Transcripts For CSPAN2 Federal Reserve Chair Jerome Powell Testifies Before House Financial... 20240712

Now, testimony from Federal Reserve chair Jerome Powell on Monetary Policy and the state of the u. S. Economy amid coronavirus. He spoke about low Interest Rates, unemployment numbers and what future Economic Growth and recovery could look like. Help in front of the House Financial Services committee, this is three hours. So the committee will come to order. Thank you. Without objection, the chair is authorized to declare a recess of the committee at any time. Members are reminded to keep their video function on at all times, even when theyre not recognized by the chair. Members are also reminded that they are responsible for muting and unmuting themselves and to mute themselves after they are finished speaking. Consistent with the regulations accompanying h res 965, staff will only mute members and our witness as appropriate when not recognized to avoid inadvertent background noise. Members are reminded that all house rules relating to order and decorum apply to this remote hearing. This meeting is entitled Monetary Policy. And the state of the economy. I now recognize myself for four minutes to give an opening statement. Chair powell, the law that required the Federal Reserve chair to testify before congress twice each year was established back in 1978. However, no fed chair has ever testified before this committee with the economy in the condition that it is in today. More than 116,000 americans are dead from the coronavirus, and just last week, 21 states recorded an increase in their average daily new cases compared to the prior week. The april jobs report was the worst in american history, showing 20. 5 million jobs lost and wiping out nearly a decade worth of job gains in a single month. Today, the topline Unemployment Rate remains higher than it has been at any time since the Great Depression and three full Percentage Points above its highest level during the great recession. As you recently noted, chair powell, the expected decline in gdp is likely to be the most severe on record. Communities of color, who were suffering disproportionately from the virus, are also in Major Economic distress. Even before the crisis, a 2019 mckinsey study found the overall racial wealth gap between black and white families widened from 100,000 in 1992 to 150,000 in 2016. Unfortunately, over 2 million black americans lost their jobs as a result of covid19, and nearly 18 of black workers have lost their jobs since february. Youre warning that, and i quote, if not contained and reversed, the downturn could further widen and gaps in economic wellbeing, quote, unquote, is a reminder that the fed and Congress Must use all tools available to address these unjust disparities. States and cities are making painful cuts at a moment when they desperately need more resources. As states scramble to pay skyrocketing unemployment claims and meet Public Health expenses, 1. 6 million Public Sector employees have lost their jobs. State government face and estimated 790 billion revenue shortfall next year, and without action, 5. 3 million more Public Sector employees could lose their jobs. Were also facing an impending eviction crisis with 30 of renters being unable to pay their rent for june. Against this backdrop, donald trump has urged a premature return to business as usual and haled a jobs report that showed black unemployment rising as a quote, he said, great day, unquote. Last month, the house passed the heroes act to extend assistance to states, cities, the unemployed, as well as renters and homeowners, but the Senate Republican leader has said, congress should, quote, wait and see, quote, unquote, before considering more relief. While the Trump Administration has declared victory and spread dangerous misinformation, you have been a real voice of reason, cautioning that unemployment is still, quote, historically high, unquote, recognizing its disproportionate impact on communities of color and acknowledging that economic recovery will depend on Public Health outcomes. You have also stressed that quote, additional fiscal support, quote unquote is needed to avoid longterm damage. The economy recovered unevenly from the last crisis, leaving the fed with limited ammunition. Nevertheless, the fed has stepped in to rescue an economy and free fall. Weve seen the stock market respond, but communities of color and Small Businesses are reeling, and you are at the end of what you can reasonably do in terms of Monetary Policy to help the economy. Now is the time for strong fiscal policy from congress in the form of the heroes act. Without it, im extremely concerned about the future of our nations economy. With that, i yield back the balance of my time. The chair now recognizes the Ranking Member of the committees, the gentleman from north carolina, mr. Mchenry, for four minutes for an opening statement. Well thank you, madam chair, and chairman powell, welcome back before the committee. Thank you for virtually being here and for virtually taking our questions. But the circumstances are obviously much different than where we were in february when we last met. Id like to commend you and the Federal Reserve for your activities and engagement in this unprecedented time. I believe is the feds rapid and Decisive Action that prevented the worst effects of this economic catastrophe brought about by the coronavirus, and helped stabilize the market. The feds, as firefighter, was able to stave the flames, to contain the flames. But we know that that is not a permanent circumstance for the Federal Reserve to be in that firefighting phase. Using its 133 emergency Lending Authority, the fed signaled to the american households and to businesses that it will do everything in its power to respond to the economic crisis that resulted from this Global Health crisis. The fed announced nine Lending Programs to help support the proper functioning of our Financial Markets and our economy. Smartly done. Many of these facilities are in operation today. However, some of those facilities arent even yet operational, but markets were calmed just by the announcement from the fed. So i want to commend you for that Decisive Action in this early phase of what we know are challenging times for the American People. I believe we must keep these facilities focused on broadbased support of our economy and ensure that theyre responsive to the Economic Conditions, not the political ones. I also want to express a point you made last week and i believe is worth repeating. As the fed embarks on protecting the economy through careful and targeted use of its powers, Congress Must be realistic about what the fed can and cannot do. The fed is a lender. The fed is a lender of last resort. It is not responsible for fiscal policy. Thats congress action. And it is not a piggy bank to be used to fund the whims of congress. We must ensure the fed remains a laser focused on Monetary Policy and not become a testing ground for ideological experiments or unproven theories. Unconventional monetary proposals should be considered with utmost care, particularly ones that have had mixed records in other major economies. We should be focused on the 10s of millions of americans who remain out of work through no fault of their own. According to the feds economic projections, we will still be facing unprecedented unemployment for the rest of this year for nearly twice the Unemployment Rate that we experienced just as recently as february. Creating an economic recovery that grows jobs must be priority number one. But the fed cannot do this alone. The fed cannot train workers to match them more effectively with job openings. Congress has to legislate that. Congresss response for enacting progrowth policies, not the fed. And the fed cannot modernize our Education System or change tax policy. Thats congresss role. Only congress can legislate these policies, which is why we need Bipartisan Solutions to ensure that our economy remains strong and comes back stronger than ever. We should be identifying the metrics that will be used to determine the ongoing need for emergency lending as well. Chairman powell, i urge you to continue to be forward looking, as you have been, since many of us before the public actually knew what the coronavirus was, you were taking action. And so i anticipate the challenges we face in the next six months or a year will be enormous, but i commend you for looking ahead. And while i hope were through the worst, it is clear that more must be done. However, we should all keep an eye toward the aftermath and how we plan to rightsize policies once again, to ensure the longterm stability of our Financial System. And with that, id like to thank you again for being here and i look forward to your testimony and questioning. Yield back. The chair now recognizes the chair of the national security, International Development and Monetary Policy subcommittee, mr. Cleaver, for one minute. Thank you, madam chair. Thank you, chairman powell, for being here. On sunday, the dallas Federal Reserve president kaplan stated, and i quote, systematic racism is a yoke that drags on the American Economy and a more inclusive economy will lead to a better growth. And i tend to agree with what he said. Before the pandemic nearly 60 of black adults were employed. Covid19 has ravaged our nation, and the lowpaid and Frontline Service sectors. Now just less than half of black people are employed. Economic justice is a part of social justice, and i want to examine some of these concepts with you. Economic justice would include the minimum wage increase, expanded earned income tax credit, investment in education, and create a progressive tax code. So thank you for being here, and ill explore those later. Thank you, madam chair. Youre welcome. The chair now recognizes the Ranking Member of the subcommittee, mr. Hill, for one minute. Thank you, madam chair. Chairman powell, thank you for being with us virtually today. We appreciate you being responsive to all of our questions in this challenging environment. Your Monetary Policy report dated june 12th was an excellent, detailed recap of the Extraordinary Events of the past four months. I commend the Federal Reserve and their Quick Response and necessary actions taken to mitigate the harm from covid19. Your quick action preserved Companies Access to markets and fresh capital to weather this storm. Today members will discuss the Federal Reserves facilities, the virus, and its impact on the economy, and our citizens, many of whom are not yet back to work. I look forward as well to a discussion about Monetary Policy. The Balance Sheet has grown by nearly 3 trillion since the beginning of march. I look forward to discussing these things and again, welcome you to the committee back. Okay, yield back. I want to welcome to the committee, our distinguished witness, Jerome Powell, chair of the board of governors of the Federal Reserve system. Chair powell has served on the board of governors since 2012, and as its chair since 2017. Chair powell has testified before the committee and i believe he does not need any further introduction. Without objection, your written statement will be made a part of the record. I want to remind members that chair powell has a hard stop, and will be with us for three hours until 3 00 p. M. Eastern time. Chair powell, you are now recognized to present your oral testimony. Thank you, chairwoman waters, Ranking Member mchenry, and other members of the committee. Thank you for the opportunity to present the Federal Reserves semiannual Monetary Policy report. Our country continues to face a difficult and challenging time, as the pandemic is causing tremendous hardship here 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 our healthcare workers. 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 to our nation. Beginning in midmarch Economic Activity fell at an unprecedented speed in response to the outbreak of the virus and the measures taken to control its spread. Even after the unexpectedly positive may employment report, nearly 20 million jobs have been lost on net since february. And the reported Unemployment Rate has risen about 25 Percentage Points to 13. 3 . The decline in real Gross Domestic Product 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 report, lowincome households have experienced by far the sharpest drop in employment, while job losses of african americans, hispanics and women have been greater than those of other groups. If not contained and reversed, the downturn could further widen gaps in economic wellbeing that the long expansion had made some progress in closing. Recently, some indicators have pointed to stabilization, and in some areas, a modest rebound in Economic Activity. With an easing of restrictions on mobility and 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 employment remained far below their prepandemic levels and significant uncertainty remains about the timing and strength of the recovery. Lack of that Economic Uncertainty comes from uncertainty about the path of the disease and the effects of 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 longer term damage from permanent job loss and business closures. Long periods of unemployment can erode worker skills and hurt their future job prospects. Persistent unemployment can also negate the gains made by many disadvantaged americans during the long expansion and described to us at our fed listens events. The pandemic is presenting acute risks to Small Businesses, as discussed in the report. If a small or 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 embody the work of generations. With weak demand and large price declines for some goods and services, such as apparel, gasoline, air travel, and hotels, Consumer Price inflation has dropped noticeably in recent months. But indicators of longer term Inflation Expectations have remained fairly steady. As output stabilizes and the recovery moves ahead, inflation should stabilize and then gradually move up over time closer to our symmetric 2 objective. Inflation is nonetheless likely to remain below our objective for some time. Feds response to this extraordinary period is guided by our mandate to promote maximum employment and stable prices for the American People, along with our responsibilities to promote the stability of the Financial System. We are committed to using our full range of tools to support the economy in this challenging time. In march, we quickly lowered our policy Interest Rate to near zero, reflecting the effects of covid19 on Economic Activity, employment, and inflation, and the heightened risks to the outlook. We expect to maintain Interest Rates at this level until were confident that the economy has weathered recent events and is on a track to achieve our 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, weve been purchasing sizable quantities of treasury securities and agency mbs 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 report, these purchases have helped restore orderly Market Conditions and have fostered more accommodative financial conditions. As market functioning has improved since the strains experienced in march, we have gradually reduced the pace of these purchases. To sustain the smooth market functioning and thereby foster the effective transmission of Monetary Policy to the broader financial conditions, we will increase our holdings of treasury securities and agency mbs over coming months at least at the current pace. We will closely monitor developments and were prepared to adjust our plans as appropriate to support our goals. To provide stability to the Financial System and support the flow of credit to households, businesses, and state and local governments, the fed, with the approval of the secretary of the treasury, established 11 credit and liquidity facilities under section 133 of the Federal Reserve act. The june report provides details on these facilities, which fall broadly into two categories, stabilizing shortterm funding markets and providing more direct support for credit across the economy. To help stabilize shortterm funding markets, the fed set up the commercial Paper Funding Facility and the money market liquidity facility, to stem rapid outflows from prime money market funds. The fed also established a primary dealer credit facility, which provides loans against good collateral to primary dealers that are critical intermediaries in shortterm funding markets. To more directly support the flow of credit to households, businesses, and state and local governments, the fed established a number of facilities. To