Transcripts For CSPAN Federal Reserve Chair Powell On Monetary Report 20240712

Chairman Jerome Powell will update the committee on Monetary Policy develop and the state of the u. S. Economy. It has always been four months since the last Humphrey Hawkins hearing, but we are seeing a different economy today. One that has been racked by the physical and Economic Impact of the covid19 pandemic, and ensuing shutdowns. Chairman powell, you have stated that the Federal Reserve is strongly committed to using our tools to do whatever we can and for as long as it takes, to provide relief and instability to ensure that the recovery is as strong as possible. Additionally, the fed has purchased more than 2 trillion in treasury and mortgage began ins since midmarch. Because of this, the Balance Sheet has expanded to more than 7 trillion. Congress, the administration, and regulatory agencies have taken action to protect and stabilize the infrastructure of our Economic System. The cares act has been central to that effort, and recent stats indicate that our labors are working. It was announced on june 5, encouraging signs for jobs and the economy, that nonfarm Payroll Employment rose by 2. 5 million in male and the Unemployment Rate declined to 4. 3 . According to the report, these improvements in the labor market reflected Economic Activity that had been curtailed in march and april due to the pandemic and efforts to contain it. Title iv provided a 500 billion infusion into the Exchange Stabilization fund. Up to 440 billion of which can be used to support lending facilities, such as the main Street Lending facilities and municipal lending facilities. The fed has a set of facilities, both under and outside of the cares act, and there is evidence and that the mere announcement of some of those facilities has had a positive and destabilizing effect on markets, even before they have become fully operational. Although come any positive effect of these facilities is welcome, getting them fully operational ensures they achieve their full effect. The Federal Reserve recently announced positive changes to the term sheets of the main street facilities that will allow additional smaller and mediumsized businesses to act as facilities and announce that the facilities open for lander registration and have encouraged lenders to start lending as soon as possible. Thee are important steps in facilities becoming fully operational. In addition to emergency lending facilities, the fed can continue to right size regulations to increase access to credit in the economy. In response to a letter i sent to the federal banking regulators on april 8, vice chairman coral has noted that congress should consider modifying part of the dodd frank act, the collins amendment, to allow regulators to provide flexibility as things respond to increased credit demand. There are also several proposed rules of the agencies have been working on since before covid19. And i encourage the agencies to finalize these as soon as possible, such as the covered. Unds rule during this hearing to my look forward to hearing more on the state of the economy, including its response to the cares act, an update on the status of the 13th street emergency lending facilities, how the facilities have provided or stand to provide necessary credit to households, businesses, states, local governments and local governments. And changes at that could increase credit and liquidity in the market place to further support the economy. Chairman powell, i thank you for joining us. Senator brown thank you for holding this hearing. Thanks to mr. Powell for participating remotely, to practice social distancing and prevent the potential spread of coronavirus. We know that the virus is still spreading and is still taking the lives of americans every single day, across the country and in big cities and small towns alike, where americans are calling for the government to pond to the health and of pendant. They are outraged by the killings of black americans and are demanding justice and an end to the systemic racism that pervades every aspect of american society, including our economy. Your job and our job is to oversee our Economic System to be good stewards of our economy. That requires seeing our economy as it actually is. We are not overseeing an academic model of a perfect market. The evils of racism have been woven into the fabric of our nations history since its beginning. Look at housing, we see how it works, from jim crow to redlining, to today and dismantling important civil rights law. We cannot rely on the market to sort itself out. It never has and never will. We know that black workers are last are paid less than their white peers who have the same education levels. We black families are less likely to own their own homes than white families. We know black students pay more for college. We and black retirees have less money for retirement and less wealth to pass on to their children. Many, including some members of the house and senate, suggest, both in their statements and policies, that black americans do not work hard, do not want to start businesses or save or invest. That is a racist narrative. The real reason behind the disparities is that we have centuries of systemic oppression the denies black americans opportunity to fully participate in our economy. And whenever we try to fix it, the people who perpetuated that system, people who have no problem intervening in the market to save corporations and the white men who run them, say, no, we cannot have government meddling in the economy. Lets be clear, government has always intervened. It has only been a question of who is intervening on behalf of corporations, the wealthy and privileged, or the people that make the country work . By contrast has never been clearer than it is today. Workers are the people who make the economy run, not the ceos and other top executives, with the people who stopped ourselves, deliver our packages come operate our subways and buses. We finally started calling the mostly them, mostly women, disproportionately black in brown we started calling them what they are, essential. But the government has not started treating them that way. Even before the pandemic, this economy was not working for working americans. Our central workers faced the barriers to housing and health care, wages were stagnant, wealthy economy the inequality continued to rise, corporations were boarding their executives with huge bonuses and Stock Holdings with buybacks. They were not using the record profits to pay essential workers what they are actually worth. Now, these same companies that have been aligning, lining the pockets of their investors and executives at the expense of their workers, now they want the government to cushion the landing. And congress has asked of the treasury and Federal Reserve to lend trillions of dollars to support our economy during this unprecedented time. But while treasury into the fed help Financial Markets and corporations, you are now holding up you now need to hold up the other end of the deal, making sure americans are safe, big corporations are staying afloat. Look at the stock market. The number of americans in the tens of millions out of a job. We saw this happen in the 2008 financial crisis. The government intervened to help corporations and banks. They were happy to take the bailouts, no complaints of government handouts there. In fact, it was considered patriotic. While millions lost their jobs, homes, getting paid less. Many looked for help, for stimulus for people who may be economy work. Those in washington called that a bill out. Bail out. History repeats itself. As covid19 spread across the country earlier this year, many workers, mostly black and brown, found themselves thrown from one crisis into the next. As it currently stands, with no steps taken to ensure the money they are lending goes to workers, the treasury and fed are only reinforcing the inequities between workers and wall street, between black and brown americans and white americans. Toy have said Congress Needs do more to help state and local governments, put money directly in peoples pockets and i agree. Democrats have a plan to get help directly to the workers, but Mitch Mcconnell is in no rush to help people. He said he sees no urgency, his words, no urgency. To Administration Want pretend like we are not in the middle of a pandemic and economic recession. They want to force people back to work without protection, at the same low wages, while they from liability if any of their workers get sick. We one people to go back to work , of course, but they want us to return to business as usual. We no what that means know what that means, Government Intervention to put their thumb on the scale for wealthy shareholders and the free market for everybody else. We cannot return to that business as usual. The economy and justice are not separate issues. The americans who protest across the country are demanding more from their government, they want an end to Police Violence that takes black lives with impunity, they want to know that their voices are heard. They want Economic Security and a safe place to live. They want a president who acts in the interest of his citizens, not his own. They want to have faith in their government. The fed and the government can restore that trust. It is clear the white house is not going to. We must take action now to support the workers who think this economy run, that means providing help for immediate needs, addressing systemic racism and economic injustice. If we fail to act, it will hurt many people and make things worse. The fed can make sure that companies at that get bailed out keep paying workers, and they stop buybacks and dividends on wall street. And actually adopt policies that combat inequality, rather than supercharge it. To fed cannot lead lend big businesses and leave workers behind, like we saw during the last crisis. We need to be better stewards of the economy. I thank you for your leadership. I urge you to redouble your efforts to make sure that you ended that thousands of talented men and women who work with you are dedicated to taking steps to ensure that the economy works for all americans. Thank you. Thank you. Chairman powell, your full testimony as part of the record. You now begin you may now begin. Mr. Powell thank you. Members of the committee, thank you for the opportunity to present the Monetary Policy report of the Federal Reserve. Our country continues to face a difficult and challenging time, as the pandemic is causing hardship in the United States and around the world. The coronavirus outbreak is first and foremost a Public Health crisis. The most important response has come from her health care workers. And on behalf of the Federal Reserve, i want to express our sincere gratitude to these dedicated individuals who put themselves at risk day after day, in service to others and our nation. Beginning in midmarch, Economic Activity fell at an unprecedented speed in response to the upper go the virus and measures to control its spread. Even after the unexpectedly positive me unemployment report, nearly 20 million jobs have been lost on net since february, and the Unemployment Rate has risen about 10 percentage point to 13. 3 . The decline in real gdp this quarter is likely to be the most severe on record. The burden of the downturn has not fallen equally on all americans, instead those least able to withstand the downturn have been affected most. As discussed in the june Monetary Policy report, low income households have experienced by far the sharpest unemployment, while job losses have been greater in women and minority groups and then and other groups. The downturn could further widen the caps in economic wellbeing. The long expansion has made the process in closing. Recently, some indicators have pointed to a stabilization. And in some areas a modest rebound in Economic Activity. Ezine of research and some commerce, and the extension of federal loans and grants, some businesses are opening up, while stimulus checks and Unemployment Benefits are supporting Household Incomes and spending. As a result, employment moved higher in may. That said, the levels of output and unemployment remained below their prepandemic levels, and significant uncertainty remains about the timing and recovery. Much of that uncertainty comes from uncertainty about the path of the disease and the effective measures to contain it. Until the public is confident that the disease is contained, a full recovery is unlikely. Moreover, the longer the downturn lasts, the greater the potential for longerterm damage from permanent job loss and business closures. Long periods of unemployment can erode skills and hurt future job opportunities. It can negate gains made by disadvantaged americans. And as described to us at our fed listen events. The pandemic is presenting risks to Small Businesses as discussed in the Monetary Policy report, page 24. Mediumsized business becomes insolvent because the economy recovers too slowly, we lose more than just that business. These businesses are the heart of our economy and often embodied the work of generations. A largek demand and price declines for goods and services, such as apparel, guest link mayor traveling hotels, Consumer Price inflation has dropped noticeably in recent months. But indicators of longerterm Inflation Expectations have remained steady. As output stabilizes, and recovery moves ahead, inflation should stabilize and move back up over time and closer to our symmetric 2 objective. Inflation is nonetheless likely to remain below our objective for some time. Response to this time is guided by our mandate to promote maximum employment and a stable prices for the american people, along with our responsibilities to promote stability in the Financial System. We are committed to using our full range of tools to support n thisonomy i challenging time. We lowered to zero in march, with the effects of Economic Activity, unemployment and inflation. And heightened risks to outflow. We expect to maintain Interest Rates at this level until we are confident the economy has weathered recent events and is on track to achieve maximum employment and price stability goals. We