinder their efforts to implement effective AAPs, which are designed to assist the company in achieving a workforce that reflects the gender, racial, and ethnic profile of the labor pools from which the contractor recruits and selects  OFCCP officials in headquarters and in the field said, based on their experience evaluating companies’ compliance, it was not common for companies to have placement goals disaggregated by race and ethnicity in their AAPs  A diversity and inclusion officer we interviewed from one large technology contractor noted that the requirement in the AAP to identify the need for placement goals for minorities as a whole does not address underrepresentation in certain minority groups  According to the officer, the company does not count Asian workers in setting the company’s diversity goals because Asians are well represented and the company believes it should set a placement goal for groups for which the company knows it needs to make progress  Citing comments received during development of other regulations, OFCCP officials cautioned that an analysis of utilization disaggregated by race/ethnicity may be more challenging for smaller companies with fewer employees  Further, looking at trends in diversity for minorities as a whole may not assist a company’s affirmative action efforts to identify groups that need particular outreach or support  Specifically, our analysis of workforce data found differences in representation for Black and Hispanic workers in the technology workforce compared to Asian workers  Under the current AAP regulations, companies may opt not to detect and address underrepresentation of particular minority groups since OFCCP does not require placement goals disaggregated by race/ethnicity  While OFCCP may be able to detect underrepresentation of particular minority groups during its reviews, the office reviews only 2 percent of federal contractor establishments each year  OFCCP officials said that they would need to amend their regulations in order to require disaggregated race/ethnicity information for placement goals on AAPs  The officials said disaggregating race in placement goals could help an establishment determine how to tailor outreach accordingly or better identify impediments to its equal employment opportunity efforts  However, they have not pursued this regulatory change because of competing priorities on their regulatory agenda  OFCCP’s mission includes holding federal contractors responsible for the legal requirements to take affirmative action and not discriminate against protected groups  However, not requiring contractors to set placement goals for each minority group may hinder OFCCP’s ability to effectively achieve this mission  OFCCP has not reviewed key aspects of its current approach to evaluations OFCCP officials report the agency intends to incorporate additional information on gender, racial, and ethnic disparities by industry into its compliance evaluation selection process, but we found the methodology to determine the disparities may have weaknesses  We have previously reported on the challenges OFCCP faces with its enforcement efforts, and identified additional areas that may limit OFCCP’s enforcement of federal contractors’ equal employment and affirmative action efforts  For example, our 2016 report found that OFCCP’s weak compliance evaluation selection process, reliance on voluntary compliance, and lack of staff training create several challenges to its enforcement efforts  This report found that because OFCCP was not able to identify which factors are associated with risk of noncompliance, the agency does not have reasonable assurance that it is focusing its efforts on those contractors at greatest risk of not following nondiscrimination or affirmative action requirements  OFCCP agreed with recommendations we made to address these areas and detailed steps the agency would take  In particular, to strengthen its compliance evaluation process to select contractors at greatest risk of potential discrimination, the agency stated that it planned to incorporate information on pay disparities and employment disparities  OFCCP officials indicated this information would be based on analysis of gender and race/ethnicity by industry using ACS data and EEO-1 compensation data that was to be collected beginning March 2018  However, in August 2017, the Office of Management and Budget issued a memo suspending the pay-related data collection aspects of the EEO-1 form  Despite this change, OFCCP officials said they are exploring other options for focusing on compensation disparities by industry, including through the use of ACS data, administrative data, a previous study conducted by the Department of Labor, as well as options proposed by contractors  We also found OFCCP’s current methodology for identifying disparities by industry with the ACS data may have some weaknesses that could affect the accuracy of the outcomes  For example, its reliance on the broadest industry level available may not sufficiently identify specific industries at elevated risk  Further, the methodology includes future plans to conduct the analysis for metropolitan areas  Given the importance of regional and local labor markets for assessing affirmative action efforts, regional and local analysis should also be completed before OFCCP incorporates this analysis into its selection process  It is important that OFCCP use reliable information in modifying its basic processes and setting priorities  For the reasons cited earlier regarding the importance of using quality information to make management decisions, it is important that OFCCP assess the quality of the methods for its analysis of employment disparities among industries  Without doing so, OFCCP may not accurately identify industries at greatest risk of potential noncompliance with nondiscrimination and affirmative action requirements so it can focus its limited investigation resources most effectively  Further, according to OFCCP officials, although the agency has made slight changes to various thresholds and factors for its selection process, the agency has not made any significant changes to the selection process for about 10 years, and has made no changes to its establishment-based approach since OFCCP was founded in 1965  While OFCCP currently grounds its review of a contractor in a particular physical establishment, OFCCP officials acknowledged the changing nature of a company’s work can involve multiple locations and corresponding changes in the scope of hiring and recruitment  Officials we interviewed from five of our eight selected technology companies discussed their work spread across locations, including the United States or overseas, and the related challenges they face with OFCCP’s establishment-based approach to reviews  One company representative said the AAP is not useful because site specific plans do not connect to business decisions  However, OFCCP has not reviewed the implications for the effectiveness of its mission of continuing with its establishment-based approach to conducting compliance evaluations  In addition, OFCCP officials acknowledged their inability, in identifying establishments for review, to consistently identify and include all subcontractors to which OFCCP rules should apply  They said the agency has not assessed the potential significance of any omissions of subcontractors from the oversight process  Internal control standards state that management should identify risks throughout the entity related to achieving its defined objectives to form a basis for designing risk responses, as well as the importance of periodically reviewing policies, procedures and related control activities for continued relevance and effectiveness in achieving the agency’s objectives  OFCCP officials said they have informally discussed how to adjust their work based on how work is performed in today’s economy—with virtual sites, workplace flexibilities, and nontraditional forms of employment  However, due to competing priorities, they have not conducted a formal review of these key aspects of its current approach to selecting entities for review  They acknowledged such a review would be useful  Without assessing its current approach to its establishment-based reviews and identification of all relevant subcontractors, OFCCP does not have reasonable assurance that its approach can identify discrimination occurring within the companies it oversees and may be missing opportunities to identify more effective practices or adjust its methods to external changes  While OFCCP has offered an option—the Functional Affirmative Action Program (FAAP)—for companies to move away from establishment- based reviews and which may be more appropriate for some multi– establishment contractors, uptake has been low and the agency has not conducted an evaluation of this program  Since 2002, OFCCP has allowed companies to create FAAPs, with OFCCP approval, which are based on a business function or unit that may exist at multiple establishments  As of May 2017, 73 companies across all industries had FAAPs in place  Further, some of the companies we interviewed were unaware that the FAAP was an option or believed it was cumbersome to establish given the complexity of their workforce  Asked why the FAAP has not been more broadly adopted, OFCCP officials hypothesized it could have to do with a requirement intended to ensure that companies with FAAPs would be reviewed at least as often as others, but that may result in these companies being reviewed more often than most  Standards for internal control for government agencies state that management should periodically review policies, procedures, and related control activities for continued relevance and effectiveness in achieving the entity’s objectives  Reviewing and refining the FAAP program could help OFCCP improve its ability to achieve its objectives and may provide broader insight for OFCCP’s overall enforcement approach  Jobs in the high paying technology sector are projected to grow in coming years  Female, Black, and Hispanic workers, however, comprised a smaller proportion of technology workers compared to their representation in the general workforce from 2005 through 2015, and have also been less represented among technology workers inside the technology sector than outside it  Both EEOC’s and OFCCP’s mission is to combat discrimination and support equal employment