[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]


                     FORMER FEDERAL RESERVE CHAIRS
                     ON RESPONDING TO OUR NATION'S
                            ECONOMIC CRISIS

=======================================================================

                                HEARING

                               BEFORE THE

             SELECT SUBCOMMITTEE ON THE CORONAVIRUS CRISIS

                                 OF THE

                   COMMITTEE ON OVERSIGHT AND REFORM

                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 17, 2020

                               __________

                           Serial No. 116-103

                               __________

      Printed for the use of the Committee on Oversight and Reform
      
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]      


                       Available on: govinfo.gov,
                         oversight.house.gov or
                             docs.house.gov
                             
                                __________
                               

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
41-894 PDF                  WASHINGTON : 2020                     
          
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                   COMMITTEE ON OVERSIGHT AND REFORM

                CAROLYN B. MALONEY, New York, Chairwoman

Eleanor Holmes Norton, District of   James Comer, Kentucky, Ranking 
    Columbia                             Minority Member
Wm. Lacy Clay, Missouri              Jim Jordan, Ohio
Stephen F. Lynch, Massachusetts      Paul A. Gosar, Arizona
Jim Cooper, Tennessee                Virginia Foxx, North Carolina
Gerald E. Connolly, Virginia         Thomas Massie, Kentucky
Raja Krishnamoorthi, Illinois        Jody B. Hice, Georgia
Jamie Raskin, Maryland               Glenn Grothman, Wisconsin
Harley Rouda, California             Gary Palmer, Alabama
Ro Khanna, California                Michael Cloud, Texas
Kweisi Mfume, Maryland               Bob Gibbs, Ohio
Debbie Wasserman Schultz, Florida    Clay Higgins, Louisiana
John P. Sarbanes, Maryland           Ralph Norman, South Carolina
Peter Welch, Vermont                 Chip Roy, Texas
Jackie Speier, California            Carol D. Miller, West Virginia
Robin L. Kelly, Illinois             Mark E. Green, Tennessee
Mark DeSaulnier, California          Kelly Armstrong, North Dakota
Brenda L. Lawrence, Michigan         W. Gregory Steube, Florida
Stacey E. Plaskett, Virgin Islands   Fred Keller, Pennsylvania
Jimmy Gomez, California
Alexandria Ocasio-Cortez, New York
Ayanna Pressley, Massachusetts
Rashida Tlaib, Michigan
Katie Porter, California

           David Hickton, Select Subcommittee Staff Director
                       Russ Anello, Chief Counsel
                         Senam Okpattah, Clerk

                      Contact Number: 202-225-5051

               Christopher Hixon, Minority Staff Director
                                 ------                                

             Select Subcommittee On The Coronavirus Crisis

               James E. Clyburn, South Carolina, Chairman
Maxine Waters, California            Steve Scalise, Louisiana, Ranking 
Carolyn B. Maloney, New York             Minority Member
Nydia M. Velazquez, New York         Jim Jordan, Ohio
Bill Foster, Illinois                Blaine Luetkemeyer, Missouri
Jamie Raskin, Maryland               Jackie Walorski, Indiana
Andy Kim, New Jersey                 Mark E. Green, Tennessee
                        
                        
                        C  O  N  T  E  N  T  S

                              ----------                              
                                                                   Page
Hearing held on July 17, 2020....................................     1

                               Witnesses

The Honorable Janet Yellen, Distinguished Fellow in Residence, 
  The Brookings Institution Former Chair, Board of Governors of 
  the Federal Reserve (2014-2018)
Oral Statement...................................................     7
The Honorable Ben Bernanke, Distinguished Fellow in Residence, 
  The Brookings Institution, Former Chair, Board of Governors of 
  the Federal Reserve (2006-2014)
Oral Statement...................................................     8

Written opening statements and the written statements of the 
  witnesses are available on the U.S. House of Representatives 
  Document Repository at: docs.house.gov.

                           Index of Documents

                              ----------                              

Documents entered into the record during this hearing and 
  Questions for the Record (QFR's) are listed below/available at: 
  docs.house.gov.

  * National Academies Report on School Reopenings, article; 
  submitted by Rep. Scalise.

  * American Academy of Pediatrics Guidance, article; submitted 
  by Rep. Scalise.

  * Questions for the Record: to Dr. Yellen; submitted by Rep. 
  Green.

  * Questions for the Record: to Dr. Bernanke; submitted by Rep. 
  Green.


 
                     FORMER FEDERAL RESERVE CHAIRS
                     ON RESPONDING TO OUR NATION'S
                            ECONOMIC CRISIS

                              ----------                              


                         Friday, July 17, 2020

                   House of Representatives
      Select Subcommittee on the Coronavirus Crisis
                          Committee on Oversight and Reform
                                                   Washington, D.C.

