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



 
                       OVERSIGHT OF THE TREASURY

                      DEPARTMENT'S AND THE FEDERAL

                      RESERVE'S PANDEMIC RESPONSE

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

                             HYBRID HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 30, 2020

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 116-99
                           
                           
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]             





                           ______                       


             U.S. GOVERNMENT PUBLISHING OFFICE 
42-943 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 30, 2020................................................     1
Appendix:
    June 30, 2020................................................    37

                               WITNESSES
                         Tuesday, June 30, 2020

Mnuchin, Hon. Steven T., Secretary, U.S. Department of the 
  Treasury.......................................................     6
Powell, Hon. Jerome H., Chair, Board of Governors of the Federal 
  Reserve System.................................................     7

                                APPENDIX

Prepared statements:
    Mnuchin, Hon. Steven T.......................................    38
    Powell, Hon. Jerome H........................................    41

              Additional Material Submitted for the Record

Waters, Hon. Maxine:
    Written statement of the Credit Union National Association...    52
    Written statement of the National Association of Federally-
      Insured Credit Unions......................................    60
McHenry, Hon. Patrick:
    Written statement of the National Association of Federally-
      Insured Credit Unions......................................    60
Mnuchin, Hon. Steven T.:
    Written responses to questions for the record submitted by 
      Chairwoman Waters..........................................    63
    Written responses to questions for the record submitted by 
      Representative Heck........................................    75
    Written responses to questions for the record submitted by 
      Representative Himes.......................................    76
    Written responses to questions for the record submitted by 
      Representative Gonzalez....................................    76
    Written responses to questions for the record submitted by 
      Representative Lawson......................................    77
    Written responses to questions for the record submitted by 
      Representative Steil.......................................    78
    Written responses to questions for the record submitted by 
      Representative Tlaib.......................................    78
    Written responses to questions for the record submitted by 
      Representative Vargas......................................    80
Powell, Hon. Jerome H.:
    Written responses to questions for the record submitted by 
      Chairwoman Waters..........................................    82
    Written responses to questions for the record submitted by 
      Representative Beatty......................................   109
    Written responses to questions for the record submitted by 
      Representative Heck........................................   113
    Written responses to questions for the record submitted by 
      Representative Kustoff.....................................   115
    Written responses to questions for the record submitted by 
      Representative Lawson......................................   119
    Written responses to questions for the record submitted by 
      Representative Mooney......................................   122
    Written responses to questions for the record submitted by 
      Representative Tlaib.......................................   124
    Written responses to questions for the record submitted by 
      Representative Vargas......................................   129