have also been taking broad and forceful actions to support the flow of credit in the economy. Since march, we have been purchasing sizable quantities of treasury securities and mortgagebacked securities in order to support the smooth functioning of these markets, which are vital to the flow of credit in the economy. As described in the Monetary Policy report, these purchases have helped restore literal Market Conditions and have fostered more accommodative financial conditions. As things have improved since march, we have gradually reduced pace of these purchases. The sustained is smooth market functioning has fostered the effect of Monetary Policy, for broader financial conditions we will increase our holdings and treasury securities and agencies over the coming months, at least at the current pace. We will closely monitor developments and are prepared to adjust plans to support our goals. Therovide stability to Financial System and to support the flow of credit to households, businesses and a and local governments, the fed, with the approval of the secretary of the treasury, establishes under. The report provides details on these facilities, which fall into broad categories the stabilizing of shortterm funding markets, and providing more direct support for creditors across the economy. T help stabilize shortterm funding markets, the fed set up a facility in the money market liquidity facility to help stem outflows from prime money market funds. The fed also established the primary dealer facility, which provides loans against collateral that immediate in the short term. To more directly support the credit to households, we established a number of facilities. To super the Small Business sector, we established the Paycheck Protection Program in order to bolster the effectiveness of the cares act. Our main Street Lending program, week,has launched this supports a lending to small and midsize businesses. Facilitybacked loan supports funding to businesses and consumers. To support employment and the stemming of investmentgrade businesses, we established two facilities. To help state and local governments, we set up Municipal Liquidity fund. The tools that we are using under section 13 are appropriately reserved for times of emergency. When this crisis is behind us, we will put them away. In the june report, we reviewed the implications of these tools for the feds Balance Sheet. Many of these facilities have been supported by funding from the cares act, and we will be disposing on a monthly basis the names and details of participants in each facility. And revenuesost for each facility. We embrace our responsibility to the american people, to via transparent as possible. And we appreciate the need for transparency is heightened when we are called upon to use our emergency powers. We recognize that our actions are only part of a broader Public Sector response. Ours is the passage of the cares act, enabling the fed into Treasury Department to establish many of the Lending Programs. The cares act and other legislation provide direct help to people, businesses and communities. This support could make a difference, not just in helping families into businesses in a time of need, but also in limiting longlasting damage to our economy. End by acknowledging the tragic events that have put a spotlight on Racial Injustice in this country. The fed serves the entire nation. W manyrate and are part of communities are across the country where americans are expressing themselves on issues of racial equality. Big for my colleagues throughout the system when i say, there is no place at the fed for racism and there should be no place for it in our society. Everybody deserves the opportunity to participate in our society and in our economy. We understand that our work touches communities, families and businesses across the nation, and everything we do is in service to our public mission. We are committed to using our full range of tools to support the economy and help ensure the recovery from this difficult period will be as robust as possible. Thank you. Thank you, chairman powell. Last week, the fed announced positive changes to increase access of the municipal facility and main street facility. And yesterday the Federal Reserve announced the main Street Lending program open for lender registration and requested feedback on loans for nonprofit organizations. Can you provide a timeline for when the main street facilities and municipal facility and a nonprofit loans will be fully operational . Mr. Powell sure. The municipal facility is up and operating. It is available to be approached by the eligible municipal entities. One andar, we have done we are open. So that facility is fully open. As you mentioned, the main street facility opened for lender registration yesterday. We expect that process to take a couple days. Whowe encourage lenders have completed that process to begin immediately making loans to eligible borrowers. We hope that will happen. And then i would say in a week or so, the liquidity facility itself will be available for or to purchase 95 interest in those loans. That is effectively up and running right now. In terms of nonprofits, what we did was we put out a proposal to include nonprofits in the main street facility. And we have asked for comment on it. There are two facilities in the nonprofit part of main street that have essentially the same for profit part, but the requirements are different and more tailored to the financial characteristics of nonprofits. The ratio of liquid assets to debt, the amount of liquidity on had, this distant six hand, and the statistics of the nonprofit. That is something we are looking forward to getting Public Feedback on. When we turn that around, it will take some time to get it right, but i expect it will move expeditiously over the next month. And i appreciate your attention to these. These are obviously very critical, and i hope to see them moving aggressively and as quickly as possible. I want to turn to the economy itself. On june 10, the fed released projections of the Federal Reserve Board Members and Federal Reserve board Bank President s under their individual assessments, the projected Monetary Policy. Most projections forecast of the Unemployment Rate falling to 10 later this year from a high of 14. 7 in april. Can you elaborate on your projections for what the Economic Outlook is right now and can you take into consideration whether there is a differential between the shortterm outlook versus the longerterm outlook, and how you approach this . Mr. Powell to me, it is helpful to think of it in three stages. The first was the shutdown. We have seen what that produces, very sharp declines in Economic Activity and large increases of unemployment. That was q2. We may be reaching a bottom on that now. After that, it is reasonable to expect, and all of this assumes the virus remains reasonably well under control into does not iterience an event where researches widely across the country. The second part will be the bounce back. You should see during that andod stores opening, people going back to work. W e are seeing the beginning we are seeing the beginning of that. We but expect to see large numbers of people coming back to work during the Second Period of the bounce back or beginning of recovery. Nk thate think and i thi if that will leave us short of where we were in february, phone fullyment wi employment with the economy working broadly across all areas. The reason for that is there are parts of the economy that will struggle to return to their old ways of activity because they involve getting people together closely and in large groups. It will take time to rebuild confidence and that kind of thing. Those are the three stages. Right now, we seem to be in the beginning, may be in the beginning of that second stage. I would say that this mornings retail sales number is more evident that, first of all, that the legislation you passed, the ppp and Unemployment Insurance and checks sent out, all of that is supporting demand in preopening and retail sales. We did have a positive report this morning. But i would say that the last thing i would say is it is all uncertain, but we appear to be entering that second stage of the economy reopening and businesses reopening. And in this spending increasing. My time is expired. Sen. Brown thank you, mr. Chairman. Thank you for those comments about racism, i appreciate that. I think we all do. A prominent black professor recently wrote a letter criticizing how most economists treat race in their models and assumptions. We provided that letter to you. Have you had a chance to read it . Mr. Powell i did. Sen. Brown thank you. Thethose watching, he makes point that many economic outcomes are the direct result of racism, yet we hear from other economists of the Racial Disparities in economic outcomes are explained by other factors, like education, but we know that black americans, even with the same levels or better levels of education as white peers, still make less money at the same jobs. Do you think he is correct that the u. S. Has failed to grapple with the fact that much of the economic inequality is a direct result of institutional racism . Mr. Powell let me say that is arofessor spriggs wellknown scholar that has built his career around issues of economic justice. He is somebody wellknown and widely liked and admired here at the Federal Reserve. We actually have a relationship with how rated university that we Howard University that we highly value. The economics discipline, like every other aspect of our society, has a troubled history when it comes to race and equality. His later, as i read it, because on the profession to examine whether systemic racism is reflected in the empirical work of economists. And particularly in stratification economics, which he refers to, a relatively new subfield that focuses on the failure of conventional economics to recognize and explain persistent racial inequality. That is what the letter is about. Ishink it thoughtprovoking and i would agree that there is work left to do, both in the economics profession on these issues and i hope that recent events are pushing all of us to try to do more. Sen. Brown thank you for that thoughtful response. You lead the most influential Economic Institution in the u. S. Would you commit to an openminded study of how the feds policies, with regard to Monetary Policy or the feds failure to regulate subprime lending and the various assumptions underlying our systems contribute to systematic racism, would you commit to a thoughtful and openminded note us . Tudy, doing that with mr. Powell i will take that away and talk about it with my colleagues and then come back to you. Before we commit to a big study, i want to carefully think about it. As you know, as an institution we are focused on inclusion and we try to we try to make that a very high principle for us here at the fed. We do consider Racial Disparities and things like that as a routine matter in our work now. Let me talk to my colleagues and come back to you on that. Sen. Brown one reason i voted for your confirmation for chair was that before you were chair, you are governor of the fed and you helped lead the way on dealing with issues of race. The fed has a long way to go, but think of her that. Let me talk about somebody else, the president of the atlanta fed. As you know, the first and amazingly still the only ever africanamerican Federal Reserve Bank President in the feds history of 10 decades. He recently stated that Many Americans endure the burden of exploitation of and abusive treatment by institutions of the country and he has called for the fed to renew social inequities and bring about a more inclusive economy. Would you say that the fed one of the institutions responsible for the unequal outcomes that black and Brown Workers face in this country . Mr. Powell let me say i recommend president bostics letter or a message he put on the atlanta website, it is really excellent and very well said. Are we responsible . You know, i was sort of answer it this way there is no doubt there is more all of us can do to address these issues. It feels like a time when people will be looking for ways to do more, and we will certainly be doing that. Sen. Brown have you talked to him about whether he wasnt suggesting the fed now, or and the fed in sometime, has been exploitive have you talk to him about this . Mr. Powell i have not. I did send an email thanking him for the letter. Sen. Brown you have said the fed can do better. What are you doing to make sure that the feds response does not make the existing inequality in the country even worse . Mr. Powell you know, we what we learned during the last a long expansion is a tight job bestt is probably the single thing that the fed can do to support gains by low income communities, particularly those heavily represented with these groups. So we saw in the last couple years before the coronavirus wereed that wage increases the largest for those at the lowend of the income spectrum. And we also met with many groups and people in low income communities, as part of our longstanding meetings we have with people, and what we heard is this is the best labor market we have seen in our lifetime. Do not change what you are doing, this is working. So we are highly motivated to get back to that. And everything that we are doing is to try to get the labor market back to where it was in february of 2020. We want to get back to a tight labor market. We learned that inflation did not move up noticeably at all with almost two years of unemployment between 3. 