    The subcommittee met, pursuant to notice, at 12:38 p.m., 
via WebEx, Hon. James E. Clyburn (chairman of the subcommittee) 
presiding.
    Present: Representatives Clyburn, Waters, Maloney, 
Velazquez, Foster, Raskin, Kim, Scalise, Jordan, Luetkemeyer, 
Walorski, and Green.
    Chairman Clyburn. Good afternoon. The committee will come 
to order.
    Without objection, the chair is authorized to declare a 
recess of the committee at any time. I now recognize myself for 
an opening statement.
    Today, the Select Subcommittee is pleased to welcome our 
distinguished panel, Dr. Ben Bernanke and Dr. Janet Yellen.
    Dr. Bernanke was appointed chair of the Federal Reserve by 
President George W. Bush in 2006 and oversaw the Federal 
Reserve's response to the global financial crisis. Before his 
tenure as Fed chair, Dr. Bernanke served as chair of President 
Bush's Council of Economic Advisors.
    Dr. Yellen served as vice chair of the Federal Reserve 
until 2010 to 2014 before being appointed chair in 2014 by 
President Barack Obama. Dr. Yellen also previously served in 
the White House as chair of the Council of Economic Advisors.
    This is the first time that either Dr. Bernanke or Dr. 
Yellen has testified before Congress since stepping down from 
the Federal Reserve. These extraordinary times require Congress 
to seek out advice for experts with extraordinary experiences.
    As Congress works to end this economic crisis and enable 
the strong recovery, we are fortunate to benefit from their 
individual insights and gain from their unique position as 
Federal Reserve chairs than the last economic crisis and 
recovery. I want to thank both of them for agreeing to testify 
today.
    Six months into this crisis, the coronavirus pandemic 
continues to spiral out of control. Today, over 3 million 
Americans have tested positive for the virus, including a 
record-breaking 75,600 confirmed yesterday. And more than 
140,000 Americans have died, far more than any other country.
    This administration has not only failed to fix the problem, 
it has made things worse. The White House pushed states to 
reopen without a plan to keep everyone safe. As a result, we 
have new epicenters in Florida, Arizona, Texas, and here in my 
home state of South Carolina. Florida's per capita infection is 
now 20 percent higher than New York's was at the peak of the 
outbreak in April. And now the administration is undermining 
its own public health experts in the rush to reopen schools 
again without a plan.
    Our Nation's unemployment is at a historic high. According 
to recent estimates, nearly 33 million Americans are collecting 
unemployment benefits. Just last week, several Federal Reserve 
officials expressed alarm that the country's modest recovery is 
quote, ``starting to level off.''
    This economic crisis has been especially damaging to 
communities of color, who as our witness recently wrote or 
quoted, ``burying a greater fear of COVID-19 deaths and also 
face higher rates of unemployment than their White 
counterparts.''
    So, the question for today's hearing is, what can we do 
about it? First, we cannot address our economic woes until we 
first address the urgent public health crisis. It is far past 
time for the White House to take responsibility for others' 
crisis and provide the much-needed Federal leadership and a 
clear national strategy to fight this pandemic.
    Second, the Federal Reserve and Treasury must act quickly 
to use the authority and funding Congress provided to help 
America's families. This is an unprecedented crisis that 
requires an unprecedented response. While the Fed has taken 
significant steps to show up credit markets and protect big 
businesses, it has done less to protect workers. In fact, the 
Fed's primary mechanism to protect jobs, the Main Street 
Lending Program, has struggled to get off the ground.
    The Fed should do more to ensure the Main Street Lending 
Program is accessible for the small businesses who most need it 
and deserve this assistance and to protect the workers this 
program was designed to help.
    Third, the White House must work with Congress to act 
boldly and decisively to prevent an economic catastrophe. 
American families and small businesses cannot wait any longer 
for relief. Congress must pass another economic recovery 
package that includes support for low-wage workers and the 
unemployed, new assistance to states and localities, and 
programs that invest in public health. On May 15, more than two 
months ago, the House passed the HEROES Act to do exactly that. 
I urge my colleagues in the Senate to end the delays and pass 
this vital legislation.
    I would also like to address one final point. After we 
announced this hearing, my Republican colleagues suggested we 
add a witness who is not a Federal Reserve chair or a former 
Federal Reserve chair. Now, I have accepted every other witness 
my Republican colleagues have proposed, and I think it has been 
five thus far. And I look forward to hearing from this proposed 
witness at a future date.
    But, today, my goal is to hear from the unique insights 
from Chair Bernanke and Chair Yellen on their efforts to help 
our Nation recover from the 2008 financial crisis as leaders of 
the Fed.
    For example, Dr. Bernanke has stated, and I quote, ``The 
initial 2009 fiscal program was perhaps not adequately sized 
given the size of the problem. We must not make that same 
mistake again.''
    Our witnesses today serve honorably under Presidents of 
both parties. I am hopeful that all my colleagues will 
participate in this hearing in a bipartisan manner and help us 
search for solutions to benefit the American people.
    The chair now recognizes the distinguished ranking member 
for his opening statement.
    Mr. Scalise. I thank you, Mr. Chairman. And I want to thank 
our witnesses for appearing before the subcommittee as well. 
They both have distinguished careers and can offer some 
important insights on the hearing about responding to our 
Nation's economic crisis, which is today's topic.
    But with due respect, Mr. Chairman, both of today's 
witnesses were selected by the majority. And I know you and I 
spoke about this, but I requested as Rule 11 of the House of 
Representatives actually requires that the minority get to also 
have a witness, so that the Select Committee can hear from a 
diversity of perspectives.
    Whether people are from different parties, if they are both 
bringing a similar perspective on an issue, that is not the 
intention of the House rules, which is why I asked for a 
witness as well, and somebody who is widely regarded as an 
expert on the economy.
    He has testified before Congress dozens of times. In fact, 
he was a former head of the Congressional Budget Office. He is 
the person tasked to inform us, Congress, on understanding 
budget and economic impacts of policy decisions.
    So, Mr. Chairman, I know you denied that witness, we talked 
about it, but because of that decision, we are also being 
denied the diversity of opinion that we should be getting on 
today's topic. We should all request and seek that the House 
rules, as they require, welcome that diversity of opinion, 
which is why both parties are allowed to invite witnesses to 
provide us with pertinent testimony. That was denied today to 
us at this hearing, unfortunately, and it hinders our ability 
it get all of the facts.
    But with that, Mr. Chairman, pursuant to Clause 2(j)1 of 
Rule 11, I am requesting that we get what we are allowed under 
the rules on that, as a minority date of hearing under this 
subject.
    The Rules require it. They were not followed in the request 
that we made. It doesn't allow the chair to select both a 
Republican and Democrat. It allows the chair to select 
witnesses, but it also allows the minority to be able to submit 
a witness. We did that. It was denied.
    So, in lieu of that, the rules require that we are able to 
have a minority day of hearing. I just wanted to invoke that, 
Mr. Chairman. I know you and I can, our staffs can work through 
that. But as a point of order, I did want to bring that up, Mr. 
Chairman.
    Why don't we now talk about the state of the economy----
    Chairman Clyburn. Gentleman, I want interrupt you for a 
moment.
    Mr. Scalise [continuing]. I will recognize you on that 
point of order.
    Chairman Clyburn. Well, thank you very much. I understand 
that you have submitted the letter. I have received the letter, 
and I will take it under advisement. I will commit to you today 
that I will consider your request in accordance with the House 
rules. In fact, as I understand it, that one of the witnesses 
that you have requested already appeared before this committee 
just last month.
    With that, I would yield back and thank you, and I feel 
that you and I will be able to deal with this in an amicable 
manner.
    Mr. Scalise. Thank you, Mr. Chairman. I am confident we 
will be able to work through this as well.
    Now, why don't we talk about the economy. The unemployment 
rate in February was 3.5 percent. That is the lowest in over 50 
years. The unemployment rate for African Americans and 
Hispanics was the lowest in recorded history of this country. 
Hourly wages were growing at the fastest pace we have seen in 
over a decade. America was experiencing the hottest economy we 
have ever seen, and every segment of our country was reaping 
those benefits.
    And then a global pandemic hit our shores. China lied and 
hid the truth about it. The organization that the world looks 
to for medical expertise and guidance in a pandemic, the World 
Health Organization, was corruptly complicit in actually 
regurgitating China's lies. America got hit hard, and it got 
hit fast like the rest of the world did in this global 
pandemic. The worst we have seen in over 100 years.
    Immediately, America came together to fight the invisible 
enemy and to prevent our hospitals from being overwhelmed, and 
we did so without knowing nearly as much as we do today by this 
unique destructive virus. All we could really do was shut down 
and put the largest most prosperous economy in human history on 
pause. The pause was necessary, but it came at a staggering 
cost from lowest unemployment in almost 50 years to now over 40 
million jobs lost.
    Income inequality was made worse. Forty percent of people 
making less than $40,000 were laid off. Children lost 
irretrievable months of in-school learning. Vaccinations 
plummeted. Progress on the opioid crisis that we made working 
together was reversed. What America must now decide is whether 
those losses are going to be short-term costs, or will they be 
long term irrevocable damage?
    I proudly supported the CARES Act. In fact, virtually all 
Members of Congress did. And there are some important 
structural building blocks for recovery in that legislation. We 
already know about PPP, and we have had hearings on the 
tremendous success that did in saving millions of jobs. But we 
put billions of dollars in place for PPE to protect our 
frontline healthcare workers. We put billions in place for 
testing for the development of therapies and ultimately a 
vaccine.
    But let's be honest about the relief portion of the CARES 
Act, what we did was float the U.S. economy with borrowed money 
to temporarily compensate for shutting it down. The question 
before us today is knowing now what we know about the 
unintended cost of the shutdown, should we continue to extend 
it, or instead focus on the building blocks of long-term 
sustainable and equitable recovery.
    A few key principals in shared goals should guide us in 
this direction. Federal policy should reward and support 
America's workers. Educating our children safely in the 
classroom is a paramount responsibility. It is not just a goal, 
it is something we have to achieve.
    Federal policy should accelerate innovation and research 
and manufacturing here in the United States. And only a healthy 
and growing economy can support long-term sustainable and 
equitable prosperity.
    With that, all Americans are concerned about the continued 
spread of the virus, and all Americans have a role and a 
responsibility in helping to slow the spread, as we are all 
wearing masks when we are out in public.
    But let's also acknowledge some key developments. The death 
rate continues to fall because we are doing better protecting 
our most vulnerable population and improving the treatment of 
COVID patients. President Trump's Operation Warp Speed is 
showing great promise, including this week's remarkable 
announcement of promising results from vaccine trials. Testing 
capacity and PPE production continue to ramp up. Red tape is 
being cut, and this progress can give hope to all of us who 
want to end this pandemic.
    America must continue to forge ahead with this can-do 
attitude and find practical solutions to the challenges that 
must be solved, beginning with safely reopening our schools.
    Earlier this week, Vice President Pence brought his task 
force down to Louisiana--and I had the honor of spending the 
day with him, along with our governor who happens to be a 
Democrat--talking with school officials, public health experts, 
and even Coach Orgeron about the importance of getting kids 
back to school and how to do it safely.
    Dr. Birx, by the way, who is the White House coordinator, 
coronavirus response coordinator and a respected medical 
official was there and talking about how you can safely reopen. 
Our attitude has to be, how to do it, not whether you can do 
it, clearly, it can be done.
    Children need to get back to school and continue their 
education. For many children, the time lost will never be made 
up. Children's health will improve and schools reopen. 
Vaccinations will increase. Child nutrition for our most 
vulnerable will improve.
    The American Academy of Pediatrics, Mr. Chairman, issued an 
important report, which among other things, quote, ``strongly 
advocates that all policy consideration for the coming school 
year should start with a goal of having students physically 
present.'' The report goes on to say, quote, ``the importance 
of in-person learning is well-documented, and there is already 
evidence of the negative impacts on children because of school 
closures in the spring.''
    I would hope that we would be focused on the damage to 
students of not reopening as we put our efforts behind how to 
safely reopen.
    Mr. Chairman, I would like to ask unanimous consent that 
this report by the American Academy of Pediatrics be entered 
into the record.
    If there is any objection, but I did want to make that 
request----
    Chairman Clyburn. The gentleman has a right to object, 
though, I do not intend to object.
    Mr. Scalise. We will provide you with this report by the 
Academy of Pediatrics.
    Chairman Clyburn. OK.
    Mr. Scalise. And I would ask that it be included if there 
is no objection.
    Chairman Clyburn. Without objection.
    Mr. Scalise. To conclude, Mr. Chairman, thank you.
    School reopening also helps the economy because parents can 
more readily get back to work. We should resolve that no 
business in America ever again has to compete with a Federal 
policy that makes unemployment relief pay better than actually 
going back to work.
    Small business after small business has told me their 
biggest obstacle of reopening right now is getting their 
workers to come back because the temporary bonus unemployment 
check in many cases pays more than the actual salary. This 
policy needs to stop.
    While some in Washington want to continue the shutdown with 
the Federal Government continue floating the economy and have 
the Federal Reserve just keep printing more money, that is not 
a path to prosperity. We have faced big challenges throughout 
America's history.
    America put a man on a Moon. For goodness sake, we can 
surely reopen our schools and safely rebuild our economy. Let's 
rise to this challenge.
    I yield back the balance of my time, Mr. Chairman.
    Chairman Clyburn. I thank the ranking member for his 
opening statement.
    Now, I would like to introduce our witnesses. The Honorable 
Ben Bernanke is a distinguished fellow in residence at the 
Brookings Institution and served as chair of the Board of 
Governors of Federal Reserve from 2006 to 2014.
    The Honorable Janet Yellen is also a distinguished fellow 
in residence at the Brookings Institution and served as chair 
of the Board of Governors of the Federal Reserve from 2014 to 
2018.
    The witnesses will be unmuted so we can swear them in.
    Please raise your right hands.
    Do you swear or affirm that the testimony you are about to 
give is the truth, the whole truth, and nothing but the truth, 
so help you God?
    Ms. Yellen. I do.
    Mr. Bernanke. I do.
    Chairman Clyburn. Let the record show that the witnesses 
answered in the affirmative.
    Thank you. Without objection, your joint written statements 
will be made part of the record. With that, Chair Bernanke, you 
are now recognized to provide your testimony.
    Mr. Bernanke. Mr. Chairman, could I defer to Dr. Yellen to 
go first?
    Chairman Clyburn. Yes.
    Mr. Bernanke. We coordinated our comments.
    Chairman Clyburn. Very well. The chair now recognizes Dr. 
Yellen.

 STATEMENT OF THE HONORABLE JANET YELLEN, DISTINGUISHED FELLOW 
IN RESIDENCE, THE BROOKINGS INSTITUTION; FORMER CHAIR, BOARD OF 
                GOVERNORS OF THE FEDERAL RESERVE

    Ms. Yellen. Thank you. Chairman Clyburn, Ranking Member 
Scalise, and members of the committee, I appreciate the 
opportunity to testify before you today. My remarks will focus 
on the economic impact of the coronavirus and the contribution 
that fiscal policy can make in addressing it. Former Chair 
Bernanke will then discuss the Federal Reserve's response.
    In many respects, this recession is unique. Although, like 
all recessions, it is imposing heavy costs. Most downturns 
result from developments inside the economy. This recession was 
triggered by a public health crisis. The unusual source of the 
recession is reflected in the extraordinarily rapid decline in 
economic activity earlier this year, and the sharp, but 
incomplete rebound of recent months following the first steps 
toward reopening.
    The heaviest blows are falling on lower-paid workers as 
well as women and minorities who are overrepresented in the 
most affected service sectors. They have born a 
disproportionate share of the losses of jobs and income.
    By far, the most important factor determining the economy's 
path will beat the course of the pandemic itself. To support 
recovery, and more importantly to save possibly tens of 
thousands of lives, controlling the spread of the virus and 
mitigating its effects should be the first priority for Members 
of Congress, local leaders, and other policymakers. This 
requires support for testing and contact tracing, medical 
research, and sufficient hospital capacity. It also requires 
working to ensure that businesses, schools, and public 
transportation have what they need to reopen safely.
    If the pandemic comes under better control, economic 
recovery should follow. However, the pace of the recovery could 
be slow and uneven. In the face of ongoing uncertainty, 
households and businesses may remain cautious for a time, 
increasing precautionary saving and reducing spending, hiring, 
and capital investment. The longer the recession lasts, the 
greater the damage it will inflict on households and business 
balance sheets. And the depth of the recession may leave scars 
on the economy, such as the deterioration of unemployed 
workers' skills or the closure of many businesses. An important 
goal with fiscal and monetary policies should be to speed the 
recovery and minimize the recession's lasting effects.
    The fiscal response to the coronavirus has thus far been 
quite effective in our view. Enhanced unemployment insurance 
and the Paycheck Protection Program have helped unemployed 
workers and their families, together with many businesses, 
survive the spring shutdowns. However, a number of programs 
authorized by the Congress are coming to an end, and new 
actions are necessary.
    Our recommendations for further fiscal action are as 
follows: First, nothing is more important for restoring 
economic growth than improving public health. Investments in 
this area are likely to pay off many times over.
    Second, with unemployment still at record levels, enhanced 
unemployment insurance should be extended, and complimentary 
programs like food stamps adequately funded. Rather than making 
a one-time appropriation, we think the Congress would be well-
served by tying supplemental unemployment insurance and other 
support programs to the national or state unemployment rate, 
thereby creating an automatic stabilizer.
    Third, Congress should provide substantial support to state 
and local governments. The enormous loss of revenue from the 
recession, together with the new responsibilities imposed by 
the response to the pandemic, has put their budgets deeply in 
the red. To avoid the recessionary effects of major fiscal cuts 
by those governments, Federal support should be substantial, 
and conditions on the aid should not be overly restrictive.
    Following our advice would further increase the already 
record-level Federal budget deficit. With interest rates 
extremely low and likely to remain so for some time, we do not 
believe the concerns about the deficit and debt should prevent 
the Congress from responding robustly to this emergency.
    The top priorities at this time should be protecting our 
citizens from the pandemic and pursuing a stronger and 
equitable economic recovery. Thanks.
    Chairman Clyburn. Thank you very much, Dr. Yellen. We will 
now hear from Dr. Bernanke.

