spending and chicago pmi fed chair with alan blinder in a few moments. steve liesman will give us a curtain razor on that. hey, steve. >> good morning, carl. yeah, we're wondering whether powell continues a cautious tone, much more cautious tone than the market seems to embrace and in a way his cautious tone seems to give the market a green light because it means more stimulus or the fed being around for a long time here among powell's concerns he's expressed in the past that the employment and growth rebound could take longer than it anticipated, some businesses won't survive the downturn, a possible second wave of the virus and the stimulus will run out and think about more stimulus on the other side you can see the effects of the stimulus carl alluded to in the income and spending numbers this morning. quite astonishing. every one of the numbers you're about to see are historic, never been there before. 11% month to month rise in income we'll tell you why that happened in a second. 13% month to month decline in spending 33% savings rate what happened on the income side very simple, a huge decline in wages and salaries, $740 billion down at an annual rate but $2.9 trillion increase in government benefits these numbers are annualized but still, the magnitude is enormous here when it comes to those issues we'll be listening to powell about what more the fed may have planned. a bunch of programs not yet launched from the fed. they can happen any day, any week now discussion perhaps of the upcoming meeting more qe1, 2 greater, solid forward guidance linked to a date or data and the tantalizing possibility that perhaps the federal reserve would cap interest rates carl >> yeah. steve, you just touched on it, but it does seem that the expectations here that we're going to hear a conversation around the fed's main street lending program, municipal liquidity facility and potentially this shift towards the restart of large-scale bond buying and how long that might continue as well in terms of those expectations and some of the reports we've seen ahead of this, how much, i guess, do you expect the tone or rhetoric or the details to come out in this conversation from chairman powell? >> i don't know how much teeth, but i think the attitude will be full-blown stimulus continuing from the federal reserve and you're right to point out quantitative easing. it's well to remember that the fed has not really done a traditional quantitative easing program yet in this crisis, along the lines of what it did in the '08/'09 crisis it's come into the bond and mortgage market to stabilize those markets, provide liquidity. that's what those pchs were about. they weren't really about lowering interest rates or creating portfolio preferences although there was perhaps some impact on that the fed still has full qe in its arsenal where it examines forward and says we're going to buy without limit until we achieve certain goals or perhaps put a limit on it and say we're going to do $700 billion or a trillion worth of qe it has that and hasn't launched that part of the program yet, morgan >> steve, if you look at the bond market which you just mentioned and the stock market, it would seem to me like the fed has accomplished what they wanted to in terms of stabilizing them some would say on the stock market maybe even too well given what the overall economy really looks like what do you expect chair powel to say about which numbers, which metrics the fed is watching from here to establish whether they need to do anything more >> you know, jonathan, it's an extraordinary time where when you ask a fed official the most important numbers they will tell you it is the coronavirus numbers, the public health numbers. that's where they're taking their cues from. and that's why they have embraced this concern about a second wave of virus that's their big concern they will turn their attention to the economy if you think about it, jonathan, the fed has not really had an opportunity to stimulate the economy in part because people are inside their houses. people are not spending right now. there's limited opportunities for them to spend and in a sense you don't want to generate that kind of economic activity. it's when people come out of their homes if we can get the kind of situations conducive to people returning to some of the places that are shut down and those places reopening, that's when you want stimulus for the economy and the fed is -- we know already is thinking about that second wave of action that the federal reserve might take and also looking strongly to the fiscal side to also have plans ready to help stimulate the economy rather than the word you used was apt, stabilize the economy. >> steve, how do you think powell addresses the disparity on the measures and the numbers and dollars that have been used? >> not a lot of dollars have been used at all because the fed is trotting -- treading carefully when it comes to opening these programs there were documents put out by the boston federal reserve that showed the process by which you would get a loan from the main street lending facility. contrast that with the ppp program that was sort of launched quickly and to its credit but haphazardly banks were concerned about whether or not they could disperse the money because the documents were there i think it learned a lot from ppp. on the one hand you haven't launched these programs and there's a lot of fire power left in them. trillions of dollars worth of fire power in addition the treasury secretary has another i believe the last count was $295 billion worth of lending in municipal bonds and main street lending depending on how that program works and what the need is for it >> we'll keep our eye on that. it's a good way to get into what the discussion may sound like. let's bring in mike santoli on a day, mike, where we not only have to worry about calendar issues and seasonality, but the different ways the powell exchange will affect the markets versus what we think about the president and things that might be market negative >> even coming into it all, arguably the rally was getting to this mature phase, getting