5 4 , and we learned that they were benefits to those communities, but also to the country because we are pulling people into the labor force. The Labor Force Participation was going up. That is what we can contribute, as well as other things we do. We try to model, as far as inclusion, those values. But we are very focused on maximum employment. Thank you. You,or shelby yes, thank chairman. Chairman powell . I would like to pick up on what was said earlier, the economy and how it is doing. And i think that you are spot on as far as a lot of this is predicated on how the coronavirus is contained, where it goes into so forth, because that is what is on peoples mines, but many people now want to go back to work. I see more activity. We have seen the jobs report. Do you see in your models or forecasted the next months jobs report being up, down or the same . Is there going to be progress, including the Third Quarter . Do you have the models on that . Mr. Powell yes, i would start by saying that there is a tremendous amount of volatility in the labor market. , justy will move around because it is a survey and it is difficult to conduct a survey when you cannot do it in person. Sen. Shelby absolutely. Mr. Powell the answer is, yes, i think that our expectation generally and expectation of that werecasters is will announce the unemployment decline and unemployment increase. That as a function of lifting the social distancing measures, the shutdown, and moving back into large parts of the economy to reopened businesses reopen businesses. That should result in a significant amount of job gains and increasing activity from where we were at the beginning, but it will leave us short of where we were. Sen. Shelby that is all predicated on containing the virus and it not coming back, correct . Mr. Powell yes, i think the public wants to have confidence to be able to return to these kind of activities. I think the return to investments can create that confidence. And it will be extremely high from an economic standpoint. Sen. Shelby i like what you have done at the fed. You have been there for a number of years. And you have been an investor in your past life and so forth. Does it bother you, as the fed chairman, to see the Balance Sheet has grown so fast . And i know that we have extraordinary times, we have to have extraordinary measures, but to deof the Balance Sheet as it is growing and will probably continue to grow, will be a thing for the future. And it will be a real challenge for somebody, is it not . Mr. Powell i do not think that the Balance Sheet presents any real threat to inflation or financial stability. Sen. Shelby currently. Mr. Powell currently. We do not want the Balance Sheet to be bigger than it needs to be to achieveo our job, maximum employment and price stability. The am not concerned about Balance Sheet and plans i see for a Going Forward at this point. Over time, i think what we did learn i was here for the last cycle of Balance Sheet, the last qe and decline in the Balance Sheet, and i think it is something that has to be taken carefully. It is not something we are thinking about now. What we are thinking about now is providing the accommodations of this economy needs for as long as it needs it. That is all we are think about. When the time comes, what we did from 2014 from 2014 to 2017, we froze the size of the Balance Sheet and as the economy grows, the Balance Sheet streaks shr inks. That is a passive way. And it does not cause a reaction in the market. There have been reactions when we try to actually shrink the size of the Balance Sheet. Sen. Shelby thank you. Mr. Powell thank you, senator. Thank you, mr. Chairman. Notthank, chairman powell, only for your testimony but for your innovative and i think very thoughtful leadership. And also for your personal integrity and decency. Thank you very much for that. If state and local governments cannot provide essential services, what impact will it have on the economy . And without Additional Resources of the federal government, how will they be able to provide adequate services . State and local governments provided a lot of Critical Services that people rely on daytoday, police, fire, public safety, all the things that they deal with, which is provided by state and local governments. They all have a balanced budget requirement, so what you see when revenues turn down and expenses turn up is layoffs. About 13 of the labor force, they are one of the largest employers, so it can weigh on the economy. If states are in tight financial straits, what happens is first of all they will cut essential services, then they will lay people off. All of that will weigh on them. That could be the biggest drag on the economy Going Forward, the states forged by their constitutions to contract, rced by theirfo constitutions to contract, literally. Mr. Powell it can be. It is pretty welldocumented it happened after the recession, that there was a drag. Andne of the other issues, a senator braun echoed this, is king at statistics, 40 of 14 of essential employees are africanamerican. Once again, we will see the situation institutionally, maybe not intentionally, but institutionally there is a significant portion of this distress that will be laid on the shoulders of africanamerican workers because they are the state workers and that will be laid off. Is that accurate . Mr. Powell i do not know the exact number, but it is certainly right. And we know from people who have lost their jobs so far in the private sector come from the Service Industry that has been affected by the coronavirus, and they are heavily lower income people, minorities over represented and women overrepresented. Let me turn to the report. It was encouraging, but did represent a turning of the corner that we are going to go for it . I think your previous comments suggest it is encouraging news, but Going Forward still significant unemployment figures will be confronting us for years, perhaps, is that accurate . Yes, it was definitely good news. Maybe the biggest a data surprise anybody can remember. People were looking at the claims data and other things. The larger context is Something Like close to 25 Million People have been displaced in the workforce, partially or through unemployment. So we have a long road to get those people back to work. It is a good thing that we are starting, we are starting earlier than we thought. It is a positive thing, but we have to acknowledge that it is a lot of people. And as i mentioned, there is a broad expectation that we will see big numbers of people coming back this summer. We hope it turns out to be right. But also that those people who work in the service industries, that will take longer to willer, they will be it be a lot of them and they will need they will still find it hard to get back to work as quickly as the others. One of my concerns in having during the recession of 2008, is Unemployment Rates will stay high. And our Unemployment Benefits will expire. , in fact what happens, as usual, in some parts of the country they will lag. So you will have very high Unemployment Rates. Youroint is, we need, in view, to have extended Unemployment Benefits much greater than the president allows. And also would it make sense to index of those benefits to a certain Unemployment Rate, so we do not find a certain states or areas that are well behind and they lose their benefits . Mr. Powell i see that they are going to be there is going to be a large number of people that will not be able to immediately go back to work at their old job, even in their own industry. There will be a group left over, even when we get the employment numbers up. Ad the details are entirely matter of fiscal policy. And there are a lot of interesting ideas being tossed around on how to do that. But i do think that they will be hardpressed to find work. And they will need support. They will have Unemployment Insurance, but that is something i would be looking at, what kind of support will they need. Some of them will need to find more paths or new paths through the economy, are there ways to help them do that . Thank you. Y good morning, chairman powell. Thanks for joining us. I want to stress how encouraging the recent Economic Data has been. Actually, for a while now. We had a tremendous increase in personal income in the month of april, which is not terribly surprising, but the may employment number was very encouraging and surprising. Retail sales today was really good news. I am not suggesting we are out of the woods, but the anecdotal evidence has been encouraging. I would remind my colleagues that there is no such thing as a free lunch. Severalave authorized trillion dollars of Government Spending in a variety of ways and much of it has not been spent, so i think we should be very careful in evaluating what is necessary before we go forward. I want to talk about Corporate Bond buying, because when we put together the cares act, the concept of funding so they could buy Corporate Bonds, whether through etfs or a new index or directly, there are always two reasons for having this capacity. One was to ensure the smooth functioning of the markets. For that, the existence of these programs has been remarkably successful. We have seen record volumes of corporate debt issuance. Clearly the Corporate Bond market is functioning and functioning very well. The second possibility was to provide liquidity to a company that is fundamentally solvent, but facing a serious liquidity problem because of the nature of the moment. It seems to me that continuing broadbased corporate buying of bonds now, including setting so,et a new index for doing doesnt serve either of those purposes. Those needs are being met. And i worry that it starts to look like fiscal policy, or it starts to look a lot like the goal is to lower spreads, despite the fact that nominal rates are incredibly low. And it certainly seems to me that this kind of activity at a time when the markets already functioning smoothly, and we are not addressing individual borrower needs, we run the risk we diminish price signals that we get from the Corporate Bond market, which can be extremely important in enabling us to detect problems. So i am wondering why we need to be continuing a broadbased Corporate Bond buying program now. And what is the exit strategy on this . Mr. Powell i certainly hope it does not have the negative effects you mentioned. This is something we said we would do at the beginning. And you pointed out that the markets reacted strongly to the announcement. Believebecause they what we said we are going to do. One reason is we feel like we need to follow through and do what we said we were going to do. Sen. Toomey on that, my impression had always been it was a contention thing. That this would be there as needed and used as needed, but if not needed it is not clear to me that you have to use it anyway to show that youre using to willing to use it. I do not think anybody doubts your willingness to use it. Mr. Powell we are not actually increasing the dollar volume of things we are buying, we are shifting away from etfs toward the other index. s, it look at that faq will really depend on the level of market function. If market function continues to improve, we are happy to slow or stop the purchases. If it goes the other way, we will increase. Sen. Toomey is there a problem with the market functioning now . Mr. Powell market function has improved really substantially, that is why you see little demand. So far, no demand at the primary market. We originally thought that is where the demand would show up. So, again, it was out of an excess of caution to preserve these gains by following through. I do not see us as wanting to run through the bond market like an elephant, doing things and snuffing out price signals. We want to be there if things turn bad in the economy or if things go in a negative direction. We want to make sure that we are there. Also, with the etfs, remember it is a small part of the market. The bonds give us a better purchase, should we need it. We do not need it now. Sen. Toomey that is my real point my get the argument of creating a broader index, but it is not clear to me that that needs to be intervening actively in the Corporate Bond market right now. Let me move on. Last week, my understanding is you suggested the fed might be considering whether to adopt yie ld targets, which really means ield caps. I am very concerned about that. First of all, but the idea about manipulating treasury yields to keep them lower involves a lot of potential problems. It is clearly picking borrowers over lenders. It creates problems for Pension Funds and insurance funds, it distorts prices signaling. And i do not know how you get out of that. Do you have more thoughts on the idea of establishing yielded targets on the Treasury Curve . Mr. Powell sure. This is something that we have never done. Actually, that is not true, we did after world war ii. We have not done it in the modern era. A couple Central Banks, the bank of australia into the big of japan have done it. It is a tool that they have chosen to use. But we did at the last meeting was just brief people on the d how it works,and th so that people understand the technology and that sort of thing. We have made no decision to go forward on it, as you have seen some of my colleagues have given speeches lately, raising questions about it. So the sense of it is is if the market, if rates were to move up a lot and for whatever reason, and we wanted to keep them low to keep Monetary Policy accommodative, we might think about using it on some part of the curve, not the whole curve. It is not a decision we have made, it is in early stages and we are evaluating. Sen. Toomey thinking. You. Ank ofator the deaths and others have galvanized people to stand up in march against injustice and inequality that has plagued our country since its founding. Minority communities have suffered systemic racial, social and economic indignity, also being disproportionately impacted by the other crisis gripping our nation, which is the covid19 pandemic. Will there be a longterm, negative Economic Impact if 40 of black owned a businesses permanently shut their doors as a result of the pandemic . Mr. Powell well, Small Businesses are under a lot of pressure. The answer would become a yes, certainly. Those are important businesses. Will there be a longterm Economic Impact if 44 of black households and 41 of latino households are unable to make their next rent payment and already evicted . Mr. Powell evictions and foreclosures, things like that can be very bad, not just for the individuals involved, but they are very bad for the individuals, but also they can weigh on Economic Activity as well. Will there be a longterm negative Economic Impact if africanamerican and hispanic families wealth, which is currently eight to 10 times smaller