 STATEMENT OF THE HONORABLE BEN BERNANKE, DISTINGUISHED FELLOW 
IN RESIDENCE, THE BROOKINGS INSTITUTION; FORMER CHAIR, BOARD OF 
                GOVERNORS OF THE FEDERAL RESERVE

    Mr. Bernanke. Thank you, Chairman Clyburn, Ranking Member 
Scalise, and members of the committee, thank you for the 
opportunity to testify before you today.
    In my oral remarks, I will briefly summarize the Federal 
Reserve's response to the coronavirus crisis. The Federal 
Reserve has moved swiftly and forcefully in this crisis. It 
eased monetary policy in March by lowering the Federal funds 
rate nearly to zero and indicating that it plans to keep rates 
low for several years. And the Fed may well do more in coming 
months as reopening proceeds and as the outlook for inflation, 
jobs, and growth become somewhat clearer.
    In particular, to maintain downward pressure on longer-term 
interest rates, the Federal Open Market Committee likely will 
provide forward guidance about the economic conditions it would 
need to see before it considers raising its target rate, as 
well as clarifying its plans for further securities purchases 
for quantitative easing.
    The Fed has also been active beyond monetary policy. First, 
the Fed has served as a market-maker of last resort by acting 
to stabilize critical financial markets when capital or other 
regulatory constraints have interfered with normal market 
making in arbitrage. In March, uncertainty about the pandemic 
led hedge funds and others to scramble to raise cash by selling 
longer-term securities. The upsurge of the supply of longer-
term securities, including Treasuries, was more than dealers 
and other market-makers could handle resulting in substantial 
volatility.
    To stabilize these key markets, the Fed purchased large 
quantities of Treasuries and mortgage-backed securities. Risks 
and liquidity premiums in these key markets have since returned 
closer to normal.
    Second, the Fed has served as lender of last resort to the 
financial system, the classic function of central banks. 
Fortunately, the financial system is in much better shape today 
than it was during the financial crisis. The Fed, nevertheless, 
has taken steps to ensure that the financial system, including 
banks, broker dealers, and money market funds has sufficient 
liquidity to operate normally and to keep extending credit.
    Third, the Federal Reserve with the support of Congress and 
the Treasury has also served during the current crisis as a 
lender of last resort to the nonfinancial sector, backstopping 
key credit markets disrupted by the pandemic. Using emergency 
authorities, the Fed revived the financial crisis-era 
facilities to stabilize commercial paper and asset-backed 
securities markets. The Fed has also added new facilities to 
lend to corporations and state and local governments, and to 
buy outstanding corporate bonds.
    By establishing these programs, the Fed has given private 
investors the confidence to reengage by reassuring them that 
the government would not allow these critical markets to become 
dysfunctional.
    The Fed also established the Main Street Lending Program to 
lend through banks to medium-sized companies. It is too soon, 
however, to judge its performance. This program is very 
different from anything the Fed has attempted before and poses 
difficult technical challenges. Questions remain about how many 
banks and borrowers will participate. The Fed and Treasury may 
have to further ease terms for borrowers and increase 
incentives for banks for this program to have the desired 
effect.
    Is there more the Fed could do? As I noted, the Fed likely 
will provide more clarity about its monetary policy plans, and 
it may need to adjust the terms or borrower eligibility 
requirements of its various lending facilities.
    Broadly speaking, though, the Fed's response has been quite 
comprehensive. As Chair Powell often notes, the Fed's 
authorities allow it to lend but not to spend. Some households 
and firms will need subsidies or grants rather than loans to 
survive this challenging period. Spending is, of course, the 
province of Congress.
    Thank you, Mr. Chairman.
    Chairman Clyburn. Thank you very much, Dr. Bernanke. And 
thanks to you, again, Dr. Yellen.
    We have now come to where each member gets five minutes to 
ask questions. So, I am going to begin by yielding myself five 
minutes.
    And I would like to begin by asking Dr. Bernanke about the 
op-ed piece that he wrote this week. And I am going to quote 
from that op-ed piece. It said, a new package is needed in 
order to stabilize aggregate demand and restore full benefit or 
full employment.
    Now. I would like to ask you, Dr. Bernanke, what do you 
think will happen to the economy other the next few months if 
Congress fails to pass a new stimulus bill?
    Mr. Bernanke. Well I will focus on the state and local 
government part of this. They are both the first-line providers 
of critical financial services, health, education and the like, 
and are also big employers. And one thing we learned in the--
after the financial crisis was that because of balanced budget 
requirements at the state and local level, as states and 
localities saw big declines in their revenues, they also had to 
do serious cuts in their employment and capital investment 
leading to a slower economic recovery.
    Some recent estimates suggest that the contraction at the 
state and local level slowed growth in the U.S. economy after 
the crisis by about half a percentage point a year, which is 
significant.
    Now this crisis has had similar effects. On the one hand, 
state and localities have had greater expenses to deal with the 
health crisis to help companies reopen safely. On the other 
hand, they see big revenue hits. One estimate is that the 
revenue hit for states alone since February is over $500 
billion.
    If no action is taken to help the states and localities, 
you know, avoid massive contraction, then it will have a 
negative effect both on recovery but also on critical services 
that they provide to their citizens.
    Chairman Clyburn. Dr. Yellen, Dr. Bernanke has given us 
some insight as to what will happen if we do not assist state 
and local governments. I wanted to ask you what would happen if 
we do not extend support to public health agencies to food 
stamps and other public assistance programs? And unemployment 
insurance, what will happen if we fail to move in those areas?
    Ms. Yellen. Well, we have tried--we have both emphasized 
that money spent on public health yields a very high return. It 
means that the economy can get back on its feet more rapidly. 
We can reopen and put people back to work, and, of course, we 
also save lives in the process.
    With respect to unemployment insurance, I am tremendously 
concerned that the extended benefits are now scheduled to end 
on July 31. I think, frankly, it would be a catastrophe not to 
extend unemployment insurance. It has done a great deal to 
support the incomes of a large number of individuals, 
disproportionately low-wage workers, and minorities 40 percent 
of whom have lost their jobs.
    It has provided a good deal of support to them. And to the 
economy more broadly because we need the spending that those 
unemployed workers can do. Without it, we would simply see more 
weakness--as their spending contracts, we would see more 
weakness throughout the entire economy.
    And those workers, especially the lower-income workers who 
are benefiting from the $600, they have a very high propensity 
to spend the money that they are given. We have seen higher-
income workers do more saving, but the lower-income workers who 
are receiving those unemployment benefits are spending it which 
benefits jobs throughout the economy.
    There is the issue of work incentives. And if we had a 
stronger economy and the unemployment rate were lower and we 
were closer to full employment, I would worry about the 
disincentives that having more than 100 percent replacement 
ratio would involve.
    But at this point, I really--there is such a shortage of 
jobs that I really don't think this is. And I think there is 
evidence in recent suggesting this is not really stopping the 
economy from creating jobs and putting people back to work.
    We do suggest that unemployment benefits could be based on 
the individual's pre-unemployment wages with a replacement rate 
that would not receive 100 percent. But I don't know at this 
point if states all have the technical ability to put that into 
effect.
    Chairman Clyburn. Well, thank you very much for that. I see 
that I am out of time. I do have one other question, but I'll 
let the ranking member go now, and maybe he will loan me some 
time later.
    I yield to the ranking member.
    Mr. Scalise. OK. Is that working, Mr. Chairman?
    Chairman Clyburn. Yes, I hear you now.
    Mr. Scalise. OK, thank you. We will let you get that last 
question in.
    But I do want to point out that when you look at what we 
need to do to get our economy back open, this isn't a question 
of reinventing the wheel. Clearly, we're dealing with serious 
challenges that we're all working through. But let's look to 
what did work to get us to that hottest economy in the world 
before this.
    That was a robust tax policy. It was making our country 
competitive again. It was putting more money in the pockets of 
families. Letting families have more control over their own 
destiny, over their own money that they worked hard to earn. 
And that was done by the Tax Cuts and Jobs Act. We saw 
unparalleled growth in our country's economy, we saw the 
ability to bring jobs back, and we can do that again once we 
get through this.
    That's why it's so encouraging to see what President Trump 
is doing on Operation Warp Speed. It doesn't get enough credit 
or attention, but we're seeing the full focus of the Federal 
Government. Agencies like the FDA removing red tape so that 
they can focus everything on finding vaccines, therapies and, 
ultimately, a cure for COVID-19.
    And we saw already the remarkable progress this week. We 
hear from drug companies who are in Phase 3 of testing on very 
effective vaccines. That's where our focus should be for long 
term to get through this. And, hopefully, that happens soon. 
And I appreciate that President Trump and Vice President Pence 
are focusing so much time on that.
    But then as we look to the health of our country, we also 
need to look at opportunities we're going to have coming out of 
this. As we push to get people back to work, how we can create 
more incentives to strengthen this economy in America and 
address what we saw that China did.
    We know that China hoarded PPE. As we all complained about 
the shortages of PPE at the very beginning of this, it's 
because the bulk of it is made in China, and they were hoarding 
the PPE while they were lying to us about this. That's why we 
ought to have a hearing on holding China accountable to see 
what they did to shut off the supply of that vital protective 
equipment for our frontline hospital workers. When we were in 
the midst of trying to find out what was really happening, they 
hoarded it, and we didn't have that ability to get it.
    We're now starting to make that here in America. We ought 
to have incentives to create more jobs by bringing that back--
it's a national security item--bring that back into America, 
create those jobs here in America. If you look at things like 
the drugs that were made in China, we can make that here in 
America. That would be something we ought to look at 
incentivizing.
    I hear from small businesses every day who talk about the 
problems, the problems created by paying people. In many cases, 
over 75 percent of workers in America, they have studied, are 
making more money on the enhanced benefits than in their normal 
job. And it's a true impediment. It's a true impediment when 
you talk to small businesses across this country, like getting 
them back to work.
    I do want to ask Dr. Yellen, because you talked about a 
substantial amount of money to bail out states. Do you have a 
rough idea of how much money you are talking about? We have 
already passed $150 billion to help the states get through 
this. Are you talking about a $500 billion number, $1 trillion 
number, can you quantify what you mean when you are talking 
about this package that would bail out Sates?
    Ms. Yellen. So, as Chair Bernanke mentioned in his response 
to the chair's question, there is a study by the Center on 
Budget and Policy Priorities that suggest that, I believe, it's 
through 2022 that the shortfall for Sates alone is put at about 
$550 billion. And there's perhaps not quite as large but also 
tremendous shortfalls at the local level. So, I think we aren't 
talking about very substantial cutbacks.
    And Chair Bernanke and I are both happy to be serving on 
state reopening committees.
    Mr. Scalise. And, if I may, I appreciate that, and I 
apologize, I know we're on limited time. You know, you talk 
about $550 billion as a starting point, not even time for local 
governments. I think we all are talking about this, but we need 
to recognize there were many states that--not many, but there 
were a few states that had massive budget shortfalls, 
multibillion-dollar budget shortfalls prior to COVID-19.
    So, the idea that the Federal taxpayer, which is already 
stretched, should bail out those states that had failed 
policies, you can look at the tax policies I talked about 
earlier, many of those states had budget shortfalls because 
they were taxing their people too high and because they were 
running the good jobs out of their states.
    That's what they should be focused on, focused on fixing 
the problems they had prior to COVID-19 that were causing their 
economies to collapse and businesses to flee and good jobs to 
flee. Fix that now while we're in the middle of rebuilding 
things. That's where the focus ought to be so that they can 
come back stronger, they can come back in a more healthy 
position, not just continue and ask the Federal taxpayer to 
bail out their state problems. That's where the focus ought to 