                       OVERSIGHT OF THE TREASURY

                      DEPARTMENT'S AND THE FEDERAL

                      RESERVE'S PANDEMIC RESPONSE

                              ----------                              


                         Tuesday, June 30, 2020

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 12:45 p.m., in 
CVC-200, Congressional Auditorium, Hon. Maxine Waters 
[chairwoman of the committee] presiding.
    Members present: Representatives Waters, Maloney, 
Velazquez, Sherman, Meeks, Clay, Scott, Green, Cleaver, 
Perlmutter, Himes, Foster, Beatty, Heck, Vargas, Gottheimer, 
Gonzalez of Texas, Lawson, San Nicolas, Tlaib, Porter, Axne, 
Casten, McAdams, Ocasio-Cortez, Wexton, Gabbard, Adams, Dean, 
Garcia of Illinois, Garcia of Texas; McHenry, Wagner, Lucas, 
Posey, Luetkemeyer, Huizenga, Stivers, Barr, Tipton, Williams, 
Hill, Zeldin, Loudermilk, Mooney, Davidson, Budd, Kustoff, 
Hollingsworth, Gonzalez of Ohio, Rose, Steil, Gooden, 
Riggleman, Timmons, and Taylor.
    Chairwoman Waters. The Financial Services Committee will 
come to order. First, I want to thank Secretary Mnuchin and 
Chair Powell for your patience while we wrapped up our votes. I 
appreciate that there may be a vote called during the hearing 
as well; however, I plan to continue the hearing if votes are 
called. I am told by my staff that both of you have agreed to 
be here for 2 hours from the start of the hearing, and I thank 
you.
    Without objection, the Chair is authorized to declare a 
recess of the committee at any time.
    I want to welcome the Members and our distinguished 
witnesses to the first Full Committee hybrid hearing being 
conducted by the Committee on Financial Services. As Congress 
breaks new ground with these remote hearings, I want to remind 
Members of a few matters, including some required by the 
regulations accompanying H. Res. 965, which established the 
framework for remote and hybrid committee proceedings.
    First, I would ask all Members on the Webex platform to 
keep themselves muted when they are not being recognized. This 
will minimize disturbances while Members are asking questions 
of our witnesses. Members on the Webex platform are responsible 
for muting and unmuting themselves. The staff have been 
instructed not to mute Members except when they are not not 
being recognized by the Chair, and there is inadvertent 
background noise. Members on the Webex platform are reminded 
they may only attend one remote hearing at a time, so if you 
are participating today, please remain with us during the 
hearing. Members should try to avoid coming in and out of the 
hearing, particularly during the question period. If, during 
the hearing, Members wish to be recognized, the Chair 
recommends that Members identify themselves by name so as to 
facilitate the Chair's recognition.
    I would also ask that Members be patient as the Chair 
proceeds, given the nature of the online platform the committee 
is using. In addition, the Chair informs the Members 
participating in person that in enforcing order and decorum in 
the hearing room, the Chair has a duty to protect the safety of 
the Members. The attending physician provided the following 
guidance: ``For U.S. House of Representatives meetings in a 
limited enclosed space, such as a committee hearing room, for 
greater than 15 minutes, face coverings are required.''
    Accordingly, the Chair will treat wearing masks as a matter 
of order and decorum, and all Members should wear masks. The 
Chair has a strong preference for Members to continue to wear a 
mask, even while being recognized by the Chair. Members who do 
not wish to wear masks may participate virtually through the 
Webex platform.
    Before proceeding to the hearing, I have one committee 
business matter. Without objection, two resolutions, 
distributed in advance to all Members' offices establishing 
committee task forces for the remainder of 2020, are approved.
    Today's hearing is entitled, ``Oversight of the Treasury 
Department's and the Federal Reserve's Pandemic Response.'' 
This hearing is the committee's first quarterly hearing 
required by the Coronavirus Aid, Relief, and Economic Security 
(CARES) Act for oversight of the various facilities and 
programs under the Act.
    I would like to inform Members that our witnesses have a 
hard stop today at 2:00.
    I now recognize myself for 4 minutes to give an opening 
statement.
    Secretary Mnuchin, Chair Powell, welcome back. The pandemic 
continues to have a terrible impact. More than 126,000 people 
have lost their lives in the United States, and, this past 
Sunday, there were 40,000 new cases of COVID-19, the highest 
number of daily cases. And the unemployment rate in May was 
13.3 percent, nearly 4 times higher than it was last May. All 
of the job gains of the past decade have been wiped out.
    Communities of color have been affected disproportionately 
both by the virus and its economic impact. The Centers for 
Disease Control reports that Jewish, Black, and Latinx 
Americans are 4 to 5 times more likely than Whites to be 
hospitalized for COVID-19, and half of all Black adults are not 
working. During the 2008 foreclosure crisis, we saw a similarly 
disproportionate impact on communities of color. This was 
followed by an unequal recovery where White households gained 
the wealth they lost, and Black and Brown households are still 
trying to catch up. We cannot endure another unequal crisis or 
unequal recovery. Your agencies and Congress must do all that 
we can to ensure that history does not repeat itself.
    I want to thank both of you for your efforts thus far, and 
for the ways that you have worked with me and the members of 
this committee, including taking my many calls to strengthen 
the implementation of the CARES Act.
    Secretary Mnuchin, you have used your authority to provide 
Community Development Financial Institutions (CDFIs) and 
Minority Depository Institutions (MDIs) greater access to the 
Paycheck Protection Program (PPP), including by setting aside 
$10 billion for them to lend to ensure that more loans go to 
small, minority-owned businesses.
    Chairman Powell, you have worked with us to reduce the 
minimum loan size at the Main Street Lending Facility from $1 
million to $250,000, and to extend the length of the loans. You 
have also expanded eligibility of the Municipal Liquidity 
Facility to increase access to a greater number of cities and 
towns.
    The CARES Act has provided important relief to struggling 
families and communities, but as the pandemic has strengthened, 
so must our efforts.
    I now recognize the ranking member of the committee, the 
gentleman from North Carolina, Mr. McHenry, for 4 minutes.
    Mr. McHenry. Thank you. Thank you all for being before the 
committee and behind the salad guards that we have arranged for 
you. It's good to see your smiling faces behind your masks, but 
I am grateful that we are able to assemble. This is certainly a 
large undertaking for the second-largest committee in Congress, 
and I do want to commend the chairwoman for these efforts so 
that we could actually have this hybrid hearing. I think it 
shows that Congress and our government are still working, even 
if we have to do so using technology. Thank you all for your 
response and your active response since this crisis began.
    I want to say, first of all, I believe that the Fed's and 
Treasury's decisive actions prevented the worst of the economic 
catastrophe, but there is still much work to be done. It is 