than the medium net worth of white families, is further depleted . Mr. Powell i would say there would. Considering the longterm Economic Impacts of the Racial Disparities exacerbated by covid19s pandemic, what are the consequences of Congress Failing to account for these Racial Disparities in the next covid19 relief bill . With the economy be better off if Congress Took action to mitigate these inequalities with public relief legislation . Mr. Powell senator, i would say that fiscal policy is really for you. And i do think that what you have done so far has been by far the largest of any fiscal response. And i think you are starting to see that in some of the economic numbers we are seeing. Ismy point i am driving at we cannot ignore the reality that when one segment of our society, africanamericans and hispanics, disproportionately affected by covid19, disproportionately affected in income and their business potential closures, you cannot have that whole segment of the economy ultimately doing so worse then everybody else, and believe the economy will do well when you look at the population that they have. It certainly cries out for all of us, for the fed, congress, to being dealing with these realities. Not just in terms of justice, but in terms of the National Interest as well. Let me turn to another question. As our country navigates this economic crisis that flows from the pandemic, and hopefully remember the lessons we have learned that have been passed down. What we learned in the Great Recession is cuts to the state and local sectors delay economic recovery and are completely preventable if congress provides relief. Isnt it true that according to the inflation adjusted data, state and local Investments Continue to fall for a full five years after the recession officially ended . Mr. Powell i do not know the number, but i would not doubt it. Sen. Menendez i looked it up. I and commended to you. Isnt it also true that state and local austerity adopted after the Great Recession was a drag on Economic Growth for 23 out of 20 six quarters between 20082014, and that without the austerity gdp would have been roughly 3. 5 larger by the end of 2015 . Mr. Powell i know the finding, i cannot know those numbers. I will take your word for it. Sen. Menendez i commend it to you. Send me back an answer in writing, i would appreciate it. Didnt state and local governments cut more than 750,000 jobs after the Great Recession . Mr. Powell yes, and they did not hire they did not do much hiring for quite a long time. Sen. Menendez that is exactly where we are at now. Given the current budget predictions, far worse than even during the Great Recession, isnt it fair to say that unless congress provides federal assistance to state and local governments to stem the shortfalls and that it will be significantly worse than during the Great Recession . Mr. Powell i think there already a million layoffs at state and local. Sen. Menendez there have been listed a million so far. Moodys analytics says you need the 500 billion that sender cassidy, and other colleagues, have recommended for state and local governments. The absence of any type of assistance means 6 million to 8 million more Public Service jobs, and it would be the irony that those who need the most wil, the firefighters, the health professionals, will be the ones that would lose their jobs. I hope the congress does respond. Thank you very much. Sen. Cotton thank you for joining us today. Lastoke a couple times month about giving more Companies Access to the feds primary Market Facility, allowing the fed to part cash to to purchase. He fed it is expensive to get in as an issuer by one of the public firms like s p and moodys, but at the moment only companies that can afford that extensive, sometimes cumbersome process can access the primary Market Facility or indirectly access the second Market Facility, but there are Many Companies that issue Investment Grade debt that purchasedated b, and without sacrificing the quality. May, when we spoke about this issue, you said we were working on this issue. When will the fed allow issued debt to be bought using this Credit Facilities . Mr. Powell we did open up the ratings to three additional firms that had significant business and particular sectors. It is not just the three majors. It is three others that are considered majors for some purposes. Weve considered that does leave some companies that dont have a rating. As we have opened these facilities they are just in the process of opening they are, we are looking for an answer there. Sro and has not traditionally been used in this way. We are looking at options for what to do. I wish i could tell you we had an answer yet, but we are working. Sen. Cotton so you have not opened it yet, but you have not foreclosed trying to find some solution for this challenge. Mr. Powell we cotton any timeu would put on that . Mr. Powell we actually talked about yesterday, so we are working on it. I think soon, lets say. Sen. Cotton i just want to stress again that companies have very strong Balance Sheets and employ tens of thousands of all of our states, who for one reason or another choose not to go to a public rating agency, but are in many ways in the same position as a publicly traded company who would use these facilities. And i really hope that the treasury can find a way to treat everyone in the inequitable fashion and protect as many of those jobs as possible as we try to open up our economy and get back to something more like normal. Mr. Chairman, i think i will yield back the balance of my time now, because i know we have a lot of people in the queue for questions. Tester thank you, senator crapo, Ranking Member brown. Atppreciate your steady hand the wheel, mr. Chairman. We are at 13. 3 . I believe that is correct. Refresh my memory. At the peak of the Great Recession, when folks were bouncing off the walls around here because the total worldwide financial financial, potentially, we were at 10. 6 , right . Mr. Powell Something Like that. It was in the tens. Tester if you consider that the lower wage workers are the ones who are severely hit i think you pointed it out in your testimony. And since we have got a lot of poverty in Rural America, could you give me a quick assessment that that that is working in the areas it is needed. It is needed across the country. 13. 3 might be very conservative. You know that. With the employee the economy where it is that, it is needed everywhere. But are we getting this to Rural America . I like to think we are, first through our support of the Paycheck Protection Program, through the Paycheck Protection Program liquidity facility. We have made that easier for small banks to use, because they can then transfer their ownership interest in the loan fully to our facility and it is off their Balance Sheet. That gives them Balance Sheet capacity. It is gone. That should help. It should also have helped borrowers. Also, main street main street is for Larger Companies, and some of those will be in rural areas. Sen. Tester in particular, the ones that have really gotten trashed in my state are restaurants, bars, workout facilities, motels. Are we able to focus this money in any way to, say, the Hospitality Industry . That is what they are. To really make sure the money is going there those folks are really in tough shape. I mean tougher shape than in agriculture, i can claim i have had trouble, that it has been nothing compared to the folks in the hospitality business. Mr. Powell that is true across the country. If the business has 500 employees, they would have been eligible for the ppe program. Ppp program. There is no money left in that. Our program, anybody who is eligible can borrow. In terms of rural eligibility, were looking back to your financials, the way they were prepandemic. We are looking at 2019 financials. Sen. Tester is there a way to do oversight to make a determination that the people who have been impacted get the money . I have been told by several businesses, the money is there. I have not been impacted by covid, but it is their free. I am going to go get it. Mr. Powell it is interesting. We have not made any main street loans. Were just starting to do that. We will look at what the loans are. We have not made the investmentgrade loans either, because the market opened up wide open, and lots and lots of companies borrowed, including the ones who had become socalled fallen angels, and dropped below Investment Grade. Sen. Tester . Me approacher let something else. I know you dont concern yourself with debt as much in times of economic slowdowns, as we are in today. Especially one as significant as this. But when obama left office, the debt was 19. 9 trillion. 3. 5 years later, in the trump administration, we are over 26 trillion. Can you tell me, and you will be able to forecast this out bit can you tell me what that debts impact is going to be on inflation and unemployment, moving forward . Mr. Powell its hard to say very specifically what it would be, but the United States federal budget has been on an unsustainable path for years now. That just means the debt is through is growing faster than the economy. Debt to gdp is rising. That is by definition unsustainable. What really happens is over time , future generations our kids and grandkids there will be spending their tax dollars will go to servicing debt that we incurred to buy the stuff we wanted when we were in charge, or when we were adults in america. Every generation is entitled to spend what it wants to spend on the things it thinks it needs, but it really ought to pay for them in some sense, other than passing the bills onto the kids, just in very simple terms. The longer run issue is one of generational equity. The u. S. Has a lot of fiscal and borrowing power. We are the worlds reserve currency. We have the best economy, the most vibrant economy, the best institutions, so we can borrow a lot. But i think we need to get back on a sustainable path. I will close up by saying that the time to work on that is when the economy is strong, unemployment is low, there is growth. That is when you want to work on that. Those concerns are always going to be there, but i would not prioritize them at a time like this, when the spending is what it is doing is it is giving us a better economy Going Forward, which could really help service the debt. Sen. Tester i agree with you. It is just a statement. We should have been prioritizing that before the economy collapsed, i can 2017, 2018, 2019. Thank you, mr. Powell. Good morning, mr. Chairman. I want to go back a little bit. Wroter in the pandemic, i a letter with senator warner to the treasury, regarding mortgage forbearance and the quiddity. There were concerns for mortgage servicers. Thank fully, the uptake on the forbearance programs has been modest. There is still some concern about an increase in mortgage forbearance. And a need for the fed to establish a liquidity facility for Mortgage Services if Economic Growth stagnates in the coming months. My question is, do you foresee the need for a liquidity facility in the near term . And what kind of warning signs would you be looking out for to indicate that need, if you have an interest . Mr. Powell the housing regulators and the treasury really have the lead on that. We were worried. I would say we were more worried a couple months ago that stress is building up, just as you described, then we are now. The stresses have moved down a little bit. Of course, we will be monitoring that carefully. As of right now, it does not look like there is a need for such a facility. Thank you. The fed has said that results the seeker review and the stress tests will be released on june 25. Considering the importance of understanding how the fed views the response of the banks to the covid19 pandemic, this is a highly anticipated you know, this is when we are looking forward to. I think there is some anticipation with releasing that information. We have also been closely tracking the fed integration of stress test results with nonstress Capital Requirements in the capital buffer. I question is, can you tell us more about what the fed will be releasing on the 25th, and whether or not that will include a disclosure of the feds covid analysis and stretched capital buffer stress capital buffer requirements . I believe it will. We are in the process. That is nine days away. We are just working on it. Rounds after the release on the 25th, what comes next . Will banks have to resubmit capital plans or conduct additional stress tests . Is that the anticipated response you are looking at, or have you gotten that for yet . Mr. Powell again, were making that announcement on the 25th, and it is something we are actively of course, nine days before that, we are actively engaged in considering those issues right now. [laughter] sen. Rounds ok. Let me run along a little bit different route, mr. Chairman. Given the length of time that we will be in a low Interest Rate environment, i think it is worth it to the federal government to consider issuing some longduration bombs with maturities that are beyond the 10 or 30 years that is typical for today. In the past two years, u. K. , canada, and italy have sold 50 year bonds, and austria, belgium, and ireland have sold sovereign bonds with hundred year maturities. Is this something the u. S. Should consider, and with the fed consider buying ultra long treasuries . Mr. Powell that is an issue that is squarely in the province of the treasury secretary and his colleagues at the Treasury Department. And as you know, secretary atchin looked very carefully longer and longer maturities earlier in this administration. So it is not something the fed really plays a role in deciding. Sen. Rounds very good. Thank you, mr. Chairman. I yield back. Crapo senator warner . Sen. Warner thank you, mr. Chairman. It is good to see you, chair powell. I dont know if you saw, but former chairman ben bernanke of the fed and another 100 economists wrote the congressional leadership today, released a letter, pointing out the need for stimulus. We have a 16 trillion hole in our economy that needs to be dealt with. Mr. Bernankes letter also pointed out how enormous leave crisis hase covid19 been to communities