support the Small Business center, we established the Paycheck Protection Program liquidity facility to bolster the effectiveness of the cares act. Our main Street Lending program, which is just now launching, supports lending to both small and mediumsized businesses. The term Asset Backed Securities Loan Facility supports lending to both businesses and consumers. To support the employment and spending of Investment Grade businesses, we established two Corporate Credit facilities, and to help u. S. State and local governments match cashflow pressures and serve their communities, we set up the Municipal Liquidity facility. The tools that we are using under section 133 authority are appropriately reserved for times of emergency. When this crisis is behind us, we will put them away. The june report reviews the implications of these tools for the Federal Reserves Balance Sheet. Many of these facilities have been supported by funding from the cares act. We will be disclosing on a monthly basis names and details of participants in each facility, amounts borrowed, and Interest Rate charged, and overall costs, revenues, and fees for each facility. We embrace our responsibility to the American People to be as transparent as possible, and we appreciate that the need for transparency is heightened when were called upon to use our emergency powers. We recognize that our actions are only part of a broader Public Sector response. Congresss passage of the cares act was critical, enabling the fed and the treasury to establish many of the Lending Programs. The cares act and other legislation provide direct help to people, businesses, and communities. This direct support can make a critical difference, not just in helping families and businesses in a time of need, but also in limiting long lasting damage to our economy. Id like to end by acknowledging the tragic events that have again put a spotlight on the pain of Racial Justice in this country. The Federal Reserve serves the entire nation. We operate in and were part of many of the communities across the country where americans are grappling with and expressing themselves on issues of racial equality. I speak for my colleagues throughout the Federal Reserve system when i say theres no place at the Federal Reserve for racism, and there should be no place for it in our society. Everyone deserves the opportunity to participate fully in our society and in our economy. We understand that the work of the fed touches communities, families, and businesses across the country. Everything we do is in service to our public mission. Were committed to using our full range of tools to support the economy and to help assure that the recovery from this difficult period will be as robust as possible. Thank you. I look forward to our discussion. Thank you, chairman powell. I recognize myself for five minutes for questions. Chair powell, before you joined the fed, you were a fellow at the Bipartisan Policy Center and an advocate of deficit reduction. So i took it seriously when you said on april 29th and i quote, this is a time to use a great fiscal power of the United States to do what we can to support the economy, quote unquote. On may 13th, two days before the house passed the heroes act, you reiterated this message saying, quote, additional fiscal support could be costly, but worth it if it helps avoid longterm economic damage and leaves us with a stronger recovery, quote, unquote. On sunday, dallas fed president , robert kaplan, seemed to echo that, saying, quote, fiscal policy is going to be critical from here, quote, unquote. And yesterday, former fed chairs, bernanke, yellen, and more than 130 economists wrote a letter calling for a bold congressional response, including and i quote, continued support for the unemployed, new assistance to states and localities, and investments in programs that preserve the employer, employee relationship, quote unquote. The may jobs report showed slightly better jobs numbers than the april jobs report, which was the worst in recorded history. But there are still major reasons for alarm. Black unemployment rose to 16. 8 and 600,000 Public Sector jobs were lost. Yet, this administration and Senate Republicans are not moving with any urgency. Republicans seem to be more focused on a more limited response while granting a broad liability shield for major corporations. Question. Do you agree with your predecessors, chair powell . Should Congress Take bold action as soon as possible, quote unquote . Thank you, madam chair. So i would agree that congress has already provided significant fiscal support and that support is now having a positive effect on the economy. We see it in Consumer Spending and income data. We see it in payrolls, all of that is helping. And i would just note that there are Something Like 25 Million People who wouldve been dislodged from their job, either in full or in part, due to the pandemic, and i would think that it would be a concern if congress were to pull back from the support that its providing too quickly. I wouldnt presume to prescribe exactly what you should or should not do, but i would say that it would be wise to look at ways to continue to support both people who are out of work and also smaller businesses that may not have vast resources for a continued period of time, not forever, but for a period of time so that we can get through this critical phase. The economy is just now beginning to recover. Its a critical phase, and i think that support would be wellplaced at this time. Thank you very much. On may 15th, more than a month ago now, the house passed a heroes act, which would, among other things, provide 175 billion in rental and homeowner assistance, nearly 1 trillion to support state territory and local governments, and another round of direct stimulus payments for individuals and families. I would note many states are reporting an uptick in confirmed cases, of new highs, hospitalizations, with some officials slowing their effort to reopen. So who will suffer if the senate does not properly adopt these measures to support state and local governments, renters, homeowners, and the broader economy . Well, as i mentioned, madam chair, i do think it would be appropriate to think about continuing support for people who are newly out of work and for smaller businesses who are struggling to get through what will be a temporary period as the economy moves back up toward higher levels of activity. Thank you very much. Before moving on for the next question, id like to call on Ranking Member mchenry to share with us some information that is very important to this committee. Well, madam chair, please continue your questions. Ill take that out of my time, but well, actually, while were here, since the technologys tough, point of personal privilege, i would seek to inform Committee Members about the tragic passing of our colleague and friend andy barrs wife, carol, last evening. When andy arrived home, he found that his wife had passed. They have two young children. She was 39 years old. This is quite a surprise and shock for all of of us, but wanted to ensure that Committee Members know this information. And please keep andy and his two girls, his two young girls, in your prayers. Thanks so much, and thank you, madam chair. Yield back. Thank you so very much. And now, mr. Mchenry, i will recognize you for five minutes for questions. Well, thank you, madam chair. And look, chairman powell, chairwoman waters, her questions about fiscal policy are certainly, i think, appropriate. We always want the fed chair to endorse our pieces of legislation. That is commensurate with every previous fed chair and certainly with you as well. However, monetary and fiscal policy are two very different things. And so i would urge you and the leadership of the fed to stick to Monetary Policy. Now, your words of encouragement that we have are our responsibilities on the fiscal side of the house, i think are wellnoted. And what youre telling us about the employment marketplace on a Going Forward basis, i think is informative for our policymaking. And so thank you for your statements there, that that additional congressional action is required. Now, along those lines, we have the main Street Lending facility that is to be stood up soon. So walk me through what the intention here is because this is not something that is, and over the last 100 years, the fed has engaged in, the intention here. And what is the missing piece that perhaps congress should think about filling in . Mr. Mchenry, are you asking specifically about main street . Yes. So if youd say the intention of the main Street Lending facility. Okay, great. So for smaller companies, there was the Paycheck Protection Program and for companies that have access to the bond market and are investmentgrade rated, we have Corporate Credit facilities, and then theres the large group of very important companies, very diverse, different sectors, different needs, just very different. For them, we have the main street facility. And our intention is that if they are a credit Worthy Company in that space who were not able to get credit from the Banking System because of the pandemic we want to be there to provide that credit. Thats what weve been working on. Its significantly different from any other undertaking we have been working on here, thickly because that space is particularly, commercial banks are really the key form of liquidity and the lending and the bank credit agreements are always negotiated so that isnt a really high level of standardization. Each one is a little bit different. Weve got to find a way to get to those bar words, it through their credit agreements and get them funding. We are working to the Banking System to do that. We have registered lenders so that the facility is effectively open now. The lenders are registering and they cannot begin to make loans. We are encouraging them to do so and those loans will soon be transferred, 95 interest in them will be transferred to the facility. We are there, and as i think weve shown, as they go with all the facilities we are learning, and no one has ever done this exactly and so we have been constantly taking feedback from lenders and borrowers, and we will keep doing that and thats true for all of our facilities until we feel weve got the facility that can do the best job. So thats a unconventional set of Monetary Policy that you are utilizing, given the unconventional nature of this health and, therefore, economic crisis that were facing. We also see other banks, japan, in europe trying to control inflation targets using unconventional means. Such as yield curve control and negative rates. Do we have empirical evidence to support deploying these tools in the United States, as you see it . Theres a split. The evidence is mixed on negative rates. There are those who believe negative rates are quite effective and there are those who see the results of somewhat ambiguous. Here in the United States weve looked at carefully. We we look at it during the long expansion that ended in february and chose not to deploy them in the United States. Lately, the fomc has looked carefully at negative rates and continues to see you broadly across the committee that negative rates not something that we think is appropriate for the u. S. Economy, at least at this time. Its not something we see ourselves resorting to. Instead, we look at ourselves using asset purchases been for forward guidance. In terms of your curve control, it is currently being used by a couple of Central Banks around the world. Rather than by assets which are doing is youre saying we wont let the Treasury Curve at a certain level move about something, and if it starts to move above that level, our rate moves above it and then we will lie treasurys to drive the rate level back down. The United States did that from the late 40s into the early 50s. Ill just finish, sorry. But we are really just educating ourselves on at this point back. Its not something we have at all decided to do. Thank you for your testimony, and chairman powell, i also appreciate the fact you said when the crisis passes we will put them away, these new tools. That is a very sober assessment. We need to have return to normalcy once this crises is passed. Thank you for your leadership and i yield back. Mr. Cleaver, you are recognized for five minutes. Thank you, madam chair. Chairman powell, again thank you for being here. I started out with my opening comments talking about the situation that we find ourselves in in this country, and i believe that this is a moment unlike any other ive seen in terms of the countries willingness to finally address these longlasting issues of race and putting it aside. I spoke to a group of 5000 demonstrators, and us almost brought to tears when he stood up to speak because they crowd was probably 65 white and the rest may be brown and africanAmerican People. I think this is a different situation. I believe the Federal Reserve has a place in this particular moment. I think that you could play a role. One of the things that im thinking about, the Justice Department used to do and probably still should do, what they consider patterns and practices where if theres a problem in a particular city, some Police Department or the Fire Department or maybe just that city, and they go in and to do a study and and or into a Consent Decree to try to enable a change. That happened in ferguson was her. Ferguson has changed dramatically. What im wondering how you would feel about patterns and practices with some of our financial agencies where there is an obvious lack of inclusion in and maybe even history of problems, do you think that would work in the Financial Services world . As you know we do supervise on banks for fair lending practices. Where we see that kind of pattern and practice, we engage in strong enforcement measures. There is some of that going on already. Well, are there other steps though that the Federal Reserve can take to confront this moment . I mean, do you believe that the board can take on some of the issues of economic injustice . I may be using terminology thats not universal, but increasing the minimum wage and expanding the earned income tax, for the things i mentioned earlier, and to try to begin to iron out, if you will, some of the wrinkles that have been around way too long cracks i mean, i dont even feel great about even discussing this issue in 2020. I see a role, im just wondering if you think that the fed can play a role . I do. I do think we have a role. I believe we will do our best to play that role. I wouldnt say its the lead role, but i would say that we are definitely recommitting ourselves to enforcement of fair lending laws, as i mentioned. I would also say just as an institution we have tried to make it a a very high priorityf diversity and inclusion. We want to set an example for that, both internally, to some extent, my colleagues and and e spoken out publicly on these issues which i think is appropriate in this unusual moment. The last thing and probably the most important thing we can do is try to get back as quick as possible to the labor market we had for the last couple of years. Theres nothing like a tight labor market for the lives in low and moderate income communities. We saw things we had not seen in 50 years, and want to get back there. Everything working with our Monetary Policy tools is ultimately designed to get us back to a tight labor market as quickly as we can and then stay there. Thats really the overarching goal of what were doing. I appreciate your comments. My questions were not meant to be accusatory. In fact, i think that the Federal Reserve, i mentioned earlier the comments of mr. Kaplan, but even later on this week i will be sitting down with Esther George to discuss some of the same issues. Thank you mr. Chairman, and thank you, chairman waters. And give her a much. Ms. Wagner, you are recognized for five minutes. Thank you, madam chairwoman. I thank you, chairman powell, for coming before this committee today and i wanted to commend you estimate of our colleagues have, and the Federal Reserve, for moving so very swiftly and decisively these past few months and keeping americas economy stable during this pandemic. Just this week the Federal Reserve announced it would begin by up to 550 billion in individual Corporate Bonds to the secondary market Corporate Credit facility with the ability to also i believe into 25 billion in funding from the Treasury Department that was provided by the cares act. I understand the need for the Federal Reserve to have this facility at the ready, but id like to know why decided that