[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
EXAMINING THE FEDERAL RESERVE'S
MANDATE AND GOVERNANCE STRUCTURE
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON MONETARY
POLICY AND TRADE
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
__________
APRIL 4, 2017
__________
Printed for the use of the Committee on Financial Services
Serial No. 115-13
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U.S. GOVERNMENT PUBLISHING OFFICE
27-370 PDF WASHINGTON : 2018
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HOUSE COMMITTEE ON FINANCIAL SERVICES
JEB HENSARLING, Texas, Chairman
PETER T. KING, New York MAXINE WATERS, California, Ranking
EDWARD R. ROYCE, California Member
FRANK D. LUCAS, Oklahoma CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina NYDIA M. VELAZQUEZ, New York
STEVAN PEARCE, New Mexico BRAD SHERMAN, California
BILL POSEY, Florida GREGORY W. MEEKS, New York
BLAINE LUETKEMEYER, Missouri MICHAEL E. CAPUANO, Massachusetts
BILL HUIZENGA, Michigan WM. LACY CLAY, Missouri
SEAN P. DUFFY, Wisconsin STEPHEN F. LYNCH, Massachusetts
STEVE STIVERS, Ohio DAVID SCOTT, Georgia
RANDY HULTGREN, Illinois AL GREEN, Texas
DENNIS A. ROSS, Florida EMANUEL CLEAVER, Missouri
ROBERT PITTENGER, North Carolina GWEN MOORE, Wisconsin
ANN WAGNER, Missouri KEITH ELLISON, Minnesota
ANDY BARR, Kentucky ED PERLMUTTER, Colorado
KEITH J. ROTHFUS, Pennsylvania JAMES A. HIMES, Connecticut
LUKE MESSER, Indiana BILL FOSTER, Illinois
SCOTT TIPTON, Colorado DANIEL T. KILDEE, Michigan
ROGER WILLIAMS, Texas JOHN K. DELANEY, Maryland
BRUCE POLIQUIN, Maine KYRSTEN SINEMA, Arizona
MIA LOVE, Utah JOYCE BEATTY, Ohio
FRENCH HILL, Arkansas DENNY HECK, Washington
TOM EMMER, Minnesota JUAN VARGAS, California
LEE M. ZELDIN, New York JOSH GOTTHEIMER, New Jersey
DAVID A. TROTT, Michigan VICENTE GONZALEZ, Texas
BARRY LOUDERMILK, Georgia CHARLIE CRIST, Florida
ALEXANDER X. MOONEY, West Virginia RUBEN KIHUEN, Nevada
THOMAS MacARTHUR, New Jersey
WARREN DAVIDSON, Ohio
TED BUDD, North Carolina
DAVID KUSTOFF, Tennessee
CLAUDIA TENNEY, New York
TREY HOLLINGSWORTH, Indiana
Kirsten Sutton Mork, Staff Director
Subcommittee on Monetary Policy and Trade
ANDY BARR, Kentucky, Chairman
ROGER WILLIAMS, Texas, Vice GWEN MOORE, Wisconsin, Ranking
Chairman Member
FRANK D. LUCAS, Oklahoma GREGORY W. MEEKS, New York
BILL HUIZENGA, Michigan BILL FOSTER, Illinois
ROBERT PITTENGER, North Carolina BRAD SHERMAN, California
MIA LOVE, Utah AL GREEN, Texas
FRENCH HILL, Arkansas DENNY HECK, Washington
TOM EMMER, Minnesota DANIEL T. KILDEE, Michigan
ALEXANDER X. MOONEY, West Virginia JUAN VARGAS, California
WARREN DAVIDSON, Ohio CHARLIE CRIST, Florida
CLAUDIA TENNEY, New York
TREY HOLLINGSWORTH, Indiana
C O N T E N T S
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Page
Hearing held on:
April 4, 2017................................................ 1
Appendix:
April 4, 2017................................................ 29
WITNESSES
Tuesday, April 4, 2017
Calomiris, Charles W., Henry Kaufman Professor of Financial
Institutions, Columbia University.............................. 5
Levy, Mickey D., Chief Economist for the Americas and Asia,
Berenberg Capital Markets, LLC................................. 9
Spriggs, Hon. William E., Chief Economist, AFL-CIO, and
Professor, Department of Economics, Howard University.......... 7
APPENDIX
Prepared statements:
Calomiris, Charles W......................................... 30
Levy, Mickey D............................................... 68
Spriggs, Hon. William E...................................... 84
Additional Material Submitted for the Record
Davidson, Hon. Warren:
Chart entitled, ``Federal Debt as % of GDP''................. 99
Hill, Hon. French:
Editorial entitled, ``A 21st-Century Federal Reserve,'' dated
March 15, 2017............................................. 100
EXAMINING THE FEDERAL RESERVE'S
MANDATE AND GOVERNANCE STRUCTURE
----------
Tuesday, April 4, 2017
U.S. House of Representatives,
Subcommittee on Monetary
Policy and Trade,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 10:04 a.m., in
room 2128, Rayburn House Office Building, Hon. Andy Barr
[chairman of the subcommittee] presiding.
Members present: Representatives Barr, Williams, Huizenga,
Pittenger, Love, Hill, Emmer, Mooney, Davidson, Tenney,
Hollingsworth; Moore, Foster, Sherman, Green, Heck, Kildee, and
Vargas.
Ex officio present: Representative Hensarling.
Chairman Barr. The Subcommittee on Monetary Policy and
Trade will come to order.
Without objection, the Chair is authorized to declare a
recess of the subcommittee at any time.
Today's hearing is entitled, ``Examining the Federal
Reserve's Mandate and Governance Structure.''
I now recognize myself for 3 minutes to give an opening
statement. Last month, we hosted a hearing on sound monetary
policy. One witness testified that unconventional policies will
work, but they need more time. After a decade of unconventional
monetary policies, we are tired of waiting. Well before the
Great Recession and to this day, the Fed has chased a Keynesian
nirvana. We were told the economy would speed up; instead, it
slowed down. We were sold a reliable solution; now we are left
with a persistent problem. American households are right to
demand a more reliable governance structure for our Federal
Reserve.
Today, we will carefully consider what this structure
should look like. To be sure, my colleagues on the other side
of the aisle have an answer for why their central planning went
awry. They blame Republicans for fiscal austerity, but the
truth is inconvenient. There was no fiscal austerity. The
previous Administration recklessly spent beyond our means, and
instead of preserving monetary policy independence, it cajoled
the Fed into fueling a Keynesian stimulus that promised more
than it could ever deliver.
A lot of fingerprints were left at this economic crime
scene; none of them belonged to austerity. Eye-popping fiscal
stimulus and monetary accommodations were supposed to promote a
robust economy. Instead, they infected every nook and cranny of
what was a resilient economy. Washington elites pretended to
know how they should spend your paycheck. They pretended to
know what jobs employers should create and how much those jobs
should pay. They pretended to know what businesses should
produce, because they also pretended to know what you should
consume. Pretending to know is the problem. Budget blowouts and
unconventional monetary policies promised something better, and
when better did not materialize, we got even more of the same.
The first step to ending this Keynesian goose chase is a
more disciplined and transparent monetary policy. We need to
stop asking for policy miracles and start returning to the
simple objective of stabilizing prices. Doing so will give
households and businesses the information they need to make
productive economic decisions. A Reason Foundation author put
it this way: ``Wealth is what we humans produce, while money is
but a measure that speeds our exchange of the goods and
services we create. Money by itself has no value. Instead, it
fuels value creation by facilitating commerce wherever it shows
promise.''
The record is clear. Unsustainable spending of other
people's money, coupled with the most interventionist and
improvisational monetary policies left us with a persistent
economic funk. The answer cannot lie with doing even more of
the same. Monetary policy can and should serve as a reliable
foundation for growing economic opportunities, but it cannot do
so without a more productive governance structure, a structure
that holds the Fed to account for only what it can do, and
insulates monetary policy from political pressures to do what
it can't.
The Chair now recognizes the ranking member of the
subcommittee, the gentlelady from Wisconsin, Gwen Moore, for 5
minutes for an opening statement.
Ms. Moore. Thank you so much, Mr. Chairman. And let me join
you in thanking our witnesses for taking time out of their busy
schedules to be with us today.
I would just like to say that I was here when Henry Paulson
walked in and said, ``I need $700 billion to keep our economy
from going into free-fall.'' I was here when Barak Obama raised
his hand and was sworn in, and we were losing 700,000 jobs a
month and our economy was in free-fall. I was here when you say
that there was no such thing as austerity. I was here for the
sequester, the massive cuts in food stamps. And I was here last
week when we just dodged a bullet of having $1 trillion pulled
out of health care in the United States of America. So I am
just scratching my head here wondering whatever are we talking
about.
Regarding the dual mandate of the Fed, I am on record
opposing eliminating considerations of employment from the dual
mandate. And it is an odd notion to think that labor and
inflation are not linked. So it strikes me as counterproductive
that the Fed should turn a blind eye to employment in its
policy consideration. It just doesn't make sense economically
for the American people.
As for limited authority of the Fed, we made some targeted
changes to the Fed in the Dodd-Frank Act, including ending
bailouts. I think those were timely and provide additional
accountability and stability to the financial system. I also
think that expanding representation at the Fed so that it is
more authentic and realistic in how it reflects society as a
whole is good, but I grow increasingly anxious with the
committee's preoccupation with infusing politics into the Fed,
constraining the Fed from executing its mission by further
limiting its open market activities, adding unworkable formula
rules to monetary policy, and restructuring the Fed to give
banking interests even more weight on decisions, a decision
that would only make policy more myopic and not better.
