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




 
                        MONETARY POLICY AND THE

                          STATE OF THE ECONOMY

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

                            VIRTUAL HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 17, 2020

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 116-97
                           
                           
                           
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]                 



                            ______                       


             U.S. GOVERNMENT PUBLISHING OFFICE 
 42-941 PDF            WASHINGTON : 2021 
                           
                           

                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             ANN WAGNER, Missouri
GREGORY W. MEEKS, New York           FRANK D. LUCAS, Oklahoma
WM. LACY CLAY, Missouri              BILL POSEY, Florida
DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas                      BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri            STEVE STIVERS, Ohio
ED PERLMUTTER, Colorado              ANDY BARR, Kentucky
JIM A. HIMES, Connecticut            SCOTT TIPTON, Colorado
BILL FOSTER, Illinois                ROGER WILLIAMS, Texas
JOYCE BEATTY, Ohio                   FRENCH HILL, Arkansas
DENNY HECK, Washington               TOM EMMER, Minnesota
JUAN VARGAS, California              LEE M. ZELDIN, New York
JOSH GOTTHEIMER, New Jersey          BARRY LOUDERMILK, Georgia
VICENTE GONZALEZ, Texas              ALEXANDER X. MOONEY, West Virginia
AL LAWSON, Florida                   WARREN DAVIDSON, Ohio
MICHAEL SAN NICOLAS, Guam            TED BUDD, North Carolina
RASHIDA TLAIB, Michigan              DAVID KUSTOFF, Tennessee
KATIE PORTER, California             TREY HOLLINGSWORTH, Indiana
CINDY AXNE, Iowa                     ANTHONY GONZALEZ, Ohio
SEAN CASTEN, Illinois                JOHN ROSE, Tennessee
AYANNA PRESSLEY, Massachusetts       BRYAN STEIL, Wisconsin
BEN McADAMS, Utah                    LANCE GOODEN, Texas
ALEXANDRIA OCASIO-CORTEZ, New York   DENVER RIGGLEMAN, Virginia
JENNIFER WEXTON, Virginia            WILLIAM TIMMONS, South Carolina
STEPHEN F. LYNCH, Massachusetts      VAN TAYLOR, Texas
TULSI GABBARD, Hawaii
ALMA ADAMS, North Carolina
MADELEINE DEAN, Pennsylvania
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
DEAN PHILLIPS, Minnesota

                   Charla Ouertatani, Staff Director
                   
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    June 17, 2020................................................     1
Appendix:
    June 17, 2020................................................    55

                               WITNESSES
                        Wednesday, June 17, 2020

Powell, Hon. Jerome H., Chairman, Board of Governors of the 
  Federal Reserve System.........................................     5

                                APPENDIX

Prepared statements:
    Powell, Hon. Jerome H........................................    56

              Additional Material Submitted for the Record

Waters, Hon. Maxine:
    Letter from Representative Green regarding his absence from 
      the hearing................................................    62
Rose, Hon. John:
    Federal Reserve release entitled, ``Strategic Allocation of 
      Coin Inventories''.........................................    63
Powell, Hon. Jerome H.:
    Written responses to questions for the record from 
      Representative Budd........................................    65
    Written responses to questions for the record from 
      Representative Cleaver.....................................    69
    Written responses to questions for the record from 
      Representative Garcia......................................    75
    Written responses to questions for the record from 
      Representative Hill........................................    79
    Written responses to questions for the record from 
      Representative Himes.......................................    84
    Written responses to questions for the record from 
      Representative Huizenga....................................    88
    Written responses to questions for the record from 
      Representative Stivers.....................................    94
    Written responses to questions for the record from 
      Representative Wagner......................................    97


                        MONETARY POLICY AND THE

                          STATE OF THE ECONOMY

                              ----------                              


                        Wednesday, June 17, 2020

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 12:02 p.m., via 
Webex, Hon. Maxine Waters [chairwoman of the committee] 
presiding.
    Members present: Representatives Waters, Maloney, 
Velazquez, Sherman, Cleaver, Perlmutter, Himes, Foster, Heck, 
Vargas, Gottheimer, Lawson, San Nicolas, Tlaib, Axne, Casten, 
McAdams, Wexton, Lynch, Adams, Phillips; McHenry, Wagner, 
Lucas, Posey, Luetkemeyer, Huizenga, Stivers, Tipton, Williams, 
Hill, Emmer, Zeldin, Loudermilk, Mooney, Davidson, Budd, 
Kustoff, Gonzalez of Ohio, Rose, Steil, Timmons, and Taylor.
    Chairwoman Waters. The Financial Services Committee will 
come to order. Thank you.
    Without objection, the Chair is authorized to declare a 
recess of the committee at any time.
    Members are reminded to keep their video function on at all 
times, even when they are not being recognized by the Chair. 
Members are also reminded that they are responsible for muting 
and unmuting themselves, and to mute themselves after they are 
finished speaking. Consistent with the regulations accompanying 
H. Res. 965, staff will only mute Members and our witness, as 
appropriate, when not being recognized, to avoid inadvertent 
background noise.
    Members are reminded that all House rules relating to order 
and decorum apply to this remote hearing.
    Today's hearing is entitled, ``Monetary Policy and the 
State of the Economy.''
    I now recognize myself for 4 minutes to give an opening 
statement.
    Chair Powell, the law that requires the Federal Reserve 
Chair to testify before Congress twice each year was 
established back in 1978. However, no Fed Chair has ever 
testified before this committee with the economy in the 
condition that it is in today.
    More than 116,000 Americans are dead from the coronavirus. 
And just last week, 21 States recorded an increase in their 
average daily new cases compared to the prior week.
    The April jobs report was the worst in American history, 
showing 20.5 million jobs lost, and wiping out nearly a 
decade's worth of job gains in a single month. Today, the top-
line unemployment rate remains higher than it has been at any 
time since the Great Depression, and 3 full percentage points 
above its highest level during the Great Recession.
    As you recently noted, Chair Powell, the expected decline 
in GDP is likely to be the most severe on record.
    Communities of color, who are suffering disproportionately 
from the virus, are also in major economic distress. Even 
before the crisis, a 2019 McKinsey study found that the overall 
racial wealth gap between Black and white families widened from 
$100,000 in 1992, to $150,000 in 2016. Unfortunately, over 2 
million Black Americans lost their jobs as a result of COVID-
19, and nearly 18 percent of Black workers have lost their jobs 
since February.
    Your warning that, ``if not contained and reversed, the 
downturn could further widen gaps in economic well-being,'' is 
a reminder that the Fed and Congress must use all tools 
available to address these unjust disparities.
    States and cities are making painful cuts, at a moment when 
they desperately need more resources. As States grapple to pay 
skyrocketing unemployment claims and meet public health 
expenses, 1.6 million public-sector employees have lost their 
jobs. State governments face an estimated $790 billion revenue 
shortfall next year, and without action, 5.3 million more 
public-sector employees could lose their jobs.
    We are also facing an impending eviction crisis, with 30 
percent of renters being unable to pay their rent for June.
    Against this backdrop, Donald Trump has urged a premature 
return to business as usual, while heralding a jobs report that 
showed Black unemployment was rising. He said, ``It's a great 
day.''
    Last month, the House passed the Health and Economic 
Recovery Omnibus Emergency Solutions (HEROES) Act to extend 
assistance to States, cities, and the unemployed, as well as 
renters and homeowners. But the Senate Republican leader has 
said that Congress should, ``wait and see,'' before considering 
more relief.
    While the Trump Administration has declared victory and 
spread dangerous misinformation, you have been a real voice of 
reason, cautioning that unemployment is still, ``historically 
high,'' recognizing its disproportionate impact on communities 
of color, and acknowledging that economic recovery will depend 
on public health outcomes. You have also stressed that, 
``additional fiscal support is needed to avoid long-term 
damage.''
    The economy recovered unevenly from the last crisis, 
leaving the Fed with limited ammunition. Nevertheless, the Fed 
has stepped in to rescue an economy in freefall. We have seen 
the stock market respond, but communities of color and small 
businesses are reeling. And you are at the end of what you can 
reasonably do in terms of monetary policy to help the economy.
    Now is the time for strong fiscal policy from Congress in 
the form of the HEROES Act. Without it, I am extremely 
concerned about the future of our nation's economy.
    With that, I yield back.
    The Chair now recognizes the ranking member of the 
committee, the gentleman from North Carolina, Mr. McHenry, for 
4 minutes for an opening statement.
    Mr. McHenry. Thank you, Madam Chairwoman.
    And, Chairman Powell, welcome back to the committee. Thank 
you for being here virtually, and for taking our questions 
virtually.
    The circumstances are obviously much different than where 
we were in February, when we last met. I would like to commend 
you and the Federal Reserve for your activities and engagements 
in this unprecedented time. I believe it was the Fed's rapid 
and decisive action that prevented the worst effects of this 
economic catastrophe brought about by the coronavirus, and 
helped stabilize the market.
    The Fed, as firefighter, was able to stave off the flames, 
to contain the flames. But we know that is not a permanent 
circumstance, for the Federal Reserve to be in that 
firefighting phase.
    Using Section 13(3) emergency lending authority, the Fed 
signaled to American households and to businesses that it will 
do everything in its power to respond to the economic crisis 
that resulted from this global health crisis. The Fed announced 
nine lending programs to help support the proper functioning of 
our financial markets and our economy--smartly done.
    Many of these facilities are in operation today. However, 
some of those facilities aren't even yet operational, but 
markets were calmed just by the announcement from the Fed.
    I want to commend you for that decisive action in this 
early phase of what we know are challenging times for the 
American people. I believe that we must keep these facilities 
focused on broad-based support of our economy, and ensure that 
they are responsive to economic conditions, not the political 
ones.
    I also want to reference a point you made last week, that I 
believe is worth repeating. As the Fed embarks on protecting 
the economy through careful and targeted use of its powers, 
Congress must be realistic about what the Fed can and cannot 
do. The Fed is a lender. The Fed is a lender of last resort. It 
is not responsible for fiscal policy. That is Congress' job.
    And it is not a piggy bank to be used to fund the whims of 
Congress. We must ensure the Fed remains laser-focused on 
monetary policy and does not become a testing ground for 
ideological experiments or unproven theories. Unconventional 
monetary proposals should be considered with the utmost care, 
particularly ones that have had mixed records in other major 
economies.
    We should be focused on the tens of millions of Americans 
who remain out of work through no fault of their own. According 
to the Fed's economic projections, we will still be facing 
unprecedented unemployment for the rest of this year--nearly 
twice the unemployment rate that we experienced just as 
recently as February. Creating an economic recovery that grows 
jobs must be priority number one.
    But the Fed cannot do this alone. The Fed cannot train 
workers to match them more effectively with job openings. 
Congress has to legislate that. Congress is responsible for 
enacting pro-growth policies, not the Fed. And the Fed cannot 
modernize our education system or change tax policy. That is 
Congress' role. Only Congress can legislate these policies, 
which is why we need bipartisan solutions to ensure that our 
economy remains strong and/or comes back stronger than ever. We 
should be identifying the metrics that will be used to 
determine the ongoing need for emergency lending as well.
    Chairman Powell, I urge you to continue to be as forward-
looking as you have been. Before the public actually knew what 
the coronavirus was, you were taking action. And so, I 
anticipate that the challenges we will face in the next 6 
months or a year will be enormous, but I commend you for 
looking ahead.
    And while I hope we are through the worst of it, it is 
clear that more must be done. However, we should all keep an 
eye toward the aftermath and how we plan to right-size policies 
once again to ensure the long-term stability of our financial 
system.
    And, with that, I would like to thank you again for being 
here. I look forward to your testimony and to the questions.
    And I yield back.
    Chairwoman Waters. The Chair now recognizes the gentleman 
from Missouri, Mr. Cleaver, who is also the Chair of our 
National Security, International Development and Monetary 
Policy Subcommittee, for 1 minute.
    Mr. Cleaver. Thank you, Madam Chairwoman.
    And thank you, Chairman Powell, for being here.
    On Sunday, Dallas Federal Reserve President Kaplan stated, 
``Systemic racism is a yoke that drags on the American economy, 
and a more inclusive economy will lead to a better growth.'' 
And I tend to agree with what he said.
    Before the pandemic, nearly 60 percent of Black adults were 
employed. COVID-19 has ravaged our nation and the low-paid and 
front-line service sectors. Now, just less than half of Black 
people are employed.
    Economic justice is a part of social justice, and I want to 
examine some of these concepts with you. Economic justice would 
include increasing the minimum wage, expanding the earned 
income tax credit, investing in education, and creating a 
progressive Tax Code.
    So thank you for being here, and I will explore those 
later.
    Thank you, Madam Chairwoman.
    Chairwoman Waters. You are welcome.
    The Chair now recognizes the ranking member of the 
subcommittee, Mr. Hill, for 1 minute.
    Mr. Hill. Thank you, Madam Chairwoman.
    Chairman Powell, thank you for being with us virtually 
today. We appreciate you being responsive to all of our 
questions in this challenging environment.
    Your monetary policy report dated June 12th was an 
excellent, detailed recap of the extraordinary events of the 
past 4 months. I commend the Federal Reserve for their quick 
response and necessary actions taken to mitigate the harm from 
COVID-19. Your quick action preserved companies' access to 
markets and fresh capital to weather this storm.
    Today, Members will discuss the Federal Reserve's 
facilities, and the virus and its impact on the economy and our 
citizens, many of whom are not yet back to work. I look 
forward, as well, to a discussion about monetary policy. The 
balance sheet has grown by nearly $3 trillion since the 
beginning of March.
    I look forward to discussing these things, and again 
welcome you to the committee.
    I yield back.
    Chairwoman Waters. I want to welcome to the committee our 
distinguished witness, Jerome Powell, Chair of the Board of 
Governors of the Federal Reserve System. Chair Powell has 
served on the Board of Governors since 2012, and as its Chair 
since 2017.
    Chair Powell has previously testified before the committee, 
and I believe he does not need any further introduction.
    Chair Powell, without objection, your written statement 
will be made a part of the record.
    I want to remind Members that Chair Powell has a hard stop, 
and will be with us for 3 hours, until 3 p.m. eastern time.
    Chair Powell, you are now recognized to present your oral 
testimony.