opportunity for U S  workers; however, weaknesses in their processes impact the effectiveness of their efforts  When conducting investigations, EEOC has not been consistently capturing information on industry codes  This impedes its ability to conduct industry sector analysis that could be used to more effectively focus its limited enforcement resources and outreach activities  Similarly, OFCCP faces delays in its compliance review process but it has not analyzed its closed evaluations to understand the causes of these delays and whether its processes need to be modified to reduce them  In addition, as part of their affirmative action programs federal contractors are only required to set placement goals for all minorities in general  By not requiring contractors to disaggregate demographic data for the purpose of establishing placement goals, OFCCP has limited assurance that these contractors are setting goals that will address potential underrepresentation in certain minority groups  Further, OFCCP plans to incorporate information on disparities by industry into its process for selecting establishments for compliance evaluations, but has not fully assessed its planned methods  Without such assessment, OFCCP may use a process that does not effectively identify the industries at greatest risk of potential noncompliance with nondiscrimination and affirmative action requirements  In addition, key aspects of OFCCP’s approach to compliance reviews of contractors’ affirmative action efforts have not changed in over 50 years, whereas the structure and locations of these companies’ work have changed  Finally, although OFCCP has developed an alternative affirmative action program for multi-establishment contractors, few contractors participate in this program  Because OFCCP has not evaluated the program, it does not have information to determine why there has not been greater uptake and whether it provides a more effective alternative to an establishment-based AAP  We are making a total of six recommendations, including one to EEOC and five to OFCCP  Specifically: The Chair of the EEOC should develop a timeline to complete the planned effort to clean IMS data for a one-year period and add missing industry code data  (Recommendation 1) The Director of OFCCP should analyze internal process data from closed evaluations to better understand the cause of delays that occur during compliance evaluations and make changes accordingly  (Recommendation 2) The Director of OFCCP should take steps toward requiring contractors to disaggregate demographic data for the purpose of setting placement goals in the AAP rather than setting a single goal for all minorities, incorporating any appropriate accommodation for company size  For example, OFCCP could provide guidance to contractors to include more specific goals in their AAP or assess the feasibility of amending their regulations to require them to do so  (Recommendation 3) The Director of OFCCP should assess the quality of the methods used by OFCCP to incorporate consideration of disparities by industry into its process for selecting contractor establishments for compliance evaluation  It should use the results of this assessment in finalizing its procedures for identifying contractor establishments at greatest risk of noncompliance  (Recommendation 4) The Director of OFCCP should evaluate the current approach used for identifying entities for compliance review and determine whether modifications are needed to reflect current workplace structures and locations or to ensure that subcontractors are included  (Recommendation 5) The Director of OFCCP should evaluate the Functional Affirmative Action Program to assess its usefulness as an effective alternative to an establishment-based program, and determine what improvements, if any, could be made to better encourage contractor participation  (Recommendation 6) We provided a draft of this report to the Departments of Labor (DOL), Commerce, the Equal Employment Opportunity Commission (EEOC) and the National Science Foundation (NSF)  We received written comments from DOL that are reproduced in appendix V  In addition, DOL, Commerce, EEOC, and NSF provided technical comments which we incorporated into the report as appropriate  DOL agreed with 4 of the 5 recommendations we made to improve oversight of federal contractors, and identified some steps it plans to take to implement them  Specifically, the department agreed with our recommendations to analyze internal process data to better understand the cause of delays that occur during compliance evaluations, assess the quality of methods used to incorporate consideration of disparities by industry into the process to select contractors for review, and to evaluate its current approach to identifying entities for review in light of changes in workplace structures, as well as its Functional Affirmative Action Program  DOL stated that it appreciated, but neither agreed nor disagreed, with our recommendation to take steps toward requiring contractors to disaggregate demographic data for the purpose of setting placement goals in the AAP rather than setting a single goal for all minorities  The department said this would require a regulatory change with little immediate benefit as contractors are already required to collect demographic data on each employee and applicant, and must conduct in- depth analyses of their total employment processes to identify where impediments to equal opportunity exist  While we acknowledge these data collection requirements for federal contractors, we remain concerned that without requiring contractors to also establish placement goals to address any underrepresentation for specific minority groups, contractors may not develop objectives or targets to make affirmative action efforts work  We maintain, therefore, that DOL should take steps toward requiring contractors to develop placement goals disaggregated by race/ethnicity  EEOC provided us a memo that it characterized as technical comments on the draft report  In these comments, EEOC neither agreed nor disagreed with our recommendation to develop a timeline to complete its planned effort to clean IMS data for a one-year period, which would include adding missing industry codes, but stated that it was taking some actions to enhance these data  We continue to maintain a timeline should be developed to complete this review, which is needed for the commission to conduct industry sector analysis that could be used to more effectively focus its limited resources and outreach activities  EEOC also emphasized the importance of systemic investigations, noting that while outreach may be somewhat useful in generating charges, individual charges are unlikely to make a substantial impact on a systemic practice affecting an entire employment sector  We maintain that the ability to analyze IMS data by industry could help EEOC to focus its resource use, including for systemic investigations  EEOC also noted staffing and resource constraints as issues faced by the commission  As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date  At that time, we will send copies to the appropriate congressional committees, the Secretary of Labor, the Chair of the Equal Employment Opportunity Commission, the Secretary of Commerce, and the Director of the National Science Foundation  In addition, the report will be available at no charge on GAO’s website at http://www gao gov  If you or your staff should have any questions about this report, please contact me at (202) 512-7215 or brownbarnesc@gao gov  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report  GAO staff who made key contributions to this report are listed in appendix VI  Our two objectives were to: (1) identify the demographic trends in the technology workforce over the past 10 years, and (2) assess the efforts by the U S  Equal Employment Opportunity Commission (EEOC) and the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) to oversee technology companies and technology contractors’ compliance with equal employment opportunity and affirmative action requirements  This appendix provides details of the data sources used to answer these questions, the analyses we conducted, and any limitations we encountered  There is no commonly accepted definition of the technology sector or technology-oriented occupations  To arrive at our definition for the technology sector, we identified industries with the highest concentration of technology-oriented occupations, a similar approach to what other federal agencies have used recently to analyze trends within this sector  To identify technology-oriented occupations, we reviewed relevant research and interviewed researchers and other individuals knowledgeable about the technology sector  Based on this research, we defined technology-oriented occupations to include all computer, engineering and mathematical occupations, including managers  We selected our occupations using Bureau of Labor Statistics (BLS) Standard Occupational Classification (SOC) System codes, and crosswalked those occupations to the corresponding U S  Census Bureau occupation codes to conduct our analysis  (For a complete list of the occupations we included as technology occupations, see appendix II)  We defined the technology sector as a group of industries with the highest concentration of technology workers  Using data from the American Community Survey, an ongoing national survey conducted by the U S  Census Bureau that collects information from a sample of households, we identified the 15 industries with the highest concentration of technology workers  For this analysis, we used Census industry codes since we used this dataset for many of our analyses  The concentration of technology workers in these industries ranged from a high of 62 2 percent in the computer systems design and related services industry to a low of 19 33 percent in the wired telecommunications carriers industry (see table 3)  Companies in the technology sector also employ non-technical workers, such as sales people  We cross-walked the industries we identified in the American Community Survey with corresponding industry codes from the North American Industry Classification System (NAICS), which is the standard used by federal statistical agencies in classifying business establishments  The other data sets used in this review use NAICS codes to identify industry  The NAICS