Transcripts For CSPAN Fed Reserve Chair Powell Treasury Secretary Mnuchin Testify On CARES Act... 20240713

We will receive testimony from the secretary of the treasury and e chairman of the Federal Reserve as required under title iv of the cares act. Congress has appropriated 3 trillion to protect and support americans to fight the pandemic and also to stabilize the infrastructure of our economic system. A large portion of this funding is authorized under title iv of the cares act which provides resources for loans, guarantees, and other investments from treasury and the Federal Reserve 13. 3 emergency Lending Facility and programs in support of eligible businesses, states, municipalities, and tribes. Title iv of the cares act provided 454 billion as an infusion into the exchange stabilizatiofund to support the Federal Reserves emergency lending facilities that facilitate liquidity in the marketplace and support eligible businesses, states, governments, and tribes. This unique authority known as 13. 3 authority is authorized under section 13 of the Federal Reserve act and plays a Critical Role in stabilizing markets. Both prior to and after the enactment of the cares act the Federal Reserve announced the establishment of or its intent to establish several emergency lending facilities to support Financial Markets and businesses including some that are supported and funded by the cares act. Last week other members of this committee and i had a robust discussion with the vice chairman on these facilities and stressed the importance of getting facilities like the main Street Lending programs and the Municipal Liquidity facility up and running quickly to provide a lifeline to struggling businesses, states, and local governments. I stress the importance of setting these up quickly and allowing broad access. There is also a discussion about whether it is acceptable for the treasury to take any losses on investments put into special pupurpose vehicles that the fed will lend to various programs. The 13 three facilities are a critical component of a strong economic recovery which reinforces the need to have them quickly operational, broadlyly available, and as flexible as possible. Title iv contains a robust oversight provision, especially the one that brought us here today, section 402. 6. It is critical that each federal agency follow all requirements in the cares act. Other steps are already being taken to ensure appropriate oversight. Last week this committee voted to special inspectoreneral for Pandemic Recovery favorably. Yesterday the Oversight Committee published its initial report on oversight of title iv. The cares act is the biggest rescue package in the history of congress and we need to make sure the dollars quickly find their mark. During this hearing i look forward to hearing more on an update of the status of the treasury loan programs, 13 three emergency facilities and the Paycheck Protection Program. Steps the fed and treasury have taken to provide a transparency into the loans and loan guarantees under the cares act and how they use funds and how they will be prioritized to provide liquidity to the economy. While not part of title iv of the cares act, sba and treasury worked aroundtheclock to ramp up the Paycheck Protection Program and has approved over 4. 3 million loans to Small Businesses that amount to about 513 billion. Acaccording to the sba the loan size for the ppp is hundred is 118,000. During the second round of funding, the average loan size has been around 70,000. On april 28, treasury and sba announced that it would review all loans in excess of 2 million to make sure that the certification for the loans was appropriate. Last week sba treasury provided a safe harbor for loans under 2 million. On may 8, 2020 congress committechair sent a letter to secretary mnuchin requesting a detail report on the status of the program on on may 12 treasury announced a new transparency measure with regard to the psp. I encourage you to continue your work with applicants and update information as additional funds are disbursed. I commend each of you and your staff for hard work and if and extraordinary actions you have takeno stabilize e economy and provide support to americans during this time. Thank you for joining us today to share your agencys activities in response to covid19. Senator brown. Thank you, chairman. I want to thank these four followinthe best advice. Holding a virtual hearing to prevent the spread of coronavirus. I will welcome secretary mnuchin and chairman powell to the Senate Banking and housing committee. Thank you for joining us. I am still outraged by leader mcconnelells decision to keep e senate in session, putting capitol hill workers including Capitol Police officers, custodial staff, floor staff, cafeteria workers, putting all workers at risk. Leader mcconnell has forced workers to go against Public Health authorities advice for three weeks now. He still has no plan to get additional help for families in communities. The house passed a bill that incoorates many of our plans. The American People arriving to the challenge, their leaders are failing them. Leader mcconnell says he sees no urgency. Those are his words, no urgency. Before i begin, i would like to pause to recognize all of the workers who have lost their lives on the job during this pandemic. The coronavirus has been the great revealer. It has brought out the best in our communities. We remember the solidarity tha created our social safety net during the new deal that inspired world war ii Victory Gardens and empowered the civil rights movement. That solidarity reveals itself in fire escape applause for hospital workers and videoconference play dates as millions of americans pull together to do their part to flatten the curve. This pandemic also lays bare how corporations that now claim their workers are essential have for too long treated them as more of a cost to be minimalized. Since the bailouts in the financial crisis, many of us have been concerned about how our country rewards wall street and ignores the people who make our country work. Whenever we are asked why wages for these essential workers are stagnant, we are told we cannot afford it. Companies would have to raise prices if they pay people more. Never mind that ceos were getting huge raises. Wall Street Investors huge payouts. Never mind that low prices dont you good if your wages stay low. Our economy has beenen paying te price with a shrinking middle class, rising inequality and lower economic growth. Now it is clear when millions of americans and workers are laid off or have hours cut or ming low wages to begin with are now worried about their future, our economy grinds to a halt. The only thing keeping our society running in the middle of this crisis is American Workers. Those who stock the shelves and deliver packages and fill prescriptions and prepare food and care for loved ones. A Grocery Store worker in ohio told me, i dont feel safe at work and they dont pay me much. I do not feel essential. I feel expendable. We are asking people to show up for work and risk their health and family safety. Perhaps we are finally realizing the words of dr. King ringing true that one day our society will come to respect the sanitation worker or the person who picks up the garbage. If he does not do his job, disease is rampant. All labor has dignity. Yes, all labor has dignity. You might think at a time when we are demanding more from essential workers than ever before that people who punch a clock or swipe a badge, people who take care of our families, mostly women, often black and brown workers, you might think they will all be getting a huge raise. Our economy is supposed to reward people whose talents are in high demand. That is what we are taught. But that is not happening. Workers are getting left behind again. And essential workers go home to their families, after a long stressful day, they are wondering how they will pay their rent, afford another week of groceries, and how they might infect their families. Those are the ones working. How about the 35 million americans that have been laid off because of this crisis . When we passed the cares act we tried to address this. We tried to make sure that the trillion dollars in spending would not go to wall street like it usually does. We wanted to make sure the fed and treasury got this money directly into workers pockets. We did not want it to see it to go to gas and oil companies. Those activities pose an existential threat to essential workers in our economy. Chairman powell, i appreciate your comments about how Congress Needs to do more to put money directly to workers. If congress does not act to put money in the hands of people who actually power the economy and workers and their families and mainstream businesses and struggling communities, we risk making the crisis worse. Leader mcconnell needs to let the senate take up the house bill immediately. Debate it, negotiated, argue with us, do something. Congress has an important responsibility to make sure that the 500 billion we have already approved for the fed and treasury is actually getting to workers. And from what we know so far, it does not appear that this administration or the Federal Reserve are making workers their priority. Today i look forward to hearing from both of you. Not only about what you are doing for big banks or corporations, we already know that and how you expect the money to trickle down, but how you are making sure the money and Authority Congress gave you actually helps the people who make this country work. I want to hear how it will be different this time and i want you to explain what you will do to transform our economy so that it works for everyone, not just the wealthy and the powerful. I want to hear about your plans to make our economy work for essential workers now and in the future and how to safely get those who have lost their jobs back to work. Thank you, chairman. Thank you, senator brown. We will now move to testimony. Secretary mnuchin and senator chairman powell, your statements will be part of the record. We will go to your oral testimony and we will start with you, secretary mnuchin. Thank you, members of the committee. Thank you for this opportunity to highlight how the treasury and Federal Reserve are working together to provide liquidity to the financial system. Our programs support the flow of credit to American Workers, families, business, states, and municipalities. I am testifying on camera at the request of the committee. I look forward to testifying in person Going Forward in a safe way with proper social distancing according to medical guidelines. I want to begin by acknowledging the unprecedented challenges the American People are experiencing due to the covid19 pandemic. We have issued impact payments to provide direct relief to millions of americans. The typical family of four received a proximally 2400. We distributed 150 billion to states, local and tribal governments through the Coronavirus Relief fund for essential services. We have also approved nearly 25 billion in payroll support to the Airline Industry to protect this sector of our economy. Turning to the central focus of the hearing, the cares act also provided authority to 454 billion in support for the Federal Reserve lending facilities to provide liquidity to the system. Since march 17 i have approved the following, the commercial paper funding facility, the primary dealer credit facility, the money market the liquidity facility, the assetbacked securities loan facility, the primary markrket corporate credt facility, the secondary market Corporate Credit facility, the main street business lending program, the municipally facility and the ppe Lending Facility. We have committed 200 billion in credit support under the cares act. We have the remaining money to create or expand these programs as needed and we continue to monitor a variety of economic sectors closely and we are prepared to support these programs with the Federal Reserve as we need to move forward. We are sympathetic to hardworking americans and businesses enduring tremendous challenges due to covid19. We have taken unprecedented steps to shut down our economy in the interest of Public Health. As a result in the Second Quarter of this year we are continuing to see large unemployment and other negative indicators. It is important to realize that the large number represents real people. Thats why it is important to begin bringing people back to work in a safe way. Since march 17 i have approved the following, the commercial paper funding facility, the primary dealer credit facility, the money market the liquidity facility, the assetbacked securities loan facility, the primary market Corporate Credit facility, the secondary market Corporate Credit facility, the main street business lending program, the municipally facility and the ppe Lending Facility. We have committed 200 billion in credit support under the cares act. We have the remaining money to create or expand these programs as needed and we continue to monitor a variety of economic sectors closely and we are prepared to support these programs with the Federal Reserve as we need to move forward. We are sympathetic to hardworking americans and businesses enduring tremendous challenges due to covid19. We have taken unprecedented steps to shut down our economy in the interest of Public Health. As a result in the Second Quarter of this year we are continuing to see large unemployment and other negative indicators. It is important to realize that the large number represents real people. Thats why it is important to begin bringing people back to work in a safe way. As we listen to medical experts, we are optimistic about the progress being made on vaccines, antiviral therapies, and testing. We will begin to open the economy in a way that minimizes risk to customers. We expect conditions to improve in the third and Fourth Quarter and into next year. I will conclude by thanking the hardworking people at the treasury, the Federal Reserve, and throughout the administration. Under the leadership of president trump, i am proud to have worked with all of you on a bipartisan basis to get relief into the hands of hardworking americans and businesses as quickly as possible. Though these are unprecedented and difficult times, these programs are making a major positive impact on peoples lives. Together we will destroy the covid19 virus and our country will emerge from this stronger than ever. Thank you for the opportunity to discuss these efforts today and i look forward to questions. Thank you, secretary mnuchin. Chairman powell. Chairman, Ranking Member brown and other members of the committee, thank you for the opportunity to testify today at the first quarterly hearing on the cares act. This is a worldwide Public Health crisis and healthcare workers have been the First Responders. They are showing courage and determination and earning our lasting gratitude. So have the legions of other workers who put themselves at risk every day on our behalf. As a nation we have temporarily withdrawn from many Economic Activity to slowly spread of the to help slow the spread of the virus. Some sectors of the economy have been effectively closed since mid march. People