important to remember this is not a crisis that was caused by 
irresponsible choices by any specific industry or corporation. 
What we have seen is the impact of a voluntary shutdown of our 
economy in an effort to save lives. The bipartisan CARES Act 
directed both the Treasury Department and the Federal Reserve 
to stand up responsible programs that would have been 
unthinkable even months ago, and to do so quickly, and you have 
done so rather quickly.
    Now that many of these programs are up and running, we must 
be forward-thinking to seek solutions to return us to the 
roaring economy that we experienced right before the global 
health crisis. That means we need to understand the nature of 
what we have done and what we need to do going forward. We know 
the pandemic has touched nearly every aspect of our economy and 
every family. Facilities discussed today need to be similarly 
far-reaching and responsive to economic conditions, not 
political ones. And I know there are a number of programs that 
have been desired by policymakers to be company-specific or 
something like that, but that is not the appropriate response 
nor commensurate with the law.
    Moreover, Members are going to have a lot of questions 
about fiscal policy, which I think Secretary Mnuchin is best 
fitted to, and monetary policy, which Chairman Powell is best 
suited to. And I think the understanding of that is important 
for us as policymakers to experience at the beginning of this 
hearing rather than to hear you defer to one another. Our role 
in Congress is to assess the effectiveness of existing 
programs, determine the goals for additional relief programs, 
and identify the appropriate entity to provide that relief. 
That is our role.
    Of course, we need to access the key programmatic data, and 
so I want to commend Secretary Mnuchin for coming forward with 
this type of oversight material in a massive, unprecedented 
way, with the type of low-level data that we requested in 
Congress, and to provide that in a transparent way. The 
thousands of pages of documents that you and your team have 
assembled for just this committee alone is staggering in such a 
short period of time. I hope my colleagues will use this data 
appropriately so that we can assess these programs and make 
sure they are working.
    I do want to commend you, Secretary Mnuchin, for the 
delivery of the PPP program so effectively and so quickly. It 
wasn't perfect, of course, but it saved millions of jobs. And 
Chairman Powell, I want to commend you. You have made your 
words good in terms of action, and that builds confidence in 
the institution of the Federal Reserve, that your words 
actually are as good as action by the Federal Reserve. So, 
thank you for following through on your word and your 
commitment. I think there is positive news in terms of the 
assessment for this initial response, and I want to thank you 
for being here at the first quarterly oversight hearing under 
the CARES Act.
    Madam Chairwoman, on a personal note, I would like to 
welcome back our friend and colleague, the ranking member of 
the Oversight Subcommittee, Andy Barr, from his family concerns 
he has been attending to. So, thank you, Andy. We welcome you 
back.
    I yield back.
    Chairwoman Waters. Thank you very much. I now recognize the 
gentleman from Texas, Mr. Green, who is also the Chair of our 
Subcommittee on Oversight and Investigations, for 1 minute.
    Mr. Green. Thank you, Madam Chairwoman. And I thank 
everyone. It is an honor to serve under your leadership, Madam 
Chairwoman.
    The 2019 Home Mortgage Disclosure Act (HMDA) data were 
released last week and demonstrate that unequal access to 
credit on the basis of race and ethnicity remains the norm in 
America today. This is something that we can do something 
about, but there is a problem. Many of the people who have the 
authority and who are in positions to make a difference refuse 
to even acknowledge that the problem exists. I have the 
evidence. I have pictures from prior hearings. The one to my 
right asks, ``Do you believe that discrimination in lending 
exists?'' One person has his hand up. He is with the NAACP. He 
is African American. The four Anglo persons on this panel 
refused to raise their hands. These are the problems that we 
have to contend with. I yield back the balance of my time.
    Chairwoman Waters. Thank you, Mr. Green. I now recognize 
the subcommittee's ranking member, Mr. Barr, for 1 minute.
    Mr. Barr. Madam Chairwoman, before I deliver my opening 
statement, I rise to ask a question of personal privilege.
    Chairwoman Waters. Without objection, certainly.
    Mr. Barr. Thank you, Madam Chairwoman. As you know, 2 weeks 
ago, I lost my wife unexpectedly to a heart condition, and I 
want to express my sincere appreciation to you, Madam 
Chairwoman, Ranking Member McHenry, and to all of my colleagues 
on this committee on both sides of the aisle for the outpouring 
of prayers and expressions of sympathy for Carol and her 
greatest legacy, our two daughters. Your friendship and 
kindness during this difficult time for me and my family means 
so much, and I thank all of you.
    Chairwoman Waters. Thank you very much, Mr. Barr, and now 
you may take 1 minute if you would like--
    Mr. Barr. Thank you.
    Chairwoman Waters. --on the subject that is before us 
today.
    Mr. Barr. Thank you. And thank you, Secretary Mnuchin and 
Chairman Powell, for appearing before the committee today and 
for your continued efforts to ameliorate the effects of the 
government-imposed shutdown of the economy arising out of the 
pandemic. Congress acted decisively through the passage of the 
CARES Act and other legislation to mitigate the damage to the 
economy, and keep people employed and businesses strong to 
ensure that the economy can emerge on the other side in a 
position for long-term growth. Congress directed the Fed and 
Treasury to play a critical role in the response, and 
throughout, you both have been decisive and aggressive in using 
the tools at your disposal and been incredibly responsive to 
congressional concerns. You have made appropriate adjustments, 
each of you personally, and there are elements of Treasury's 
and the Fed's responses to the pandemic that could still be 
improved or adjusted to honor congressional intent. I look 
forward to talking to you about those today, including and 
especially in commercial real estate. I look forward to 
discussing that today. And, again, thank you, both of you, for 
being here today. I yield back.
    Chairwoman Waters. Thank you, Mr. Barr. I want to welcome 
today's witnesses. First, we have Steven T. Mnuchin, Secretary 
of the Treasury. He has served in this current position since 
2017. Mr. Mnuchin has testified before the committee on 
previous occasions, and I do not believe he needs any further 
introduction.
    Next, we have Jerome Powell, Chair of the Board of 
Governors of the Federal Reserve System. Mr. Powell has served 
on the Board of Governors since 2012, and as its Chair since 
2017. Mr. Powell has testified before the committee on previous 
occasions, and I do not believe he needs any further 
introduction.
    Each of you will have 5 minutes to summarize your 
testimony. When you have 1 minute remaining, a yellow light 
will appear. At that time, I would ask you to wrap up your 
testimony so we can be respectful of the committee members' 
time. And, without objection, your written statements will be 
made a part of the record.
    Secretary Mnuchin, you are now recognized for 5 minutes to 
present your oral testimony.