be.
    I do want to ask Dr. Bernanke, you know, I cited the 
American Academy of Pediatrics Study that talks about the 
importance of bringing kids back to school for many reasons, 
health reasons, getting nutrition, but also to be able to be 
learning at the right pace.
    Do you agree with the Academy of Pediatrics talking about 
the importance to children of getting back in school, not just 
learning at home?
    Chairman Clyburn. I'm going to assist the ranking member, 
your time has expired. But I am going to let Dr. Bernanke 
answer this question, because I am sure you are going to allow 
me to----
    Mr. Scalise. I will allow you to finish.
    Mr. Bernanke. Thank you. I will be brief.
    Chairman Clyburn. Thank you.
    Mr. Bernanke. My wife is a teacher, I do understand the 
value of children of in-person instruction, plus the support 
that they get. I understand the importance of working parents. 
But there is a concern here, of course, about the health risks. 
And I think that local districts are going to have to make 
tough decisions based on their local conditions, you know, and 
based on their evaluation of the public health situation.
    I am not a doctor. I can't make that judgment. But local 
districts are going to have to use the advice they get from 
professionals to make those choices.
    Mr. Scalise. And Dr. Birx Tuesday talked about some of 
those steps you can take to do it safely as the Academy of 
Pediatrics did too. No tradeoff between safety, but the 
importance of getting kids back in school in a safe way can be 
done. We have to do it.
    With that, Mr. Chairman, I yield back. Thank you.
    Chairman Clyburn. Thank you very much, Mr. Ranking Member, 
before going to Chair Waters, I would like to present a 
question because of what you raised, Mr. Ranking Member, is 
something I think we ought to take a look at.
    We have heard from several of my colleagues recently that 
the next package ought to be capped at $1 trillion. The CARES 
package itself is far in excess of that. The HEROES Act is 
around $3 trillion, of which nearly $1 trillion is devoted to 
state and local governments.
    I would like to suggest, what do you think about capping 
the next package at $1 trillion? Should that be? And if so, why 
or why not?
    Dr. Yellen.
    Ms. Yellen. I would be concerned about capping it when we 
know that the needs of the state and local governments come, 
alone come close to that, and a substantial amount will also be 
needed for unemployment insurance and for public health needs.
    So, I don't know what the right number is. We need support, 
also, that comes from all of that spending for economic 
activities so that unemployment doesn't rise. So, per aggregate 
demand and total spending in the economy, at this point, we do 
need fiscal support as well.
    So, I would be concerned with the cap at the magnitude you 
mentioned,
    Chairman Clyburn. Dr. Bernanke, what's your attitude about 
that?
    Mr. Bernanke. Well, I think that what--the reason for a cap 
would be the concern about the deficit, which I understand. But 
right now, as we talk about in our testimony, real interest 
rates are negative, the interest burden is very low, there's a 
big appetite for debt. It's an opportunity to take advantage of 
our ability to borrow, to do something to help our economy 
recover. In the longer term, we're going to have to worry about 
sustainability. But right now, I think the priority ought to be 
doing what needs to be done.
    As Mario Draghi once said, whatever it takes, is probably 
what we need to be thinking now.
    I can't hear you, Mr. Chairman.
    Chairman Clyburn. I yield to Chair Waters for five minutes 
of questions.
    Ms. Waters. Thank you very much, Mr. Chairman. For this 
hearing. This is very important, and I am so pleased that you 
brought the past chairs of the Fed to talk with us today. 
Because not only are they responsible for our monetary policy, 
they have shown us how effective they can be with being the 
lender of last resort.
    So, both of our past chairs have wonderful reputations and 
backgrounds for the way that they have managed the Fed when 
they were in charge, and I appreciate their observations, their 
advice to all of us as we fight through this pandemic that's 
confronting us all.
    The first thing I would like to have past Chair Yellen 
explain why Powell said that with the interest rates being low 
that we should be very generous in the way that we deal with 
this pandemic and the resources that we allocate to it? If 
there was ever a time to put, you know, substantial support 
into this economy, now is the time. What is it about the 
interest rates that everybody should understand that made 
Powell say that?
    Ms. Yellen. Well, when interest rates are low, the cost to 
the Federal Government in terms of interest burden on the debt 
is extremely low. And I can give you as an example, because 
interest rates were low even before the pandemic hit, and now 
they've gone lower.
    But between 2007 and just before the pandemic, the ratio of 
Federal debt to GDP had doubled from 40 to 80 percent. And yet 
the interest burden of that debt because interest rates fell 
during that period and stayed low, it was no additional cost 
relative to the size of the economy, and that's true and will 
only be more true now.
    So, I agree with Chair Bernanke that one day in the future, 
we will have to get deficits after this is over and the economy 
is recovered, we'll have to deal with deficits and get them 
under control. But now is a time when I think it's not 
necessary to worry about it.
    And I guess the final thing I'd add is that in an economy 
with unemployed resources, we don't have to worry about the 
spending diverting activity away from other things.
    Ms. Waters. Thank you so very much. We have heard the 
connection between what the experts, the health experts are 
advising us and how that helps to improve the economy if, in 
fact, we wear masks, if we are social distancing, if we have 
the PPE that we need, all of that.
    So, we have been advised that a surge certainly has taken 
place and we can see the results of that. And every time that 
happens, it sets us back somewhat from being able to deal with 
the economy. Is that correct?
    Ms. Yellen. Regardless of what the rules are, we have seen 
that people are afraid to engage in activities that risk their 
health and pull back from it. And the worst the outbreak gets, 
the more true that is. So, whatever helps public health enables 
us to get people back to work.
    Ms. Waters. So, because of that, we need leadership. And 
now that we are talking about the schools, I believe that we 
made a mistake with some of our governors in some of our states 
opening up certain businesses too soon. We're seeing the 
results of that.
    So, I don't know where all of this confidence is coming 
from about opening up these schools, get these children back 
in. I think Mr. Bernanke is correct when he said the localities 
in our school districts have to be careful, they have to make 
sure that they can provide the safety, otherwise, we will 
continue to have surges, and children will get sick, some may 
even die. And this does not help the economy, does it?
    Ms. Yellen. No, it doesn't. We do have to be careful. I 
mean, the American Academy of Pediatrics Report and the 
National Academy Report point that out. And it's also expensive 
for the schools to make the modifications they need to be able 
to open safely.
    And I think Congress needs to think about funding the 
expenses that are involved. Of course, it's an important goal 
to reopen the schools. And I can't imagine who would disagree 
with the priority that should be attached to that.
    Ms. Waters. The last second or so I have here, minority 
communities, Black communities, Latinx communities are 
suffering. We suffered from a lack of testing. We suffered from 
our hospitals not having all of the PPE. We suffered for, you 
know, not even being eligible for unemployment. We suffered 
because we still need food stamps, et cetera.
    I heard something about perhaps looking at grants and 
better workers to infuse, you know, capital and resources into 
minority communities.
    What are you suggesting we do for minority communities that 
would help us be able to deal with this pandemic and not cause 
us to die from it--or some have indicated we are dying and 
getting sick.
    Ms. Yellen. Well, with respect to access to capital, it 
seems to me that businesses and minority communities really 
face tremendous barriers. And I believe it's important for 
Congress to do special things in order to provide funds for 
these on particularly businesses and minority areas.
    Ms. Waters. Do you think grants would be helpful instead of 
looking for ways by which to keep your business open and then 
take back the money? Could we use some grants?
    Ms. Yellen. I think grants are important for many 
businesses. Many businesses really didn't benefit in low-income 
areas from PPP. They don't have strong relationships with 
banks, but they do with CDFIs.
    And I would say, I don't know if it's really feasible, but 
I would love to see the Fed and Treasury explore a 13(3), maybe 
something within the mainstream facility through CDFIs that 
would be oriented toward these low-and moderate-income 
neighborhoods and businesses.
    Ms. Waters. Now, I want to talk about
    [inaudible] for yield Mr. Bernanke and Congress to sign up 
with all of these other economies the--that was so unusual to 
see so many of you to sign on to something that was urging us 
to, you know, to be very, very generous with this stimulus,
    [inaudible] to have $3 trillion stimulus
    [inaudible]. Why did you all sign that document?
    Chairman Clyburn. The gentlelady's time has expired.
    Ms. Waters. Can the gentlelady respond to that, Mr. 
Chairman?
    Chairman Clyburn. OK.
    Ms. Yellen. We urge that because we feel it's important 
both for equity and for the recovery of the economy.
    Ms. Waters. Thank you Mr. Chairman.
    Chairman Clyburn. Thank you, Dr. Yellen. The chair now 
yields five minutes to Congressman Jordan.
    Mr. Jordan. Thank you, Mr. Chairman.
    Dr. Bernanke, what's more important, reopening schools or 
protesting?
    Mr. Bernanke. Opening schools safely is very important, and 
people protest for the causes they feel are important as part 
of the American way, as you know.
    Mr. Jordan. Well, I agree with that, but I wish you would 
tell Democrat leaders that because they obviously think 
protesting is more important than opening our schools.
    You hear Democrats at the Federal level, you hear Democrat 
mayors, Democrat governors all talking about how they can't 
reopen schools, while Mayor de Blasio can go out and stand with 
a bunch of protestors and paint on Fifth Avenue in front of 
Trump Towers, Mayor Garcetti can go out and kneel down to 
protestors without a mask, bow down to the mob without a mask, 
and that's fine, but, oh, he can't open schools.
    Do you know how many school districts there are in the 
country, Dr. Bernanke?
    Mr. Bernanke. No, sir.
    Mr. Jordan. Thirteen thousand school districts, 56 million 
kids that deserve to get back in school--as you said earlier, 
your wife's a teacher; my wife's a teacher--get back in school 
and get their education. But Democrats seem to say: No, no, no, 
they can't do that.
    In fact, Democrats think there is lots of things they think 
are--that protesting is more important. Democrats think 
protesting is more important than going to church. Democrats 
think protesting is more important than going to school, more 
important than going to a loved one's funeral, more important 
than going to work, we have seen from so many Democrats.
    And I think what's interesting is we have now seen, in 
Portland, over the last six weeks, some of the--I mean, we've 
seen the city burn for the last six weeks, and I have yet to 
see any condemnation come from Democrat leaders.
    Six weeks of this happening. The protests, over the last 
several weeks, 12 police officers shot, 130 injured, 60 Secret 
Service people injured just in the District of Columbia.
    What's more important, Dr. Bernanke? What's more important 
to economic growth: Reopening schools, or protesting?
    Mr. Bernanke. Well, I have not been involved in any of the 
commentaries that you're referring to. I think----
    Mr. Jordan. I understand.
    Mr. Bernanke [continuing]. Opening schools----
    Mr. Jordan. I'm asking what's more important to economic 
growth? You're an expert in economic growth----
    Mr. Bernanke. Economic growth, opening schools is more 
important. Protesting is important for democracy and people who 
have different views about what they think needs to be 
protested about.
    Mr. Jordan. Do you know what the Brookings Institute--
Institution, a place you know something about--do you know what 
they estimated just when schools are just down for a few 
months--do you know what they estimated the cost to the economy 
would be?
    Mr. Bernanke. I'm sure it's very large because of the 
effects on working parents.
    Mr. Jordan. Exactly, $2.5 trillion, $2.5 trillion, just the 
cost of the protests, the damage, the rioting, the looting, the 
destruction of property, just in one city, Minneapolis, $500 
million.
    And, as we know, this is happening in cities all across the 
country, and, yet, somehow protest is allowed to continue. 
That's fine. And I'm all for protests. I want everybody, under 
the First Amendment, to be recognized and be allowed. That's 
the hallmark of our country. But somehow Democrats say, no, no, 
no.
    In fact, Governor Newsom just closed down churches again in 
California, but says nothing about the protests that continue 
to take place. So, this is what I find troubling.
    And now this push not to let kids go back to school. You're 
familiar with the fact that the American Academy of 
Pediatricians has said that kids should be back in school, that 
we should reopen schools.
    Mr. Bernanke. I believe, if I saw that study right, that 
there are--you know, it has to be done safely.
