In his second appearance on Capitol Hill this week, Powell told the House Financial Services Committee that the Fed does not have supremacy over the Federal Deposit Insurance Corp. or the Office of the Comptroller of the Currency on regulatory matters and it will not attempt to strong-arm the other two agencies on revisions to their joint Basel III endgame proposal. 

"I would say it's strictly collaborative," he said. "And I would say that our discussions with the FDIC, which [Fed] Vice Chair [Michael] Barr has actually been conducting, and the OCC, they've been very productive so far. So … we've continued to work our way through this, and I believe we will get, fairly soon, to a resolution of the remaining process issue."

Powell's latest remarks come one day after he declared the Fed's interest in re-proposing the so-called Basel III endgame package to allow the public an opportunity to comment on the "broad and material changes" that have been made to it in recent months. 

During Wednesday's three-hour hearing, Powell declined to say what is holding up negotiations between the Fed, FDIC and OCC over how to proceed. 

"I don't want to say that we're at odds," he said. "I just want to say we're working through this issue together."

He also refused to raise the curtain on changes the Fed has already made to the proposal, noting that "nothing is agreed until everything is agreed." 

Powell did note that not all changes made to the original proposal — which was put forth last summer and attracted a wide variety of public comments, the vast majority of which were in opposition — would be included in the re-proposal. 

"We're focused on one big area, but there are institutions that have made comments all across the spectrum, and we're reading all of those carefully. We're not going to republish all of those," he said. "Some of those, we can just make changes and move forward on."

Powell also amended some of his statements from yesterday's hearings. Instead of noting the "strongly held view of the board" on the matter of re-proposal, he referred to "the strong view of a number of board members." He also clarified that while the capital rule could be finalized as soon as the first quarter of next year, that was one of a "range" of potential timelines. 

Despite his belief that a re-proposal is appropriate and in line with past actions by regulators, Powell did not rule out the possibility of moving to finalize the rule without seeking additional public input. But, if that option is on the table, committee members let Powell know that using it would draw a swift backlash.

"Broad and material changes to the Basel III endgame necessitate a full re-proposal. Full stop," said Rep. Patrick McHenry, R-N.C., who chairs the Financial Services Committee. "Failure to do so will result in an immediate Congressional Review Act vote out of this House of Representatives as quickly as we can possibly process it."

When pressed for his views on the current level of capital within the banking system, Powell told the committee it was "about right," but noted that determining the optimal amount of capital is not an exact science. He said his main goal in finalizing the capital reforms is to put the U.S. on even footing with other large countries and banking jurisdictions around the world. 

Powell added the negative public response to the initial Basel III endgame proposal — accounting for well over 90% of the overall feedback, by some estimations — is something that should be addressed. 

"Broad support, empirically, would mean a good solid vote on the Fed board. I've tried not to be specific about what that means," he said. "But it also means broad support among the broader community of commenters on all sides."

He also made clear that the Fed does not intend to pursue any other regulatory reform items — such as new long-term debt requirements and liquidity standards — until changes to the capital proposal are agreed upon and put forth to the public.

Powell said the Fed is committing resources to improving the infrastructure underlying its last-resort lending facility, the discount window, adding that the current user interface is "tired."

Another topic of repeated interest from legislators — both in the House Financial Services Committee on Wednesday and in the Senate Banking Committee on Tuesday — was executive compensation at banks. Specifically, lawmakers wanted to know why the Fed did not join the FDIC, OCC and Federal Housing Finance Agency in proposing new restrictions on incentive-based compensation for bank leaders in May. The National Credit Union Administration and the Securities and Exchange Commission have pledged to take similar steps in the near future.

Section 956 of the Dodd-Frank Act of 2010 required the financial regulators to develop policies on compensation to ensure executives were not incentivized to take excessive risks. The fact that the Fed has gone so long without meeting this mandate has frustrated some members of Congress for years, but the issue has taken on renewed relevance in the wake of the failure of Silicon Valley Bank and other large regional banks last year. 

Powell, who in the past has said he would like to better understand the issue the regulators are seeking to solve, testified that the Fed is continuing to explore the topic. At several points this week, he pointed to guidance the Fed issued regarding executive compensation in 2010 and noted that the agency's examiners strictly supervise banks to ensure they adhere to these standards. He said the Fed's job is not done, but implied on Wednesday that it may have met its legal obligations.

"Section [956] requires a rule or guidance, by the way," Powell said after an exchange with Rep. Nydia Velazquez, D-N.Y. "It does not require a rule."