Academic studies inform us that making the Fed look more
like America will lead to better economic outcomes. Industry is
moving to diversify, and so should the Fed. If anywhere on
Earth anyone should use economic research, it is the Fed. So I
believe that the future of the Fed will look more authentic,
more like this vast, diverse country. The Fed will need to
normalize its monetary policy in the future, but I applaud the
steps the Fed has taken to harmonize its growth policies with
early steps that Democrats took to stabilize the economy after
the Bush-GOP deregulation and induced Great Recession, lack of
accountability, lack of--just drunken sailor financial
activity.
And I just don't get it. How do bread lines and austerity
serve our constituents? And so I will not be apologetic for my
votes for pro-growth policies like the stimulus, which could
have been better targeted, but I certainly have no regrets
about Dodd-Frank, and have worked on a bipartisan basis for
tweaks and fixes. I think that the Fed's moves, while
unconventional, have been largely helpful, and certainly more
helpful than the GOP austerity agenda.
And with that, I yield back my time, Mr. Chairman.
Chairman Barr. Thank you. The gentlelady yields back.
The Chair now recognizes the gentlelady from Utah, Mia
Love, for 1 minute for an opening statement.
Mrs. Love. Thank you, Mr. Chairman, for holding this
important hearing.
When the Federal Reserve was created in 1913, Congress set
price stability as the Fed's principal objective with regards
to monetary policy. It wasn't until 65 years later, in 1978,
that Congress amended the Act to redefine the goals of monetary
policy to include maximum employment. And the late 1970s, of
course, was a period of stagflation, slow economic growth, and
high inflation, and Congress was reacting to a serious, but
ultimately temporary, circumstance.
Last month at a previous hearing of this subcommittee
regarding sound monetary policy, we heard several witnesses
contend that the only thing the Federal Reserve can control
over the longer run is the rate of inflation. The purchasing
power of currency, giving the Fed multiple, at times
conflicting, objectives, on the other hand, merely creates
unsatisfactory outcomes.
Proponents of the dual mandate contend that the Fed can and
should work to achieve both employment and inflation goals.
Federal Reserve Chair Yellen herself, in explaining her strong
support of the dual mandate, has said that she believes that
both inflation and employment matter greatly to the American
people and that they both impact the welfare of households and
individuals in this economy. There is no question that
inflation and employment both matter to the American people
greatly.
The question is whether the Federal Reserve is
appropriately tasked with actively pursuing both objectives and
is capable of achieving them. I would also note that most
economists would agree, and I would confidently wager that
Chair Yellen agrees, that the economy performs best and
therefore creates jobs the most effectively under circumstances
of price stability.
I look forward to exploring the question today of whether
we should stick with price stability. Thank you.
Chairman Barr. The gentlelady's time has expired.
The Chair now recognizes the gentleman from California, Mr.
Sherman, for 1 minute for an opening statement.
Mr. Sherman. First, I was surprised to hear the chairman
say that we shouldn't be cajoling the Fed. I have seen his
party do it in this room hundreds of times.
But I want to focus on democracy, because people who are
dedicated to constitutional values don't spend a lot of time
reading FMOC notes and people in economics tend not to focus a
lot of their time on the U.S. Constitution. We believe in this
country in one person, one vote, but when it comes to the Fed,
which is a governmental institution, we have one bank, one
vote, in selecting various regional Governors. And then when it
comes to the FMOC, the region that I am from, California, has
21 percent of the people, and it is in the lowest of 3
categories to have a seat on the FMOC. It is treated exactly
the same as a region that has 3 percent.
So I look forward to democracy reining in the structure of
the Fed. It was in the 1960s that we got the ruling one person,
one vote, when it came to State senate districts. Maybe this
last bastion of King George will be liberated.
I yield back.
Chairman Barr. The gentleman yields back.
And the Chair now recognizes the gentleman from Minnesota,
Mr. Emmer, for 1 minute.
Mr. Emmer. I want to thank Chairman Barr for calling this
important hearing this morning, and I want to thank all of our
witnesses for agreeing to be here to testify.
We are only a few months into the 115th Congress, however,
this is already the second subcommittee hearing we have had to
review the policies of the Federal Reserve, and the third
hearing if we consider the committee as a whole. I am pleased
to see the chairman's dedication to ensuring proper oversight
of the Fed, and I share his commitment to make the Federal
Reserve a more transparent and market-friendly institution.
The Fed has immense influence over capital markets,
financial institutions, and the American economy. Since the
Great Recession, the Fed has used its nearly unlimited
discretion to reduce interest rates to historical lows by
trillions of dollars of toxic assets and bailouts of numerous
financial institutions. However, the consistently inconsistent
nature of the Fed's forecast to raise interest rates, as well
as the flawed nature of its dual mandate, have led to confusion
in the markets, anemic growth, and lack of confidence in our
economy.
I look forward to today's hearing as well as the
opportunities provided to this chamber in the 115th Congress to
chart a new course for the Fed and provide stability and
opportunity to businesses and families across this country.
And I yield back.
Chairman Barr. The gentleman yields back.
And finally, the Chair recognizes the gentleman from
Illinois, Mr. Foster, for a 1-minute opening statement.
Mr. Foster. First off, I would like to second a few
comments that were made. I was there during the TARP scenario,
and it was ugly. And I think that Members on both sides of the
aisle who were not there would do themselves well to look over
the tapes of the hearings and the congressional Floor vote and
remember what it was that got us into this and what we had to
do to get out, because it wasn't pretty.
I think the discussion that just happened having to do with
the tradeoff between maintaining price stability and employment
stability is fundamental to your attitude. There was a very
interesting paper out of the Federal Reserve research arm
having to do with--I think the title of it was, ``Doves for the
Poor, Hawks for the Rich,'' or vice versa--that had to do with
the fact that over the course of a business downturn, you
actually do less damage to your economy by maintaining
employment stability, and there are substantial redistributive
effects if you decide that you are going to maintain employment
stability at the expense of price stability. And I think this
is a tradeoff that we have to understand, and not duck from the
fact that it is a fundamental tradeoff that will always be with
us.
Thank you. I yield back.
Chairman Barr. The gentleman's time has expired.
Today, we welcome the testimony of Dr. Charles Calomiris,
who currently serves as the Henry Kaufman Professor of
Financial Institutions at Columbia University; Dr. William
Spriggs, who serves as the AFL-CIO's chief economist, and is
also a professor of economics at Howard University; and Dr.
Mickey Levy, who is the chief economist for the Americas and
Asia at Berenberg Capital Markets, LLC.
Each of you will be recognized for 5 minutes to give an
oral presentation of your testimony. And without objection,
each of your written statements will be made a part of the
record.
Dr. Calomiris, you are now recognized for 5 minutes.
STATEMENT OF CHARLES W. CALOMIRIS, HENRY KAUFMAN PROFESSOR OF
FINANCIAL INSTITUTIONS, COLUMBIA UNIVERSITY
Mr. Calomiris. Chairman Barr, Ranking Member Moore,
subcommittee members, it is a pleasure to be with you today to
share my thoughts on how to improve the governance structure of
the Federal Reserve System.
The Fed has failed to achieve its central objectives, price
stability and financial stability, during about three-quarters
of its 100 years of operation. Although the Fed was founded
primarily to stabilize the panic-plagued U.S. banking system,
since the Fed's founding and, largely, as the result of errors
in Fed monetary and other policies, the United States has
continued to suffer an unusually high frequency of severe
banking crises, including during the 1920s, the 1930s, the
1980s, and the 2000s. The two major U.S. banking crises since
1980 place our country within the top quintile of risky banking
systems in the world, a distinction it shares with countries
such as Argentina, Chad, and Democratic Republic of Congo.
It is high time to address deficiencies in our financial
system that have produced these subpar results, and one of the
key areas where reform is needed is in the governance of the
Fed. The Fed has played an active role in producing most of
those crises, and its failure to maintain financial stability
has often been related to its failure to maintain price
stability.
In his review of Fed history, Allan Meltzer points to two
types of deficiencies that have been primarily responsible for
the Fed's falling short of its objectives: adherence to bad
ideas; and politicization. Failures to achieve price stability
and financial stability reflected a combination of those two
deficiencies.
Unfortunately, the failures of the Fed are not nearly a
matter of history. Since the crisis of 2007 to 2009, a feckless
Fed has displayed an opaque and discretionary approach to
monetary policy in which its stated objectives are redefined
without reference to any systematic framework that could
explain those changes; has utilized untested and questionable
policy tools with uncertain effect; has been willing to pursue
protracted fiscal, as distinct from monetary, policy actions;
has grown and maintains an unprecedentedly large balance sheet
that now includes a substantial fraction of the U.S. mortgage
market; has been making highly inaccurate near-term economic
growth forecasts for many years; and has become more subject to
political influence than it has been at any time since the
1970s.
The same problems that Mr. Meltzer pointed to, bad ideas
and politicization, now as before, are driving Fed policy
errors. I am very concerned that these Fed errors may result
once again in departures from price stability and financial
stability. In my written testimony, I show that the continuing
susceptibility of the Fed to bad thinking and politicization
reflects deeper structural problems that need to be addressed.
Reforms are needed in the Fed's internal governance, in its
process for formulating and communicating its policies, and in
delineating the range of activities in which it is involved.