    Mr. Jordan. Of course. That they have----
    Mr. Bernanke. Yes.
    Mr. Jordan. Of course safely, but that's not what we hear 
from Democrats. We just hear we can't open schools. We're all 
for doing it safely.
    Do you know how many kids under 17 have died of coronavirus 
in the state of California, Dr. Bernanke?
    Mr. Bernanke. Probably very few. Congressman, I have no 
expertise on this. I'm not pretending to give you any kind of 
advice on whether to open schools or not. That's not my area of 
knowledge.
    Mr. Jordan. Well, I'm just saying the place you work, the 
Brookings Institution, did a study a few years ago that said 
what a cost is to our economy, $2.5 trillion, and why we hear 
from so many Democrats that we can't do it--I think we can. I 
think we can do it safely. I think it needs to happen. That's 
all we're saying. How about this: What's more important: 
Opening schools, or defunding the police?
    Mr. Bernanke. I think it's--you know, we can't defund the 
police. We need police, but there are concerns about police 
community relations and police behavior.
    Mr. Jordan. Well, you need to have a talk with the L.A. 
Teachers Union, because the L.A. Teachers Union said that 
they're not going to open their school. They won't open their 
school until they get an increase in taxes, until they get a 
bailout for their district, until they get Medicare for all, 
and until the police are defunded. Then they'll think about 
opening the schools to help the students get the education that 
will allow them to achieve the American Dream--something you've 
done.
    I notice, in your--your wife's a teacher. You went to MIT. 
You went to Harvard. Ms. Yellen went to Yale. She went to 
Brown. You know how important education is to accomplishing the 
American Dream. Tell that to the L.A. Teachers Union, who says, 
unless the police are defunded, they don't want to come back 
and teach kids in school this fall.
    Mr. Bernanke. I absolutely agree that education is 
extremely important for everyone.
    Mr. Jordan. Yes. We need Democrat leaders to step forward 
and say the same darn thing, and say it's just as important as 
going out, as Mayor Garcetti did, and kneeling down in front of 
the--in front of the cancel-culture rioters. Education is just 
as important, and we need our schools open.
    Chairman, I yield back.
    Chairman Clyburn. Well, thank you so much. I will say to 
the gentleman, as one of those Democratic leaders who was also 
a public school teacher--I started my professional career 
teaching in public schools, but I'll also say I'm sitting in 
Congress today because of a successful protest.
    With that, I yield five minutes to Mrs. Maloney.
    Mrs. Maloney. OK. Thank you, Mr. Chairman.
    I had the pleasure of hearing testimony from both of our 
witnesses today for many years on the Financial Services 
Committee, along with Ms. Waters, and I have to say that it's 
great to hear from you both again.
    First, I'd like to ask both of you--we're in the middle of 
the worst economic crisis of our lifetime by far. In April, a 
staggering 20 million people lost their jobs, which was a 
record for a state. It's the highest it's been since the Great 
Depression. The unemployment rate rose to 14.7 percent.
    But, in the last two months, the unemployment rate has 
actually decreased, and now it's down to 11.1 percent. That 
surprised me, because we're still seeing millions of people 
file for unemployment insurance every week.
    So, I want to ask both of you: Where do you see the 
unemployment rate going? Is it going to get worse before it 
gets better, or is it going to continue going down in the 
months ahead?
    And let's start with you, Dr. Bernanke.
    Mr. Bernanke. It's very hard to forecast, but I suspect 
that--we've seen some signs lately of some slowing in activity 
because of the increased concern about the virus.
    So, I don't think we'll see as rapid a decline as we've 
seen recently. CBO had its numbers around 10.5; the Fed, its 
numbers around 9 to 10 at the end of the year. Those seem like 
reasonable ballpark estimates.
    So, maybe a little bit lower than where we are now, but not 
where we'd like to be.
    Mrs. Maloney. OK. Dr. Yellen?
    Ms. Yellen. Yes. I agree. A lot of the workers who lost 
their jobs were on temporary layoff, and they maintained--and 
this is good that they did--their attachment with their 
previous firms. As soon as lockdowns ended and reopening 
started, a reasonable number of those workers were able to go 
right back to work.
    But, as Chair Bernanke just said, with the resurgence of 
the virus, progress is slowing and could even reverse. Even if 
things had continued on a good track, I think it will take a 
number of years--2, 3 years to get unemployment down to levels 
anywhere close to where we were before the pandemic.
    Mrs. Maloney. Thank you. As you both know, in the CARES 
Act, we provided people who have lost their jobs with an extra 
$600 a week in unemployment insurance. Businesses were shutting 
down and laying people off through no fault of their own, and, 
if everyone who was laid off because of the coronavirus stopped 
spending at the same time, we'd see a massive contraction in 
the economy and possibly even a depression.
    From both an economic and a moral perspective, we had to 
make sure that people who are unemployed could keep spending on 
the necessities of food and clothing and so forth, and the 
extra $600 a week has been critically important for the 
millions of Americans who are unemployed, and it has prevented 
a depression by boosting the aggregate demand.
    This extra $600 a week is set to expire at the end of this 
month, in just 14 days, which means that, in 14 days, we could 
be headed over an economic cliff. But, now, you're both 
economists; you know the importance of an aggregate demand.
    So, I want to ask both of you: Do you believe allowing the 
extra $600 a week in unemployment insurance--do you believe we 
should let--do you think, if we have it expire, would it harm 
the economy?
    Let's start with you, Dr. Bernanke.
    Mr. Bernanke. Well, we gave three priorities for Congress 
on fiscal policy, and one of them was continuation of the 
pandemic UI, which I do think is very important on both 
humanitarian and also economic basis.
    I think you can modify the structure to satisfy some of 
your Republican colleagues in terms of avoiding the more than0 
percent replacement in some cases, or, alternatively, giving 
perhaps a special EITC for people who take jobs if there is a 
differential.
    So, there are some structural things you could do, but I 
agree with the basic thrust that it's very important to 
continue the support for the unemployed, which there is an 
enormous number, of course, as you know.
    Mrs. Maloney. And Dr. Yellen?
    Ms. Yellen. Yes, I completely agree with that, both on 
humanitarian grounds, and the spending is absolutely needed for 
more pain not to be extended throughout the economy and for 
unemployment to continue moving down.
    Similarly, for state and local governments, which we also 
prioritize, if there isn't substantial support there, we're 
going to see massive layoffs in state and local governments, 
and, again, the loss in spending, the loss in jobs will harm 
workers throughout the economy.
    Mrs. Maloney. And now for the flip side of the question: Do 
you believe that, from a purely macroeconomic standpoint, 
extending the extra $600 a week will boost the economy? What is 
your analysis of how a straight extension of the enhanced 
unemployment insurance would affect the economy? Would it 
support aggregate demand?
    Dr. Yellen, and then Dr. Bernanke, and I yield back.
    Ms. Yellen. Yes. Yes, it does. I believe it supports 
aggregate demand and spending in the economy that we need to 
create jobs.
    Mrs. Maloney. Dr. Bernanke?
    Mr. Bernanke. We've advocated that the extra unemployment 
insurance be tied in some way to the national unemployment rate 
so that it goes up when unemployment goes up, and down and when 
it goes down, and that would make it more responsive to 
changing conditions.
    Mrs. Maloney. Thank you, and I yield back.
    Chairman Clyburn. Thank you, gentlelady.
    The chair now yields five minutes to Mr. Luetkemeyer.
    Mr. Luetkemeyer. Thank you, Mr. Chairman, and thank our 
witnesses for being here today. I appreciated your testimony. I 
serve on the Financial Services Committee as well and have 
enjoyed the conversation and your testimony over the years
    [inaudible] at all of so many financial----
    In a March op-ed in the Financial Times, both of you said 
that--I quote--to avoid permanent damage from the virus-induced 
downturn, it is important to ensure that credit is available 
for otherwise sound borrowers who face a temporary period of 
low income or revenues, unquote--end quote.
    I think that my personal opinion is I think this is 
critical--this is a critical concept for Congress that we must 
understand. Currently, with the stimulus of the CARES Act and 
the forbearance banks have been given to customers, we have not 
seen broad delinquencies and charge-offs yet.
    However, as this forbearance ends and as depository 
institutions and, more importantly, examiners of those 
institutions get back to business as usual, I am fearful that 
we will see a broad markdown of assets on balance sheets, and 
even entire business lines of financial institutions similar to 
what we did in 2008 and 2009.
    I repeatedly called for financial regulators to provide 
additional forbearance to financial institutions and allow them 
the needed reserve, accounting, and capital relief necessary to 
allow them to work with their customers.
    I've got legislation that I believe accomplishes this goal, 
and so my questions to you are: Do you think that additional 
forbearance for financial institutions is necessary to allow 
them the needed time to work with their customers, and, if our 
economy continues to be shut down, are you concerned that the 
classification of nonperforming loans will drastically impact 
reserve accounts at depository institutions and, in turn, 
decrease access to credit, particularly in low-and moderate-
income communities.
    I'd like an answer from both of you, please.
    Mr. Bernanke, do you want to start first?
    Mr. Bernanke. Sure. I think forbearance is a bit risky. We 
saw it in savings and loan crisis, you know, that we need to 
make sure that banks are properly valuing their assets. But the 
Fed has been trying to work with the banks. They've changed the 
accounting standard, the CECL accounting standard, to make it--
they don't have to assess the depth of the recession quite the 
same way.
    They changed the supplementary leverage ratio. They're 
working with--they're telling the banks to work with the 
borrowers, as you described.
    I think we don't want to--you know, it's really good news 
that the banking system is in such strong condition, but I 
think it's important to continue to evaluate them, for example, 
through the stress tests, and, if it becomes necessary for some 
banks to raise new capital, that was the thing that stopped the 
crisis in 2009. If it becomes necessary to do that, I hope the 
Fed and the other bank regulators will enforce that.
    Mr. Luetkemeyer. Dr. Yellen?
    Ms. Yellen. Yes. I agree with my former colleague, my 
current colleague. I think it's important for the Fed and the 
Fed has encouraged banks to lend and change regulations in ways 
that make it easier for banks to lend.
    But it's also very important in my view, as Ben said, that 
they have the capital that's necessary to meet the lending 
needs of the economy, and we've seen from the analysis in the 
recent stress tests, the pandemic analysis, that about a 
quarter of the major banks that are subject to that stress test 
are likely to see capital fall below minimum levels.
    If we have the W shape and, you know, a second wave of the 
virus or if the recovery is very prolonged, and it----
    Mr. Luetkemeyer. Thank you.
    Ms. Yellen [continuing]. May prove necessary for the Fed to 
ask them to raise capital.
    Mr. Luetkemeyer. Well, you kind of made my case there with 
your last comment, and I appreciate that, but I'm concerned. 
Both of you are looking at it from a big bank perspective. 
There are lots--most of the banks in this country are less than 
$50 billion in assets. You're looking at credit unions that are 
small in size.
    Those are the ones, I think, that we need to be trying to 
shore up and give the ability to give forbearance to the 
customers, because they're the ones that supply the small 
business loans in this country, and you and I, Dr. Yellen, had 
this conversation in committee many times.
    Without that forbearance--and we saw the lack of it in 2008 
in 2009 and what it did and how devastating it was to the 
businesses, our local communities, jobs, and the banks and 
credit unions themselves.
    So, I would appreciate a response to that.
    Ms. Yellen. Well, many banks, including community banks, 
have built some significant capital buffers in the aftermath of 
the financial crisis, and it's appropriate for them at a time 
like this to be able to bring those buffers down to support the 
credit needs of their communities, but----
    Mr. Luetkemeyer. I appreciate that.
    Ms. Yellen [continuing]. I would agree with Ben on 
forbearances. You know, we need to know what's happening in 
those banks.
    Mr. Luetkemeyer. OK. I have one quick question for you. And 
you guys have both indicated your--how you would like to see 
the $600 or any other sort of unemployment insurance extended.
    What do you think is an incentive to get people back to 
work? You're trying to take care of people unemployed. I'm 
trying to get them back to work. What do you see as an 
incentive? What would you support, or what kind of idea would 
you have to get people back to work?
    Continuing the $600 would be a detriment for people going 
back to work.
    Mr. Bernanke. I'm sympathetic to that, sir. You could lower 
the $600 so that the replacement ratio is not above 100 