have put their lives and livelihoods on hold making enormous sacrifices to protect not just their own health and their loved ones, but also there neighbors and the broader community. While we are all affected, the burden falls heavily on those least able to bear it. Sacrifices represent an investment in our collective health. As policymakers we should do what we can to help cushion the blow. The scope and speed of the downturn are without modern precedent, worse than any recession since world war ii. We have seen a decline in Economic Activity and employment and the job gains for the last decade have reversed. More than 20 Million People have lost jobs and recent Research Shows that people earning less are the ones being hardest hit. This reversal of economic fortune hacaused a level of pain that is hard to capture in words, as lives are up ended amid uncertainty about the future. The reserve is committed to use a full range of tools to support the economy in this challenging time. Our actions fall under four categories. First, purchases of treasuries and agency mortgagebacked security to restore functionality in these markets. Second, the liquidity and funding measures including discount window measures, swap lines with the Central Banks, and several treasury bk facilities to support smooth money market function. With additional treasury backing, facilities to more directly support the flow of cred to households, businesses, and state and local governments. Fourth, temporary regulatory adjustments to allow banks to expand their Balance Sheets to support household and business customers. So far we have created 11 facilities under Section Three of the act. We support liquidity, funding, anthe flow of credit. These have been undertaken with the approval of treasury secretary and many of them were supported by funding from the cares act. I discussed these in greater length in my written statement which i provided to the committee. At the fed we are committed to transparency in deploying emergency powers. Public faith in our operations depends on that transparency. Thank you and i will be happy to answer questions. Thank you, chairman powell. I will begin with you, mr. Chairman. Threshold for cities and with regard to the municipal facility, the threshold for cities and counties are established but they are at such a level that many of these small cities and counties across the United States cannot apply for individual loans. You have indicated that it would be contemplated thatat the stats be able to apply for loans for these smaller cities and counties. There is a lot of concern about this. I would like to ask you to clarify that it is intended that these dollars do reach these small cities and counties and tell us the process by which that can be accomplished. Thank you, mr. Chairman. As you have seen, we have been gradually expanding the scope of the potential borrowers in this world. There are 50,000 entities capable of borrowing so we need to draw lines to be able to handle it. In the first instance, we said that we will always be lending to states and with the purpose ofown streaming to counties, cities, and other subdivisions of governmental authority. We also lowered the size of the city. We are continuing to look at ways to accommodate borrowers including in the case of states with relatively low populations where the only borrower with access might be the State Government itself. We are looking at ways to make sure that in those states that we address the needs and that is something we will be working on Going Forward. Thank you very much. Secretary mnuchin, with regard to the facilities, the cares act appropriates 500 billion to be utilized through the Exchange Stabilization fund to help facilitate the implementation of these section 13 facilities by the Federal Reserve. Most of that has not yet played out, am i correct . Of the 500 billion, 50 billion s in direclending programs from the treasury and d 450 billion was available. I have allocated about half of that. Let me be clear, i am prepared to allocate the rest of that. The only reason i have not allocated it fully is we are just starting to get these facilities up and running. We want a better idea as to which one of the Facilities Needs more capitol, as well as the potential for more facilities. I expect to allocate all of the capital as needed as was given to us. So the public can be clear this, the way these facilities work is once the money is allocated to a particular facility and the fed implements that facility, that money can be leveraged into much greater amounts of liquidity for whatever market situation that is addressed, correct . That is correct. Depending upon the credit risk, it depends on the leverage. We have allocated with the existing capitol up to about 2. 3 trillion n in existing facilities. Let me make a comment because i know there are questions as to whether the treasury is willing to take risk with that. I would say the answer is absolutely yes. The way these facilities work is in the facilities that do not have any credit risk such as the ppp, i approve those without capitol allocated by definition, any facility that the fed believes puts them at risk, i do put up capital. By definition, capital is at risk and we are fully prepared to take losses in certain scenarios on that capital. I have just about 50 seconds left and i want to stay with the time. There have been some allegations that Big Companies are being benefited by these facilities. Could you quickly address that, secretary mnuchin . Let me comment. The announcement of the Corporate Bond facility without putting up one dollar of taxpayer money unlocks the entire primary and secondary market for Corporate Bonds. Companies that i had expected would need to borrow from us were able to borrow 25 billion in the primary markets. I would say in the best case scenario, the markets open and we do not need to use these facilities. In the case of main street facility and the municipal facility which we expect both up and running by the end of the month, we expect these to have a big impact on both markets. Thank you. Senator brown. The essential workers that we all pay are often the lowest paid workers in the economy. They are usually women, black and brown workers, too often they dont have a union, they do the laundry at hospitals, they prepare our food, they put their lives on the line to keep the country running, they are still worried about paying the bills and staying healthy. Secretary, do you think that is fair . Senator, i apologize due to the technical issues, i did not hear the beginning of your question. The people who we call the essential workers, they are often the lowest paid workers. They do the laundry, they are the custodians, the security people, they prepare our food, they put their lives on the line for low wages. They are worried about paying the bills. Is that fair . Mr. Senator, i want to thank all of the essential workers whether it be the health care people. Thanking is great. But is it fair that the economy pays those people so little in these conditions . Some of those people are paid less than others. Is that fair . I dont know what specific workers you are referring to. I can lay them out. I will try the chairman of the Federal Reserve. Chairman, is it fair that those workers who are exposing themselves to this virus and making low wages, we call them essential by all definitions, is that fair . Those are workers who are in the Service Sector. It is all about the Service Sector and particularly those parts of the Service Sector where there are lots of in person contact. Those tend to be lower paid workers. They are definitely the most affected. I will just say that all of our efforts are to do what we can to help those people and create conditions so that they will have the best possible chance to get back to work. Some of the best things you both can do is support pandemic pay for those workers and a recovery act that includes more dollars for these lowpaid workers who continue to celebrate as essential. Mr. Secretary, we passed the cares act to help millions of workers to help the country work. You set up cares act programs to lend trillions of dollars to companies. Am i right that you are not requiring companies to use the money they borrowed to keep their workers on the payroll . I am following the exact letter and spirit of the law on a bipartisan basis. In some facilities there are specific requirements and i assure you that we are absolutely enforcing the requirements, as required in the literal and spirit of the negotiations. That was nice sounding rds, but the administration is willing to send people to work without regard for their safety, the administration is unwilling to make sure trillions of dollars in taxpayer money will help workers directly. Secretary, let me sosomewhere else. Public Health Experts have told us it is not safe to open the economy into we have Worker Protections in place to control the spread of covid. Things like testing, Contact Tracing and protective equipment, efforts the president has clearly failed to lead. You said there is considerable risk of not reopening, keeping some businesses closed could cause permanent economic damage. In many workers will die if we send people back to work without proper protections . We dont intend to send anybody back to work without protections. I was prepared to come there today, i thought it was safe to testify, and i was at the senate this morning wearing a mask. I assure you myself and everyone on the task force, the Vice President and others, are following the best medical advice. I cannot be more proud of the medical advice we are getting and the way the economy is opening up in a safe way. So how many workers should give their lives to increase our gdp by half a percent . You are pushing people back in the workplace and theres no National Program to provide worker safety. The president says reopen slaughterhouses, nothing about slowing down or getting protective equipment. How many workers should give their ves to increase the gdp or dow jones by 1000 points . No workers should give their lives to do that and i think your characterization is unfair. We have provided enormous amounts of equipment and work with governors. We have done a terrific job. Im not to let you make a political speech about what a great job, we hear that from the president at his news conferences, when in fact the country, the president has still not scaled up testing, he has played state against state and hospital against hospital to get protective equipment. Everybody in the country, your comments notwithstanding. Chair poll you said additional , fiscal support could be costly but worth it to avoid economic damage. Congress needs to think about more than just the National Debt right now. It is costly to help people and pay for our failure in the future, is that right . If you would answer quickly, mr. Chairman. That is what i said, i said it could be viewed this is a question for congress to weigh. I want to call it the risk of longerterm damage to the economy. Thats what i was doing. I said we may need to do more and congress as well. Thank you. One brf comment, the administration thinks we should put more workers at risk for the stock market. They havent come up with a basic plan to protect workers when they go back to work. President and leader mcconnell dont want to give away when they wanted to give away millions to companies, it wasnt a problem then. But we need to spend money now to keep workers safe despite the comments by some in leadership. Thank you. I would disree with that characterization as well, but lets move on. Senator to me. Thank you, mr. Chairman. Thank you for joining us. I want to followup on the discussion about additional spending and remind everybody, while we authorized something on the scale of 3 trillion to round things off of a direct spending and lending and then authorized the fed to complement that with another roughly 3 trillion, that could be 6 trillion. And do another spending bill, we actually let some of this stuff go to work. And understand the consequences of what weve already done. I appreciate the chairman observing that his comment, while i think it was mischaracterized on calling on congress to pass a new bill, is more nuanced and acknowledged the potential cost of new spending. The comment you made at the peterson institute, mr. Chchairman, do you stand by that comment . I do viewed i do. Would you like me to expand on that . I think we covered it. Let me follow up on something the secretary said about reopening. I think it is worth remembering why we shut down our economy in the first place. It was a very ecific reason, to prevent the virus from spreading so rapidly that sony that so many people would get sick so quickly that we would overwhelm hospitals. It has been clear for weeks that we will not overwhelm our hospitals, certainly not in pennsylvania, and not in most of the country. I think it is essential begin the process of carefully, thoughtfully and safely reopening the economy. Secretary mnuchin, the longer we continue a shutdown, when weeks turn into months, doesnt that necessarily increase the risk that some businesses will fail, some jobs will not be there to go back to if a long down continues indefinitely . That is absolutely the case. There is the risk of permanent damage, and as i said before, we are conscious of the Health Issues and want to do this in a balanced and safe wa thank you. I guess for either of you, i want to talk about the main Street Program. Give us your best estimate on when we can expect borrowers to be able to access funds from these programs. I will go ahead. On main street and frankly the other facilities, we expect them to be stood up and ready to go by the end of this month. It might be a day or two into june, but that is our expectation, and funds should be flowing directly after that. Very briefly, is it possible to characterize the remaining hurdles you need to get over in order to start actually being operational . Sure. All of them are complex and main street is in a class by itself. It is not the bond market. These are small and Mediumsized Companies that live in a world of bank lending, a world of negotiated documents. We are trying to enter that world and make loans to qualified yers. We set up operations at the Federal Reserve bank of boston, we hired service providers, and we are doing that to be ready to face off against this. It is a different industry with different credit needs. Some of them are assetbased and some cash flow based. It is a complex undertaking and people are working around the clock, and have been for weeks to get ready by the end of the month. Thank you. I also observed that one of the terms and conditions of the facilities is that the banks acting as lenders and, by the way, im hoping that Business Development companies could be affected but the lender is required to keep some of the risks on their own books. I am wondering what reaction you have gotten from lenders and potential borrowers. What participation are you anticipating . Do you think there will be Strong Demand for these facilities given how they have been structured . There are three facilities we have had a lot of outreach to borrowers, lenders, everybody, going back the last couple of months. The different facilities will attract Different Levels of demand. We are getting a good deal of interest inquiry on them. You should know we will continue to be prepared to adapt, as we have shown, if the uptick is not what we hoped. We will go after that and find ways to address the needs of this area of the economy. Thank you very much. Thank you, mr. Chairman. Thank youou. Senator reid. Chairman powell, thank you for your ldership. I think you recognize the state and local government is critical to our response to covid, but also to our economy. 