system has six levels of industry classification, with the smallest level (2-digit code) providing the most general industry classification, and the largest (6-digit) providing the most specific classification  In total, we identified 55 6-digit NAICS industry codes that comprise the technology sector using this method  (See appendix III for a list of the 6-digit NAICS codes and industry names that correspond to the Census industries we identified ) We compared our list of industries to those included in the 2016 reports by EEOC and the BLS on the technology sector  While each report includes a somewhat different set of industries depending on the authors’ particular definition of technology occupations, most of the 15 industries we selected overlap with industries selected in these other reviews  Stemming from their particular focus, these reports included some additional industries and/or occupations excluded from our analysis, such as those in the life sciences  We also compared our findings on the demographic trends in the technology workforce to 2016 EEOC and Census Bureau reports that reviewed diversity in the technology sector  Despite the definitional and methodological variations, the demographic trends found in these other reports were generally comparable to our findings  To determine the demographic trends in the technology workforce over the past decade, we analyzed quantitative data on technology workers within and outside the technology sector from 2005 through 2015 from the Census Bureau’s Public Use Microdata Sample of the American Community Survey (ACS) for the years 2005, 2007, 2009, 2011, 2013, and 2015  ACS is an ongoing national survey that collects information from a sample of households  We analyzed trend data for gender, race, and ethnicity, and median salary by occupation and sector, and analyzed point-in-time data on educational background by occupation  We analyzed the percentage of technology workers who earned bachelor’s degrees in computer, engineering, mathematics, and technology fields  For median salary, we analyzed data for workers who were employed full-time, which included those who, over the past 12 months, reported usually working 35 hours or more per week and 50 weeks or more per year, and those with wages greater than zero  To account for the sample representation and design used in the ACS, we used the person weight present in the ACS data  We used the successive difference replication method to estimate the standard errors around any population estimate  For each comparison, we tested the statistical significance of the difference for men and women and for specific racial and ethnic groups at the p-value <0 05 level  In addition, we tested the statistical significance of the change between 2005 and 2015 for each gender and racial/ethnic group  For race categories using ACS data in this report, we included only non- Hispanic members of White, Black, Asian, and Other categories  For the Asian category, we included Asian American, Native Hawaiian or Other Pacific Islander  The Hispanic category incorporated Hispanics of all races  Our analysis included American Indian or Alaskan Native, and Two or More Races, in the category reported as “Other ” We assessed the reliability of the ACS generally and of data elements that were critical to our analyses and determined that they were sufficiently reliable for our analyses  Specifically, we reviewed documentation on the general design and methods of the ACS and on the specific elements of the ACS data that were used in our analysis  We interviewed Census Bureau officials knowledgeable about the ACS data and completed our own electronic data testing to assess the accuracy and completeness of the data used in our analyses  To determine workforce trends in companies within the technology sector and at leading information technology companies, we analyzed data from EEOC’s Employer Information Reports (EEO-1) for the years 2007, 2011, and 2015  We report EEO-1 data starting in 2007 because EEOC made significant changes to its requirements related to the reporting of EEO-1 data over time  For example, beginning in 2007, EEOC changed its requirements related to the reporting of data on managers and changed its practices for collecting certain racial/ethnicity information  EEO-1 reports contain firm-level data that is annually submitted to EEOC, generally by private-sector firms with at least 100 employees or federal contractors with at least 50 employees that have a contract, subcontract or purchase order amounting to $50,000 or more  Companies that fit the above criteria submit separate EEO-1 reports for their headquarters as well as each establishment facility  EEOC requires employers to use the North American Industry Classification System (NAICS) to classify their industry  To identify trends using EEO-1 data for workers, we analyzed data for companies with the NAICS codes we initially identified as technology industries  We selected the leading information technology companies using Standard & Poor’s (S&P) 500 Information Technology Index list, which identifies the largest public information technology companies at a given time  In October 2016, this list consisted of 67 companies in the world that have stocks trading with the United States, and we analyzed EEO-1 data from 65 of these companies  For both analyses, we analyzed EEO-1 data from all job categories by gender, race and ethnicity, and industry sectors  For job categories, the EEO-1 form collects data on 10 major job categories including 1) Executives, Senior Level Officials and Managers; 2) First/Mid-Level Officials and Managers; 3) Professionals; 4) Technicians; 5) Sales Workers; 6) Administrative Support Workers; 7) Craft Workers; 8) Operatives; 9) Laborers and Helpers; and 10) Service Workers  In our analysis, “all other jobs” combines sales workers, administrative support workers, craft workers, operatives, laborers and helpers, and service workers  We used the race/ethnicity categories used by the EEOC as follows: White, Black or African American, Asian (including Native Hawaiian or Other Pacific Islander), Hispanic or Latino, and “Two or more Races” (including American Indian or Alaska Native)  We assessed the reliability of the EEO-1 data and determined that despite limitations, they were sufficiently reliable for our analyses  To determine the reliability of the EEO-1 data that we received from EEOC, we interviewed knowledgeable EEOC officials, reviewed relevant documents provided by agency officials and obtained on its website, and performed manual data testing for missing variables  For our analysis of technology degree earners, we used degree completion data tabulated by the National Science Foundation from the National Center for Education Statistics’ Integrated Postsecondary Education Data System (IPEDS) for the year 2014  Using a variety of sources, such as academic research and interviews with representatives from academia, we defined technology-related fields as degree programs in computer science, engineering, and mathematics  We analyzed IPEDS data by race and gender and who had obtained a bachelor’s or master’s degree in technology-related fields  We determined that the potential external candidates for technology positions generally had obtained either a bachelor’s or a master’s degree in a technology-related field  We used the race/ethnicity categories used by IPEDS as follows: White, Black, Asian (including Pacific Islander), Hispanic, and Multiracial or other (which includes American Indian or Alaska Native, Other or Unknown Race, and Two or more Races, i e  respondents who selected one or more racial designations)  Race and ethnicity breakouts are for U S  citizens and permanent residents only, and thus do not include data on temporary residents  The analysis by gender includes temporary residents  To determine the reliability of IPEDs data, we reviewed relevant documents obtained on the National Center for Education Statistics website, such as annual methodology reports and the handbook of NCES survey methods  We determined that data from IPEDs were sufficiently reliable for our purposes  To identify how EEOC and OFCCP have overseen technology companies’ compliance with federal equal opportunity and affirmative action requirements, we reviewed relevant federal statutes and regulations, EEOC and OFCCP policies, strategic planning documents, and operational manuals  We interviewed EEOC and OFCCP officials in headquarters, and in two regional locations selected based on the large proportion of technology companies in those areas  At EEOC, we met with officials from the San Francisco and New York district offices  At OFCCP, we met with officials from the Pacific and Northeast regional offices  To explore charges of discrimination filed with the EEOC against technology companies, we planned to analyze data from the EEOC Integrated Mission System (IMS), which contains records on EEOC charges and enforcement activities  However, since industry code is not a mandatory field for investigators to complete, roughly half the entries did not have an industry code  Therefore, we could not reliably identify technology companies that have faced charges or enforcement  We attempted to match information we had developed on federal technology contractors with charges filed in the IMS database  Depending on the matching method we used, this yielded very different results and we determined this was not a sufficiently reliable method  Further, any matching method we used would have excluded technology companies that did not hold a federal contract  To obtain information on evaluations of technology contractors completed by OFCCP and complaints received against technology contractors, we took a two-step approach  First, using the Federal Procurement Data System–Next Generation (FPDS-NG), we developed a list of company establishments and their subsidiaries that received federal contract obligations in fiscal years 2011-2015 under any of the 55 NAICS codes we included above as technology industries  We selected only company establishments that received 50 percent or more of their total federal contract obligations under these NAICS codes  Each establishment was counted only once regardless of how many federal contracts it received during the time period  Using this method, we identified 43,448 establishments in our pool of “technology contractors ” To identify subsidiaries, which are also subject to OFCCP requirements and evaluations, we identified any other establishments that shared the global vendor code with the contractors we identified, regardless of their NAICS code  This yielded 2,116 additional contractors  Second, we matched the names (removing suffixes) of the technology contractors and their subsidiaries that we identified in FPDS-NG against OFCCP’s data on their evaluations of contractors to identify the evaluations of technology contractors that OFCCP opened and completed from fiscal year 2011 through fiscal year 2016  We conducted a similar matching exercise to identify the complaints OFCCP received against technology companies  In addition, we identified which of the leading technology companies had completed evaluations between fiscal year 2011 through 2016  We obtained information during interviews with researchers, and representatives of workforce and industry organizations and associations  In addition, we interviewed diversity and compliance representatives of eight of the leading information technology companies located in the San Francisco Bay area which were also federal contractors to discuss their efforts to increase diversity and to gain their perspectives on the federal role in overseeing compliance with nondiscrimination laws  These companies were: Cisco Systems, Inc  Facebook, Inc  Google Inc  Hewlett Packard Enterprise Company Intuit Inc  Oracle America, Inc  This is the list of technology occupations that we used in our analyses  We selected our occupations using Bureau of Labor Statistics (BLS) Standard Occupational Classification (SOC) System codes, and cross- walked those occupations to the corresponding U S  Census Bureau occupation codes  This is the list of the 55 6-digit North American Industry Classification System (NAICS) codes we identified as technology-related industries  To develop this list, we identified the 15 industries with the highest concentration of technology workers using U S  Census Bureau industry codes and then used the U S  Census Bureau’s 2012 Industry Code List for Household Surveys to crosswalk the Census codes with NAICS codes  In addition to the contact named above, Betty Ward-Zukerman (Assistant Director), Kate Blumenreich (Analyst-in-Charge), Sheranda Campbell, Julianne Hartmann Cutts, Clarita Mrena, Moon Parks, Alexandra Rouse, and John Yee made significant contributions to all phases of the work  Also contributing to this report were Rachel Beers, James Bennett, Hedieh Fusfield, Julia Kennon, Jean McSween, Jessica Orr, Dae Park, James Rebbe, Almeta Spencer, and Alexandra Squitieri 


Report 2: The Federal Reserve's (the Fed's) responsibilities as the nation's central bank fall into four main categories: monetary policy, provision of emergency liquidity through the lender of last resort function, supervision of certain types of banks and other financial firms for safety and soundness, and provision of payment system services to financial firms and the government  Congress has delegated responsibility for monetary policy to the Fed, but retains oversight responsibilities to ensure that the Fed is adhering to its statutory mandate of "maximum employment, stable prices, and moderate long-term interest rates " The Fed has defined stable prices as a longer-run goal of 2% inflation—the change in overall prices, as measured by the Personal Consumption Expenditures (PCE) price index  By contrast, the Fed states that "it would not be appropriate to specify a fixed goal for employment; rather, the Committee's policy decisions must be informed by assessments of the maximum level of employment, recognizing that such assessments are necessarily uncertain and subject to revision " Monetary policy can be used to stabilize business cycle fluctuations (alternating periods of economic expansions and recessions) in the short run, while it mainly affects inflation in the long run  The Fed's conventional tool for monetary policy is to target the federal funds rate —the overnight, interbank lending rate  This report provides an overview of how monetary policy works and recent developments, a summary of the Fed's actions following the financial crisis, and ends with a brief overview of the Fed's regulatory responsibilities  In December 2008, in the midst of the financial crisis and the "Great Recession," the Fed lowered the federal funds rate to a range of 0% to 0 25%  This was the first time rates were ever lowered to what is referred to as the zero lower bound   The recession ended in 2009, but as the economic recovery consistently proved weaker than expected in the years that followed, the Fed repeatedly pushed back its time frame for raising interest rates  As a result, the economic expansion was in its seventh year and the unemployment rate was already near the Fed's estimate of full employment when it began raising rates on December 16, 2015  This was a departure from past practice—in the previous two economic expansions, the Fed began raising rates within three years of the preceding recession ending  Since then, the Fed has continued to raise rates in a series of steps to incrementally tighten monetary policy  The Fed raised rates once in 2016, three times in 2017, and four times in 2018, by 0 25 percentage points each time  The Fed has stated that "some further gradual increases in     the federal funds rate" are necessary to fulfill its mandate  The Fed describes its plans as "data dependent," meaning they would be altered if actual employment or inflation deviate from its forecast  Although monetary policy is now less stimulative than it had been at the zero lower bound, the Fed is still adding stimulus to the economy as long as the federal funds rate is below what economists call the "neutral rate" (or the long-run equilibrium rate)  To illustrate, the federal funds rate is currently similar to the inflation rate, meaning that the real (i e , inflation-adjusted) federal funds rate is around zero  However, there is uncertainty as to what constitutes a neutral rate today  By historical standards, a zero real interest rate would be well below the neutral rate, but the neutral rate appears to have fallen following the financial crisis, so that current rates may be close to the neutral rate today  Typically, the Fed keeps interest rates below the neutral rate when the economy is operating below full employment, at neutral levels when the economy is near full employment, and above the neutral rate when the economy is at risk of overheating  Indeed, the Fed identifies this as one of its "three key principles of good monetary policy " Because of lags between changes in interest rates and their economic effects, in the past, the Fed has often preemptively changed its monetary policy stance before the economy reaches the state that the Fed is anticipating  In this business cycle, the Fed has maintained a (progressively less) stimulative monetary policy throughout the expansion, boosting economic activity  In one sense, this policy could be viewed as having successfully delivered on the Fed's mandated goals of full employment and stable prices  The unemployment rate has been below 5% since 2015 and is now lower than the rate believed to be consistent with full employment  Other labor market measures are also consistent with full employment, with the possible exception of the still-low labor force participation rate  Economic theory posits that lower unemployment will lead to higher inflation in the short run, but inflation has not proven responsive to lower unemployment in recent years  After remaining persistently below the Fed's 2% target from mid-2012 to early 2018 as measured by core PCE, inflation has remained around 2% in 2018 as measured by headline or core PCE  Economic growth has also picked up beginning in the second quarter of 2017, after being persistently low by historical standards throughout the expansion  Contributing to the 2018 growth acceleration, a more expansionary fiscal policy (larger structural budget deficit) added more stimulus to the economy in the short run  Two notable policy changes contributing to fiscal stimulus in 2018 were the 2017 tax cuts ( P L  115-97 ) and the boost to discretionary spending in FY2018 and FY2019 agreed to in P L  115-123   The Fed did little to offset this fiscal stimulus, as the pace of monetary tightening in 2018 was only slightly faster than in 2017  Despite strong economic data (which is only available with a lag), the Fed announced in January 2019 that it would be "patient" before raising rates again in light of increased economic uncertainty and financial volatility  The Fed's intended policy path poses risks  If the Fed waits too long to raise rates again, the economy could overheat, resulting in high inflation and posing risk to financial stability  As an example of how overly stimulative monetary policy can lead to the latter, critics contend that the Fed contributed to the precrisis housing bubble by keeping interest rates too low for too long during the economic recovery starting in 2001  Critics see these risks as outweighing any marginal benefit associated with monetary stimulus when the economy is already so close to full employment  Raising rates more quickly would also provide more "headroom" for the Fed to lower rates more aggressively during the next economic downturn  The potential percentage point reduction in rates before hitting the zero bound is currently smaller than the rate cuts that the Fed has undertaken in past recessions  Alternatively, there is uncertainty about whether strong growth, low unemployment, inflation around 2%, and the generally benign economic environment will continue  Economic expansions do not "die of old age"; nevertheless, the current expansion is already the second longest on record and cannot last forever  The flattening of the yield curve (i e , long-term Treasury yields are similar to short-term Treasury yields) is seen by some as a warning signal that rates are too high  Although there is a risk of stimulative monetary policy causing the economy to overheat, there is also a risk that tightening too quickly could be harmful if the economy slows  Some critics would prefer clear evidence that inflation is above the Fed's target or financial conditions are unstable before the Fed raises rates again  Monetary policy refers to the actions the Fed undertakes to influence the availability