 STATEMENT OF THE HONORABLE STEVEN T. MNUCHIN, SECRETARY, U.S. 
                   DEPARTMENT OF THE TREASURY

    Secretary Mnuchin. Thank you very much, and, Mr. Barr, let 
me express my condolences for your loss.
    Chairwoman Waters, Ranking Member McHenry, and members of 
the committee, I am pleased to join you today to discuss how 
the Treasury Department and the Federal Reserve are working 
together to provide liquidity to credit markets, businesses, 
and households, as well as State and municipal governments. We 
remain committed to making sure that every American gets back 
to work as quickly as possible.
    America's economy continues to recover from the challenges 
posed by the COVID-19 pandemic. The jobs report for the month 
of May vastly exceeded expectations with a record gain of 2\1/
2\ million jobs after experts had predicted a loss of nearly 8 
million jobs. While the unemployment rate is still historically 
high, we are seeing additional signs that conditions will 
improve significantly in the 3rd and 4th quarters of this year.
    The ``Blue Chip Report'' is forecasting that our GDP will 
grow by 17 percent annualized in the 3rd quarter and by 9 
percent in the 4th quarter. The U.S. Chamber of Commerce 
reported this month that 79 percent of small businesses are at 
least partially open, and half of the remaining businesses are 
opening very soon. Retail sales rose in May by 18 percent, more 
than double the expectation. Investors and businesses have 
historically high cash positions, the highest level since 1992, 
indicating that private capital is ready to return as 
communities reopen.
    We are in a strong position to recover because the 
Administration worked with Congress on a bipartisan basis to 
pass legislation and provide liquidity to markets in record 
time. In particular, the PPP is keeping tens of millions of 
employees connected to their jobs. Economic impact payments are 
also helping millions of families and workers through these 
challenging months. We are monitoring economic conditions 
closely. Certain industries, such as construction, are 
recovering quickly, while others, such as retail and travel, 
are facing longer impacts and may require additional relief. We 
look forward to continued conversations with you to address 
these critical economic issues.
    Treasury has been hard at work implementing the CARES Act 
Program. The PPP: we have approved over 4.8 million small 
business loans for $519 billion. Economic impact payments: we 
distributed nearly 160 payments in record time. Programs to 
support aviation and other eligible businesses: we have 
approved and dispersed over $27 billion to over 500 airlines 
and other aviation businesses, preserving hundreds of thousands 
of jobs. We are in the process of documenting loans to business 
and critical national security for approximately $25 billion. 
The Coronavirus Relief Fund: from this fund, we have 
distributed $150 billion across States and local governments 
and additional money to tribal governments.
    The CARES Act granted Treasury the authority to provide 
$454 billion to support Federal Reserve Lending Facilities 
under Section 13.3. Since March 17th, using funds available, I 
have approved a number of Federal Reserve programs: the 
Commercial Paper Program; the Primary Dealer Program; the Money 
Market Mutual Program; the TALF; the Primary Market Corporate 
Credit Facility; the Secondary Facility; the Main Street 
Facility; the Municipal Facility; and the PPP Lending Facility. 
We have committed approximately $200 billion to support these. 
The announcements of these programs have helped unlock markets 
and promote much-needed access to liquidity. We have over $250 
billion to create or expand programs as needed.
    While we are beginning to have conversations about 
supplemental relief legislation, we look forward to working 
with Congress on a bipartisan basis in July on any other 
further legislation that will be necessary. Treasury has 
already been entrusted with a tremendous amount of funding to 
inject into the economy. We are closely monitoring these 
results and seeing conditions improve. We would anticipate that 
any additional relief would be targeted to certain industries 
that have been especially hard hit by the pandemic, with a 
focus on jobs and putting all Americans back to work who have 
lost their jobs through no fault of their own.
    The Treasury Department is implementing the CARES Act with 
transparency and accountability. We are providing information 
to the government-wide reporting on USAspending and updates to 
Congress. We are also cooperating with the congressional 
oversight committee, GAO, and others. We are pleased that the 
Federal Reserve has announced plans to boost loan information 
on its website regarding its facilities. Chair Powell and I 
have had very productive initial meetings with four members of 
the Oversight Committee, and we look forward to continuing to 
work with them. Thank you very much.
    [The prepared statement of Secretary Mnuchin can be found 
on page 38 of the appendix.]
    Chairwoman Waters. Thank you. Chair Powell, you are now 
recognized for 5 minutes to present your oral testimony.