STATEMENT OF THE HONORABLE JEROME H. POWELL, CHAIRMAN, BOARD OF 
            GOVERNORS OF THE FEDERAL RESERVE SYSTEM

    Mr. Powell. Thank you.
    Chairwoman Waters, Ranking Member McHenry, and members of 
the committee, thank you for the opportunity to present the 
Federal Reserve's Semiannual Monetary Policy Report.
    Our country continues to face a difficult and challenging 
time as the pandemic is causing tremendous hardship here in the 
United States and around the world.
    The corona outbreak is, first and foremost, a public health 
crisis. The most important response has come from our 
healthcare workers. On behalf of the Federal Reserve, I want to 
express our sincere gratitude to these dedicated individuals 
who put themselves at risk day after day in service to others 
and to our nation.
    Beginning in mid-March, economic activity fell at an 
unprecedented speed in response to the outbreak of the virus 
and the measures taken to control its spread. Even after the 
unexpectedly positive May employment report, nearly 20 million 
jobs have been lost on net since February, and the reported 
unemployment rate has risen about 10 percentage points to 13.3 
percent. The decline in real gross domestic product this 
quarter is likely to be the most severe on record.
    The burden of the downturn has not fallen equally on all 
Americans. Instead, those least able to withstand the downturn 
have been affected most. As discussed in the report, low-income 
households have experienced by far the sharpest drop in 
employment, while job losses of African Americans, Hispanics, 
and women have been greater than those of other groups. If not 
contained and reversed, the downturn could further widen gaps 
in economic well-being that the long expansion had made some 
progress in closing.
    Recently, some indicators have pointed to stabilization 
and, in some areas, a modest rebound in economic activity. With 
an easing of restrictions on mobility in commerce and the 
extension of Federal loans and grants, some businesses are 
opening up, while stimulus checks and unemployment benefits are 
supporting household incomes and spending. As a result, 
employment moved higher in May.
    That said, the levels of output and employment remain far 
below their pre-pandemic levels, and significant uncertainty 
remains about the timing and strength of the recovery. Much of 
that economic uncertainty comes from uncertainty about the path 
of the disease and the effectiveness of measures to contain it. 
Until the public is confident that the disease is contained, a 
full recovery is unlikely.
    Moreover, the longer the downturn lasts, the greater the 
potential for longer-term damage from permanent job loss and 
business closures. Long periods of unemployment can erode 
workers' skills and hurt their future job prospects. Persistent 
unemployment can also negate the gains made by many 
disadvantaged Americans during the long expansion, as described 
to us at our Fed Listens events.
    The pandemic is presenting acute risks to small businesses, 
as discussed in the report. If a small or medium-sized business 
becomes insolvent because the economy recovers too slowly, we 
lose more than just that business. These businesses are the 
heart of our economy and often embody the work of generations.
    With weak demand and large price declines for some goods 
and services, such as apparel, gasoline, air travel, and 
hotels, consumer price inflation has dropped noticeably in 
recent months, but indicators of longer-term inflation 
expectations have remained fairly steady. As output stabilizes 
and the recovery moves ahead, inflation should stabilize and 
then gradually move up, over time, closer to our symmetric 2-
percent objective. Inflation is nonetheless likely to remain 
below our objective for some time.
    The Fed's response to this extraordinary period is guided 
by our mandate to promote maximum employment and stable prices 
for the American people, along with our responsibility to 
promote the stability of the financial system. We are committed 
to using our full range of tools to support the economy in this 
challenging time.
    In March, we quickly lowered our policy interest rate to 
near zero, reflecting the effects of COVID-19 on economic 
activity, employment, and inflation and the heightened risks to 
the outlook. We expect to maintain interest rates at this level 
until we are confident that the economy has weathered recent 
events and is on track to achieve our maximum employment and 
price stability goals.
    We have also been taking broad and forceful actions to 
support the flow of credit in the economy. Since March, we have 
been purchasing sizable quantities of Treasury securities and 
agency mortgage-backed securities (MBS) in order to support the 
smooth functioning of these markets, which are vital to the 
flow of credit in the economy.
    As described in the report, these purchases have helped 
restore orderly market conditions and have fostered more 
accommodative financial conditions. As market functioning has 
improved since the strains experienced in March, we have 
gradually reduced the pace of these purchases.
    To sustain smooth market functioning and thereby foster the 
effective transmission of monetary policy to the broader 
financial conditions, we will increase our holdings of Treasury 
securities and agency MBS over coming months at least at the 
current pace. We will closely monitor developments, and we are 
prepared to adjust our plans as appropriate to support our 
goals.
    To provide stability to the financial system and support 
the flow of credit to households, businesses, and State and 
local governments, the Fed, with the approval of the Secretary 
of the Treasury, established 11 credit and liquidity facilities 
under Section 13(3) of the Federal Reserve Act.
    The June report provides details on these facilities, which 
fall broadly into two categories: stabilizing short-term 
funding markets; and providing more direct support for credit 
across the economy.
    To help stabilize short-term funding markets, the Fed set 
up the Commercial Paper Funding Facility and the Money Market 
Liquidity Facility to stem rapid outflows from prime money 
market funds. The Fed also established the Primary Dealer 
Credit Facility, which provides loans against good collateral 
to primary dealers that are critical intermediaries in short-
term funding markets.
    To more directly support the flow of credit to households, 
businesses, and State and local governments, the Fed 
established a number of facilities. To support the small-
business sector, we established the Paycheck Protection Program 
(PPP) Liquidity Facility to bolster the effectiveness of the 
Coronavirus Aid, Relief, and Economic Security (CARES) Act. Our 
Main Street Lending Program, which is just now launching, 
supports lending to both small and medium-sized businesses. The 
Term Asset-Backed Securities Loan Facility supports lending to 
both businesses and consumers. To support the employment and 
spending of investment-grade businesses, we established two 
corporate credit facilities. And to help U.S. State and local 
governments manage cash-flow pressures and serve their 
communities, we set up the Municipal Liquidity Facility.
    The tools that we are using under Section 13(3) authority 
are appropriately reserved for times of emergency. When this 
crisis is behind us, we will put them away.
    The June report reviews the implications of these tools for 
the Federal Reserve's balance sheet. Many of these facilities 
have been supported by funding from the CARES Act. We will be 
disclosing on a monthly basis names and details of participants 
in each facility, amounts borrowed and interest rates charged, 
and overall costs, revenues, and fees for each facility.
    We embrace our responsibility to the American people to be 
as transparent as possible, and we appreciate that the need for 
transparency is heightened when we are called upon to use our 
emergency powers.
    We recognize that our actions are only part of a broader 
public-sector response. Congress' passage of the CARES Act was 
critical in enabling the Fed and the Treasury to establish many 
of the lending programs. The CARES Act and other legislation 
provides direct help to people, businesses, and communities. 
This direct support can make a critical difference, not just in 
helping families and businesses in a time of need, but also in 
limiting long-lasting damage to our economy.
    I would like to end by acknowledging the tragic events that 
have again put a spotlight on the pain of racial justice in 
this country. The Federal Reserve serves the entire nation. We 
operate in, and we are part of, many of the communities across 
the country where Americans are grappling with and expressing 
themselves on issues of racial equality.
    I speak for my colleagues throughout the Federal Reserve 
System when I say there is no place at the Federal Reserve for 
racism, and there should be no place for it in our society. 
Everyone deserves the opportunity to participate fully in our 
society and in our economy.
    We understand that the work of the Fed touches communities, 
families, and businesses across the country. Everything we do 
is in service to our public mission. We are committed to using 
our full range of tools to support the economy and to help 
ensure that the recovery from this difficult period will be as 
robust as possible.
    Thank you, and I look forward to our discussion.
    [The prepared statement of Chairman Powell can be found on 
page 56 of the appendix.]
    Chairwoman Waters. Thank you, Chairman Powell.
    I now recognize myself for 5 minutes for questions.
    Chair Powell, before you joined the Fed, you were a Fellow 
at the Bipartisan Policy Center and an advocate of deficit 
reduction. So, I took it seriously when you said on April 29th 
that, ``This is the time to use the great fiscal power of the 
United States to do what we can to support the economy.''
    On May 13th, 2 days before the House passed the HEROES Act, 
you reiterated this message, saying, ``additional fiscal 
support could be costly but worth it if it helps avoid long-
term economic damage and leaves us with a stronger recovery.''
    On Sunday, Dallas Fed President Robert Kaplan seemed to 
echo that same quote: ``Fiscal policy is going to be critical 
from here.''
    And yesterday, former Fed Chairs Bernanke and Yellen, and 
more than 130 economists, wrote a letter calling for a bold 
congressional response, including, ``continued support for the 
unemployed, new assistance to States and localities, and 
investments in programs that preserve the employer-employee 
relationship.''
    The May jobs report showed slightly better jobs numbers 
than the April jobs report, which was the worst in recorded 
history, but there are still major reasons for alarm, including 
that unemployment rose to 16.8 percent, and 600,000 public-
sector jobs were lost.
    Yet, this Administration and Senate Republicans are not 
moving with any urgency. Republicans seem to be more focused on 
a more limited response, while granting a broad liability 
shield for major corporations.
    Question: Do you agree with your predecessors, Chair 
Powell? Should Congress, ``take bold action as soon as 
possible?''
    Mr. Powell. Thank you, Madam Chairwoman.
    I would agree that Congress has already provided 
significant fiscal support, and that support is now having a 
positive effect on the economy. We see it in consumer spending, 
in income data; we see it in the payrolls. All of that is 
helping.
    And I would just note that there is something like 25 
million people who have been dislodged from their job, either 
in full or in part, due to the pandemic. And I would think that 
it would be a concern if Congress were to pull back from the 
support that it is providing too quickly.
    I wouldn't presume to prescribe exactly what you should or 
should not do, but I would say that it would be wise to look at 
ways to continue to support both people who are out of work and 
also smaller businesses that may not have vast resources for a 
continued period of time--not forever, but for a period of time 
so that we can get through this critical phase.
    The economy is just now beginning to recover. It is a 
critical phase, and I think that support would be well-placed 
at this time.
    Chairwoman Waters. Thank you very much.
    On May 15th, more than a month ago now, the House passed 
the HEROES Act, which would, among other things, provide: $175 
billion in rental and homeowner assistance; nearly $1 trillion 
to support State, Territory, and local governments; and another 
round of direct stimulus payments for individuals and families.
    I would note that many States are reporting an uptick in 
confirmed cases, of new highs in hospitalizations, with some 
officials slowing their efforts to reopen.
    Who will suffer if the Senate does not properly adopt these 
measures to support State and local governments, renters, 
homeowners, and the broader economy?
    Mr. Powell. As I mentioned, Madam Chairwoman, I do think it 
would be appropriate to think about continuing support for 
people who are newly out of work and for smaller businesses who 
are struggling to get through what will be a temporary period 
as the economy moves back up toward higher levels of activity.
    Chairwoman Waters. Thank you very much.
    Before moving on for the next question, I would like to 
call on Ranking Member McHenry to share with us some 
information that is very important to this committee.
    Mr. McHenry. Madam Chairwoman, please, continue with your 
questions. I will take that out of my time, but--well, 
actually, while we are here, since the technology is tough, a 
point of personal privilege.
    I would seek to inform committee members about the tragic 
passing of our colleague and friend, Andy Barr's, wife Carol, 
last evening. When Andy arrived home, he found that his wife 
had passed.
    They have two young children. She was 39-years-old. This is 
quite a surprise and a shock for all of us, but I wanted to 
ensure that committee members know this information. And please 
keep Andy and his two girls, his two young girls, in your 
prayers.
    Thank you so much.
    And thank you, Madam Chairwoman. I yield back.
    Chairwoman Waters. Thank you so very much.
    And now, Mr. McHenry, I will recognize you for 5 minutes 
for questions.
    Mr. McHenry. Thank you, Madam Chairwoman.
    And, look, Chairman Powell, Chairwoman Waters, her 
questions about fiscal policy are certainly, I think, 
appropriate. We always want the Fed Chair to endorse our pieces 
of legislation. That is commensurate with every previous Fed 
Chair and certainly with you as well.
    However, monetary and fiscal policy are two very different 
things. And so, I would urge you and the leadership of the Fed 
to stick to monetary policy.
    Now, your words of encouragement, that we have our 
responsibilities on the fiscal side of the house, I think are 
well-noted. And what you are telling us about the employment 
marketplace on a going-forward basis, I think is informative 
for our policymaking. And so thank you for your statements 
there, that additional congressional action is required.
    Now, along those lines, we have the Main Street Lending 
Facility that is to be stood up soon. Walk me through what the 
intention here is, because this is not something that, over the 
last 100 years, the Fed has engaged in--the intention here. 
What is the missing piece that perhaps Congress should think 
about filling in?
    Mr. Powell. Mr. McHenry, are you asking specifically about 
the Main Street or--
    Mr. McHenry. Yes. So if you would say the intention of the 
Main Street Lending Facility.
    Mr. Powell. Okay, great.
    For small companies, there was the Paycheck Protection 
Program (PPP). And for companies that have access to the bond 
market and are investment-grade rated, we have corporate credit 
facilities. And then there is a large group of very important 
companies, very diverse, different sectors, different needs, 
just very different, and for them we have the Main Street 
facility.
    And our intention is that, to the extent that there are 
creditworthy companies in that space who are not able to get 
credit from the banking system because of the pandemic, we want 
to be there to provide that credit. So, that is what we have 
been working on.
    It is significantly different from any other undertaking we 
have been working on here, particularly because that space is--
by definition, it is a space where commercial banks really are 
the key form of liquidity and of lending. And the bank credit 
agreements are always negotiated, so there isn't a really high 
level of standardization. Each one is a little bit different.
    We have to find a way to get to those borrowers, get 
through their credit agreements, and get them funding. And we 
are working through the banking system to do that.
    We have now registered lenders who are--so the facility is 
effectively open now. The lenders are registering, and they can 
now begin to make loans. We are encouraging them to do so. And 
those loans will soon be transferred--95 percent interest in 
them will be transferred to the facility.
    So, we are there. And, as I think we have shown, as we go 
with all of these facilities, we are learning. No one has ever 
done this, exactly. And so, we have been constantly taking 
feedback from lenders and borrowers, and we will keep doing 
that--and that is true for all of our facilities--until we feel 
we have the facility that can do the best job.
    Mr. McHenry. Okay. That is an unconventional set of 
monetary policy that you are utilizing, given the 
unconventional nature of this health, and therefore economic, 
crisis that we are facing.
    We also see other banks--Japan, Europe--trying to control 
inflation targets using unconventional means, such as yield 
curve control and negative rates. Do we have empirical evidence 
to support deploying these tools in the United States, as you 
see it?
    Mr. Powell. There is a split. I would say the evidence is 
mixed on negative rates. There are those who believe negative 
rates are quite effective, and there are those who see the 
results as somewhat ambiguous.
    I think here in the United States, we have looked at it 
carefully. We looked at it during the long expansion that ended 
in February, and chose not to deploy them in the United States.
    Lately, the Federal Open Market Committee (FOMC) has looked 
carefully at negative rates and continues to see, pretty 
broadly across the Committee, that negative rates are not 
something that we think are appropriate for the U.S. economy, 
at least at this time, and it is not something that we see 
ourselves resorting to. Instead, we look at ourselves using 
asset purchases and forward guidance.
    In terms of yield curve control, as you pointed out, it is 
currently being used by a couple of central banks around the 
world. And that is just, rather than buying assets, what you 
are doing is you are saying, we won't let the Treasury curve at 
a certain level move above something, and if it starts to move 
above that level, the rate moves above it, then we will buy 
Treasuries to drive the rate level back down.
    The United States actually did that--
    Chairwoman Waters. Time--
    Mr. Powell. --in the late 1940s and early 1950s. I will 
just finish; sorry. But we are really just educating ourselves 
on it at this point. It is not something we have at all decided 
to do.
    Mr. McHenry. Thank you for your testimony.
    And, Chair Powell, I also appreciate the fact that you 
said, when the crisis passes, we will put them away, these new 
tools. I think that is a very sober assessment. We need to have 
a return to normalcy once this crisis passes.
    Thank you for your leadership.
    And I yield back. Thank you, Chairwoman Waters.
    Chairwoman Waters. Mr. Cleaver, you are recognized for 5 
minutes.
    Mr. Cleaver. Thank you, Madam Chairwoman.
    And, Chairman Powell, again, thank you for being here.
    I started out, in my opening comments, talking about the 
situation that we find ourselves in, in this country. And I 
believe that this is a moment unlike any other that I have 
seen, in terms of the country's willingness to finally address 
these long-lasting issues of race and putting them aside.
    I spoke to a group of 5,000 demonstrators, and I was almost 
brought to tears when I stood up to speak, because the crowd 
was probably 65 percent white, the rest maybe Brown and 
African-American people.
    I think this is a different situation. And I believe that 
the Federal Reserve has a place in this particular moment. I 
think that you could play a role.
    And one of the things I am thinking about is what the 
Justice Department used to do, and probably still should do, 
what they consider patterns and practices, where if there is a 
problem in a particular city, some police department or a fire 
department or maybe just that city, and they go in and they do 
a study and enter into a consent decree to try to enable 
change. And that happened in Ferguson, Missouri, and Ferguson 
has changed dramatically.
    But what I am wondering is, how you would feel about 
patterns and practices with some of our financial agencies, 
where there is an obvious lack of inclusion and maybe even a 
history of problems? Do you think that would work in the 
financial services world?
    Mr. Powell. As you know, we do supervise some banks for 