20 million jobs will not recover, 8. 5 percent of gdp, and we know these are dire circumstances. Budget losses this year, 25 next year. How likely will we need a robust recovery if states dont receive flexible Fiscal Relief, not a loan from the fed, but Fiscal Relief . Be robust can our recovery if this sector is not in play . I dont want to get to into individual fiscal proposals, those are really for you. I will echo i think Something Like 13 of the workforce is in state and local government. A lot of the Critical Services people rely on daytoday are provided at the state and local level. With balanced budget amendments, that means provisions in the state constitutions, it means sharplyenue goes down it can mean job and service cu. Those are important things to consider Going Forward. Thank you. Secretary mnuchin, i want to make a comment. I made this comment to you repeatedly. I do believe that in the Coronavirus Relief fund we passed, you do have the flexibility to provide support to states when it comes to lost revenue. This lost revenue was not anticipated in their budgets, far from that. Second, it is directly related to the covid virus. I would urge you to relook, as you have done the ppp and tailored that several times, to look back again and reconsider the ability to use flexibility in the Coronavirus Relief fund. That is just a comment. Let me return to chairman powell. We know our unemployment is going to be with us for a while. It is about 15 now and ive seen estimates as high as 20 or 25 next year. Yeour Unemployment Insurance programs will end at a certain time. Do you think it is important for us to have the confidence an give confidence to people that they can still receive funds like this, even if the date has passed and the economy is still in disarray and states are looking at 10 unemployment . Shouldnt we build in some type of test for unemployment . That is a question about a specific fiscal policy, which falls to you. We try to not get into too many specifics. I will say, risk i cald out last week and that ive been concerned about and others have, that long periods of unemployment can really affect peoples ability to go back to work. They lose networks and skills and contacts with the job market. Anything that keeps people intact is hopefully in their job, but in the meantime, keep them out of solvency and things like that should the expansion start later or take longer to get going, those are appropriate things to look into. A final point. I think we are missing the boat again. This is like deja vu. I was here in 2008, 2009 and 2010, and we leapt in to help the Mortgage Market with both feet, but did not help people avoid foreclosure. It seems like that will happen again unless we have a physical program that provides resources the key people in their homes when they cant pay their rent and miss their mortgage payments. That will put pressure on the mortgage community. And the fed, and the treasury will rush to their help, wall street will get help and main street will get left behind. It will be as it was in 2008, 2009 and 2010, thousands of people without homes and any economic recovy will be slowed by people in those conditions. I would just ask whether you consider this fiscal response to the core problem. People cant pay their rent or mortgage, thats probably the best response rather than phoning in later. I think you are right. Waves of foreclosures can undermine household finances, obviously. Of course, in this case, there has been significant forbearance on that, and i think that is, again, something to continue to consider. Thank you very much. Thank you. Senator scott. Thank you all for being with us this morning. An important time in our country and theres no doubt that a Global Pandemic has shocked the world and frankly shuttered a lot of businesses. The Paycheck Protection Program, it has saved somewhere near 50 million jobs. The second, 20 million jobs. We still have about 100 million left we can employ into our communities. With that said, thinking about the backdrop of 100 million left in the ppp, mr. Chairman, i think you know i feel passionate about helping the underserved communities, whether that is in South Carolina or West Virginia. Very often, small and minority businesses are the lifeblood in those small, rural communities. Frankly, we have the minority Business Development agency that has done a good job of helping deploy some of the resources from ppp into those underserved communities. How can we use the nbda or some other mechanism to get more of those resources into our rural or innercity communities where perhaps the Paycheck Protection Program has been more intimidating for smaller businesses like muffler shops and beauty salons rural gas , statio . Maybe they had a week for they were able to get into the cycle. How can we help those organizations and agencies like the nbda provide the marketing so more people understand the benefits and the program of the ppp . Mr. Secretary . Scott, thank you. We appreciate the work you have done with us on this issue already and we will continue to work with you and others. One of the things we are pleased about the additional money, the average loan size has come down considerably. I think we all have certain concerns about in the first tranche, how larger mpanies were prioritized and i believe that has been corrected. I could not be more pleased that we were able to get sole proprietors and others into the program. Fortunately right now, we have a significant amount of money left, but we are very much willing to consider the bipartisan request of reserving money for cdfis at the end to make sure underserved communities are properly served in this program. Thank you. Again, let me say to you, you have done a fabulous job under intense pressure and without any question america recognizes the valuable service you provide to our country. I am personally thankful for your accessibility. Under pressure, you have been very receptive and responsive, and that is a lot under the current conditions. Thank you for that. Chair powell, i heard you talk about forbearance. This is an issue that continues to grow in importance and in urgency, whether it is a Small Business, residential or commercial market. The one concern i have that continues to grow would be commercial mortgagebacked securities. There are number of Shopping Centers in South Carolina and frankly throughout the country, having spoken to some of the folks who own the Shopping Centers, 20 to 22 of the folks are able to pay rent, which means we are looking at a domino effect in the Mortgage Market. Whether it is commercial and frankly residential the same concern. I am not sure what the answers are. Certainly it is either forbearance or bankruptcy for many firms. What should wewe anticipate from the fed and treasury as it relates to freeing more liquidity in that market, and i dont know there is a silver bullet, i dont see a panacea, but what would you both suggest i tell my constituents on this important issue . Thank you. It is an important market. We have supported it with open market purchases. In addition, legacy are ailable for our term asset loan facility, an assetbacked security. It is an important market and we continue to monitor it. The 13 three facility is a Lending Facility, that is the tool we have. Not every problem can be successfully addressed with such a facility, but where it can be, we are willing to take a hard look. Thank you. Mr. Secretary, anything to add . Quickly, please. Working with the fha and ginnie mae on the agency side, and working with the fed on the securitization side. Unfortunately, securitizations have limitations, but we continue to do this. Thank you. Thank you, mr. Chairman. I may be over my time but i cant see the clock so i assume i have five minutes left. I have been trying to tap, im not sure everybody hears it. I will do something louder. Thank you, sir. Senator mendez. State and local governments are facing unprecedented budget challenges. We are looking at an enormous wave of budget shortfalls about to crest, which will lead to a devils cocktail of devastating layoffs, dangerous cuts to public safety, and essential services and massive local tax increases. Any one of those ingredients alone threatens to make this economic crisis even worse and the combination of all three is almost unthinkable. The bureau of labor statistics just reported that state and local governments laid off nearly one million workers in april. That is almost one million firefighters, police officers, teachers, Emergency Personnel that should be on the front lines of the Public Health crisis but are sidelined instead. Chairman powell, let me start by asking, do you agree that our economy will getet worse if stae and local governments are forced to lay off even more firefighters, police officers, teachers, and Emergency Health personnel . Let me say what we are doing. We have a liquidity facility that is there to address the shortterm liquidity needs that these entities have because of their loss of revenue due to the effects of the pandemic. That is rereally the tool that e have. I appreciate that. That is not my question. My question is if states, counties, and municipalities continue on the path to layoff, we have one million laid off, even more, just from an Economic Situation, doesnt that make the economic recovery even worse . Essentially, yes. We have the evidence of the Global Financial crisis in the years afterward where state and local government layoffs and lack of hiring did weigh on economic growth. One of the tools we have to alleviate the problem is by using the money that was provided in the cares act to bring down borrowing cost for state and local governments so they can set the stage for a strong recovery. I was glad to see the Federal Reserve support local governments through the municipal Lending Facility, but i dont think it is enough. In a letter that i and oths sent to you and secretary mnuchin last week, we called on the fed to establish another facility to purchase medium and longterm Municipal Bonds both directly from issuers as well as on the secondary market and thereby ensure our state and local governments can continue to finance Key Public Services and invest in infrastructure and other areas to jumpstart our economy and get americans back to work. Will you commit to work on that proposal that the senator sent to you . Yes, we will look at that, senator. I will say that generally with 13 three, we are trying to address liquidity needs, which are longer term. But notwithstanding that, we are taking a look. I appreciate that. In a speech last week, you said additional fiscal support could be costly, but worth it if it helps avoid longterm economic damage and leaves us with a stronger recovery. I agree. Cities, states, and counties is tremendous. Not just my state of new jersey. Moodys shows all states in the nation will face budget shortfalls. They found ohio and arizona are facing a fiscal shock totaling 20 of their state budget. For some states the numbers are worse, like West Virginia facing a 40 fiscal shock. Be expected to solve all of our problems. Act,roduced smart bipartisan with three republicans and three democrats to provide direct support to our state and local governments. I think when we have colleagues from mississippi, louisiana, and maine on the republican side, it is not a partisan issue. Would that be the type of solution that can get us back in terms of the states until fiscal recovery . Senator, we try to stick to our knitting over here and you knknow what we have done what we can with theunicipal liquidity facility. Those questions are for elected officials. Let me close on this, a lot of minority owned businees are not getting access to the Paycheck Protection Program as we intended. I know the secretary has been receptive. I hope you will be as well for allowing Community Development Financial Institutions and Minority Development institutions get greater access to these programs and to the lending facilities set up in the cares act so these funds can reach businesses in low income and underserved areas of the country. It is still not happening and i urge, the secretary has been rather receptive, i urge you, mr. Chairman, to be receptive as well. Thank you. We will move to senator sasse, who will be with us by telephone. I will tap at 30 seconds left of your 5 minutes. You can proceed. Thank you, chairman. And gentlemen, thank you for being here. Sorry, i am in the hallway outside of a Judiciary Committee hearing. I dont have the zoom camera. Thank you for for your time and responsiveness. I wanted to start by asking about recent cyber attacks. We have seen an increase in schemes directed at Financial Institutions that have been active in trying to help with corona response, and im curious if you have an update for us on Cyber Security attacks in this space. I would just comment on that we have a department within treasury that is actively working on all of these issues and coordinates to make sure the infrastructure. I will give a pitch toward the secret service bill of moving the secret service back to the treasury. Issues i think they can help with our cyber related issues. I can assure you, we have all of the resources working on this and take it very seriously. Institutions that do not have the scale to have huge cyber defenses on their own. When we see foreign actors doing stuff like this it is obviously critical that we view this as a whole society problem. Thank you for your pledge to keep looking at that. Chairman powell, the fed has done a series of announcements over the last two months about the 133 lending facilities. In the announcement of april 9, the fed announced that it would be expanded to include commercial Mortgage Backed securities as well as loans. The wall street journal described that expansion as the fed will be buying the worst shopping malls in the country and some of the most indebted companies. Can you give youperspective on the wall street journals characterization of ththis expansion, and are they right about the risk levels for some of the commercial properties . As america goes through this experience of corona time, lots of people are not just doing telecommuting and distancing for the present, that we see in silicon valley, lots of Companies Planning to migrate as a longterm strategy and i am sure that is what we will see for commercial property across america. The taxpayers should not be on the hook for flooding into that space. Can you explain how you would respond to the wall street journal . We are supporting Asset Backed Securities markets broadly, that is consumers, car