it was time to launch the facility now. What was the reasoning for launching this week . Actually this is something weve been saying since we first announced the facility, which we do. It did happen to be the fact that we ultimately got around to doing it on monday. The overall goal of all that is to support market functioning. This is the Corporate Credit facility, the secondary market part of it. We want to support market functioning because when markets are working, companies can borrow. People can borrow. Companies are not feeling tons of Financial Stress and they are less likely to take cost cutting measures and things like that. I was a couple of things. First, buying cash bonds is going to form the primary mode of support over time by which we support market function. Over time, we will gradually move away from eds, not suddenly at all and move more to buying bonds. Its a better tool ultimately for supporting the query and markets. At the current moment marketer functioning to do wells are purchases will be at the bottom end of the range weve written down. As is markets continue to normalize come are purchases we decline. Are you planning to hold all the response to maturity . Ultimately, we are. We are generally a hold to maturity entity. It may be that we sell some back into the secondary market down the road but ultimately we are by and hold type of buyer. As you and on april 22 response to letter from senator crapo, the Federal Reserve vice chair for supervision, randal quarles, requested that congress consider modifying section 171 of the doddfrank act otherwise known to all of us as the collins amendment. Do you agree with vice chair quarles that congress should revisit the collins amendment to ensure that banks are able to adequately respond to increased credits demands . Yes. What were looking for and a lot of these things were doing is temporary relief during the pandemic so that the banks can use the Balance Sheet to support their household and business customers. Its no more complicated than that. As they take in more deposit and engaged in forbearance on things like credit card analysis and things like that, their Balance Sheets grow. They have been supporting their customers and borrowers, this is simply a matter of allowing them to do that. It would be a temporary measure. So you are in favor of the least a temporary measure to modify section 171 of the collins amendment to allow them to handle increased Credit Demand . Yes, and will be happy to work with you on the details of that. That would be terrific. I thank you so much. The Federal Reserve has noted that nonbank Financial Institutions are currently not considered eligible lenders for any main street laurel facility. In the faq guidance states you may consider expanding the list of eligible lenders in the future. Chairman powell, what is the reasoning for the Federal Reserve excluding nonbank and noninsured noninsured depository institutions from being eligible lenders under the main Street Lending program . Is it not possible to create a vendor agreement similar to ones that we issued by the department of treasury nonbank and noninsured depository institutions like we did for the Paycheck Protection Program . No, it is possible. It is possible. We have engaged in a in a sprie to get this program set up. Thats what weve been doing. I would liken it a little bit to dunkirk, get in the boats and go, bring the people back. Thats really what weve been doing. In the case at this, now that weve done that we can go back and we can look at first provisions, including my time has expired to help you to take a careful look at that and that we are also able to modify the collins amendment. I thank you, madam chairwoman and i yield back. Thank you. Mr. Perlmutter, youll recogne for five minutes. Thank you, madam chair. Chairman powell, thank you for the hard work that you and your staff in the paddock put in very difficult circumstances, and taking a look at your monitor report, just if you look at the first four graphs in the report. The last few years you have been here or chairman yellen, they have sort of consistent, steady growth since the Obama Administration into the Trump Administration. Now i know the definition of falling off a cliff. Those graphs are very telling in the loss of jobs that weve seen. My first question to you is, in the heroes act there is a substantial appropriation for state local and School Districts who have seen their tax revenues fall tremendously. Colorado, just the State Government about is looking at a 3 billion drop in revenue from last year. So i know you are not particularly in talking about fiscal measures, but if, in fact, we were not to assist state, local, and School Districts over the course of the next year or two, and thousands and thousands of jobs are lost, how is it going to affect the recovery that you hope for . I would agree that i shouldnt, i wouldnt offer specific advice on fiscal policy. I will say though from an economic standpoint state and local governments employ Something Like 13 Million People. States have to balance their budgets, and when revenues go down and expenses go up, what do they do . They cut costs. Weve seen state and local governments lay off already a million and have people. State and local governments provide essential services. They are a very Large Employer and i would say its certainly worth considering all of that. It will hold back the economic recovery if they continue to lay people off and if they continue to cut essential services. In fact, thats kind of what happened post the Global Financial crisis. All right. I thank you for that. I guess im going to summarize your answer. Laying off a lot of people will not help the recovery. I saw it today, even a substantial company like at t, announced it is laying off thousands of people as part of a restructuring or something. I didnt read the entire article. In your report on the second page it says, the strains on household and business Balance Sheets from economic and financial shocks since march will likely create persistent fragility. What did you mean, or whoever wrote the report, what did you mean by persistent agility . This is what we mean by that. Something like 25 Million People have been displaced in the workforce overall, either fully or partially. Those people are right now theyre getting enhanced Unemployment Insurance perhaps. Many of them may have gotten support checks as part of the cares act. But over time they dont have a secure income flow and to the extent they lose of those benefits that theyre getting, they are going to come under financial pressure right away. Most low and moderate income households dont have substantial Financial Assets to fall back on. Its the same thing with smaller businesses. They dont seem to have substantial quantities of cushion, financial cushion to fall back on. Thats what our surveys show, both for households and businesses. They will be understrength and, of course, the prospect of facing that kind of string is already strenuous and causes people to pull into spending. Those are the things that become self reinforcing for the econom economy. So you put together 11 different facilities, and from Corporate Bond purchases and municipal and all those kinds of things. Is there anything that you would like to do from a monetary and the position of the fed at the treasury or the administration has prevented you from doing . The answer is no. We have very specific powers which are lending powers in addition to our regular Monetary Policy powers. We have lending powers that weve used to completely unprecedented extent here, and i think we have been able to broadly do the things that we felt were most in need of doing. Of course, the powers that are going to matter so much Going Forward have already mattered i really the spending, tax and spending power. I thank you for your testimony and your work, and i yield back to the chair. Thank you. Mr. Rose, you are recognize for five minutes. Mr. Rose . Hes not present . Then we will go on to mr. Steil you are recognized for five minutes. Hello . Is this mr. Steil . Can you hear me . Yes. Okay. I was talking, chairwoman, ifi can begin . Yes, you may begin. Thank you chairwoman waters and Ranking Member mchenry and thank you, chairman powell for being with us today. As we move to the Pandemic Recovery process i am really encouraged early economic results. Obviously we still have much further to go but again im encouraged. I credit the administration led by President Trump and institutions like the fed and your leadership for helping us to so quickly work to revive the economy. However, i received news yesterday that makes me all the less encouraged and more concerned. I received a call from a bank in tennessee six Congressional District yesterday alerted me to the fact they have been notified at the beginning of this week by the fed that they would only be receiving a small portion of their weekly order of coinage. According to this baker come his institution will likely run out of coins by friday of this week or this weekend. After some preliminary research i found that many other banks across my district are having the same operational challenge. My fear is that customers who use these banks will react very poorly. I know we all do want to wake up to headlines in the near future that such as tanks out of money. Chairman powell, i wonder are you aware of this issue and what is being done to mitigate it . Thank you. Yes, i yes, i am aware of it. Im very much aware of it. Let me say, whats happened is that with the partial closure of the economy, the flow of coins to the economy has gotten all, its kind of stopped. The places we go to give your coins and get credits instore, get cash, folding money, those have not been working. Stores have been close so the whole system the flow had come to a stop. We are well aware of this and working with the mid and with the reserve banks. As the economy reopens we are seeing coins begin to move around again. If your bank has already done so they should certainly be in touch with their reserve bank to report the situation. We have been working on this problem and very much appreciate your bringing it to our attention. We feel like we are making progress, but its been something that weve been working on. Chairwoman waters, i would like to submit for the record this release from the fed, strategic allocation of coin inventories. Without objection, such is of the order. Chairman powell, i wonder, and to some degree youve always spoken to this, but is this thing indicative of a larger issue . And is it temporary or is this point to a larger structural issue on this particular matter . We believe its just temporary. Its due to the fact that the economy being in significant part close as a mention and the flow of coins to the economy, something that we dont, the reserve banks and the banks and come out all the time but now were beginning to see those shortages. We have been aware of it. Working with the mint to increase supply and working with the reserve banks to get that supply what needs to be. So we think it is a temporary situation. If you would give, i guess the banks that im talking with, her like the one i mentioned in my district, what would you suggest they do to deal with this issue . Im thinking particularly not only about the banks by their customers, businesses and the consumer whos going to be faced, all these institutions and individuals are going to be faced with the prospect of having to round up or round down. In the time when pennies of the difference between profitability and loss, it seems like it might be a bigger concern than the announcement from the fed would indicate that it is. So i would encourage your banks to get in touch with their reserve bank. I dont know whether your atlanta or st. Louis, which may be both in your district. I dont know. In any case, they are responsible for this. We are working hard on it. Thank you, chairman. I would just encourage you maybe to put out some more robust guidance for banks so that they dont feel the banks that ive been speaking with all have the opinion that they dont know what to tell the customers. I would just encourage you to maybe put up some more robust guidance to them. I want to thank you for bringing that up. I will certainly do that. I am a cosponsor along with several other members of our committee of h. R. 2650, the payment choice act of 2019, a bipartisan support a bill which would require merchants to accept cash. This legislation is critical because parts of the country in both rural and urban areas are more dependent on the cash economy. I see ive run out of time but i would encourage my colleagues to take a look at and support this bill. Thank you, chairman powell. Thank you chairwoman waters. I yield back. Mr. Himes, youre recognized for five minutes. Thank you, chairwoman. Thank you, chairman powell come for being with us today and thank you for your extraordinary efforts and efforts of the Federal Reserve to contribute to the Emergency Rescue we have all witnessed. Ive got at least two concerns of want to explore with you. The first pertains to who was the beneficiary of the billions of dollars, trillions of dollars, that have been mobilized in the rescue . As you know a company can do three things with its money. It can be stuff, cost a good soul, rent, insurance, space, Raw Materials that they can pay wages, keep people employed, and 30 can service its capital structure. Can pay interest on bonds or to banks. They can issue dividends. As you know in the Paycheck Protection Program we set up an explicit incentive that that money be used for wages. My first question, chairman powell, is that start with the primary market Corporate Credit facility where you are linking directly to the issuance of security to corporations. Is there any incentive or requirement that recipients of that aid preference payment of wages over the service of payment of interest are the purchase of stuff . Ill put it this way. Theres nothing in the cares act. The cares act specifically exempts the transactions that take place in the primary market Corporate Credit facility from those requirements. They do apply to direct loans. Actually, no. I have different requirements that apply to direct loans. You are really talk about the requirements of the paycheck protection act. I mentioned the Paycheck Protection Program explicitly created an incentive for the use of that money to pay wages and, therefore, keep up employment. It doesnt sound like the fed lending, the primary market Corporate Credit facility, has those protections. Let me ask you to reflect, i cant run through all in the programs but the commercial Paper Funding Facility, the primary dealer credit facility, the Money Market Mutual Fund credit facility. All of these Credit Facilities, are there any terms of the building availability of that liquidity that preferences the payment of wages over the servicing of debt by corporations . No, there are not. Were in for many the law that you pass. The cares act specifically does not apply to those things. Used public money to allow corporations to avoid bankruptcy and service their debt and ultimately pay dividends. Command that to my colleagues as something is a real concern. The story is told, talking about the car washed i down the street who qualified for a loan, a lot of it was used to keep things stolen, to reserve loans. Want to explore another concern, as much as i supports your efforts, in my decade doing this, this is the second time necessary for the government and Federal Reserve to step in a massive way and bail out the economy. Ten years ago it was the banks and Auto Industry and now its the airlines. The worry i have which relates to my first worry is that in the private market are sector, and going to decide they can take more risk, dividend capitals because when the going to get tough and catastrophe hits, we will either to bail them out. I want to ask you to reflect on whether you think the activities over the last six months and ten years have created a moral hazard in our market system. Let me say the victories of all of our programs and workers were able to keep the jobs because companies can finance themselves. You raise a good question. Certainly its a concern and thats why generally we dont look for ways to insert ourselves into markets when they are functioning. This is a historical event unlike any other. The situation that happened where we felt like we had to come in with our tools as aggressively as possible. I dont regret those physicians. Thats why i always say who put the tools away. Ultimately, free