Transcripts For CNBC Squawk Alley 20240713

Basis and do coordinate. I would just comment that ive worked closely with ambassador lighthizer on the china agreements and forced Technology Transfer is a major issue that weve been combatting. Fair, but weve heard u. S. Government officials of both administrations for two decades talk about agreements that are eventually going to have feet and they almost never do ambassador lighthizer has been a bit of a pitbull on this piece of it, but discussing it in the interagency process isnt the same as us pushing to help huawei and their state based actors to understand i. P. Theft has real consequences not just press releases i would just say and i know that the chairmans gavel implies im at time, but the Intelligence Community Oversight Committee of the community in the legislature, this is an increasingly bipartisan issue that republicans and democrats believe that its important for us to be holding these faux private Sector Companies in china to more account and the Chinese Government needs to know we mean it not just say eventually somebody is going to come up the stairs if you keep stealing i. P. And they continue to do it for what its worth i think the article 1 perspective on an increasingly bipartisan basis is serious. Thanks, chairman senator tester. I want to thanks both secretary mnuchin and chairman powell for being on the call today. Weve all seen whats transpired over the last several months as far as inspects general go my question is simple, can i get both of your commitments individually if an i. G. Submits a request to you, you would provide any information to them and do so in a timely manner yes. Yes. Good. Secretary mnuchin, can tell me how active thecongressional oversight has been ive seen the recent report i cant comment on what meetings theyve had or done on that. Okay. You would, i assume, would comply with any requests they make i see no reason why we wouldnt. I just i value that and appreciate that from both of you. I think the president has a different opinion and i say that by what he said, not what i think about the values of the Inspector General. Secretary mnuchin, do you think it is right to be able to remove Public Servants that their job as independents and only the governor [ inaudible ]. I think that if youre referring to the removal of the i. G. , again, which i only know from ive heard the president say, but yes, thats within his authority. Yeah even if theyre doing their job . Again, thats an appointed position he has the right to withdraw it just as hes nominated a new special Inspector General to work with the c. A. R. E. S. Act which we look forward to the Senate Confirming so we can work with that person. I have a totally different perspective on that and i will tell you why i know he has the ability to remove anybody including yourself and i would say that if youre doing your job in this case the Inspector Generale is doing an independent basis, i think its just not i think its a clear misunderstanding of the three branches of government so i talk to you a little bit about reporting to the i. G. S and i will tell you i learned something on todays call that i didnt know, that nearly half, by senator toomey, of the dollars weve allocated, the 3 trillion has neither been spent or lent. Can you guys we need more transparency on these programs and i think you would agree with that when can we see full information about who is getting the dollars . Well, let me just comment when we negotiated this bipartisan deal, we agreed to unprecedented transparency so we agreed to release things that are not required by 13. 3 so i dont know why you havent seen that. Everything is posted on our website or the feds website we take great pride in the transparency that weve provided and weve agreed to it. Mr. Secretary, youre saying that the information about whos getting the dollars and money is already posted on your website again, what ive said is every single commitment weve made is listed on the website, every single term sheet, and yes, to the extent er dollar thats gone out has been listed on your website, thats what i heard . Again, within the c. A. R. E. S. Within the c. A. R. E. S. Act facilities with the fed, when we do individual transactions through them, they are listed. Chairman powell, i look forward to seeing that list, by the way, secretary mnuchin, and im going to go online and search it because im going to tell you that as much transparency as you said are with this program, as a senator from montana, as a member of the banking committee, im not seeing any of it quite frankly im seeing general numbers, i am not seeing any of it we will deal with that at a later date chairman powell, i have a question for you, theres been 3 trillion put out. Can you give me an idea how many dollars, because of the leveraging that the fed has used, has been infused in the economy . Well, senator, our facility, the big facilities to which the equity has been committed are really just coming online, so its all ahead of us weve taken some time to set these facilities up so the amount thats gone out so far is in the context of the u. S. Economy fairly modest. We have committed, though, to disclose all of the borrowers and the amounts in a timely way. I appreciate that theres 200 billion that i believe secretary mnuchin said would be leveraged to 2. 