loans, credit card loans and things like that. In addition to what you mentioned. We are only buying the aaa rated piece and we are only buying it with a goodsized haircut so t creditisk is actlly very low on this. The same thing is true of the clos. That is helpful. Thank you, chairman. Secretary mnuchin, i want to go back to some china ip issues we discussed before. The Chinese Government has been stealing American Intellectual property for decades to fuel its economic rise. While we have indicted companies for Cyber Espionage for theft of intellectual property, we have really seen any sanctions for these crimes. For instance, we indicted huawei and its subsidiaries for a long list of crimes from trade sanctioneft to evasion, money laundering, but we have not placed any sanctions on huawei itself. How do you and the Treasury Department assess the cost in benefits of utilizing sanctions against some of the Chinese Communist partys economic champions like huawei that are obviously are not really private Sector Companies. They built the business side of the organization by stealing ip. The back end is hooked into not just into the communist party but military intelligence. Why do we continue to treat these companies as if they are really private Sector Companies. Whered you come down on the but military intelligence. Cost benefit analysis of using sanctions . Its a matter of policy. Ive said this before. I dont comment on future sanctions or do i comment on specific sanctions on specific companies. The issues related to huawei, we do discuss on an interagency basis and do coordinate. I would also comment i have worked closely with ambassador lighthizer on the china agreement and Technology Transfer is a major issue we have been combating. Fair, but we have heard u. S. Government officials from both administrations for a few decades talk about agreements that will have teeth but they almost never do. Ambassador lighthizer has been a pit bull on this piece of it. Discussing it in the interagency is not the same as us pushing it to help huawei and the statbased actors understand ip theft has real consequences. I am glad it is a topic for interagency discussion, but i know the chairmans gavel i am at time but i would say in the intelligence community, in the Oversight Community in the legislature, this is an increasinglyipartisan issue that republicans and democrats believe it is important for us to be holding these faux private Sector Companies in china tomorrow, the Chinese Government will need to know someone will come up the stairs if you keep stealing ip and they continue to do it. For what its worth, the article one perspective is serious. Thanks, chairman. Thank you, mr. Chairman. I want to thank both secretary mnuchin and chairman powell for being on the call. We have all seen what has transpired over the last couple of months as far as inspectors general go. My question is quite simple. Can i get both of your commitments individually that if an ig submits a request to you, you would provide any information to them in a timely matter . Yes. Yes. Good. Secretary mnuchin, can you tell me from your perspective, how active is the congressionall Oversight Commission . Secretary mnuchin ive seen the recent report. I cannot comment on what meetings they have done on that. Ok. You guys i would assume comply with any requests they make. Correct . Secretary uchin i see no reason why we wouldnt. I value that and i appreciate that from both of you. The president has a different opinion. I say that by what he said and not by what i think about the values of the Inspector General. Secretary mnuchin, do you think is right to remove Public Servants that their job is independence and holding the government accountable . Secretary mnuchin if you are referring to the removal of the ig, which again, but that is within his authority. Even if they are doing their job . Secretary mnuchin again, thats an appointed position. He has the right to withdraw. Just as he has nominated a new Inspector General to work with the careres act, which we look forward to the Senate Confirming so we can work with that person. I have a different perspective on that. I will tell you why. I know he has ability to remove anybody, including yourself. If you are doing your job and in the case of the Inspector General doing it on an independent basis, i think it is clear misunderstanding of the three branches of government. I talked to you about reporting to the igs. I learned something on todays call. Nearly half of the dollars we have allocated, the 3 trillion, has neither been spent or learned. Spent or lent. , we need more transparency in these programs, and i think you would agree on that. I think you would agree with that. When can we see more information abouwho is getting the dollars . Let me comment. When we negotiated this bipartisan deal, we agreed to unprecedented transparency. We agreed to release things that are not required by 13 three. I do not know why you have seen that. Everything is posted on our website. Oer the feds website. We take great pride in the on our website or the feds website. We take great pride in the transparency that we have provided and agreed to should agreed to. Youre saying the information about who is getting the dollars and who is getting the money is already posted on your website . Sec. Mnuchin what ive said is every commitment we have made is listed on the website. Every term sheet. Every dollar has been posted on the website. Thats what i heard. Sec. Mnuchin within the cares act with the fed when we do individual transactions through them, they are listed. I look forwarto seeing that list. I am going to go online and search it, because im going to tell you that as much transparency as you said is with this program as a senator from , montana and a member of the banking committee, am not seeing any of it. Im seeing general numbers. Im not seeing any of it. We will deal with that at a later date. Chairman powell, i have a question for you. 3 trillion has been put out. Can you give me an idea how many dollars because of the leveraging the fed has used has been infused in the economy . Chairman powell senator, the big facilities to which the equity has been committed are really just coming online. It is all ahead of us. We have taken some time to set these facilities up. The amnt that has gone out so far is in the context of the u. S. Economy, fairly modest. We have committed to disclose all of the borrowers and the amounts in a timely way. I appreciate that. There is 200 billion that would be leveraged to 2. 3 trillion. Do you agree with that . Chairman powell potentially. We cannot be precise about these numbers. We leverage their equity at that. What is 100 billion among friends . I appreciate you both for being here. I look forward to finding the Information Secretary mnuchin said was online. Ke care and god bless. Thank you, mr. Chairman. Chairman powell, thank y 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 ratings public rating agencies from moodys shared that can be a very expensive process. Some companies do not want to go through the cost or rigmarole of getting those ratings. These Companies Often tend to be privately owned, sometimes familyowned. They can have very large employee bases. We havsome in arkansas. They are employing thousands of workers. I think probably all of the senators on this committee, all 50 states have companies in this category. Often times, they sell loans directly to the Insurance Companies like life insurers that are rated by the National Association of insurance commissioners. Those ratings are highquality. They are the functional equivalent of a Rating Institute like in s p or a moodys. Secretary mnuchin, what is the possibility of opening up those facilities to companies that are selling those kind of loans with those kind of Credit Ratings creditworthiness ratings from the naic . Sec. Mnuchin i appreciate the opportunity that you brought this to our attention. As ive suggested, im working with the fed csely to see if we can accommodate using those naic ratings. If in need, there is some private rating that cacan be doe on a level that is not costly to the companies to make sure they , but we are committed can use these facilities as well. Chairman powell, can i get your perspective on the question . Chairman powell if i understood your description of the company, it sounds more like main street companies than primary or secondary credit markets. Those are for investmentgrade issuers to issue public bonds. If i misunderstood, im sorry. On the main street facity, the limitation is the exceed the employee cap, which i understand to be 10,000. It would be similar to the main street Lending Facility. Chairman powell i would echo what secretary mnuchin said. We areorking on this problem. Thank you for that. Mr. Secretary, any thoughts on when that decision might be made . So some of these companies can get some c certainty on when thy will have access to the facility, another facility, or perhaps a brandnew facility . Sec. Mnuchin i will commit to try to get back to you within the next week. We want to make sure that if there are companies that slip through these two facilities, the chair and i will Work Together to make sure we deal with those issues, thahat they have funding. Thank you both for that. Thank you for your work. Secretary mnuchin, i want to turn to your question on the Paycheck Protection Program. Question, but i have it coming into my office this morning from one of our Small Community lenders in arkansas. I suspect banks across our state have this question. The note we received said we are required to file a ppp version of sba form 1502 by friday for all of the loans refunded. The reporting requirements have not been issued. We are reaching a critical point in time. Banks have to extract this information from our core. That can be timeconsuming and tedious. Asked for more detail. That is as follows. Thanks will have to extract the data points from the software syst. This will require programming in merging to the required performance and inspecting for accuracy. This will require several days to accomplish. It is not as simple as pushing a button and the data is populated. Given that this is tuesday, the deadline is friday what is the prospect of getting more detailed guidance from the sba as soon as possible or pushing the deadline back a little bit . Sec. Mnuchin mr. Senator, i believe weve already pushed that date back. I will check on that and confirm it. If there is a specific instution that has a problem, please let me know the name and we will figure out how to accommodate that. We want to make sure we get the information, but where there are small and mediumsize banks that have issues, we will try to accommodate them. Thank you again for the treasury and sbas willingness to work with us over these last two months to iron out tse wrinkles as the cares act is applied to so many different situations. I yield back my time. Thank you. Senator warner . Sen. Warner can you hear me . Yes. Sen. Warner great. Thank you. I want to start with chairman powell, some the comments youve made that i want to reinforce. We all realize and understand that losing a job in any point in your lifetimes an enormous challenge. Losing a job in the midst of the recession or depression could be devastating. I point to the survey the fed put out that 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 know 36 million americans were unemployed. We are at depression levels of unemployment. Statistics have shown that losing a job during a recession could actually incur longtime income losses up to 19 over the coming decade. Some of the statistics i have seen. I would like you to take a moment to say we have to measure overdoing versus under doing. With this type of devastation, with this type of pain hitting lower and moderate income americans, can you speak to the results and the longterm scars this will present if we do not take aggressive action . Chairman powell there is clear evidence that when you have a situation where people are unemployed for long periods of time, that could permanently weigh on both their careers and their ability to go back to work. Also way on the economy for years. Weigh on the economy for years. Equally so with small and mediumsized businesses, which are the job machine of our economy. If we allow unavoidable insolvencies because of a Natural Disaster, that will destroy the work of many families and generations. 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 the biggest from us. Still, this is the biggest shock we have seen in living memory. The question looms in the air, as it enough . Sen. Warner i would argue historically, whether it is our country or other nations, governments tend to under shoot during these periods and we now have 36 miion americans without work and 40 of folks under 40,000 a year losing their work. The scar could be deep and wide. One of the reasons i want to turn to you, secretary mnuchin, and we discussed this in a number of colleagues on both sides of the aisle understand this. We did some aggressive things for folks in the Airline Industry. Aggressive things for folks under 500. That middlemarket the main street facility is supposed to address, i am concerned we need to get that out and we need toto be aggressive with it. I got a letter to you to you all yesterday. I outlined some ideas. You made mention earlier you are willing to have some of that 75 billion at risk in this facility. I would like you to speak to that a little bit more, specifically i terms as you build out the baseline of this facility, how much risk and how much of that cital did you expect to potentially lose . I would love to have the fed chairman quickly echo whether he is willing to relook at some of the penalty fees that are fed regulations but not legislatively mandated. Sec. Mnuchin first of all, i want to thank you for the time you spent with us during the legislative process in helping to craft these different pieces and d your availability since then. We appreciate your thoughts and we will continue to work with you. As it relates to risking capital, almost by definition any time fed thinks they need capital, there is a risk to us. We model out very different scenarios. We have obviously continued to adapt the main Street Program to let more and more companies into it. Though we refer to it as one program, it has three subprograms. We run different scenario analysis. There are scenarios within main street where we could lose all of our capital. We are prepared to do that. There are scenarios where the world gets better and we could make a small amount of money. As i said, no different than secretary paulson during the tarp period, they did not think they were going to make money. Our intentiois we intend to take some losses on these facilities. That is our base case scenario. Wt toarner do you address in terms of penalty rate . Chairman powell what we are doing with these programs is we are making loans in times of severe stress. There were generalpurpose of Central Banks. What rate should we charge . We charge a rate that is a little bit higher than the normal rate. In most cases, much below than what the market is providing. That encourages