market in an economy like ours, you should get the benefits of your success and the cost of your failures, too. Mr. Style presents . If not, mr. Taylor, you are recognized five if not, mr. Lucas, you are recognized. Five minutes. Cursor to the right bottom of my screen, thank you. Thank you. Chairman, for five years, ive worked diligently in an effort to unlock at least 45 billion in capital to be available to the economy and without saying anymore, you understand where im headed. I hear rumors we might be getting closer to such a rule being announced. Any insight you could provide all that . Im happy to confirm the rumors. We are indeed getting close. Im under strict orders not to give you an actual date which i will obey. Nonetheless, its been a long road that we will get there very soon, i am told. I have enough patients, ill wait. Progress is really important. That said, there have been a lot of comments made about the nature of the programs put together as a way the fed has addressed this unprecedented set of challenges weve had. In your experience as a fed chairman you ever have imagined the pandemic of this magnitude with the fact the u. S. But around in the snow, i certainly didnt. Everybody else, i was aware of pandemics consequences what you essentially had all over the world, governments and people deliberately stopping Economic Activity well see declines in Economic Activity beyond any in living memory because of a disease. Its a Natural Disaster so i do think this is a onceinalifetime event and i hope Market Participants dont think of it as something the way the world will react to anything. Certainly. In the 1930s, the dustbowl . Of 201930 and congress policies, that made things so dramatic worse reporters went away and had never come back its fair to say doing what we in congress and what treasure happen, the president is dramatically cheaper, on the track is a lot more in keeping very strongly, i do. We are going to come out of this and more we do now, will be and we will get tax revenue backup economy to pull him and service. With more things are going to take, the economy will be stronger and that will help everyone. Ultimately they will reflect the new reality is fiscal policy in the u. S. Congress to reflect the new reality. Thats how we get to being able to pay. Thats why i think this is not a time to worry too much about the longer run fiscal situation. This isnt the time to prioritize that. One last thought. Making sure that programs work as well in the countryside as they do in the Money Centers in big urban areas is critically important from my perspective, making sure the facilities are available to everybody, helps assure robust recovery. You dont want to leave any particular regions or parts of society behind to come out of this. I believe youre working aggressively in the area. Weve tried to, we made sure states with rural populations dont have a lot of big cities nonetheless, the benefit to the facility. We will continue to adjust all facilities. I yield back the balance of my time. Thank you. Id like to start by thanking you for setting up the phone call the other day regarding commercial real estate in the future that market and its importance. I dont have time to get into that today, i wish i did. We still have a problem in them ringing the alarm bell again. Since i was privileged to join this committee nearly eight years ago, when does america get a raise . The truth is that for far too long, 40 years, weve been content one some people supported running the economy short of its potential. I remember when i got here there were people on and off, if we ever dip below 60 , it would trigger inflation and then it was five, four and a half, for what we know is we were in this economy between three and a half and 4 unemployment. For two and a half years. We maintained, we were short of the price stability target. The fact is, during your tenure, and i tip my hat to you. Youve open peoples eyes about the importance of the labor market, he did this yesterday and the senate, and we cannot thank you enough. Well done, sir. Youve pointed out, rightfully, labor markets help with wage growth but especially with wage growth for people at the lower end of the income spectrum. Again, i want to thank you but it states the mission of the fed is no different today than it was over two generations when it never allowed the economy to operate labor staffs. The law hasnt changed and rules and regulations havent changed so we are going to get past this and the sooner the better but my question is, short of you having a lifetime appointment, which i support, short of you having that though, how can we be assured that what you have appropriately pursued will continue . Every federal entity in the history of civilization, resisted opening up the underlying authorizing act and its no different in my conversations. To some degree, i get that. Riders who said once people feel about congress the same way they do when baby gets the hammer. We are worried about what would get there. Theres no assurance what you have rightly pursued will continue to be pursued. What you have figured out and left the that you will continue into the future if we dont change the law . Delay stump you . I forgot to unmute myself, sorry. I think the law has written to accommodate what weve really learned. What a lot of us are learning. For many years when we were growing up, inflation really was a problem. They had to watch carefully or inflation would move up and hurt people on fixed incomes more than anybody else. What weve learned is Police Forces weve been seeing around the world for a quarter century, they are going to stay a while and we live in an era of continued downward pressure on inflation and it gives us the ability to have low levels of unemployment. I dont think its going to be if you change the law to the situation will change. No change in the law is what we need, i think economists broadly do get that and thats why we are eager to get back to where we were and below. Rising inflationary pressures at 3. 5 . We saw was the gains in wages going to people at the lower end of the wage spectrum for the first time in a long time. I cant tell you how fast we want to get there so we will use our tools that way and thats how i look at it. Week you for your leadership. Mr. Style, available . I cant hear you. We are going to have to leave this hearing, the u. S. Senate is about to dabble in for brief session. Long Time Commitment to bring you live gavel to gavel coverage live to the floor of the u. S. Senate here on cspan2. The presiding officer the senate will come to order. The parliamentarian will read a communication to the senate. The parliamentarian under the provisions of rule 1, paragraph 3 of the standing rules of the senate, i hereby appoint the honorable pat toomey, a senator from the commonwealth of pennsylvania, to perform the duties of the chair. Signed chuck grassley, president pro tempore. The presiding officer under the previous order the Senate Stands adjourned until 10 00 a. M. , on adjourned until 10 00 a. M. , on the senate is dabbling out after a brief session. The Senate Lawmakers working back in their home states, and the return monday july 20, continued debate to be the white house budget director and later, an authorization bill followed live here on cspan2. We take you back now. We appreciate all your efforts. Thank you very much. Your most recent report, you stated how standards for both households and benefits become less benefiting households and businesses. What i think you are saying as Financial Institutions are looking three or four months down the road and preparing for regulators or exams and begin classifying loans and force banks to reserve against those assets. I can tell you when talking to bankers, the legislature, you dont go for bridge to the institutions and they force institutions to classify lines of business and theres going to be a real problem with shortage in rural areas. What you think it should look like . We are encouraging power of supervisors to encourage banks to work with their borrowers and not to jump to criticize loans and take on board the situation we are in and communicate with them a lot in that respect and i hope its getting through to the banks and its getting through to the borrowers. You dont want to force anything to automatically happen. Its natural in a situation like this, where businesses are partially closed, concerns about credit but this is clearly a temporary. We are going to. I appreciate the comment and for the comments about businesses struggling the need for forbearance and i appreciate it but havent gone through this program, their banks and their accounts and attorneys close at hand are reluctant to do anything unless theres physical guidance, some words on paper they can see and say i got a bill to put something in place to give them the forbearance and protection they need to get to the customers. My greatest fear is a situation where the regulars go in and give business down entire industries and hurt local communities and lose banks in the process. We cant do this in this situation. Its too far based. Would never get out of this economic downturn and im hoping you will help us come up with a solution to make sure theres something banks can show to provide the programs they need to manage their customer base. We are trying to give that we are also doing additional training of supervisors and things came into this quite wellcapitalized so that helps as well. It is going to be more guidance on the pandemic exams and how we conduct those so we are working away at it and we want to hear from banks and supervisors and anybody who it looks like this is not getting through because this is effectively a Natural Disaster. They made the comment the other day hes seen in increase in deposits, locally here the local things a 20 increase in savings increase, have you seen the same thing happening . What you ascertain from the as to why and what kind of affect down the road it will have, having that kind of money . The answer is yes, we are seeing a lot of that. You saw in the data where youre holding his high levels right now. Part of that is they are getting personal Bank Accounts, Unemployment Insurance and its the checks and theyve been pulling back. His evidence is spending power and we are starting to see that in the spending. I think its well for the next few months. I yelled back. Thank you. Going to go back to mr. Style. Id love to share if you can hear me. Yes. Thank you very much. Thank you for being with us. I look forward to these meetings in person as we look through technical glitches. Following the financial crisis of 2009, the Federal Reserves Balance Sheet group 2 million reaching about 4. 5 trillion. In your comment following up on wagners question, you know the Federal Reserve has been holding to maturity. Wondering if you can comment on the Economic Indicators youre looking at between 2009 into 2019, the Federal Reserve dropped the Balance Sheet by roughly half of the trillion dollars whether or not indicators will guide you because you make determinations in the fed to whether or not we will need those and pull reserves to maturity or if there will be opportunity to reduce the Balance Sheet in advance of that. In. We waited until the economy was well down the path of recovery before we even thought about that. The other thing we did was we froze the sheet at the end of 2014, a period of three years so the economy was growing and therefore, the ratio of the Balance Sheet of the economy was declining. I think we declined 25 to maybe 17, 18 . Its a passive away to allow the Balance Sheet to shrink relative to the economy. I think in this situation, we are thinking maybe Something Like that but its so far down the road. We are at the beginning of the second phase of this process. The one for the economy begins to recover from the shutdown. And that will take time and then there will be a period we get back to unemployment so it will be a while before we get back. The Balance Sheet doesnt prevent issues in terms of inflation, they were big concerns as we group the Balance Sheet. Obviously we dont have the pressures today, i do hope it remains in the future, Balance Sheet is beyond the trillion dollars. You and your colleagues will continue to watch that. Let me shift gears slightly, loosing articles recently related to Loan Obligations in the banking sector, i think whats important to note is making institutions came into this crisis with a much healthier Balance Sheet than in 2000 under an article. Reporter identifying risk loan obligation, indicating things may have broader systemic risk. New, as to whether or not hold that and therefore wellcapitalized on these challenges . Sure. Its quite different from the things that are back, we have a lot of transparency, we regularly include them, we stress them really hard to see what losses they produce and also, theyre not large, less than one half of 1 of the assets of the banks so its something if they contain loans, we been all over that and looking at it carefully so i think the comparison to the Global Financial problem, its not the right one but we will continue to monitor. Appreciate you being here today and i yield back. You are recognized for five minutes. We will move on. On meet yourself. Good day. Think you for being with us and thank you for the work you do, we are very appreciative. These are difficult times are in for the second time we are in a severe recession. In may, we saw 20 million plus americans had jobs than three months prior so Unemployment Rate is at the highest since world war two. Projections have that remaining at 10 through the remaining of the year. The situation appears for lower income workers far worse than it does for others making more. Youve somewhat alluded to it today, and i believe yesterday, i think you said youve been concerned about the overall deficit for the long term but its time to address that when the economy is strong and not in an economic crisis. Correct . In. Im sorry, forgot to unmute myself again. Yes, i do think that. Ultimately, the debt cant grow faster than the economy forever. Weve been on that for a while and we need to address it. Ultimately, we just have to address it. Unemployment is low and the economy is growing is that time. Thank you, i couldnt agree with you more. Obviously recession is different but i want to look at the last one to see what we can look at to deal with this one. I had an opportunity in 2009 stimulus bill timeframe that we devoted about 20 physical support for state budget and thats when i was working at the state of iowa and in charge of supervising some of that funding. One thing i saw was the assistant started to end in 2010 because of a balanced budget requirement that we have the state of iowa, have the budget meaning teachers, firefighters, Public Servants etc. Lost their jobs and have seen others showing cuts were a drag on the economy for several after will show the jobs lost due to the cuts offset the Public Sector entirely. Does that impact seemed like it might be part of the reason the recovery from 2008 recession was so slow . Yes, that is a finding that Economic Research has come up with pretty clearly. I appreciate that. It seems like we are in agreement the local budget is a key step to recovery process. We are working on getting that to the house and its something i worked on. Do you think thats Something Congress needs to do more on to make sure we recover our economy . Most governments are Large Employers, Critical Services people and theres a balanced budget almost every state so when there are budget problems, both of those create not just misery but they way on the economy. I do think its an area where it will be for congress to work. Thank you. We are trying to push that through. I have a bill i wrote previously that supports state and local governments to ensure these job cuts dont happen again. I appreciate all you are doing to help shore up our economy by giving us the guidance and oversight we need and im grateful for you today and we can move a state and local government forward. They can. Thank you. I link Ranking Member, this think of our mutual friend, andy and his daughters and i know he would love to be here to grow you about a number of issues as he and i spoke previously sharing the subcommittee but i need to touch base on two things, main street business thats not eligible for Paycheck Protection Program and as you although, a huge part of our manufacturing economy is in automobiles, especially automobile parts. Those account for about 100,000 