fair lending practices, and where we see that kind of pattern 
and practice, we engage in strong enforcement measures. So, 
there is some of that going on already.
    Mr. Cleaver. Are there other steps, though, that the 
Federal Reserve can take to confront this moment? Do you 
believe that the Board can take on some of the issues of 
economic injustice? And I may be using terminology that is not 
universal, but increasing the minimum wage and expanding the 
earned income tax credit, things I mentioned earlier, to try to 
begin to iron out, if you will, some of the wrinkles that have 
been around way too long, if not even--I don't even feel great 
about even discussing this issue in 2020.
    I see a role, but I am just wondering if you think the Fed 
can play a role?
    Mr. Powell. I do think we have a role, and I believe we 
will do our best to play that role. I wouldn't say it is the 
lead role. But I would say that we are definitely recommitting 
ourselves to enforcement of fair lending laws, as I mentioned.
    I would also say, just as an institution, we are going to 
want to be--we have tried to make it a very high priority of 
diversity and inclusion. We want to set an example for that, 
both internally--to some extent, my colleagues and I have 
spoken out publicly on these issues, which I think is 
appropriate in this unusual moment.
    And then the last thing and probably the most important 
thing we can do is try to get back as quickly as possible to 
the labor market we had for the last couple of years. There is 
nothing like a tight labor market for the lives in low- and 
moderate-income communities. We saw things we hadn't seen in 50 
years, and we want to get back there.
    Everything we are doing with our monetary policy tools is 
ultimately designed to get us back to a tight labor market as 
quickly as we can and then stay there. That is really the 
overarching goal of what we are doing.
    Mr. Cleaver. Yes. I appreciate your comments, and my 
questions were not meant to be accusatory. In fact, I think 
that the Federal Reserve--I mentioned earlier the comments of 
Mr. Kaplan. But later on this week, I will be sitting down with 
Esther George to discuss some of these same issues.
    Thank you, Chairman Powell.
    And thank you, Chairwoman Waters.
    Chairwoman Waters. Thank you very much.
    Mrs. Wagner, you are recognized for 5 minutes.
    Mrs. Wagner. Thank you, Madam Chairwoman.
    And I thank you, Chairman Powell, for coming before this 
committee today. And I wanted to commend you--as so many of my 
colleagues have--and the Federal Reserve for moving so very 
swiftly and decisively these past few months on keeping 
America's economy stable during this pandemic.
    Just this week, the Federal Reserve announced it would 
begin buying up to $250 billion in individual corporate bonds 
through the Secondary Market Corporate Credit Facility, with 
the ability to also, I believe, tap into $25 billion in funding 
from the Treasury Department that was provided by the CARES 
Act.
    I understand the need for the Federal Reserve to have this 
facility at the ready, but I would like to know why you decided 
to launch the facility now? What was the reasoning for 
launching this week?
    Mr. Powell. Actually, this was something we have been 
saying we would do since we first announced the facility. It 
did happen to be the fact that we ultimately got around to 
doing it on Monday.
    And the overall goal of all of that is to support market 
functioning. This is the Corporate Credit Facility, and this is 
the secondary market part of it. So, we want to support market 
functioning, because when markets are working, companies can 
borrow, people can borrow, companies aren't feeling tons of 
financial stress and they are less likely to take cost-cutting 
measures, and things like that.
    I would say a couple of things. First, buying cash bonds is 
going to form the primary mode of support over time by which we 
support market function. Over time, we will gradually move away 
from ETFs, not suddenly at all, and we will move more to buying 
bonds. It is a better tool, ultimately, for supporting 
liquidity and market function.
    At the current moment, markets are functioning pretty well, 
so our purchases will be at the bottom end of the range that we 
have written down. And as those markets continue to normalize, 
our purchases would decline.
    Mrs. Wagner. Chair Powell, are you planning to hold all of 
these bonds to maturity?
    Mr. Powell. Ultimately, we are generally a hold-to-maturity 
entity.
    Mrs. Wagner. Okay.
    Mr. Powell. It may be that we sell some back into the 
secondary market down the road, but ultimately, we are a buy-
and-hold buyer.
    Mrs. Wagner. Chairman Powell, as you know, on April 22nd, 
in response to a letter from Senator Crapo, Federal Reserve 
Vice Chair for Supervision Randal Quarles requested that 
Congress consider modifying Section 171 of the Dodd-Frank Act, 
otherwise known to all of us as the Collins Amendment.
    Do you agree with Vice Chair Quarles that Congress should 
revisit the Collins Amendment to ensure that banks are able to 
adequately respond to increased credit demands?
    Mr. Powell. Yes. What we are looking for in a lot of these 
things we are doing is temporary relief during the pandemic so 
that the banks can use their balance sheet to support their 
household and business customers. It is no more complicated 
than that.
    As they have taken in more deposits and as they have 
engaged in forbearance on things like credit card balances and 
things like that, their balance sheets grow. So, they have been 
supporting their customers and borrowers, and this is simply a 
matter of allowing them to do that. It would be a temporary 
measure--
    Mrs. Wagner. So you are in favor of at least a temporary 
measure to modify Section 171, the Collins Amendment, to allow 
them to handle those increased credit demands?
    Mr. Powell. Yes. And we will be happy to work with you on 
the details of that.
    Mrs. Wagner. That would be terrific. I thank you so much.
    The Federal Reserve has noted that non-bank financial 
institutions are currently not considered eligible lenders for 
any Main Street loan facility. And in the FAQ guidance, it 
states that you may consider expanding the list of eligible 
lenders in the future.
    Chairman Powell, what is the reasoning for the Federal 
Reserve excluding non-bank and non-insured depository 
institutions from being eligible lenders under the Main Street 
Lending Program?
    Is it not possible to create a lender agreement similar to 
the one that was issued by the Department of the Treasury for 
non-bank and non-insured depository institutions, like we did 
for the Paycheck Protection Program?
    Mr. Powell. It is possible. We have been engaged in a 
sprint here to get these programs set up, and so that is what 
we have been doing. I would liken it a little bit to Dunkirk: 
get in the boats and go; bring the people back. That is really 
what we have been doing.
    So, now that we have done that, we can go back and we can 
look at various provisions, including the one you are talking 
about.
    Mrs. Wagner. Well, thank you. My time has expired, but I 
hope you do take a careful look at that and that we are also 
able to modify the Collins Amendment.
    I thank you, Madam Chairwoman, and I yield back.
    Chairwoman Waters. Thank you.
    Mr. Perlmutter, you are recognized for 5 minutes.
    Mr. Perlmutter. Thank you, Madam Chairwoman.
    And, Chairman Powell, thank you for the hard work that you 
and your staff at the Fed have put in, under very difficult 
circumstances.
    Taking a look at your monetary report, if you look at the 
first four graphs of the report, the last few years you have 
been here, or Chair Yellen, they have been sort of consistent, 
steady growth since the Obama Administration, into the Trump 
Administration, and now I know the definition of, ``falling off 
a cliff.'' Those graphs are very telling in the loss of jobs 
that we have seen.
    My first question to you, sir, is, in the HEROES Act, there 
is a substantial appropriation for State, local, and school 
districts, who have seen their tax revenues fall tremendously. 
In Colorado, just the State Government alone is looking at a $3 
billion drop in revenue from last year.
    I know you are not particularly interested in talking about 
fiscal measures, but if, in fact, we weren't to assist State, 
local, and school districts over the course of the next year or 
two, and thousands and thousands of jobs are lost, how is that 
going to affect the recovery that you hope for?
    Mr. Powell. I will agree that I wouldn't offer specific 
advice on fiscal policy. I will say, though, from an economic 
standpoint, State and local governments employ something like 
13 million people. States have to balance their budgets, and 
when revenues go down and expenses go up, what do they do? They 
cut costs. And we have seen State and local governments already 
lay off 1.5 million people.
    State and local governments provide essential services, as 
we all know. They are a very large employer, and I would say it 
is certainly worth considering all of that. It will hold back 
the economic recovery if they continue to lay people off and if 
they continue to cut essential services. And, in fact, that is 
kind of what happened after the global financial crisis.
    Mr. Perlmutter. I thank you for that. I guess I am going to 
summarize your answer: Laying off a lot of people will not help 
the recovery.
    And I saw today even a substantial company like AT&T 
announced it is laying off thousands of people as part of a 
restructuring or something. I didn't read the entire article.
    But in your report, on the second page, it says, ``The 
strains on household and business balance sheets from the 
economic and financial shocks since March will likely create 
persistent fragilities.''
    What did you mean, or whomever wrote the report mean by, 
``persistent fragilities?''
    Mr. Powell. This is what we mean by that: Something like 25 
million people have been displaced in the workforce, overall, 
either fully or partially. And those people are--right now, 
they are getting enhanced unemployment insurance perhaps; many 
of them may have gotten support checks as part of the CARES 
Act. But, over time, they don't have a secure income flow. And 
to the extent they lose those benefits that they are getting, 
they are going to come under financial pressure right away. 
Most low- and moderate-income households don't have substantial 
financial assets to fall back on.
    And it is the same thing with smaller businesses. They 
don't tend to have a substantial financial cushion to fall back 
on. And that is what our surveys show both for households and 
businesses.
    So, they will be under strain. And, of course, the prospect 
of facing that kind of strain is already strenuous and causes 
people to pull in their spending. And those are the kinds of 
things that become self-reinforcing for the economy.
    Mr. Perlmutter. You have put together 11 different 
facilities, from corporate bond purchases and municipal and all 
of those kinds of things. Is there anything that you would like 
to do, from a monetary policy position of the Fed, that the 
Treasury or the Administration has prevented you from doing?
    Mr. Powell. The answer is no. We have very specific powers, 
which are lending powers. In addition to our regular monetary 
policy powers, we have lending powers that we have used to a 
completely unprecedented extent here. And I think we have been 
able to broadly do the things that we felt were most in need of 
doing.
    And, of course, the powers that are going to matter so much 
going forward and have already mattered are really the tax and 
spending powers.
    Mr. Perlmutter. I thank you for your testimony and for your 
work, sir.
    And I yield back to the Chair.
    Chairwoman Waters. Thank you.
    Mr. Rose, you are recognized for 5 minutes.
    Mr. Rose. Thank you, Chairwoman Waters, and Ranking Member 
McHenry.
    And thank you, Chairman Powell, for being with us today.
    As we move through the pandemic recovery process, I am 
really encouraged by the early economic results. Obviously, we 
still have much further to go, but again, I am encouraged. And 
I credit the Administration, led by President Trump, and the 
institutions like the Fed and your leadership for helping us to 
so quickly work to revive the economy.
    However, I received news yesterday that makes me a little 
less encouraged and more concerned. I received a call from a 
bank here in Tennessee's Sixth Congressional District 
yesterday, alerting me to the fact that they have been notified 
at the beginning of this week by the Fed that they would only 
be receiving a small portion of their weekly order of coinage.
    According to this banker, his institution will likely run 
out of coins by Friday of this week, or this weekend. And after 
some preliminary research, I found that many other banks across 
my district are having the same operational challenge.
    My fear is that customers who use these banks will react 
very poorly. And I know that we all don't want to wake up to 
headlines in the near future such as, ``Banks Out of Money.''
    Chairman Powell, I wonder, are you aware of this issue, and 
what is being done to mitigate it?
    Mr. Powell. Thank you. Yes, I am aware of it. I am very 
much aware of it.
    And let me say, what has happened is that, with the partial 
closure of the economy, the flow of coins through the economy 
has gotten all--it has kind of stopped. The places where you go 
to give your coins and get credit or cash, folding money, those 
have not been working. Stores have been closed. So, the whole 
system of flow has kind of come to a stop.
    We are well aware of this. We are working with the Mint and 
we are working with the Reserve Banks. And as the economy 
reopens, we are seeing coins begin to move around again.
    So, if your bank hasn't already done so, they should 
certainly be in touch with their Reserve Bank to report this 
situation. And we have been working on this problem, and we 
still very much appreciate your bringing it to our attention. 
We feel like we are making progress, but it has been something 
that we have been working on.
    Mr. Rose. Chairwoman Waters, I would like to submit for the 
record this release from the Fed, ``Strategic Allocation of 
Coin Inventories.''
    Chairwoman Waters. Without objection, it is so ordered.
    Mr. Rose. Chairman Powell, I wonder--and, to some degree, 
you have already spoken to this, but is this indicative of a 
larger issue? And is it temporary? Or does this point to a 
larger structural issue on this particular matter?
    Mr. Powell. No, we believe it is just temporary. It is due 
to the fact of the economy being, in significant part, closed, 
as I mentioned. And the flow of coins through the economy, 
something that we don't--the Reserve Banks and the banks think 
about it all the time, but now we are beginning to see those 
shortages.
    We have been aware of it. We are working with the Mint to 
increase supply, and we are working with the Reserve Banks to 
get that supply where it needs to be. So, we think it is a 
temporary situation.
    Mr. Rose. For the banks that I am talking with, like the 
one that I mentioned in my district, what would you suggest 
that they do to deal with this issue?
    And I am thinking, particularly, not only about the banks 
but their customers, businesses, and the consumer, who is going 
to be faced--all of these institutions and individuals are 
going to be faced with the prospect of having to round up or 
round down. And in a time when pennies are the difference 
between profitability and loss, it seems like it might be a 
bigger concern than the announcement from the Fed would 
indicate that it is.
    Mr. Powell. I would encourage your banks to get in touch 
with their Reserve Bank. I don't know whether you are Atlanta 
or St. Louis, but whichever--I think maybe both in your 
district. I don't know. But in any case, they are responsible 
for this. And we are working hard on it.
    Mr. Rose. Thank you, Mr. Chairman. I would just encourage 
you, maybe, to put out some more robust guidance for banks so 
that they don't feel--the banks that I have been speaking with 
all have the opinion that they don't know what to tell their 
customers. So, I would just encourage you to maybe put out some 
more robust guidance to them.
    Mr. Powell. I want to thank you for bringing that up. I 
will certainly do that.
    Mr. Rose. I am a cosponsor, along with several other 
members of our committee, of H.R. 2650, the Payment Choice Act 
of 2019, a bipartisan-supported bill which would require 
merchants to accept cash. This legislation, I believe, is 
critical, because parts of the country, in both rural and urban 
areas, are more dependent on the cash economy.
    I see that I have run out of time, but I would encourage my 
colleagues to take a look at, and support this bill.
    Thank you, Chairman Powell.
    Thank you, Chairwoman Waters, and I yield back.
    Chairwoman Waters. Thank you.
    Mr. Himes, you are recognized for 5 minutes.
    Mr. Himes. Thank you, Madam Chairwoman.
    And thank you, Chairman Powell, for being with us today. 
And thank you for your extraordinary efforts and the efforts of 
the Federal Reserve to contribute to the emergency rescue that 
we have all witnessed.
    I have at least two concerns, though, that I want to 
explore with you. And the first pertains to, who was the 
beneficiary of the billions of dollars, trillions of dollars, 
that have been mobilized in the rescue?
    Chairman Powell, as you know, a company can do three things 
with its money: first, it can buy stuff, cost of goods sold, 
rent, insurance, space, raw materials; second, it can pay 
wages, keep people employed; and third, it can service its 
capital structure, it can pay interest on bonds or to banks, it 
can issue dividends.
    Chairman Powell, as you know, in the Paycheck Protection 
Program, we set up an explicit incentive that that money be 
used for wages.
    My first question, Chairman Powell, is, let's start with 
the Primary Market Corporate Credit Facility, where you are 
actually lending directly, through the issuance of securities, 
to corporations. Is there any incentive or requirement that 
recipients of that aid preference the payment of wages over the 
payment of interest or the purchase of stuff?
    Mr. Powell. I will put it this way: There is nothing in the 
CARES Act--the CARES Act specifically exempts the transactions 
that take place in the Primary Market Corporate Credit Facility 
from those requirements. They do apply to direct loans--
actually, no, different requirements apply to direct loans. You 
are really just talking about the requirements of the Paycheck 
Protection Act.
    Mr. Himes. No, I mentioned that the Paycheck Protection 
Program, obviously, explicitly created an incentive for the use 
of that money to pay wages and, therefore, keep up employment. 
It doesn't sound like the Fed lending, the Primary Market 
Corporate Credit Facility, has those protections.
    Let me ask you to reflect--and I can't run through all 11 
programs, but the Commercial Paper Funding Facility, the 
Primary Dealer Credit Facility, the Money Market Mutual Fund 
Credit Facility--all of these credit facilities, are there any 
terms in the availability of that liquidity that preferences 
the payment of wages over the servicing of debt by 
corporations?
    Mr. Powell. No, there aren't. And we are implementing the 
law that you passed. The CARES Act specifically does not apply 
those things, and we don't think it is up to us to rewrite the 
law to achieve goals we might have.
    Mr. Himes. No, I--
    Mr. Powell. This was negotiated carefully as part of the--
    Mr. Himes. I do understand that. But having lived through 
the political fallout of the Troubled Asset Relief Program 
(TARP), when America saw the banks and the auto companies 
bailed out and the preservation of an awful lot of the 
shareholders and the bondholders associated, I am very 
sensitive to programs that ultimately use public money to allow 
corporations to avoid bankruptcy and service their debt and 
ultimately pay dividends.
    I just commend that to my colleagues as something of real 
concern. Because when the story is told here, I think a lot of 
private--and I am not just talking about corporations; I am 
talking about the car-wash guy down the street who qualified 
for a loan, and a lot of that money will have been used to keep 
banks solvent, to preserve loans, and to service bonds.
    Chair Powell, I want to explore another deep concern I have 
about these. As much as I support your efforts and the Federal 
Reserve's efforts to bail us out here, in my one decade, plus 
or minus, of doing this, this is now the second time in which 
it has been necessary for the Government, the Federal Reserve, 
and fiscal policy to step in, in a truly massive way, to bail 
out the economy. Ten years ago, it was the banks, it was the 
auto industry, and now we are seeing the airlines, and the list 
goes on and on and on.
    And the worry I have, which relates to my first worry, is 
that actors in the private sector--and I was once in the 
private sector--are going to decide that they can take on a lot 
more risk, repurchase shares, dividend capital, because, when 
the going gets tough and catastrophe hits, we will be there to 