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

    Mr. Powell. Chairwoman Waters, Ranking Member McHenry, and 
members of the committee, thank you for the opportunity to 
testify today to discuss the extraordinary challenges our 
nation is facing and the steps we are taking to address them.
    We meet as the pandemic continues to cause tremendous 
hardship, taking lives and livelihoods both at home and around 
the world. This is a global public health crisis, and we remain 
grateful to our healthcare professionals for delivering the 
most important response, and to our essential workers who help 
us meet our daily needs. These dedicated people put themselves 
at risk day after day in service to others and to our country.
    Beginning in March, the virus and the forceful measures 
taken to control its spread induced a sharp decline in economic 
activity and a surge in job losses. As the economy reopens, 
incoming data are beginning to reflect a resumption of economic 
activity. Many businesses are opening their doors, hiring is 
picking up, and spending is increasing. The economy has entered 
an important new phase and has done so sooner than expected.
    While this bounce-back in economic activity is welcome, it 
also presents new challenges, notably the need to keep the 
virus in check. While recent economic data offers some positive 
signs, we are keeping in mind that more than 20 million 
Americans have lost their jobs and that the pain has not been 
evenly spread. The rise in joblessness has been especially 
severe for lower-wage workers, for women, and for African 
Americans and Hispanics. This reversal of economic fortune has 
caused a level of pain that is hard to capture in words as 
lives are upended amid great uncertainty about the future. The 
path forward for the economy remains extraordinarily uncertain 
and will depend, in large part, on our success in containing 
the virus. A full recovery is unlikely to occur until people 
are confident that it is safe to engage in a broad range of 
activities. The path forward will also depend on policy actions 
taken at all levels of government to provide relief and support 
the recovery for as long as needed.
    The Federal Reserve is strongly committed to using our 
tools to do whatever we can for as long as it takes to provide 
some relief and stability to ensure that the recovery will be 
as strong as possible and to limit lasting damage to the 
economy. After lowering the Federal funds rate to essentially 
zero, our actions so far fall into four categories: stabilizing 
Treasury and agency MBS markets; money market, and liquidity 
and funding measures; direct efforts to support the flow of 
credit in the economy; and targeted regulatory measures to 
support those efforts.
    So far, we have created 11 Facilities under Section 13.3 of 
the Federal Reserve Act to support liquidity, funding, and the 
flow of credit to households and businesses and State and local 
governments. Without access to credit, families could be forced 
to cut back on necessities or even lose their homes. Businesses 
could be forced to downsize or close, resulting in further 
losses of jobs and incomes and worsening the downturn.
    Our emergency lending facilities have all been undertaken 
with the approval of the Treasury Secretary, and many are 
supported by funding from the CARES Act. Their status and 
effects are discussed in greater length in my written 
statement, which I have provided to the committee. The Fed will 
continue to use these powers forcefully, proactively, and 
aggressively until we are confident that the nation is solidly 
on the road to recovery. When the time comes, after the crisis 
has passed, we will put these emergency tools back in the 
toolbox.
    I would stress that these are lending powers, not spending 
powers. I will also note that we design our facilities to work 
for broad ranges of businesses and municipalities. We do not 
target particular firms or industries. Elected officials have 
the power to tax and spend and to make decisions about where to 
direct such targeted relief. The CARES Act and other 
legislation provides direct help to people, businesses, and 
communities. This direct support is making 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.
    Public faith in our operations depends on transparency. At 
the Fed, we are committed to that transparency, particularly in 
deploying our emergency powers. Thank you. I look forward to 
answering questions.
    [The prepared statement of Chairman Powell can be found on 
page 41 of the appendix.]
    Chairwoman Waters. Thank you very much, Chairman Powell. I 
now recognize myself for 5 minutes for questions.
    As I mentioned in my opening, the pandemic is 
strengthening, and so, too, must our response. Two weeks ago, 
Chair Powell, when I asked you about the need for more 
congressional action to protect our communities, you said, 
``There are something like 25 million people who are still 
dislodged from their job, in full or in part, due to the 
pandemic. I would think it would be a concern if Congress were 
to pull back from the support that it's providing too 
quickly.''
    Unfortunately, tomorrow, this is exactly what will happen 
if the Senate does not pass the Health and Economic Recovery 
Omnibus Emergency Solutions (HEROES) Act. Tomorrow, the PPP 
program stops taking new loan applications. The PPP should be 
extended immediately so that the remaining $135 billion in 
funding can support small businesses. Also happening tomorrow, 
millions of families will be unable to pay their rent and 
mortgages. In June, one-third of renters couldn't pay rent, 4.2 
million homeowners are currently in forbearance because they 
are unable to pay their mortgages, and evictions have already 
started in many States where local eviction moratoria have 
expired. While the moratoria should be extended, it is not 
conscionable to simply delay an eviction and foreclosure 
crisis. Congress and the Administration must provide assistance 
to struggling low-income families to cover their rent and 
utility payments.
    So, Chairman Powell, millions of families are at risk of 
being stripped of their homes. Do you think Congress should 
provide financial assistance to ensure that people can stay in 
their homes?
    Mr. Powell. Thank you, Madam Chairwoman. I try to keep my 
fiscal comments at a very high level, and actually that comment 
you referred to, was referring to the unemployment insurance 
that expires at the end of July. And I think for the specifics 
of what you need to be doing, we have the Treasury Secretary 
here, and I would defer to the Treasury Secretary on fiscal 
matters here.
    Chairwoman Waters. Okay. So, you put it off on Mr. Mnuchin. 
While you have made some changes to broaden the Municipal 
Liquidity Facility, many jurisdictions, like the Territories, 
are still locked out. When we last spoke, you mentioned that it 
was difficult, but perhaps there was a way that Guam may be 
eligible. Did you find a way to take a serious look at that and 