jobs, 125,000 of those here in michigan alone and what we are seeing and hearing from large automobile manufacturers their concern for their suppliers. They are telling me a tremendous number here in the Second District of michigan that they are having liquidity issues, not that they dont have properly funded recently but its about liquidity right now. Last month, i joined with my chicken colleagues asking the administration to provide short term lending to Medium Size Companies using necessary capital from the main Street Lending program. You said we are there in standing up the main street program, im not as convinced of that and i like to clarify what that means, i need this now. What i want to know would you commit to add a dedicated program for these sector focus on these Companies Production in the manufacturing if we lose them, that will be huge hit. Im wondering if you will commit to working out that . The facility is open now for lenders to register so the companies will have banks they work with their regular business and those things should be in the process of registering to become approved lender in the main street facility. Then they can make main street loans right away and shortly, we will put 95 interest in those so we are there, thanks how about a separate facility within . We dont do facilities for individual industries. What we do is the request we set up should be a good fit for what youre talking about, 2019 financials you can borrow in a multiple of your 2019 so that could be four or six depending on the kind of loan company but its a physically good fit for this facility. Do facilities of broad applicability and anybody needs this and the requirements can do this. Dedicated to this. I think thats a mistake however, we need to move on to another unintended consequence as part of the Paycheck Protection Program and a company not able to take part in that but waiting for this main Street Lending program, i had a company here in michigan, probably many of my colleagues have had 26yearold very Fast Growing Company that has manufacturing facilities here, a couple hundred constituents but they are based in philadelphia, theyve been focused on growth for six years and that means theyve had to borrow funds which has led to accumulation of debt. The rules are written so that they would not qualify to participate in the Lending Program and the way the requirements are currently drafted, companies that would otherwise be viewed as american Success Stories when using different ways. Funding funds from going to companies that need them the most and i understand your not wanting to deal with Overleveraged Companies being bailed out that we are talking about companies that have calculated that. Working on with colleagues on something that would help that. We would appreciate there be a one to one ratio in the last 12 to 18 months. For either of those kinds of companies, if we are missing something, we want to understand that. We are willing to adopt is programs so we are looking forward to that. Thank you for being with us and your leadership this Economic Situation due to the coronavirus. The last time you were before this committee, they moved ahead with its reinvestment act. In light of the congress to address racism and systemic issues throughout our economy and nation, its particularly important we get the pr a correct and since its purpose was to address black and minority individuals and communities and have Financial Institutions meet credit so many of my colleagues share my concern and probably it does more harm than good. Im glad the fed did not sign on. In january, government gave a speech on how to strengthen it and in the speech, she said i sharing our work publicly, we hope to solicit public input on a broader set of reform and find a way forward, away toward the best approach. The occ has finalized its rules, is there any update you can provide for the committee on where the fed may move forward on public input received on its frameworks . Sure. First of all, its extremely important law and its a good time to update. Would want to update it in a way that has broad support among the community, its always been our one nonnegotiable addition for so we are still working on it and i do think we will move forward, i dont have much on timing for it but theres a lot of great work in my life where we are in terms of the things, the ways we been thinking about it. Who will ultimately move forwa forward, i cant say when but we are not going to let the work go to waste. Thank you. Next question, congress and the fed have done a decent job of keeping your comment on life support response being an even, you have double digit Unemployment Rates, africanamericans and since hit harder than and we chose to act quickly and i think it was the right call but by my calculation, that have allocated little over 200 billion of 50 million that congress allocated to the henry and some of the funding was subsided for the you discussed. How do you and the remaining funds . And it takes time i worry if we dont use this fast enough, communities may suffer as a result. I agree, fiscal actions he took were only of course nothing is perfect. In an emergency, you do the best we can. I have been so much worse. In terms of the rest of the money, there when we need it, have a lot more money we enter appropriate cotton maybe to the end of the beginning here and now youre getting into the base of the reopening of the economy but the money is needed, Legal Authority the money as it is to put it in the programs and we stand ready to do more needs to be done. The being more of the same as necessary or is there anything else youre looking at . I think weve covered now, weve got nonprofits that will take us time between small and Large Companies must state and local governments, weve covered a lot. Blood execution and continue to improve what weve done, do that. Thank you. You have five minutes. Thank you. Can you hear me . Yes, i can hear you. I never abandon you, i was here the whole time, my microphone wasnt working. He was sad to hear the news of andys wife and family, is a friend to all of us. On our side, we love him and its tragic. We will keep his life and family in our prayers. Thank you for letting us know. Dont agree with the lifetime appointment, wouldnt do that to you, i wouldnt shorten your life. That wouldnt be fair at all but i commend you, i would call republicans of old stable, dignified intelligence, i think everyone has been looking to you for guidance and youve been the right person at the right time and i want to commend you. Go to commend you for highlighting disproportionate highlight the pandemic has had on communities of color, latinos, africanamericans and especially the poor. My district is in Imperial County which is a Porter County to mexico, 70 of my district latino, Unemployment Rate is a striking 28 in april, thats what it was basically the same we had during the great recession. Twentyfive and 30 . The 266 say in april, it increased about 15 , specifically in the areas of everpresent, which is on the border. The city of san diego, unemployment here was about 20 , disproportionate impact of the pandemic in our economy is here in my district. What policies have specified produced on unemployment africanamericans and latinos during this panama . What policies is a put in place to ensure latinos, africanamericans are not suffering from this high Unemployment Rates as we emerge from this recession . All of our policies are focused on the problem. The way this pandemic worked is it companies and parts of the growing which involve getting people together in tight quarters and feeding them or giving them drinks or find them around and those are service jobs which happen to be overly represented and the workforce happens to be consistent. A large measure of minorities. Extraordinary large portions are laid off and has fallen heavily on the land populations as well as africanamericans. We are supporting credit in the economy to companies so they dont feel Financial Stress, we are trying to create an environment in which people have the best chance to go back to their old jobs or get a new job. Thats really what all of our efforts are about. I think you know the job you described also relies a lot on tourism and restaurants and Service Economy, he seemed to be the last ones coming out of this recession, people dont feel comfortable going back so without Unemployment Insurance and the enhancement, are they going to make it . We are going to see lots of people going back to work in the next few months, but the people in those parts of a tourism being a big part, many will struggle until the pandemic is really in the history books so thats a problem. I think they will need support, it will be difficult to find jobs in the industry at all and who will need to support them and help them. As congress did in a Global Financial crisis, as the years were on congress, react employment insurance a number of times just to keep people in their apartment, not being evicted or moving into a shelter and by the way, thats going to be a place where the disease can spread more, too. Its important we provide that. I hope you use your influence to make sure that happens. One of the things you said was his pandemic is over again, thank you again. We have a lot of faith in you. Thank you. Can you hear me . Yes, i can hear you. Terrific. Appreciate you being here, we are all concerned about the economy and recovery and jobs. Something that concerns me are the properties that have longterm mortgages, lender has very little flexibility and their ability to forbear. We saw the need to forbear for lenders to forbear, encouraging banks which are the biggest and lenders in our economy to forbear. Weve given guidance to forbear. We have worked on legislation and financing and encourage forbearance. There are pockets of the economy where theres not the ability for the lenders to forbear at a level that will help them get to the other side. Specifically concerned about some sectors and hospitality, Student Housing and indoor retail rates because of the pandemic, they have no cash, very little. They cannot service mortgages, they cant pay for utilities or insurance, they cant pay property tax. Ive been working with the a lot of members on this committee, republicans and democrats from all over the country who share this concern. I perceive this absent action by congress, by the federal government, we are going to see a wave of foreclosures beginning in the fall and going through next spring. The impact on jobs i think will be material as people who are working in indoor retail, Student Housing for you have University Town that needs to have the housing to run the university, the foreclosures are going to be serious and their foreclosed and dont have the capital to reopen the business. So assuming you see things the way i see it, is a common cataclysm here, do you have the Statutory Authority to open up the main Street Lending program or any other program to provide Lending Authority to someone to in turn help the properties in trouble and cant make their mortgage . There are limits, as i think youre referring to and what we can do, their lending powers, we have to conclude periodically secured. There are lines we cant cross within that. We can take a lot of risk and the question is for Companies Like that, you hit the most effective sectors, there has to be landing on an asset basis, it is something we are looking at. I know youre looking at that. My question is yes or no, can you do this without act of congress or did we need to take an act to give you the authority . Do you have the authority today if you decided this is important, weve got to do it, take it to the properties and get them to the other side to get them to the other side, communities will survive. There are whole communities that will die or badly impaired if they lose hospitality space or Shopping Centers important to the community. You have the authority what does Congress Need to act to give you that . Without seeing the numbers, youre talking about low leverage situations where it really is liquidity problem, you have that authority. Right in the hospitality space, the average is 53 . Real estate is normally 15 to 70 times. Thats well outside the range you have stated bible you can do, my question is, do i have to pass a law so you can blend into this space or do you have the authority right now to say theres a problem, we are going to take action . I think some of the problems in the space will be better served by fiscal policy. I think we can reach some of them as well. Thank you. Thank you. Thank you for all youre doing in these difficult times. They expand Unemployment Benefits by increasing the benefits by an extra 600 a week on top of the benefits the state provides. In virginia, maximum weekly benefit was 370, the extra money has been a huge relief for a 22000 virginians who filed unemployment since march 15. These benefits set to expire end of july. Do you anticipate Unemployment Rates falling significantly by that time . Many forecasters would say, and i would agree we should see strong job creation between now and end of july. That may mean Unemployment Rate falls down. One of the arguments, continuing this benefit is that its too generous. My colleagues are suggesting theyre having a hard time getting employees to come back to work because its what they make in their regular job, is it something youve encountered as far as Business Activity and data . Have you gotten any information they are trying to hire people back and having trouble . Rather kick back and take unemployment . Employers and many employees are reluctant to go back quickly and it may partly be that the 600 is generous compared to what they make, many were making cap much but its also a Service Economy job and youre close to someone, a beauty shop or nail salon or any of those things, reluctant on workers to go back to work and if they can delay that. More broadly, i would say the program and at the end of july, i would say its probably went to be important that it be continued in some form, i wont say what form but you wouldnt want to go all the way to zero on that. Talk about people not feeling comfortable going back to work. People are concerned about the safety, they have somebody at home with a compromised immune system or the elderly, a lot of people in my district are having trouble accessing childcare because many centers have closed. Thats a real issue for a lot of people. Former chairs endorsed a proposal which is the securities act for unemployment act due to the state of the economy. Changes in Unemployment Rate, you agree we should tie assistance to the economy or what are your thoughts on these that have set triggers for the benefits to continue . He got almost two months, month and a half until the end of the ui program and you are seeing a lot of interesting ideas come up. There are a number of proposals for bipartisan groups and i think theres no doubt youre thinking, what should the next bit of support look like . Some of the ideas are interesting, i dont want to endorse a particular idea or program but i think there worth careful consideration. Thank you. I want to thank you for all of your transparency and programs the fed is administrating and also for having these and your willingness to make changes to the businesses eligible for the program in terms of money amounts and things like that by opening up to four people. I appreciate to your responsiveness to the community. I yield back. Thank you. Thank you, madam chair, thank you for your willingness to be so accessible. I want to thank you for everything you are doing during this crisis by your actions preventing us from getting much worse. I take your answers seriously about what we need to do for those still impacted by this crisis, especially those forcing a lot of unemployment and benefiting from this recovery and we need to try to help them. It is answered a question a little bit, you dont want to endorse any one proposal there, other elements you think there are important . A couple of things, but the Unemployment Insurance, its important to keep in mind that some of the jobs are not coming back soon. The jobs in all those areas where travel, accommodation, restaurants and bars, things like that, the people will have a hard time finding a job so to keep them in their apartment, its better to keep them in. This is a Natural Disaster. We should find ways to support those people and help them through this difficult part of their lives. Many will go back to their jobs but state and local governments do