hard, but valuable, lessons from the current crisis that they are applying to their internal processes to assess capital adequacy. these lessons include the linkages between liquidity risk and capital adequacy, the dangers of latent risk concentrations, the value of rigorous stress testing, the importance of strong governance over their processes, and the importance of strong fundamental risk identification and risk measurement to the assessment of capital adequacy. perhaps one of the most important conclusions to be drawn is that all assessments of capital adequacy have elements of uncertainty because of their inherent assumptions, limitations, and shortcomings. addressing this uncertainty is one among several reasons that firms should retain substantial capital cushions. currently, we are conducting a horizontal assessment of internal processes that evaluate capital adequacy at the largest u. s. banking organizations, focusing in particular on how shortcomings in fundamental risk management and governance for these processes could impair firms'abilities to estimate capital needs. using findings from these reviews, we will work with firms over the next year to bring their processes into conformance with supervisory expectations. supervisors will use the information provided by firms about their processes as a factor – but by no means the only factor – in the supervisory assessment of the firms'overall capital levels. for instance, if a firm cannot demonstrate a strong ability to estimate capital needs, then supervisors will place less credence on the firm's own internal capital results and demand higher capital cushions, among other things. moreover, we have already required some firms to raise capital given their higher risk profiles. in general, we believe that if firms develop more - rigorous internal processes for assessing capital adequacy that capture all the risks facing those firms – including under stress scenarios – and maintain adequate capital based on those processes, they will be in a better position to weather financial and economic shocks and thereby perform their role in the credit intermediation process. we also are expanding our quantitative surveillance program for large, complex financial organizations to include supervisory information, firm - specific data analysis, and marketbased indicators to identify developing strains and imbalances that may affect multiple institutions, as well as emerging risks to specific firms. periodic scenario analyses across large firms will enhance our understanding of the potential impact of adverse changes in the operating environment on individual firms and on the system as a whole. this work will be performed by a multidisciplinary group composed of our economic and market researchers, supervisors, market operations specialists,

janet l yellen : economic outlook testimony by ms janet l yellen, chair of the board of governors of the federal reserve system, before the joint economic committee, us congress, washington dc, 3 december 2015. * * * chairman coats, ranking member maloney, and members of the committee, i appreciate the opportunity to testify before you today. in my remarks i will discuss the current economic outlook before turning to monetary policy. the economic outlook the u. s. economy has recovered substantially since the great recession. the unemployment rate, which peaked at 10 percent in october 2009, declined to 5 percent in october of this year. at that level, the unemployment rate is near the median of federal open market committee ( fomc ) participants ’ most recent estimates of its longer - run normal level. the economy has created about 13 million jobs since the low point for employment in early 2010, and total nonfarm payrolls are now almost 4 - 1 / 2 million higher than just prior to the recession. most recently, after a couple of months of relatively modest payroll growth, employers added an estimated 271, 000 jobs in october. this increase brought the average monthly gain since june to about 195, 000 – close to the monthly pace of around 210, 000 in the first half of the year and still sufficient to be consistent with continued improvement in the labor market. at the same time that the labor market has improved, u. s. economic output – as measured by inflation - adjusted gross domestic product ( gdp ), or real gdp – has increased at a moderate pace, on balance, during the expansion. over the first three quarters of this year, real gdp is currently estimated to have advanced at an annual rate of 2 - 1 / 4 percent, close to its average pace over the previous five years. many economic forecasters expect growth roughly along those same lines in the fourth quarter. growth this year has been held down by weak net exports, which have subtracted more than 1 / 2 percentage point, on average, from the annual rate of real gdp growth over the past three quarters. foreign economic growth has slowed, damping increases in u. s. exports, and the u. s. dollar has appreciated substantially since the middle of last year, making our exports more expensive and imported goods cheaper. by contrast, total real private domestic final purchases ( pdfp ) – which includes household spending, business fixed investment, and residential investment, and currently represents about 85 percent of aggregate spending – has