bail them out.
    I want to use my last, I guess, 40 seconds or so to ask you 
to reflect on whether you think that the activities of the last 
6 months and of the last 10 years have created a significant 
moral hazard in our market system?
    Mr. Powell. Let me first say that, of course, the intended 
beneficiaries of all of our programs are workers, who are able 
to keep their jobs because companies can finance themselves. 
So, that is really the point of it.
    But, you raise a good question. And I would just--
certainly, it is a concern, and that is why, generally, we 
don't look for ways to insert ourselves into markets when they 
are functioning. This is a world historical event unlike any 
other. The situation that happened is one where we really felt 
like we had to come in with all of our tools as aggressively as 
possible.
    I don't regret those decisions. That is why I always say 
that we will put the tools away, and I take it very seriously. 
Ultimately, in a free market, in an economy like ours, you 
should get the benefits of your success and the costs of your 
failures too. And that is the way it should work.
    Chairwoman Waters. The gentleman's--
    Mr. Himes. Thank you, Madam Chairwoman. I yield back.
    Chairwoman Waters. Mr. Steil, you are recognized for 5 
minutes.
    [No response.]
    Chairwoman Waters. Is Mr. Steil present?
    [No response.]
    Chairwoman Waters. If not, Mr. Taylor, you are recognized 
for 5 minutes.
    [No response.]
    Chairwoman Waters. If not, Mr. Lucas, you are recognized 
for 5 minutes.
    Mr. Lucas. Thank you. Chairman Powell, for 5 years, I have 
worked very diligently in an effort to unlock at least $45 
billion in capital to be available to the economy. And without 
me saying any more, you understand where I am headed: the 
inter-affiliate margin rule.
    I hear rumors that we might be getting closer to such a 
rule being announced. Are there any insights you could provide 
on that?
    Mr. Powell. I am happy to be able to confirm those rumors. 
We are, indeed, getting close.
    And I can't give you--I am under strict orders, which I 
will obey, not to give you an actual date. Nonetheless, it is 
very clear that it has been a long road, I will agree with you, 
but we will get there very soon, I am told.
    Mr. Lucas. I have spent enough time on farm bills, I have 
enough patience. I will wait you out. But knowing we are making 
progress is really important.
    That said, Chairman Powell, there have been a lot of 
comments made about the nature of the programs that have been 
put together and the way the Fed has addressed this 
unprecedented set of challenges that we have had in the first 
part of this year.
    That said, in your experience as the Fed Chairman, in your 
academic training, could you ever have imagined a pandemic of 
this magnitude, with this kind of economic impact not just on 
the United States but around the world?
    Mr. Powell. No, I certainly didn't. Like everybody else, I 
was aware that there were things called, ``pandemics,'' and 
that they could have consequences. But essentially, all over 
the world, you had governments and people, sort of, 
deliberately stopping a lot of economic activity. And we will 
see declines in economic activity that just are beyond any in 
living memory because of the disease. It is akin to a natural 
disaster.
    So, I really do think this is a once-in-a-lifetime--I 
certainly hope it is a once-in-a-lifetime event, and I hope 
market participants don't grow to think of it as something 
where we will react to any old thing.
    Mr. Lucas. Absolutely.
    And you and I have discussed many times before, coming from 
my part of Oklahoma, the Great Depression in the 1930s, the 
Dust Bowl, the dramatic effect of Fed policy in 1929 and 1930, 
and Congress' policies, the Administration-at-that-time's 
policies that made things so dramatically worse. Three-quarters 
of the population in my home county went away and has never 
come back.
    Is it fair to say that doing what we in Congress, and what 
the Fed has done, what Treasury has done, unprecedented as it 
may be, still is dramatically cheaper than a lack of action?
    Fair assessment, Mr. Chairman? Putting the economic train 
back on the tracks costs a lot more than keeping it on the 
tracks.
    Mr. Powell. I feel very strongly that way. I really do. And 
we are going to come out of this. And the more we do now, the 
stronger our economy will be, the better we are able to keep 
people working, get tax revenue back up, and have a strong 
economy to pull us forward and service the debt.
    We are going to come out of this with more debt, so our 
banks are going to have taken losses, households will have run 
down their capital--everybody will. Nonetheless, the economy 
will be stronger, and that will help everyone.
    Mr. Lucas. And, ultimately, Fed policy will reflect that 
new reality, as will fiscal policy in the United States 
Congress have to reflect that new reality. The piper will have 
to be paid, ultimately. But having that bill to pay is how we 
get to the point of being able to pay.
    Mr. Powell. That is right. And that is why I think this is 
not a time to worry too much about the longer-run fiscal 
situation. We will have to return to that, but I would say this 
isn't the time to prioritize that.
    Mr. Lucas. One last thought, representing a substantial 
part of the rural area of Oklahoma, making sure that Fed 
programs work as well in the countryside as they do in the 
money centers, in the big urban areas, is critically important, 
from my perspective.
    Making sure those facilities are available to everybody 
helps ensure a robust recovery. We don't want to leave any 
particular regions or parts of society behind as we come out of 
this. And I believe you are working aggressively in that area.
    Mr. Powell. We have tried to. And, in fact, I would point 
to the things we have done with the municipal facility, where 
we made sure that States that have more rural populations and 
don't have a lot of big cities nonetheless have the benefits of 
that facility. And we will continue to adjust all of our 
facilities to try to serve that goal.
    Mr. Lucas. With that, Madam Chairwoman, I yield back the 
balance of my time.
    Chairwoman Waters. Thank you.
    Mr. Heck, you are recognized for 5 minutes.
    Mr. Heck. Thank you, Madam Chairwoman.
    I would like to start by thanking you for setting up the 
phone call the other day with Chair Powell regarding the issue 
of commercial real estate and the future of that market and its 
importance. I don't have time to get into that today, and I 
wish I did, because we still have a problem, and I am ringing 
the alarm bell again.
    Since I was privileged to join this committee nearly 8 
years ago, I have asked at every single Humphrey-Hawkins 
hearing, when does America get a raise?
    The truth of the matter is that, for far too long--indeed, 
I would suggest 40 years--we have been content, and some people 
have supported, frankly, running the economy short of its 
potential.
    I remember when I got here that there were people both on 
and off the FOMC who thought if we ever dipped below 6 percent 
unemployment, it would trigger inflation. And then it was, no, 
not 6, but 5\1/2\, 5, 4\1/2\, or 4 percent. And what we know is 
that we ran this economy between 3\1/2\ and 4 percent 
unemployment for 2\1/2\ years, and we maintained--in fact, we 
were short of the price stability target.
    The fact of the matter is that, during your tenure, Mr. 
Chair--and I tip my hat to you, sir--you have opened people's 
eyes about the importance of a tight labor market. You did this 
yesterday in the Senate, you have done it again here today, and 
you have done it in public utterances. And we cannot thank you 
enough. Well done, sir.
    You have pointed out, rightfully, that tight labor markets 
help with wage growth, but especially with employment levels 
and wage growth for people at the lower end of the income 
spectrum. Again, I want to thank you.
    But the fact remains, Mr. Chairman, that the mission of the 
Fed is no different today than it was over 2 generations, when 
it never allowed the economy to operate at a tight labor 
status. The law hasn't been changed, and the rules and 
regulations haven't been changed. We are going to get past this 
at some point, and the sooner, the better.
    But my question for you is, short of you having a lifetime 
appointment--which, by the way, I would support, sir--how can 
we be assured that what you have so appropriately pursued will 
continue?
    And I want to preempt you a little bit, if I may, Mr. 
Chairman, by saying that every Federal entity in the history of 
civilization has resisted opening up the underlying authorizing 
Act for that entity, and the Fed has been no different in my 
conversations with them. And, to some degree, I get that. It is 
as though you are channeling Will Rogers, who said once, ``This 
country has come to feel the same when Congress is in session 
as when the baby gets hold of a hammer.'' You are worried about 
what might happen if we opened up that Act.
    But there is no assurance that what you have rightfully 
pointed out, what you have rightfully pursued, will continue to 
be pursued. How do we assure ourselves that what you have 
figured out and what you have led the Fed to do will continue 
into the future if we don't change the law, sir?
    Mr. Powell. I actually think the law, as written, does 
accommodate what we have really learned, what a lot of us have 
learned, and that is that--so, for many years, when we were 
growing up, inflation really was a problem. People weren't 
imagining it. They really had to watch carefully or inflation 
would move up. And it would hurt people on fixed incomes more 
than anybody else.
    And what we have learned is that these disinflationary 
forces we have been seeing around the world for a quarter-
century are here to stay for awhile, and that we live in an era 
of continued downward pressure on inflation, and that gives us 
the ability to have very low levels of unemployment. I don't 
think anybody is going to unlearn that.
    I also don't think, if you change the law, that the 
situation will change. The economy is ever-evolving. So, I 
don't know that changing the law is what we need to do. I do 
think we get that, and I think economists broadly do get that 
now.
    And that is why we are so eager to get back to where we 
were and below. We weren't seeing inflationary pressures at 
3\1/2\ percent. What we saw was the gains in wages going to 
people at the lower end of the wage spectrum for the first time 
in a very long time.
    I can't tell you how much we want to get back there and how 
fast we want to get there. So, we will be using our tools that 
way, and that is really how I look at it.
    Mr. Heck. Thank you again, sir, for your leadership.
    Mr. Powell. Thank you.
    Chairwoman Waters. Thank you very much.
    Mr. Steil, you are recognized for 5 minutes.
    [No response.]
    Chairwoman Waters. Is Mr. Steil available? If not--
    Mr. McHenry. We can't hear you, Bryan.
    Chairwoman Waters. Mr. Steil? You are recognized for 5 
minutes.
    Mr. Powell. He is talking, but we can't hear him.
    Mrs. Wagner. Yes. Can staff look into whatever technical 
difficulty there is? Because he is unmuted, it appears.
    Chairwoman Waters. We have a little technical difficulty 
here. We are checking with our staff.
    Well, Mr. Steil, we cannot hear you, so we are going to 
move on, while they are trying to correct that, to Mr. Taylor.
    Is Mr. Taylor ready? You have 5 minutes.
    [No response.]
    Chairwoman Waters. If not, we will move on to Mr. 
Luetkemeyer.
    You are recognized for 5 minutes.
    And we will get back to you both, Mr. Steil and Mr. Taylor. 
Thank you.
    Mr. Luetkemeyer. Thank you, Madam Chairwoman.
    And thank you, Chairman Powell, for being here today.
    Thank you for your quick action over the last several 
months to set up these different facilities to be able to 
underpin our markets and to minimize the damage to our economy. 
It is amazing to see what you have done, the impact it has had, 
and we certainly appreciate all of your efforts. Thank you very 
much.
    With regards to my questions, in your most recent monetary 
policy report, you have stated how, ``lending standards for 
both households and businesses have become less accommodative, 
and borrowing conditions are tight for low-rated households and 
businesses.''
    What I think you are seeing is that financial institutions 
are beginning to look 3 or 4 months down the road and preparing 
for regulators and their exams to come into their institution 
after this period of forbearance and begin classifying loans 
and force banks to reserve against those assets.
    I can tell you, from talking to bankers across the country, 
that if the regulators do not give forbearance to these 
financial institutions, and they start classifying whole lines 
of business, there is going to be a real problem with a credit 
shortage in rural areas and low- to moderate-income (LMI) 
communities.
    Do you believe the regulators should be providing this 
forbearance, and what do you think it should look like?
    Mr. Powell. We are encouraging our supervisors to encourage 
banks to work with their borrowers and not to jump to criticize 
loans and to take onboard the situation that we are in. We are 
communicating with them a lot in that respect. And I hope that 
is getting through to the banks and that it is, in fact, then 
getting through to the borrowers.
    We don't want to force anything to automatically happen. I 
guess it is natural that, in a situation like this, where 
businesses are partially closed or people aren't spending, you 
will see concerns about credit. But this is clearly a temporary 
period, and we are just going to continue to urge banks to work 
with their customers--household and business customers.
    Mr. Luetkemeyer. I appreciate that comment, sir, but in 
your earlier comments, you talked about some businesses 
struggling and the need for forbearance. And I appreciate that, 
but I can tell you, having gone through this PPP program, that 
the banks, with their accountants and attorneys close at hand, 
are very reluctant to do anything unless there is some physical 
guidance there, some words on paper that they can point to.
    And so, I have a bill to try and put something in place 
that they can point to, to give them the kind of forbearance 
and protection they need to be able to then give forbearance to 
their customers.
    My greatest fear is that we wind up with a situation like 
2008 and 2009, where the regulators go in and get rid of entire 
lines of business, close down entire industries, and hurt local 
communities and wind up losing banks in the process. We can't 
do that in this situation. It is too broad-based. If we do 
this, we are going to never get out of this economic downturn.
    And I am very hopeful that you will work with us to try and 
come up with a solution to make sure there is something that 
the banks can point to, to provide the kind of forbearance they 
need, the certainty they need, to be able to manage their 
customer base.
    Mr. Powell. We are trying to give them that. And we are 
also doing additional training of supervisors. And I would just 
point out, too, that banks came into this quite well-
capitalized, and so that helps as well.
    There is going to be some more guidance, though, 
interagency guidance, on post-pandemic exams and how we conduct 
those.
    So, we are working away at it. And we really want to hear 
from banks and from supervisors and anybody who--to the extent 
it looks like this is not getting through. Because this is 
effectively a natural disaster, and we want to treat it like 
that.
    Mr. Luetkemeyer. Right.
    Just a quick comment here. I know that Treasury Secretary 
Mnuchin made a comment the other day that he is seeing an 
increase in deposits. I know, anecdotally, locally here, the 
local banks in the area here, it looks like there is a 10-, 20-
percent increase in deposits. Savings have increased.
    Have you seen that same thing happening? What do you 
ascertain from that as to why and what kind of effect down the 
road it will have on the citizens of our country, having that 
sort of money at hand, ready to be spent?
    Mr. Powell. The answer is, yes, we are seeing a lot of 
that. And you saw it in the income data, where people are 
holding just very, very high levels of savings right now. And 
part of that is that they are getting the PPP loans, and some 
of those turn up in personal bank accounts. It is also the 
enhanced unemployment insurance, and it is the checks. And they 
have been holding back.
    But I think, getting to your point, there is evidence that 
there is a lot of spending power. And we are starting to see 
that in the spending data that was released yesterday. So, I 
think it bodes well for the next few months.
    Mr. Luetkemeyer. Thank you.
    And I yield back, Madam Chairwoman.
    Chairwoman Waters. Thank you.
    Mr. Vargas, you are recognized for 5 minutes.
    [No response.]
    Chairwoman Waters. I am going to go back to Mr. Steil. Has 
the problem been corrected with Mr. Steil?
    Mr. Steil. I hope so, Chairwoman Waters. Are you able to 
hear me?
    Chairwoman Waters. Yes, I can hear you now.
    Mr. Steil. Thank you very much, Chairwoman Waters.
    And thank you very much for being with us here today, 
Chairman Powell. I look forward to being able to do these 
meetings in person, as we work through some of the technical 
glitches here.
    During and immediately following the financial crisis of 
2009, the Federal Reserve's balance sheet grew by north of $2 
trillion, reaching about $4.5 trillion.
    In your comments following up to Congresswoman Ann Wagner's 
question, you noted that the Federal Reserve has been mostly 
holding to maturity.
    I am wondering if you could comment on what economic 
indicators that you are looking at, at the Federal Reserve, 
between 2009 into 2019, as the Federal Reserve dropped the 
balance sheet by roughly half-a-trillion dollars, and whether 
or not those same economic indicators will be guiding you as 
you make determinations in the Fed as to whether or not you 
will be needing to hold those reserves all the way through 
their maturity or if there will be opportunities to reduce the 
Fed's balance sheet in advance of that maturity?
    Mr. Powell. We waited until the economy was well down the 
path of recovery before we even thought about starting to 
shrink the size of the balance sheet.
    And the other thing that we did was, we froze the balance 
sheet--at the end of 2014, we froze the size of the balance 
sheet for a period of 3 years so that the economy was growing 
and, therefore, the ratio of the size of the balance sheet to 
the economy was declining. And I think we declined from maybe 
25 percent of GDP to maybe 17, 18 percent. So, that is a 
passive way to allow the bank balance sheet to shrink relative 
to the economy.
    I think, in this situation, we are thinking that we may do 
something like that, but it is so far down the road. I think we 
are at the beginning of the second phase of this process, the 
one where the economy begins to recover from the shutdown 
period, and that period will take some time. And then there 
will probably be a lengthy period as we get back to full 
employment. So, it will be a while before we start really 
thinking about how to shrink the balance sheet.
    And I would say that, at current levels, or at current 
planned levels, I think we know now that the balance sheet 
doesn't present issues in terms of either inflation or 
financial stability. Those were big concerns as we grew the 
balance sheet during the last crisis.
    Mr. Steil. Obviously, we don't have the inflationary 
pressures today. I do have some concerns that we may see 
inflationary pressures in the future, as the Fed's balance 
sheet has now increased beyond $7 trillion. And, obviously, you 
and your colleagues at the Federal Reserve will continue to 
watch that.
    Let me shift gears slightly. We have seen articles recently 
related to collateralized loan obligations (CLOs), the risk 
that that may impose in the banking sector. I think what is 
important here to note is that banking institutions came into 
this crisis with a much healthier balance sheet than they did 
in 2009.
    There was recently an article that was put forward 
identifying potential risks in the collateralized loan 
obligation space and indicating that banks may have broader 
systemic risk.
    Could you comment as to whether or not you hold that view, 
or whether or not you believe banks came in with a strong 
balance sheet and are, therefore, well-capitalized to weather 
these challenges?
    Mr. Powell. Sure. The CLOs are quite different from the 
things that were problems back in the crisis. We have a lot of 
transparency into what is inside the CLOs. We regularly include 
them in our annual stress tests. We stress them really hard to 
see what kind of losses they produce. And they are also not 
that large. I think it is less than one-half of 1 percent of 
the assets of the banks are in these CLOs.
    It is something we have--if they contain leveraged loans, 
we have been all over that problem for several years and 
looking at it carefully. So, I think the comparison to the 
global financial crisis is not the right one. Nonetheless, it 
is an issue we will continue to monitor.