3 trillion do you agree with that yes, potentially. We cant be precise about these numbers but we could leverage that whats a hundred billion among friends. Thank you very much. I appreciate you both being here i look forward to being able to find the information that secretary mnuchin said was online take care, god bless. Senator cotton. Thank you, mr. Chairman secretary mnuchin, chairman powell, thank you both for being here i want to speak about the primary and secondary Corporate Credit facilities. As of today those facilities are available to companies that have [ inaudible ] from public rating agencies like s p and moodys, as you know that can be an expensive process that come companies dont want to go through the of getting those writings these Companies Often tend to be privately owned, sometimes family owned they can have very large employee bases we have some in arkansas, an aggregate employing thousands of workers. I think probably all this centers on this committee or all 50 states have committees in this category. Oftentimes they sell insurance directly rated by the National Association of insurance commissioners, those ratings are high quality and they are the functional equivalent of a public Ratings Agency like an s p or moodys secretary mnuchin, what is the possibility of opening up those facilities to companies that are selling those kind of loans with those credit worthiness ratings from the isc i appreciate the opportunity you brought this to our attention and as ive suggested im working with the fed very closely to see if we can accommodate using those naic ratings and if in need there is some private ratings that can be done on a level that is not costly to the companies. We are committed to make sure that these companies can use the facilities as well chairman powell, can i get your perspective on that question yes if i understood your description of the companies, they sound more like main street companies than primary or secondary credit market those are for Investment Grade who issue public bonds if i misunderstood im sorry. On the main street facility, mr. Chairman, i think the limitation some Companies Might face they exceed the employee cap which i understand to be 10,000 it would be similar to the main Street Lending facility. Well, ill just echo what secretary mnuchin said were working on this problem. Thank you for that. Mr. Secretary, any thoughts on when that decision might be made, some of these companies can get the certainty on whether they will have access to that facility or another facility or a brand new facility i understand the importance of this and ill commit to try to get back to you within the next week. We want to make sure if there are companies that slip through these two facilities the chair and i will make sure we work through these issues to make sure they have funding thank you for that and your work on this over the last couple weeks secretary mnuchin, i want to turn to a question about the Paycheck Protection Program. Its a very specific question, but i got a guy coming in my office from one of our Small Community helpeders in arkansas, i suspect that thanks across all of our states have this question, the note we received said we are required to file a ppp version of sba form 1502 by friday for all the loans we funded, yet the guidance and format of the reporting requirements have not been issued and we are reaching a critical point in time as you know banks have to extract this information from our core and that can be time consuming and tedious. We asked for a little more detail that detail is as follows, banks will have to extract these data points from our primary Core Software system and will require programming to mine these data points and merging into the required formats and then inspect for accuracy this will require several days to accomplish. It is not as simple as pushing the button and the data is populated. Mr. Secretary, given that this is tuesday, these the deadline is friday, whats the prospect of getting more detailed guidance from the sba as soon as possible or pushing that deadline back a little bit to comply with what you need. I believe weve already pushed that date back but i will check on that and confirm it if there is a specific institution that has a problem, please let me know the name and well figure out how to accommodate that we want to make sure that we get the information, but where there are small and medium sized banks that have issues well try to figure out how to accommodate them. Thank you very much i thank you for the treasury and sbas willingness to work with us to iron out these wrinkles as the c. A. R. E. S. Act isapplied i so many situations. Thank you senator warner. [ no audio ] can you hear me yes. Thank you im going to start, chairman powell, with some of the comments i think you have hve e we all realize and understand losing a job at any time in your life is an enormous job and losing a job in the midst of a recession or depression could be devastating. The survey that the fed put out last week said 40 of our fellow americans who make less than 40,000, 40 , of those folks had their jobs disappear between february and march we all know as well that 36 million americans unemployed were at depression levels of unemployment and statistics have shown that losing a job during a recession could actually incur longtime income losses up to 19 over the coming decade some statistics that ive seen i would like you to take a moment to say, we have to measure over doing versus under doing but with this type of devastation and pain, disproportionately hitting low and moderate income americans, can you speak to us of the results and the longterm scars this will present if we dont take aggressive action thank you i would be glad to so there is clear evidence that when you have a situation where people are unemployed for long periods of time that can permanently weigh on both their careers and their ability to go back to work and weigh on the economy for years, equally so with small and mediumsized businesses which are the jobs machine of our great economy if we allow unnecessary avoidable unsolvencies because of a Natural Disaster that, too, will destroy the work of many families and generations and it wont it will weigh on the economy. Those are things to keep in mind as i said earlier, this is the biggest response by congress ever and the fastest and biggest from us and still this is the biggest shock weve seen in living memory. The question looms in the area is it enough and well have to i would argue that historically, whether its our country or other nations, that governments tend to undershoot during these periods