My testimony focuses on reforms that address those
problems: one, internal governance reforms that focus on the
structure and operation of the Fed, which would decentralize
power within the Fed and promote diversity of thinking; two,
policy process reforms that narrow the Fed's primary mandate to
price stability and that require the Fed to adopt and to
disclose a systematic approach to monetary policy; and three,
other reforms that would constrain the Fed asset holdings and
activities to avoid Fed involvement in actions that conflict
with its monetary policy mission.
Table 1 summarizes the reforms proposed here and Figure 1
outlines the primary channels through which reforms would
improve monetary policy.
In my remaining time, I would like to point to some of the
most important elements in my testimony. Improving the Fed's
primary mandate to focus on price stability is a reform that is
long overdue. Price stability is an achievable long-run
objective, and thus, the Fed can be held accountable for
achieving it. Indeed, long-run inflation is completely under
its control. Inflation matters for growth. High levels of
inflation or volatile inflation result in low output and high
unemployment in the long run.
As Milton Friedman and many others have correctly argued
for years, the reason to target price stability is not because
we care about price stability per se, no one should, but rather
because we care about employment and output. By making price
stability the primary long-run objective of the Fed, we ensure
that the average levels of employment and output will be
maximized in the long run.
Paradoxically, the point of narrowing the Fed's long-term
mandates to inflation is to boost average employment. Narrowing
the Fed's primary mandate makes the Fed more accountable, while
protecting it from myopic political pressures that are inherent
in a democracy.
Holding the Fed primarily to account for price stability
does not preclude it from supporting the economy during slumps
with countercyclical policy over the short or medium terms as a
secondary objective. Indeed, a host of possible monetary policy
strategies are consistent with both meeting a long-run
inflation target and providing countercyclical influence.
There is no doubt that a Fed with a single inflation
mandate would continue to execute countercyclical policy
aggressively. By making that countercyclical process
systematic, we would further ensure the appropriate
accountability of monetary policy, while further insulating it
from myopic political pressures or from seat-of-the-pants
biases that cause monetary policy to fall short of its
objectives.
Much of my testimony is devoted to the need to improve the
deliberative process at the Fed by making it more democratic
and by ensuring true diversity of thinking. The Fed has lost
the diversity of experience and perspective that used to
animate and inform its debates.
Chairman Barr. The time of the gentleman has expired. We
will continue to explore these topics--
Mr. Calomiris. Okay.
Chairman Barr. --in Q and A. Thank you, sir.
Mr. Calomiris. Thank you.
[The prepared statement of Dr. Calomiris can be found on
page 30 of the appendix.]
Chairman Barr. Dr. Spriggs, you are now recognized for 5
minutes.
STATEMENT OF THE HONORABLE WILLIAM E. SPRIGGS, CHIEF ECONOMIST,
AFL-CIO, AND PROFESSOR, DEPARTMENT OF ECONOMICS, HOWARD
UNIVERSITY
Mr. Spriggs. Thank you, Chairman Barr, and thank you,
Ranking Member Moore, for inviting me today.
I think we should once again be reminded of, as was
mentioned earlier, the Humphrey-Hawkins Full Employment Act. It
was an act of democracy. Congress did give instructions to the
Federal Reserve. And it is clear from the instructions that
Congress gave and the fact-finding that went into the
legislation, that Congress' mandate was full employment, full
employment with common sense. And included in that common sense
was full employment with price stability.
Economists all agree that the economy can overheat, and you
could try and attempt to get full employment and end up with
accelerating inflation. Economists must agree, because we now
have experienced it, that you can have another problem, which
is deflation. And ignoring the threat of deflation, a real
threat, is as dangerous as ignoring accelerating inflation.
This is the lesson of the Bank of Japan, which has still not
figured out how to get out of its deflation. So we should be
reminded that our Federal Reserve, by having a dual mandate, is
also cautionary in thinking about that.
One of the problems with the Fed is that it is made up of
and owned by banks. This gives it a very one-sided view of the
economy. And when you look at the transcripts of the Federal
Reserve minutes for the Federal Open Market Committee, you see
a very other worldly view of unemployment at the peak of this
downturn.
Can the Fed itself and by itself achieve full employment?
The Humphrey-Hawkins Act did not anticipate that the Fed could
do that. It placed clear responsibility on the fiscal authority
of Congress to make that happen. So no one thinks the Fed can
do that by itself. And the austerity that was pursued
immediately after the initial stimulus is why this recovery is
unique compared to all other recoveries before this. When you
look at what happened under George W. Bush, when you look at
what happened under Ronald Reagan, when you look at the
downturn under George H.W. Bush, you see a different response
from fiscal stimulus.
This downturn had the biggest downturn in public
investment, the Federal Reserve did not step in to shore up
public investment, and State and local governments have still
not recovered their level of investment in roads, in education,
and in the infrastructure of our cities and societies. That is
not the Federal Reserve's fault. Those things come under fiscal
authority. And we continue to starve and cut the budgets that
would have allowed public investment to return. In fact, the
current President is saying we need infrastructure, because
even he recognizes that we have starved public investment.
The Federal Reserve did take some unusual steps, but steps
which have been proven in the light of the reality of
deflation. The Federal Reserve is looking at the lessons
learned in Japan and has understood that quantitative easing
was a tool that they could use. Many economists have blinded
themselves to this reality. There is a zero lower bound, there
is a point at which typical traditional policy is not going to
lead to stability.
Now, this century, the Federal Reserve has kept the price
level at an average of 1.9 percent. Its target for inflation is
2 percent. So one can say they have pretty well hit the target
over this long period, with a very small standard deviation.
The claim that price stability alone leads to job gains and
income growth just is contradicted by the simple facts. Before
the great moderation, before the deliberate downturn of the
1980s, we had an average unemployment rate in the United States
of 5.2 percent, which allowed us to have a greater and more
rapid growth of income. Since then, we have had price
stability, far greater price stability, but unemployment has
averaged 6.2 percent, and we have had very short periods in
which unemployment was sufficient to drive up the wages of
American workers and stimulate the growth of new
establishments.
It is the growth of wages and broad income growth that
leads to new firm establishment. It is not the other way
around. The causal factor is by generating broad-based income
growth, you create new customers, and that allows for new
establishments.
I look forward to being able to answer questions.
[The prepared statement of Dr. Spriggs can be found on page
84 of the appendix.]
Chairman Barr. Thank you, sir. The gentleman's time has
expired.
Dr. Levy, you are now recognized for 5 minutes.
STATEMENT OF MICKEY D. LEVY, CHIEF ECONOMIST FOR THE AMERICAS
AND ASIA, BERENBERG CAPITAL MARKETS, LLC
Mr. Levy. Chairman Barr, Ranking Member Moore, and members
of the subcommittee, I appreciate this opportunity to present
my views on monetary policy. My focus is specifically on the
Federal Reserve's balance sheet.
In summary, my assessment is that while the Fed's asset
purchases during the financial crisis of 2008-2009 were
emergency measures that did help lift the financial crisis and
end the recession, the subsequent quantitative easing asset
purchases, particularly the Fed's Large Scale Asset Purchases
under QE3, and maintaining a $4\1/2\ trillion balance sheet,
even though the economy is growing normally and financial
markets are behaving normally, has served no economic purpose
and are very risky.
The Fed's balance sheet of $1.8 trillion of mortgage-backed
securities (MBS) inappropriately involves the Fed in credit
policy and credit allocation. The Fed's overall balance sheet
of $4\1/2\ trillion gives the false impression to Congress that
it is reducing the budget deficit in a riskless way, when in
fact it exposes the government, as well as current and future
taxpayers, to very large losses. In addition, it blurs the role
between monetary and fiscal policies, and jeopardizes the Fed's
credibility and maybe even its independence.
I recommend that the Fed embark immediately on a strategy
that would gradually and predictably unwind the excesses in its
portfolio as part of normalizing monetary policy. Once again,
reflecting the Fed's current $4\1/2\ trillion portfolio, there
are over $2 trillion in excess reserves in the banking system.
By gradually and predictably unwinding these excess reserves,
this would enhance economic performance and provide for a
healthier banking system.
The financial crisis was scary and required emergency
unprecedented Fed policy, but the Fed's continuation of crisis
management quantitative easing that has bloated its balance
sheet has been a mistake. Along with maintaining extremely low
interest rates, there is no question that it has stimulated
financial markets, boosted stock prices and housing values, and
encouraged risk-taking. However, strikingly, it has failed to
stimulate nominal GDP. Nominal GDP growth has actually
decelerated despite all the Fed's efforts. So it is
inappropriate for the Fed to say that it has stimulated the
economy. Meanwhile, through its quantitative easing and
artificially low rates, the Fed has increased wealth inequality
and it has added financial burdens to poorer Americans and
older Americans. The economy would have continued growing along
its modest pace and jobs would have been created even without
QE, the Fed's Operation Twist (which involved selling shorter-
term securities and buying longer-duration securities), and the
Fed's reinvestment of maturing assets.
Unfortunately, potential growth has been slowed
significantly by higher taxes and a growing web of government
regulations that have deterred businesses from expanding,
investing, and hiring. These economic and job-dampening factors
are way beyond the scope of the Fed's monetary policy. All of
the Fed's excessive easing cannot help.
In Fiscal Year 2017, reflecting the Fed's positive carry
from its excessive balance sheet, the Fed will remit over $100
billion of net profits to the Treasury, but this comes at a
very high risk. The CBO estimates that if interest rates were
to rise by one percentage point from its baseline, it would add
$1.6 trillion to the deficit over 10 years. Based on the Fed's
own forecast of what it thinks is appropriate for the Fed funds
rate and its forecast of economic growth and inflation, the
unfavorable deficit risks are even higher. Where is the Fed's
transparency on this important fiscal exposure?