of color. I think we saw that as well. We all saw it in the may unemployment numbers. Theou well know, unemployment numbers of black Americans Still went up. I think there is a common point of evidence that the Great Recession indicates that a prolonged economic downturn will seriously damage opportunity and wealth accumulation for all americans, but particularly for families of color, a subject you and i have talked about, chairman powell, a number of times the important resource that minority institutions provide, and that they provide theseerm investments in neighborhoods. At mbis and cfi s, many are held back from investment because lack of access to liquidity, and operational limitations. Would you agree, mr. Chairman, that building capacity at these institutions could provide a significant response to the downturn by boosting access to small,for many of these minorityowned businesses, that otherwise, i think, by third or fourth quarter, are going to be in top shape . Mr. Powell as you suggest, i mbis arecdfis and very important in their communities. We have strong relationships with those institutions, and we do what we can to foster their physical conduct of their business. We are heavily engaged with cfi mbis. s and warner if we could be creative in this moment and provide proper resources, they could not only be an important component of fighting the economic inequality that i appreciate you making your comments about racism at the end of your opening comments, but also about seeing the kind of economic renewal that we so desperately need in this part of america. I have been working on a proposal with seto colleagues tt would provide direct private and public money into cdfis and mbis, as part of a longterm strategy to rebuild the communities and foster Economic Growth. The direct equity infusions we are talking about would be more of a treasurydirected investment. A are also looking at acility that would have federal not to have loans forgiven, but a facility where there would be investments from treasury, retention of some of butobligation at maturity, helping to clean up the Balance Sheets of some of these entities. That would dramatically increase we doity, which if equity and clean up the Balance Sheet, i think there would be enormous value here. I think this is completely consistent with the feds mission to achieve maximum, stable employment. That maximum stable employment is obviously a mandate that extends to all communities. Many of my colleagues and you have acknowledged the persistent economic disparities we have in our country. This has to be dealt with. Thee were protests on street about criminal justice. But they are also about longterm, chronic economic disparities. I would ask you, mr. Chairman, if we rollout this plan, that you and the fed, within the bounds of your authority, would really lean in, stretch, expand the envelope a little bit. I think we really have an opportunity and an obligation to make sure that these institutions are better able to be part of our economy. If you could make a quick comment on that, i would appreciate it. Mr. Powell i would be happy to. As you know, as we have discussed on other occasions, 13 three facilities are supposed to be programs of brought eligibility. We dont tend to target particular beneficiaries, but brought institutions. Anyone who meets the requirements can take part in the facility. But subject to that, i am very happy to take a look at this idea. Sen. Warner i know my time is up. I would just point out when we have 40 of americans who are making less than 40,000 a year out of work, disproportionately in lmi communities, i think that is a broadbased community broadbased problem country has to address. Senator purdue . Is senator purdue with us . We will move on until he gets back. Senator tillis . Tillis thank you, mr. Chairman. Can you hear me . Yes. Crapo sen. Tillis thank you, chairman powell, for being here. I just heard an echo. I think i have corrected it. I am kind of curious. Now that vice chair coral vice chair quarrels they while beck talked about adding ccarts to see car stress testing. Im sure that is partially a national a Natural Evolution of what you see is working and not working. I heard recently they are going to add another layer focused on the circumstances we find ourselves with with covid19. That i haveoncerns with that is, number one, i think the Banking Institutions with about twice as much capital as they had after the financial crisis we could arrive at a point, with the results of the stress tests, where we are actually going to increase their Capital Requirements. That seems to me to be at odds with us relying on the banks to get out there and help families and businesses, provide capital and support financial intermediation. So part of what im asking is, if we are going down this path, are we working with the banks to really think through the costbenefit of this particular additional regimen added to the stress testing . Are we potentially at risk of increasing Capitol Rotunda Capital Requirements at the worst possible time . Haveowell senator, as i mentioned, we are just in the middle of making those decisions and carefully reviewing all the materials. So im just point to have to say i hear you. I hear your comment loud and clear. Probably probably a discussion for us to have after the announcement on the 25th. As we mentioned publicly, we are doing sensitivity analyses, which seems like the right thing to do. You are also right that we are capitaling to have our requirements be procyclical. In terms of the actual results of the test and things like that, and what we are doing, i think i should just leave it at that. Sen. Tillis on margin, i understand the regulators are on board. Do we have any idea of when we could expect action on that . I have been expecting it i understand that it is imminent. Do you have any read on when we are going to see that . Mr. Powell soon, but that is all we know soon. I wish i could be more specific, but that is all i know, is soon. Sen. Tillis i know it cuts across several lanes, but it has been soon since september of last year. I hope it is getting to be sooner. I have a question. And thank you, i know you agree. I think it was last week, mr. Chairman, that you said the fomc is not even thinking about raising rates. I think you went on to say that they are likely to stay at zero between now through 2022. It feels like Forward Guidance that policy is anchored in the calendar rather than fomc goals. Im curious. I think it was in that setting that you did not make any mention of yield curve control, and i wasurious, was that just not right for that particular discussion . Or do you believe there is not a place for yield curve control in this dialogue . Mr. Powell i did say we are not only not thinking about raising rates, but we are not thinking about not thinking about raising rates. That is what i said. I did not mention the end of 2022 read what that came out of was a summary of Economic Projections showed that overwhelmingly, Committee Members did not see the likelihood, under the current expected path of raising rates, at least through the end of 22. I talked about yield curve control in the press conference, but i would just echo what i said earlier to senator to me. This was a briefing on the historical use of yield curve control but that it actually, during world war ii and then after, to lead the fed treasury accord, and also on some current usage by the bank of japan and the reserve bank of australia, really just to acquaint the committee with what it is and why some other Central Banks have used it. We have not made any decision to go forward on that. , thest was it is a tool same way we have looked at negative rates. Repeatedly, we look at negative rates. In the case of negative rates, we have pretty much decided that that is not something we think is attractive for us here in the United States. Yield curve control was more lets educate on what it is, and decide whether we think it might, under some circumstances, be useful. Sen. Tillis mr. Chair, the only thing, im going to submit maybe a question for the record about what financial policy we should be pursuing for what i consider to be the doughnut hole travel, leisure, hotels that were first into the crisis. They are going to be the last out. I dont believe the treasury has the authority that it needs to come up with a facility for them, but i think it is critically important. Thank you, chairman powell. Thank you, joe crapo. Sen. Crapo thank you. Senator warren . Sen. Warren thank you, mr. Chairman, and thank you chairman powell, for being with us today. We are facing an economic crisis that has devastated millions of families and Small Businesses across this country. Two weeks ago, many people celebrated the latest job numbers, which showed a dip in the overall Unemployment Rate. But we are not going to be able to build a successful recovery if we dont understand the scope of the problem. So i wanted to dig into the numbers just a little bit today. Chairman powell, our jobs coming back at the same rate for both black and white americans . Backowell are they coming at the same rate . No, actually. I think the answer to that is no. I want to check that, but i believe that the black Unemployment Rate did not come down as much as a white Unemployment Rate. I was going to say, as i understand it, white unemployment fell to 12. 4 , while black unemployment actually rose to 16. 8 . Is that right, mr. Chairman . Have known i would those numbers the day after report, but yes. Up slightly it went for black americans. Some people in Congress Want to let the help expire. They are saying, mission accomplished. Mr. Chairman, you notice the Unemployment Rate is higher for black americans, and we have just said it is actually increasing. If congress let Unemployment Insurance benefits expire, which families are going to find it hardest to pay the bills, to make rent, or to afford groceries . Mr. Powell well, the unemployed. People who lost their jobs lately here, minorities are well overrepresented in that group, as are women. This crisis has been hard on millions and millions of americans, and i know you have been thinking a lot about thisk you directly s it accurate to say that our economy is healthy when there are serious racial gaps in how americans are doing . Mr. Powell i think that is a longer run weakness in our economy. Even when our economy is healthy, we have longer run issues, and that is one that has been with us for a very long time. Sen. Warren i think you would describe this is not a healthy economy. Mr. Powell that is not a healthy feature of our economy, now or ever. Sen. Warren thank you, mr. Chairman. I appreciate your focusing on this issue. This crisis has hit communities of color the hardest. They have faced the biggest decline in employment, and they have faced the largest proportion of deaths from covid19. Recoveringjob start for white americans, we cant just say that the problem is fixed, and start cutting off help for people who are out of work. Senate republicans are eager to let thisre eager to help expire, but we still have more than 20 Million People out of work, and the Unemployment Rate is going up for black americans. Inequality is not something that happens on its own. It is the result of policy choices. Who we decide to help, and who is paying, matters. Fungus can help those who need it most by reauthorizing expanded unemployment, and by doing it now. You very much, mr. Chairman. I appreciate your being here today. Sen. Crapo thank you. Senator mcsally . Sen. Mcsally thanks for your testimony today. I would like to talk about real estate. Back in arizona, we are seeing the economy is starting to recover somewhat, but there is concern for businesses in every sector, with revenues down, rinse not being paid, and mortgages not being paid. This really crosses many sectors. In the 2008 crisis, arizona really was hurt deeply in this area. Monitoringncerned, what is happening in the sector. Ins real estate pretty much goes across many industries, you mentioned you were monitoring this, but you are not as concerned as before. Could you elaborate on that, and is there any discussion or consideration about a real estatefocused facility in order to be able to help out in this area . That,well i would say like other companies, real estaterelated companies are eligible to take part in our facilities. I would point to the i would also point to the fact that commercial mortgagebacked securities are eligible assets for the firm asset loan facility. Facilities tose companies any company from any industry that meets the financial requirements of the facility and is otherwise eligible can take part. We dont target facilities toward individual industries so much. Sen. Mcsally but you mentioned earlier, i think, in response to senator rounds, that you were kind of monitoring this element of the economy, and you had concerns a few months ago, but list concerns now. Could you elaborate more on that . Mr. Powell i was talking about Residential Mortgages there. Mortgage servicers forbearance happened in the cares act, and the mortgage servicers were looking at very large the quiddity requirements. The question was, are they going to be able to address that problem . So steps were taken by the housing regulators, and then there was a heavy wave of refinancing with lower mortgage rates. Those concerns that we had a couple of months ago have sort of been alleviated a little bit. I would say we are still monitoring the situation carefully. That is very much about residential mortgagebacked securities. Mcsally thank you. Follow followup on what senator tillis touched on at the very end, in arizona, lodging, tourism has really been hit hard by this, and really concerned about their slow recovery. What are you seeing in this sector, with unemployment and Consumer Spending . Is there anything within your agencys authority to help this, or are you going to go back to the overall facilities for anything . This is a specific sector that has been hit hard, the lack of tourism and travel. Mr. Powell very hard. It is airlines, hotels, any business that depends on getting people together in tight groups and either feeding them or