and cost of money and credit to promote the goals mandated by Congress, a stable price level and maximum sustainable employment  Because the expectations of households as consumers and businesses as purchasers of capital goods exert an important influence on the major portion of spending in the United States, and because these expectations are influenced in important ways by the Fed's actions, a broader definition of monetary policy would include the directives, policies, statements, economic forecasts, and other Fed actions, especially those made by or associated with the chairman of its Board of Governors, who is the nation's central banker  The Fed's Federal Open Market Committee (FOMC) meets every six weeks to choose a federal funds target and sometimes meets on an ad hoc basis if it wants to change the target between regularly scheduled meetings  The FOMC is composed of the 7 Fed governors, the President of the Federal Reserve Bank of New York, and 4 of the other 11 regional Federal Reserve Bank presidents serving on a rotating basis  The Fed targets the federal funds rate to carry out monetary policy  The federal funds rate is determined in the private market for overnight reserves of depository institutions (called the federal funds market)  At the end of a given period, usually a day, depository institutions must calculate how many dollars of reserves they want or need to hold against their reservable liabilities (deposits)  Some institutions may discover a reserve shortage (too few reservable assets relative to those they want to hold), whereas others may have reservable assets in excess of their wants  These reserves can be borrowed and lent on an overnight basis in a private market called the federal funds market  The interest rate in this market is called the federal funds rate  If it wishes to expand money and credit, the Fed will lower the target, which encourages more lending activity and, thus, greater demand in the economy  Conversely, if it wishes to tighten money and credit, the Fed will raise the target  The federal funds rate is linked to the interest rates that banks and other financial institutions charge for loans  Thus, whereas the Fed may directly influence only a very short-term interest rate, this rate influences other longer-term rates  However, this relationship is far from being on a one-to-one basis because longer-term market rates are influenced not only by what the Fed is doing today, but also by what it is expected to do in the future and by what inflation is expected to be in the future  This fact highlights the importance of expectations in explaining market interest rates  For that reason, a growing body of literature urges the Fed to be very transparent in explaining what its policy is, will be, and in making a commitment to adhere to that policy  The Fed has responded to this literature and is increasingly transparent in explaining its policy measures and what these measures are expected to accomplish  The Federal Reserve uses two methods to maintain its target for the federal funds rate: The Fed can also change the federal funds rate by changing reserve requirements, which specify what portion of customer deposits (primarily checking accounts) banks must hold as vault cash or on deposit at the Fed  Thus, reserve requirements affect the liquidity available within the federal funds market  Statute sets the numerical levels of reserve requirements, although the Fed has some discretion to adjust them  Currently, banks are required to hold 0% to 10% of customer deposits that qualify as net transaction accounts in reserves, depending on the size of the bank's deposits  This tool is used rarely—the percentage was last changed in 1992  Each of these tools works by altering the overall liquidity available for use by the banking system, which influences the amount of assets these institutions can acquire  These assets are often called credit because they represent loans the institutions have made to businesses and households, among others  The Fed's control over monetary policy stems from its exclusive ability to alter the money supply and credit conditions more broadly  The Fed directly controls the monetary base , which is made up of currency (Federal Reserve notes) and bank reserves  The size of the monetary base, in turn, influences broader measures of the money supply, which include close substitutes to currency, such as demand deposits (e g , checking accounts) held at banks  The Fed's definition of monetary policy as the actions it undertakes to influence the availability and cost of money and credit suggests two ways to measure the stance of monetary policy  One is to look at the cost of money and credit as measured by the rate of interest relative to inflation (or inflation projections), and the other is to look at the growth of money and credit itself  Thus, it is possible to look at either interest rates or the growth in the supply of money and credit in coming to a conclusion about the current stance of monetary policy—that is, whether it is expansionary (adding stimulus to the economy), contractionary (slowing economic activity), or neutral  During the high inflation experience of the 1970s the Fed placed greater emphasis on money supply growth, but since then, most central banks including the Fed have preferred to formulate monetary policy in terms of the cost of money and credit rather than in terms of their supply  The Fed conducts monetary policy by focusing on the cost of money and credit as proxied by the federal funds rate  A simple comparison of market interest rates over time as an indicator of changes in the stance of monetary policy is potentially misleading, however  Economists call the interest rate that is essential to decisions made by households and businesses to buy capital goods the real interest rate  It is often proxied by subtracting from the market interest rate the actual or expected rate of inflation  If inflation rises and market interest rates remain the same, then real interest rates have fallen, with a similar economic effect as if market rates (called nominal rates) had fallen by the same amount with a constant inflation rate  The federal funds rate is only one of the many interest rates in the financial system that determines economic activity  For these other rates, the real rate is largely independent of the amount of money and credit over the longer run because it is determined by the interaction of saving and investment (or the demand for capital goods)  The internationalization of capital markets means that for most developed countries the relevant interaction between saving and investment that determines the real interest rate is on a global basis  Thus, real rates in the United States depend not only on U S  national saving and investment but also on the saving and investment of other countries  For that reason, national interest rates are influenced by international credit conditions and business cycles  How do changes in short-term interest rates affect the overall economy? In the short run, an expansionary monetary policy that reduces interest rates increases interest-sensitive spending, all else equal  Interest-sensitive spending includes physical investment (i e , plant and equipment) by firms, residential investment (housing construction), and consumer-durable spending (e g , automobiles and appliances) by households  As discussed in the next section, it also encourages exchange rate depreciation that causes exports to rise and imports to fall, all else equal  To reduce spending in the economy, the Fed raises interest rates and the process works in reverse  An examination of U S  economic history will show that money- and credit-induced demand expansions can have a positive effect on U S  GDP growth and total employment  The extent to which greater interest-sensitive spending results in an increase in overall spending in the economy in the short run will depend in part on how close the economy is to full employment  When the economy is near full employment, the increase in spending is likely to be dissipated through higher inflation more quickly  When the economy is far below full employment, inflationary pressures are more likely to be muted  This same history, however, also suggests that over the longer run, a more rapid rate of growth of money and credit is largely dissipated in a more rapid rate of inflation with little, if any, lasting effect on real GDP and employment  Economists have two explanations for this paradoxical behavior  First, they note that, in the short run, many economies have an elaborate system of contracts (both implicit and explicit) that makes it difficult in a short period for significant adjustments to take place in wages and prices in response to a more rapid growth of money and credit  Second, they note that expectations for one reason or another are slow to adjust to the longer-run consequences of major changes in monetary policy  This slow adjustment also adds rigidities to wages and prices  Because of these rigidities, changes in the growth of money and credit that change aggregate demand can have a large initial effect on output and employment, albeit with a policy lag of six to eight quarters before the broader economy fully responds to monetary policy measures  Over the longer run, as contracts are renegotiated and expectations adjust, wages and prices rise in response to the change in demand and much of the change in output and employment is undone  Thus, monetary policy can matter in the short run but be fairly neutral for GDP growth and employment in the longer run  In societies in which high rates of inflation are endemic, price adjustments are very rapid  During the final stages of very rapid inflations, called hyperinflation, the ability of more rapid rates of growth of money and credit to alter GDP growth and employment is virtually nonexistent, if not negative  Either fiscal policy (defined here as changes in the structural budget deficit, caused by policy changes to government spending or taxes) or monetary policy can be used to alter overall spending in the economy  However, there are several important differences to consider between the two  First, economic conditions change rapidly, and in practice monetary policy can be more nimble than fiscal policy  The Fed meets every six weeks to consider changes in interest rates and can call an unscheduled meeting