I encourage the Fed to establish this strategy for
unwinding the excesses in its portfolio. It is important that
the Fed establishes a strategy and then sticks with it, and not
waiver back and forth and be pushed around by financial
markets.
I recommend two steps, and they are pretty easy and pretty
passive. First, the Fed should announce it will halt
reinvesting the maturing assets in its portfolio, which would
lead to a sizeable runoff in its holdings of the Treasuries,
and then after a couple of years, announce a Treasury for MBS
swap that would move the Fed toward an all Treasuries
portfolio. Even this fairly aggressive unwinding of the Fed's
portfolio would leave plentiful excess reserves in the system.
It would help the health of the banking system and be positive
for economic performance. Thank you.
[The prepared statement of Dr. Levy can be found on page 68
of the appendix.]
Chairman Barr. Thank you, Dr. Levy. Your time has expired,
and we can get to your second point in the Q and A there.
The Chair now recognizes himself for 5 minutes. Dr.
Calomiris, monetary policy is not easy, but could our monetary
policy and thus our economy benefit from greater diversity of
thought in the Federal Open Market Committee (FOMC)?
Mr. Calomiris. Thank you for that question, Mr. Chairman.
Yes, I believe that this is a major problem right now. The lack
of diversity reflects excessive centralization of power, and we
see it in a lack of diversity in the models the Fed is using
and we also see it in the lack of dissent. And, in fact, this
has been a very troubling pattern over the past 20 years, that
the Federal Reserve Board has moved away from the dissent
patterns that we observed in the past, and I think this
reflects the fact that the power within the Fed system is
overly centralized. You can't have diverse thinking if you have
monopolistic power.
Chairman Barr. And with that greater diversity of thought
in mind, Dr. Calomiris, should we expand the voting rights on
the Fed's monetary policy committee? And as you know, only 5 of
12 district bank presidents presently vote at each FOMC
meeting. Wouldn't broadening those voting rights to include all
of the district bank presidents at every FOMC meeting provide
for a monetary policy that directly benefits from all of the
information that all of the committee members would bring to
bear?
Mr. Calomiris. Very much so. There are two obvious reasons
to believe so. First, note that the dissents that are still
happening within the Federal Reserve System are coming entirely
from Federal Reserve bank presidents. In terms of diversity of
opinion, they are the whole show right now. So I think
expanding their role by having all of them vote at every
meeting would definitely improve the diversity.
The second point is they are the ones who, other than the
Chair, control research departments. The Governors don't. The
Governors only get the information that the Chair of the Fed is
willing to give them. The bank presidents actually have staffs,
and they can and do, therefore, research independently to some
extent.
Chairman Barr. I agree with you. And I would just note that
Dallas Fed president Richard Fisher advocated for just such a
governance reform. And Mr. Fisher was among the first to sound
the housing crisis alarm actually more than a year before other
committee members acknowledged the smoke that they smelled was
actually evidence of fire. So I would agree with that.
One final question to you, Dr. Calomiris, related to the
directors and the regional district banks. The 12 district
presidents are nominated by their boards of directors, who, in
considerable part, represent the economic interests of their
region. Each board, as you know, is composed of class A, B, and
C directors, the latter two being nonbankers, and the class A
directors being bankers. The Dodd-Frank Act took away the power
of the bankers or the class A directors to vote for their
district presidents. Is this a power that we should restore to
class A directors?
Mr. Calomiris. I think it is a good idea. Again, we want
diversity of views, but bankers have a particular expertise
that is very valuable in this system. And if you go back to the
Federal Reserve Act, the 12 banks were actually given power so
that they would reflect bankers' knowledge and interest. So I
think it makes sense to include them. And if you think about
who some of the most successful presidents have been, they have
been people who have benefited from that kind of real-world
financial experience.
Chairman Barr. Dr. Levy, in my time remaining, as you know,
the Fed continues to reinvest proceeds from maturing assets,
effectively maintaining its QE policy. You testified about
this. In addition, the Fed is still using interest on excess
reserves and repos to set the Federal funds rate as opposed to
conventional open market operations. The Fed still owns more
than $1.8 trillion in mortgage-backed securities, the Fed's
balance sheet remains 4\1/2\ times the size of the pre-crisis
balance sheet, yet we are 8 years beyond the Great Recession.
How would empowering every district president to fully
participate in each FOMC meeting, and how would a single
mandate of price stability or at least creating, or placing a
priority on price stability, how would those reforms improve
monetary policy, especially with reference to the balance
sheet?
Mr. Levy. I think an even-handed balance of power in the
Federal Reserve System between the Federal Reserve presidents
and the Board of Governors would lead the Fed to make the right
decision and stop reinvesting the maturing assets on its
portfolio and let them run off.
As Dr. Calomiris said, we definitely need a balance. And
the bank presidents, who have a keen understanding of banking,
would contribute a lot to monetary policy deliberations.
With regard to inflation and the dual mandate, the Fed
would be much more precise about its inflation target, and like
the ECB, identify 2 percent as its definitive target and not
waiver and give the impression that inflation above 2 percent
for a while would be acceptable. By pursuing absolutely
discretionary policies and frequently changing its mind creates
more uncertainties in financial markets and--
Chairman Barr. Thank you, sir.
The Chair's time has expired. So thank you for your answer.
And the Chair now recognizes the ranking member, Ms. Moore,
for 5 minutes.
Ms. Moore. Thank you so much, Mr. Chairman. And here I am
adding on to my free MBA that I get whenever we have such a
distinguished panel here.
I don't want to seem naive, but I just want to start out
with you, Dr. Calomiris. In your testimony, on page 17 at the
bottom, you state that, ``A policy rule must be a specific
algebraic formula that can be used to determine how monetary
policy should respond to changes in macroeconomic conditions.''
And I guess, since we are debating whether or not the QE
was a good policy, I want you to share with us, if we had used
this sort of algebraic formula, we would have been below zero
interest rates when QE was first adopted. So this seems to be a
contradiction that we ought to have a policy that meets the
algebraic formula, and in reality the Fed saved the economy by
doing QE.
Can you just justify those two things?
Mr. Calomiris. Sure. Thanks for your question. No, there is
no contradiction. The formula can change. And, of course, I
agree, and have written about it for many years, that when you
hit the zero lower bound, the formula has to potentially
include some quantitative easing, but that doesn't mean that
you can't still be systematic, that you can't explain to people
what you are doing.
So, yes, as I talk about at length in my testimony, there
is going to be a need for the formula to adapt, and the Fed
should be in charge of deciding from time to time--
Ms. Moore. It isn't a formula if you change it.
Okay. So, Dr. Spriggs, we have heard my colleagues here
agree that we need more diversity on the Fed, but when they do
it, they just talk about more white men from the other banking
regions having a vote. So when you talk about diversifying the
committee, are you talking about just other white men having an
opportunity to vote, or how would you explain diversity?
Mr. Spriggs. No. I think it means diversity of experiences
and diversity of communities that have been served. So I am
very happy that the Fed can celebrate that they have chosen an
African American to be the president of the Atlanta Regional
Bank. This is historic, as he is the first one. But more
important than his skin color is that he is a housing expert.
And having someone who understands the housing market and the
need of finance to sustain a middle-class country is an
important voice to be at the table.
What was missing during the housing crisis was someone who
actually understood, what did this mean for the American
household to have that much wealth disappear. So it is that
kind of diversity.
Now, of course, economists, unfortunately, are of a similar
mind. We are a discipline which is far more orthodox than any
other social science. People have studied this. If you compare
the Ph.D. comprehensive exam at Howard to the Ph.D.
comprehensive exam at any other university, you will find that
there are maybe two questions that are different. We all do
think alike.
So part of the diversity is at least achieving having
different voices at the table and people who understand--
Ms. Moore. Thank you so much.
Mr. Spriggs. --that the responsibility is beyond bankers.
Ms. Moore. Thank you, Dr. Spriggs. I want you to comment on
the dual mandate, which is continually being challenged in this
committee. As a matter of fact, Mr. Brady offered a bill to end
the dual mandate. How do you think that might compromise, in
fact, price stability, so how they might work together or how
that might affect it?
Mr. Spriggs. I think we see--and as you mentioned before,
the problem with a Taylor-like rule, an algebraic rule that
runs into the zero lower bound means that the Fed would have to
do something different, and that something different is a
reality that comes about if the Fed isn't paying attention to
the real economy and paying attention to what is happening to
wages. You can't get price stability if you have high
unemployment, because high unemployment means that you are far
away from the production possibilities curve.
If you run an economy that only touches that curve, that
only pushes us to the peak, and not think about it in the long
run, then every time we reach that peak, you keep shrinking the
economy, and that is the problem we have run into.
Ms. Moore. All right. Thank you so much.
Dr. Levy, let me let you finish this out. You said that you
want more clarity on Fed goals. Well, the Fed mandate is 2
percent inflation. Could it be more clear?
Mr. Levy. It could be much clearer. The Fed identifies 2
percent, but then after the fact, it modifies its view and
states that 2 percent is just a long-run average. It proceeds
with saying that exceeding 2 percent for a while is just fine
if the overheating is helpful. So it is totally discretionary.
In contrast, the European Central Bank has a mandate up to
but not exceeding 2 percent, period.
Ms. Moore. Thank you.
Chairman Barr. The gentlelady's time has expired.