flying them around or putting them in rooms, and things like that. All of those companies bars, restaurants, retail are all really feeling this. There is no question about it. Either way, a lot of the layoffs are in the Service Industry companies. What we have done is we have created these facilities, and they look back to the Financial Performance of the potential borrower before the pandemic. So if you were in reasonable financial shape before the pandemic, in principle, you can be an eligible borrower. We are not went to look at what happened to you because of the pandemic. That is really how we have approached this. Sen. Mcsally thank you. On page six of the Monetary Policy report, there is a graph that shows unclaimed rates among several demographics, including africanamerican, hispanic, white, asian. We have 22 native american tribes in arizona that have been in many cases very hard hit the pandemic. About 300,000 individuals. Its a pretty significant percent of arizona. Is your Agency Tracking any data specifically on native americans . If so, what are you finding . If not, will you commit to helping with this Important Community that needs help right now as well . We do keep very good track of that. In particular, the Federal Reserve bank of minneapolis has a specialty in that area. We will be happy to work with you on that. Dont havehing i the numbers on the tip of my tongue, but it is very much a focus of ours. Sen. Mcsally . Sen. Mcsally great, thank you. To wrap up, what is your level of optimism . Arizonans are struggling. Theyre getting back to work. We are still having to manage this pandemic. What is your level of optimism of the recovery, Going Forward . Sellowell long run, dont the u. S. Economy short. Long run, im confident that we will have a full recovery. Im confident of that. I think that the fact is we have had the largest economic shock in living memory, and the economy is going to recover from that, but we have to be patient with it. You will see people moving back. I think over the coming months, a lot of people will come back to work. But there will be a significant number of people who dont go back to work because they are in those industries we talked about, and that is where there will be less employment. This people are going to need help Going Forward to get back to work. But over time, we will get back. I just think, as most forecasters believe, it is going to take some time to get all the way back to where we were. When we get there . Absolutely. Sen. Scott thank you, chairman crapo, and thank you chairman powell, for all the work you are doing. I want to go back to the letter that senator warner referred to from chairman ben bernanke and janet yellen, and many other economists, that says that the fiscal stimulus from congress, the next stimulus, must be large, commencement with the nearly 16 trillion nominal outcome output gap or economy faces over the next decade, due to cbo estimates. Without asking you to commit to a dollar amount, let me frame the question this way. Is there a bigger risk for our economy that we provide too little support, or that we do too much . Mr. Powell i saw the headline. I have not seen the letter. I dont know what is in the letter that former chair bernanke he brought. Received the economy is the largest in federal in living memory. The fed response was the largest response. 3 trillion in these programs, it is a great deal. It is a question we will all have to answer over time is it enough . There is a reasonable probability that more will be needed, both from you and the fed. The things you have already passed are having a positive effect now. We should see a lot more of that. Sen. Schatz in light of that, are you starting to reconsider is the fed starting to reconsider its understanding of the relationship between deficits, inflation, and growth . Are we reconsidering it . I dont think this is really changed thinking on that. The thing about inflation is there haseen been sort of downward pressure on inflation around the world for a couple of decades, and so the models would have called for with big deficits, they wouldve called for higher inflation. We would have called for higher Interest Rates. We dont see either of those things. I think we are not working on the hypothesis that higher inflation is a likely outcome. Of course, we know what to do if there is higher inflation, but really, at least in the near term, and as far as we can see, what we see is a short run in inflation. Schatz in your modeling, what assumptions are you making about covid rates over the next several months . At differente look scenarios. We look at a wide range of different scenarios. We model a scenario where there is a second wave. We model a scenario with a kind of baseline scenario, which is that, you know, essentially, covid rates come down over time, and there may be regional outbreaks, but we dont have a Second National wave. We look at different scenarios. Sen. Schatz can we drill down on that . We can take it offline and i will issue a quick question for the record. It seems to me that the data changes day by day, and one of the things you said in earlier testimony was that a lot depends on covid rates. I mean, we can tweak fiscal and Monetary Policy, but a lot of this does depend on what is happening with the virus, and i would like to understand what are your inputs, just as we consider our fiscal policy. Finally, i wrote you a letter, asking you to suspend dividends, and you said you were conducting Sensitivity Analysis of Current Conditions to decide whether to spend dividends. And i am wondering why you are conducting an analysis only of Current Conditions, and not testing whether banks can handle a serious adverse scenario Going Forward, since that is quite likely. Mr. Powell that is exactly what we are doing. That question is one that is at the heart of her stress testing, which is about future highly stressful scenarios. So that is precisely what we are in the middle of doing. Sen. Schatz and what is your timeframe for a decision on the suspension of dividends . Mr. Powell we will be announcing the results of the stress tests on june 25. Sen. Schatz thank you. Mr. Powell sen. Crapo is senaty back with us . Senator moran . Are you with us, senator moran . Senator cramer . Sen. Cramer mr. Chairman, thank you. Im happy to step in. Chairman powell, thank you for being with us today. You and i, in the past, have talked a couple of times about my concerns about having a central role in facilitating the Financial Support of businesses that are part of the cares act. Act is relevant to the energy industry, particularly the oil and gas industry of north dakota. An excessive be standard, to me, that they find, in terms of climate and whatnot. That is just one factor, and you and i have had a good discussion. You of course assured me of their limited role in all of that. However, in recent days or weeks, i have become even more concerned about that standard, their standard of climate investment, with a different standard for foreign investment, particularly Chinese Companies and companies that dont meet the same enforcement demands, that dont have the same accountabi a transparency, particularly with pc aob for public companies. It is an issue that caused senator mcsally and i to send a letter yesterday to Ceo Larry Fink to get a better understanding of their strategy as a company, in light of what appears to be, i think, a double standard in the way they treat the investment of Chinese Companies versus americans. In light ofnce blackrock appears to provide to Chinese Communist party as well is the radical environmentalist african investors, should i be concerned about their role in the cares act . Can you give me some assurances that this part of blackrock wont impact the publics funds and the Public Interest in keeping our particular oil and gas industry vibrant, and the Important National security that they provide . Mr. Powell senator, i would say there is no reason for you to be concerned. We play an administrative role. We set the policy decisions in our facilities and lend only to u. S. Companies. They are just our agent. They bring particular skills that we dont have, and that they do have. So that is really what this is about. Appreciate that assurance. Im sure they are listening as well. We have obviously a lot of work to do as well on our side, to make sure that we create a standard that protects americas investment in those same companies. I appreciate again your assurances. With that, i yield. Kennedy mr. Chairman, this is john kennedy. Im on now. Sen. Crapo we will go to senator van hollen next, and you will be after that. Senator van hollen . Is not on, then we will go masto and thenez to you, senator kennedy. Thank you forsto all of your good work. I appreciate your quick, fed tofulct by the respond to the covid19 pandemic that has, as we have seen, inflicted more than a million americans, and statewide more than 90,000 people. I agree with you that Congress Must at present continue to act. Our work is not done. We have to continue to invest in our businesses and local governments. Let me talk to you. Im from nevada. We have had this conversation before. Let me give you statistics i know are aware of because you do if it all the time. The travel industry, hospitality, restaurants, entertainment, has been one of the hardest hit. You have said that alreadytodayd this conversation. Nations seventh largest industry in terms of employment before this crisis. Nearly four in 10 of all job losses caused by this crisis have been in the travel industry. 8than 8 billion workers million workers are unemployed. It has twice the National Employment Unemployment Rate during the great depression. This is nine times worse than the Economic Impact following 9 11. Workforce 25 of our is employed in the hospitality and entertainment industry. We have had more than 400,000 people file for unemployment. We are at 28 unemployment. Nevada has the highest percentage of unemployment in the country. And the ability of people to go back to work travel spending is forecast to decline by half 1 trillion in 2020. Trillion in 2020. Is there anything the fed can do in its existing authority to help the travel, tourism, and hospitality sectors . What else could we be thinking about . We are going to be the last to come out and come back in this economy. Nevadaell so obviously is ground zero for this, with entertainment, travel, restaurants, bars, all the things many of them, anyway. What we can do, other than to support the economy in a general manner our facilities, that is the tool we have. Any Nevada Company that meets the debility requirement for our facilities is welcome to borrow. That is really the tool that we have. Because i like to say, we do lending, not spending. We can lend to solvent borrowers who can servicing loan, and the servicing requirements are not terribly strict. We look back to last years prepandemic financials to see if you are qualified. You will not be disqualified because companies have been affected by the pandemic. That is really what we have to offer. Sen. Cortez masto ive heard this before and i am curious can the Federal Reserve take a stake in a company to mitigate problems . Mr. Powell no, we cant do that. Sen. Cortez masto thank you, that helps clarify this. We know the job losses for the last two months. The National Governors association requested 500 billion in aid to state and local governments, to congress, requesting that aid. That, what levels of an implement with the fed predict . Have aell i dont projection, but all states effectively have balanced budget requirements, so what they do when they see revenues drop and costs rise, just what we are seeing now but they do is they lay people off. They cut essential services. And both of those things can weigh on Economic Activity, in addition to the human cost of those things. A role int play advising congress on specific fiscal policy. That i do think that state and local governments are major employers and provide essential services. That is certainly an area that is worthy of your interest. Masto know my time is running out. Read into the record with the fit consider making changes to , soliquidity facilities they would be able to provide more assistance to local governments . Mr. Powell you went out for a second. On the municipal facility, we have repeatedly made adjustments. A specificested adjustment, i missed it. Sen. Cortez masto can you turn it into a grant . Mr. Powell we cannot turn it into a grant. We can only lend. The law is clear on that. It is you who can do that, as you did with the ppp program. Sen. Cortez masto if Congress Went down that route, would you have concerns with that . Mr. Powell if Congress Wants to make grants, that is entirely congress. Sen. Crapo senator kennedy . You need to unmute, senator kennedy. There you go. We have got you. Kennedy mr. Chairman i apologizeirman for being late, but i was in another hearing. If these questions have been asked and answered, if you could just give me short answers, i would appreciate it. I dont want to belabor this. Sen. Kennedy when will the main Street Lending program be ready . Now forll it is open lenders to register. Once they are registered, they can start making loans, and we encourage them to do so. The facility will be, within a week or so, open to receive those loans. Sen. Kennedy in terms of demonstrating credit worthiness, have you made a decision about using rating agencies other than the big three or four . Mr. Powell we have, senator. We have looked carefully at all the rating agencies. We have added three additional ones, and the criterion really of that they have a record significant experience and age in the private sector, so that investors rely on them. The answer is there were three in different areas who had that. We added them. Sen. Kennedy have you made a decision about the minimum amount of the loan . We powell in main street, lowered it to 250,000. Yes, sir. And we are carrying that over into the nonprofit part. Sen. Kennedy i think that is a positive development. How big is the Federal Reserve Balance Sheet right now, mr. Chairman . Over 7ll just a touch trillion, i believe. Sen. Kennedy how big was it