percent, is the concern, and you can provide additional 
incentives to work. For example, you could have an enhanced 
unemployment tax credit for people who are at work, for 
example.
    So, I mean, there are ways to improve that--you know, that 
ratio so that people have the appropriate incentive to go to 
work without taking away the necessary support of the 
unemployed.
    Mr. Luetkemeyer. I know that the President is supportive of 
a payroll tax cut, which to me would be an incentive for people 
not only to stay employed; it's a 100 percent pay raise, but 
also people to go back to work. So appreciate your comments. 
Thank you. Great to see both of you again.
    I yield back, Mr. Chairman.
    Mr. Bernanke. Thank you.
    Chairman Clyburn. Thank you.
    The chair now yields to Ms. Velazquez for five minutes.
    Ms. Velazquez. Thank you, Mr. Chairman.
    I would like to relay testimony from a restaurant owner in 
my district who testified before the House Small Business 
Committee this week and stated that PPP, which did provide a 
lifeline for her, is an eight-week solution to an 18-month 
problem.
    So, Mr. Chairman, I really thank you for holding this 
important hearing.
    Dr. Bernanke, three out of four small businesses have been 
experiencing a decrease in revenue since March, and an 
estimated 7.5 million small businesses are at risk of permanent 
closure as a result of this crisis.
    So, Dr. Bernanke, you were Federal chair--Fed chair during 
the Great Recession when access to capital nearly froze for 
small businesses. Congress made changes to the SBA's 
traditional loan programs, including increasing the guarantees 
and reducing fees.
    As Congress weighs long-term recovery proposals for small 
businesses, would you recommend similar changes to SBA loan 
programs to provide access to affordable capital for small 
businesses?
    Mr. Bernanke. Yes. I think the PPP program was very helpful 
in getting capital out to small businesses. SBA could be 
modified. My colleague, Dr. Yellen, talked about the Fed and 
the Treasury lending to CDFIs that could be particularly 
relevant to minority communities, for example. So, I think 
there are ways to support small business.
    Many--many people--many small businesses are run by--on the 
income of the individual who owns them, so, you know, using 
family resources and credit cards and the like, and so 
supporting the unemployed or supporting people broadly, it 
would also be--would be helpful.
    And I think there is an issue. At some point in the future, 
we're going to have to--this economy may change in very 
important ways. We have to allow that at some point to begin to 
happen, but I think, for now, I would be inclined to want to 
continue to provide support to small businesses that are being 
hit by the virus.
    Ms. Velazquez. Thank you.
    Dr. Yellen, in your testimony, you mentioned that, because 
the recession is unprecedented in so many ways, forecasting the 
recovery is difficult.
    PPP was enacted to keep employees on payroll, but small 
firms have other fixed costs. Should Congress consider the bold 
step of extending the eviction moratorium for individuals past 
July 27 and expanding it to include small businesses?
    Ms. Yellen. I think, with respect to small business 
expenses, an approach that looked promising to me that is in 
the HEROES Act is an employee retention tax credit. One exists 
now, but the HEROES Act expands it.
    And, for small businesses, it provides a tax credit for 
expenses other than wage expenses, and that struck me as a 
promising approach in terms of supporting smaller businesses.
    Ms. Velazquez. Well, I'm concerned about those small 
businesses that lack liquidity, but lack the cash that they 
need in order to be able to pay rent, realestate costs, to 
remain in those businesses. So, a tax credit in that respect 
really doesn't help them.
    Ms. Yellen. Well, it's a refundable tax credit, so they 
would be eligible to receive the credit even if they don't have 
profits.
    Ms. Velazquez. Thank you.
    Dr. Bernanke, consumer spending is at the heart of the U.S. 
economy, and millions of small businesses operating in retail, 
hotel, and leisure are struggling, as your testimony indicates. 
Why is it so critical to extend enhanced unemployment insurance 
now to support individuals and small businesses, and in what 
amount would you recommend?
    Mr. Bernanke. Well, as I mentioned, unemployment insurance 
has a humanitarian aspect. We want people to be able to pay 
their bills and to be stay in their homes. I think, also, I 
would add that we need to worry about health insurance, which 
is another thing that happens when you lose your job.
    The other purpose of the unemployment insurance is to 
increase aggregate demand. People will go out and spend, and 
that will help the economy generally. But there is a very 
powerful sectoral effect, and there are some sectors, like 
restaurants, that are going to--it's going to be a while before 
they can operate normally because of the effects of social 
distancing and so on, and it's very hard to get around that 
problem.
    Ms. Velazquez. And, also, it is important that the public 
health crisis, if it's not adequately addressed, we will 
continue to face an economic uncertainty.
    Consumers, if they don't feel safe, they don't want to go 
into any restaurant or hotel or any of those small businesses.
    Mr. Bernanke. That's correct.
    Ms. Velazquez. Thank you. I yield back.
    Chairman Clyburn. I thank the gentlelady for yielding back.
    The chair now recognizes, for five minutes, Mrs. Walorski.
    Mrs. Walorski. Thank you, Mr. Chairman. Thanks for our 
witnesses as well. I'm grateful to have this conversation about 
the economy, but I just wanted to convey my disappointment with 
the minority not being able to have anybody on this panel 
today.
    If there is ever a time in this country when Americans are 
literally desperate for bipartisan cooperation, it's now. I 
mean, it's July 2020. So, I'm just disappointed that we're 
having a one-sided conversation, the most important 
conversation we've probably had on this committee, about the 
recovery in this country, and I just think that--I'm so 
disappointed, and I think the American people are as well.
    But, to get to the point today, the pandemic is unlike any 
crisis in our lifetime. Our country has experienced a 
devastating loss of life. Emergency actions, like stay-at-home 
orders, were necessary to slow the spread and flatten the 
curve, but the picture that's emerging on a broader toll of 
Americans' health that we can't ignore: We've heard plenty of 
anecdotal evidence that loneliness and isolation are especially 
hard on those battling depression or substance abuse disorders, 
as well as victims of domestic violence.
    We know, as Americans, many Americans are delaying or 
skipping doctor visits for fear of contracting coronavirus. 
It's staggering to think of the ripple effect that this is 
going to have for years to come as we brace not only for COVID-
19 death toll, but for spikes in deaths from suicide, overdose, 
heart conditions, cancer, and any number of other diseases that 
are diagnosed too late. This is an all-encompassing tragedy.
    Right now, millions of Americans are ready to return to 
work. Businesses are ready to reopen their doors. This is a 
positive step, I think, for Americans' mental and financial 
health. In order to safely reopen our economy, we all need to 
ensure access to the things like PPE, testing, and childcare. 
Commonsense tells us every reopening plan should include those.
    That's why it's been discouraging for me to see the 
Democrats playing politics with recovery plans, and the one 
that we're talking about today, the HEROES Act, for example, 
was not a serious bill that included all sorts of blank-check 
giveaways, such as restoring unlimited deductions for state and 
local taxes, or SALT, as we all refer to it.
    The nonpartisan Joint Committee on Taxation has founded 
over--has found over half the benefits of this policy would go 
to those with annual incomes of $1 million or more. Only one 
percent of the benefits would go to those making less than 
$100,000 a year.
    Tax experts on both sides, left and right, agree that 
restoring an unlimited SALT deduction is bad policy that would 
do nothing to help our Nation's economic recovery. 
Irresponsible bill would also extend the $600 we're talking 
about per week and temporary supplemental unemployment benefits 
from the CARES Act through January 2021.
    I supported the CARES Act and the unemployment supplement 
back in March. Much of the economy was going to be shut down 
for an undetermined amount of time. This benefit helped pay--I 
think we all understand. It helped pay rent, put food on the 
table. It had brought peace of mind as people found themselves 
unemployed or furloughed by no fault of their own.
    But I've heard from small business owners all over my 
district who are trying to open responsibly, and what they're 
finding is that the supplement has distorted the job market. 
It's easy to see why, in my home state of Indiana, workers 
receiving the $600 per week are getting about three times as 
much as they otherwise would on unemployment. In many cases, a 
worker can stay on unemployment and make more money than if 
they return to work.
    The nonpartisan Congressional Budget Office said that 
extending the $600-per-week supplement through January 2021, as 
the HEROES Act proposes, would weaken the incentives to work, 
decreasing the economic output, and decreasing unemployment. In 
short, it would kill our economy.
    Ways and Means have proposed a backdoor bonus that would 
make work pay by allowing workers to keep up to two weeks of 
the additional benefit after accepting a job, essentially 
amounting to a $1,200 reentry hiring bonus.
    Chairman Bernanke, the University of Chicago estimates that 
over two-thirds of unemployment insurance recipients nationwide 
are receiving more money on unemployment than they would if 
they returned to work. What impacts of paying such a large 
group of people at so much more than their normal incomes 
happens, and then do you see our plan as incentivizing rehiring 
a good thing as a way to incentivize work?
    Mr. Bernanke. Well, I think, during the lockdowns, it 
didn't make a lot of difference, because people weren't going 
out to work anyway.
    Mrs. Walorski. Right. Yes. Right.
    Mr. Bernanke. I think--I've said now a couple of times----
    Mrs. Walorski. Right.
    Mr. Bernanke [continuing]. That it makes a lot of sense to 
rethink the structure of UI, and maybe even put rewards on the 
work side, like EITC or something--the thing about the back-to-
work bonus is that it rewards people who are unemployed and 
cutting back, and they might earn more than somebody who was 
there the whole time, so that's a question.
    But I see no major contradiction between maintaining 
adequate UI support for those who can't find work, but also 
restructuring so that people have the appropriate incentives to 
go back to work. I think those things can be done.
    Mrs. Walorski. Well, I appreciate it. And, in my case, you 
know, we're going to have companies shutting down that can't 
rehire, because it's so big, the difference between 
unemployment with that $600 a week. If it went to January 2021, 
my district and my state would be in trouble as with the rest 
of the country. There would be no jobs to go back to by that 
point.
    But I yield back, Mr. Chairman.
    Chairman Clyburn. I thank the gentlelady for yielding back.
    The chair now recognizes Mr. Raskin for five minutes.
    Mr. Raskin. Thank you very much, Mr. Chairman.
    As we meet today, we have 3.6 million coronavirus cases in 
America, the most in the world, just eight days after we hit 3 
million. Yesterday posted a single-day record of 77,000 new 
cases in a single day, and three of our states--Florida, 
Arizona, and Texas--are now facing record increases and maxed 
out hospital intensive care capacity, and what do our 
colleagues do? Well, they blame Democrat governors and Democrat 
mayors and the Chinese Communist Party and the World Health 
Organization; anybody but the President of the United States of 
America.
    What a fraud this is. What disinformation. What a pathetic 
and transparent effort to distract America from what's really 
going on. It's true that China covered up the virus at the 
beginning.
    But, Mr. Chairman, as I have shown several times before 
with submissions to the record, Donald Trump covered up for 
China 37 different times, praising President Xi for his very 
good leadership, their excellent collaboration in the crisis, 
and their beautiful, beautiful friendship.
    So, our colleagues really must have an empty cupboard of 
excuses that they have to go back to blaming President Trump's 
very good friend, the head of the Chinese Communist Party.
    And, while praising China, in January, February, March, and 
April, President Trump destroyed our opportunity to wage an 
effective national response to the coronavirus crisis, instead 
burying America in his course of magical thinking, assuring the 
public the virus would magically disappear one day and selling 
to the public with his various pronouncements his belief in 
different quack miracle cures, like injecting people with 
disinfectant and drinking hydroxychloroquine.
    Mr. Chairman, I'm sorry that we have spent any time on 
these distractions, but they keep pumping out propaganda, and 
we need to answer it.
    I'd like to ask Chairman Bernanke this: The Federal Reserve 
is using its section 13(3) powers under the Federal Reserve Act 
to allocate part of the $454 billion of existing assistance for 
states and municipalities.
    Can you describe how much money the Fed has allocated to 
the program for states and localities, and do you think--is it 
your assessment that the Fed should be putting more money into 
the states and localities?
    Mr. Bernanke. Well, the Fed has not gone anywhere close to 
using its existing capacity. Its only made one or two loans so 
far.
    I will still say that it's been worthwhile, because the 