a little bit maybe fatigued as it got above the levels at 3,000. the fed still very friendly in its posture and message, but it's a less powerful message at the s&p at 3,000 than 2400 or 2600 i think that's already in the premise of why the market is where it is. and then the china piece would come along as a handy excuse to add something to worry about if the market was a little bit right for some kind of a pullback i don't know that there are any grand hopes embedded in, you know, some acceleration of global trade and the emerging markets and china's economy racing ahead this is going to up end. it's more like one more thing to worry about while we're fixated domestically in the u.s. and whether we can get the service economy restarted in a way that seems sustainable. >> right i wonder, mike, it's been a week of large calls out of macro desks. jpmorgan is one, of course, today where they're dialing back their optimism because of a delayed reopening of the economy because of u.s./china tensions then you have others like b of a that argue it's the most hated rally, positioning would suggest a huge catch-up trade if the market caught an extended bid into june. do you favor one school of thought or the other >> i favor the idea that mostly this last phase of the rally has been feeding off of the reluctance of people to participate. it does seem as if positioning is still supportive of this market but less so than it was 100 days ago the fast money is all in a large degree if you look at the options put call ratios and things like that, it seems as if the trading community is riding it, whereas the more traditional investors still feel as if the market has raced ahead. it's almost perhaps why there was a rush to seize on this idea that there was going to be a rotation into the depressed cyclical and value stocks because that seems like the area of the market that has not yet escaped people's grasp >> yeah. let's get to the fed chair with alan >> thank you very much for being here i would like to start with the most obvious question, are you sleeping well? >> thank you, alan thanks for having me today welcome. i would like to say hello to my fellow classmates from 1975. if you permit me, i want to start this by noting that this is a difficult time for many americans. people have lost loved ones, many millions of people have lost their jobs, there's a great deal of uncertainty about the future, and i really think we ought to start by acknowledging that fact. i will add that the fed is strongly committed to using our tools to do whatever we can for as long as it takes to provide some relief and some stability now to support the recovery when it comes and to try to avoid longer run damage to people's lives through long states of unemployment or to their businesses through unnecessary insolvency with that let me get to your question sleeping well, better than i was sleeping in late february and early march. put it that way. >> glad to hear that because i'm sure you need to keep up on your sleep. this is your 45th reunion and congratulations on that, by the way. did you take economics 101 at princeton and do you remember who taught it to you way back then >> i did burton mceal taught it i took micro and macro my freshmen years those are the only econ courses i took. >> that's two more than william martin, but that's great and he did well in that job. anything in your princeton education that got you thinking about the federal reserve in a somewhat serious way not dreaming you would be chairman of the fed, if that's so, it would be interesting to hear, but just thinking about the federal reserve and what it does. >> well, the answer is yes for whatever reason, by the time i was a senior at princeton, i did have this idea, i didn't have much of a plan, but i had an idea i wanted to have a career that was mostly a private sector career but then to go in and serve in government at different times in my career the model would have been cyrus vance or george schultz. part was growing up in washington, d.c. not in the middle of all that, but on the outside looking in i definitely picked up and i did major in politics ultimately and i picked up that idea and i strongly wanted to do public service. my dad had done public service in the war and then he was a u.s. attorney and law clerk and wanted to serve again and couldn't while i was at princeton he had to turn down a job in administration because he had six children's tuition to pay. that made me want to do public service even more. >> i want to start with a few general questions about the fed and get more down to some of the specific things you've been dealing with at a general level, strange as it may seem to those in the financial world, not every american spends every minute of every day thinking about the federal reserve. so could you maybe start us off by talking a little bit about where and how you see the fed fitting in in the more general scheme of government and while you're doing that maybe you can reveal the secret handshake. >> i'll be glad to the fed is an institution, a great american institution, founded about 107 years ago, and it's an interesting institution from the standpoint of it's sort of federated nature. there's a board of governors that exists here in washington, d.c., the members are nominated by the president, confirmed by the senate and serve long terms of 14 years, although your term as chair or vice chair as you know is only four years. your underlying term as governor is long and that's meant to keep you out of sort of the political cycle, so they're not synced up with the political cycle and we're supposed to operate in a nonpolitical way we have 12 reserve banks around the country and the presidents of those reserve banks also serve on the federal open market committee, which is where we set interest rates and those are appointed by their private sector boards with the consent of the board it's a way of making sure that we don't have the sort of group think that could result from having everyone in one building and one part of the country. we instead have institutionalized diversity of perspectives from all around