at the end of december . For trillionow dollars. Low 4 trillions. Sen. Kennedy how long would it take to reduce that to some amount that is not otherworldly . Mr. Powell [laughter] that is an interesting standard. I think when the time comes in the crisis is over, and we are not purchasing assets at this kind of pace, what we will do, probably that will be sometime out, but what we will do is what we did in 2014 to 2017. What really worked as we just stopped it. Refroze that side of the Balance Sheet. As the economy grows, the Balance Sheet shrinks as a percentage of the economy. That was a very peaceful period during which people were not worried about the size of the Balance Sheet, but it declined from 25 to 17 , Something Like that. That is some years away, that is probably the way we start. Sen. Kennedy i cannot see the clock. How much time do i have left . Sen. Crapo you have two minutes. Chairman, none. Of us can protect the future, of isrse, and our economy estimated to take a real hit this year, as you well know. The Intelligence Unit of the Economist Says we are going to have a ghis year of about 4 . But they are projecting that europe is going to be even worse. Theyre projecting about 9 for , iat britain, 9 for france think 6 for germany. If the european union, one of our biggest , takes muchners longer for themselves to recover . Mr. Powell a weak global economy, a weak european economy, will certainly weigh on u. S. Activity. There are a great area for exports and trade of all kinds, and also europeans come and spend money here on tourism a lot. Here in washington, we see that all the time. So yes, weakness around the globe actually does for the u. S. Economy. Ok, thank you, mr. Chairman. I want to yield back my time since i went way over at the last hearing. Sen. Crapo you are a gentleman and a scholar. Senator van hollen, are you here . How about senator jones . Sen. Jones thank you very much. And chairman powell, thank you again for being with us, and thank you for all your service and all that you and the fed have done over the last few months. It has been really extraordinary, and i want to echo my appreciation for your comments about the systemic racism that we see in america. Today on the floor, by the way, you may have some interest five of my colleagues, three republicans and three democrats, at 3 00 today, will be reading dr. Kings letter from a birmingham jail in its entirety. I believe its entirety. I believe its message of 1963 is as important today as it was then. And i know we have focused a lot on the data and how it has affected minorities in this country, particularly our black population. The latest data showing the black Unemployment Rate at just under 17 . The hispanic Unemployment Rate at almost 19 . The white Unemployment Rate 14 . Ing around bloomberg has reported africanamerican owned 41 ,esses declined by representing 440,000 businesses, a stark contrast to the 17 drop for white owners. Cnbc declared that we have a housing apocalypse coming before us. Does solegal Services Much for the poor and needy in alabama, particularly with housing. They have said the avalanche of evictions is here, and foreclosures are not far behind. I want to focus my questions really on our minority communities and underserved communities, instead of the overall economy. Do minoritye risk if Unemployment Benefits are not extended . Minorities are substantially overrepresented in the unemployed, particularly the unemployed since Something Like 25 Million People have had their employment disrupted as a consequence of the pandemic. In that group, minorities are very much overrepresented. All measures that dont help them make life tougher for them. Sen. Jones measures that keep people on the payroll i know this has been a concern for millions. Some transition where we can provide incentives to get back on payrolls, get back to work you would favor that, i assume. Mr. Powell we dont take a position on particular aspects of fiscal policy. I would say this. There is going to be a lot of people going back to work in coming months, but they will be a lot of people who cannot. For example, if they work in the travel and entertainment industry, there just are not going to be jobs. It is going to be a while. Support,ome form of people Going Forward, in my view, is likely to be appropriate. In the Great Recession, i think unemployment assistance was reauthorized on a number of occasions. Not only can they not go back to their old jobs, but there are no jobs in that industry. It is really tough for them, at least for a period of time, to give them support. And balance that with incentives to get back to work. A similar question with regard to minority communities, with regard to businesses. Minority Business Owners face enormous risk as it is, even before this pandemic started. The same question what are the Downside Risks for our minority businesses if overall business aid is not extended by congress . I think as i mentioned during my opening remarks, the Small Businesses of america, that is where the jobs are created, on net. Business people are going in and out of business all the time, but what you dont want is a wave of avoidable insolvency which will weigh on the economy for years. That is all the more so true of minority businesses. Because of the Important Role they play in our economy and in their communities. Sen. Jones again, focusing on minority communities, if renters and homeowners are not helped with extended eviction moratoriums, what effect will that have on our minority communities in america . Mr. Powell evictions and foreclosures and things like welldocumented negative impacts on peoples life. I think during a pandemic which is still ongoing, it is particularly important, because you wind up sleeping in somebody elses basement or in a shelter or something. Keep people in homes while the economy recovers and while the pandemic is dealt with. I think those are things well worth looking at. Sen. Jones thank you, chairman powell, and thank you, chairman crapo. Thank you, mr. Chairman, and chairman powell, thank you for being here again. And think you for your leadership. What the fed has done to provide liquidity has been absolutely historic and has helped us avoid a major meltdown. I have got a question simply the final point i would ask you about the Balance Sheet treasury debt has increased 2. 9 trillion the last three months, mostly due to the cares act. April, the treasury issued 1. 4 trillion of new debt. 430 billion dollars was absorbed by the domestic market only. The foreign market held pretty steady. The balance of that was taken up by the fed, as i understand it. I dont know how long we can do that. , with monetizing paceebt at this current mr. Powell that is certainly not our attention intention. The large amount of purchases in arch march and april were because the markets had stopped working, and the treasury market is the most important Financial Market in the world. The primary dealers in the banks Balance Sheets were full and they wanted shortterm cash or treasury options. It was a very difficult situation, so we went in and bought a lot it was not bought a lot. It was not about meeting treasurys supply. U. S. Treasury debt is an attractive asset around the world. There is a lot of demand for our paper, but it is a lot about market function. Theas a positive effect on market because it has positive effects and those are good too. Purdue if demand for that paper does not come back in the coming months, what is the longerterm implication for Interest Rates . If there was a tone about the impact, a correlation . Mr. Powell there seems to be plenty of demand for our paper. I do not want to speculate about what Interest Rates might do. Reservehe worlds currency and particularly in times of stretch stress people want to own u. S. Treasury obligations. It has been that way for a long time. Notwithstanding the last crisis, people wanted the last u. S. Treasurys because we have the most liquid markets. Purdue i have one more question and i will yield back. I have heard conversation about labor and all over my state, ours was one of the first to reopen, and one of the inhibitors to supplying the demand that i think is out there is getting people to come back into the workforce. The unemployment structure is creating a disincentive and i want sure want to make sure we protect the people who need protecting, but the people who need to come back to the jobs who are sitting there, in georgia we have a number of job openings going unfilled because people are not going back yet. Mr. Powell that is something you will be considering as the program runs out at the end of july. I wouldnt presume to tell you what the fed thinks you should do, because it is not our role. I think you will want to continue support for workers for some time. Million newly unemployed or partially employed people, and even if we start putting people back to work really fast, which may happen, there will be plenty of people who dont have jobs and may not for a while because there are no jobs in travel accommodation and various places. I know there is a lot of interesting ideas being thrown around, but i think something will likely wind up being appropriate. Purdue thank you, mr. Chairman. Senator smith. Sen. Smith thank you for being with us. We are more than three months into the economic crisis caused by coronavirus and more than two months from the passage of the cares act that provides Financial Support for families and Health Care Systems and businesses. As you acknowledged in your opening statement, covid is not the great equalizer. It is hardest on those who are already struggling because they do not have a safe, affordable wages,o live, low chronic poverty, and the generational impact on black and brown and indigenous people, the systemic racism that limits their freedom and opportunities and even their lives. I think in this moment it is essential that Congress Takes up the challenge and fulfills the promise of america for racial and economic justice. I wanted to talk with you a little bit about this, because i think there is a rising narrative we hear from some including the president , that things are improving and we need to reopen the economy and go back to normal. What i am so worried about is we are burying our head in the sand about the virus continuing spread, and looking away from the disparate intact dutch impact covid is impact covid is having, and if we do not change we will not get back to normal, we will get best back to a worse normal emphasizes these inequities. On the question of housing and rental companies in particular, because this is something i feel n minnesota, the star tribune analyzed what is happening with rent selection in the twin cities. It found that 95 of class a apartment buildings, the expensive ones where people who have a lot of money can live, 95 of them are making their payments, but only 88 of renters in the Affordable Apartment buildings are able to make their rent payments. We can see that if you have more money, we are seeing the impact of this on low income people. I think we are probably seeing the impact of extended Unemployment Insurance and health care to make that even higher. I know you dont want to comment on specific proposals, but what would be the impact on the housing market, especially the rental market, if congress doesnt provide some sort of longterm rental assistance people . What would be the impact of that, do you think . Mr. Powell i think if people, for example, get evicted or foreclosed upon or things like that, even their ability to get back into the labor market becomes challenged. Is afrom a human this moral issue and economic issue. At this particular time, because of the likelihood that we will have a Large Population of people who are not able to go back to their old jobs or even find a new job in their old industry, so those are things worth considering as you think about what to provide. Sen. Smith would you expect that this would put incredible , sometimes landlords publicprivate partnerships, because they lose their revenue stream to keep those buildings up and running, would you agree with that . Mr. Powell yes. You can see pressure on the ownership as well. Sen. Smith and would you see a stunning this is statistic from my home state, only 25 of black families in minnesota own their own home. The number is 76 of white families. Didd you agree that if we ,ee a surge of evictions forbearance expires, we dont take additional action, this ends up exacerbating the ration racial inequities we see . Mr. Powell yes, it went, and this pandemic, the way it hits our economy, the Service Economy particularly, has been a real inequality increaser for the reasons we discussed. People losing their jobs are for a large to a large extent, Service Employees with a low e and a High Percentage of that is who is bearing the brunt of this. Important thatis we continue the rental and eviction forbearance, and makes the case for the bill that senator brown and others of us are working on to provide 1 billion in emergency rental assistance so families do not have to lose their housing, making it so much more difficult for us to recover and exacerbating these fundamental and systemic inequities we see in our economy overall. Thank you, chair powell. Thank you. Senator moran. Appreciate that you are putting your intellect and expertise so diligently to work to improve our economy. Ppp concerned, i think worked pretty well for our smallest employers and it has been my hope that main Street Lending program will be a similar solution for Larger Companies in kansas. It doesnt really matter if you have lost your job whether you work for a company who employs 9000 people or 900, you are still out of a job, and we have a lot of work to do. Chairman, i am genuinely main street may see Lending Program not have a Material Impact in helping small and mediumsized businesses in kansas and across the country, and the result is a failure to recover quickly, continuing unemployment, but perhaps the result in which Larger Companies that have been able to raise cash in recent weeks will consolidate their market share at the expense of those smaller businesses that were unable to do so in