payment. It helps those who need credit. If markets are functioning well, we dont want to replace them. We want to be a backstopo the markets. Sen. Warner i think my time is up, but i would urge you these are extraordinary times. I hope you will lean into this as much as possible. Thank you, mr. Chairman. Rounds. You, senator thank you, mr. Chairman. Gentlemen, first of all, i appreciate the work you have done in making this whole thing work as well as it has in short period of time. I would ask first of all to secretary mnuchin, local vendors have a number of questions coming in. Two different sections. Portion number one was a rule in which we asked these loans be divvied out and accepted within 10 days of the time of approval. Second of all, how that relates to a june 30 date for the execution or completion of the use of those loans. Mr. Secretary, i do not find where there is a june 30 end date where that has to happen in order to facilitate forgiveness of the loan. Can you talk a little bit about your options and the flexibility you have with regard to the ppp and the forgiveness loans and that date that so many people june 30 have concerns about . Sec. Mnuchin let me comment. I think the concern people have that is even bigger that we would like to get a bipartisan technical fix as you said, there is the 10 days to disperse it. We have given banks another 10 days to send back the documents. Then there is the eight week period. Companies are having issues with not necessarily being able to use it during that eight weeks. They dont want more money. They want flexibility that they can use it in longer than eight weeks. With relation to the june 30 issue, we are happy to follow up with your staff to talk about where that fits into the bill. Sen. Rounds chairman powell, a letter from vice chair florals recommending that Congress Give regulator discretion to loosen requirements described by dodd frank. Do you share the vice chairs thinking . What measures do you think congress and the Federal Reserve should consider . Chairman powell i do share that. Thidea is that temporarily during this unusual time in our history, the banks have been strong. They have been taking in deposits because of the growth in the Balance Sheet, they are constrained by some of these regulations. They are taking on board very low risk asse. We try to provide relief so they can continue to do what they are doing. I do support that. We have done a number of things. We will let you know as we see the need for other adjustments. Sen. Rounds thank you. Secretary mnuchin, one thought with regard in the middle of this covid19 pandemic, we shall have a discussion on a regular basis we get questions from taxpayers about the amount of money we borrowed and what we are going to do about it. Youre going to play a key role in how we lay out that repayment plan. Can you talk about the tools available to you with regard to long or ultralong Treasury Bonds . I know it has been a hot topic. I know most recently you launched a 20 year bond. Can you talk about the maturities, how you plan on laying that out, the strategy you are using to best accommodate our needs for immediate liquidity and also recognizing you have got some tools available and with these ultralow Interest Rates we are at right now, it may work to our benefit to feather this out over an extended period of time. Sec. Mnuchin i am glad you asked that question. It is very important. We spent time looking at 50 and 100 year bonds. Determined there was not enough demand to make it worth it given our borrowing sizes. We did get advice on a 20 year. We added the 20 year. That gives us the ability to extend the duration and raise significant funds. It is my intention to bar a lot into borrow a lot of money the shortterm to have the funding, but then to expand our financing in 10, 20 and 30 year bonds. What i would like to do is lock in a significant amount at low Interest Rates so the money we are borrowing can be paid back and dealt with over a long period of time. Sen. Rounds thank you. Thank you. Senator warren. Sen. Warren thank you, mr. Chairman. Todays hearing takes place in the worst economic crisis of our lifetime. Unemployment is at Great Depression levels with nearly 40 of people taking less than 40,000. Lost their jobs in march alone. Businesses are shuttered. They may never reopen. Congress passed the cares act and put nearly half 1 trillion worth of taxpayer money and Corporate Bailout money in your hand. This is not the ppp or the Small Business fund, but h half 1 trillion for midsized and giant corporations. I want to talk about where that money is going. The longest treasury reserved the right forules for which Companies Get taxpayer relief. And how they can spend the money. Over the past few weeks, the fed has been putting out these rules in the form of what you call term sheets. Secretary mnuchin, you have said the jobs numbers will improve. On fox news, you said quote, we will have a better third quarter. We will have a better Fourth Quarter. Next year is going to be a great year. To make that happen, people are going to need jobs. Does this mean you will require companies that receive bailout money fr the taxpars to keep their workers on payroll . Sec. Mnuchin let me comment. I have said publicly and i will say again, i think the job numbers will get worse before they get better. I want to be very clear that i think june will be a difficult quarter. As it relates to the cares act, i take great pride in the bipartisan support on these bills. These specifics were negotiated on a bipartisan basis very clearly in each one of these programs. It is our intent in the 13 three facilities to fulfill the spirit and the details of the law. Different facilities have different requirements. Sen. Warren i am sorry, secretary mnuchin. That is not quite right. What 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. A very simple question for you. You say the economy is going to recover. It is going to take jobs in order for that to happen. What i want to know is, are you going to require companies that receive money from this half 1 trillion slush fund to have to keep people on payroll . It is a simple question. Yes or no . Are you going to require that . Let me say our number objective is keeping one people employed. Sen. Warren good. Are you going to require t thatf people getting taxpayer money . Thats my question. Sec. Mnuchin aga, we negotiated on dividends, 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. Sen. Warren im sorry. I have a very limited time, mr. Secretary. Let me understand what you are saying. In all the facilities that are not the main street facility, youre not putting in any requirement for payroll. The main street facility is a commercial reasonable effort to be able to maintain jobs. In other words, if somebody if a corporation fires a bunch of people and then gets federal taxpayer money, you are fine with that or if they take a bunch of taxpayer money and say it did not work out commercially, then they can fire people. I take it your answer to my question that whether or not you are going to require as part of the terms of the loan that people be kept on payroll is no . Is that right, secretary mission . Sec. Mnuchin that was discussed with people on both sides of the aisle. Sen. Warren i am sorry, secretary mnuchin. Im talking about your term sheets you are putting out. Youre telling me youre not going to require payroll. The me ask you one more question. Taxpayers are on the hook for nearly half 1 trillion. Youre not going to require they keep a Single Person on payroll. There are some rules in the term sheets as you identified earlier like prohibiting companies from getting bailout money and double giving and other cares programs. By Law Companies they get this , money are going to have to sign agreements certifying their compliance. Here is what i want to know. When you create a certification process that ensures executives are held personally liable and are subject to criminal penalties ifhey provide false information or misuse bailout funds . And if you could be brief, mr. Secretary. Sec. Mnuchin we will review that. Programs like the Airline Programs have very specific requirements to keep jobs. Which was the intent of congress. Sen. Warren the rest was left up to you. What you are saying is you will not do it. Youre in a situation where 35 million americans have filed for unemployment. You are in charge of half 1 trillion. You are boosting your wall street buddies and you are leaving americans behind. Sec. Mnuchin senator warren, i think thats a very unfair characterization. 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. Sen. Warren you were given th authority to determine the terms. You said it yourself. You are putting out term sheets. The term sheets do not require a Single Corporation getting hundreds of dollars in taxpayer money retain one job. Senator purdue. Sen. Purdue thank you for being here today. I look forward to these quarterly updates. Chairman powell, when you ok this responsibility, the fed had about 5 trillion Balance Sheet. You worked it down to about 3. 8. It was about four when the covid19 crisis hit. With the money supply increasing from 3. 8 trillion to 5 trillion recently, with the debt being at 23 trillion and about two thirds of what we have done in the 3 trillion relief package and with the potential for more movement by the fed thatould take the Balance Sheet from 4 trillion in march, it five moves you made takes up to potentially 13. 5 trillion. It is around 7 trillion today. It could go rth of 14 trillion as main Street Programs level up. How do you put this genie back in the bottle . Help us understand how you are thinking about demand for capital and what it might do to Interest Rates in the shortterm and longterm implications of what we have just done. This is not criticism at all. I would just love to get your thoughts on how we should be thinking about the Balance Sheet, given china, japan, e. U. All the other big Central Banks are doing similar moves, just not as dramatically as we have done. Chair powell we expanded our Balance Sheet, we bought a lot of treasury securities to get markets working. As these facilities grow, we will also expand our Balance Sheet. That expands the money supply. I would expect that over time, that time will probably not be very soon, b but over time, the assets we have in our Balance Sheet from this era, it will come to matururity, rolloff, and the Balance Sheet will gradually return. But that is some years down the road. Sen. Perdue i watched how hard it was to get us down from 4. 1 to 3. 8, d the consternation we had both politically and economically, so you are confident that over time we will be able to manage that size Balance Sheet . Chair powell what matters is the size of the Balance Sheet relative to the size of the economy. That came down significantly from the end of 2014 until 2017, just by holding the Balance Sheet constant. So it can be done in a way that is passive and gradual, and it was for three years. We came down from 25 of gdp to 16 or 17 of gdp. So it can be done. In the meantime, i would say, it does not have implications inflation or problematic implications. Im not saying there are no limits, but it is not something that raises Financial Stability or inflation concerns today. Sen. Purdue secretary mnuchin, i want to thank you and echo what was said earlier about your availability through this crisis. I know that you are recently married. I dont know where your wife is these days sheltering in place, but congratulations to you and her and thank you for all the sacrifices you are making. I want to correct the record. We have been told in this meeting that there is no data but i want to highlight some numbers. The dodd frank bill killed about 4000 community banks. A bipartisan bill done in 2018 that modified parts of the bill they are the rock stars in this. Process. In the p. P. Program,nyway. I have a question, secretary. We went from 800 banks approved under the s. B. A. System prior to this. Almost 5000 banks made 4. 3 million loans and put t 520 billion to companies under 500 employees. And, by the way, 99. 8 of the 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, mr. Secretary. I think we have two levels in , one the bill itself and one that is happening now, we have disincentivized people to come back to work. My state is beginning to open up safely. We have the military and central workers. Look at how they managed this crisis. It gives me great confidence we can open the economy up. The unemployment premium is keeping people from coming back to work. There are employers in my state who want people to come back to work, but they are saying, what would i do that . I am going to enjoy this premium right now and i will be back in a couple months. The second thing is a lot of small employers actually encouraged a few weeks ago their employees to go on unemployment, even though they were getting money, and they were hoping that when the revenues started when they opened up, they would begin to bring people back and use the loan to pay salaries. How would you help us think about how to deal with that . The Labor Department at one point said they would put rules out about this premium. The enforcement behind it, if an employer once the employee to come back to work, they should no lononger be given employment insurance. Could you address those concerns . Chair powell we are aware of the problem and aware of the technical fix on unemployed insurance. Specifically on the ppp, if you offer back a worker and they do not take that job, they will be required to notify the local Unemployment Insurance agency because that person will no longer be eligible for unemployment. Thank you. Thank you to all of the testifiers and panelists. Chairman powell, i want you to take us through two very simple scenarios. The first is, if Congress Takes no additional action in the next couple of months, and the other is if Congress Steps into the breach and passes another fiscal policy bill. I know you are loathe to weigh in on specific policy considerations, but i want you to talk in terms of the overall economy about the impact of quarters three and four should we decide to say that the bills we have passed are enough. Chair powell i think it depends on the path of the economy, honestly. As i said, my concern has been the risk and possibility of longer run damage to the economy through unnecessary insolvency on the part of households and businesses and longterm unemployment. And that if we find ourselves in that place, we may have to do more. It could also be Something Congress would want to do. According to census data, about half of Small Businesses are going to run out of cash within a month. States are slowly reopening their economies, but Consumer Behavior is not going to rebound to normal within one month. Do you think there is going to be a Strong Enough rebound in Economic Activity in the next 13 months for that alone . From what we have already done alone to prevent thousands of Small Businesses from going under, or do you think there is a need for additional fiscal policy . Chair powell i think we are going to see here fairly quickly how the reopening goes. It is very hard to know. We havent done this before. No one has done this before, so i think you will you getting a lot of information quickly here in terms of what is needed. I am reluctant i make my comments on fiscal policy at a general level. I am reluctant to talk about timing and specific provisions. It is really not the feds role. I will 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. Chair powell it is a combination of a couple things. First, as i mentioned, the risk of lasting damage to the productive capacity of the economy. To the labor force because of longterm unemployment, and through unnecessary avoidable insolvencies on the part of small and mediumsized businesses. Those things create a real risk. The other thing i will point to is, what we do is address liquidity problems, not solvency problems. We have lending powers, not spending powers. Notver time and this is a certainty, this is a possibility over time, solvency problems emerge from liquidity problems. Thatepends on the path of the economy, how well the reopening goes, and which path we find ourselves on. I think what congress has done to date has been remarkably timely and forceful. You could say the same about what we have done. I do think we need to take a step back and ask, over time, is it enough . And we need to be prepared to act further. I would say we are if the need is there. Seems to me theistinction between a solvency problem and liquidity problem applies to big institutions, big corporations, even government. But talking about a Small Business or family, there isist much of a difference between having a cash flow problem and simply being flat broke. It seems to me that that distinction, which you are able to make, and rightly do, as head of the Federal Reserve, is a rather abstract one for the companies that are eightperson, and the families that are at the economic deaths door. They dont distinguish between a solvency problem and a liquidity problem, they run out of money. Secretary mnuchin, section 4114 of the c. A. R. E. S. Act states that carriers receiving payroll grants shall, refrain from conducting involuntary furloughs or reducing pay rates and benefits until september 30, 2020, but on april 21, United Airlines received 4. 