and we have 36 million americans without work and 40 of the folks under 40,000 a year losing their work that this scar could be deep and wide one of the reasons i want to turn to you, secretary mnuchin, weve discussed this and a number of our colleagues on both sides of the aisle understand, we did aggressive thegs for folks in the airline industry, aggressive things for folks under 500, but that middle market the main street facility is supposed to address we need to get that out and be aggressive with it i get a letter to you all for you secretary yesterday outlining some of the ideas i hoped you would be willing to lean into, and you made mention earlier that you were willing to have some of that 75 billion at risk in this facility, but i would like you to speak to that a little bit more, specifically in terms of which as yuz built out the baseline of this facility how much risk and challenge did you lose i would love to have the fed chairman echo whether hes willing to relook at some of the penalty fees that are my understanding fed regulations but not legislatively mandated secretary mnuchin, you first, please. Thank you i want to thank you for the time you spent with us during the legislative process in helping to craft these different pieces and your availability since then to work with us. We appreciate your thoughts and will continue to work with you as it relates to risking capital as ive said almost by definition, any time that fed things they need capital theres a risk to us we obviously model out various different scenarios. Weve obviously continued to adapt the main Street Program to let more and more companies into it and although we refer to it as one program it has three subprograms. We run different scenario analyses theres scenarios in main street where we could lose all of our capital and were prepared to do that theres areas where the world gets better and we can make a small amount of money. As ive said no different than secretary paulson during the t. A. R. P. Period, they didnt think they were going to make money. Our intention is that we expect to take some losses on these facilities thats our base case scenario. Mr. Chairman, do you want to address in terms of the penalty rate what were doing with the programs is making loans in times of severe stress where markets are not working and providing credit the original purpose of Central Banks. What rate should we charge and what we do is charge a rate that is a little bit higher than the normal rate but in most cases much below what the market is currently providing and that encourages payment it helps those who cant get credit but not who want to get credit from us to save a few basis points we want to be a backstop to those markets. I think, mr. Chairman, my time is up but i would urge you, these are extraordinary times and i hope you lean into this as much as possible thank you, mr. Chairman. Thank you senator rounds thank you, mr. Chairman gentlemen, first of all, thanks and i appreciate the work you have done and your organizations have done in making this whole thing work as well as it has in a short period of time i would ask, first of all, to secretary mnuchin, discussing with our local lenders theyve got a number of questions coming in with regard to ppp and specifically two sections, the portion of number one was the rule in which we asked that these loans be literally divvied out and accepted within ten days of the time of approval. Second of all, how that relates to a june 30th date for the execution or completion of the use of the loans i dont find where theres a june 30th end date where that has happened to facility forgiveness of that loan can you talk about your options or the flexibility you have with regard to ppp and the forgiveness of loans and that june 30th date that so many people have concerns about let mes just comment. I think the concern that people have thats bigger that we would like to get a bipartisan technical fix is you said, theres the ten days to disperse it, given banks another ten days and people havent sent back the documents and then the eightweek period. Companies are really having issues with not necessarily being able to use it during that eight weeks and they dont want more money, but want flexibility that they can use it in longer than an eightweek period. As it relates to the june 30th issue were happy to follow up with your staff and talk about where that fits into the bill. Chairman powell, i noted [ inaudible ] with a letter from vice chair recommending that Congress Give regulators discretion to loosen certain Capital Requirements prescribed by 171 of dodd frank do you share the vice chairs thinking and what measures do you think congress and the Federal Reserve should consider . I do share that the idea is temporarily during this period, unusual, unique period in our history, the banks have been strong and making loans and taking in deposits and because of the growth in their Balance Sheet theyre constrained by some of these regulations because theyre taking on board very low risk assets weve tried to provide relief to try to continue to do what theyre doing. So i do support that weve done a number of things and, you know, well let you know as we see the need for other adjustments. Secretary mnuchin, one thought with regard to in the middle of this covid19 pandemic, we still have a discussion about on a regular basis questions from taxpayers about the amount of money we borrowed and what were going to do about it. Youre going to play a key role in how we lay out that repayment plan can you talk a little bit about the tools available to you, specifically with regard to long or ultra long Treasury Bonds i know its been a hot topic and most recently you lost a 20year bond can you talk about the maturities and how you plan on laying that out and the strategy youre using to best accommodate our needs for the immediate liquidity, but also recognizing that youve got some tools available and with these ultralow Interest Rates it may work to