HIGHLIGHTS-Yellen's Q&A testimony to House panel

WASHINGTON, July 16 Wed Jul 16, 2014 12:58pm EDT

WASHINGTON, July 16 (Reuters) - Following are highlights from the question and answer session of Federal Reserve Chair Janet Yellen's testimony before the House Financial Services Committee on Wednesday.

Yellen's prepared remarks to the committee were identical to those she delivered in testimony to the Senate Banking Committee on Tuesday.

YELLEN ON PUTTING LIMITS ON USE OF REVERSE REPOS

"We have discussed and are aware of the potential if it's available on a very large scale, and can be expanded and contracted very quickly, to create financial stability risks and we absolutely intend to make sure that we address those risks."

YELLEN ON OPTIMISM ABOUT ECONOMY AND GROWTH IN LABOR MARKET

"I am optimistic about the economy and that's reflected in the forecasts that are included in the monetary policy report. We had a very surprising negative growth in the first quarter, which is a number that in a way doesn't seem consistent with the underlining momentum in the economy and many indicators of spending and production. And I do think the economy is recovering and that growth is picking up and that we have sufficient growth to support continued improvement in the labor market."

YELLEN ON STABILITY THREATS FROM EQUITIES, DEBT

"Threats to financial stability are at a moderate level and not a very high level."

"Some things may be on the high side and there may be some pockets where we see valuations becoming very stretched but not generally. The use of leverage is not broad-based, it hasn't increased, and credit growth is not at alarming levels by any means."

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