9 billion, and on may 1, united announced it would reduce 28,000 workers from fulltime to parttime within two weeks. Was that announcement of violation of the terms of the Payroll Support Program . Again, please be brief. Chair powell we believe they are in compliance with the program. Right now. Were they violating this when they first announced it . Chair powell again, i dont want to go through specific situations with specific companies. I ll say right now we believe they are in compliance with the agreement. Thank you. Senator tils. Thank you, mr. Chairman. Chairman powell and secretary mnuchin, thank you for what i think, heroic work. Your team has done a great job under immense pressure and i appreciate it. One thing i want to go back to, i like the fact the administration is covering legacy cmb is. I personally believe commercial real estate is under severe stress and it is likely to get worse before we start sing a and a more ca turn positive indicator from the economy. One thing i have concern with, secretary mnuchin, is that right now it looks like we have about 15 from the American Hotel and lodging association and 15 from the cmbs service providers. It seems like a low number to me. One, im curious you think that is low given the circumstances right now and what more we may need to do to get the servicers and borrowers to the table. Sec. Mnuchin it does seem a bit low to me as well. We do have a structural problem of loans that are in securitizations and how they have to be dealt with with a special service. As it relates to the banks,he banks have much more flexibility but this is a technical issue. We may need come back congress to work with you on a technical fix. Sen. Tillis thank you. I think we need to do it. I am gravely concerned with their retail shopping, the Hotel Lodging industry, industries that are largely going to lag behind some of the businesses. I would be interested in your feedback. I was also curious about a ogram and potentially other areas where we should expand. I am thinking about new issues, and dedevelopment loans. Have you thought about that . Have you also thought about aa [indiscernible] sec. Mnuchin we have thought about all of those. I would like to thank the people at the fed and treasury who work around the clock to get these facilities up and running. We have prioritized these. Chairre you as the fed and i have said, we will look at all of our options to make sure we support jobs across the spectrum. Sen. Tillis i would particularly be interested you dont have to expand on it here but on new issues, i am very interested in that, what you think is within the realm of possibility. Chairman powell, do you have anything to add to that . Chair powell just our commitment, as a secretary suggested, to keep our minds open and look at those facilities as we learn more. Sen. Tillis secretary mnuchin, i have one question for you then a final quesestion for the bothf you. I am thinking more about the tax burden right now on middleclass households. Do you think any of our future work here should include maybe a reduction in tax for middleclass households and whether that would be helpful . Sec. Mnuchin i think that is something that should be seriously considered. Se tillis the final one that i have, chairman, i will keep to time. I have a growing sense that you have a bit of a donut hole. Some businesses that are not quite right with the hedge of Protection Program because of their size, they are not quite big enough or the nature of their business to be eligible for the upcoming mainstream Lending Facility. Have you looked at secrcretary mnuchin, i appreciae what you said about the eightweek coverage period. I think there are a lot of mechanics to be included. All of that, we need to look at. We know the coverage period will take congressional action, but when we massage the ppp, it may fix the problem for some of these people i described as being in the doughnut hole. But are you seeing that now . We dont have the full information on the mainstream lending, but i get a sense there will be some people caught in between. What are your thoughts about what we needo do there . That final question is for both of you. Sec. Mnuchin our objective is to make sure there are people who do not fall in between. So between the ppp, the eidl loans, and the mainstream program, it is our objective to cover as many of those companies as possible. Chair powell that is one of the reasons why we went to a smaller minimum loan level on the main street facility in theast term of the term sheet. Sen. Tillis thank you, i also look forward to seeing the mainstream lending act mobilized in the coming weeks. Thank you, mr. Chair. Senator van hollen. Senator van hollen thank you, mr. Chairman. Secretary mnuchin, chairman powell recently acknowledged the need for additional Fiscal Relief acknowledged and responded from senator menendez that state local layoffs of police, firefighters, First Responders, teachers will make a bad Economic Situation even worse. Do you agree with that assessment . Sec. Mnuchin i recently provided guidance on the 150 billion we sent to the states, that they can use that for police, fire, and First Responders without restrictions. So i would hope there would be no layoffs as a result of that relief. That was our objective. Senator van hollen but in addition, that just moves the burden onto other Public Service providers, including teachers, healthcare workers, Public Health care workers. Wouldnt you agree that layoffs of those workers or any workers takes a bad situation and makes it worse . Sec. Mnuchin 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 it is the states or the federal government . I look forward with working with the senate on a bipartisan basis to address these issues. Senator van hollen you said which taxing authority. As you know, states have balanced budget requirements and the federal government doesnt. We just borrowed 3 trillion. It seems to me we need to take action here to prevent aad situation from getting even worse. Let me ask you about the ppp program. A 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 our administration Inspector General recently said that 25 limit on forgiveness for fixed costs is, not aligned with what language in the statute. Another issue is raised, which is the design flaw in the statute, regarding the june 30 deadline for qualifying for forgiveness. The house in the heroes act reformed both these provisions. Do you agree with the changes the house made in the heroes act with respect to ppp . Sec. Mnuchin i am not familiar with the specific language. Im happy to look at it. But i do want to comment on the 75 issue. The s. B. A. Wrote back to the ig to disagree with that. I have spoken to both cardin and rubio on this. The program was designed for eight weeks plus overhead. Senator van hollen mr. Secretary, i know what your position is. I just wanted to highlight the position of the Inspector General of the s. B. A. In my view, you cant find that 25 limitation anywhere in the statute. I challenge anyone to take a look and find it. I would ask you to take a look at the rebuilding main Street Initiative that a number of us have put forward. I think it can get bipartisan support, and i look forward to your responses there. Let me turn to chairman powell and just say that i believe that overall, the fed has acted quickly. And for the most part, necessarily and appropriately. But i have serious concerns about the actions you have taken with respect to the secondary market facility, with respect to junk bonds. In response to senator sasse, you emphasized that at least with the health program, you were essentially helping those with aaa ratings. But 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. It is not clear to me why putting money into junk bonds is helping folks on main street. In fact, it puts the public in a firstloss position behind even the most subordinated bondholder and uses public funds to take on decades of future cash flows with a price risk. Can you respond to that concern . Chair powell thanks. I would be glad to. The only highyield bonds we can buy are from those companies that were Investment Grade on march 22, but were downgraded, socalled fallen angels. In many cases, large u. S. Companies with many thousands of employees. We made them eligible for the Corporate Credit facility. We dont want to have a cliff where the Investment Grade markets are working well, but the leveraged markets and nonInvestment Grade markets are not. So we made a limited, narrow set of actions to support market function in those markets, including Exchange Traded funds. That is a portfolio and that has had an effect to improve market function. We may have to lend money to those companies. Even better, they can borrow themselves now. A lot of that has been happeng. That is kind of why we did it. It is a fairly narrow intervention. We are not buying junkbond across the board at all. Mr. Chairman, if i could follow up briefly. I think a lot of those bonds were already in trouble before the intervention. There trouble was not directly related to the pandemic. And if you could get back to me and show me where the fed has authority to purchase this kind of lowInvestment Grade instruments, i would appreciate it. Thank you. Senator kennedy. Senator kennedy chairman powell, do 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 . Chair powell yes, senator. I do think that is what we are seeing. All sen. Kennedy do you think they are substantial . Chair powell yes, i do. Sen. Kennedy is your Municipal Liquidity facility set up . Chair powell yes, it is. Well, we are probably 10 days away two weeks away from it , actually being operational. Not quite yet. Sen. Kennedy as i understand it, you basically will buy shortterm paper like revenueanticipation notes from the states, which will allow those states to issue that shortterm paper at a lower Interest Rate . I correct . Am chair powell they will be able to issue it at all in many cases, so, yes, we are supporting market function there. By the way, that should support municipalction across markets in the longterm. Sen. Kennedy do you know how many states are prohibited from borrowing money by their state operating . Chair powell i think a few states have a balancedbudget 40 requirement. Sen. Kennedy a lot of states have 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 . Chair powell i thought most states could borrow during the course of the year for maturities of less than a year to smooth out the inflow of cash, revenue anticipation notes and tax anticipation notes. Sen. Kennedy have you had a lot of inquiries about the Municipal Liquidity facility . Chair powell yes, we sure have. Sen. Kennedy ok. Secretary mnuchin, do you agree with what the chairman said . Sec. Mnuchin yes. Sen. Kennedy ok. Let me offer you an observation, mr. Secretary. I am 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. I think that whatever deal yall come up with is going to receive serious pushback from bothepublicans and democrats in both houses, for a 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 . Chair powell senator kennedy, i just want to comment on the first thing. I have no intention of doing what you just described. Sen. Kennedy its been done in the past. It was done last time. I am not being critical of you. Sec. Mnuchin senator, there were at least 20 or 30 senators, both republicans and democrats, that participated in the Detailed Analysis of the last bill sen. Kennedy i understand there i understand, but there are a lot more members in the house and senate. I am not being critical. That is the way it works around here, and we all know it. Why would you not be supportive . We have already spent 150 billion in the c. A. R. E. S. Act. We know there will be shortfalls. We may not be able to pass another bill. I think it is less than 50 chance of passing another bill. Why would we not allow states, without appropriating new money, to use that money to address revenue shortfalls that you and the chairman of the fed both agree are going to exist and be substantial . And why would we not do that today . Sec. Mnuchin senator kennedy, i appreciate your bill. I know i had the opportunity to meet with you and other senators with the president. If there is bipartisan support for that, i am sure the president and i would look forward to that. Sen. Kennedy what would it take for you to agree to support it . How do i demonstrate bipartisan support . Sec. Mnuchin i think i have a call scheduled with you later today so i will be happy to talk with you about it. But as the president has said, if there is bipartisan support in the money has already been allocated, that is something i assume we would very seriously along with. But again, there has to be broad bipartisan support. [bangs gavel] sen. Kennedy how about if there were bipartisan support in the senate . Would you consider that bipartisan support . And would you please be brief. Sen. Kennedy how much time do i have . You are a minute and 15 seconds