the country. the fed is present in every community all around the country. we look after the overall stability of the financial system and we have tools to do that we set interest rates in an effort to support economic activity when it needs support, and we supervise and regulate banks, operate large parts of the payment system, so we have a lot of different roles all of them are meant to be undertaken in a strictly nonpolitical way that serves all americans. the last thing i will say is that we do have this precious grant of independence as all central banks and major advanced economies do, but with that comes the obligation of transparency and accountability and we are accountable in our system of government to the oversight committees we report to in congress and we work very hard to keep their trust to understand what's on their minds and to explain what we're doing as a way for us to maintain our democratic legitimacy in a system where most of the authority is vested as it should be in elected people not appointed people like us >> as a somewhat specific follow-up to that, do you worry either generically or these days when so much is going on, that the public, the markets, the congress, the white house, take your pick, hold exaggerated beliefs about what the federal reserve can actually accomplish? mission creep is one thing and you've been asked to creep your mission for sure, giving your mission -- is something rather different. what do you think about that >> you know, i think we do have this precious grant of independence and that means we need to stay in our lane and just do those things that congress assigns us to do. if we're going to roam all over the landscape, then we shouldn't be independent we should be part of the elected branch of government that means we stick our netting, i would say. we have tools that can be used in the financial system only in emergency situations, such as the global financial crisis of a decade ago, such as the pandemic those tools can only be used now with the approval of the secretary of the treasury, under statute passed by congress, under dodd/frank we use those tools and they're very powerful, but they have quite a limited use. again, only to be used in unusual and circumstances with the permission of the treasury secretary who is part of the administration i think it's -- we need to stress and try to stress all the time that we have tools that we can use but they're not for general times, particularly now what i would say is that the tools that we're using now are lending tools, not spending tools. we don't have the ability to make grants of money to particular groups of people no matter how directly they're aeffected or companies affected by the pandemic. that is a job for elected officials who control spending and taxation it's not a job for appointed officials like us. there is a need to underscore the limits of our powers, although our authorities are very strong and at a time like this you're seeing how strong they can be. >> one of the ways to draw a line between lending and spending as you put it is to make, let me say, only loans that will be paid back you might say with 100% certainty, if there was such a thing in the world that's generally been a -- of the fed. you've been directed during the pandemic, the fed has been directed, to make loans in places where the fed has not gone before and maybe they're not 100% guaranteed to pay back. do you see that as -- i was talking a minute ago about mission creep or mission impossible or something like that does that kind of thing worry you? >> you know, this is an emergency of a nature we haven't really seen before, and at the beginning this was my colleagues and i really saw that we needed to be using our tools to their fullest extent, that it would be very hard to explain to the public why we would hold back from doing that at a time when we saw, you know, the 50-year low in unemployment turn into an 80, 90 year high in unemployment in the space of 60 days. we saw the economies around the world shutting down and we, you know, i think we felt called to do what we could so we crossed a lot of red line that had not been crossed before and i'm very comfortable this is that situation in which you do that and then you figure it out afterward. that's how i would look at that. >> thank you in line with that, as you were called to do a lot of things, the fed has stood up in a very short period of time a veritable alphabet soup of special lending facilities, some of which look like what happened in the financial crisis, but many of which look very different. could you give us a sense institutionally how hard a task that was you alluded in my first question you weren't sleeping much in march. i can sympathize with that can you give us all a sense of how different and how difficult it was for the institution >> well, so i think it is an extraordinary institution. we are lucky to have a large number of highly dedicated and highly educated people many who lived through the global financial crisis and were critical players in implementing the facilities put in place then to prevent the collapse of the global financial system. different set of problems. so i think we benefit from that experience all of us have studied the lessons of the financial crisis a great deal i think we knew a lot. i would break night a series of phases what happened was that as the pandemic, as it became clear that the pandemic was going to be a global phenomenon, any hope it would be contained in a meaningful way in a province of china was gone, and markets began to struggle with processing that. how do they think about -- how do they -- it's unknowable what will be the effect on the global economy. markets became volatile, investors fled from risk and really markets stopped functioning in a broad sense so that companies and households couldn't borrow. we came in the first instance and we tried to restore market function through a variety of ways we purchased a lot of treasury securities to get that market working again. the short-term money markets which are systemically important to many private corporations, they stopped