The Chair now recognizes the distinguished gentleman from
Texas, the Vice Chair of the subcommittee, Mr. Williams, for 5
minutes.
Mr. Williams. Thank you, Chairman Barr, and to all our
witnesses today. I wanted to begin by talking about the Fed's
balance sheet. We have heard that today. Pre-crisis, $900
billion; today, $4.2 trillion. Let's first explore how we got
there. The required reserves provide $110 billion of funding,
less than 3 percent of the balance sheet, while the value of
currency in circulation stands at about $1.5 trillion today, an
amount that is less than 15 percent of the balance sheet. More
importantly, and maybe more troubling, is the spike in excess
reserves held at the bank, currently $2 trillion. Large
domestic and foreign banks who are privileged to receive higher
rates on these excess funds have taken advantage of the
policies put in place by the Federal Reserve. In turn, that is
money that is just sitting there and not being lent out, not
serving an economic purpose. The Fed funds rate at the end of
February was 66 basis points, while the interest on reserves
and interest on excess reserves was 75 basis points.
Clearly, the Fed has stepped well outside the bounds of the
conventional balance sheet in both funding sources and size.
The bottom line is the Fed governance can be improved to get
out of these distortionary rates.
Question, Dr. Levy: In your testimony, you noted that the
Fed's excessive large balance sheet does not serve any positive
economic purpose but has many downside aspects to it. In terms
of economic opportunity, how damaging is it to leave the
balance sheet too big for too long?
Mr. Levy. It is damaging and very, very risky. I mentioned
the risk that if interest rates rise, it could generate very
large losses. Presently the Fed, through its large balance
sheet, generates a little over $100 billion in profits annually
that it remits to the Treasury. If interest rates go up, then
not only does the amount it remits dissipate, but the
portfolio, which includes largely longer-duration securities,
could incur large losses. In particular, the Fed's large
holdings of longer-maturity MBS are of major concern.
Think about it the following way: Fannie Mae and Freddie
Mac failed because they took excess risk involving excess
leverage, and after failing, they are now under conservatorship
of the Treasury. Some large too-big-to-fail banks ran very
risky leveraged portfolios and precipitated the financial
crisis and faced failure. Their forced recapitalization
involved the government's TARP program and subsequently the Fed
has played a critical role in forcing banks to raise more
capital, deliver their balance sheets, and reduce the risk in
their portfolios and behavior.
Now, the Fed is borrowing short and has a $4\1/2\ trillion
portfolio, playing the positive carry game that involves large
risks, but it does not talk about the risks. It should be more
transparent.
Mr. Williams. Okay. Another question: The Fed's balance
sheet stands as a monument to numerous discretionary decisions,
including the decision to step well outside the bound of simple
monetary policy and dive headfirst into the credit markets.
Does the Fed that now favors some borrowers over others not
only create economic distortions, but also compromise the very
independence of monetary policy?
Mr. Levy. Yes. The Fed--through its balance sheet and
quantitative easing--has expanded the role of monetary policy
over the boundaries into fiscal policy. This definitely risks
the credibility of the Fed and could effectively harm its
independence.
In addition, the Fed's holdings of $1.8 trillion of
mortgage-backed securities directly involves monetary policy in
credit allocation policy. That is beyond the role of monetary
policy. It is inappropriate for the Fed to influence credit
conditions in one sector over another. The Fed should unwind
its portfolio over a lengthy period of time and move to an all
Treasuries portfolio and reduce the scope of monetary policy
back to what is normal.
Mr. Williams. Now, Dr. Calomiris, as we know, the Fed sets
interest rates on reserves. In your testimony, you talk about
how setting very high interest rates tends to dissuade banks
from lending. Can you explain briefly to the committee why it
is inappropriate for the Fed to pay above market rates on bank
reserves?
Mr. Calomiris. First of all, because it is a subsidy. If
you are paying above market rates, you are trying to pay
someone to do something, and in this case, paying them not to
lend. So it is obviously a fiscal policy.
It also clearly contradicts the statute that authorized the
payment of interest on reserves, which said that they would be
at market rates, not above market rates. So I find that
strange.
But I want to emphasize a point that Dr. Levy also made.
The reason the Fed has gotten itself all tangled up in these
fiscal policies, including interest payment on reserves, is
because it is worried about having to recognize capital losses,
like the ones that Dr. Levy is talking about, and it is the
political risks from that for the Fed that is driving the Fed
to do these fiscal interventions.
Chairman Barr. The gentleman's time has expired.
The Chair recognizes the gentleman from California, Mr.
Vargas.
Mr. Vargas. Thank you very much, Mr. Chairman. And thank
you again to the witnesses for being here.
Going back, then, to the issue of the effectiveness of the
Fed's large scale asset purchases I heard from Dr. Levy, and,
again, thank you for those comments.
Mr. Spriggs, would you like to comment on those? Because I
thought, in fact, it was just the opposite; it did create
stability as opposed to become a problem or a bubble.
Mr. Spriggs. Thank you, Congressman. It created stability
in one of the most important areas. The sector that was hurt
the most by the downturn, the household sector, was in great
need of having its balance sheet stabilized. Without that
stabilization, we would have continued the downward collapse of
consumption. So when there was a tremendous spike in mortgage
interest rates and spread of the mortgage interest rates, this
was going to lead to huge ramifications in the housing market.
The Fed's intervention in this market was important to
restoring the historic spread so that interest rates looked
normal. And if you will see from the way that the markets have
responded since, whether it is looking at Treasuries or looking
at mortgage rates, we have seen that stability. And that is
important, because only with that stability has the household
sector been able to figure out how it can rebalance after the
huge losses taken in savings. Because of the foreclosure
crisis, because of the collapse of pensions, because of the
loss of jobs, the household balance sheet was shaken very
greatly. This has to be part of what the Fed takes into
consideration if we are going to have a stable financial
sector.
Mr. Vargas. Dr. Levy, would you like to comment on that?
Because it does seem to me that the balance sheet stabilization
did work in exactly the way that Mr. Spriggs was talking about,
but you don't agree with--oh, wait. Dr. Calomiris, you wanted
to comment on it. Please do.
Mr. Calomiris. Yes. So I think that there is a lot of
evidence about this, and it depends on which interventions you
are talking about and what time you are talking about.
The most recent detailed study of this by Marco Di Maggio,
who is now at Harvard Business School, shows that QE1 actually
seems to have had an effect. QE2 and QE3, the only parts of
those interventions that had an effect were their relative
price effects through their mortgage-backed securities
purchases, which is a fiscal policy. If you want to subsidize
mortgage-backed securities by making their yields lower, then
you can do that, that is a fiscal policy of Congress, but the
Fed has actually done that. And I would say beyond the period
where there was any need to stabilize the markets, it is simply
a giveaway.
Mr. Vargas. Dr. Levy?
Mr. Levy. Yes. I agree with Dr. Spriggs regarding 2008-
2009. As I mentioned several times in my testimony, there is no
question that the Fed's asset purchases during the financial
crisis in an emergency situation did help stabilize financial
markets and help lift the economy out of recession. But if we
look at the subsequent quantitative easing programs, the Fed's
Operation Twist and its reinvestments of all the maturing
assets, the economy has not been stimulated; rather it has
merely continued to grow very close to its potential growth
path. Nominal GDP, which is the broadest measure of current
dollar spending in the economy, actually decelerated. That is
contrary to what the Fed had predicted would happen and also
contrary to what its models predicted. The actual economic
performance and particularly the persistent disappointment of
capital spending suggest strongly that the Fed's monetary
policy had very, very little impact.
So when we talk about the expansion years following the
financial crisis and recession and particularly the period
since 2012, households' balance sheets had already stabilized
and consumption was growing. The housing market was growing.
Financial markets were behaving normally. Does that require an
emergency quantitative easing?
When you ask them whether the quantitative easing helped,
it is instructive to emphasize that it helped during the
crisis, but we haven't been in crisis for 8 years, and it has
done little to stimulate faster growth during the expansion.
Mr. Vargas. My time is about up. But it seems to me, then,
that in the first instance, you would agree that the
flexibility that the Fed had was almost necessary, then, for
this stability?
Mr. Levy. Yes.
Mr. Vargas. It seems there would be agreement, I imagine.
Dr. Spriggs, if you--
Mr. Levy. And I think the legislation that is pending
provides that flexibility.
Mr. Vargas. Thank you, Mr. Chairman.
Chairman Barr. The gentleman's time has expired.
The Chair now recognizes the gentleman from North Carolina,
Mr. Pittenger.
Mr. Pittenger. Thank you, Mr. Chairman. Thank you for your
fine leadership in the important work of this committee. And
thank you, each one of you, for coming, for your service to our
country, for being here today.
I would like to say that the Fed's extraordinary policy
stance over the last decade, one that Governor Walsh called
such--it was financial engineering, why has it not produced the
results that have been so consistent since World War II? We
haven't had robust economic growth, and many Americans have
been left underemployed or are really barely making it. So I
just really would like to get your take on that. Dr. Calomiris?
By the way, Dr. Calomiris, my daughter went to Columbia
Business School, and she knows of you. She did not have you for
a class, but you have a great reputation there.
Mr. Calomiris. Thank you, Congressman.
Monetary policy can temporarily, over the business cycle,
stimulate employment and growth, but it can't over any long
period of time. Beyond a couple of years, it can't. So when you
are looking at a sort of protracted under-performance of the
economy, you have to look elsewhere.