divide this Critical Service and we know what happens when they cant run deficits like that. They are already doing that which is worth looking at. Small businesses, we dont want to lose anymore Small Businesses and we have to. They are the leading part of the economy so those are three areas. Also, i was very sorry to see the news about andys wife this morning, hes a happy warrior, a wonderful man. I know we all feel terrible and hes in our prayers. Thanks for bringing that up. They are great friends and we are definitely keeping the family in our prayers. And he said this mornings number one job is hes dead to his two daughters who have lost their plum. And i do want to follow up on something you just talked about. In the first, one of the first Covid Response bills, we did include 150 billion for local governments and State Governments, but we tied that money. We said it had to be used only for Covid Response. And i hope that we will, in what you just said, at the very least, untie the strings on that money to start, and then see if local governments and State Governments need any more money. Im not going to ask you to comment on that, but i hope well do that. And in the spirit of the second part of your answer, obviously we want to focus on folks who are going to continue to be unemployed and Small Businesses too. So those are three great pillars, and i really appreciate it. So with the Interest Rates at a near record low, another thing we could do for our state and local governments, our municipal governments, is allow refunding so they could take advantage of these historically low Interest Rates in the Capital Markets. I dont know how the Capital Markets would respond to that, but its another thing that i hope we will do and i thought id bring that up since you just mentioned the importance of state and local governments. Again, i wont ask you to comment on that because frankly, its not in your purview. So the Federal Reserve did note in its may 2020 Financial Stability report that the Life Insurance industry has been adversely affected by a number of factors caused by the covid19 Economic Situation, including that near zero Interest Rate environment i just brought up. Do you think the near zero Interest Rate environment is a big impact on our insurance folks . What help do you think that we should give to make sure that, and i dont know if theres any kind of aid, but obviously we want to help people that are nearing retirement and help people that are savers. What can we do to impact that knowing that the Interest Rate probably will not go up anytime right away . So the Life Insurance industry is challenged by low Interest Rates and theyve had a lot of practice here in the last decade or so. They do come into this highly capitalized and i would just say a strong recovery is really what that Industry Needs and thats what were going to work on. Thanks for your time, mr. Chairman. I yield back, madam chair. Thank you, mr. Lynch, youre recognized for five minutes. Thank you, madam chair. Mr. Chairman, i want to say i appreciate you. I appreciate youre in this swinging. Youve been helping us on the unemployment, youve been helping us on trying to get some of this money out to main street. Im very happy to see your revisions recently on the main Street Lending program, and i want to thank chairwoman waters for her relentless advocacy to get that minimum loan size down. It started what, what was it, a billion . And then now its at 250,000. No, it was a million. It was a million first. Now its down to 250,000 so i think thats much more in the reasonable range for some of our Small Businesses. I do appreciate that the payback period has been expanded out to five years and that for participating banks, you also, you had a 15 skin in the game factor for some of these participating banks that i thought probably made the program unattractive to a lot of our local banks, but youve got that down to 5 . So well have to wait and see if thats sufficient, but i wanted to thank you for that. The question i had is we had a financial Fintech Task Force hearing the other day where the subject of chairwoman waters, fed accounts. So this is the idea about establishing fed accounts, basically doing, having the fed do for the unbanked what they do right now for banks. To give them access, to give them accounts and to tie them into the economy. I think if facebook can reach out and provide access to 2 billion daily users a day, i think maybe the fed could accomplish 5 of that, even though it would be requiring the fed to do some things it hasnt normally done. And i just wanted to know if what your thoughts are on the fed account idea, and if theres any other way that we might address the gap that still exists between some of our folks who are unbanked or underbanked in their areas, is there something the fed can do to close that gap . Thank you. Thank you. So as you pointed out, we can only offer Bank Accounts to, and our reserve banks to the depository institutions, not people. I think that would be a very dramatic change in the landscape of banking. I would worry what would happen to the rest of our private Banking System because an awful lot of people would opt to keep their personal money at the fed and then who would do the lending . It could hurt our intermediation process. In terms of the underbanked though, this is a big part of what we do, is work in local communities under cra to encourage Financial Inclusion. We also we enforce the fair credit laws to some extent. We dont have all of that authority, but we have a part of it. So those are things that we do now to address the needs of the unbanked and the underbanked. Also, we work closely with cdfis and minority depository institutions as well. They play a big role in doing that and we have a great deal of outreach and interaction with those institutions, which are active in the communities that really need the help. Well, i do think that with the changing technology, youre drifting away from brick and mortar and moving to mobile banking. I think it presents some opportunities that we have not had in the past. So i would just ask you to treat it with the level of attention that we would if the banks were in trouble. I appreciate it. We are asking you to do something that you werent designed to do, but i think the circumstances and the technology now give us an opportunity to do something. It may not be changing the feds traditional role, but certainly i think we can try to make life easier for these people who are unbanked and i yield back. Thank you. Thank you. Mr. Tipton. Youre recognized for five minutes. Thank you, madam chair, and chairman powell, good to be with you this morning and did appreciate your comments on andy barr. On our side of the aisle, he has always proceeded me in questioning and our thoughts and prayers certainly go out to he and his two daughters today and i do appreciate you, again, taking time to be here. Chair powell, weve heard a lot about the impacts that were having on the economy and appreciate that ever certainly that you have made to be able to address some of the concerns. Actually was appreciative to be able to see that the main Street Lending program was up and running this week and we are having some concerns that are being expressed. And under the terms and conditions, they may actually deter some potential borrowers, entire segments out of the market from participating in the program. And the hotel industry, weve talked about tourism this morning, for example, has been one of the hardest hit sectors during the pandemic, but they may not have great access to the mslp. Again, i know youve heard a lot of concerns out of congress from the Tourism Industry standpoint. I do believe its worth repeating, certainly a great impact in a district like mine in colorado. Could you outline whether the fed has considered that some of the loan terms will limit borrower participation, and whether this could be addressed through updated guidance as you monitor participation in the program . So some of those companies should be able to, and our facility is open to any kind of company as long as its one of the ineligible company, and that would include the ones you mentioned, and some of them should qualify, i would think, under our existing standards. Those that dont, we want to understand that and if there are ways we can adapt them and well absolutely look at that. One thing we are looking at, as i mentioned, is some kind of an Asset Based Lending thing. So i think were hearing this a lot about those sectors and its something we are looking at. Do appreciate your comments on that. One thing weve seen out of you, out of the administration, out of treasury has been flexibility. As you noted throughout this conversation, were in uncharted waters. Its something that none of us had fully anticipated or ever experienced before and hope not to again. And trying to be able to make sure that we are keeping jobs created and the viability of businesses to be able to continue is critically important. Did want to point out, i have also heard from some industry participants that Financial Reporting covenant required under the mslp may prevent participation. In particular, one thing thats been pointed out has been some of the Credit Facilities in terms of the requirements are costly for smaller applicants who dont currently have the infrastructure in place to be able to create complex quarterly filings. Could you explain why the fed chose to be able to put these enhanced reporting requirements in place and do you anticipate potential adjustments as you monitor the borrower Participation Rate and program . We cut back the Financial Reporting requirements in the last few weeks before we are going live here just for that purpose. And we thought we had cut them back to close to the bare minimum of what we would need to be able to monitor the performance of the loan at all. If we misjudged that and we want to know and well be getting that feedback. Thats feedback that we want to get. Were trying to make that process as user friendly and easy and automated as possible. We certainly tried to address that specific problem. If we didnt quite get that done, then thats very useful feedback. Okay. Thanks, and one thing that as we entered this crisis, we stepped back three months. I think in conversations that wed had, youd noted that our banks were well capitalized. Is it still your sense that our banks are well capitalized . I think weve seen them on the front lines trying to be able to deliver ppp, to be able to get that assistance out and did appreciate the comment that youd made in terms of the examinations, by the way, to be understanding that our banks have been put in a challenging situation, but in terms of the capitalization, do you still see the banks more capitalized . Yes, i do. Banks have been generally a source of strength here. Theyve taken on deposits, theyve offered a lot of forbearance to their individual and business customers and theyre making loans. Were in a whole lot better shape to face this situation than we were to face the last situation in 2008 and nine where the banks were really part of the they were at the source of a problem. Here, thats not at all the case. Thank you chairman for being here. I yield back, madam chair. Thank you. Mr. Phillips, youre recognized for five minutes. Thank you madam chair and chairman powell for being with us. I too want to add my condolences and heartfelt sympathy to andy barr and his children. I grieve with them as we all do. Chairman powell, i know youre not here to be a prognosticator, but could you please share with the american public, as simply as possible, what households should expect from an Economic Perspective in the months ahead . The way i look at it as this. You can think of this as taking place in three stages and the first stage was the shutdown and we know what that looks like. Its a lot of people who can work from home working from home, many, many people being laid off. And weve been through that, thats the second quarter, and i think were now in probably in the early stages of the second phase, which is call it the bounce back, the beginning of the recovery. And i do think assuming that the virus remains significantly under control, if you make that assumption, what we should see is companies opening up again, workers going back to work. We should see the positive data coming out and the economy starting to reopen and thats what we should see during this phase. I think most forecasters, just about all forecasters, then see theres a third phase, that there will be some parts of the economy that struggle to recover, and those are the ones where people get close together to be fed or entertained, all those areas weve been talking about. And that area is going to take a while to recover. Its going to take the public a while to gain confidence that its safe to engage in those activities and thats, there are a lot of workers that work there, and so that group is going to struggle. Theyre going to need support. Theyre going to need help and i think thats the way i see it, but i think we the incoming data suggests that were at the beginning of that second phase of recovery, reopening and expansion. Thats the road we need to get on that road and stay on that road and before you know it, things will feel a whole lot better. And mr. Chairman, im sure its fair to say that consumer psychology will change. Consumer psychology is going to change in perpetuity. Im sure youve given that some thought. What should we be thinking about as we move forward as lawmakers, relative to a changed economy because of the pandemic and the economic disruption . In the meantime, i think the focus should be getting through this critical phase. As policy makers, what help does the economy need to transit this critical phase and really get going again . Thats what were thinking about. I think longer term, these are interesting questions. It does seem very likely that people have learned that for certain jobs, you can do them anywhere. I guess we knew that, but now we really know it. And so whats going to happen with people in a whole lot of industries who can really do their jobs from home if they want to, or from a particular place of work or from another state. The technology has really moved to a place where you can do Amazing Things that we didnt have to do before. This Conference Call is not something we had regularly done, and its becoming very routine. The technology is getting better. Were all getting used to it. Theres still glitches. Theyre plenty of glitches here at the fed on these things, so i think were going to learn that this is, in a lot of ways, its accelerating preexisting trends too. There are existing trends that just had sped up a lot in the economy and the more Online Shopping and things like that. So thats something were thinking about. The main thing were thinking about, what are we going to do to make this recovery get off to a really good start, get a lot of people back to work . Support the economy and were not thinking about putting down our tools for a long time. And mr. Chairman, with that in mind, you advised us to go big and we have. Our National Debt is approaching 27 trillion. Our debt service on an annualized basis, over 400 billion a year. I do have concerns about our ability to manage that, to pay that bill, if you will, moving forward and any counsel and guidance you might share with we lawmakers, as we contemplate some degree of fiscal responsibility moving forward. First of all, i think congress did go big and it has gone big, and i think its been appropriate, and i think itll be well judged over time. In terms of the National Debt, i think the time will come when its time to return to the concerns of fiscal sustainability. A sustainable fiscal plan is one that you stay on for many years. Its not something where you flip a switch and then really go into difficult times to get. Its really ideally what you do is you get in a situation where the economy is growing faster than the debt. You stay on that path for a long time. Thats how successful countries have done it. Well need to get to that and we will. I think we dont need to get to it until we get well and truly through this extraordinary challenging time. Thank you, mr. Chairman. I yield back. Thank you. Mr. Williams, youre recognized for five minutes. Thank you madam chairman, and also want to say my prayers go out to andy barr and his family with the passing of his beautiful wife, carol. Mr. Chairman, thank you for joining us in this virtual setting during these strange times that were in. Previously when you have come