determine whether or not something could happen?
    Mr. Powell. Yes, we are taking a serious look at that. The 
Territories themselves are not investment grade-rated, and they 
were not before the pandemic set in, and that is the minimum 
standard for access to the Municipal Liquidity Facility. Of 
course, businesses in the Territories would be eligible for the 
Main Street Facility. Some of the revenue-based facilities that 
Guam has are investment grade-rated, but below the minimum, and 
we are actually reviewing our credit standards in the Municipal 
Liquidity Facility at the moment to determine if there is a way 
to adjust the Facility in a way that would make eligible some 
creditworthy issuers without violating the spirit or the letter 
of Section 13.3.
    Chairwoman Waters. Thank you. Secretary Mnuchin, with 
critical unemployment support expiring next month, and today 
marking the last day that Treasury and the Small Business 
Administration's (SBA's) claim that new PPP loans can be 
approved, does the Administration support extending these 
programs as proposed in the HEROES Act?
    Secretary Mnuchin. We do support additional legislation, 
and we look forward to working with the House and the Senate on 
that. As it relates to the PPP, I have already had 
conversations with the Small Business Committee in the Senate 
about repurposing that $135 billion, and I think that should be 
done, and I look forward to working with both the House and the 
Senate so that we can pass legislation by the end of July.
    Chairwoman Waters. Thank you very much. The ranking member 
of the committee, the gentleman from North Carolina, Mr. 
McHenry, is now recognized for 5 minutes.
    Mr. McHenry. Thank you. Thank you for your testimony. 
Secretary Mnuchin, I think there is wide agreement that your 
engagement in the PPP program made things largely better, 
right? The Treasury expertise in making sure that SBA could 
deliver on this really seminal program of the CARES Act is 
proven out because you have 4\1/2\ million small businesses 
that have benefited from it. The average loan size is quite 
modest in the context for our economy, but the effect is pretty 
widescale. So, what would you say regarding the additional 
funds that are purposed for PPP? What should be our focus as 
policymakers on repurposing that $134 billion? How can we best 
do that? Is that the 7(a) Program? Is that an expiry loan 
program? How do you see this fitting in, given the actions of 
Main Street and other Facilities you stood up through this Act?
    Secretary Mnuchin. Thank you, and I appreciate your 
comments. I think at the time when we passed the last CARES 
Act, the economy was in very difficult shape, and we needed to 
get money quickly. And I have said before, programs that took 3 
or 4 months were not the focus. I think that there appears to 
be bipartisan support in the Senate to repurpose the $130 
billion for PPP, and extending it to businesses that are most 
hard hit, that have a requirement that their revenues have 
dropped significantly, things like restaurants and hotels and 
others where it is critical to get people back to work.
    Mr. McHenry. Okay. That seems like a reasonable step in the 
right direction. Chairman Powell, the reputation you have 
garnered this year, in particular, is that your actions have 
been predictable, and that you signal what you are going to do 
and you follow through on it, transparent in that you lay out 
the metrics for action. You, therefore, follow those metrics. 
Incredible. One example is that at announcement, you said that 
you were going to support corporate bonds, and by saying you 
are going to support corporate bonds, the market acted as if 
the Fed already had the program up and running, to the point 
where once you were up and running, people asked why you 
followed through on that program.
    Now, I think that is important to note. That transparency, 
that guidance, that communication has been effective in this 
opening stage in setting up these responses. So along those 
lines, the Fed took, what I would call, strong medicine in 
terms of action on the stress test to restrict dividends and 
buybacks, and in restraints on these large financial 
institutions. I would call that quite strong medicine. I think 
what we want to understand are the metrics that the Fed is 
going to use in order to make these judgments and assessments 
in this next phase over the next couple of months for these 
large financials?
    Mr. Powell. I think you have to start with two major facts 
here. One is that the banking system is very strong, and has 
been a source of strength. The banks have been taking on a wave 
of deposits. They have been engaging in forbearance. They have 
been making loans. So, they are a source of strength in this 
situation, unlike the last crisis, where they were a source of 
weakness. It is also a fact that things are highly uncertain, 
and so to preserve that strength, what we have done is we have 
stopped all share repurchases and we have stopped increases in 
dividends, so we are preserving the level of capital in the 
system.
    To address the uncertainty, looking forward, we did run 
these three sensitivity analyses, and they were really to 
assess the overall strength of the system in the face of these 
downside cases. We found that the majority of firms were still 
adequately capitalized, sufficiently capitalized, in all of 
those scenarios. Notwithstanding that, for the first time in 
the history of these tests, we said that we are going to ask 
the banks to resubmit their capital plans. We are going to 
distribute scenarios, and we are going to look at the results 
again as we learn more about the path of the crisis. And in 
terms of the precise metrics we are going to be looking at, we 
will be providing more clarity about that, going forward.
    Mr. McHenry. But based off of that uncertainty, you are 
asserting as a regulator that you will actively review this to 
ensure that we don't have a financial crisis as a result of 
this health crisis?
    Mr. Powell. Yes, we are going to keep monitoring this. We 
are learning so much every quarter, and the path of the economy 
is highly uncertain. In our system, dividends are declared 
every quarter. We have already stopped the overwhelming 
majority of distribution, so we think that is the right place 
to be.
    Mr. McHenry. Thank you. Thanks for your leadership and 
effectiveness, and thank you as well, Secretary Mnuchin, for 
your effectiveness in leadership. I yield back.
    Chairwoman Waters. Thank you. I now recognize the 
gentlewoman from New York, Mrs. Maloney, for 5 minutes.
    Mrs. Maloney. Thank you, and welcome. Secretary Mnuchin, I 
would like to ask you about a very troubling oversight issue. 
As you know, I am the Chair now of the House Oversight and 
Reform Committee, and I take these matters very seriously, and 
I hope that you do, too.
    In the CARES Act, we created the Pandemic Response 
Accountability Committee, or PRAC, which is a committee of 
independent inspectors general that is charged with overseeing 