any time  Large changes to fiscal policy typically occur once a year at most  Once a decision to alter fiscal policy has been made, the proposal must travel through a long and arduous legislative process that can last months before it can become law, whereas monetary policy changes are made instantly  Both monetary and fiscal policy measures are thought to take more than a year to achieve their full impact on the economy due to pipeline effects  In the case of monetary policy, interest rates throughout the economy may change rapidly, but it takes longer for economic actors to change their spending patterns in response  For example, in response to a lower interest rate, a business must put together a loan proposal, apply for a loan, receive approval for the loan, and then put the funds to use  In the case of fiscal policy, once legislation has been enacted, it may take some time for authorized spending to be outlayed  An agency must approve projects and select and negotiate with contractors before funds can be released  In the case of transfers or tax cuts, recipients must receive the funds and then alter their private spending patterns before the economy-wide effects are felt  For both monetary and fiscal policy, further rounds of private and public decisionmaking must occur before multiplier or ripple effects are fully felt  Second, monetary policy is determined based only on the Fed's mandate, whereas fiscal policy is determined based on competing political goals  Fiscal policy changes have macroeconomic implications regardless of whether that was policymakers' primary intent  Political constraints have prevented increases in budget deficits from being fully reversed during expansions  Over the course of the business cycle, aggregate spending in the economy can be expected to be too high as often as it is too low  This means that stabilization policy should be tightened as often as it is loosened, yet increasing the budget deficit has proven to be much more popular than implementing the spending cuts or tax increases necessary to reduce it  As a result, the budget has been in deficit in all but five years since 1961, which has led to an accumulation of federal debt that gives policymakers less leeway to potentially undertake a robust expansionary fiscal policy, if needed, in the future  By contrast, the Fed is more insulated from political pressures, as discussed in the previous section, and experience shows that it is willing to raise or lower interest rates  Third, the long-run consequences of fiscal and monetary policy differ  Expansionary fiscal policy creates federal debt that must be serviced by future generations  Some of this debt will be "owed to ourselves," but some (presently, about half) will be owed to foreigners  To the extent that expansionary fiscal policy crowds out private investment, it leaves future national income lower than it otherwise would have been  Monetary policy does not have this effect on generational equity, although different levels of interest rates will affect borrowers and lenders differently  Furthermore, the government faces a budget constraint that limits the scope of expansionary fiscal policy—it can only issue debt as long as investors believe the debt will be honored, even if economic conditions require larger deficits to restore equilibrium  Fourth, openness of an economy to highly mobile capital flows changes the relative effectiveness of fiscal and monetary policy  Expansionary fiscal policy would be expected to lead to higher interest rates, all else equal, which would attract foreign capital looking for a higher rate of return, causing the value of the dollar to rise  Foreign capital can only enter the United States on net through a trade deficit  Thus, higher foreign capital inflows lead to higher imports, which reduce spending on domestically produced substitutes and lower spending on exports  The increase in the trade deficit would cancel out the expansionary effects of the increase in the budget deficit to some extent (in theory, entirely if capital is perfectly mobile)  Expansionary monetary policy would have the opposite effect—lower interest rates would cause capital to flow abroad in search of higher rates of return elsewhere, causing the value of the dollar to fall  Foreign capital outflows would reduce the trade deficit through an increase in spending on exports and domestically produced import substitutes  Thus, foreign capital flows would (tend to) magnify the expansionary effects of monetary policy  Fifth, fiscal policy can be targeted to specific recipients  In the case of normal open market operations, monetary policy cannot  This difference could be considered an advantage or a disadvantage  On the one hand, policymakers could target stimulus to aid the sectors of the economy most in need or most likely to respond positively to stimulus  On the other hand, stimulus could be allocated on the basis of political or other noneconomic factors that reduce the macroeconomic effectiveness of the stimulus  As a result, both fiscal and monetary policy have distributional implications, but the latter's are largely incidental whereas the former's can be explicitly chosen  In cases in which economic activity is extremely depressed, monetary policy may lose some of its effectiveness  When interest rates become extremely low, interest-sensitive spending may no longer be very responsive to further rate cuts  Furthermore, interest rates cannot be lowered below zero so traditional monetary policy is limited by this "zero lower bound " In this scenario, fiscal policy may be more effective  As is discussed in the next section, some argue that the U S  economy experienced this scenario following the recent financial crisis  Of course, using monetary and fiscal policy to stabilize the economy are not mutually exclusive policy options  But because of the Fed's independence from Congress and the Administration, the two policy options are not always coordinated  If Congress and the Fed were to choose compatible fiscal and monetary policies, respectively, then the economic effects would be more powerful than if either policy were implemented in isolation  For example, if stimulative monetary and fiscal policies were implemented, the resulting economic stimulus would be larger than if one policy were stimulative and the other were neutral  Alternatively, if Congress and the Fed were to select incompatible policies, these policies could partially negate each other  For example, a stimulative fiscal policy and contractionary monetary policy may end up having little net effect on aggregate demand (although there may be considerable distributional effects)  Thus, when fiscal and monetary policymakers disagree in the current system, they can potentially choose policies with the intent of offsetting each other's actions  Whether this arrangement is better or worse for the economy depends on what policies are chosen  If one actor chooses inappropriate policies, then the lack of coordination allows the other actor to try to negate its effects  When the United States experienced the worst financial crisis since the Great Depression, the Fed undertook increasingly unprecedented steps in an attempt to restore financial stability  These steps included reducing the federal funds rate to the zero lower bound, providing direct financial assistance to financial firms, and "quantitative easing " These unconventional policy decisions continue to have consequences for monetary policy today, as the Fed embarks on monetary policy "normalization " The bursting of the housing bubble led to the onset of a financial crisis that affected both depository institutions and other segments of the financial sector involved with housing finance  As the delinquency rates on home mortgages rose to record numbers, financial firms exposed to the mortgage market suffered capital losses and lost access to liquidity  The contagious nature of this development was soon obvious as other types of loans and credit became adversely affected  This, in turn, spilled over into the broader economy, as the lack of credit soon had a negative effect on both production and aggregate demand  In December 2007, the economy entered a recession  As the housing slump's spillover effects to the financial system, as well as its international scope, became apparent, the Fed responded by reducing the federal funds target and the discount rate  Beginning on September 18, 2007, and ending on December 16, 2008, the federal funds target was reduced from 5 25% to a range between 0% and 0 25%, where it remained until December 2015  Economists call this the zero lower bound to signify that once the federal funds rate is lowered to zero, conventional open market operations cannot be used to provide further stimulus  The Fed attempted to achieve additional monetary stimulus at the zero bound through a pledge to keep the federal funds rate low for an extended period of time, which has been called forward guidance or forward commitment   The decision to maintain a target interest rate near zero was unprecedented  First, short-term interest rates have never before been reduced to zero in the history of the Federal Reserve  Second, the Fed waited much longer than usual to begin tightening monetary policy in the current recovery  For example, in the previous two expansions, the Fed began raising rates less than three years after the preceding recession ended  With liquidity problems persisting as the federal funds rate was reduced, it appeared that the traditional transmission mechanism linking monetary policy to activity in the broader economy was not working  Monetary authorities became concerned that the liquidity provided to the banking system was not reaching other parts of the financial system  As noted above, using only traditional monetary policy tools, additional monetary stimulus cannot be provided once the federal funds rate has reached its zero bound  To circumvent this problem, the Fed decided to use nontraditional methods to provide additional monetary policy stimulus  First, the Federal Reserve introduced a number of emergency credit facilities to provide increased liquidity directly to financial firms and markets  The first facility was introduced in December 2007, and several were added after the worsening of the crisis in September 2008  These facilities were designed to fill perceived gaps between open market