the commercial market. So i have a lot of hope for the main Street Program and i need to be sure it accomplishes what it needs to accomplish, but the main Street Program is essentially saying it will stand by a Syndicate Partner for a fairly narrow class of credit agreements, but as far as i can tell, banks do not need help in syndicating profitable loans, and neither do they want any part of, even 5 , of unprofitable loans, so it appears there is little in the program to incentivize banks to originate new loans for customers, so i am nervous especially because if we have to make changes to it, the changes come so late, months from now, it will be too late for many of my constituent businesses who employ people in kansas. Can you give me your thoughts on my concerns and tried to reassure me that my concerns are unfounded . Mr. Powell sure. You do put your finger on some of the challenges with approaching the very broad diverse main street space, which has different appetites for credit. It is a heavily bankdominated financing sector of the economy, or series of sectors of the economy. That means bank credit agreements, which are individually negotiated, it is not like the bond market where there is standardization. We have no choice but to go through the banking system. We cant do Due Diligence on millions of companies. The banks do have incentives. They get to serve their customers a little better and get a generous origination fee, so we feel there is substantial interest on the part of bankers with this. It is also the case, as it was with other facilities, that the amount of Financial Stress overall in the aggregate there are companies that dont fit this is lower than it was in march and april. We realize there is still plenty of companies. The main street facility is now open. Lenders are registering and can make loans right away, and within a week or two those loans will be bought by the facility itself for 95 interest. The banks will be left with 5 and will get to keep their origination fee. We will know a lot more about the level of demand. It is not just joining an existing syndicate. We have a new loan facility, so we are open, we have three new facilities and we are opening one soon enough for nonprofits. As we have from the very beginning, we are very open to learning and adapting. We have made repeated changes to these facilities to make them better structured to achieve their goals and will continue to do that. Ran i appreciate your optimism and im reluctant to be the pessimist and i hope you are correct. Is there a plan b, or is something that would work out as we react to the markets and demand . Mr. Powell for all of these facilities, we will be watching. If we are hearing about companies for whom a loan is the right answer who do not for some reason qualify for the main street loan and should, then we will be adapting to that. We will certainly be adapting. Sen. Moran i cannot see the clock, so next time we need a bigger square for me to read. Be quick. Ebitda is a component of main Street Program. There will be industries and businesses in which that is a detriment and perhaps disqualifying for them. I particularly raise this in the Hotel Industry where it would be more advantageous for them to be able to rely upon their 2019 net earnings. I am interested in your thoughts in that regard, and i am also worried about the indication by treasury and the fed that we will operate under the cares oflosophy of the purpose cares, and the main Street Program under the spirit of cares, which is i guess a pretty uncertain term. I am looking and i think our businesses are looking for more certainty as to the nature of how this program is going to work. Can you help alleviate this and this is concerns, the concerns about it and any thoughts on ebitda . Tda,powell in terms of ebi we are looking at last years. We do run appreciated and in some industries there are better ways to approach that, for example an asset based approach. That is something we are looking at. The facility the focus is on getting the facility open, and past, looking at prepandemic earnings. Are not taking into effect into account the effect of the pandemic. Senator van hollen. Hollen welcome. I am a little late to the hearing. Upas in the senate to take the justice and policing act and take up certain issues of systemic racism. I am glad you made the statement you did in your opening remarks. I want to ask about a statement made by rafael bostic, the president of the atlanta fed where he wrote systemic racism yokeyokr that drags that drags on the american do you agree with that statement . Mr. Powell i do, absolutely. Sen. Van hollen and it is urgent that we use all those tools. President trump was celebrating that the Unemployment Rate in may, around 15 , nothing really to celebrate, but in that same unemployment data we saw black americans unemployment data go up from the previous month, did we not . Thepowell we did, and over term we see africanamerican unemployment two times more than white unemployment. These hollen only issues inollen these the Financial System. Ill street has responded favorably to some of the most recent actions the fed just took. When it comes to helping those people who are most hurt economically by this downturn, and you have folk spoken about the fact that 40 of individuals with incomes below 40,000 found themselves without a job when it comes to those individuals hardest hit, would you agree fiscal policy is probably a more effective tool than the instruments the fed has added disposal . At its disposal . Mr. Powell in the short and medium turn, fiscal policy. Fiscal g term, employment. We were pleased to be hearing that from those communities, but for now, fiscal policy. Hollen a lot of those gains were erased in a short time and our goal has to be to try to get back to where we were as soon as possible and start improving again, would you agree . Mr. Powell absolutely, certainly is for us. Hollen i dont know what your testimony was as to whether you saw a letter, but we have the letter from ben bernanke, janet yellen, and over 120 other very respected economists about the urgent need to take more fiscal action. Given what you have said about the shortterm and fiscal policy as a tool, do you agree that we need to do more . Mr. Powell i saw the headline and the first two sentences but have not had a chance to read it. I will look at it. In fiscal policy, what what i would say what i would say is we are not in the position of giving you advice. Congress has done the most it , 3. 3er done, 14 of gdp trillion. It is likely there will be a group that struggles to regain employment because they were working in those industries that are affected. It is likely they will need help from the fed and from you too. When it comesn to shortterm downturns, fiscal policy is the most effective instrument to deal with the shortterm impacts. Inhave lost 1. 5 million jobs the state and local government level in the last few months, that is a drag on the economy, isnt it . Mr. Powell yes. The state and local government is one of the largest employers. Sen. Van hollen shouldnt all of us using the tools at our disposal try to continue try to discontinue the loss of jobs . Mr. Powell it is certainly an area i would be looking. State and local governments provide Critical Services and have balanced budgets or budget requirements, so the layoffs come quickly when revenues go down and expenses go up. That will weigh on the economy. Hollen are you aware that state and local governments are making fiscal decisions as of july 1 as to whether to cut budget and lay people off . It would seem to me given all those facts that congress would be negligent in leaving town before the fourth of july, for the fourth of july parade, without providing additional relief to state and local government employees, and also to others. Thank you to both. Thank you. Do we have senator sinema . Sinema yes. Thank you. Immediate Economic Stabilization like we saw with the program ppp program will continue to be necessary as we shield the economy from the worst effects of this virus. Harshers warn of a second wave in the fall and i have urged the administration to implement a testing and tracking strategy to protect arizona from future waves. Would you agree a robust tracking regime that allows to reopen and operate safely would have a positive impact on Economic Growth . Mr. Powell i absolutely would. Anything that enhances the ability confidence and to become more confident, we will have high returns for the economy. Sen. Sinema the Federal Reserve 6. 5 cts output will reduce compared to last year. Does this assume a second wave of virus and the accompanying impacts . Mr. Powell that is just the median of the 17 projections by of 17 projections individuals in the fomc. It will be based on different assumptions made by different people. 17 probably made a different assumption. The answer to your question largely will be no, that is not my colleagues will principally have assumed there will be a second wave. Sen. Sinema that is concerning. Congress will need to find the best path forward. Arizonans and americans count on our leaders to follow the science and facts to rebuild our health and economy. Families will need immediate help if case counts worsen. Would you agree that the possibility of several future waves of the virus, identifying zersle economic stabli would be beneficial for our Economic Growth . Mr. Powell the question of automatic stabilizers is a classic fiscal policy question, and one u. N. Your colleagues will have to sort out. You and your colleagues will have to sort out. Program and the Unemployment Insurance, it has made a big difference in where the economy is now. Sen. Sinema relief for state and local governments, i providing and i would encourage you to take larger actions in arizona cities. The 2000 eight recession was significantly prolonged due to shortfalls in state and local government funding. Do you agree and would you agree that addressing state and local government shortfalls will have an Immediate Impact on outlook . Mr. Powell Research Shows in the aftermath of the Global Financial crisis during what we call the Great Recession, that state and local governments did weigh on Economic Activity. There were a lot of layoffs and at much hiring, and there was greater percentage of the labor force back then. In terms of what congress should do, that is an area that is worth some attention because of the discussion. Sen. Sinema thank you, mr. Chairman, and thank to Ranking Member, mr. Brown. Mr. Chairman, i yelled back. Thank you, senator sinema. Senator brown has asked for one more question. Brown thank you, chair powell. I know fiscal policy is not within your providence, as you say many times, but im impressed by your thoughtful answers particularly on state and local government assistance and preventing it fictions evictions. My question is simple will Congress Make any quality worth worse if we are not as thoughtful as you have been in our fiscal response . Mr. Powell it is a hard question. This whole episode with the pandemic is tough on low and moderate income communities, and congress has done a lot compared to other downturns, and it is having a real effect there may effect. There may well be a need to do more, and for us as well. Own senator jones mentioned reading one of those of americany pieces history, i am joining him with i believe four other senators from each party to read from dr. King , and he reminds us we always make excuses to address racism. What we do now matters. I want you to take that seriously. I think you do. Thank you for your thoughtful comments. My question about your working with us on this was a serious one and i appreciate your saying you would talk to other fed governors about that. I am hoping you will lead the fed as i Hope Congress will step up as well to address this most basic of american problems. Chairman crapo, thank you, and chairman powell, thank you. Thank you, senator brown. That concludes todays testimony and questioning. Chairman powell, i would like to join with those who have commanded you to the service that you and our Federal Reserve have given to the country in dealing with this pandemic, and appreciate you being here today with us as well. We look forward to continuing to work with you as you implement the various facilities and responses that fall within your purview in this crisis. Once again, thank you for taking your time to give us your wisdom today in the hearing. For senators who wish to submit questions for the record, those are due on tuesday, june 23. I ask that chairman powell, you respond as quickly as you can. This hearing is adjourned. Mr. Powell thank you, senator crapo. Thank you, senator brown. A pleasure. An executive order to enforce police rules and community policing. Cspan or on cspan. Org, or listen on the cspan radio app. What do you think we can do about that . With Police Reforms and the coronavirus continuing to affect our country, briefings from the white house, congress, governors, and mayors updating the situations, and from the 2020 campaign trail, join the conversation live every day with our live call in program, washington journal. Onit cspan. Org or listen the go with the free cspan radio app. The Senate Continues work today on a public lands package that would provide permanent funding for the land and Water Conservation fund. It would also establish a fund for maintenance of National Parks and other public lands. A final vote is expected tomorrow. Executive and judicial nominations come off the floor, discussions continue to meet with the house on pfizer reoffer you fisa reauthorization and polis Police Reform legislation. The house is not in session but members continue work off the floor on its own version of Police Reform legislation. The house returns june 25 for debate and vote. Watch it live on cspan. This november, we are going to take back the house, we are senate, and wehe senate, are going to keep white house. Keep the white house. Coverageour live starting at 8 00 p. M. Eastern on cspan, on demand at cspan. Org, or listen on the go with the free cspan radio app. Into how the coronavirus pandemic is impacting subsaharan africa. Members