And I think the answer to your question, it is a long
answer, but it has to do with needs to improve the supply side
of the economy. There is a long list of things. It could be tax
policy, it could be regulatory policy, it could be job
training, but it is not going to be monetary policy.
Mr. Pittenger. Thank you.
Mr. Spriggs, do you want to give a comment?
Mr. Spriggs. Thank you, Congressman. I would reemphasize
that this is a unique recovery, because we didn't have a fiscal
response. Public sector investment went down by historic levels
and has not recovered. We are still down several hundred
thousand public schoolteachers compared to where we were
before.
Mr. Pittenger. You wouldn't say--
Mr. Spriggs. And that is--
Mr. Pittenger. Excuse me, sir.
Mr. Spriggs. And that is not per pupil.
Mr. Pittenger. Let me reclaim my time.
Mr. Spriggs. We are down several hundred thousand public
schoolteachers.
Mr. Pittenger. You don't believe that had to do with any
restrictions on the market itself and the regulatory
environment?
Mr. Spriggs. No, that is not regulation of that. That is
Congress--
Mr. Pittenger. In terms of the--
Mr. Spriggs. That is Congress failing to learn the lesson
of the Great Depression. Fortunately, the Federal Reserve
learned the monetary lesson of the Great Depression, but we
have not seen the fiscal response commensurate with what took
place. And this--
Mr. Pittenger. Dr. Levy?
Mr. Spriggs. --lack of investment--
Mr. Pittenger. I am short on time, sir, with all due
respect. I do thank you.
Dr. Levy, what are your comments? Dr. Levy, would you like
to respond?
Mr. Levy. Yes. In December of last year, I testified before
this committee and argued that monetary policy affects
aggregate demand in the economy. What has happened so far in
this elongated expansion is there is not insufficient demand in
the economy, but there are various factors that have
constrained economic growth, including tax policy, a growing
web of regulations and government-mandated expenses, not just
on the Federal level, but the State and local levels, that have
inhibited businesses from hiring and investing. And then there
is this broad issue of educational attainment and skill levels
of our population. There is demographics. Obviously, you could
identify these factors one by one, and each is way beyond the
scope of monetary policy.
So I agree with both Dr. Calomiris and Dr. Spriggs. There
are a lot of factors that are affecting economic activity,
particularly tax and regulatory policies. It is absolutely
incorrect and can lead to undesired economic performance if we
continue to rely on the wrong policy tool.
Mr. Pittenger. What would you say that we need to be doing
now to free ourselves from this trap that we appear to be in,
this low-growth trap? What could the Fed be doing right now?
Mr. Levy. I like the idea of well-thought-out tax reform,
particularly on corporate tax policy, that affects the pass-
through businesses that employ half of all workers and generate
roughly half of all profits in businesses. We do need more
infrastructure spending, but wise infrastructure spending that
is really needed, rather than just throwing money at the
economy.
And we definitely, by every way possible, need to improve
our educational system and retrain working-age people who are
out of work.
Mr. Pittenger. Thank you. Dr. Calomiris?
Mr. Calomiris. I think what is interesting is that this is
an area where economists are very broadly in agreement. Exactly
how to do it is another matter. But the areas of deficiency
that matter for long-term growth, I can think of the four most
obvious ones. First, regulatory policy has been a major drag on
growth.
Mr. Pittenger. You have a few seconds left, sir.
Mr. Calomiris. Yes. Second, tax policy. Third, I agree with
Dr. Levy about the right kind of infrastructure. And, fourth,
educational policies. And I think that is where you are going
to get growth.
Mr. Pittenger. Thank you. My time has expired.
Chairman Barr. The gentleman's time has expired. The Chair
recognizes the gentleman from Texas, Mr. Green.
Mr. Green. Thank you, Mr. Chairman. I thank the ranking
member as well. And I thank the witnesses for appearing today.
Mr. Chairman, I want to talk about an acceptability factor.
There seems to be an acceptability factor with reference to a
good many things that are happening at the Fed. It seems that
it is acceptable in society--maybe more so than the Fed, but I
will relate it to the Fed--that women earn 80 cents for every
dollar a man earns. Why would I say it is acceptable? Because
we don't focus on it to do something about that, the fact that
women earn 80 cents for every dollar a man earns, and by the
way, it seems to be an improvement because at one time it was
76 cents for every dollar a man earned.
The certain sort of acceptability factor that we have to
work with that is a mindset: African Americans nearly always--
there are exceptions--have unemployment rates that are twice
that of white Americans. There is a sort of acceptability
associated with that. It seems that we should be able to do
something about these things if we focus on them.
And I was honored that when Chair Yellen was here last, she
agreed that she would examine this relationship between white
Americans and African Americans and the notion that the
African-American unemployment rate is nearly always twice that
of white Americans.
Now, if there is someone on the panel who differs with what
I have said in terms of the empirical evidence, kindly extend a
hand into the air so that you may be recognized? Anyone?
Kindly allow the record to show that no one has extended a
hand into the air.
This acceptability factor goes into the Fed itself--there
have been 134 Federal Reserve Bank presidents in the history of
the Fed, and we find that Dr. Bostic is the first African
American. We live in a world where it is not enough for things
to be right. They must also look right. It doesn't look right
for the Fed to not have diversity, not only in the opinions,
but diversity with reference to the people who serve. It ought
to be diverse.
Does anybody differ? If you differ, kindly extend a hand
into the air. Let the record reflect that no one differs.
The Fed ought to have diversity of opinions that can be
reflected through capable, competent, and qualified women as
well as men. One of the reasons Dr. Spriggs is here today is
because he is capable, competent, and qualified; and that sends
a message to the rest of the world about what African Americans
are capable of doing.
Does anybody differ? Raise your hand. Let the record
reflect that no one differs.
So now, let's move a little bit further into this and look
at interest rates in terms of their being increased and how
they may have a harmful impact on some demographics. Dr.
Spriggs, do interest rate increases have an adverse impact or a
different impact on some demographic groups as opposed to
others?
Mr. Spriggs. Thank you, Congressman, and thank you for the
kind words. Yes, they can. In the current setting, a large part
of the recovery has been through the automobile sector.
It was mentioned before that the Fed causes calamities, but
what the Fed did was not regulate properly. It didn't believe
it should. In the instance of the mortgages, it was that they
didn't properly police discrimination in mortgage. In the case
of automobiles, a disproportionate share of growth in auto
sales have been through subprime loans, which probably should
have been regular auto loans. That delinquency rate on payment
is beginning to rise because those are not good instruments.
The risk is in the instrument, not in the purchaser.
Unfortunately, because African Americans and Latinos are
the most vulnerable in the economy to any slowdown, there is a
real risk here in the real economy because we currently
generate enough jobs to keep the unemployment rate flat. If we
slow down, if the purpose of raising interest rates is to slow
the rate of growth, that means the algebra is you will generate
not enough jobs to keep the unemployment rate down, and people
will have a higher unemployment rate.
The first people who will have a higher unemployment rate
are Latinos and African Americans, the ones who are currently
trying to outrun these loans. And a collapse in the auto market
would lead to a recession. That is a real risk.
Mr. Green. Mr. Chairman, before you proceed, I have a
letter that is being sent to Chair Yellen that I would like to
add to the record.
And I would also like to add to the record, Mr. Chairman,
if I may, the reason we want to see diversity of ethnicity is
because it is expected that if you are there and you are
African American, it is expected that you are going to raise
some of these issues that impact African Americans. That is
kind of expected of you. I yield back.
Chairman Barr. Without objection, the gentleman's
submission will be included in the record.
And the gentleman's time has expired. The Chair now
recognizes the gentlelady from Utah, Mrs. Love.
Mrs. Love. Thank you. Thank you, Mr. Chairman, and thank
you all for being here today. This is obviously a very
important issue.
The last election, I believe, was a testament to the
frustration that the American people had about their economic
circumstances, but I think that frustration is more properly
directed at Congress instead of the Fed. I believe that we put
too many mandates on the Fed while Congress has failed to meet
its own responsibilities regarding the economy. Congress, after
all, has a lot more levers, or should have many more levers,
than the Fed does to address employment, policies towards tax,
trade, regulation, and spending, and the Fed by contrast is
uniquely qualified to address price stability.
So, Dr. Calomiris, in order for consumers, households, and
businesses to plan for the future and save, consume, save, and
invest most effectively, do they need to be confident that
prices will remain relatively constant over a period of time?
Mr. Calomiris. Yes. We have a lot of clear evidence about
that. So two pieces of evidence, because I know we are short on
time.
Number one, when inflation is more variable, contracting
periods shorten. People aren't willing to enter into contracts,
labor contracts, or debt contracts, over long periods of time.
Number two, when inflation is more volatile, holding
everything else constant, employment and output decline.
Mrs. Love. Okay. So for both consumers and businesses to
allocate capital to the highest valued uses, they need a sense
of price stability. So contracts, for instance, when you were
talking about sending out contracts, they can't have a long
period of contract which affects the economy?
Mr. Calomiris. Correct.
Mrs. Love. So price instability on the other hand in the
form of either deflation or rapid inflation can have drastic
consequences on economic decision-making and, therefore,
economic growth and job creation. That also is a major factor
in how our economy is--
Mr. Calomiris. Agreed.
Mrs. Love. Okay. So would it be reasonable to argue that
the Fed would be pursuing maximum employment, in fact, pursuing
maximum employment if they most effectively focus their efforts
on ensuring price stability?