announcement of the program reduced quite a bit the risk 
aversion and uncertainty in that market, and the market is 
functioning better on a private basis. So I--you know, you 
might consider changing the terms or lengthening the terms, but 
I do think that a lot of the benefit has been felt in terms of 
reassuring participants that the Fed is there as a backstop.
    Mr. Raskin. Thank you.
    Chairman Yellen, you said something very interesting, and I 
just want to make sure I got it right. You said: Get the 
pandemic under control, and economic recovery will follow.
    During the course of this crisis, some people have seemed 
to pose the imperative of public health and the imperative of 
economic recovery as opposites; you can favor one or the other. 
But you seem to be saying we need to focus on getting the 
pandemic under control to advance public health in order for 
the economy to come back, and I want to make sure that I got 
you right on that.
    Ms. Yellen. By and large, there is not much of a tradeoff, 
and that everything that we can do and all the resources that 
are needed to get the pandemic under control will speed 
economic recovery, and that's why, in our testimony, we say 
that there is a very high payoff on the public health side. It 
will benefit our economy.
    Mr. Raskin. Well, Chairman Yellen, President Trump pushed a 
number of gullible Republican governors and mayors to opening 
everything up way too quickly, and, at the same time, he was 
not wearing a mask and sending all kinds of terrible mixed 
messages about the public health protocols.
    Now, those very states are having to reverse course and go 
back to try to institute the public health protocols they 
didn't do in the first place, and the reopenings have been 
slowed.
    Don't you think it's better to take the public health 
problem seriously so we can really reopen the economy?
    Ms. Yellen. Well, I think that's what we have seen 
throughout Europe and much of the world where they had extreme 
lockdowns, but then got things under control and were able to 
open up in a way that they had enough testing, contact tracing, 
masks, and other steps that remained under control, and it's 
very expensive to have to shut down again to the economy, too.
    Mr. Raskin. Thank you, Mr. Chairman. I yield back.
    Chairman Clyburn. I thank Mr. Raskin.
    The chair now yields five minutes to Dr. Green.
    Mr. Green. Thank you, Mr. Chairman and Ranking Member, and 
thank you to our witnesses.
    America's businesses are facing unprecedented challenges 
due to this pandemic. Government-mandated shutdowns have caused 
numerous employees to lose their jobs and many businesses to 
shudder.
    For the sake of our witnesses, I want to let them know a 
little bit about me. After I left the Army, I started a 
healthcare company, and I too understand being an entrepreneur. 
It is not easy. It involves a lot of risks and sleepless 
nights. I'll never forget waking up in the middle of the night 
to check the lockbox on that night's proceeds many, many 
nights.
    During my time as CEO of that company, our team took the 
company from 180,000 in revenue to 212 million in annual 
revenue in just eight years. I'm very proud of what we 
accomplished, but, through all the difficulties and growing 
pains that we faced, I can't imagine the challenges facing 
small businesses today.
    With the witnesses understanding a little bit about who I 
am, I want to look at some economic performance during this 
pandemic. I know Chairman Clyburn gave a grave picture of how 
the economy is crashing. I'd like to point out it's really 
those blue states that are continuing to crash economically, 
and I can hear the retort now: Well, look at the increases in 
cases in Tennessee, Florida, and Texas. I can't talk about 
those states, but I can tell you that, in Tennessee, yes, our 
cases are going up, but our deaths remain proportionately low, 
and we're monitoring our ICU beds here in Tennessee.
    Ventilators are at 32 percent utilization. That means 68 
percent are just sitting there waiting. Recall the objective 
was to flatten the curve; not stop every single infection. So, 
protect the at-risk populations, use social distancing, and 
open up.
    We've done just that in Tennessee. Economically, our 
Tennessee recovery is setting records. Just announced, after an 
April unemployment of 15.5 percent; May, 11 percent, our June 
unemployment is down to nine percent in Tennessee, with retail 
sales booming. Restaurants and retail businesses are at the top 
of the country for recovery. And our governor just announced 
last night that our economic growth in Tennessee is only 0.2 
percent below what we predicted it would be without COVID and 
before it ever happened.
    We have the lowest debt in our Nation per capita. We have a 
fully funded pension plan. We are using our ample rainy-day 
fund, money we set aside years, to distribute additional 
dollars to businesses and medical providers.
    It just goes to show it matters who governs. Conservative 
policies that advance freedom--we need the prosperity, even in 
a crisis. And, in Tennessee, we appreciate that the Trump 
administration has taken bold action to provide economic 
relief.
    The President slashed streamlined regulations, pushed for a 
payroll tax holiday to ease hiring penalties, worked with 
Congress to enact the Paycheck Protection Program and billions 
in additional low-interest loans for small businesses.
    If the government is going to force businesses to close, 
then it has an obligation to provide relief. The President has 
also declared war on this virus, expediting emergency supplies 
on a massive scale and ramping up efforts to create a vaccine 
at, using his words, warp speed.
    America is a resilient Nation. We'll bounce back stronger 
than ever. It's critical that Congress works with the 
President, and not just sits there and bashes the President, 
and help America recover.
    It's equally important we get our economy blasting on all 
cylinders. As I and many of my colleagues have pointed out, the 
cost of shutdowns are nearly equally as great.
    As former Fed chairs, I'm grateful that you guys are here 
to share your perspectives on the economic challenges our 
Nation is facing. And, real quick, my first question is to 
Chairman Bernanke: How much debt is enough? I mean, we're at 22 
trillion before this thing happened. It looks like we're 
upwards of 10 more trillion. I mean, what is too much?
    Mr. Bernanke. Well, just first going back to the first part 
of your comment, there is a lot of evidence that people's 
behavior does depend on the illness in the local area. So, I 
don't know about your state. We'll have to see how that works 
out, but there is that issue, and it makes a lot of sense.
    I'd also mention that lockdowns are not the only way to 
address the problem. There is other tools, like masks and tests 
and tracing and so on, and I'm hopeful that that will be used.
    On debt, you know, like I said, given how low interest 
rates are around the world--and that's not just a monetary 
policy thing; this is a global trend that goes on, that's now 
going on for 30 years, of interest rates coming down and down. 
The burden of the debt is not as high as the dollar amount 
would make you think, and this is a critical situation----
    Mr. Green. How much is too much? I mean, I just am looking 
at what's the number? Is it a debt administration----
    Mr. Bernanke. It's not a number; it's a trajectory. The 
problem is, when it keeps growing and growing and the interest 
keeps compounding and getting bigger and bigger, you get to a 
point where either the burden of the interest is so high, you 
have to raise taxes or cut spending, or, alternatively, you run 
into an inflation situation. That's the kind of outcome you 
want to avoid. We're not that close to it now given the level 
of our debt burden.
    Mr. Green. The money we're printing isn't going to cause 
inflation?
    Mr. Bernanke. No. People said it would after 2008. They 
were wrong, then, too.
    Chairman Clyburn. The gentleman's time has expired.
    The chair now recognizes, for five minutes, Mr. Foster.
    Mr. Foster. Thank you. And, you know, I too would like to 
stay on that same point.
    One of the factors that prevented an adequate fiscal 
response to the Great Recession was the very politically 
successful narrative that we were somehow spending ourselves 
into hyperinflation and defacing the dollar.
    Dr. Bernanke probably shares with me the fond memories of 
former Senator from Illinois, Republican Mark Kirk, traveling 
to China in 2009 to warn officials that they should not buy 
U.S. Treasury securities or other U.S. debt because U.S. 
spending was, quote, driving us to a default, and that the 
Federal Reserve bank was, quote, creating hyperinflation, which 
is a mantra that we've heard from Republicans again and again 
and again, and are apparently hearing once more.
    So, first, did the Republicans' prediction of 
hyperinflation materialize, why or why not, and what were the 
actual interest rates compared to hyperinflation?
    Either one of you--I guess start with Dr. Bernanke.
    Mr. Bernanke. Well, as you know, inflation was very low, 
and, in fact, the Fed has had a great deal of difficulty 
getting inflation up to the two percent level, and interest 
rates, which include an inflation premium, have been quite low 
as well, pretty much in the two percent range until recently, 
and now under one percent.
    Mr. Foster. Thank you. And are you aware of a worse 
prediction in macroeconomics?
    Mr. Bernanke. There are a lot of bad predictions in 
macroeconomics----
    Mr. Foster. All right.
    Mr. Bernanke [continuing]. Respond to that one.
    Mr. Foster. All right well, for the record, it would be 
amusing to see a list of
    [inaudible] appears on the
    [inaudible] prediction.
    Now, going into this crisis--the question is: How much debt 
is too much? Going into this crisis, the net worth of Americans 
was about $120 trillion.
    Chairman Clyburn. Will the gentleman yield for a moment?
    Mr. Foster. Yes.
    Chairman Clyburn. We need some people to mute, because 
we're getting a lot of feedback. Please, if you're not 
speaking, mute yourselves.
    Mr. Foster?
    Mr. Foster. All right. Can I resume here?
    So, going into this crisis, the net worth of Americans was 
roughly $120 trillion, and the market value of property 
directly owned by the U.S. Government, though it's hard to 
estimate, but it's been estimated in the range of 200 to $300 
trillion.
    So, in contrast, going into this crisis, our government had 
a publicly held debt of roughly $20 trillion, and--which will 
probably be around 25, perhaps $30 trillion when the 
coronavirus crisis has been dealt with.
    So, my question is: Are there any credible circumstances 
under which our government would be unable to pay its debts as 
a result of a fiscally sufficient response to the coronavirus 
crisis?
    Dr. Yellen?
    Ms. Yellen. So, I think it's hard to imagine. If 
something--some shock were to happen that drastically caused 
interest rates to rise--and I really can't imagine what that 
would be--then the Federal Government would face strains 
because of a higher interest burden on the debt, and would have 
to deal with it.
    Now, you know, eventually some steps do have to be taken in 
my view to deal with deficits to get them back under control 
when this is over so that the debt-to-GDP ratio stabilizes 
rather than continuing to rise.
    Mr. Foster. I agree. But I think--I guess you concur that 
there is no short-term emergency that we're facing?
    Ms. Yellen. No, none.
    Mr. Foster. Thank you.
    You know, in terms of--as we contemplate the next COVID 
relief package, we can allocate Federal spending in many ways, 
you know, direct payments to individuals; rental assistance; 
payroll and unemployment support; grants or subsidies to 
businesses, large and small; you know, subsidized or guaranteed 
loans to businesses, or relief to state and local governments.
    So, just putting aside all equity issues, which of these 
provides the biggest macroeconomic bang for the buck, and where 
should we look for objective and competent advice on this?
    Mr. Bernanke. Our recommendations were, first, public 
health--that has a very high return--both the medical side and 
also the safe opening side.
    The second is unemployment insurance, both because of 
humanitarian reasons, and also because people unemployed spend 
a great deal of their income. And the third would be state and 
local.
    Those, I think, are the priorities. There is other things 
you might want to look at, like supporting small business. I 
think the PPP program did a lot of good, but those are the 
three, I think, that, in our judgment, are the most important 
priorities.
    Mr. Foster. Yes. So, has anyone tried to actually quantify 
this? I mean, you know, specifically is there modelling that's 
done by the CBO and the Fed? I mean, incorporate the different 
multipliers for this different kind of spending, or not? We 
just--are we sort of on our own in Congress here?
    Mr. Bernanke. I would imagine the CBO has got estimates. I 
don't have them to hand.
    Ms. Yellen. There is a huge----
    Mr. Foster. All things occur in variable. Yes.
    Ms. Yellen [continuing]. Huge amount of work on this. I 
don't know the CBO estimates, but what different marginal 
propensities to spend out of income that goes to different 
groups in the economy, there is a vast amount of work on that.
    And, as been said, unemployment compensation to low-wage 
workers, virtually all of that is spent, and it would be 
similar for state and local government spending that are among 
our top priorities. Very high impact on spending in the 
economy.
    Mr. Foster. Thank you. And I'm out of time and yield back.
    Chairman Clyburn. Thank you, Mr. Foster.
    The chair now recognizes Mr. Kim for five minutes.
    Mr. Kim. Thank you, Mr. Chairman, and thank you all for 
gathering here and talking about this.
    I wanted to just start by responding to a comment made 