our benefit to feather this out over an extended period of time. Thank you im glad you asked that question because i think its very important. So the first i would just answer, prior to this we spent a lot of time looking at 50 and 100year bonds and determined that there just wasnt enough demand to make it worth it, given our borrowing sizes. We did get advice on a 20year, weve added the 20year that gives us the ability to extend the duration and raise significant amount of funds. It is my intention as you have described to borrow a lot of money in the short term, to have the funding, but then to expand our financing in 10, 20, 30year bonds. What i would like to do is lock in a significant amount at very low Interest Rates so that the money were borrowing can be dealt with over a long period of time thank you thank you senator warren. Thank you, mr. Chairman todays hearing takes place in the worst economic crisis of our life times unemployment is now at Great Depression levels. Nearly 40 of people making less than 40,000 lost their jobs in march alone. Businesses are shuttered and they may never reopen. Congress passed the c. A. R. E. S. Act and put nearly half a trillion dollars worth of taxpayer money in Corporate Bailout money in your hands. This is not the ppp or the Small Business fund. But half a trillion dollars for mid sized and giant corporations so i want to talk a little bit about where that money is going. The law gives the treasury and federal authority to write rules determining which Companies Get taxpayer relief and how they can spend that money over the past if few weeks, the fed has been putting out these rules in the form of what you call term sheets secretary mnuchin, you have said that jobs numbers will increase. You said on fox, we will have, quote, a better third quarter, a better Fourth Quarter and next year is going to be a great year now, to make that happen, people are going to need jobs does this mean that you will require companies that received the bailout money from the tarps to keep their workers on payroll . Let me comment. I have said publicly and ill say again, i think the job numbers will get worse before they get better. I just want to be clear that i think that june will be a very difficult quarter. As it relates to the c. A. R. E. S. Act, i take great pride in the bipartisan support on these bills and these specifics were negotiated on a bipartisan basis very clearly in each one of these programs and it is our intent in the 13. 3 facilities to fulfill both the spirit and the details of the law different facilities have different requirements im sorry, secretary mnuchin, thats not quite right what the law specifically does is gives you the specific authority to determine the terms on which these loans are made and who is going to be able to get them for these midsized and giant corporations i had a very simple question for you, you say the economy is going to recover, its going to take jobs in order for that to happen, so what i want to know is are you going to require companies that receive money from this half a trillion dollar slush fund to have to keep people on payroll . A simple question, yes or no, are you going to require that . Our number one objective is keeping people employed. Good. So are you going to require that i want to be clear. People who are getting taxpayer money thats my question. Again, we negotiated very significant restrictions on employee compensation, on dividends, on buybacks, and in the main street facility, we have put in a provision that we expect people to use their best efforts to support jobs. But im sorry, im sorry i have very limited time here, mr. Secretary. Let me understand what youre saying in all the facilities that are not the main street facility youre not putting in any requirement for payroll and the main street facility is something about commercial reasonable effort to be able to maintain jobs . In other words, if somebody fires a corporation fires a bunch of people and then gets federal taxpayer money youre fine with that or if they take a bunch of federal taxpayer money and say it didnt work out commercially for us then they can fire people. I take it your answer to my question that whether or not youre going to require as part of the terms of the loan that people be kept on payroll is no . Is that right, secretary mnuchin . That was discussed with people on both sides of the aisle. No. At the time im sorry, secretary mnuchin. Im talking about your term sheets that youre putting out and your taelg me youre not going to require any payroll let me ask you one more question taxpayers are on the hook here for nearly half a trillion dollars. Youre not going to require that they keep a Single Person on payroll. There are some rules, though, in the term sheets as you identified earlier like prohibiting companies from getting bailout money from double dipping in other c. A. R. E. S. Programs. And by law, companies that get this money will have to sign agreements certifying theyre in compliance so secretary mnuchin, heres what i want to know, will you create a certification process that ensures that executives are held personally liable and are subject to criminal penalties if they provide false information or misuse bailout funds . If you could be brief, mr. Secretary. We will review that and be again i would just comment on programs like the Airline Programs had very specific requirements to keep jobs, which was the intent of congress thats right. And the rest was left up to you and what your a saying is you wont do it. Were in a situation where 35 million americans have filed for unemployment theyre in charge of half a trillion dollars, youre boosting your wall street buddies and you are leaving americans behind i think thats senator warren, i think thats a very unfair characterization and these issues were discussed with both republicans and democrats at the time you were not necessarily part of those discussions but these were completely discussed. You were given the authority to determine the terls you said it yourself, youre putting out terms sheets and those term sheets do not require that a Single Corporation get dollars in taxpayer money retaining one job. Senator purdue. Thank you, mr. Chairman thank you both for being here today. I look forward to these quarterly updates. Chairman powell, when you took this responsibility, the fed had about a 5 trillion Balance Sheet, you worked it down to about 3. 