    Mr. Steil. Well, I appreciate that. And I appreciate you 
monitoring that as well as the increases in the Fed's balance 
sheet and the risk that that may pose to inflation down the 
road.
    I appreciate you being here today, and I yield back. Thank 
you.
    Chairwoman Waters. Thank you.
    Mr. Vargas, you are recognized for 5 minutes.
    [No response.]
    Chairwoman Waters. If Mr. Vargas is not present, we will 
move on to Ms. Axne.
    Mrs. Axne. Good day, Chairwoman Waters.
    And hello, Chairman Powell. Thank you so much for being 
with us again today. And thank you for all the good work that 
you do. We are very appreciative.
    Obviously, we know these are difficult times that we are 
in. For the second time in a dozen years, we are in a severe 
recession. I believe that in May, we saw that 20 million less 
Americans had jobs than they did 3 months prior, so 
unemployment is at its highest rate since World War II. And the 
Fed's projections have that remaining at almost 10 percent 
through the end of the year.
    We have also discussed, to make matters worse, that 
situation appears far worse for lower-income workers than it 
does for others who are making more.
    Chairman Powell, you have somewhat alluded to it today and, 
I believe, yesterday. I think you said you have been concerned 
about the overall deficit for the long term, but that the time 
to address that is when the economy is strong, not when we are 
in an economic crisis. Is that correct?
    Mr. Powell. Yes, I do think that. Ultimately, the debt 
can't grow faster than the economy forever. That is sort of the 
definition of an unsustainable path. We have been on that for a 
while now, and we need to address it. We have no choice; 
ultimately, we have to address it. The time to do that is when 
unemployment is low and the economy is growing.
    Mrs. Axne. Thank you. I couldn't agree with you more.
    Obviously, each recession is different, but I want to take 
a look back at the last one to see what lessons we learned, to 
see what we can look at to help deal with this one.
    I had an opportunity, back in the 2009 stimulus bill 
timeframe, that I know we devoted about 20 percent of that 
total aid to fiscal support for State budgets. And that is when 
I was working for the State of Iowa and in charge of 
supervising some of that funding.
    One thing that I saw was that, when that assistance started 
to end in 2010 because of balanced-budget requirements that--
for instance, in the State of Iowa, we had to cut budgets, 
meaning that teachers, firefighters, public servants, et 
cetera, lost their jobs.
    And then, I have also seen some research from the 
International Monetary Fund and others showing that these cuts 
were a drag on the economy for several years afterwards, and 
some of those estimates showed that the jobs lost due to these 
cuts actually offset the job growth in the public sector 
entirely.
    Does that impact seem like it might be part of the reason 
why the recovery from the 2008 recession was so slow?
    Mr. Powell. Yes, that is a finding that economic research 
has come up with, I think, pretty clearly.
    Mrs. Axne. Well, I appreciate that.
    It seems like we are in agreement that supporting State and 
local budgets is a key step to supporting the recovery process. 
I know we are absolutely trying to work on getting that piece 
through the House, and it is something that I have worked on.
    Do you think that is something Congress needs to be doing 
more on to make sure that we recover our economy?
    Mr. Powell. As you point out, State and local governments 
are large employers, and they provide critical services to 
people. And there is a balanced-budget provision, effectively, 
in every State or almost every State. And so, when there are 
budget problems, what happens is you see layoffs and cutbacks 
in essential services. Both of those create not just human 
misery but they also weigh on the economy.
    So, I do think it is an area where it is appropriate for 
Congress to look.
    Mrs. Axne. Thank you. Obviously, we are trying to push that 
through. I actually have a bill that I wrote previously that 
directly supports State and local governments for lost revenue 
to ensure that these job cuts don't happen again.
    I appreciate all that you are doing to help us shore up our 
economy at this point, and to give us the guidance and the 
oversight that we need. And I am grateful for your being here 
today. I hope that we can move a State and local government 
bill forward.
    Thank you so much, and I yield back.
    Chairwoman Waters. Thank you.
    Mr. Huizenga, you are recognized for 5 minutes.
    Mr. Huizenga. Thank you, Madam Chairwoman. I appreciate it.
    And I, like the ranking member, just think of our mutual 
friend, Andy Barr, right now, and his daughters.
    And I know, Chairman Powell, he would love to be here to 
grill you about a number of issues, as he and I had both 
previously chaired the Monetary Policy and Trade Subcommittee.
    But I need to touch base on the Paycheck Protection--sorry, 
two things: Main Street Business that is not eligible for the 
Paycheck Protection Program.
    And, as you well know, a huge part of our manufacturing 
economy is in automobiles, especially automobile parts. Those 
account for about 900,000 jobs, and 125,000 of those jobs are 
here in Michigan. And what we are seeing and hearing from the 
large automobile manufacturers is their concern for their 
suppliers
    And those suppliers are telling me--which I have a 
tremendous number of here in the Second District of Michigan--
that they are having some liquidity issues. Not that they 
haven't been properly funded previously, but it is about 
liquidity right now.
    Last month, I joined with my Michigan colleagues in asking 
the Administration to create a fund that provides short-term 
lending assistance to medium-sized companies in the motor 
vehicle parts sector, using necessary capital from the Main 
Street Lending Program.
    Now, you had said, and I had written it down--I think you 
had said, ``We are there,'' in standing up the Main Street 
program. I am not as convinced, I guess, of that. And I would 
like to make sure that you can come in and maybe clarify what 
that means. We need to have it up now.
    And what I really want to know is, will you commit to 
working with Treasury Secretary Mnuchin to add a dedicated 
program for the auto parts sector focused on medium-sized 
companies, to keep production for key links in the motor 
vehicle part manufacturing viable? Because if we lose them, 
that is going to be a huge part of our economy to be hit. And I 
am wondering if you will commit to working on that?
    Mr. Powell. The facility is open now for the lenders to 
register, so those companies will have banks that they work 
with that are their regular partners in business, and those 
banks should be in the process of registering with the Boston 
Fed to become an approved lender in the Main Street facility.
    At that point, they can make Main Street loans right away. 
And very shortly, they will be able to put 95 percent interest 
in those loans.
    So, we are there, effectively, if their banks are--
    Mr. Huizenga. How about a separate facility within that 
program?
    Mr. Powell. We don't do facilities for individual 
industries. What we do is we set--the requirements that we have 
set up should be a very good fit for the companies you are 
talking about.
    Essentially, we are looking at 2019 financials, and you can 
borrow at a multiple of your 2019 earnings before interest, 
taxes, depreciation and amortization (EBITDA). And that could 
either be four or six, depending on the kind of a loan you want 
and the kind of company it is. So, they would be a perfectly 
good fit for this facility.
    And we don't do facilities that are designed for individual 
industries. We do facilities of broad applicability. And 
anybody who meets those requirements can borrow.
    Mr. Huizenga. So, I hear ``no,'' on no specific program 
dedicated to the automotive industry, correct?
    Mr. Powell. That is right.
    Mr. Huizenga. Okay. I think that is a mistake.
    However, I need to move along to another unintended 
consequence, I believe, as part of the Paycheck Protection 
Program, and a company that is not able to take part in that 
but is waiting for this Main Street Lending Program.
    I have a company here in Michigan, in my district, and 
probably many of my colleagues have had their product, La 
Colombe. It is coffee. And they are a 26-year-old, very fast-
growing company that has manufacturing facilities here; a 
couple of hundred constituents, but they are all based in 
Philadelphia.
    For the last 6 years, they have been focused on growth, and 
that also means they have had to borrow funds, which has led to 
accumulation of quite a bit of debt.
    The rules are currently written so that La Colombe would 
not qualify to participate in the Main Street Lending Program.
    I believe that the way the leverage ratio requirements in 
the program are currently drafted, it unfairly punishes 
companies such as La Colombe that would otherwise be viewed as 
true American success stories when using different metrics.
    As the rules are currently written, it is designed to 
prevent funds from going to the companies that need them most. 
And I understand that you are not wanting to deal with 
overleveraged companies being bailed out, but we are talking 
about fast-growing companies that have had to accumulate debt.
    I am working with some colleagues on a bipartisan letter 
that would help that. We would appreciate if there would be a 
different ratio, one-to-one, independently appraised within the 
last 12 to 18 months, and the ability to access that. So, I 
look forward to hearing from you offline on that.
    Mr. Powell. For either of those kinds of companies, if we 
are missing something, then we want to understand that. And we 
have been willing to adapt these programs consistently. So, we 
will look forward to talking about it.
    Mr. Huizenga. Wonderful. Thank you. I appreciate that.
    Chairwoman Waters. Thank you.
    Mr. McAdams, you are recognized for 5 minutes.
    Mr. McAdams. Thank you, Madam Chairwoman.
    And thank you, Chair Powell, for being with us and for your 
leadership during this difficult economic situation due to the 
coronavirus.
    Chair Powell, since the last time you were before this 
committee, the Office of the Comptroller of the Currency (OCC) 
moved ahead with its rewrite of the Community Reinvestment Act 
(CRA). In light of the renewed focus by Congress to address 
racism and systemic issues throughout our economy and 
throughout our nation, I think it is particularly important we 
get the CRA correct, since its purpose, its historical purpose, 
was to address discrimination against Black and minority 
individuals and communities and to have financial institutions 
meet the credit needs of these communities.
    I think many of my colleagues share my concerns that the 
OCC's rule misses the mark and probably does more harm than 
good. And I am glad that the Fed did not sign on to the 
rulemaking.
    In January, Fed Governor Lael Brainard gave a speech on how 
to strengthen the CRA. And in that speech, she said, ``By 
sharing our work publicly, we hope to solicit public input on a 
broader set of options for reform and find a way toward 
interagency agreement on the best approach.''
    So, now that the OCC has finalized its rule, is there any 
update that you can provide for this committee on how or when 
the Fed may move forward on any of the public input it received 
on its CRA framework?
    Mr. Powell. Sure. First of all, CRA is, for us, an 
extremely important law, and we agree that it is a good time to 
update it. We would want to update it in a way that has broad 
support among the community of intended beneficiaries. That has 
always been our one, non-negotiable condition for it.
    So, we are still working on it, and I do think we will move 
forward with it. I don't have much for you on the timing of it. 
But there has been a lot of great work done, and I like where 
we are on it, in terms of the ways we have been thinking about 
modernizing it.
    We will ultimately move forward, and I can't say exactly 
when, but we are not going to let that work go to waste.
    Mr. McAdams. Thank you. We look forward to hearing more 
about that.
    Next question. My perception is that Congress and the Fed 
have done a decent job of keeping the economy on life support. 
We clearly aren't doing great yet, and the response has been 
uneven. But you have double-digit unemployment numbers and 
higher unemployment rates for African Americans, for instance, 
and some sectors are hit harder than others.
    I think Congress has the option--we had the option, when 
this pandemic broke out, of acting quickly or acting perfectly, 
and I think we chose to act quickly. And I think that was the 
right call.
    But, by my calculation, the Fed has allocated a little over 
$200 billion of the $454 billion that Congress allocated to the 
Treasury and the Fed in the CARES Act. Some of that funding was 
set aside for the Main Street facility that you have already 
discussed and other facilities. My question is, how do you 
intend to use the remaining funds?
    I understand that it takes time to set up various 
facilities, but I also worry that if we don't move fast enough, 
then business and individuals and communities may suffer as a 
result.
    Mr. Powell. First, let me agree that I think the fiscal 
actions that you took were incredibly timely and I think will 
be very well-judged over time, even though, of course, nothing 
is perfect. It is an emergency; you do the best you can. And I 
think the PPP program, the UI program, the checks--I think all 
of it is going to wear well over time. It is certainly helping 
the economy now through what could have been so much worse of a 
situation.
    In terms of the rest of the CARES Act money, it is there 
when and as we need it. We have a lot more ability to use our 
lending powers, should that be necessary, should it be 
appropriate, and we are certainly willing to do that.
    I think we have kind of gotten to maybe the end of the 
beginning here, and now we are getting into the phase of the 
reopening of the economy. But that money is there if it is 
needed.
    Of course, the Secretary of the Treasury actually has the 
legal authority to deploy that money as he sees fit. But it 
would be--one of the things he can do is put it in our 
programs. And we stand ready to do more, if more needs to be 
done.
    Mr. McAdams. Do you see that essentially as being more of 
the same as necessary, or is there anything else you are 
looking at, any other gaps that keep you up at night?
    Mr. Powell. I think we have covered, now, the--we have 
nonprofits, now, in Main Street. That will take us some time. 
We have small, medium, and large companies. We have State and 
local governments. I think we have covered a lot of the 
waterfront. We are always open to additional ideas.
    Mainly, it is a lot of execution now and just continuing to 
improve what we have done, make it do its job better.
    Mr. McAdams. Thank you.
    I yield back.
    Chairwoman Waters. Thank you.
    Mr. Vargas, you are recognized for 5 minutes.
    Mr. Vargas. Thank you, Madam Chairwoman. And can you hear 
me?
    Chairwoman Waters. Yes, I can hear you, Mr. Vargas.
    Mr. Vargas. Okay. I just want you to know that I never 
abandoned you. I was here the whole time. My microphone wasn't 
working.
    It was sad, though, to hear the news of Andy's wife and 
family. Andy is a friend to all of us, as you know. On our 
side, too, we love him. And that is really tragic. And I know 
that we will all keep his wife and his family, especially now, 
in our prayers.
    And, again, thank you, Mr. McHenry, for letting us know.
    Mr. Powell, I don't agree with Mr. Heck; I am not in favor 
of a lifetime appointment for you. I wouldn't do that to you. I 
wouldn't shorten your life like that. I think you are too much 
of a good guy. That wouldn't be fair at all.
    But I do have to commend you. I think that you are one of 
those, what I would call, those Republicans of old--stable, 
dignified, intelligent, fair, charitable. And I think everyone 
has been looking to you for guidance, and I think that you have 
been just the right person at the right time. And, again, I do 
want to commend you.
    And I also want to commend you for highlighting the 
disproportionate impact that this pandemic has had on 
communities of color--Latinos, African Americans--and 
especially the poor.
    My district is composed of all of Imperial County, which is 
a border county here to Mexico, and part of San Diego County. 
Over 70 percent of my district is Latino. The unemployment rate 
in Imperial County was a striking 28 percent in April. That is 
basically the same rate that we had during the Great Recession 
there, 25 to 30 percent. And the Bureau of Labor Statistics 
currently states that, as of April, the unemployment rate in 
San Diego County also increased about 15 percent.
    Taking a closer look specifically in the areas I represent, 
such as San Ysidro, which is right on the border; National 
City, the next little City up; Chula Vista, the next City up; 
and then the City of San Diego, the unemployment here in April 
was about 20 percent. The disproportionate impact of this 
pandemic on our economy is clear in my district.
    What policies has the Fed pursued specifically on reducing 
the high rates of unemployment for African Americans and 
Latinos during this pandemic? And what policies has the Fed put 
in place to help ensure that Latinos and African Americans are 
not suffering from this disproportionately high unemployment 
rate as we emerge from this recession?
    Mr. Powell. I am tempted to say that all of our policies 
are focused on that problem.
    The way this pandemic worked is it hit companies and parts 
of the economy that were service-economy companies which 
involved getting people together in tight quarters and either 
feeding them or giving them drinks or flying them around or 
entertaining them. And those are service jobs, which happen to 
be overly represented--the workforce happens to consist, to a 
large measure, of low- and moderate-income communities and 
minorities.
    An extraordinarily large portion of people who are laid off 
are from those parts of the economy. And, of course, it has, as 
the numbers show, fallen heavily on the Latin population as 
well as African Americans and women.
    The tools we have are the tools we have. So, we are 
supporting the flow of credit in the economy to companies so 
that they don't feel financial stress. We are trying to create 
an environment in which people have the very best chance to go 
back to their old job or to get a new job. That is really what 
all of our efforts are about--nothing more, nothing less.
    Mr. Vargas. But, Mr. Chairman, I think that you know that--
and I agree with you--the type of job that you just described 
also relies a lot on tourism and restaurants in that service 
economy. And they seem to be the last ones that are going to 
come out of this recession. People don't feel comfortable going 
back.
    So, without unemployment insurance and the enhancement, how 
are these people going to make it?
    Mr. Powell. I think we are going to see lots and lots of 
people go back to work here in the next few months. We believe 
that. But the people who are in those parts of the service 
industry--tourism, of course, is a big one--they are going to 
struggle. Many of them will struggle until the pandemic is 
really in the history books. So, that is going to be a problem.
    I think those people are going to need support. It may be 
difficult to find jobs in that industry at all. And I think we 
are going to need to support them and help them, as Congress 
did in the global financial crisis.
    I think, as the years wore on, Congress re-upped employment 
insurance a number of times, just to keep people in their 
apartment, keep them there, not being evicted, not having to 
move into a shelter or move into a crowded place. And, by the 
way, that is going to be a place where the disease can spread 
more quickly too. So, I do think it is important that we 
provide that kind of help.
    Mr. Vargas. I appreciate those words. And I hope you use 
your influence as you can to make sure that happens.
    I do have to ask this, though: One of the things that you 
said was, this pandemic was--ah, my time has expired.
    Again, thank you very much for being here. And continue to 
be the person you are. We have a lot of faith in you.
    Thank you.
    Mr. Powell. Thank you, sir.
    Chairwoman Waters. Thank you.
    Mr. Taylor, you are recognized for 5 minutes.
    Mr. Taylor. Thank you.
    Chairman Powell, I appreciate you being here. We are all 
concerned about the economy, as it goes to recover, and jobs. 
Something that is of deep concern to me are the properties that 
have long-term mortgages where the lender has very little 
flexibility in their ability to forebear.
    We, as a Congress, saw the need to forebear, for lenders to 
forebear. The OCC provided guidance on March 13th encouraging 
banks, which are the biggest lenders in our economy, to 
forebear. We have given guidance to Fannie Mae and Freddie Mac 
to forebear. We have worked on legislation and financing, 
trying to help encourage forbearance.
    There are pockets of the economy where there is not the 