working so we did some facilities there, then we turned to the provision of credit to corporations and to municipalities and states. that's something we had not done in modern history at all but this is not the global financial crisis that was about weakness in the financial system this time the financial system is in good shape relatively. it's got strong capital, much better risk management, high levels of liquidity. this was a problem in the real economy in the private sector of companies to the being able to finance themselves we set up -- we announced the setup of a facility to, you know, backstop that market and as we backstop these markets before we begin lending they start to work again. there's a confidence factor that we've seen in real force here. it was a remarkable time it's a great honor to serve in these jobs sometimes they're not easy, but we never forget how important it is and really what an honor it is to have -- to be able to be in a job at this time when you're really needed >> thank you let me pursue one particulars aspect of that which i guess is still incipient or maybe it's just started, you know better than i, which is the main streets, so-called main street lending programs i remember when main street was first announced thinking that this was an assignment that pushed the fed into a place where no fed had ever been even more so than the ones that you were just speaking about can you comment on the special difficulties the fed has enkoirntsed in standing up this so-called main street lending program? >> i would be glad to. the main street facility is for small and medium sized companies, companies that aren't large enough or some way don't have the ability to have access to the capital market so they don't issue public bonds or public equity, meaning that the way they get their financing in their operations is through the banking system and through non-banks. we have a facility that deals with companies that have access to the bond market and there's -- congress has done a lot for smaller companies that are under 500 employees with the paycheck protection program. this is for the companies that are in the middle. and it is very challenging because it's an extraordinarily diverse space. the credit needs of different kinds of companies and different industries are extraordinarily diverse. some of them borrow against assets and some against cash flow and some are much more volatile than others it's quite diverse trying to figure out the right credit products for that market is challenging in addition, the world of bank credit is a world in which every credit agreement between a borrower and a bank is negotiated each credit agreement is a little different it doesn't have the degree of standardization, for example, that the bond market has where there are forms of indentures and prospectuses and it's much more routine than it is. it's challenging to get in there. nonetheless get in there we will and so we're days away from making our first loans in main street we have three facilities that are part of it, meant to reach out to different parts of that broad space. in the meantime many of those companies are finding that they can borrow from banks. others are waiting for us to get our facility up and running. it is far and away the biggest challenge of any of the 11 facilities that we've set up, are the three main street facilities, but, you know, i would -- the last thing i'll say is as we've shown, we're very willing to learn from experience we put out a term sheet, proposed term sheet. we got a couple thousand letters from people on the first main street term street we consulted actively with all kinds of companies and experts and, you know, we've now released the documents and do expect to start making loans on main street in a few days. >> in a few days congratulations. you envisioning these loans to be million, half a million that was me speaking, you speak, what size loans are we talking about? >> the current structure is that the smallest loans would be about a half a million and the largest ones could be, you know, over 100 and that's for the larger companies we're working with companies that have as many as 15,000 employees and $5 billion in revenue and there's no limit on the bottom end you know, i can imagine us expanding on either end too. the whole nature of this exercise that congress has given us, go find companies that have employees, really it's all about creating a context in which employees, a climate in which employees will have the best chance to either keep their job or go back to their old job or ultimately find a new job. that is the point of this exercise, it's all about those 25 million people or so who have been laid off, the ones who may not be laid off but ultimately be laid off. we're holooking for companies in any part of the economy that have employees that are not able to get credit that would have been able to get credit in 2019. we're looking back at companies in good financial shape before the pandemic, trying to find those companies and we're trying to create credit products that work for them. that's the nature of the exercise >> tough job thank you. let me finish up before opening up to questions with one or maybe two more nitty gritty monetary policy questions. you've had all of these before quite a few european central banks and japan pushed their overnight interest rates into negative territory quite a while ago, in some cases years ago, and have kept them there yet the fed even before you were chair has made it clear that it doesn't have any intention of doing that can you explain why, is this some aspect of american exceptionalism that's not so obvious? just generally why >> maybe i will give it a context. we set a policy, the federal funds rate, and we lower it when the economy is weak, raise it when the economy is stronger inflation was more often a problem and we raise it. it hasn't been a problem in a while, but we raise it to prevent the economy from overheating. hasn't been a problem recently in the late -- in the mid and late 90s, just after you were at the fed, alan, japan hit the lower zero, and the question