jerome h powell : welcoming remarks – " conversation with the chairman : a teacher town hall meeting " welcoming remarks by mr jerome h powell, chairman of the board of governors of the federal reserve system, at conversation with the chairman : a teacher town hall meeting, washington dc, 6 february 2019. * * * thank you to all the educators who are here with us in washington or are joining us online. i look forward to responding to your questions. but first, i have a few thoughts about the vital work you do as economics educators and its connection to what the federal reserve is trying to accomplish. i promise to be brief, because it is a school night. i am here today, and the fed has organized this event, because of the importance of economics education. some of your students may go on to become professional economists, but all of them, i hope, will apply the valuable lessons and the skills they have gained from economics in other careers and in others aspects of their lives. studying economics can benefit students in multiple ways. the lessons of economics are valuable in a wide variety of vocations. moreover, the knowledge gained will empower students as consumers, managers of their own finances, and as informed citizens. economics has been consistently useful to me over my career in law, finance, and government service. it is, of course, central to my current role as a monetary policymaker and financial regulator. in government, economic analysis is one of the principal tools we use in making policy decisions. among other things, economics is an essential facet of the science of public policy. what policies actually work? which ones sound good but don ’ t work, or are actually counterproductive? economics gives us the tools to answer those questions and help us make the best the decisions on behalf of the public. of course, economics is not only the basis for judgments and decisions made by the fed and other government agencies. it also underpins the countless decisions by consumers, businesses, and investors that drive economic activity. the concepts you teach and apply in the classroom guide those decisions and even help explain human behavior outside of the workings of the economy. for example, to continue to grow and succeed, any business owner should understand the differences between fixed cost, variable cost, average cost, and marginal cost. businesses and investors need to understand present or discounted value, but so should any parent or grandparent starting a college fund. economics teaches us about the power of incentives, which are central to thinking

the fed an exceptionally broad and deep understanding of developments in financial markets and financial institutions. the benefits of the fed ’ s supervisory authority for its non - supervisory activities the extensive information and the expertise that the fed gains in the process of supervising banks are useful for carrying out many of the central bank ’ s non - supervisory activities. the benefits of supervisory information for monetary policy are perhaps the most debated. the research literature has focused on whether information drawn from bank examinations is helpful in assessing the economic outlook and thus in formulating monetary policy. the results have been mixed ( peek, rosengren, and tootell, 1999 ; feldman and others, 2003 ). some evidence suggests that supervisory information is likely to be most useful for monetary policymaking in times of financial stress. for example, the federal reserve ’ s experience suggests that such information was helpful in evaluating the availability of credit in the early 1990s, when some banks ’ lending was constrained by their limited capital ( bernanke and lown, 1991 ; greenspan, 1994 ). more generally, monetary policy is certainly aided by the anecdotal information on regional economic conditions that reserve bank business and community contacts, including numerous bankers, provide. many of these contacts are fostered by the extensive interaction between the reserve banks and the banks in their districts. the federal reserve ’ s oversight of the payments system is another critical central banking function. in contrast to the situation in some other countries, the federal reserve lacks explicit legal authority to oversee systemically important payments systems. instead, the federal reserve ’ s powers in this area derive to a considerable extent from its bank supervisory authority. notably, some key institutions providing clearing and settlement services hold bank charters that place them under federal reserve oversight. 3 in its capacity as a bank supervisor, the fed can obtain detailed information from these institutions about their operations and risk - management practices and can take action as needed to address risks and deficiencies. the fed is also either the direct or umbrella supervisor of several large commercial banks that are critical to the payments system through their clearing and settlement activities. 4 as i have mentioned, the fed also has an operational role in the payments system. in particular, fedwire - a system that the fed operates for transmitting large - value payments - is a critical component of the u. s. financial infrastructure. the operation of fedwire and related payments systems often involves large short - term credit exposures to system participants ( reflecting so - called daylight overdrafts ). the fed also extends