Mr. Calomiris. Exactly. That is the argument for making
price stability the sole primary objective. And I just want to
emphasize, that doesn't mean the sole objective; you can still
have a secondary objective of stabilizing unemployment that is
subject to your primary objective of price stability. You want
to hold the Fed accountable for something we know how to hold
it accountable for, but you also want to encourage it to
stabilize over the business cycle in addition to that. There is
no conflict between those.
Mrs. Love. Okay. Thank you.
Isn't it also widely accepted that the Fed's monetary
policy changes impact the economy with substantial lag, perhaps
as much as several quarters or even more than a year, after
changes in policies are announced?
Mr. Calomiris. Correct. And as you pointed out, variable
lags that are often hard to predict.
Mrs. Love. Okay. And lastly--I am actually happy I am able
to get through all of this--isn't it also broadly accepted that
by the time policy changes are fully incorporated, economic
circumstances very often have changed so that change in policy
made in quarters or even a year before are no longer
appropriate?
Mr. Calomiris. Yes. We even have words for that in
economics. We have the words ``recognition lag'' and
``implementation lag'' to point out exactly the problems that
you are addressing.
Mrs. Love. Okay. And given that reality, isn't it
reasonable to argue that in trying to meet the mandate of
maximum employment, the Fed might do, and perhaps even more
often than not, does do more harm than good?
Mr. Calomiris. It depends on exactly how the Fed approaches
this. We know that there are seat-of-the-pants biases that if
you don't have a commitment to price stability, the answer is
yes. But if you do have a commitment to price stability, the
answer is not necessarily yes. That is, you can stabilize
employment and should stabilize employment subject to having
that commitment to price stability.
I have an article I cite in my paper which is written by
two Federal Reserve Board economists in 2004, that talks about
that, that if you have that commitment to price stability as
your primary objective--I am not putting words in their mouth,
but I am interpreting their results--that then you avoid these
biases that allow you to be able to target over the cycle.
Mrs. Love. So in all, what I am trying to say is that I
believe that the Fed can be pursuing maximum employment more
effectively if they really focus on ensuring price stability,
and Congress needs to take its responsibility back in using its
levers to focus on maximum employment.
Mr. Calomiris. I couldn't agree more.
Mrs. Love. Thank you.
Chairman Barr. The gentlelady's time has expired, and now
the Chair recognizes the gentleman from Arkansas, Mr. Hill.
Mr. Hill. I thank the chairman.
And I thank the distinguished panel.
Mr. Chairman, I would like to ask unanimous consent that an
article be put in the record. It is by Dr. Todd Buchholz, who
was my deputy when I ran the Economic Policy Council in the
White House. He has written a very thoughtful piece on
restructuring the Fed.
Chairman Barr. Without objection, it is so ordered.
Mr. Hill. Thanks, Mr. Chairman.
Dr. Calomiris, you talked about the concentration of power
in the Fed and governance, and I found that very interesting
considering you talked about the lack of dissent in the Open
Market Committee, and yet when we include the district bank
presidents, we get more discretion, more discussion, more
dissents.
And I find that so curious that they are reluctant to these
kinds of structural governance changes when that is the
absolute call for corporate America, to have more dissent, more
discussion, more independent directors, more demonstrating that
by votes. As a former banker, I saw it in bank examinations.
Where are the dissents in your loan committee? Why does
everybody vote yes? So I really enjoyed that part of your
testimony, and we do want directors of our regulatory
commission, just like we look for directors in corporate
America, we want saber-toothed tigers as directors and
Governors, not tabby cats. So thanks for that comment.
And in that regard, the concentration of the Board of
Governors, it seems to me sometimes is disconnected with
reality. And I cite for example, you talk about rent seeking
between interest groups and the Board of Governors, and so I
have some draft legislation that would try to shift power back
in Fed policy to the district banks for things like M&A
approvals or CRA issues, and let the expertise be held
primarily at the district bank instead of coming to Washington.
Could you comment on that, Dr. Calomiris?
Mr. Calomiris. I can see the argument that that would be an
improvement, but I would like to see that get out of the
Federal Reserve System entirely. I think it conflicts, as I
argue in my report, with monetary policy.
And I would also point out that this is not a partisan
issue. I think it is very important to mention, I cite the
Governors who were Democratic appointees who have been the most
vocal complainers about the concentration of power at the
Federal Reserve Board, Larry Meyer and Alan Blinder.
So this need of both to create more independence in the
bank presence, but also to empower the Governors. Give them
staff. Let them have the ability to actually think in an
organized way.
Mr. Hill. Because we do have that at the SEC, for example.
Commissioners have their own counsel; isn't that right, sir?
Mr. Calomiris. Exactly. I think this is exactly the right
comparison, yes.
Mr. Hill. Good. Thank you for that.
Dr. Levy, let me turn to you and talk a bit about your
concerns about the Fed balance sheet, which, again, I found
your testimony important. I am concerned that we are running,
the Fed is now running the largest hedge fund in the world and
that they, in fact, are at potential systemic risk as they
attempt to unwind this balance sheet, and I enjoyed your
comments about the transparency of that.
Again, legislation I am considering would in the emergency
lending powers under Section 13(3), require that those have
some congressional oversight to do that, and I would be
interested in you talking about that topic.
And then also on 14(2), limiting the Fed to only borrowing
Treasury securities. And I remain concerned that other central
banks are now buying corporate stocks, for example, which I
find very concerning. It is concerning enough that the Fed now
has a major interest in the mortgage-backed securities market,
which I think puts it in a severe conflict.
So could you reflect a little bit about your philosophy of
Treasury-only purchases in the open market operations and then
also swapping out if they take other assets as well?
Mr. Levy. In all but emergency situations, the Fed's
purchase should be Treasuries only, and I strongly recommend
that the Fed take the appropriate steps that over a reasonable
period of time it unwinds its current mortgage-backed security
portfolio. Right now, it is at $1.8 trillion.
That would take a while. To begin, I recommend allowing the
Fed's holdings of Treasuries to passively roll off. Next, it
should involve a measured and preannounced swap of Treasuries
for mortgage-backed securities. Regarding your point about
other securities, the Fed should not be involved at all in what
other central banks are doing, such as purchasing stocks and
corporate bonds.
Mr. Hill. Thank you, Dr. Levy. I yield back, Mr. Chairman,
thank you.
Chairman Barr. Thank you. The gentleman yields back.
The Chair recognizes the gentleman from Minnesota, Mr.
Emmer.
Mr. Emmer. Thank you, Mr. Chairman, and thanks again to the
witnesses for being here today.
In the short time that we have, I would love to talk with
all three of you, and I am sure we are going to get an
opportunity at some subsequent date, but I just want to go
back. I thought Congresswoman Love did a fantastic job
addressing this dual-mandate issue.
Dr. Calomiris, the question is this. I am looking at your
testimony. In your testimony you write, you provide some
internal governance reforms for the Federal Reserve, and then
you talk about the fact that they need to be supplemented.
These reforms you are talking about, diversity of opinion, the
rest, experience, needs to be supplemented with some policy
reforms as well.
And in the quote that I think is very important, you say,
``These reforms that ensure the right kind of accountability
for the Fed by improving policy transparency, constraining
unaccountable discretion, and discouraging politicization of
monetary policy.'' And then you go on and you say, ``The most
obvious policy process improvement would be to repeal the dual
mandate imposed on the Fed in the 1970s and replace it with a
single primary price stability mandate.''
And you continue, ``The reason to target price stability is
because we care about employment and output. By making price
stability the primary long-run objective of the Fed, we ensure
that the average levels of output in employment will be
maximized in the long run.''
Short question, was it a mistake to put in the 1970s to
establish this full employment as part of the dual mandate when
you already had a mandate for price stability?
Mr. Calomiris. I guess I would say that it was an
insufficiently clear formulation. Congress said, do these two
things, but it didn't really explain how to do them.
So my criticism would be, as I testify, that what Congress
should tell the Fed to do is to have a single primary mandate,
and then subject to achieving that mandate, also stabilize over
the cycle. There is no conflict between those. There are many
algebraic formulas that explain that. And by the way, through
the Fed's successful years of the 1990s, the Fed was doing
that, so we know that it can be done.
Mr. Emmer. Right. But here is the problem. You might be
surprised to know that I think the dual mandate is the problem,
one of the greatest problems that we have with the Fed, because
of politicization, politicization--I can't even say the word
today--because the decisions are political, right? And that is
what you are talking about, more accountability with the
discretion that you have given.
By putting this in there, and I was going back to your
words, with price stability, it is already there, if we would
have just focused on price stability, rather than adding this
nebulous full employment. That is part of price stability. If
you just focus on that and target on that, correct?
Mr. Calomiris. Correct, but I would want to correct one
thing, which is the Fed didn't really have a clear price
stability mandate. And even now, the Fed has picked a 2 percent
inflation target, but if you have been following the news, you
know that currently Fed leaders are talking about increasing it
maybe to 4 percent.
The point is, there needs to be, in my view, a legislative
definition of price stability, too. That would be something
new.
Mr. Emmer. But this is where we are going. Some would argue
that that is theft, 2 percent, 4 percent, this is what we are
trying to do. It is all the different tools that they don't
seem to run out of, and yet none of them seem to accomplish the
ends.
Just briefly, in the time we have left, could you point out
some of the political pressures that have impacted the Fed in
the last 8 years, that you are referring to?
Mr. Calomiris. I have worked with the Federal Reserve
banks, many of them, as a consultant, and so I have been privy
to being part of the Federal Reserve System as a sort of semi-
outsider. I also served on the Fed's Centennial Advisory
Committee which was advising Fed officials, and was cochaired
by Mr. Greenspan and Mr. Volcker.