came what do you do now. right -- since really then, it's more than 20 years now, central bankers and economists have been working on what do they do when they hit zero and are they out of ammunition. the answer is no during the global financial crisis the fed got to zero we effectively promised to hold our policy interest rate at zero for a long period of time. that affects short, medium and long-term interest rates and supports economic activity because borrowers borrow across the curve. we also bought, this what is became as known as quantitative easing, longer term securities and other fully guaranteed securities by the u.s. government to lower long term yields those are the two principle tools we used during the financial crisis we feel we understand them and no longer think of them as non-standard tools we think of them as in the toolbox because we are in an era of much lower interest rates and we expect part of the time to be at the effective lower bound of zero which we are now. some banks decided in addition to that, to use negative rates we don't think that's an appropriate tool here in the united states. i would say the evidence on whether it actually works is mixed. there are clearly some negative side effects as are sometimes are with these things and it's just not clear to my colleagues and to me on the thorough open market committee this is a tool that would be appropriate to deploy here in the united states >> if i can push you on that for like one more, because what's different in the united states compared to, i don't know, pick it, the eurozone >> well, a couple things one, first, i don't see that -- don't see that the evidence -- this isn't really a difference, this is a difference in understanding, many central bankers around the world who feel this way, the evidence on whether it actually helps is pretty ambiguous because one thing it does, it interferes with the process of credit intermediation that banks undergo and they take in deposits and lend it out to the extent that the policy rate is negative, you're crushing down on bank margins and that makes them lend less there are other possible negative effects there i think the evidence is mixed. it's not clear either way. we also have institutional arrangements here that would not work with negative rates i wouldn't say those are decisive like the money market funds fund industry which a lot of companies of various kinds use to fund themselves and which individuals look upon as a place to put their money >> thank you very much let me turn to some questions that have come in from people listening. i'll have to -- pardon my squinting a little i'm reading this off my screen with my -- i won't mention my age. it's older than yours. here's a question that starts with -- from frank brosen thanking you for your extraordinary job an the question is, how sensitive is the fed to the very difficult time in particular the lower end of the economic spectrum is experiencing these days compared to the extraordinary strength in the equity market that wall street has seen? and does that affect policy at all or is it just a necessary side effect that even if you aren't rooting for it, it just happens? >> let me say hello to frank and say that we know that -- i guess everyone is affected by the pandemic in a negative way to one degree or another, but the burdens are falling very strongly on those who can least afford to bear them. the unemployed come largely from parts of the service economy which involve dealing with large groups of people in -- that are tightly together, so that's restaurants, bars, travel, it's hotels, it's a lot of places, and many of the jobs that have been lost at least temporarily are relatively low paid service industry jobs. you can just see that, those are the people that have the least financial resources. in our survey of household economic decision making which we released a week ago, if you were someone who made $40,000 or less annually, the chances of your being laid off in the last month or so approach 40% almost 40% of those people have lost a job if you're making 40,000 this is falling -- secondly falling on women to an extraordinary degree this is falling on women to some extent in those jobs and so this is -- there's tremendous inequality in the way the pandemic is affecting our population you asked does that affect our policy look, it does affect our policy. although essentially part of our mandate is maximum of employment maximum employment and stable prices are mandates so we're focused on the full range of employment and doing whatever we can as i mentioned earlier to try to get those people back to work or in a new job some of those jobs may take a while to come back it's important that those people be protected from this event this is not something that was anybody's fault really this was a natural disaster. it's important that they receive support and they have received a very high degree of support so far. >> thank you this next question comes i think from several people, but in particular came first from gilchrist berg what if there is another big wave of covid-19 in the late fall and the fed is asked to react again? how big a balance sheet can you manage before it gets to be a problem and one of the problems he asked in the question is inflation or maybe you see other problems just in general is there any limit to how big you can make the balance sheet? >> let me start by saying we're not experts on epidemiology or the spread of pandemics or anything like that we talk to experts and the main answer they give you is things are highly uncertain we don't know anything that general public doesn't know if you're listening to, you know, the experts about how this will go there is clearly a risk of that, a risk of a second outbreak or a second wave. you know, that would be challenging. we, of course, would continue to react. we're not close to any limits that we might have i would say we would continue to have some authority to react i would worry more a second outbreak would undermine confidence a full return to -- a full recovery of the economy will depend on people being confident