8. There was about 4 when the covid19 crisis hit. The money supply increasing from 3. 8 to 5 trillion recently, with the debt being at 23 trillion and with about twothirds of what weve done in the 3 trillion relief package, looks like goes to debt and with the potential for more movement by the fed that would take the Balance Sheet from 4 trillion in march the five moves you made takes it up to potentially 13. 5 trillion, its around probably 7 trillion today, and it could go north of 14 if, in fact, main Street Programs is levered up. Help us understand, how do you put this jeanne back in the bottle and how youre thinking about the demand for capital and what it might do to Interest Rates in the short term and the long term implications of what weve just done . This is not a criticism at all i would love to get your thoughts of how we should be thinking about that Balance Sheet given that china, japan, eu, all the other big Central Banks are doing fairly similar moves, just not as dramatically as we have done. When we expand our Balance Sheet when we file securities as you know, senator, we bought a lot of treasury and mbs securities to get those markets working, and as these facilities grow well also expand our Balance Sheet and those that expands the money supply i would expect over time and that time will not be soon, but over time the assets that we have on our Balance Sheet from this era will come to maturity and roll off and the Balance Sheet will again very gradually return this will be some years down the road i would think sorry to interrupt. Ive watched how hard it was to get us down from 4. 1 to 3. 8 in the latter stages of that and the consternation it had both politically and economically youre confident over time we will be able to manage that sized sfwhls. What matters is the size of the Balance Sheet relative to the size of the economy. That came down quite significantly from the end of 2014 until 2017 just by holding the Balance Sheet constant it can be done in a way that is sort of passive and gradual and it was for about three years and we came down from 25 of gdp to 16 or 17 of gdp it can be done over time and in the meantime i would say it doesnt have implications for inflation, it doesnt have implications particularly for problematic implications im not saying there are no limits to this, but its not something that raises Financial Stability or inflation concerns today. But i just want to thank you and echo what senator scott said about your availability through this crisis. I know youre recently married and i dont know where your wife is these days sheltering in place, [ inaudible ] but thank you for your sacrifice in making this happen. I want to correct the record weve been told in this meeting that theres no data out there but i want to highlight some numbers for us here. First of all, the dodd frank bill killed about 4,000 Community Banks in about six years. There was a bipartisan bill done in january of 2018 that modified the most onerous parts of that and saved our Community Banks and they are the rock stars in this process of the ppp program. They had 800 sba banks were approved under the sba system prior to this, some 5,000 banks made 4. 3 million loans and so far put out 520 billion to companies under 500 employees. By the way, 99. 8 of that 520 billion went to companies with fewer than 500 employees it did what we wanted to do. 93 of those loans are 350,000 or less. My problem is this, secretary, is that i think we have two levels, one in the bill itself and one that is happening now and what weve done here, is that weve disincentived people to go back to work we have two constituent groups throughout, the military and essential workers, but look at how theyve managed their protocols and so forth while they managed through this crisis and it gives me confidence that we can open the economy up the unemployment premium is keeping people from coming back to work. There are employers in my state that want people to come back to work and theyre saying no, im going to enjoy this premium and call me back in a couple months. The second thing, a lot of small employers encouraged a few weeks ago their employees to go on unemployment even though they were getting money and hoping that they would when the revenue started when they opened up they would begin to then bring the people back and then uses the loan to pay salaries and how would you help us think about help us think about how to deal with that . The Labor Department at one point said they were going to put rules out about this premium and the second thing is, the enforcement behind if an employer wants an employee to come back then an employee should no longer be qualified for insurance. Let me just say, we are aware of the technical problem here and want a technical fix on the Unemployment Insurance but let me comment on the ppp. Offer back a worker and they dont take that job, you will be required to notify the local Insurance Agency because that person will no longer be eligible for unemployment. Thank you to all of the testifiers and panelists chairman powell, i want you to take us through two simple scenarios. The first if Congress Takes no additional action in the next couple months, and the other if Congress Steps in and passes another bill, i know you are loathed to weigh in on specific policy recommendations but in terms of the overall economy about the impact on quarters three and four, should we decide to say that the bills weve passed are enough . I think it really depends on the path of the economy. The risk and possibility of longer run