over. Sen. Kennedy i am sorry, i cannot see the clock. Were going to have to figure that out. Several have had that. Sec. Mnuchin i leave the details to you and the senators. I appreciate the unanimous support we had previously. I leave that to you. Sen. Kennedy i am sorry i went over, mr. Chairman. Chair powell no problem. Senator cortez masto. Can you see your clock . [laughter] thank you for joining us. Let me start with chairman powell. Chairman powell, we had an interesting conversation on the liquidity problems versus insolvency problems. I do know that you have highlighted that some of the ctors, airlines and hospitality, are in rough financial shape. Because i come from nevada and it is a hospitalitygenerated state where we get most of our revenue, can you speak to the challenges that hospitality in terms of Tourism Sector face right now . Chair powell i think sectors of the economy like about where the Business Model is to gather people in one place and entertain them, feed them, fly them around, whatever you going to do. Those are sectors that it will take some time for the public to return. It will happen, but it will take time for the public to gain confidence and adapt to the new world and start traveling, taking vacations, and going to restaurants. Sen. Cortez masto that is one thing we have not talked about, this notion that when we looked to open businesses we have to find a balance about opening businesses in general. But they are only successful as Customer Confidence that is there to patronize. That is not just true for the hospitality industry. That is true for all businesses. I do know service and retail has been hardest hit. My understanding is over 2 of those businessesave closed permanently already. How are we to address this Consumer Confidence issue . Because i know that is something that you have thought about. What should we be doing . Chair powell it affects different sectors of the economy differently. The ones we talked about are the ones where it is most important. Other sectors may be able to recover much more quickly. And we certainly hope so. But the number one thing is people believing that it is safe to go back to work or go out, and that is about having a sensible, thoughtful reopening of the country something we all want and something we are in the early stagesf now. That is what it will take for people to regain confidence i think and resume their to bettys. At a different pace depending on the nature of the business and the nature of the activity. Sen. Cortez masto and the health care piece of it. They will save going out if they feel they are going to be healthy and safe when they go, isnt that true . Chair powell yes, it will be a combination of getting the virus under control, development of therapeutics and a vaccine, all those things. And also i think seeing what your eyes are telling you. You can feel it already that people are doing things they would not have done two months ago. A little bit at a time. I think the process will take time. Sen. Cortez masto until that happens, many people are relying on local governments and State Government as their social safety net, right . They are looking to the state and local governments to tell them how they can stay safe, if they are opening businesses, where the Health Care Facilities are, the testing that is needed, Contact Tracing. Isnt it true that that is where they rely, on local and State Governments . Chair powell i think that is where the decisions will be made, state and local government. Also, individual businesses. We talked to businesses, nonprofits, and leaders in those areas. What i feel like, certainly for the larger ones, there is a very thoughtful process going on about this. Ultimately, people will make up their own minds. You can change the formal social distancing measures, but ultimately, people will decide what they should and should not do with themselves and their families. I think that will boil down to having pretty good confidence that it is safe to go out. Sen. Cortez masto i agree with you. I also know, at least in my state, that many are waiting and relying on their state and local governments to weigh in and help them make those determinations and set those guidelines to make sure that communities are safe. That is why funding for state and local governments is so important. I cannot stress that enough. Not only in the next fiscal package, but you also touched on municipal Lending Facility. I would like to see more of that available to smallerpopulated states and local governments. Nevada has 3 million population. There has to be a way to also give them the opportunity to get the liquidity or the funds they needs to ensure they are providing that social safety net to consumers in general. I know that my time is up. Secretary mnuchin, i have questions s for you as well. I will submit those for the record. Thank you both for joining us today. Chair powell thank you. Before i moved to senator mcsay, i will announce a vote started about 10 minutes ago. We still have a number left to go, so i ask you to please Pay Attention to the clock. Sorry it turns out this way at the end of these hearings. Senator mcsally . Sen. Mcsally thank you, chairman. Chairman powell, good to see you. I want to talk about china. Unleashed this virus on to america and the world, with a classic communist coverup, deception, continued propaganda campaign, costing now over 90,000 american lives. Americans losing their job so 35 million far. We dont know who patient zero is. They destroyed samples, silenced doctors and kicked out journalists. Their reckless behavior continues to be at the root of all this as you know, this is why we are here today. We are talking about the economy, which is very strong andhich was a very strong now really struggling. People all over arizona really struggling because of the calamity from this virus. I dont think anybody let me ask. I dont think any of you think there is any reason we should be rewarding china or Chinese State owned enterprises or entities or individuals that want china to prosper as we implement massive initiatives to support the american economy. Is it fair to say neither of you want that to happen . Sec. Mnuchin that is correct. Chair well that is really not a question for me. We are the economic sponse to this. Sen. Mcsally i know, but none of us as americans want china or chinese owned enterprises prospering. I want to talk about a Company Called blackrock. On march 24, the Federal Reserve bank of new york retained blackrock as a financial agent to operationalizand transact with primary dealers in the primary market Corporate Credit facility, and the secondary market Corporate Credit facility. As you know, these facilities serve as markets for companies to sell bonds and attain loans during this downturn. Typically there is a Competitive Bidding process, but blackrock was selected for this one. As you probably know, blackrock is one of the leading investment banks in chinese funds, includining helping Chinese Companies list and go public in american stock exchanges. Chinese Companies Listed on american exchanges prohibit the Oversight Board from reviewi their audit reports. Blackrocks website, they have a page titled 5 myths and realities about investing in china. According to blackrock, one of the biggest myths is that Chinese State owned enterprises dont control their economy. Blackrock even tries to back it up with data. I wont go into all of it, but it is ridiculous. It doesnt mention anything about human rights abuses, military responses, the hong kong democracy protests, or even that the country is ruled by a communist party. Ironic they are one of the Worlds Largest banks and allegedly a staple of free markets, neglects to mention communists actually run china, all while refusing to invest in industries in america, but that is a separate issue. My question is, how and why does blackrock get selected as a financial agent for these facilities . How much money do they stand to make as the agent . And what, if anything, will prevent blackrock from taking those profits they earn to invest in china and Chinese State owned enterprises . Chair powell i guess i will take that. We hired blackrock for their expertise in these markets. They are actually an asset manager. They are very large as manager, which is very active in the markets that we are concerned with, with the primary market and secondary market credit facilities. It was done very quickly due to the urgency. We will rebid the contract as we, in practice, do Going Forward. So that is where that is. The fees are a matter of Public Record and we will be happy to supply those to you. Sen. Mcsally what if anything can we do to prevent any of their profits from this to actually benefiting china and Chinese State ownecompanies, in which they are severely invested in . Chair powell i would say all large Asset Managers buy chinese securities. These are global Asset Managers. I am not here to defend or criticize them for that, it is not relevant to the work we want them to do. What we are trying to do is create conditions in which u. S. Workers can keep their jobs or return to them. That is our sole focus. We are not trying to reach out for other Public Policy objectives or deviate from that. We have a laser focus on that and we conclude this company was the right one to be our fiscal agent in this place. Their views on anything else are not important. What is important is that we do everything we can to support [indiscernible] sen. Mcsally let me say it is important to all of us. Thank you for your leadership to support our economy, support jobs, to get our economy back on track. But it is also important we wake up as americans and hold china accountable, and they are not allowed to profit because of these investments taxpayers have made. I will followup with you on these issues. I really think blackrock and others need to also wake up and do their patriotic duty. See what is going on here. Communist china should not be profiting off of unleashing this calamity on the world. That should be something that should unite all americans even if they work at blackrock. Chair powell thank you. Senator jones. Senator jones thank you, mr. Chairman. I agree we nd to hold all people accountable, china, the w. H. O. , folks in this administration, Everybody Needs to be held accountable if they had deficiencies in what is going on with this pandemic. Secretary mnuchin, let me assess saw recently that the treasury is going to begin issuing debit cards for americans for their direct payments. You will recall that senator cotton and i sent a letter shortly after the passage of the c. A. R. E. S. Act encouraging that, so i appreciate your willingness to do that. I think it will quickly get money to millions of americans that have not received those direct payments as of yet. I wanted to ask you about the payroll Protection Program. As we talked about early on in the first round of funding, there were problems with the banks, there were underserved communities not getting their fufunds. I thinink we tried to correct tt anare doing much better, but the s. B. A. Issued a report in the wake of that, that recommended the agency start collecting demographic information on who got those loans. Can you commit to work with the s. B. A. Administrator to collect demographic information mandatory for these ppp loans so there is that muchneeded transparency . Sec. Mnuchin i can tell you, in the forms that the lenders are required there is demographic information. We have been advised to make that optional and not mandatory, but we very much hope people provide that. Let me just say, we are very much committed to making sure that we serve the underserved communities with the money we have left. Sen. Jones thank you. Chairman powell, you know, i saw your speech and i read your comments. I saw the 60 minutes piece and it reminds me when listening to comments what judge taylor in to kill a mockingbird said. You know, people will hear what they hear and see what they want to see. Call to action from saw is a that. 40 of americans that have lost their jobs and how it is affecting our minority communities, not only in their health disparities, but what is being shown as a spotlight is the disparities on so many things. You mentioned how this pandemic can exacerbate the existing gaps of wealth and assets and ownership between minorities and even just poor people in general. We started the pandemic with about poor people and it will 40 million get much bigger and will be across much more across racial lines. What can we do to narrow that gap, to make sure the wealth gap doesnt get greater as we en back up this economy . Chair powell well, the job losses that have been happening have been happening in the service economy, particularly in those parts that are dealing directly with people. That is less wellpaying jobs, and that sort of thing. So if you look at those hardest hit, it is restaurants, hotels, travel, things like that retail. I recommend that report, which we just released. That is where those statistics cocome from and there is a lot n there. It is stunning how quickly households get into financial trouble, how little many lower income households have in the way of financial resources. These are longerterm problems. For now, this very much falls on us to do what we can to support the economy. As i mentioned earlier, you have 20 some Million People out of work. We want to do everything we can to create a world where they can go back to their jobs or find new jobs. I think that is something all of as policymakers should be strongly focused on. Sen. Jones thank you for that. It seems to be connected to your comments of also making sure that we keep people in their livelihoods, keep the unemployment numbers down. I think from our standpoint, we have been focused on both saving lives and saving livelihoods. And while we dont want to give folks incentives to stay on unemployment, we certainly do want to give incentives to businesses to open carefully. I would encourage you, if you havent, to look at the Paycheck Security Program that senator warner and others and i will be filing this week. So we can give these opportunities. Because i assuming that the more am opportunities we can give employers to keep people on payroll with benefits, it will aid in opening up the economy safely and trying to keep us from getting into that longterm recession. Would that be fair . Chair powell i would be happy to look at your latest proposed legislation. Sen. Jones thank you, mr. Chairman. Thank you for coming. Chair powell thank you. Senator moran. Senator moran mr. Chairman, thank you. Had i had more time, i would have extolled the virtues of both the secretary and the chairman in their efforts in Public Service during this crisis. In the absence of that time, i hope you understand the sentiments that sentence expresses. I want to focus, secretary mnuchin, we have talked about ppp and seen the positive consequences that have come from the program. There are large businesses, main street, in which the facilities are being developed to assist. But i am worried about other businesses. I would use an example, not that i am lobbying for any company, but an example that comes to my mind in kansas