that it's safe to go out and safe to engage in a broad range of economic activities that's how the economy will recover and you see people testing the limits now probably every day all of us are doing things we might not have done two months ago and you're seeing how that works we're watching the data nationally i think a second wave could be -- would really undermine public confidence and might make for a longer, you know, a significantly longer recovery, a week of recovery in terms of the balance sheet and inflation -- the inflation concerns for now are to the downside the risks are to the downside, not to the upside. we see prices moving down and that's because in a lot of parts of the economy people are cutting prices you'll see weak inflation data for a while. we've been dealing with disinflationary forces for a long time actually, globally inflation, one thing that's happened since 1975 is inflation was really the big economic issue, really since another princeton, paul volker, one of the great public servants of our lives, what he did at the fed and his colleagues did, inflation has been understand control. it's not -- the upside risk to inflation is not great i would say, you know, of course, our balance sheet can't go to infinity i would say that i'm comfortable with where we are now and the path that we're on and don't see risks based on what we're doing right now to inflation or to financial stability. >> thank you we have a couple of variants on this question. i'll read the one that came from ro roseanne harper. once the fed is done purchasing s fixed income securities, anticipating going down the road you were talking about a little further, what's the plan for managing the portfolio i read the question as saying it will have more than fixed income or might have more than fixed income securities? >> well, we tend to -- with the things that wound up on our balance sheet during financial crisis we held them to maturity. these are short-term loans of four years that's what we've been doing the plan would be not to sell them but to hold them to maturity i would say we do not desire to have an active role in managing the portfolio. we're not the right ones to -- once the facilities are -- have done the lending they're going to do, the decisions about what to do, about covenant defaults and things like that will not be something that we will want to be involved in on a day-to-day basis, arrange-points th basis, arrangements that will work out we will have a financial adviser on each of these nilfacilities d that will be managed but not by fed policymakers >> thank you that's very useful there's a generic question from judy about how will the fed go about communicating with the public on these emergency tools and in particular an effort to avoid some of the misunderstandings that took root after the emergency measures of the financial crisis about a decade ago that proved as you well know not to be too popular with the public even though it was successful >> the first thing we're disclosing just a lot of information, much more than the law actually requires us to disclose we're disclosing for all of the facilities under the c.a.r.e.s. act, disclosing the name of the borrower the amount and updating those in -- on a regular basis i would like to think that, you know, disclosure will help because i read things in the paper supposedly happening and i know they're not happening we haven't made many loans yet i read we're extending tons of credit to this industry and actually we haven't really made a lot of loans in the corporate credit facilities. we haven't started the municipal facility yet i think that's -- so transparency is really important. i also think we have to just -- this is something we've been focused on alan, you were at the very beginning of the transparency revolution and one of its principal authors so i think the old theory, tell them nothing, there should be mystery around central bank and alan and a bunch of researchers flipped that completely around and now the view has been for some time the transparency is your friend, markets will do the work for you if they understand what you're doing. we work very hard to explain ourselves to the general public and particularly focused on the general public's elected representatives in congress. we work really hard to stay in communication with them, the ones who are on the committee, the ones in leadership, the ones not on the committee, just so -- and we try to communicate publicly through a lot of outreach so we explain what we really are doing and try to avoid misunderstanding and also, by the way, listen to feedback we listen. we did this round of events over the last year or so called fed listens which was such a successful program where we listen to people from all different walks of american life talk about how they think about the fed and monetary policy and it really informed the work we've been doing in sort of reviewing the way we do what we do >> just as a footnote to that. i'm happy every time you draw the distinction between lending and spending, but a warning, i wrote a whole book on the crisis as you know, the public left that with no distinction thinking that the federal reserve had spent all this money and the treasury had spent all this money, even though virtually every penny was lending, not spending. this is something that i'm not -- don't think i have a magic solution to how you explain this to the average american, but it's a huge task and the -- in the case of the financial crisis, they never really got the distinction good luck with that. >> alan, i would just say most people have better things to do in their life than to understand the details of central banking working at the fed you get that from day one our obligation is to be as transparent as possible and patiently and clearly explain ourselves to the public that we serve and we just work really hard at that and that's part of the job, you know, it's part of how we retain our democratic legitimacy >> thank you we've got time for a few more questions. i'm squinting at the screen to try to read them michelle asks, are the latest fed -- this