operations and the discount window, and most of them were designed to provide short-term loans backed by collateral that exceeded the value of the loan  A number of the recipients were nonbanks that are outside the regulatory umbrella of the Federal Reserve; this marked the first time that the Fed had lent to nonbanks since the Great Depression  The Fed authorized these actions under Section 13(3) of the Federal Reserve Act, a seldom-used emergency provision that allowed it to extend credit to nonbank financial institutions and to nonfinancial firms as well  The Fed provided assistance through liquidity facilities, which included both the traditional discount window and the newly created emergency facilities mentioned above, and through direct support to prevent the failure of two specific institutions, American International Group (AIG) and Bear Stearns  The amount of assistance provided was an order of magnitude larger than normal Fed lending, as shown in Figure 1   Total assistance from the Federal Reserve at the beginning of August 2007 was approximately $234 million provided through liquidity facilities, with no direct support given  In mid-December 2008, this number reached a high of $1 6 trillion, with a near-high of $108 billion given in direct support  From that point on, it fell steadily  Assistance provided through liquidity facilities fell below $100 billion in February 2010, when many facilities were allowed to expire, and support to specific institutions fell below $100 billion in January 2011  The last loan from the crisis was repaid on October 29, 2014  Central bank liquidity swaps (temporary currency exchanges between the Fed and central foreign banks) are the only facility created during the crisis still active, but they have not been used on a large scale since 2012  All assistance through expired facilities has been fully repaid with interest  In 2010, the Dodd-Frank Act changed Section 13(3) to rule out direct support to specific institutions in the future  From the introduction of its first emergency lending facility in December 2007 to the worsening of the crisis in September 2008, the Fed sterilized the effects of lending on its balance sheet (i e , prevented the balance sheet from growing) by selling an offsetting amount of Treasury securities  After September 2008, assistance exceeded remaining Treasury holdings, and the Fed allowed its balance sheet to grow  Between September 2008 and November 2008, the Fed's balance sheet more than doubled in size, increasing from less than $1 trillion to more than $2 trillion  The loans and other assistance provided by the Federal Reserve to banks and nonbank institutions are considered assets on this balance sheet because they represent money owed to the Fed  With the federal funds rate at its zero bound and direct lending falling as financial conditions began to normalize in 2009, the Fed faced the decision of whether to try to provide additional monetary stimulus through unconventional measures  It did so through two unconventional tools—large-scale asset purchases (quantitative easing) and forward guidance  With short-term rates constrained by the zero bound, the Fed hoped to reduce long-term rates through large-scale asset purchases, which were popularly referred to as quantitative easing (QE)  Between 2009 and 2014, the Fed undertook three rounds of QE, buying U S  Treasury securities, agency debt, and agency mortgage-backed securities (MBS)  These securities now comprise most of the assets on the Fed's balance sheet  To understand the effect of quantitative easing on the economy, it is first necessary to describe its effect on the Fed's balance sheet  In 2009, the Fed's emergency lending declined rapidly as market conditions stabilized, which would have caused the balance sheet to decline if the Fed took no other action  Instead, asset purchases under the first round of QE (QE1) offset the decline in lending, and from November 2008 to November 2010, the overall size of the Fed's balance sheet did not vary by much  Its composition changed because of QE1, however—the amount of Fed loans outstanding fell to less than $50 billion at the end of 2010, whereas holdings of securities rose from less than $500 billion in November 2008 to more than $2 trillion in November 2010  The second round of QE, QE2, increased the Fed's balance sheet from $2 3 trillion in November 2010 to $2 9 trillion in mid-2011  It remained around that level until September 2012, when it began rising for the duration of the third round, QE3  It was about $4 5 trillion (comprised of $2 5 trillion of Treasury securities, $1 7 trillion MBS, and $0 4 trillion of agency debt) when QE3 ended in October 2014, and has remained at that level since  Table 1 summarizes the Fed's QE purchases  In total, the Fed's balance sheet increased by more than $2 5 trillion over the course of the three rounds of QE, making it about five times larger than it was before the crisis  This increase in the Fed's assets must be matched by a corresponding increase in the liabilities on its balance sheet  The Fed's liabilities mostly take the form of currency, bank reserves, and cash deposited by the U S  Treasury at the Fed  QE has mainly resulted in an increase in bank reserves, from about $46 billion in August 2008 to $820 billion at the end of 2008  Since October 2009, bank reserves have exceeded $1 trillion, and they have been between $2 5 trillion and $2 8 trillion since 2014  The increase in bank reserves can be seen as the inevitable outcome of the increase in assets held by the Fed because the bank reserves, in effect, financed the Fed's asset purchases and loan programs  Reserves increase because when the Fed makes loans or purchases assets, it credits the proceeds to the recipients' reserve accounts at the Fed  The intended purpose of QE was to put downward pressure on long-term interest rates  Purchasing long-term Treasury securities and MBS should directly reduce the rates on those securities, all else equal  The hope is that a reduction in those rates feeds through to private borrowing rates throughout the economy, stimulating spending on interest-sensitive consumer durables, housing, and business investment in plant and equipment  Indeed, Treasury and mortgage rates have been unusually low since the crisis compared with the past few decades, although the timing of declines in those rates does not match up closely to the timing of asset purchases  Determining whether QE reduced rates more broadly and stimulated interest-sensitive spending requires controlling for other factors, such as the weak economy, which tends to reduce both rates and interest-sensitive spending  The increase in the Fed's balance sheet has the potential to be inflationary because bank reserves are a component of the portion of the money supply controlled by the Fed (called the monetary base ), which grew at an unprecedented pace during QE  In practice, overall measures of the money supply have not grown as quickly as the monetary base, and inflation has remained below the Fed's goal of 2% for most of the period since 2008  The growth in the monetary base has not translated into higher inflation because bank reserves have mostly remained deposited at the Fed and have not led to increased lending or asset purchases by banks  Another concern is that by holding large amounts of MBS, the Fed is allocating credit to the housing sector, putting the rest of the economy at a disadvantage compared with that sector  Advocates of MBS purchases note that housing was the sector of the economy most in need of stabilization, given the nature of the crisis (this argument becomes less persuasive as the housing market continues to rebound); that MBS markets are more liquid than most alternatives, limiting the potential for the Fed's purchases to be disruptive; and that the Fed is legally permitted to purchase few other assets, besides Treasury securities  On October 29, 2014, the Fed announced that it would stop making large-scale asset purchases at the end of the month  Now that QE is completed, attention has turned to the Fed's "exit strategy" from QE and zero interest rates  The Fed laid out its plans to normalize monetary policy in a statement in September 2014  It plans to continue implementing monetary policy by targeting the federal funds rate  The basic challenge to doing so is that the Fed cannot effectively alter the federal funds rate by altering reserve levels (as it did before the crisis) because QE has flooded the market with excess bank reserves  In other words, in the presence of more than $2 trillion in bank reserves, the market-clearing federal funds rate is close to zero even if the Fed would like it to be higher  The most straightforward way to return to normal monetary policy would be to remove those excess reserves by shrinking the balance sheet through asset sales  The Fed does not intend to sell any securities, however  Instead, it is gradually reducing the balance sheet by ceasing to roll over securities as they mature, which began in September 2017—almost three years after QE ended  Initially, it allowed only $6 billion of Treasuries and $4 billion of MBS to run off each month, which was gradually increased to $30 billion of Treasuries and $20 billion of MBS per month, where it will remain until normalization is completed  The Fed believes that it would only cease shrinking the balance sheet or use QE again in the future if it its ability to stimulate the economy using reductions in the federal funds rate were insufficient  The Fed intends to ultimately reduce the balance sheet until it holds "no more securities than necessary to implement monetary policy efficiently and effectively " The Fed has stated that it foresees a balance sheet size that is consistent with this goal will be larger than it was before the crisis  In part, that is because other liabilities on the Fed's balance sheet are larger—there is more currency in circulation now than there was before the crisis, and the Treasury has kept larger balances on average in its account at the Fed  But the balance sheet will also be significantly larger because the Fed decided in January 2019 to continue using its new method of targeting the federal funds rate even after normalization is completed  Under the new method, the federal funds rate is not determined by supply and demand in the market for bank reserves, and the Fed would prefer to