all of the money spent in the CARES Act, and identifying waste, 
fraud, and abuse. Last month, the General Counsel's office in 
Treasury issued a legal opinion that questions PRAC's authority 
to oversee trillions of dollars of CARES Act spending. To put 
it bluntly, this legal analysis is so bad that it borders on 
bad faith.
    The opinion claims, with no evidence, that Congress did not 
intend for the PRAC to have oversight authority over anything 
in the first half of the CARES Act, including the PPP program 
and any of the Fed's Lending Facilities or the $150 billion in 
funding for State and local governments. So I would say, 
Secretary Mnuchin, that this interpretation is wrong, that it 
is just plain wrong.
    Senator Gary Peters and I proposed and authored this 
section of the law, the PRAC Act, and I was heavily involved in 
negotiating those provisions in the CARES Act, and I am telling 
you that Congress' intent was for the PRAC to oversee all of 
the spending in the CARES Act, not just one-half of the CARES 
Act, but all of it. That was our intent, and that was what the 
bill said explicitly. The interpretation from your general 
counsel's office is already causing problems because it is 
hindering the PRAC's ability to monitor how the States are 
spending their CARES Act money.
    So now, Secretary Mnuchin, I would say that we have worked 
very productively together and in good faith negotiations on 
the Beneficial Ownership Bill and other bills before Congress, 
so I hope that you will take my concerns about this erroneous 
legal opinion seriously, and this is what I would like to ask 
today: I would like you to commit to interpreting this section 
of the CARES Act as Congress intended, with the PRAC's 
oversight authorities applying to all of the CARES Act 
spending. I think this is a small step, but a very important 
one, that you can take to show that you are serious about the 
oversight of the trillions of dollars in the CARES Act.
    Secretary Mnuchin. Thank you. I appreciate your comments, 
and I assure you we are very much committed to working with the 
Oversight Committee on transparency. Now, as it relates to 
this, I can assure you it was not bad faith. I am happy to have 
our office follow up with you. It has to do with a technical 
issue of recipients reporting. As it relates to the issue of 
monitoring State spending, I am more than happy to put the PRAC 
in touch with our Inspector General, who has primary oversight, 
and to make sure that whatever information specifically the 
PRAC wants on the States, that we accommodate.
    Mrs. Maloney. That is not what I am asking. What I am 
asking is, will you commit to interpreting the PRAC's oversight 
authorities as applying to all of the CARES Act spending? That 
was our intent. I wrote that section of the law. That was what 
Congress wanted. There is no problem with the interpretation. 
It is very clear and explicit. Will you commit to allowing the 
oversight that was in the bill?
    Secretary Mnuchin. I appreciate that you wrote that 
portion. I would also say I appreciate I had very direct 
discussions with people in the Senate about various different 
oversight. That is why we agreed to a new oversight committee 
with full transparency. We agreed to provide information that 
was not required under Section 13.3 so we have full 
transparency. And, again, I am happy to follow up with you on 
the specific concerns as to which different entities should 
receive what information. I think it is important that there is 
not bureaucratic overlap. But, again, let me emphasize, if the 
PRAC needs certain information, we will try to do what we can 
to accommodate it.
    Mrs. Maloney. I am very disappointed with that answer, and 
I guess we will have to pursue a legislative solution. It was 
very clear that the intent of Congress was that PRAC would have 
oversight of all of the CARES spending. I yield back. I am out 
of time.
    Chairwoman Waters. Thank you.
    The gentlewoman from Missouri, Mrs. Wagner, is now 
recognized for 5 minutes.
    Mrs. Wagner. Thank you, Madam Chairwoman, and thank you for 
joining us today, Secretary Mnuchin and Chairman Powell. I want 
to commend you both at the outset here for your leadership 
during this unprecedented time. Both the United States 
Department of the Treasury and the Federal Reserve System have 
shown their ability to both effectively and rapidly respond to 
the economic crisis caused by COVID-19 by providing trillions 
of dollars to stabilize our economy.
    Chairman Powell and Secretary Mnuchin, lender registration 
for the Main Street Lending Program went live on June 15th, I 
believe. Do either of you know how many lenders have registered 
so far, and do you know the average size of the lenders 
participating? If not, when do you think this information might 
be made available? I will toss it to either of you?
    Mr. Powell. Sure. In the range of 300 banks, and it may be 
higher than that--that number is a few days old--have entered 
the registration process. It takes a few days, so I can't tell 
you exactly how many, but that is how many will come out of the 
pipeline.
    Mrs. Wagner. Average size of lenders?
    Mr. Powell. I don't know. The size ranges from the large to 
the very small, and the very small are particularly well-
represented, but it does range across the full spectrum.
    Mrs. Wagner. And you will be providing this information to 
us on a regular basis?
    Mr. Powell. We are working with the borrowers to figure out 
the right way to connect lenders and borrowers and borrowers 
and lenders so they can get in touch with each other. So we are 
working with the lenders to put something together that will 
make that happen in the most efficient way.
    Mrs. Wagner. Thank you. Chairman Powell, in your efforts to 
create broad-based programs, do you think that the Main Street 
Facility will need to expand any further to meet the needs of 
our businesses?
    Mr. Powell. Let me say, as you have seen, the Secretary and 
I work very closely on this, and we have been very willing to 
learn from experience and learn from what we are hearing from 
different parts of the economy, so we--
    Mrs. Wagner. You certainly did with the PPP program, so I 
would hope that you would approach this the same way.
    Mr. Powell. We will. As you know, we are in the relatively 
early stages of opening up a non-profit Main Street Facility, 
and I think will be watching as the regular Main Street fully 
comes online, and continuing to look to see whether there are 
ways we can improve it.
    Mrs. Wagner. Thank you. Chairman Powell, last week's 
release of the Federal Reserve's Comprehensive Capital Analysis 
and Review (CCAR) outcome and, more importantly, the results of 
their COVID-19 sensitivity analysis, underscores the 
resilience, I think, of the banking system. While we can all 
agree that the level of uncertainty in the economy continues to 
be high given the progression of the COVID-19 pandemic, I 
believe the Federal Reserve subjected CCAR filers to 