is a bit related to a previous question, are the latest fed policies likely to lead to more income inequality in the united states absolutely not i'll tell you why. as i mentioned the pandemic is falling on those least able to bear its burdens it is a great increaser of inequality if you look at the labor market reports that the bureau of labor statistics puts out you will see it is low paid workers in the service industries bearing the brunt of this. it's also women as i mentioned everything we do is focused on creating an environment in which those people will have their best chance to keep their job or get a new job, maybe go back to their old job if they've been furloughed how does that work so take the -- take a company that, for example -- i won't give a name but as an example, a company that was investment grade on march 22nd but downgraded to so-called junk, but that has tens and tens of thousands of employees now why would we include that program in one of our programs. these are large companies and many would fit that description. the reason is this f a company doesn't have market access and can't roll over its debt and can't have enough cash on hand to deal with its obligations, what they're going to do is lay people off they're going to cut costs and that's the choice they will make, let's put it that way. by announcing our facility and including those companies the ones that need the credit or needed the credit in march, those companies have been able to finance themselves and have cash on their balance sheet and for the most part haven't. these are companies not so directly affected as some of the service industry companies are that deal directly with the public in large numbers. they've been able to avoid big layoffs. it really is -- that is the point of all of this and it -- i think we have to keep our focus really tightly on that goal of the labor market in supporting the labor market and not gets distracted by other goals. >> thank you i think this will be the last question it takes us outside the boundaries of the united states. katherine rampell asks, as the fed looks as the global economic situation, what are you thinking about the -- what's happening in both in the pandemic and in the economics in some of the poorer countries in asia and she lists india, pakistan, and indonesia as examples. >> so this is a very challenging time for those countries they don't have the kind of medical infrastructure that we have they don't have the policy space as we say. they don't have the ability to provide support to their economy either through fiscal policy or monetary policy that we do it's a very, very difficult challenging time for many of those poorer countries and the international monetary fund and the world bank are doing, you know, everything they can to get more resources and try to help those countries. there's no question for all of the suffering that's going on in the countries like the united states, western europe, you're seeing even worse outcomes in many of the poorer countries and, you know, it's something that those international organizations are going to need a lot of support from nations like the united states and have been getting it, you know, to deal with. >> i have one final question from an extremely important person, very important person. susan powell asks, and she starts phrasing it, chairman powell, do you have a favorite child? and should that favorite child be congratulated on anything >> i love all my children equally, but i certainly think susan powell deserves special congratulations here today for graduating in the class of 2020. so thank you thank you, susan. >> all of us here join that congratulations, susan the class of 2020 will long remember the end of its senior year and is going going to get o graduations. probably most people on the call don't know a virtual one happening soon and then another physical one in a year's time. chairman powell, on behalf of the griswald center, if i may take the liberty on behalf of the class of 1975, on behalf of the entire princeton university community and the citizenary of the united states. i want to thank you for your service. i want to thank you for spending the time with us this morning. we are deeply in your debt and really glad that you're the chairman of the federal reserve. thank you. >> thank you, allen. great to be here today >> that's fed chair powell with former fed vice chair talking to a somewhat broader audience this time ferreting out some bits of news in the last few weeks. commenting the fed did cross some historical lines but it was appropriate. talked about a confidence factor with second wave of the virus. the thousands question about negative rates not working, at least mixed evidence that it works well with serious side effects. >> yeah, i would bullet all those as main news from the conversation he just had i'd add to that the idea the balance sheet is not close to any limit that he would be comfortable with he doesn't see it creating financial stability. he's comfortable with where it is now, where it's going and also suggested there's more to react. i thought the red line comment was a little curious maybe come back to that in a second the second wave concern is a theme that chairman powell has talked about quite a bit there serviit was again saying second wave could undermine and create a bigger recovery. i'm not sure he meant to use red line it's essential illegal to cross. they crossed a line they hadn't before but i'm not sure he meant red line >> mike, some modest gains on the s&p during the past 45 minutes but perhaps not too much to speak of. the dow didn't seem to respond that much either would you put this in the category of the fedchair restating what he's already said before and perhaps adding to the sense of relative stability that the markets have been feeling? >> yeah, i think, john, a reminder of feds posture which is really focused on risk management the potential downside of an economy that doesn't come back fully or has another relapse down the road. what does that mean? it's pretty strong signaling in that kind of commentary that says we're in no hurry