ability for the lenders to forebear at a level that is going to 
help them get to the other side. I am specifically concerned 
about three subsectors in real estate--hospitality, student 
housing, and indoor retail--where, because of the pandemic, 
they have no cash flow or very little cash flow. They cannot 
service their mortgages. They can't pay for the utilities. They 
can't pay for insurance. They can't pay their property taxes.
    I have been working with a lot of Members on this committee 
and in Congress, Republican and Democrat, from all over the 
country, who share this concern. I perceive that, absent action 
by this body, by Congress, it will--or, actually, I am sorry, 
by the Federal Government, we are going to see a wave of 
foreclosures beginning in the fall and going through next 
spring.
    That impact on jobs, I think, will be very material, as 
people who are working for hotels, working in indoor retail, 
people who are--student housing, where you have a university 
town that needs to have the housing to run the university, 
where those foreclosures are going to be very serious, 
particularly when they are foreclosed and the property itself 
is closed and the forecloser does not have the expertise or the 
capital to reopen that business.
    So, assuming that you were to see things the way I see it, 
where there is a coming cataclysm here, do you have the 
statutory authority, you and the Treasury, to open up the Main 
Street Lending Program or any of your other programs to provide 
lending authority to someone, to then, in turn, help these 
properties that are in trouble and can't make their mortgage?
    Mr. Powell. There are limits, as I think you are referring 
to, in what we can do. Of course, there are lending powers, and 
they are very explicit in the law. We have to have evidence 
that we are adequately secured, and we cannot lend to insolvent 
borrowers. So, there are lines that we can't cross.
    Within that, we can take a lot of risk. And the question 
is, for companies like that--you really hit the most affected 
sectors--we would have to be lending on some sort of an asset-
based basis.
    Mr. Taylor. Sure.
    Mr. Powell. That is something that we are looking at.
    Mr. Taylor. I know you are looking at that. And my 
question--again, it is a yes-or-no question--can you do this 
without an act of Congress, or do we, Congress, need to act to 
give you the authority?
    Do you have the authority today, if you decided, hey, this 
is important, we have to do it, we can make these loans to the 
lower-leveraged, healthier properties to try to get them to the 
other side--they have a liquidity crunch, right? If we can get 
them to the other side, they will be able to re-employ people, 
and communities will survive.
    There are whole communities that are going to die or be 
very badly impaired if they lose their hospitality space or 
lose shopping centers that are extremely important to that 
community.
    Do you have the authority, or does Congress need to act to 
give you the authority?
    Mr. Powell. My guess is, without seeing the numbers, if you 
are talking about low-leverage situations where it really is 
just a liquidity problem, we have that authority. We do have 
that authority. Some of the cases, though, it is--
    Mr. Taylor. So, if you look at a collateralized mortgage-
backed security loan in the hospitality space, the average 
leverage level is 63 percent. That puts it--real estate is 
normally levered, 15 to 17 times EBITDA, just to kind of put it 
in Main Street terms. That is well outside the range of what 
you have stated, by rule, that you can do.
    Again, my question is, do I have to pass a law so that you 
can then go lend in this space, or do you have the authority 
right now to say, you know what, there is a problem, we are 
going to take action?
    Mr. Powell. Yes, I think some of the problems in that space 
would be better served by fiscal policy. I think we can 
probably reach some of them on our own as well. So, the answer 
might be both of them.
    Mr. Taylor. Okay. Thank you.
    Thank you, Madam Chairwoman. I yield back.
    Chairwoman Waters. Thank you.
    Ms. Wexton, you are recognized for 5 minutes.
    Ms. Wexton. Thank you, Madam Chairwoman.
    And thank you, Chairman Powell, for joining us again today 
and for all that you are doing in these difficult times.
    One of the most stabilizing things that Congress did in the 
CARES Act was to expand unemployment benefits by increasing the 
benefits by an extra $600 per week, on top of those benefits 
that the State provides.
    In Virginia, our maximum weekly benefit was $378, so the 
extra money has been a huge relief to the over 822,000 
Virginians who have filed for unemployment benefits since March 
15th.
    But these unemployment benefits, these enhanced benefits 
are set to expire at the end of July. Do you anticipate the 
unemployment rate falling significantly by that time?
    Mr. Powell. I would say, reasonably--many forecasters would 
say, and I would agree, that we should see strong job creation 
between now and the end of July. Yes. And that may mean that 
the unemployment rate comes down.
    Ms. Wexton. One of the arguments against continuing this 
benefit is that it is too generous. Some of my colleagues are 
suggesting that employers are having a hard time getting 
employees to come back to work because unemployment is more 
lucrative than what they make in their regular jobs.
    Is that something that you have encountered, as far as your 
regional surveys of business activity or in the data? Have you 
gotten any information that employers are trying to hire people 
back and that they are having trouble doing so because the 
employees say, I would rather just kick back and collect my 
unemployment?
    Mr. Powell. Here is what we have been hearing. It is sort 
of a little bit different from that. Many employees are 
reluctant to go back quickly, and it may partly be that the 
$600 is generous compared to what they make. We know that many 
of them weren't making that much, combined with the other 
unemployment insurance.
    But it is also, if it is a service-economy job and you are 
very close to someone--it is a barber shop, it is a beauty 
parlor, it is a nail salon, any of those things--there is also 
still reluctance on the part of workers to go back to work at 
all, and if they can delay that.
    More broadly, I would say, that is--of course, that program 
ends at the end of July. I would just say, it probably is going 
to be important that it be continued in some form. I wouldn't 
say what form, but you wouldn't want to go all the way to zero 
on that, it seems to me.
    Ms. Wexton. I am glad to hear that, Mr. Chairman. And what 
you have said, talking about people not feeling comfortable 
going back to work, is pretty consistent with what I am hearing 
anecdotally, that people are really concerned about the safety, 
and if they have a loved one at home who is elderly or has a 
compromised immune system.
    And also, a lot of people in my district--and I would 
imagine it is the same nationwide--are having trouble accessing 
childcare at this time, because many of those centers have 
closed. So, that is a real issue for a lot of people.
    Now, former Fed Chairs Yellen and Bernanke have endorsed a 
proposal, which is the Worker Relief and Security Act, that 
would tie Federal unemployment benefits to the state of the 
economy--for example, changes in the unemployment rate.
    Do you agree that we should tie assistance to the 
conditions in the economy? Or what are your thoughts on these 
processes that would have set triggers in the legislation for 
the benefits to continue?
    Mr. Powell. I think you have almost 2 months, a month-and-
a-half really, until the end of the UI program, and I think you 
are seeing a lot of interesting ideas come up. There are a 
number of proposals that have come out from bipartisan groups.
    No doubt, you are thinking, what should the next bit of 
support look like? And I think some of those ideas are very 
interesting ones. I don't want to endorse a particular idea or 
program that somebody has proposed, but I do think those things 
are worth careful consideration.
    Ms. Wexton. Thank you, Mr. Chairman.
    And I want to thank you for all of your transparency in the 
programs that the Fed is administering and also for your having 
these listening sessions and for your willingness to make 
changes to those businesses that might be eligible for the 
program, in terms of the money amounts and things like that, by 
opening it up to more people. And I really appreciate your 
responsiveness to us in the community.
    Thank you.
    And, Madam Chairwoman, with that, I will yield back.
    Chairwoman Waters. Thank you.
    Mr. Stivers, you are recognized for 5 minutes.
    Mr. Stivers. Thank you, Madam Chairwoman.
    Thank you, Chairman Powell, for your testimony and for your 
willingness to be so accessible. I want to thank you for 
everything you are doing during this crisis. I think your 
actions have prevented this from getting much worse.
    I take your answers pretty seriously about what we need to 
do for people who are still impacted by this crisis, especially 
folks who are still seeing a lot of unemployment and aren't 
benefiting from this coming recovery, and we need to try to 
help them.
    And you just answered a question a little bit ago, that you 
don't want to endorse any one proposal. But are there elements 
that you think are important, without endorsing one single 
proposal?
    Mr. Powell. Just, I think, a couple of things.
    With the unemployment insurance, I think it is important to 
just keep in mind that some of the jobs are not coming back 
soon. They ultimately are likely to come back, but those jobs 
that are in tourism and all of those areas where--travel, 
accommodation, restaurants, bars, things like that--those 
people are going to have a hard time finding a job, so I think 
it's better to keep them in their apartments, it is better to 
keep them paying their bills.
    And this is a natural disaster; this isn't their fault. And 
I think we should find ways as a country to support those 
people and help them through this difficult part of their 
lives. I think many people will go back to work, though.
    I think the other one I would mention--and we have talked 
about it--is just State and local governments do provide those 
critical services, and we know what happens when they can't run 
deficits, and so they cut heads. And they are already doing 
that, and I think that is another one which is worth looking 
at.
    And the last thing I will say is, absolutely, small 
businesses. We don't want to lose any more small businesses 
than we absolutely have to here. They are the beating heart of 
the economy.
    And so, I just think those are three areas I would point 
to.
    Can I also just take a second and say--
    Mr. Stivers. Yes, sir.
    Mr. Powell. --I was very, very sorry to hear the news about 
Andy Barr's wife this morning. He has been a--
    Mr. Stivers. Me, too.
    Mr. Powell. --great guy to work with. He is a happy 
warrior. He is a wonderful man. And I know we all feel terrible 
about it, and he is in our prayers.
    Mr. Stivers. Thanks for bringing that up, Mr. Chairman. 
They are great friends, and we are definitely keeping the 
family in our prayers. And I know Andy said this morning his 
number-one job is being a dad to his two daughters who have now 
lost their mom. So, we are keeping them in our prayers, and I 
really appreciate you bringing it up.
    And I do want to follow up on something you just talked 
about. In one of the first COVID response bills, we did include 
$150 billion for local governments and State governments, but 
we tied that money--we said it had to be used only for COVID 
response.
    And I hope that we will, in what you just said, at the very 
least, untie the strings on that money to start and then see if 
local governments and State governments need any more money. I 
am not going to ask you to comment on that, but I hope we will 
do that.
    And in the spirit of the second part of your answer, 
obviously, we want to focus on folks who are going to continue 
to be unemployed, and small businesses too. Those are three 
great pillars, and I really appreciate it.
    So, with interest rates at a near-record low, another thing 
we could do for our State and local governments, our municipal 
governments, is allow advance refunding, so they could take 
advantage of these historically low interest rates in the 
capital markets.
    I don't know how the capital markets would respond to that, 
but that is another thing that I hope we will do. And I thought 
I would bring that up, since you just mentioned the importance 
of State and local governments. Again, I won't ask you to 
comment on that because, frankly, it is not in your purview.
    The Federal Reserve did note in its May 2020 Financial 
Stability Report that the life insurance industry has been 
adversely affected by a number of factors caused by the COVID-
19 economic situation, including that near-zero-interest-rate 
environment I just brought up. Do you think the near-zero-
interest-rate environment has a big impact on our insurance 
folks?
    And what help do you think that we should give to make sure 
that--and I don't know that it is any kind of aid, but, 
obviously, we want to help people who are nearing retirement, 
and help people who are savers. What can we do to impact that, 
knowing that the interest rate probably will not go up any time 
soon?
    Mr. Powell. The life insurance industry is challenged by 
low interest rates, and they have had a lot of practice here in 
the last decade or so. They do come into this highly-
capitalized. And I would just say, a strong recovery is really 
what that industry needs, and that is what we are going to work 
on.
    Mr. Stivers. Thanks for your time, Mr. Chairman.
    I yield back, Madam Chairwoman.
    Chairwoman Waters. Thank you.
    Mr. Lynch, you are recognized for 5 minutes.
    Mr. Lynch. Thank you, Madam Chairwoman.
    Mr. Chairman, I want to say that I appreciate you. I 
appreciate that you are in there swinging. You have been 
helping us on the unemployment. You have been helping us on 
trying to get some of this money out to Main Street.
    I am very happy to see your revisions recently on the Main 
Street Lending Program. And I want to thank Chairwoman Waters 
for her relentless advocacy to get that minimum loan size down. 
It started at, what was it, a billion? And now it is at 
$250,000, so--no. It was a million. It was a million first. 
Now, it is down to $250,000. I think that is much more in the 
reasonable range for some of our small businesses.
    I do appreciate that the payback period has been expanded 
out to 5 years, and that, for participating banks, you also--
you had a 15-percent skin-in-the-game factor for some of these 
participating banks that I thought probably made the program 
unattractive to a lot of our local banks, but you got that down 
to 5 percent. We will have to wait and see if that is 
sufficient, but I wanted to thank you for that.
    The question I had is, we had a FinTech Task Force hearing 
the other day on the subject of Chairwoman Waters' FedAccounts. 
This is the idea about establishing FedAccounts, basically 
having the Fed do for the unbanked what they do right now for 
banks, to give them access, to give them accounts, and to tie 
them into the economy.
    I think if Facebook can reach out and provide access to 2 
billion daily users a day, I think maybe the Fed could 
accomplish 5 percent of that, even though it would be requiring 
the Fed to do some things it hasn't normally done.
    And I just wanted to know what your thoughts are on the 
FedAccount idea; and if there is any other way that we might 
address the gap that still exists between some of our folks who 
are unbanked or underbanked in their areas? Is there something 
that the Fed can do to close that gap?
    Thank you.
    Mr. Powell. Thank you.
    As you have pointed out, we can only offer bank accounts at 
our Reserve Banks to depository institutions, not people. I 
think that would be a very dramatic change in the landscape of 
banking, and I would worry about what would happen to the rest 
of our private banking system, because an awful lot of people 
would opt to keep their personal money at the Fed, and then who 
would do the lending? It could kind of hurt our intermediation 
process.
    In terms of the underbanked, though, a big part of what we 
do is work in local communities under CRA to encourage 
financial inclusion. We enforce the fair credit laws, to some 
extent. We don't have all of that authority, but we have a part 
of it. Those are things that we do now to address the needs of 
the unbanked and the underbanked.
    Also, we work closely with Community Development Financial 
Institutions (CDFIs) and Minority Depository Institutions 
(MDIs) as well. They play a big role in doing that. And we have 
a great deal of outreach interaction with those institutions 
which are active in the communities that really need the help.
    Mr. Lynch. I do think that, with the changing technology, 
drifting away from brick-and-mortar and moving to mobile 
banking, I think it presents some opportunities that we have 
not had in the past. So, I would just ask you to treat it with 
the level of attention that we would if the banks were in 
trouble.
    I appreciate that I am asking, or we are asking, you to do 
something that you weren't designed to do, but I think the 
circumstances and the technology now give us an opportunity to 
do something. It may not be changing the Fed's traditional 
role, but certainly, I think we can try to make life easier for 
these people who are unbanked.
    And I yield back. Thank you.
    Chairwoman Waters. Thank you.
    Mr. Tipton, you are recognized for 5 minutes.
    Mr. Tipton. Thank you, Madam Chairwoman.
    Chairman Powell, it's good to be with you this morning.
    And I did appreciate your comments on Andy Barr. On the 
other side of the aisle, he has always preceded me in 
questioning. And our thoughts and prayers certainly go out to 
him and his two daughters today.
    And I do appreciate you, again, taking the time to be here.
    Chair Powell, we have heard a lot about impacts that we are 
having on the economy, and I appreciate the efforts, certainly, 
that you have made to be able to address some of the concerns.
    I was appreciative to see that the Main Street Lending 
Program (MSLP) was up and running this week. And we are having 
some concerns that are being expressed, that under the terms 
and conditions, that they may actually deter some potential 
borrowers, entire segments of the market, from participating in 
the program.
    And the hotel industry--we have talked about tourism this 
morning--for example, has been one of the hardest-hit sectors 
during the pandemic, but they may not have great access to the 
MSLP.
    Again, I know you have heard a lot of concerns out of 
Congress from the tourism industry's standpoint, but I do 
believe it is worth repeating. Certainly, it has had a great 
impact in a district like mine in Colorado.
    Could you outline whether the Fed has considered that some 
of the loan terms will limit borrower participation, and 
whether this could be addressed through updated guidance as you 
monitor participation in the program?
    Mr. Powell. Some of those companies should be able to--our 
facility is opened at any kind of company as long as it is an 
eligible company, and that would include the ones you 
mentioned, and some of them should qualify, I would think, 
under our existing standards.
    Those that don't, we want to understand that. And if there 
are ways we can adapt, then we will absolutely look at that. 
One thing we are looking at, as I mentioned, is some kind of an 
asset-based lending thing.
    I think we are hearing this a lot about those sectors, and 
it is something we are looking at.
    Mr. Tipton. I do appreciate your comments on that.
    One thing we have seen out of you, and out of the 
Administration, out of Treasury, has been flexibility. As you 
have noted throughout this conversation, we are in uncharted 
waters. It is something that none of us had fully anticipated 
or ever experienced before, and hope not to again. Trying to be 
able to make sure that we are keeping jobs created and the 
viability of businesses to be able to continue is critically 
important.
    I did want to point out, I have also heard from some 
industry participants that the financial reporting covenant 
required under the MSLP may prevent participation. In 
particular, one thing that has been pointed out has been some 
of the credit facilities, in terms of the requirements were 
costly for smaller applicants, who don't currently have the 
infrastructure in place to be able to create complex quarterly 
filings.
    Could you explain why the Fed chose to put these enhanced 
reporting requirements in place? And do you anticipate 
potential adjustments as you monitor the borrower participation 
rate in the program?
    Mr. Powell. We cut back the financial reporting 
requirements in the last few weeks before we were going live 
here, just for that purpose. And we thought we had cut them 
back to, sort of, close to the bare minimum of what we would 
need to be able to monitor the performance of a loan at all. If 
we misjudged that, then we would want to know. And we will be 
getting that feedback. That is feedback that we want to get.