earlier in this hearing. Another member of this committee 
pressing this point about schools, cited the American Academy 
of Pediatrics about next steps with our kids.
    I was interested in learning more about this, so I just 
quickly researched this, and I found an important clarifying 
comment made by the Academy regarding this statement being 
misunderstood and misrepresented, and I wanted to read part of 
it.
    Candice Jones from the AAP said, ``The original guidance 
was always written as being a strong advocate for the goal of 
kids physically being present in school with a lot of things to 
consider and that's where things got misrepresented and 
misunderstood.''
    Then in fact, she actually goes on to say, ``We have to 
consider COVID activities in the community.'' ``This should not 
be politically motivated,'' and we have to think about what's 
best for our kids, teachers, and families.
    In fact, the American Academy of Pediatrics joined with the 
American Federation of Teachers, National Education 
Association, and others to issue a joint statement saying: 
Science should drive decisionmaking on safely reopening 
schools. Public health agencies must make recommendations based 
on evidence, not politics. We should leave it to health experts 
to tell us when the time is best to open up school buildings, 
and listen to educators and administrators to shape how we do 
this.
    For instance, schools in areas of high levels of COVID, 
community spread should not be compelled to reopen against the 
judgment of local experts. A one-size-fits-all approach is not 
appropriate for return-to-school decisions.
    Withholding funding from schools that do not open in person 
full time would be a misguided approach.
    These are incredibly important things to consider here. I'm 
a father of a young boy that's supposed to start school soon. I 
would love to have him get a great education and be able to 
enjoy his year in kindergarten.
    I want everything for him, and I don't want anyone to 
accuse me or anyone else of not wanting my kid or our kids to 
have the education that they deserve. But my education--my 
public school education that I got in my district also taught 
me to respect science and expertise and to make sure families 
and education professionals are part of that discussion.
    Going back to the topic of our hearing here, I wanted to 
just go to Chair Bernanke. I thank you for what you've been 
saying, the work that you've been doing with regards to state 
and local governments and need to be able to fund that.
    I was actually just on a Small Business Committee hearing 
this morning where Treasury Secretary Mnuchin--I asked him 
about this issue, and he wouldn't commit to me that he would 
support this type of aid in the next funding package because we 
should not, quote/unquote, ``bail out states with mismanaged 
budgets,'' is how we talked about it there.
    So, I want to ask, you know, your stipulation on this. Does 
your experience on a state reopening commission give you any 
concern that additional funding for state governments in the 
midst of this pandemic will create incentives for 
mismanagement?
    Mr. Bernanke. No. I think the money can be structured in 
ways that eliminates that incentive. It can be done in terms of 
block grants, you know, for education, for example, or for 
healthcare. It can be done by formulas that don't relate to the 
existing tax burden, things like population, unemployment rate, 
et cetera.
    So, I think there is ways to provide the money that will 
not be--provide an incentive for mismanagement. You can make 
sure--you could require that the money not be used to increase 
pension funds or cut taxes, for example.
    So, I don't think that's really an issue. And the most 
important issue is that the states and localities are both big 
employers and also the front line in terms of critical services 
to the pandemic.
    Mr. Kim. Yes. I appreciate that. And, look, in addition to 
the issue about mismanagement, though, you addressed, I also 
want to address the use of that term ``bailout'' here, because 
it keeps coming up again. It came up in this hearing as well.
    In my state of New Jersey, we only get back around 75 cents 
to 81 cents for every dollar we put into the Federal 
Government. Other states get back a dollar, over a dollar, 
sometimes over two dollars for every dollar that they put in. 
So, I just don't appreciate this notion that Federal taxpayers 
are bailing out states like mine.
    For years, residents of my state have been helping other 
states, doing more than our fair share. Now we need help, and 
we're just asking for what is fair here in the middle of a 
pandemic.
    But, even beyond that point, Chair Bernanke, you talk about 
sort of the strong sense and the challenges that we face at the 
state level could have dire circumstances on the national 
economy.
    So, it's--I want to just hear a little bit more from you 
about that, about, if we don't help states, what is that going 
to do when it comes to our responsibility to our national 
economy?
    Mr. Bernanke. I think we made this mistake in the recovery 
from the 2007-2009 recession after the global financial crisis. 
We had an $800 billion Federal program, fiscal program, but the 
states were forced to contract, lay off people. And an estimate 
I saw recently was, as I mentioned before, is that cut about a 
half a percentage point off the growth rate as the economy was 
trying to recover from that serious recession.
    So, it will have implications for spending and jobs, for 
the economy as a whole, as well as for people, you know, within 
New Jersey.
    Mr. Kim. Great. Thank you so much.
    Mr. Chairman, back to you.
    Chairman Clyburn. Thank you so much.
    We have now reached the end of our period of questions.
    The chair would like to recognize the ranking member for a 
closing statement if he would like to make one.
    Mr. Scalise. OK. Thank you again, Mr. Chairman, and good to 
see both Drs. Bernanke and Yellen, and we really have been 
talking a lot about what we need to do to reopen the economy 
safely--always the key term there. And there are really good 
examples out there. It would have been good to hear even more 
opinions on how it's being done, because, when you go all 
around the communities--and I get to go to a lot of different 
places to see what people are doing smartly--you can learn from 
what other people are doing as you work to reopen.
    I know, again, I talked about the meeting that I had with 
the Vice President on Tuesday. What Vice President Pence did is 
brought his whole team down. You had Dr. Birx there. You had 
all these medical experts, Seema Verma from CMS.
    You had the head of the LSU system and the head of the 
Southern University system. I think it's the only Historically 
Black College and University system, not just school. And they 
were both talking about what they are doing to safely reopen. 
It can be done. They both confirmed that. Dr. Birx confirmed 
that it can safely be done. You don't do it if it can't safely 
be done. It can safely be done.
    So, then our challenge--our challenge as policymakers, as 
leaders, is to go figure out how to do it, not to allow anybody 
the copout of saying, ``Well, it's hard, and we're just not 
sure, so we won't do it.'' Go talk to the people who are doing 
it safely, because there is a serious cost--a serious cost.
    You know, when you go back to the Academy of Pediatrics, 
they talk about, sure, you've got to follow guidelines. It's 
not about whether or not to follow guidelines. You've got to 
follow the CDC guidelines and your state and local guidelines, 
but you can do it, and there is a cost of not doing it. They 
talk in this report about the damage to kids.
    There is a cost to kids; not just in learning. There are a 
lot of other things, too. A lot of kids get their basic 
nutrition from school. A lot of kids with disabilities get 
their basic needs met in school. That's not being done if 
you're closing schools.
    You know, for some of these school systems to say they're 
not going to reopen or a teacher's union to say they're not 
going to come back to work unless police are defunded or 
something ludicrous, think about the kids.
    You know Mr. Jordan talked about the over 50 million kids 
that are going to be losing out, and they're losing out if they 
don't get their schools reopened.
    So, you know, Coach Orgeron talked about this with Vice 
President Pence. And sports, some people think are trivial. 
Sports are key to uniting communities. It's something in the 
psyche of people that they want to see their sports come back. 
But he talked about the human aspect of it, and this applies to 
the over 50 million kids that would be denied that opportunity 
to go back.
    He said: A year ago today, Joe Burrow was projected to be a 
sixth-round draft pick, but, because he had that opportunity, 
because he worked hard and he got to be around a system where 
he could prove himself, in the course of those next eight 
months, he became the number-one draft pick, maybe one of the 
most storied careers of a quarterback in college football 
history, winning the Heisman Trophy. All of that would have 
been denied.
    And think about the other 50 million-plus kids in America 
that will be denied opportunity if we don't do the hard work of 
figuring out how to do it. Not whether or not to do it, but 
actually doing it.
    It's something that we've got to challenge ourself to do. 
Like I said, we put a man on the moon. We can absolutely do it. 
The doctors say you can do it--Dr. Birx, the American Academy 
of Pediatrics. Let's go get it done.
    Mr. Chairman, I yield back.
    Chairman Clyburn. I thank the ranking member for his 
statement, and I just want to reiterate that, at the beginning 
of the hearing, you asked to enter certain documents into the 
record. I did not object.
    Of course I want to point out that, last week, when 
President Trump started pushing to fully reopen schools without 
regard to public health guidance, the American Academy of 
Pediatrics issued a clarification. You just heard it from Mr. 
Kim about--so his statement will go into the record. But I want 
to emphasize that statement said that science should drive 
decisionmaking on safely reopening schools.
    Now, I noticed, my friend, that you talked about Dr. Birx 
being there with the Vice President and Southern University and 
LSU being there. The fact of the matter is I would love for 
some elementary school teachers to have been there, for some 
kindergarten teachers to have been there, for some 
superintendents from those public-school districts around 
Louisiana to have been there.
    They are the ones who are on the front lines. They are the 
ones who are committed to taking care of these little children 
all day, every day; not Dr. Birx, not the Vice President, not 
the President or the athletic directors at LSU, or Southern 
University.
    I'm a proud graduate of an HBCU. We just closed down our 
program, all, for the whole fall. And I love going to 
homecoming, and I love watching my team play.
    But that's not what this is about. This is about educating 
our children in a safe, healthy environment, and we need to go 
with the experts when it comes to that.
    I went down to LSU when Clemson played LSU. I'm a big fan 
of Joe Burrow's. I hope he has a successful career, but he's 
not going to have a successful career if he can't stay healthy. 
And he is not insulated from this virus just because he got the 
Heisman Trophy. We've got to do what's necessary to keep him 
healthy.
    So, today, in closing, I want to thank Chair Bernanke and 
Chair Yellen for being here today. We appreciate your 
distinguished records of government service and your expertise 
that you have shared with us this afternoon.
    I hope that Congress will use this to chart a path through 
to the other side of this terrible pandemic. This hearing has 
made clear that the Federal Government's economic recovery 
efforts so far are not sufficient, and, without further action, 
we face even greater economic turmoil. This turmoil will have a 
disproportionate impact on communities of color.
    Today's hearing has also made clear that there are steps 
our Government must take now to put us on the road to economic 
recovery. First, as our witnesses explained in their written 
testimony--and I quote--``nothing is more important for 
restoring economic growth than improving public health,'' end 
of quote.
    We cannot hope for an economy to recover until we 
successfully control this pandemic.
    Second, Congress must take bold action now and pass a 
substantive economic recovery package, like the HEROES Act, 
that includes substantial support to state and local 
governments.
    As the witnesses testified today--and I'm quoting again--
``these governments will have to lay off workers and limit 
essential services until they get Federal help,'' end of quote.
    Chair Bernanke and Chair Yellen eloquently explained why 
the economy cannot afford for Congress to do anything less than 
immediately pass a comprehensive and robust recovery measure.
    Finally, the Fed should adjust the terms of eligibility 
toward lending facilities to ensure that all borrowers have 
access to credit and explore additional facilities to support 
lending to households and small businesses that have been 
harmed by this crisis.
    Drs. Bernanke and Yellen steered the Nation out of the 2008 
financial crisis. Congress and the administration should heed 
their advice and act now if we hope to get on the path to 
economic recovery, in a manner that is effective, efficient, 
and equitable.
    Without objection, all members will have five legislative 
days within which to submit additional written questions for 
the witnesses, to the chair, which will be forwarded to the 
witnesses for their response. I ask our witnesses to please 
respond as promptly as you are able to.
    This meeting--this hearing is adjourned.
    [Whereupon, at 2:34 p.m., the subcommittee was adjourned.]

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