maintain abundant bank reserves so that it does not have to use open market operations to respond to changes in banks' demand for reserves  By contrast, if it went back to the pre-crisis method of targeting the federal funds rate, only minimal excess reserve balances would be necessary (but perhaps more than before the crisis), so its balance sheet could be much smaller  The Fed has not yet announced when the wind-down will be completed or how large the balance sheet would be upon completion, but the January 2019 FOMC minutes noted the wind-down could be completed as soon as this year  In that case, the balance sheet would not be much smaller than its current size of $4 trillion when normalization is completed—more than four times larger than its pre-crisis size  Although the Fed has stated that it intends to eventually stop holding MBS, the Fed would still have sizable MBS holdings in 2025, according to projections from the New York Fed  In order to raise the federal funds rate in the presence of large reserves, the Fed has raised the two market interest rates that are close substitutes—it has directly raised the rate it pays banks on reserves held at the Fed and used large-scale reverse repurchase agreements (repos) to alter repo rates  In 2008, Congress granted the Fed the authority to pay interest on reserves  Because banks can earn interest on excess reserves by lending them in the federal funds market or by depositing them at the Fed, raising the interest rate on bank reserves should also raise the federal funds rate  In this way, the Fed can lock up excess liquidity to avoid any potentially inflationary effects because reserves kept at the Fed cannot be put to use by banks to finance activity in the broader economy  In practice, the interest rate that the Fed has paid banks on reserves has been slightly higher than the federal funds rate, which some have criticized as a subsidy to banks  Reverse repos are another tool for draining liquidity from the system and influencing short-term market rates  They drain liquidity from the financial system because cash is transferred from market participants to the Fed  As a result, interest rates in the repo market, one of the largest short-term lending markets, rise  The Fed has long conducted open market operations through the repo market, but since 2013 it has engaged in a much larger volume of reverse repos with a broader range of nonbank counterparties, including the government-sponsored enterprises (such as Fannie Mae and Freddie Mac) and certain money market funds, through a new Overnight Reverse Repurchase Operations Facility  The Fed is currently not capping the amount of overnight reverse repos offered through this facility  There has been some concern about the potential ramifications of the Fed becoming a dominant participant in this market and expanding its counterparties  For example, will counterparties only be willing to transact with the Fed in a panic, and will the Fed be exposed to counterparty risk with nonbanks that it does not regulate? The Fed has distinct roles as a central bank and a regulator  Its main regulatory responsibilities are as follows: B ank regulation   The Fed supervises bank holding companies (BHCs) and thrift holding companies (THCs), which include all large and thousands of small depositories, for safety and soundness  The Dodd-Frank Act requires the Fed to subject BHCs with more than $50 billion in consolidated assets to enhanced prudential regulation (i e , stricter standards than are applied to similar firms) in an effort to mitigate the systemic risk they pose  The Fed is also the prudential regulator of U S  branches of foreign banks and state banks that have elected to become members of the Federal Reserve System  Often in concert with the other banking regulators, it promulgates rules and supervisory guidelines that apply to banks in areas such as capital adequacy, and examines depository firms under its supervision to ensure that those rules are being followed and those firms are conducting business prudently  The Fed's supervisory authority includes consumer protection for banks under its jurisdiction that have $10 billion or less in assets  P rudential regulat ion of nonbank systemically important financial institutions   The Dodd-Frank Act allows the Financial Stability Oversight Council (FSOC) to designate nonbank financial firms as systemically important (SIFIs)  Designated firms are supervised by the Fed for safety and soundness  Since enactment, the number of designated firms has ranged from four, initially, to none today  R egulation of the payment system   The Fed regulates the retail and wholesale payment system for safety and soundness  It also operates parts of the payment system, such as interbank settlements and check clearing  The Dodd-Frank Act subjects payment, clearing, and settlement systems designated as systemically important by the FSOC to enhanced supervision by the Fed (along with the Securities and Exchange Commission and the Commodity Futures Trading Commission, depending on the type of system)  M argin requirements   The Fed sets margin requirements on the purchases of certain securities, such as stocks, in certain private transactions  The purpose of margin requirements is to mandate what proportion of the purchase can be made on credit  The Fed attempts to mitigate systemic risk and prevent financial instability through these regulatory responsibilities, as well as through its lender of last resort activities and participation on the FSOC (whose mandate is to identify risks and respond to emerging threats to financial stability)  The Fed has focused more on attempting to mitigate systemic risk through its regulations since the financial crisis, and has also restructured its internal operations to facilitate a macroprudential approach to supervision and regulation 

ground_truth: Congress has delegated responsibility for monetary policy to the Federal Reserve (the Fed), the nation's central bank, but retains oversight responsibilities for ensuring that the Fed is adhering to its statutory mandate of "maximum employment, stable prices, and moderate long-term interest rates." To meet its price stability mandate, the Fed has set a longer-run goal of 2% inflation. The Fed's control over monetary policy stems from its exclusive ability to alter the money supply and credit conditions more broadly. Normally, the Fed conducts monetary policy by setting a target for the federal funds rate, the rate at which banks borrow and lend reserves on an overnight basis. It meets its target through open market operations, financial transactions traditionally involving U.S. Treasury securities. Beginning in 2007, the federal funds target was reduced from 5.25% to a range of 0% to 0.25% in December 2008, which economists call the zero lower bound. By historical standards, rates were kept unusually low for an unusually long time to mitigate the effects of the financial crisis and its aftermath. Starting in December 2015, the Fed has been raising interest rates and expects to gradually raise rates further. The Fed raised rates once in 2016, three times in 2017, and four times in 2018, by 0.25 percentage points each time. In light of increased economic uncertainty and financial volatility, the Fed announced in January 2019 that it would be "patient" before raising rates again. The Fed influences interest rates to affect interest-sensitive spending, such as business capital spending on plant and equipment, household spending on consumer durables, and residential investment. In addition, when interest rates diverge between countries, it causes capital flows that affect the exchange rate between foreign currencies and the dollar, which in turn affects spending on exports and imports. Through these channels, monetary policy can be used to stimulate or slow aggregate spending in the short run. In the long run, monetary policy mainly affects inflation. A low and stable rate of inflation promotes price transparency and, thereby, sounder economic decisions. The Fed's relative independence from Congress and the Administration has been justified by many economists on the grounds that it reduces political pressure to make monetary policy decisions that are inconsistent with a long-term focus on stable inflation. But independence reduces accountability to Congress and the Administration, and recent legislation and criticism of the Fed by the President has raised the question about the proper balance between the two. While the federal funds target was at the zero lower bound, the Fed attempted to provide additional stimulus through unsterilized purchases of Treasury and mortgage-backed securities (MBS), a practice popularly referred to as quantitative easing (QE). Between 2009 and 2014, the Fed undertook three rounds of QE. The third round was completed in October 2014, at which point the Fed's balance sheet was $4.5 trillion—five times its precrisis size. After QE ended, the Fed maintained the balance sheet at the same level until September 2017, when it began to very gradually reduce it to a more normal size. The Fed has raised interest rates in the presence of a large balance sheet through the use of two new tools—by paying banks interest on reserves held at the Fed and by engaging in reverse repurchase agreements (reverse repos) through a new overnight facility. In January 2019, the Fed announced that it would continue using these tools to set interest rates permanently, in which case the balance sheet may not get much smaller than its current size of $4 trillion. With regard to its mandate, the Fed believes that unemployment is currently lower than the rate that it considers consistent with maximum employment, and inflation is close to the Fed's 2% goal by the Fed's preferred measure. Even after recent rate increases, monetary policy is still considered expansionary. This monetary policy stance is unusually stimulative compared with policy in this stage of previous expansions, and is being coupled with a stimulative fiscal policy (larger structural budget deficit). Debate is currently focused on how quickly the Fed should raise rates. Some contend the greater risk is that raising rates too slowly at full employment will cause inflation to become too high or cause financial instability, whereas others contend that raising rates too quickly will cause inflation to remain too low and choke off the expansion.