    We are trying to make that process as user-friendly and 
easy and automated as possible. And I had thought we--we 
certainly tried to address that specific problem. If we didn't 
quite get that done, then that is very useful feedback.
    Mr. Tipton. Okay. Thanks.
    And one thing that--as we entered this crisis, if we step 
back 3 months, I think in conversations that we have had, you 
had noted that our banks were well-capitalized. Is it still 
your sense that our banks are well-capitalized?
    I think we have seen them on the front lines trying to be 
able to deliver PPP, to be able to get that assistance out.
    And I did appreciate the comment that you had made in terms 
of the examinations, by the way, to be understanding that our 
banks have been put in a challenging situation.
    But in terms of the capitalization, do you still see the 
banks as well-capitalized?
    Mr. Powell. Yes, I do. Banks have been generally a source 
of strength here. They have taken on deposits. They have 
offered a lot of forbearance to their individual and business 
customers. And they are making loans.
    We are in a whole lot better shape to face this situation 
than we were to face the last situation in 2008 and 2009, where 
the banks were really part of the--they were at the source of 
the problem. Here, that is not at all the case.
    Mr. Tipton. Thank you, Chairman Powell, for being here.
    And I yield back, Madam Chairwoman.
    Chairwoman Waters. Thank you.
    Mr. Phillips, you are recognized for 5 minutes.
    Mr. Phillips. Thank you, Madam Chairwoman.
    And, Chairman Powell, thank you for being with us.
    I, too, want to add my condolences and heartfelt sympathy 
to Andy Barr and his children. I grieve with them, as we all 
do.
    Chairman Powell, I know you are not here to be a 
prognosticator, but could you please share with the American 
public, as simply as possible, what households should expect, 
from an economic perspective, in the months ahead?
    Mr. Powell. The way I look at it is this: You can think of 
this as taking place in three stages. The first stage was the 
shutdown, and we know what that looks like. It is a lot of 
people who can work from home, working from home, and many, 
many people being laid off. And we have been through that. That 
is sort of the second quarter.
    And I think we are now probably in the early stages of the 
second phase, which is--call it the bounceback, the beginning 
of the recovery. And I do think, assuming that the virus 
remains significantly under control, if you make that 
assumption, what we should see is companies opening up again, 
workers going back to work. We should see positive data coming 
out and the economy starting to reopen. And that is what you 
should see during this phase.
    I think most forecasters, just about all forecasters, then 
see there is a third phase where there will be some parts of 
the economy that struggle to recover, and those are the ones 
where people get close together, to be fed or entertained, in 
all those areas we have been talking about.
    And that area is going to take a while to recover. It is 
going to take the public a while to gain confidence that it is 
safe to engage in those activities. And there are a lot of 
workers who work there. And so, that group is going to 
struggle. They are going to need support. They are going to 
need help.
    And I think that is the way I see it. But I think the 
incoming data suggests that we are at the beginning of that 
second phase: recovery; reopening; and expansion. And if that 
is the road, we need to get on that road and stay on that road. 
And before you know it, things will feel a whole lot better.
    Mr. Phillips. Mr. Chairman, I am sure it is fair to say 
that consumer psychology will change. Consumer psychology is 
going to change in perpetuity. I am sure you have given that 
some thought. What should we be thinking about as we move 
forward, as lawmakers, relative to a changed economy because of 
the pandemic and the economic disruption?
    Mr. Powell. In the meantime, I think the focus should be on 
getting through this critical phase. As policymakers, what help 
does the economy need to transit this critical phase and really 
get going again, that is what we are thinking about.
    I think, longer term, these are interesting questions. It 
does seem very likely that people have learned that, for 
certain jobs, you can do them anywhere. I guess we kind of knew 
that, but now we really know it. And so what is going to happen 
with people in a whole lot of industries who can really do 
their jobs from home if they want to, or from a particular 
place of work, or from another State?
    The technology has really moved to a place where you can do 
amazing things that we didn't have to do before. This 
conference call is not something we had regularly done, and it 
is becoming very routine. The technology is getting better; we 
are all getting used to it. There are still glitches. There are 
plenty of glitches here and at the Fed on these things.
    I think we are going to learn that this is--in a lot of 
ways, it is accelerating preexisting trends too. There were 
existing trends that just got sped up a lot in the economy--
more online shopping and things like that. So, that is 
something we are thinking about.
    The main thing we are thinking about is, what do we have to 
do to make this recovery get off to a really good start, get a 
lot of people back to work, support the economy? And we are not 
thinking about putting down our tools for a long time.
    Mr. Phillips. And, Mr. Chairman, with that in mind, you 
advised us to go big, and we have. Our national debt is 
approaching $27 trillion; our debt service, on an annualized 
basis, over $400 billion a year.
    Do you have concerns about our ability to manage that, to 
pay that bill, if you will, moving forward? And any counsel and 
guidance you might share with us lawmakers as we contemplate 
some degree of fiscal responsibility moving forward?
    Mr. Powell. First of all, I think Congress did go big and 
has gone big. And I think it has been appropriate, and I think 
it will be well-judged over time.
    In terms of the national debt, I think the time will come 
when it is time to return to the concerns of fiscal 
sustainability. A sustainable fiscal plan is one that you stay 
on for many years. It is not something where you flip a switch 
and then really go into difficult times to get--ideally, what 
you do is you get in a situation where the economy is growing 
faster than the debt, and you stay on that path for a long 
time.
    That is how successful countries have done that. We will 
need to get to that. And we will. I think we don't need to get 
to it until we get well and truly through this extraordinarily 
challenging time.
    Mr. Phillips. Thank you, Chairman Powell.
    I yield back.
    Chairwoman Waters. Thank you.
    Mr. Williams, you are recognized for 5 minutes.
    Mr. Williams. Thank you, Madam Chairwoman.
    And I also want to say that my prayers go out to Andy Barr 
and his family, with the passing of his beautiful wife, Carol.
    Mr. Chairman, thank you for joining us in this virtual 
setting during these strange times that we are in.
    Previously, when you have come before our committee, we 
were talking about how we can continue to build on the historic 
economic growth that we all were experiencing. Now that we are 
talking under very difficult circumstances, I would like to 
focus on getting back to where we were pre-coronavirus.
    And as we have talked about before, small businesses are 
the main economic engine. As you know, I am a small-business 
owner, and we are the job creators in our country. And I am one 
of those who believes we could have growth in the fourth 
quarter. I feel pretty good about that.
    What do you think needs to be done to support these Main 
Street businesses as they attempt to remain viable as the 
lockdown across our country ends?
    Mr. Powell. As the lockdown ends, and the economy reopens, 
the first thing is we need to do it in a sustainable way, and 
nobody wants to do this, but it is really good if we do, and 
that is: I think, to the extent we can continue to observe 
those, ``keep a distance,'' ``wash your hands,'' ``wear a 
mask'' kind of things, that is really going to help. That goes 
with a fast reopening of the economy. That goes with a 
successful reopening. So, those things are really important.
    I also think we at the Fed need to keep our foot on the gas 
until we are really sure that we are through this. And that is 
certainly our intention. And I think you may find that there is 
more for you to do as well.
    Mr. Williams. Well, a traditional snapshot of the banking 
industry during this unique time will likely not paint a rosy 
picture, based upon the recent shutdowns and phased-in 
recoveries. However, bank capital levels and reserves remain 
historically strong, as we have talked about, and there are 
many borrowers who could return to profitability once the 
economy rebounds.
    So, Mr. Chairman, what steps are being taken to ensure that 
the regulators are taking a reasoned approach to oversight? And 
how is that being communicated to the various Federal Reserve 
district banks and the examiners in the field?
    Mr. Powell. On a number of occasions, we have issued public 
statements, public communications to our supervisory group, and 
the other banking agencies have done that as well.
    And, essentially, it boils down to guidance that we want 
the banks to work with their borrowers. We don't want to be on 
a hair trigger to classify loans or call them troubled loans or 
anything like that. We want to look at this as an unusual 
situation and be flexible and thoughtful about the way we do 
our jobs.
    Of course, we haven't been really supervising. We are only 
starting to supervise again. And, at the Fed, we are going to 
do it remotely. We are not going to be visiting yet, but that 
time will come, I think, fairly soon. But we are doing training 
for supervisors and things like that.
    We have also, by the way, encouraged banks to use their 
buffers. They have built up these buffers during good times, 
and that is a great thing now, because they can use those 
capital buffers to make loans and to work with borrowers.
    Mr. Williams. Yes. Thank you for that, because it is 
different than 2008, as we have all talked about.
    The Atlantic magazine published an article entitled, ``The 
Looming Bank Collapse: The U.S. financial system could be on 
the cusp of calamity. This time, we might not be able to save 
it.'' The point of the article was to compare the threat that 
collateral loan obligations, or CLOs, pose to the financial 
system in a similar way that mortgage-backed securities did 
during the 2008 financial crisis.
    Do you think that the threat of CLOs is properly accounted 
for? And can you discuss how the Fed has been monitoring this 
risk?
    Mr. Powell. I don't think that is an appropriate 
comparison. I really don't. This is not the same as the 
mortgage-backed securities.
    In that situation, back 10, 12 years ago, there was almost 
total lack of transparency into what the banks held and how 
sensitive was it to risks and things like that.
    That is not the case with the CLOs. With the CLOs, we have 
really good information. We include them--to the extent they 
are on bank balance sheets, we include them in our stress 
tests. We stress them under very stressful situations, like the 
current situation, and we know what the losses would be, coming 
out of that. It is a very, very different situation.
    That is not to say there won't be losses. There will be 
losses. This is a severe downturn. But it is one that we have 
been monitoring carefully and that the banks are well-
capitalized to deal with, we believe.
    Mr. Williams. Thank you.
    And I want to thank you for being here today. I have a lot 
of respect for what you are doing.
    As a business owner, I feel that we are in the comeback 
mode. As I said earlier, I look forward to having growth in the 
fourth quarter and a better year next year.
    Thank you for your hard work, and I appreciate your efforts 
in working with us.
    I yield back.
    Chairwoman Waters. Mrs. Maloney, you are recognized for 5 
minutes.
    Mrs. Maloney. Thank you, Madam Chairwoman.
    First, I want to join my colleagues in offering my 
condolences to Andy Barr and his family, and our hearts are 
with them.
    But now, I would like to welcome back to the committee, 
Chairman Powell.
    And I just want to start by saying that I think the U.S. 
economy is going to need all the help it can get for the 
foreseeable future, and I hope you don't take your foot off the 
gas, and you continue to be aggressive.
    In your press conference last week, you announced that the 
Fed does not expect to raise interest rates until at least 
2022--a position that almost all FOMC members supported. And 
that is a position that I strongly support as well.
    And, as you noted, the Fed is being cautious due to the 
enormous uncertainty about the coronavirus and about the damage 
to the economy going forward.
    I want to ask you, would you continue to hold interest 
rates at zero until 2022 even if economic conditions 
unexpectedly improve? In other words, what would cause you to 
change your position that interest rates should stay at zero 
until 2022?
    Mr. Powell. Thank you.
    What you are referring to there, the end of 2022, that is 
actually not a Committee forecast. It happens to be the median 
of forecasts of individual Committee members. We don't say that 
as a collective group. What that really was, was evidence that 
that is what our participants feel. That is their prediction of 
appropriate monetary policy. It isn't actually a promise to do 
that.
    What we have said we would do is we would keep rates where 
they are until we are confident that the economy has weathered 
the current situation and is well on the road to recovery.
    What would it take? We are not thinking about raising 
rates. We are thinking that this economy is going to need 
support from monetary policy for an extended period of time, 
and not just through interest rates, but also through our asset 
purchases, and through the lenders.
    This is the largest economic shock to hit our economy in 
living memory, and it is also without any kind of precedent. It 
looks like it will be the deepest recession. It may not turn 
out to be a very long one. But the road back, we believe--and 
many other forecasters do too--will take some time, and we will 
be there to support this economy until we fully recover.
    As I mentioned, we want to get back to where we were in 
February, as Mr. Williams was saying. We want to get back to 
3.5-percent unemployment and wages going up the most for people 
at the low end of the wage spectrum--where we were, where low- 
and moderate-income community people were telling us, this is 
the best we have had it in a really long time. We want to get 
back to that as soon as we possibly can, and we will be using 
our tools to do that.
    Mrs. Maloney. Also, we have a good sense of what economic 
indicators the Fed looks at in normal times. You look at the 
employment numbers, the inflation data, consumer confidence, 
and all of the usual economic metrics. But I don't, and I don't 
believe anyone has a good sense of what metrics you will be 
looking at now, in the middle of a recession caused by a public 
health crisis, where the economy won't bounce back until the 
virus is under control.
    My question is, what are the key metrics that you are 
looking at now? Are you looking at rates of infection? 
Hospitalization rates? Mortality? What are the public health 
metrics you are paying the most attention to?
    Mr. Powell. Of course, we are looking at all kinds of 
economic data, which I will mention, but we are also now 
looking, of course, at all of the data we can get and hearing 
from experts about the pandemic and where are cases going down, 
where are they going up, and all that kind of thing. That is a 
new area for us, of course--for everybody, really, unless you 
were an epidemiologist before this.
    So, that is a big thing. And it is almost as though, if you 
could give me a--if you knew for sure what the path of the 
pandemic was, then you would have a lot more confidence in what 
your economic forecast was. But, of course, we don't have that.
    We are also looking, though--I think for a month or so, 
now, we have been looking at the data that suggest an economic 
reopening. So you can track, are people moving around a lot? 
There is a lot of this high-frequency data that you get from 
the technology companies, and it gets published. Are people 
moving around a lot? Are they starting businesses? So, lots of 
early indicators.
    And we have been seeing a great deal of that. You are now 
clearly seeing that spending is ticking up, employment is 
ticking up. So, these are the early real indicators that we 
have been hoping to see, and we are beginning to see them now.
    Mrs. Maloney. Thank you, and I yield back.
    Thanks for coming.
    Chairwoman Waters. Thank you.
    Mr. Hill, you are recognized for 5 minutes.
    Mr. Hill. Thank you, Madam Chairwoman. Thanks for 
conducting this hearing.
    And of course, our thanks to Lisa, Clement, and Petrina for 
keeping us on track on the technology. We appreciate our staff.
    Martha and I were just so brokenhearted last night at about 
8:30 when we learned about the loss of Carol Barr. I can't 
imagine the pain that Andy feels. All of us on the committee 
share that bond of affection for Andy, and we wish him comfort 
during this tough time.
    Mr. Chairman, I'm glad to have you back before the 
committee. And you have done an excellent job today talking 
about the facilities, the challenges with the facilities, 
talking about your concerns about how to maintain some fiscal 
support in the unemployment area particularly, and your concern 
about small businesses. So, thanks for being so thorough in 
your answers.
    As the ranking member on the Monetary Policy Subcommittee, 
I wanted to turn and talk about the balance sheet of the Fed 
and monetary policy and just put some parameters on it, as we 
are in COVID-19 now.
    And, again, thank you, publicly, for the outstanding job 
that the Board of Governors did in early March to bring 
liquidity back to the system and preserve people's access to 
capital by keeping our capital markets functioning.
    But I do want to talk about how we measure monetary policy 
going forward now, as we, as you say, enter that midpoint of 
the return to economic recovery.
    The balance sheet was about $4 trillion before the pandemic 
hit. And there was a lot of concern over it at that level, in 
terms of a percentage of GDP and the like. And very quickly 
dwarfing anything in the QE days, you have added $3 trillion to 
the balance sheet, and we are close to $7 trillion.
    Do you see that range, pre-COVID, of 16 to 17 percent of 
GDP still a post-pandemic target based on reserves that you see 
the balance sheet returning to?
    Mr. Powell. I hadn't thought of an actual target, but I 
would suggest, in the long run, the size of our balance sheet 
will be dictated by the public's demand for our liabilities, 
the two biggest of which are currency and reserves.
    And so, we felt that we were getting really close to that 
demand at the level you suggest. And that would tend to be 
roughly constant over time, I guess, as a percentage of GDP. 
So, it is a place to get back to.
    Mr. Hill. And at the peak, in 2014, you owned about 21 
percent of all new-issue Treasuries and about 40 percent of 
new-issue agency MBS. And in this most recent phase this 
spring, as you expanded the balance sheet, I think you are at 
about 19 percent of the new-issue Treasury market and about 30 
percent of the MBS market.
    Some commentators have said, well, how is it getting as big 
an issue this time as it was certainly in 2008, from a 
dislocation of point of view? But you have had liquidity and 
spread issues in the MBS market. Do you want to take a minute 
and talk about why you did engage in the GSE agency purchases?
    Mr. Powell. Sure. Those markets are critical for financing 
the housing industry, and, also, they are closely connected to 
the Treasury market, as you know. So, it benefits all of the 
financial markets and the general public when the Treasury 
market is working.
    In terms of MBS, there wasn't the capacity to hold those 
securities. And what was happening is, the very low rates that 
we were putting in place weren't getting through to borrowers. 
Rates weren't going down, and that is because there wasn't the 
demand to hold the MBS secure.
    We had to get in there and get the market functioning 
again. And I am happy so say that it is now functioning 
essentially normally, not perfectly. But that was really what 
was our thinking then.
    Mr. Hill. Well, I think, obviously, you had people trying 
to get out of long-dated maturities in the Treasury market, and 
you had prepayment speeds pick up, so I understand why you did 
it.
    But you do support moving, in the long run, to an all-
Treasury portfolio, from a philosophical point of view. Isn't 
that correct?
    Mr. Powell. Yes. Absolutely. In fact, I had no intention of 
ever buying a mortgage-backed security when I became the Chair, 
but--
    Mr. Hill. Right. Would you say that the repo market and the 
short-term liquidity markets are now functioning, after your 