before our committee, we were talking about how we can continue to build on the historic Economic Growth that we all were experiencing. Now that we are talking under very difficult circumstances, id like to focus on getting back to where we were pre coronavirus. And as weve talked about before, Small Businesses are the main economic engine and as you know, i am a Small Business owner and were the job creators in our country. And im one of those that believe we could have growth in the Fourth Quarter. I feel pretty good about that. So what do you think needs to be done to support these main street businesses as they attempt to remain viable as the lockdown across our country ends . So as the lockdown ends and the economy reopens, the first thing is that we need to do it in a sustainable way. And nobody wants to do this, but its really good if we do. And that is, i think to the extent we can continue to observe those keep a distance, wash your hands, wear a mask, that kind of thing, thats really going to help. That goes with a fast reopening in the economy. That goes with a successful reopening. So those things are really important. I also think we at the fed need to keep our foot on the gas until were really sure that were through this and thats certainly our intention and i think you may find that theres more for you to do as well. Well, and as traditional snapshot of the Banking Industry during this unique time will likely not paint a rosy picture based upon the recent shutdowns and phased in recoveries, have based upon the recent shutdowns and faced in recoveries. Everbank capital levels and reserves remain historically strong as weve talked about. There are many borrowers that could return to profitability once the economy rebounds. So mr. Chairman, what steps are being taken to ensure that the regulators are taking a reasoned approach to oversight, and how is that being communicated to the various Federal Reserve district banks and the examiners in the field . On a number of occasions, weve issued public statements, Public Communications to our supervisory group. The other banking agencies have done that as well. And essentially it boils down to guidance that we want you to work with. We want the banks to work with their borrowers. We dont want to be on a hair trigger to classify loans or call them trouble loans or anything like that. We want to look at this as an unusual situation and be flexible and thoughtful about the way we do our jobs. Of course we havent been really supervising. Were only starting to supervise again, at the fed, were going to do it remotely. Were not going to be visiting yet, but that time will come fairly soon. But were doing training for supervisors and things like that. So we really want to be. Weve also, by the way weve encouraged banks to use their buffers. Theyve built up these buffers during good times and thats a great thing now because they can use those Capital Buffers to make loans and to work with borrowers. Thank you for that, because it is different than 08 as weve all talked about. The atlantic magazine published an article titled the looming bank collapse. The us Financial System could be on the cusp of calamity and this time we may not be able to save it. The point of the article was to compare the threat to collateral Loan Obligations or clos pose to the Financial Systems in a similar way that Mortgage Backed securities did during the 2008 crisis. Do you think that the threat of clos is properly accounted for, and can you discuss how the fed has been monitoring this risk . So i dont think that thats an inappropriate comparison. I really dont. This is not the same as the Mortgage Backed securities in that situation at 10, 12 years. There was almost total lack of transparency into what the banks held and how sensitive was it to risks and things like that. Thats not the case with the clos. With the clos we have really good information. We include them. It extend through on bank Balance Sheets. We include them in our stress tests. We stress them under very stressful situations like the Current Situation, and we know what the losses would be coming out of that. So its a very, very different situation. Thats not to say there wont be losses. There will be losses. This is a severe downturn, but it is one that we have been monitoring carefully and that the banks are well capitalized to deal with, we believe. Well, thank you. I want to thank you for being here today. I have a lot of respect for what youre doing as a business owner. I feel that we are in the comeback mode. As i said earlier, i look forward to having growth in the Fourth Quarter and a better year next year. So thank you for your hard work and appreciate your efforts and working with us. I yield my time back. Ms. Maloney, you are recognized for five minutes. Thank you, madam chair. Can you hear me . Yes. I can hear you. Thank you. First, i want to join my colleagues and ill pray my condolences to andy barr and his family. Our hearts are with them, but now id like to welcome back to the Committee Chairman powell. I just want to start by saying that i think the u. S. Economy is going to need all the help it can get for the foreseeable future. I hope you dont take your foot off the gas and continue to be aggressive. In your press conference last week, you announced that the fed does not expect to raise Interest Rates until at least 2022, a position that almost all fomc members supported. Thats a position that i strongly support as well. As you noted, the fed is being cautious uncertainty about the coronavirus and about the damage to the economy Going Forward. So i want to ask you, would you continue to hold Interest Rates at zero until 2022, even if Economic Conditions unexpectedly improve . In other words, what would cause you to change your position that Interest Rates should stay at zero until 2022 . Thank you. So what youre referring to there, the end of 2022, thats actually not a committee forecast. It happens to be the median of forecast of individual Committee Members. We dont create a collective group. So what that really was, was evidence that thats what our participants do feel. Thats their prediction of appropriate Monetary Policy. It isnt actually a promise to do that. What weve said we would do is we would keep rates where they are until were confident that the economy has weathered the Current Situation and as well on the road to recovery. So what would it take . I think were not thinking about raising rates. Were thinking that this economy is going to need support from Monetary Policy or an extended period of time and not just through Interest Rates also through our asset purchases and also through the this is the largest economic shock to hit our economy in living memory. Its also without any kind of precedent, it looks like itll be the deepest recession. It may not turn out to be a very long one, but the road back, we believe and many other forecasts do too. Well take some time and well be there to support this economy until we fully recover. As i mentioned, we want to get back to where we were in february, as mr. Williams was saying. We want to get back to three and a half percent unemployment, wages going up the most for people at the low end of the wage spectrum, where we were. Were low in moderate Income Community people were telling us, this is the best weve had it in a really long time. We want to get back to that as soon as we possibly can, and well be using our tools to do that. Also, we have a good sense of what Economic Indicators the fed looks at in normal times. You look at the employment numbers, the inflation data, consumer confidence, and all the usual economic measures. I dont believe anyone has a good sense of what metrics youll be looking at now in the middle of a recession caused by a Public Health crisis or where the economy will bounce back and so the virus is under control. So my question is, what are the key metrics that youre looking at now . Are you looking at rates of infection, hospitalization rates, mortality . What are the Public Health metrics youre paying the most attention to . So, of course, were looking at all kinds of economic data, which ill mention. But we are also now looking of course at all the data we can get and hearing from experts about the pandemic and were cases going down, where are they going up and all that kind of thing. Thats a new area for us. And of course, for everybody really, other than, unless you were an epidemiologist before this. So thats a big thing. Its almost as though, if you could give me a if you knew for sure what the path of the pandemic was, then youd have a lot more confidence in what your Economic Forecast was. But of course we dont have that. Were also looking though, i think for for a month or so now weve been looking at the data that suggested an economic reopening. So you can track are people moving around a lot . Theres a lot of this High Frequency data that you get from the Technology Companies gets published. Are people moving around a lot . Are they starting businesses . Lots of early indicators . So weve been seeing a great deal of that. Youre now clearly seeing spending is ticking up, employment is ticking up. So these are the early real indicators that weve been wanting to see, and were beginning to see them now. Thank you and i yield back. Thanks for coming. Thank you. Mr. Hill youre recognized for five minutes. Thank you, madam chair. Thanks for conducting this hearing. Of course, our thanks to lisa clement and patrina for keeping us on track on the technology. We appreciate our staff. Martha and i were just so broken hearted last night at about 8 30, when we learned the loss of carol barr. I cant imagine the pain that andy feels. So all of us on the committee, share that bond of affection for andy, and we wish him comfort during this tough time. Mr. Chairman, glad to have you back before the committee. Youve done an excellent job today talking about the facilities, the challenges with the facilities, talking about your concerns about how to maintain some fiscal support in the unemployment area, particularly and your concern about the Small Businesses. So thanks for being so thorough in your answers. As the Ranking Member on the Monetary Policy subcommittee, i wanted to turn and talk about the Balance Sheet of the fed and Monetary Policy. And just put some parameters on it as we are in covid19 now and again, thank you publicly for the outstanding job that the board of governors did in early march to bring liquidity back to the system and preserve peoples access to capital by keeping our Capital Markets functioning. But i do want to talk about how we measure Monetary Policy Going Forward. Now, as you say, enter that mid point of the return to economic recovery. The Balance Sheet was about 4 trillion before the pandemic yet. There was a lot of concern over it at that level, in terms of a percentage of gdp and the like. Very quickly dwarfing anything in the qe days, you have added 3 trillion to the Balance Sheet and were close to 7 trillion. Do you see that range of precovid of 16 to 17 of gdp still a post pandemic target based on reserves that you see the Balance Sheet returning to . I hadnt thought of an actual target though, but in the long run, the size of our Balance Sheet will be dictated by the publics demand for our liabilities. The two biggest of which are currency and reserves. So we felt that we were getting really close to that demand at the level you suggest. That would tend to be roughly constant over time, i guess, as a percentage of gdp. So its a place to get back to. And at the peak in 2014, you owned about 21 of all new issue treasuries, and about 40 of new issue agency mbs. And in this most recent phase, this spring, as you expanded the Balance Sheet, i think youre about 19 of the new issue treasury market. And about 30 of the mbs market, some commentators have said, well, housing is as big an issue this time as it was certainly in a way from a dislocation point of view. But you had a liquidity and spread issues in the mbs market. You want to take a minute and talk about why you did engage in the gsc agency purchasing. Sure. So those markets are critical for financing the housing industry, and also there are closely connected to the treasury market, as you know. So it benefits all the Financial Markets and the general public when the treasury market is working. So in terms of the mbs, there wasnt the capacity to hold those securities. And what was happening is the very low rates that we were putting in place, they werent getting through to borrowers. Rates werent going down thats because there wasnt the demand to hold the mbs securities. So we had to get in there and the market functioning again. Im happy to say that it is now functioning essentially normally, not perfectly, but that was really what was our thinking. Well then obviously you had people trying to get out of the long dated maturities in the treasury market, and you had prepayment speeds pick up. So i understand why you did it, but you do support moving in the long run to an old treasury portfolio from a philosophical point of view. Isnt that correct . Yes. In fact, absolutely. In fact, i had no intention of ever buying Mortgage Backed security when i became the chair would you say that the repo market in the short term liquidity markets are now functioning after your extraordinary efforts in march and youre no longer needed in the daily repo market to the same extent . Yes. I would say that i also hasten to add that were still on alert. We feel we dont take the gains for granted at all, right . Well, were grateful for your leadership. Madam chair, thank you for the opportunity. Mr. Chairman, thanks for being before the committee. I yield back. Thank you. Mr. Sherman, youre recognized for five minutes. Unmute. Mr. Sherman. Mr. Green, youre recognized for five minutes. Mr. Sherman needs to unmute. Hes muted. Mr. Sherman, unmute. Can i be heard . Yes. Mr. Sherman are you there . Im here. Can i be heard . No, lets go. We only got a few more minutes left for the other members to be able to ask questions. I hope i can be heard. You can be heard mr. Sherman. Good. Mr. Powell. Thank you for joining us a Credit Rating agencies, as you know, the chairwoman and congressman andy barr wrote a letter with 16 has written you about this. Andy barr has written you a letter about this. There are nine Credit Rating agencies accepted for various purposes by the sec, which has the expertise in the area. Yet the fed seems to put a premium on only three Credit Rating agencies. Is it your intention to look at instruments rated by all of the sec accepted Credit Rating agency . Weve actually expanded the group of Credit Rating agencies to six from three, and were continuing to look at others. But theres still a situation where youll accept one of those second three only if the same instrument is rated by a one of the big three, or are you accepting all six on the same level . The former, not the latter. So you havent given real equality to the six that you have decided this. The second issue is when we pass the cares. If a company got a loan from the federal government, it came with strings like no stock buy backs. If youre just going to go out in the market and buy debt instruments, those strings wouldnt apply of course, the company may have issued that bond a long time ago and is not consented to any restrictions on it, stock buy back. Are you planning to have a transaction, which in substance is a government loan. That is to say, that is accomplished in form by having the company issue, a bond as to which you are basically the sole purchaser you and the treasurer are the sole purchase. The cares act is very specific on this and i wasnt part of this, but my understanding is it was all carefully negotiated. Those requirements do not apply to Capital Markets transactions or syndicated loans. They do apply to direct loans. The main street facilities is a direct loan program. The Corporate Credit facilities are either syndicated loans or Capital Markets transactions, so. Capital market transaction is usually one when there are many buyers of the debt instrument issuance, are you going to have any that are in substance, a government loan, what you choose to package them and say that their Capital Markets transaction . I wouldnt. Were not. When we purchase a bond, which is a registered security and it comes in a normal form, thats a Capital Markets transaction. Even if youre the sole purchaser and it is all of the economic indicia of being a government loan, the fact that you can call it a bond issuance, liberates you and the company from