damage to the economy through unnecessary insolvencies on the part of households and businesses and longterm unemployment and if we find ourselves in that place we may have to do more and it could be something that congress would want to do so go ahead. According to census data about half of Small Businesses are going to run out of cash within a month states are slowly reopening the economies, but Consumer Behavior is not going to rebound to normal within a month. Do you think that theres going to be a Strong Enough rebound in Economic Activity in the next one to three months for that alone, for what weve done alone to prevent thousands of Small Businesses from going under or do you think there is a need for additional fiscal policy i think we were going to see fairly quickly how the reopening goes and its very hard to know. We havent done this before. No one has done this before. I think youre going to be getting a lot of information fairly quickly in terms of what may be needed. I am reluctant to i make my comments offiscal policy at a general level and reluctant to talk about timing and specific provisions its not the feds role. We do try to stick to our ill give you an openended question, please provide the panel with some comments about the importance of fiscal policy over the next six to nine months its a combination of a couple things. First, just as i mentioned the risk of lasting damage to the capacity of the economy through the labor force because of longer term unemployment and through unnecessary avoidable insolvencies on the part of small and mediumsized businesses those two things create a risk. The other thing ill point to is, what we do is we address liquidity problems, not solvency problems we have lending powers, not spending powers. So over time, and this is not a certainty, this is a possibility, over time, solvency problems emerge from liquidity problems liquidity can develop into solvency with the passage of time that all depends on path of the economy and how well the reopening goes and, you know, which path we find ourselves on. I think what congress has done to date has been remarkably timely and forceful. I think you could say the same about what weve done. I think we need to take a step back and ask over time, is it enough we need to be prepared to act further and i would say we are ifs the need is there. It seems to me that the distinction between a solvency and a liquidity problem applies to big institutions, big corporations, even governments, but when youre talking about a Small Business or a family, theres not much of a difference between having a cash flow problem and simply being flat broke. And it seems to me that that distinction youre able to make and rightly do as the head of the Federal Reserve is a rather abstract one for the companies that are eight persons and the families that are sort of at economic deaths door, they dont distinguish between a solvency problem and a liquidity problem. Theyve run out of money go ahead. Secretary mnuchin, section 4114 of the c. A. R. E. S. Act states that carriers receiving payroll grants shall, quote, refrain from conducting involuntary furloughs or reducing pay rates and benefits until september 30th, 2020, but april 21st you United Airlines received 4. 9 billion and may 1st announced it would reduce 28,000 workers from fulltime to part time within two weeks was that announcement a violation of the terms of the Payroll Support Program . Again, please be brief. We believe right now theyre in compliance with the program right now were they violating this when they first announced it . Again, i dont want to go through specific situations with specific companies i will say right now we believe they are in compliance with the agreement. Thank you senator tillis. Thank you, mr. Chairman chairman powell, secretary mnuchin, thank you for your heroic work. Your team has done a great job under pressure and i appreciate it one thing i want to go back to smengsed mentioned by my colleagues, i like the fact that the administration [ inaudible ] i think thats good stuff. I personally believe that commercial real estate is under severe stress and likely to get worse before we start seeing it turn and a more positive growth and more positive indicator of the economy. One thing that i have concerned with, secretary mnuchin, right now looks like weve only got about 15 of the from the American Hotel lodging association, about 15 of forbearances of any kind from the cmbs Service Providers that seems like a low number to me one, i would be curious if you think thats low given the circumstances right now and then what more we may need to do congressionally to get the servicers and borrows to the table . It does seem a bit low to me as well. We do have a structural problem of loans that are insecurizations and how they have to be dealt with with the special servicers. As it relates to the banks the banks have much more flexibility but this is a technical issue and we may need to come back to congress to work with you on a technical fix. Thank you i would like to hear about that. I think we need to do it im gravely concerned with Retail Shopping and Hotel Industry and those are industries that will lag behind the business startups were seeing in some states. I would be interested in your feedback i was curious about the program and potentially areas where we should expand. Im thinking about new issues to ombs as installment loans. Have you thought about that and have you thought about less than aaa. Weve thought about [ inaudible ]. Weve thought about all of those and i would just say, you know, i want to thank the people at the fed and the treasury who have worked around the clock to get these facilities up and running. Weve prioritized these. I assure you as the fed chair and i have said, we would look at all of our options to make sure we support jobs across the spectrum i would particularly be interested you dont have to expand on it here but on new issues im interested in that and see what youre