extraordinary efforts in March, and you are no longer needed in 
the daily repo market to the same extent?
    Mr. Powell. Yes, I would say that. I also hasten to add 
that we are still on alert. We feel like we don't take the 
gains for granted at all.
    Mr. Hill. Right.
    Mr. Powell. Right.
    Mr. Hill. Well, we are grateful for your leadership.
    Madam Chairwoman, thank you for the opportunity.
    And Chairman Powell, thanks for being here before the 
committee.
    I yield back.
    Chairwoman Waters. Thank you.
    Mr. Sherman, you are recognized for 5 minutes.
    Mr. Sherman. Thank you. Mr. Powell, thank you for joining 
us.
    Credit-rating agencies--as you know, Congressman Andy Barr 
has written you a letter about this. There are nine credit-
rating agencies accepted for various purposes by the SEC, which 
has the expertise in the area, yet the Fed seems to put a 
premium on only three credit-rating agencies.
    Is it your intention to look at instruments rated by all of 
the SEC-accepted credit-rating agencies?
    Mr. Powell. We have actually expanded the group of credit-
rating agencies to six from three, and we are continuing to 
look at others.
    Mr. Sherman. But is there still a situation where you will 
accept one of those second three only if the same instrument is 
rated by one of the big three? Or are you accepting all six on 
the same level?
    Mr. Powell. The former, not the latter.
    Mr. Sherman. Not the--
    Mr. Powell. No.
    Mr. Sherman. So, you haven't given real equality to the six 
that you have decided to recognize.
    The second issue is, when we passed CARES, if a company got 
a loan from the Federal Government, it came with strings, like 
no stock buybacks.
    If you are just going to go out on the market and buy debt 
instruments, those strings wouldn't apply, of course. The 
company may have issued that bond a long time ago and has not 
consented to any restrictions on its stock buyback.
    Are you planning to have a transaction which in substance 
is a government loan--that is to say--but is accomplished in 
form by having the company issue a bond as to which you are 
basically the sole purchaser, you and the Treasury are the sole 
purchaser?
    Mr. Powell. The CARES Act is very specific on this, and I 
wasn't part of this, but my understanding is it was all 
carefully negotiated. Those requirements do not apply to 
capital markets transactions or syndicated loans. They do apply 
to direct loans.
    The Main Street Facility is a direct loan program. The 
Corporate Credit Facility are either syndicated loans or 
capital markets transactions.
    Mr. Sherman. A capital markets transaction is usually one 
when there are many buyers of the debt instrument issuance. Are 
you going to have any that are in substance a government loan, 
but you choose to package them and say that they are capital 
markets transactions?
    Mr. Powell. When we purchase a bond, which is a registered 
security, and it comes in a normal form, that is a capital 
markets transaction.
    Mr. Sherman. Even if you are the sole purchaser and it has 
all of the economic indicia of being a government loan, the 
fact that you can call it a bond issuance liberates you and the 
company from congressional intention. Is that what you are 
saying? It was never our intention to have you take what is in 
substance a loan and package it as a capital markets 
transaction.
    We know a bond issuance is one where there are many 
purchasers of the same instrument, and a loan is one where the 
Federal Government makes a loan or is the sole lender in the 
transaction or substantially the sole lender.
    And it sounds like you have found a loophole in what we 
have written and that you plan to exploit it. It was certainly 
never the intention--what sense would it make for Congress to 
say, ``Well, if you do a government loan this way, there are 
strings that come with it, but here is this loophole where you 
can avoid all of these strings?''
    Clearly, a capital markets transaction is one where the Fed 
has the additional assurance that comes from other market 
participants buying that same issuance on the same day on the 
same terms. And you are depriving us of that if you are the 
sole purchaser of the issuance.
    And, at the same time, you deprive us of the restrictions 
on stock buybacks. You create a circumstance where money goes 
directly from the Treasury into the pockets of shareholders who 
are taking their money out of the company.
    And that is certainly not what Congress intended. But if 
there is a loophole, it is up to Congress to plug that 
loophole.
    I believe my time has expired.
    Chairwoman Waters. Thank you.
    Mr. Emmer, you are recognized for 5 minutes.
    [No response.]
    Chairwoman Waters. Mr. Emmer?
    [No response.]
    Chairwoman Waters. If Mr. Emmer is not present, we will go 
to Mr. Loudermilk.
    You have 5 minutes.
    Mr. Loudermilk. Thank you, Madam Chairwoman.
    And thank you, Chairman Powell, for being here. And I would 
also like to thank you for all of the work that you have been 
doing. A lot of times, we don't look at how bad things could 
be. And I think they could be a lot worse right now if we 
hadn't had the intervention that we have had through the 
Administration--
    [Audio interruption.]
    Mr. Loudermilk. I apologize. I guess I am getting some 
feedback. I don't know if anyone else is.
    But I want to thank you for the actions that you have done. 
I know we have taken some bold actions. And especially the way 
that you have made changes on the fly with the way that you 
oversee and regulate the banks. I know that my local banks, 
community banks, regional banks were all very skeptical going 
into this, but I can tell you that they are not happy with the 
way things are, but they are pleased in the way that things are 
going, because they realize that things could be a lot worse.
    Just a couple of quick questions, because I know we are 
running low on time. But you have done a lot with mortgage-
backed securities that are with Fannie Mae and Freddie Mac and 
Ginnie Mae. Those are included in the Term Asset-Backed 
Securities Loan Facility (TALF), but in 2008, mortgages that 
weren't backed--the non-agency mortgages were included in TALF.
    And my question is--and I have written you a letter about 
this--are you considering including those non-agency-backed 
mortgages and consumer installment loans in TALF?
    Mr. Powell. The answer is, on MBS, that is something we 
have under consideration. And you are right, as a general 
matter, we have been willing to, and eager, in fact, to expand 
things, where it is appropriate.
    Consumer installment loans is a little different. We don't 
have the history--they don't have the history in the asset-
backed securities market, so we struggle a little bit with that 
one. But we are looking at it as well.
    Mr. Loudermilk. Okay. I appreciate that.
    One last question. Intercontinental Exchange and other 
clearinghouses for futures trades have had a huge spike in the 
amount of funds they hold overnight because of the market 
volatility. And commercial banks can only accept limited 
amounts of those deposits because of the capital requirements.
    They would like to be able to temporarily deposit those 
funds with the Fed. Is that something that you are considering?
    Mr. Powell. The only entities, like Intercontinental 
Exchange, that can deposit funds at the Fed are those that have 
been designated as systemically important financial market 
utilities under the law. And so, we don't have the legal 
authority to do that right now.
    But it would be a question really not for one company but 
for all of the companies that are in that category, should they 
get the legal authority to do that. But as of right now, we do 
not have the authority to give bank accounts unless they are a 
designated financial market utility.
    Mr. Loudermilk. Okay. Maybe that is something that we can 
work on, going forward. But I thank you.
    And I know we are short on time, so I will yield back.
    Chairwoman Waters. Thank you.
    Mr. Lawson, you are recognized for 5 minutes.
    Mr. Lawson. Thank you, Madam Chairwoman.
    And welcome, Mr. Powell, to the committee. I really 
appreciate the opportunity to talk to you today.
    Madam Chairwoman said about 2 hours ago that there was 
about $120 billion in PPP funds that were still available to be 
allocated. And the application number has slowed dramatically.
    Do you believe that asking impaired businesses to take on 
an additional debt obligation has limited the effectiveness of 
the program and that, in order to create business certainty and 
confidence in reopening and hiring, a grant program would be 
better? What do you propose for businesses that cannot take on 
additional debt?
    Mr. Powell. The Small Business Administration (SBA) 
administers the Paycheck Protection Program (PPP). We have a 
little bit of a role, in that once a bank makes one of those 
loans, we will take that loan off their balance sheet so they 
can have the room to make another loan. So, I follow it, but it 
is not one that we administer.
    I would say, the benefit of that program is that a loan 
turns into a grant, as long as you obey the rules. And I know 
that the rules have been adjusted both by the last law that you 
passed and also in regulatory flexibility. So I would say, for 
many small businesses, that is what they need, and that they 
are not well-served by taking on a loan to make payroll and 
things like that.
    That is the tool we have. That is all we can really do. We 
can't do grants; we can only do loans. And that is why we are 
doing that for larger companies and the ones that are eligible 
for the PPP.
    Mr. Lawson. Okay. And I think when Madam Chairwoman closes 
out, she might have something to say.
    My other question is that the April jobs report was the 
worst in American history, and the May jobs report shows that 
less than half of Black adults have jobs.
    Chairman Powell, what steps can the Fed take to ensure that 
emergency relief and targeting are at the underbanked and the 
minority-owned businesses in this state of the economy?
    Mr. Powell. Well, an all-too-large portion of those who 
lost their jobs in the pandemic were from low- and moderate-
income communities, and many of them were minorities, and the 
same is true of businesses. Minority-owned businesses are under 
tremendous pressure.
    We have tools that apply broadly across the economy. That 
is what we can do. And we can also work with MDIs and CDFIs as 
well. We do that, to try to support the work of those 
institutions in their communities.
    And that is what we can do. I know there are also things 
that Congress can do, as well, and has done.
    Mr. Lawson. Okay. Thank you.
    And I yield back, Madam Chairwoman.
    Chairwoman Waters. Mr. Emmer, you are now recognized for 5 
minutes.
    Mr. Emmer. Thank you, Madam Chairwoman.
    And it goes without saying, but I am going to say it 
anyway. Like everyone else on this committee, our hearts go 
out, and our prayers, to Andy Barr and his family. This is a 
very tough day.
    Chair Powell, I appreciate you being with us here today, 
albeit virtually. And even more so after my recent experience 
trying to get my mute button fixed, I think the House should be 
back here in Washington doing our jobs.
    The opportunity to connect with you digitally has brought 
to mind several topics related to fintech that I have been 
working on, including as ranking member on the FinTech Task 
Force of this committee--technological innovations.
    As late as last year, you told my colleague, Representative 
French Hill from Arkansas, that you were following central bank 
digital currencies closely but that the Fed was not currently 
developing a central bank digital currency. You said, 
``Characteristics that make the development of a central bank 
digital currency more immediately compelling for some countries 
differ from those in the U.S.''.
    It is true that other countries utilize digital cash at a 
higher rate than the United States. However, our technological 
edge has kept us the predominant world leader we are today for 
at least several decades. And I think the recent pandemic has 
actually shown that this is an important step that we need to 
make, regardless.
    What substantive recent actions has the Fed taken to 
understand and experiment with this technology? And, I guess, 
can you disclose any current considerations or questions you or 
the Fed have on the concept of a central bank digital currency?
    Mr. Powell. I would be glad to.
    I think central banks everywhere, all around the world, are 
looking at this, and we owe it to the public that we serve to 
be up to speed and to--if this is something that is going to be 
good for the United States' economy and for the world's reserve 
currency, which is the dollar, then we need to be there, and we 
need to understand it first and best.
    We are working hard on it. There is a group of major 
central banks that have gotten together to share understanding 
of the technology and the cybersecurity implications, the 
economic implications, the financial inclusion implications.
    It is a big, complex problem, and it is one that we take 
very seriously. And, again, I think it is our obligation to 
understand it well and not wake up one day and realize that the 
dollar is no longer the world reserve currency because we just 
missed a technological change. So, we are not going to let that 
happen.
    At the same time, there are some very serious questions 
that have to be answered before we would want to implement a 
central bank digital currency.
    Mr. Emmer. That is great. It is good to hear that you are 
leaning in.
    In the recent report issued by the Digital Dollar Project, 
and reflected in some of the congressional proposals that are 
out there, there seems to be a recognized need, an agreement 
that the private sector should be involved in the creation of a 
central bank digital currency (CBDC), either in its development 
or dispersal.
    And, I guess, through the Fed's work and analysis on the 
topic that you are currently in, what role do you think the 
private sector would play?
    Mr. Powell. I really do think this is something that the 
central banks have to design, principally. And the private 
sector is not involved in creating the money supply. That is 
something that the central bank does.
    And I know there are ideas that this should really be the 
work of a private board. I don't really think the public would 
welcome the idea that private employees who are not accountable 
solely to the public good would be responsible for something 
this important.
    Once we assess it and decide what to do, it will be all 
about the private sector. It has to work through the banking 
system and through businesses and the economy for individuals 
and all that. But I think, in the first instance, it has to be 
the work of central banks.
    Mr. Emmer. Which leads me to probably my last question. If 
the Fed were to adopt a digital currency, should the Fed have 
the technical capability to deny access to law-abiding citizens 
for any purpose? And should it oversee or track transactions 
between private individuals?
    Mr. Powell. Those are big questions. In one case, if you 
create a central bank digital currency, you can know every 
payment by everybody. And that is not good. If you don't, if 
you don't know any payments by anybody, then--
    Chairwoman Waters. The gentleman's time has expired.
    Mr. Powell. --where is your money going? So, it is a very 
difficult problem.
    Mr. Emmer. Thank you, Chair Powell.
    And thank you, Madam Chairwoman.
    Chairwoman Waters. Mr. San Nicholas, you are recognized for 
5 minutes.
    Mr. San Nicolas. Thank you, Madam Chairwoman.
    Good day to you, Chairman Powell.
    And, Andy, your friends are mourning with you, and are 
deeply sorry for your loss.
    Madam Chairwoman, I want to first begin by thanking you and 
the committee for drafting this letter on behalf of the 
committee that we sent to Secretary Mnuchin, and to you, 
Chairman Powell, dated May 13, 2020, particularly addressing 
the lack of territorial inclusion in the Municipal Liquidity 
Facility that is being administered by the Fed.
    More specifically, we wrote, ``Through the Coronavirus Aid, 
Relief, and Economic Securities Act, signed into law on March 
27th, Congress instructed the Treasury Secretary to seek the 
establishment of a facility that would support the market for 
borrowing by State, municipal, and territorial governments. 
Despite the clear and unambiguous inclusion of territorial 
governments in these instructions, the Federal Reserve's 
Municipal Liquidity Facility, initially announced on April 9th, 
did not list territories among eligible issuers of debt. 
Furthermore, despite earlier requests to correct the original 
announcement, the Fed's subsequent announcement, on April 27th, 
significantly expanded the number of eligible issuers that the 
Municipal Liquidity Facility would support but continued to 
exclude territorial governments.''
    Mr. Chairman, earlier, in your dialogue with my colleague, 
Mr. Himes, I quoted you here as saying that, ``we are 
implementing the law that you passed.'' But the law that we 
passed in the CARES Act fully includes territories in the 
Municipal Liquidity Facility, and yet the Fed is excluding 
territories from being able to access that facility.
    In response to our letter that we sent to you on May 13th, 
we got a response 2 days ago, on June 15th, from you. And the 
area that you address with respect to that concern, you state, 
``As you know, we are required by law in our emergency lending 
to be well-secured and to protect taxpayers from loss, and we 
are prohibited from lending to insolvent borrowers. The 
financial circumstances of the territories are generally 
inconsistent with these statutory constraints.''
    Now, Mr. Chairman, notwithstanding Puerto Rico's 
circumstances, Guam is not insolvent, the Commonwealth of the 
Northern Mariana Islands is not insolvent, American Samoa is 
not insolvent, and the U.S. Virgin Islands are not insolvent. 
And so my question is, why are we excluding these territories 
from being able to access the Municipal Liquidity Facility?
    Mr. Powell. As you pointed out, what we put in our letter 
is really the way the law--we are required to conclude that we 
are adequately secured, and we have not been able to come to 
the view that any of the territories would be able to borrow 
from us.
    And there are other government--I don't doubt the need for 
borrowing, but there are other programs which are better suited 
to serving the territories' needs.
    Mr. San Nicolas. But the CARES Act specifically authorizes 
territories to be able to access the Municipal Liquidity 
Facility. It is very clear in the law.
    And the rationale for excluding them is not consistent with 
all of the territories. And I seriously doubt there is some 
kind of test being administered to every other jurisdiction in 
the country that is accessing the Municipal Liquidity Facility.
    I want to ask if there is going to be any reconsideration 
from the Fed, given all of these facts?
    Mr. Powell. All of the other--to be eligible for the 
municipal facility, borrowers are required to have an 
investment-grade rating. And all of those who are eligible do 
have an investment-grade rating. That is a requirement we set 
for the Municipal Liquidity Facility.
    Mr. San Nicolas. The liquidity facility, though, Mr. 
Chairman, when we authorized it under the law, we did not set 
those kinds of bars. And one of the reasons why the liquidity 
facility being accessible by the Fed is because, when you have 
jurisdictions that are having more difficulty accessing capital 
markets, the reason why we provided those fundings is for the 
Fed to be able to provide that through the government.
    Mr. Powell. Well, I am sorry that we disagree on this. I 
would just say that we are a provider of liquidity, and those 
are the judgments that we have made. We will be happy to go 
back to the drawing board and look again, but that is the 
judgment that we have come to, in terms of what Section 13(3) 
under the Federal Reserve Act requires of us.
    Mr. San Nicolas. Just to close, Madam Chairwoman, because 
in the conversations today we talked about giving minorities 
more access and taking care of those communities, our 
territories have upwards of 90 percent populations comprised of 
minorities.
    We talked about the need for supporting tourism industries, 
and the tourism industries in our Territories are critically 
strained.
    We need to be able to access these resources that we are 
providing.
    Thank you, Madam Chairwoman. I yield back.
    Chairwoman Waters. Thank you very much.
    The Chair notes that some Members may have additional 
questions for this witness, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to this witness and to place his responses in the record. Also, 
without objection, Members will have 5 legislative days to 
submit extraneous materials to the Chair for inclusion in the 
record.
I ask you to please respond as promptly as you are able.
Let me just say that I join with all of you today, all of
my  colleagues,in sending my prayers and condolences to 
Andy Barr andhis children. Let us keep them in our prayers.
This hearing is now adjourned.
[Whereupon, at 3:03 p.m., the hearing was adjourned.]

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