congressional attention, is that what youre saying . It actually affects congressional attention. It was never our intention to have you take what is in substance alone and package it as a Capital Markets transaction. We know a bond issuance is one where there are many purchasers of the same instrument and a loan is one where the federal government makes a loan. Or is the sole lender in the transaction, or substantially, the sole lender. And it sounds youve found a loophole in what weve written and yet you planned to exploit it. It was certainly never the intention. What sense would it make for congress to say, well, if you do a government loan this way, there are strings that come with it, but youre free to do it, but heres this loophole where you can avoid all the strings. Clearly a Capital Markets transaction is one where the fed has the additional assurance that comes from other Market Participants buying that same issuance on the same day on the same terms. And youre depriving us of that, if you are the sole purchaser of the issuance and at the same time you deprive us of the restrictions on stock buybacks. You create a circumstance where money goes directly from the treasury into the pockets of shareholders who are taking their money out of the company. And that is certainly not what congress intended, but if theres a loophole, its up to congress to flag that loophole. I believe my time has expired. Thank you. Mr. Emmer, you have five minutes. Mr. Emmer. If mr. Emmer is not present or ready well go to mr. Loudermilk. You have five minutes. Thank you madam chair. Thank you mr. Chairman for being here. And also id like to thank you for all the work that youve been doing. A lot of times we dont look at how bad things could be, and i think they could be a lot worse right now, if we hadnt had the intervention that weve had through the administration quickly, i thought i had another 10 minutes to prepare. Yeah, im sorry loudermilk just showed up and well, you cant just rely on list, you look at the thumbnails. I apologize. I guess im getting some feedback. I dont know if anyone else is. But i want to thank you for the actions that youve done. I know weve taken some bold actions and especially the way that you have made changes on the fly with the way that you oversee and regulate the banks. I know that my local banks, community banks, regional banks, were all very skeptical going into this. But i can tell you that theyre not happy with the way things are, but theyre pleased and way that things are going because they realized that they could be a lot worse. Just a couple of quick questions, because i know were running low on time. But youve done a lot of Mortgage Backed securities that are with fannie mae and freddie mac and ginnie mae. Those included in talf, but in 2008, mortgages that werent backed, the nonagency mortgages were included in talf. And my question ive written you a letter about this, are you considering including those nonagency backed mortgages and consumer installment loans in talf . So the answer is on mbs. That is something we have under consideration and youre right. I mean, as a general manner, weve been willing to and eager in fact to expand things where its appropriate. Consumer installment loans is a little different. We dont have the history. They dont have a history in the Asset Backed Securities market. So we struggle a little bit with that one, but were looking at it as well. Okay. I appreciate that one last question, Intercontinental Exchange and other clearing houses for future trades have had a huge spike in the amount of funds they hold overnight because the market volatility and commercial banks can only accept a limited amounts of those deposits because of the capital requirements. Theyd like to be able to temporarily deposit those funds with the fed. Is that something that youre considering . The only entities like Intercontinental Exchange that can deposit funds at the fed are those that have been designated as systemically important Financial Market utilities under the law. So we dont have the Legal Authority to do that right now. It would be a question, really not for one company, but for all the companies that are in that category, should they get the Legal Authority to do that. But as of right now, we do not have the authority to get Bank Accounts, unless theyre a designated Financial Market utility okay. Maybe thats something that we can work on Going Forward. But i thank you and i know were short on time. So i yield back. I think mine works now just for notice. Thank you. Mr. Lawson, youre recognized for five minutes. Mr. Lawson. Thank you, madam chair, and welcome mr. Powell to the committee, really appreciate the opportunity to talk to you today. Madam chair said that maybe two hours ago, and it was about 120 billion ppp funds that that was Still Available allocated. An application number has slowed dramatically. Do you believe that as an impaired businesses to take an Additional Debt obligation is living the effectiveness of the program and that in order to create business certainty and confidence in reopening and hiring a Grant Program would be better. What do you propose for businesses that cannot take Additional Debt . So we dont have the sba administers the Paycheck Protection Program, ppp. We have a little bit of a role in that once a bank makes one of those loans, well take that loan off their Balance Sheet so they can have the room to make another loan. So i follow it, but its not one that we administer. I would say the benefit of that program is that a loan turns into a grant, as long as you obey the rules. I know that the rules have been adjusted by the last law that you pass and also in regulatory flexibility. So i would say for many Small Businesses, thats what they need and that theyre not well served by taking on a loan to make payroll and things like that. So thats the tool we have. Thats all we can really do. We cant do grants. We can only do loans. And thats why were doing that for Larger Companies than the ones that are eligible for the ppp. Okay. I think madam chair close out, she might have something to say. My other question is that the april job report, was the worst in american history. May job report shows that less than half black adults have job. Chairman powell, what steps can the fed take to ensure that emergency relief in targeting at the and the minorities own businesses in the state of the economy . Well, all too large portion of those who lost their job in the pandemic were from low and moderate income communities. And many of them are minorities and the same is true with businesses, minorityowned businesses are under tremendous pressure. We have tools that apply broadly across the economy. Thats what we can do. I think we can also work with Minority Team for institutions and cdfis as well. We do that to try to support the work of those institutions and their communities. Thats what we can do. I know there are also the things that congress can do as well and has done. Okay. Thank you. I yield back, madam chair. Mr. Emmer, youre recognized for five minutes. Thank you, madam chair. And thank you for your patience, with my ability to use this machine. It goes without saying, but im going to say it anyway, like everyone else on this committee, our hearts go out and our prayers to andy barr and his family, a very tough day. Chair powell, i appreciate you being with us here today, albeit virtually and even more so after my recent experience, trying to get my mute button fixed. I think the house should be back here in washington, doing our jobs. The opportunity to connect with you digitally has brought to mind several topics related to fintech that ive been working on, including his Ranking Member on the Fintech Task Force of this committee. Technological innovations, as late as last year, you told my colleague representative french hill from arkansas, that you were following central bank, Digital Currencies closely, but that the fed was not currently developing a Central Bank Digital currency. You said, quote characteristics that make the development of Central Bank Digital currency more immediately compelling, or some countries differ from those in the us close quote. It is true other countries utilize digital cash at a higher rate than the us. However, our technological edge has kept us the predominant world leader we are today for at least several decades. I think the recent pandemic has actually shown that this is an important step that we need to make, regardless. What substantive, recent actions is the fed taken to understand and experiment with this technology. I guess, can you disclose any current considerations or questions you or the fed have on the concept of a Central Bank Digital currency . Id be glad to. So, i think Central Banks everywhere all around the world are looking at this and we owe it to the public that we serve to be up to speed. If this is something that is going to be good for the United States economy and for the worlds reserve currency, which is the dollar, then we need to be there and we need to understand it first and best. So were working hard on it. Theres a group of major Central Banks that have gotten together to share understanding of the technology and the cybersecurity implications, the economic implications, the Financial Inclusion implications. It is a big complex problem and its one that we take very seriously. And again, i think its our obligation to understand it well and not wake up one day and realize that the dollar is no longer World Reserve currency, because we just missed a technological change. So were not going to let that happen. At the same time theres some very serious questions that have to be answered before we would want to implement digital currency. Thats great. Its good to hear. Good to hear that youre, youre leaning in. In the recent report issued by the digital dollar project and reflected in some of the congressional proposals that are out there. There seems to be a recognized need agreement that the private sector should be involved in the creation of a cbdc. This is either in its development or dispersal. I guess, through the feds work and analysis on the top of the picture were currently in, what role do you think the private sector would play . I really do think this is something that the Central Banks have to design principally and the private sector is not involved in creating the money supply. Thats something that the central bank does. I know theyre ideas that this should really be the work of a private board. I dont really think the public would welcome the idea that private employees who are not accountable solely to the public good, would be responsible for something this important. I mean, once we assess it and decide what to do, itll be all which leads to my last question. The should the fed have the Technical Capability to deny access to lawabiding citizens for any purpose and should oversee or any transactions between private individuals . Those of the questions. In one case if you create a Central Bank Digital currency you can know every payment by everybody. Thats not good. If you dont know any payments by anybody, then its a very difficult thank you. Thank you, madam chair. Thank you, madam chair. Good to see you, chairman powell in ned, your friends are morning with you. Madam chair, want to first think you and the committee for drafting is little doubt of the committee that we sent to secretary mnuchin ndu, chairman powell dated may 13, 2020, particularly addressing the territorial conclusion in the Municipal Liquidity facility that is being administered by the fed more specifically we write through the coronavirus aid relief and economic securities act signed into law on march 27, congress instructed the treasury secretary to speak establishment of the facility that would support the market for borrowing by state municipal and territorial governments. Despite the clear and unambiguous conclusion of territorial governments in these instructions the Federal Reserves mean visible liquidity facility announced on april 9, did not list territories among eligible issuers of debt youre furthermore, despite earlier request to credit the original announcement the feds subscribe announcement on april 27 expanded the number of eligible issuers at the Municipal Liquidity facility would support to continue to exclude territorial governments. Mr. Chairman, enter dialogue with my colleague i heard you say we are implement the law that you passed but the law that we passed and the cares act full eclipse territories in immiscible according facility and yet the fed is excluded territories from able to access that. In response to our letter that we sent to you on may 13, we got a response todays ago on june 15 from you, and the area you addressed with respect to that concern you state and i ani quote, as you know, we are required by law in our emergency lending to be well secure and protect taxpayers from loss and we prohibited from lending to insolvent borrowers. The financial circumstances the territories are generally inconsistent with the statutory constraints. Notwithstanding puerto ricos circumstances, guam is not insolvent. The commonwealth of northern marianas is not insolvent. The u. S. Virgin islands are not insolvent. My question is why are we excluding this territories to be able to access the municipal Lending Facility . So as you pointed out, what we put in our letter is really, really the way the law we require to conclude where adequate security, and weve not been able to come to the view that any other territories would be able to borrow from us. There are other government i dont doubt the need for borrowing both are other programs which are better suited to serving the territories need. But the cares act specifically authorizes territories to be able to access the Municipal Liquidity facility. Its very clear in the law, and the rationale for excluding them is not consistent with all of the territories. And i seriously doubt there some kind of test being administered to every other jurisdiction in the country that accessing a Municipal Liquidity facility. I want to ask if theres going to be any reconsideration from the fed given all of these facts . All of the other to be eligible for the missile facility borrowers are required up an Investment Grade rating. All of those who are eligible to have an Investment Grade rating. Thats a requirement we set for the municipal Loan Facility. The liquidity facility, mr. Chairman, were authorized did we did not set those kind of bars. One of the reasons why the liquidity facility accessible by the fed is because when you have jurisdictions that having more difficulty accessing Capital Markets, the reason why we provide those findings is for the fed to be able to provide that to the government. Im sorry that we disagree on this. I would just say we are a provider of liquidity, and those of the judgments that weve made. Be happy to go back to the drawing board and look at it that thats the judgment that we have come to in terms of what section 133 under the Federal Reserve act requires us. Just a close, madam chair, because in conversations today we talked about giving my noise access. Our territories have towards us 90 populations comprise of minorities. We talked about the need for supporting tourism industries. Our Tourism Industry and our territories are critically strained. We need to be able to access these resources with the body. Thank you, madam chair. I yield back thank you very much. I would like to thank chairman powell for his testimony today. Without objection all members will have five legislative days within which to submit additional written questions for the witness, to the chair which will be forwarded to chair powell for his response. I would ask you to please respond as probably as you able. Without objection, all members will have five legislative within which to submit extraneous materials to the chair for inclusion in the record. Let me just say that i join with all of you today, all of my colleagues in sending my prayers and condolences to andy barr and his children. Let us keep them in our prayers. This meeting is adjourned. Coming up live short on cspan2 will bring a discussion on the coronavirus and the global economy. We will hear from the Global Research chair from j. P. Morgan. This event hosted by the brookings institution. [inaudible conversations] [inaudible conversations]. Thank you. Good to talk to. Give us some specifics, what do you study . Its about cities and in a bigger sense, living together. How do we as americans, solve the problems that make it hard to live near each