to pull back on any of these programs and declare a return to normal as much as the equity markets have trying to get to place that tries to handicap some approach to normalcy again. the fed is still worried about those massive unemployment and reuptake of all these jobless workers. for the market's point of view social security kind of cushioning the downside scenario it's reminder how the fed has approached this. >> rick, i want to bring you into the conversation. when you hear the fed chair talk about the full recovery depending on people feeling if it's safe to come out and a second wave of the virus and add to a longer, weaker economic recovery take that and couple it with another wave of painful data today althoughmuch of that now dated. somehow this playing out in the bond market. is it similar concerns among those investors? >> in terms of the data today, much of the data has already returned and much of the data is in the rear view mirror. there's some exceptions but for the most part and with regard to the interest rate markets, as john ford pointed out, whether you're look at the dow or looking at ten-year notes or two-year notes or boons, nothing really moved during that i think i get a bit of an uncomfortable feeling because with the fed's balance sheet approaching $7 trillion, that's a trillion and a half shy of where the national debt was a year before barack obama was elected president. they managed to do it in 11 years. that makes me a little nervous i think it goes a long way to explain why there's these fire side chats this wasn't for our core audience just a general explainer why do you need to do that we have a truly fourth branch of government or whatever branch you want to talk about in other companies because central banks around the globe have become the power. think about it look at is going on in europe. the way they have changed the german's mind to have chashared debt like the real changes in the money are coming from central banks. that isn't going to dissipate soon i think vice chair blinder set the pace when he said we don't want anybody to get misconceptions the way they did in the last crisis i think there's a degree of, i don't know, talking down allen blinder is saying they know better than everybody else and in some ways they do you're not going to get republicans or democrats, individually, to ever implement the programs that the fed is implemented in time frame that they've done it. granted the treasuries involved and granted you don't want to use the word red line. i get that very well in the end they're the only entity that could have pulled it off. they're not going anywhere they're here to stay and it will be a lot more of this type of communication because they have gone from underground, under the radar as a rpreference to the acceptance of unelected people you have to have more communication with the average guy on the street. >> that was the sub text of the entire discussion almost pr the beginning when minder asked powell to describe what the fed is to people who don't spend a lot of time thinking about it. as far as the main street lending program goes, it was interesting to hear him talk about that program add a challenge relative to the other emergency measures here is what he said >> we're days away from making our first loans in main street we have three facilities that are part of it they are meant to reach out to different parts of that broad space. many of those companies are finding they can borrow from banks. others are waiting for us to get our facility up and running. it's far and away the challenge of any of the 11 facilities that we set up. >> given that bit of sound, we'll hear from him again, wouldn't you say in the coming weeks? >> yeah, i did want to comment on rick's comment which i think is really good one and the one you said too which is the fed is involved in a serious pr campaign here. it begins with the name main street lending facility. would it surprise you to learn that the minimum size of a company that qualifies for main street lending is 500 employees. everybody close their eyes and imagine a main street and tell me which store has 500 employees or which company has 500 employees in it. even just the name every single term sheet pits out, the fed says we're doing this to enhance the abilities of households and businesses to get credit that's true, but it's not necessarily the whole truth. the fed is supporting structures that provide credit. not necessarily the actual provision of credit. that's indirect effect of it but like asset backed securities where people get car loans through those or credit card loans through those. that's what the fed is supporting it's supporting the existing financial system the fed is trying not to make the mistake that happened last time everything it did it was blamed for helping wall street and part of the reason for that was because wall street was the big problem back then. >> it's a key point. you also make the point that in this conversation, where he does talk about transparency and the importance of it, what that does also means for the markets and investors as they look forward to see how the fed will continue to, i guess, support, buoy or driver the narrative for the markets. >> yeah. he basically said clarity about the feds intentions gets the market to do what is evident to happen they said they would buy corporate bonds including high yields those markets got very liquid quickly. they took their word for it. that sort of the cycle that we're on now they do have to follow through and do something maybe next time it's not going to work as well. that's so far, been relatively effective. >> yeah. steve, rick, mike, thank you everybody have a good weekend. tonight, mad money, 6:00 p.m. has fastly and elf let's get to the judge thanks so much welcome to the halftime report good to have you with us on this friday our top story, rally and risk and whether your money has much room left to run that debate starting right now with our investment committee. we are red in most places. however, interesting to note that the

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