gaming out and within the realm of possibility chairman powell, do you have anything to add to that . No. Just our commitment as the secretary suggested to keep our minds open and look at evolving those facilities as we learn more secretary mnuchin, i have one question for you and a final question for the both of you im thinking more about the tax burden on middle class households do you think any of our future work here should include maybe a reduction in the tax burden to middle class households and whether or not that will be helpful . I think thats something that should be seriously considered now the final one that i have, chairman, im going to keep to time, i have a growing sense that we have a bit of a doughnut hole, some businesses that are not quite right for the Paycheck Protection Program because of their size, not quite big enough or the nature of their business to be eligible for the upcoming main Street Lending facilities, so i have you all looked at and secretary mnuchin, i appreciate what you said about the eightweek period, there are a the lot of mechanics in there that want to be included as a portion of the proceeds all of that we need to look at and need to know quickly, the covered period is going to take congressional action, but when we [ inaudible ] the ppp that may fix the problem to some of these people i describe being in the doughnut hole . We dont have the full information on main Street Lending act but i get a sense theres some people caught in between and what are your thoughts about more we need to do there that final question for both you and secretary powell i would say our objective is to make sure that theyre people that dont fall out in between between the ppp, the loans and the main Street Program, it is our objective to try to cover as many of those companies as possible its one of the reasons why we went to a smaller minimum loan level on the main street facility in the last term of the term sheet thank you, chairman powell and secretary mnuchin. I also look forward to seeing the main Street Lending act mobilized in the coming couple weeks. Senator van hollen. Thank you, mr. Chairman secretary mnuchin, chairman powell recently acknowledged the need for additional Fiscal Relief and just in this hearing acknowledged in response to senator menendez that state and local layoffs of police and firefighters, First Responders, teachers, will make a bad Economic Situation even worse. Do you agree with that assessment well, ive recently provided guidance on the 150 billion we sent to the states that they can use that money for police, fire, and First Responders without restrictions i hope there would be no layoffs as a result of that relief that was our objective in addition to them, that just moves the burden on to other public Service Providers including teachers, health care workers, Public Health care workers, wouldnt you agree that layoffs of those workers or any workers just takes a bad situation and makes it worse i think it does, but i think the question that congress and the senate needs to address is who should pay for that, which taxing authority, whether its the states or the federal government and i look forward to working with the senate on a bipartisan basis to address these issues. You said which taxing authority. As you know, states have balanced budget requirements the federal government doesnt just borrowed 3 trillion. It seems to me we need to take action here to prevent a bad situation from getting even worse. Let me ask you about the ppp program. Bipartisan group of senators have written and spoken to you about some of the unilateral and unnecessary conditions the treasury regulations imposed on ppp. In fact, the Small Business administration i. G. Recently said that the 25 limit on forgiveness for fixed costs, quote, not align with the language in the statute. The senator just raised another issue which is a design flaw in the statute in my view regarding the june 30th deadline for qualifying for full forgiveness, the house in the heros act performed both of those provisions do you agree with the changes that the house made in the heros act with respect to ppp. Im not familiar with their specific language but im happy to look at it. I want to comment on the 75 issue. Sba wrote back to the i. G. To disagree with that and ive spoken to both cardin and rubio on this. The program was designed for eight weeks plus overhead. Mr. Secretary, i know what your position is i just wanted to highlight the position of the Inspector General of the sba and in my view you cant find that 25 limitation anywhere in the statute. I challenge anyone to take a look and find it there i would ask you to take a look at the rebuilding main Street Initiative that a number of us have put forward i do think it can get bipartisan support and look forward to your responses there. Let me turn to chairman powell and just say that i believe that overall has acted quickly and for the most part, necessarily and appropriately, but i have serious concerns about the actions youve taken with respect to the secondary Market Facility with respect to junk bonds in response to senator sass, you emphasized that with the program you were essentially helping those with aaa ratings when you look at the secondary Market Facility, you have purchased junk bonds and we have this strange situation where the same day we had unprecedented damage in terms of unemployment numbers, the stock market was, in fact, going up. You pointed out that most of the people being hurt are those earning less than 40,000 a year in fact, 40 of them have lost jobs its not clear to me why putting money into junk bonds is helping folks on main street in fact, piit puts the public i first loss position and using public funds to take on years and decades of future cash flows with the price risk. Can you respond to that concern . Thanks. Id be glad to the only high yield bonds we can buy are companies of Investment Grade. So called fallen angels. These are very large u. S. Companies with