is yellow roadway trucking company. It employs almost 30,000 people. It is not Investment Grade. It has leverage. And it is a company that, in the absence of assistance, the jeopardy of its employees are significant. I think there is a lot of companies out there like that. A number of companies in kansas like that. I want to make certain that we are doing the things necessary to prepare to be of assistance to them. I think senator toomey and senator warren earlier indicated that very few of us expect the treasury to not have to take losses, that there needs to be some risktaking here. And i want some kind of assurance that under the b4 program b4 facilities, that , these kinds of companies that are hugely important of the economy can receive some assistance with the facilities at treasury and the fed. Secretary mnuchin, is there some level of comfort i can have . Sec. Mnuchin you have my assurance that we will look back and look at that specific company and see what we can do and get back to you. Sen. Moran i hope that it is more than that because it is not just that company. There is a number of Companies Across the country, not just in kansas. Sec. Mnuchin to be clear, Companies Like that. And i said before, we want to make sure there are facilities that companies dont fall through the cracks. Between the different facilities, we are trying to do as much as we can within our powers. Sen. Moran let me suggest to you that timing is of the essence, just as it was in ppe. The circumstances Companies Face today in laying off employees are present and around the corner, so i encourage the precipitous but thoughtful action in addressing these circumstances. Let me see if i can get two other questions. One, do we have a timeframe, mr. Secretary, for further guidance regarding ppp and loan forgiveness . Sec. Mnuchin there is some guidance that just came out on loan forgiveness that we believe deals with most of the major issues. Sen. Moran second question, secretary mnuchin, does treasury and s. B. A. Plan to issue guidance that would allow 501 c 3 organizations to utilize the alternative size standards for ppp eligibility . Sec. Mnuchin we are reviewing that specific request. We have that request and we are reviewing it carefully. Sen. Moran is that something that the decision is close to being imminent . Sec. Mnuchin we will decide one way or another whether we can do that, so, yes. Sen. Moran thank you very much. Thank you, mr. Secretary and mr. Chairman. Sec. Mnuchin thank you. Chair powell thank you, and you get a gold star, senator moran, for yielding a minute earlier. [laughter] final senator for questioning is senator smith. Senator smith thank you, mr. Chair and thank you, Ranking Member brown. Thank you both of you fobeing here today. Chair powell, you talked about how we will not be able to solve the economic crisis without solving the Public Health crisis, which i agree with. Secretary mnuchin, you said we need to reopen the economy in a thoughtful way, which i also agree with. Seems to me the important part of being thoughtful is making sure americans have Accurate Information about whats going on. I have no doubt you will you surprised to hear a lot of us were taken aback when a couple days ago we heard president umps son eric trump, acting as a surrogate for his father, say this. He said they think, meaning they the democrats, that they are taking away Donald Trumps greatest tool, which is to be able to going to an arena filled with 50,000 people every time, so that they will you watch, they will milk it every single day between now and november 3, and guess what . After november 3, the coronavirus will magically all of the sudden go away and disappear and everybody will be able to reopen. This is the kind of misinformation that concerns me greatly. Secretary mnuchin, are you aware of any evidence that what eric trump said, that his assessment is accurate . Sec. Mnuchin i did not see his comments, nor do i think in this setting it is appropriate for me to comment one way or another. Sen. Smith i do not think it is accurate and i think it is exactly the kind of misinformation that is so damaging to and undermining of both our economic approaches and our policy approaches here. But let me ask you, secretary powell, even before the covid19 crisis, many minnesotans were struggling to find an affordable place to live. Last year i spoke with hundreds and hundreds of minnesotans and family and Community Leaders about this challenge, and Housing Developers as well. They all told us that every part of the housing continuum, from housing for homeless people, and support of housing, all the way up to workforce housing, that this is a significant problem and a significant affordability challenge. So now we have this coronavirus challenge. I, along with many of my colleagues on this committee, have been pushing for support for housing, 11. 5 billion for homelessness assistance, 100 billion for rental assistance, and 75 billion to stabilize homeowners. Can you talk about the importance of the housing sector in our economy right now and what challenges you see ahead for us . As we are living through this crisis . I appreciate what you said that the most important policy objectives should be to keep people in their home and keep them paying bills. Chair powell these are longer running problems which are under particular pressure right now. As an example lot of the jobs , a are in big urban areas, that is where the job creation is. The cost of living in those places is higher and higher, very high. Very often, the people providing services have to commute very long times to be able to afford to live in a place. It is an issue that has been with us for a while. It is not one the fed can affect much other than by affording fair lending laws and things like that. We cannot directly affect those, but they are important to our economy. Sen. Smith i realize you dont want to comment specifically on the specific policy issues we have confronting us here in congress, but in general, do you see a risk to the Housing Market as the economy continues to take a downturn in the months ahead . Chair powell i think there are multiple risks. One is to the extent that the forbearance doesnt do the job, you may have people losing their homes. Thats something, given that this is a Natural Disaster in the way, that is something that it would be great to avoid. The also see the housing industry coming to aalt, or under great pressure. That is a lot of jobs right there. It comes down to sensibly, thoughtfully opening up the economy that builds confidence, keeps people safe. I think that is really important that we do that well, and if we do these other things well, they well take care of themselves over time. Sen. Smith this is an issue i think we should continue to work on and talk about, the challenges peoe will have if they lose their home, the Ripple Effect of people not being able to pay their rent or mortgage, and then the impact that has all the way up through the housing continuum, i think, it is a great concern. If you dont have a safe place to live, nothing else in your life works. I believe this is something that is really important for us to address in the next package. Thank you very much. Chair powell thank you, senator smith. We have been joined now by senator sinema. She w will be the last question. She will be joining us on audio only. If you finish in five minutes, i may make it to the vote. Sen. Sinema thank you for being here today. Every day arizonans from every , corner of my state are worried about their health and their futurere, that is why our office has doubled our team to better serve arizonans. Our al is to offer topnotch constituent services, connecting them with resources and going the extra mile to make sure they get the asstance theneed. I am glad we are having an oversight hearing today because robust congressional oversight is critical to ensuring we know where the c. A. R. E. S. Act money is going. It is also vital to ensuring arizonans are not stuck in government bureaucracy. I am focused on cutting through that redtape to help arizonans. My first question is for secretary mnuchin. Lets start with the Economic Injury disaster loans. I sent you a letter on april 17, outlining my concerns with how the administration has run this program. I have not received a response. The c. A. R. E. S. Act promises small bunesses a 10,000 loan advance within three days of the application. I know arizonans who went through this process. None of them got their loan advance within three days and no one received the full 10,000. Why arent they getting the full amount and why arent they getting it on time . Sec. Mnuchin first of all, let me apologize that you have not received a response. I will look into that after this and get backo you. As it relates to the e. I. D. L. Program, that is within the s. B. A. , but the s. B. A. Had significant systems issues getting the e. I. D. L. Program up and running. I thought the grants were doing much better than the loans, so i will look at that. On the loans, they are rebuilding the entire system. We have over 5 million loans to process, but we will follow up with you. Sen. Sinema as you know, the s. B. A. Changed the policy of e. I. D. L. To only issue 1000 loan advances for each employee up to 10,000. The e original plan was 10,000a company. Who authorized the change . Why was it made . Sec. Mnuchin i believe the s. B. A. Administrator made the change. I believe her thought was that there was limited money, and trying to spread it out amongst as Many Companies as possible. Sen. Sinema she did not think to herself, lets go back and ask congress to authorize more funding to pay for that which they appropriated and called for in the legislation . Sec. Mnuchin there was additional money in the second phase, and we appreciate that congress reacteded to that. Sen. Sinema ok, but secretary, my question is, the s. B. A. Made this internal change without getting auorization from congress. If they are saying they did it because they did not get enough money, we gave more money and and they still have not used it to give that money to people as promised as the 10,000 in the original legislation. Sec. Mnuchin as i said, i am more than happy to follow up with you. I am not involved in some of the direct specifics of that. Let me follow up with the office. Sen. Sinema i appreciate that. The last thing i will say about the e. I. D. L. Loans, my office is working on over 300 outstanding e. I. D. L. Cases, some from early and midmarch. What can your office do to get these to work through these cases moved through quickly . Sec. Mnuchin that is not acceptable, so we will follow up with the s. B. A. For you. Sen. Sinema i appreciate that. I have some questions about the Paycheck Protection Program as well. Small Business Owners in arizona are asking for guidance on how the loan forveness works every and the lack of guidance has made it difficult for Small Businesses to plan. We received some guidance last friday and there is more to come. Would you tell me why it is taking so long to get guidance for Small Businesses on the loan forgiveness aspect of ppp . Sec. Mnuchin it is a very complicated program that we set up in a very short period of time. I thought the guidance we put out dealt with all the issues. But if there are specific issues you are hearing, we will follow up with you and provide clarity. Sen. Sinema i appreciate that we would like to followup specifically. As you know, the application to get your ppp loan was only one page long, but the forgiveness lication is 11 pages long and according to my staff, requires a minimum of three hours to complete. This is a real problem for momandpop shops in arizona. What efforts can we offer to assist Small Businesses in filling out the complex form . Sec. Mnuchin i can assure you that i spent a lot of time on the complexity of that. We tried to get it as short as we could under the requirements of the law. I hope it doesnt take three hours for Small Business. We tried to make it as short as possible. Sen. Sinema i appreciate that. Mr. Chairman, i see my time is expired. I would like you to make it to the vote. I have many more questions. I will submit some of them in writing. Thank you so much, mr. Chairman. Chair powell thank you, i appreciate that. I understand senator brown wants wants to make a 60 second statement. Senator brown i will do that. Another successful hearing. I wear on my lapel a pin oa canary in the birdcage. You all know the story of the mine workers who took the canary down. A center later come into starting to feel like were back in the minds. Millions of American Workers dont have a union to protect them after decades of corporate attacks. Based on the responses we have for today and what we have heard especially from the president over the past few months, it seems once againworkers dont have a government that cares enough to protect them. Look at how the administration treats essential workers, women especially, africanamerican, latino workers, putting our lives on the line. Look at who they are willing to spend money on. This administration tells us everything we need to know. That is why Congress Needs to stand up for workers. That is why workers need unions so we can fight back for Economic Security and safety protections and the dignity they deserve and for american values. Mr. Chairman, thank you. Powell i also want to thank you, senator brown, for your cooperation working with us to have this hearing. I appreciate the cooperative way we have been able to work on these hearings. I do disagree with the notion that our secretary and our chairman are not working very hard to make sure the support we voted on gets out to those very people, those who have these lower paying jobs, those in the service industry, the Small Businesses, mediumsized businesses, and those places that will be needed to stand up our economy as we have the opportunity to do so. We may have a different point of view on that, but i do appreciate your support in anding me get this set up working. To our witnesses, secretary mnuchin, chairman powell, i again appreciate your cooperation and work with me as we put together this hearing. We are plowing new ground in the senate as is happening across this nation when while we deal with covid19, and your cooperation in working to get us through this hearing and get the report to us is deeply appreciated. With that, i will say for senators who wish to submit questions for the record, those are due on tuesday, may 26. I asked our witnesses to respond to those questions as quickly as possible. Thank you for participating today. This hearing is adjourned. [captions Copyright National cable satellite corp. 2020] [captioning performed by the national captioning institute, [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap. Org] clicks on cspan 2, the senate is back at 10 00 a. M. Coming up on washington journal, fred upton talks about the federal response to the coronavirus. We will also discuss the potential risk for states as they reopen in the midst of the pandemic. Later, more on the federal response to covid19 with Michigan Democratic congressman dan kildee. Host good morning. With nearly 92,000 american deaths as a result of