I guess I would say that there are many examples, but that
many of these are hard to put your finger on. I will give you
one example, though. If the Fed Chair has a meeting where she
brings individuals who are unemployed to express the Fed's
sympathy for individuals who are unemployed, I think that is a
symptom of a very politicized central bank. It doesn't mean you
don't care about people who are unemployed, but it shows a
certain level of political pressure on the short term.
So the point is, yes, the Fed needs to think about long-
term policy but not be exhibiting this kind of sympathy about
the near term, about the short term, and that I think was a
symptom of it. But I guess I would say that in private
discussions with Fed officials, that this is not in my
experience, not something that is highly disputed; that there
has been a trend recently. Some of it has to do with Fed
leadership changes that have politicized the Fed very much.
Mr. Emmer. Thank you. My time has expired.
Chairman Barr. The gentleman's time has expired. The Chair
now recognizes the gentleman from Ohio, Mr. Davidson.
Mr. Davidson. Thank you, Mr. Chairman.
My context as we speak about monetary policy, I just want
to highlight what some of my colleagues have referred to as an
austere time with fiscal policy. As highlighted by the chart
that we see on the screen, I think it is hard to support that
this is austerity. When we talk about monetary policy, we
clearly haven't been austere as we have seen the interest rates
held low, and we have seen the balance sheet at the Fed grow
high.
Dr. Calomiris, an expansive mandate gives the Fed a lot of
room to hide from accountability and a lack of diverse thought
mutes dissent. Combined with the lack of either external or
internal checks, we saw the Fed's balance sheet run far out of
bounds. Doesn't this demonstrate how important it is for us to
focus the Fed's mandate and develop governance guardrails, so
we don't drive an economy off the road again?
Mr. Calomiris. Yes. I think it is very important because
making the Fed have to be systematic means that the Fed can be
held to account by you. It means that the Fed tells you in
advance how it is thinking, and then you can actually hold the
Fed to a consistency with its own announcements. That is what
is lacking right now.
The Fed has changed its targets. It says, we are chasing
this employment indicator. Then when they meet that, they say,
no, we don't like that one. We are chasing another one. It
makes you think. In answer to the prior question, when somebody
tells you that they are constantly changing what their target
is, it makes you think that their goal might be something that
is driven by some other objective.
Mr. Davidson. Correct. Thank you. And I think the other
part is, we mention all these multiple mandates. Does that mean
that the Fed really only looks at two things to make their
formulation?
So, Dr. Levy, for example, currency clearly matters at some
level in what is going on. Does that mean that people don't
care how the dollar is valued as part of monetary policy?
Mr. Levy. The Fed cares about the dollar, but it is not its
primary concern.
Mr. Davidson. Just to pick a couple of other things, for
example, price inherent, labor market participation is inherent
in inflation. Any number of inputs go into that consideration.
Does that mean without a mandate that the Fed doesn't care
about the topic?
Mr. Levy. Great question. The Fed cares. We all care, and
we all want healthy, sustained, rapid economic growth. And we
all want low unemployment for everybody, including minorities
and uneducated or semi-skilled workers. So we all want strong
economic performance. The question is, what is the proper role
of the Fed in achieving these objectives? And what we have
discussed today is that many of these goals we want for society
and for economic performance are quite simply beyond the scope
of the Fed to achieve.
All of the quantitative easing in the world and the Fed's
expanding footprint in financial markets and mortgage-backed
securities do not help us achieve our goals. Those goals have
to be addressed by other policy tools, including some of the
points that Charlie and I made, on skills training, and
education, and infrastructure, and tax policy.
Mr. Davidson. Thank you. So in short, fiscal policy has to
play its role. And in passing this dual mandate, just to
highlight whether it is working or not, for example, we would
desire that this would work, but at some point you have to say
what is it?
And when it was passed, it promised this Keynesian nirvana
that with a dual mandate. It promised that unemployment would
not rise above 3 percent. It promised that we would have no
inflation by now, in other words, real price stability, which
may not even be a good objective. So we look at many of these
things, and we go down the path to say, is it working? And at
some point when it isn't, you have to reassess and say, can't
we take that into account with a single mandate? I think you
all have made a very good case for that.
A lot of Americans continue to go missing from our
workforce or remain underemployed. Do they deserve something
better than a dual mandate that has so far not worked?
Dr. Calomiris?
Mr. Calomiris. Yes. I just want to say that I think that is
quite right, and I think that if you look at what the Fed is
doing right now, you see why we need to clarify this. The Wall
Street Journal article I just read says the Fed is talking
about shrinking its balance sheet, and it is going to try a
little and see what the market thinks and actually is
soliciting comments from self-interested parties in the market
about whether they like what the Fed is doing. That would only
happen with a central bank that is completely adrift.
Mr. Davidson. Thank you. My time has expired. Thanks for
your answer.
Chairman Barr. The gentleman's time has expired.
The Chair now recognizes the chairman of our Capital
Markets Subcommittee, Mr. Huizenga.
Mr. Huizenga. Thank you, Mr. Chairman.
And this is just stunning. The hubris that central bank has
is just amazing, as you were describing, Dr. Calomiris, the
direction of basically soliciting input about whether they
should or shouldn't unravel the mess that they have helped
create.
As a courtesy, I am going to recognize my friend, whom I
know had a clarification for you, for 30 seconds.
Mr. Green. Thank you. I greatly appreciate it. Mr.
Calomiris, you indicated, in my opinion, that you thought the
CRA should not be associated with the Federal banking system.
Would you care to give any clarity on that?
Mr. Calomiris. I said that I would prefer, as my testimony
says, I would prefer enforcement of CRA and bank mergers and
other kinds of regulatory policies, particularly those that are
very politically charged, to be removed from the Federal
Reserve consistent with the Treasury's 2008 blueprint to have
other regulatory agencies do that and to create a consolidated
bank regulatory agency that does that.
I think there is a conflict of interest by combining
monetary policy with those, and I think it would better serve
monetary policy for those to happen outside the Fed. That is my
testimony.
Mr. Huizenga. All right. And reclaiming my time. I
appreciate that. Hopefully, that answered the gentleman's
question.
Mr. Green. Thank you for the time.
Mr. Huizenga. As you were starting to lead in here--this
pretense of knowledge about what monetary policy can and can't
do that is just pervasive really is frustrating to me. And as I
think Dr. Levy was just pointing out, buying MBSs and a bunch
of other instruments doesn't necessarily achieve our goals, and
our goal is to provide an environment for all to have an
opportunity to go be successful. And I believe that what the
Fed has done has not done that.
Now we know that Wall Street is doing just fine and Main
Street is not. And a few years ago the Wall Street Journal
published a commentary entitled, ``Confessions of a
Quantitative Easer,'' which was Andrew Huszar, and that was in
November of 2013. And he was the guy that did the trading. And
he said that you would think the Fed would have finally stopped
to question the wisdom of QE.
And only a few months later after QE won, after a 14
percent drop in the stock market, renewed weakening in the
banking sector, the Fed announced a new round of bond buying,
QE2. It had never bought a mortgage bond previously, and now he
says, ``Now my program was buying so many each day through
active unscripted trading that we consistently risked driving
bond prices too high and crashing global confidence in key
financial markets. We were working feverishly to preserve the
impression that the Fed knew what it was doing.''
And he goes on, ``Despite the Fed's rhetoric, my program
wasn't helping make credit any more accessible for the average
American. The banks were only issuing fewer and fewer loans.
More insidiously, whatever credit they were extending wasn't
getting much cheaper.''
QE may have been drying down the wholesale cost for banks
to make loans, but Wall Street was pocketing most of the extra
cash. And who was getting pinched? It was the average American
worker. It was the person on the lower end.
I see Mr. Spriggs is shaking his head on that, but how do
you deny that? It seems to me that we need to narrow the Fed's
mandate on this when we know that we have a common goal, but
when the average American is paying a price for a hubris act
that has done nothing but beef up the bottom line for those
that have already had a beefed-up bottom line, it seems we are
doing a disservice.
So, Dr. Calomiris, I would like you to address that.
Mr. Calomiris. I think there are a lot of pieces to what
you are saying. One is, is it a good public policy--this is the
question--to subsidize risk in the mortgage market? That is
what the Fed's MBS purchases are doing, and of course that is
what Fannie and Freddie purchases do, and that is what Federal
Home Loan Banks do, and that is what the FHA does. They are
subsidizing risk.
And we know from the last crisis the answer. It is not a
good idea. It tends to get more risk. It tends to boost housing
prices to unsustainable levels, and it is not a good affordable
housing policy.
In my testimony, I refer to some other work I have done,
talking about what would be better affordable housing policies.
Subsidizing mortgage risk doesn't work. Subsidizing
downpayments might work a lot better, especially on a means-
tested basis.
So I think the bigger question is not just, do we want the
Fed to be doing this? Obviously, we don't. But what we have
also learned is that we don't want to be doing this.
Mr. Huizenga. My time has expired. Thank you.
Chairman Barr. The gentleman's time has expired.
And I would like to thank our witnesses for their testimony
today.
We have no further Members of Congress with questions.
The Chair notes that some Members may have additional
questions for this panel, which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 5 legislative days for Members to submit written questions
to these witnesses and to place their responses in the record.
Also, without objection, Members will have 5 legislative days
to submit extraneous materials to the Chair for inclusion in
the record.
This hearing is now adjourned.
[Whereupon, at 11:38 a.m., the hearing was adjourned.]
A P P E N D I X
April 4, 2017
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