many, many thousands of employees we made them eligible for the inestment for the primary Market Facility we dont want to have a cliff there to where the Investment Grade markets are working well we made a limited set of actions to support market functions including buying etfs. Thats a portfolio thats had an effect to improve market function. We may have to be lending money to those companies but even better, they can borrow themselves now a lot of that has been helping and thats good. Thats why we did it its fairly narrow intervention. Were not buying junk bonds across the board at all. Mr. Chairman, if i could just follow up briefly. I think a lot of those bonds were already in trouble before the intervention and their trouble was not directly related to the pandemic. If you could get back to me and just show me where the fed has the authority to purchase this kind of lower, below Investment Grade instruments, id appreciate it. Thank you. Senator, ennedy chairman powell, you believe that states and cities are going to experience revenue shortfalls as a result of the economic lockdown to try to contain the spread of the coronavirus . Yes, i think thats what were seeing do you think they will be substantial . Yes, i do is your municipal facility set up yes, it is. Were probably ten days away, two weeks away from it being operational. Not quite yet. As i understand it, you basically will buy sort term paper like revenue anticipation notes from the states which will allow those states to issue that short term paper at a lower interest rate, am i correct . They will be able to issue it at all yes, were supporting market function there by the way, that should support market function across municipal marke marke markets. Do you know how many states are prohibited by their instituti constitution from borrowing money to pay for their operating expenses i think 49. Yes, sir. A lot of states in their state constitutions are prohibited from borrowing money to operate government they can borrow money to build things but not to operate government are you aware of that . Well, i thought most states could borrow during the course of a year to smooth out the inflow of cash revenue anticipation notes have you had a lot of inquiries about the Municipal Liquidity facility yes, we sure have secretary mnuchin, do you agree with what the chairman said yes okay. Lets me offer you an observation, mr. Secretary im not expecting you to comment on it. It looks to me like the game plan is to have senator mcconnell, senator schumer, leader mccarthy, Speaker Pelosi and you go off and negotiate a deal on the next package, if there is one then you will bring that deal back to the republicans and democrats in both houses if the past is any indication, the republicans and democrats in both houses who dont get to participate in negotiations will moan and groan and complain and then moo and follow their leaders in tlike cattle. Im not sure thats going to work this time i think that whatever deal yall come up with is going to receive serious push back from both republicans and democrats in both houses for variety of reasons. I could, of course, be wrong, but i doubt it why would we not agree to allow the states to use the 150 billion that we have already appropriated to them to address shortfalls in their revenue base as a result of the coronavirus senator kennedy, i want to comment on first thing i have no intention of doing what youve just described nor i dont want to debate that its been done in the past it was done last time. Im not being critical of you. There were 20 or 30 senators of both republicans and democrats that participated in the Detailed Analysis of the last bill. I understand, but there are a lot of more members of the house and senate im not being critical im just telling you thats the way it works around here and we all know it. Why would not be supportive weve already spent 150 billion in the tariff act. We know they will have shortfall. We may not be able to pass another bill i think its less than 50 chance of passing another bill why would we not allow state, without appropriating any new money to address revenue shortfalls that you and the chairman of the fed agree will exist and be substantial why would we not do that today i appreciate your bill. I know i had the opportunity to meet with you and other senators with the president if theres bipartisan support for that, im sure that the president and i would look forward to that. What would it take for you to agree to support it . How do i demonstrate bipartisan support . I think i have a call scheduled with you later today im happy to talk more about it. I think if the president said theres bipartisan support for this and the money has been allocated, that is something that i assume we would very seriously go along with. Again, there has to be broad bipartisan support right how about if there 60 votes in the senate would you consider that bipartisan support would you please be brief how much time do i have youre 1 15 over. Im sorry i cant see my clock were going to have to figure that out several had that problem could you have him answer that i will lever thave that to y the senators there ill leave that to you im sorry i went over, mr. Chairman no problem. Senator cortez can you see your clock thank you for joining us. Let me start with chairman powell chairman powell, interesting conversation youre having can senator on the liquidity problems versus the solvency problems i do know you have highlighted that some of the sector, airlines and hospitality are in rough financial shape. Because i come from nevada and it is hospitality generated state where we get most of our revenue, can you speak to the challenges that hospitality in terms, tourism sectors face right now. Sure. I think sectors of the economy like that where the Business Model is to gather people in one place and entertain them, feed them, fly them around, whatever youre going to do, those are sectors where it will take some time for, i think, the public to