extraordinary assumptions regarding unemployment and GDP 
contraction. Despite these assumptions, the 33 largest banks 
remained above minimum Tier 1 capital requirements. Given that, 
I am wondering why the Federal Reserve has indicated that firms 
will need to resubmit capital plans, and, in addition, there 
will be an off-cycle supervisory stress test in the ``latter 
part of the year.'' The Federal Reserve has already- ncluded 
firms' capital planning management processes and, I think, 
approaches and assumptions, passed the toughest test. So, could 
you explain that, please?
    Mr. Powell. Sure. What the 33 institutions all passed was 
the regular-way, severely-adverse scenario that we wrote before 
the pandemic arrived. That is what controlled the outcome at 
this time. Also, though, remember, the pandemic arrived right 
in the middle of the stress test period, so we quickly devised, 
without going through our usual very thorough vetting process, 
three alternative sensitivity analyses, one of which was a V-
shaped recovery, one of which was U-shaped, and one of which 
was a serious double dip, and these are very serious downside 
side cases. We didn't use them to evaluate individual 
institutions, but, rather, to evaluate the broad range of 
institutions, and we didn't--
    Mrs. Wagner. I am running out of time. Why lock up 
additional capital now? This has the potential to have, I 
think, a chilling effect on the economy at exactly the point 
where banks need to provide credit and liquidity to households 
and businesses to facilitate economic recovery and support and 
financial intermediation in the capital markets. So, I will 
leave you with that.
    Mr. Powell. No, we didn't do that. We are not looking to 
raise capital standards during a crisis. That is not what is 
going on here.
    Mrs. Wagner. Thank you for that clarification, and I yield 
back.
    Chairwoman Waters. Thank you. The gentlewoman from New 
York, Ms. Velazquez, is now recognized for 5 minutes.
    Ms. Velazquez. Thank you, Madam Chairwoman, and Ranking 
Member McHenry. Mr. Secretary, at any time, have you been 
blocked by President Trump or anyone else at the White House 
from providing access to information requested by Congress or 
an oversight body?
    Secretary Mnuchin. No.
    Ms. Velazquez. Have you ever prevented anyone within the 
Treasury Department, or the Administration, more broadly, from 
providing access to information requested by Congress or an 
oversight body?
    Secretary Mnuchin. If you are referring to an oversight 
body, not that I am aware of, no.
    Ms. Velazquez. Okay. So, tonight, the PPP program expires, 
and you are advocating for extending that authorization. You 
are telling us that you are already discussing this with the 
Senate, but there is a role for the House.
    Secretary Mnuchin. Of course.
    Ms. Velazquez. Yes, and I will remind you that nothing will 
move unless we have those conversations. As Chair of the House 
Small Business Committee, I cannot in good sense make a 
determination as to where the program should go or what tweaks 
or what reforms the program needs unless we have access to the 
data. When are you going to provide the data to our committee?
    Secretary Mnuchin. I believe we said by the end of this 
week, and we have reached out to your committee to make sure we 
establish secure--
    Ms. Velazquez. No, we got a letter, but no date has been--
    Secretary Mnuchin. It is supposed to be delivered by the 
end of this week. Let me just say, I am more than happy to 
speak to you if you would like to set up a time to speak.
    Ms. Velazquez. Sir, we have been contacting your office 
every week asking for you to appear before the Small Business 
Committee with the administrator. I spoke to her last week. She 
intends to come before the committee. You are saying here that 
we need to take care of those most hard-hit businesses in this 
next repurpose of the $135 billion that is left, but we need to 
know if the program worked as intended by Congress. We know 
that 4 million businesses accessed the program, but what about 
the millions of minority- and women-owned businesses that were 
not able to access the program? You said that maybe a 
restaurant might need to get a second loan. I just heard 
Senator Marco Rubio--well, no one should get a second loan 
unless we know that most businesses who are struggling get a 
chance to get a loan.
    Chairman Powell, as Chair of the House Small Business 
Committee, I am particularly concerned about the state of our 
nation's small businesses as the pandemic poses an acute risk 
to their survival. How would the failure of small businesses, 
especially those that are women- or minority-owned, adversely 
affect the communities they serve, particularly those of color? 
What impact could these failures have on future labor market 
conditions?
    Mr. Powell. Of course, the effects could be very 
significant. Small businesses generate most of the jobs and 
most of the growth in the economy, so that could be very 
important, particularly in minority communities.
    Ms. Velazquez. Chairman Powell, earlier this month, the 
Organisation for Economic Co-Operation and Development (OECD) 
said the pandemic has triggered the most severe recession in a 
century and warned that the global economy could contract by 
7.6 percent this year should a second outbreak hit. Do you 
agree with this assessment?
    Mr. Powell. That particular number--there is a range of 
assessments, but I would say that is in the range. And, yes, I 
can't think of a more--
    Ms. Velazquez. And what impact do you see a second outbreak 
having on both the U.S. and the global economy?
    Mr. Powell. I certainly wouldn't forecast that, and, just 
hypothetically, a second outbreak could force governments and 
force people to withdraw again from economic activity. And I 
think the worst part of it would be to undermine public 
confidence, which is what we need to get back to lots of kinds 
of economic activity that involves crowds.
    Ms. Velazquez. Thank you. I yield back.
    Chairwoman Waters. Thank you. Mr. Lucas, you are now 
recognized for 5 minutes.
    Mr. Lucas. Thank you, Madam Chairwoman. Chairman Powell and 
Secretary Mnuchin, thank you for attending this hearing today. 
And I want to begin by commending Chairman Powell on finalizing 
the Inter-Affiliate Margin Rule. This may be the last time we 
discuss this, sir. While these rules may seem abstract and 
difficult to understand, they have a real impact on agriculture 
and oil and gas producers back home that use financial 
derivatives, manage risk, and plan for the future, which can 
be, as we have seen in past months, to put it mildly, 
unpredictable.
    That said, as both of you know, commercial paper finances a 
wide array of economic activity and provides liquidity for 
companies to meet their operational needs. With the commercial 
paper market under significant strain due to COVID-19, in mid-
March, the Federal Reserve established the Commercial Paper 
Funding Facility to encourage investors to lend in the 
commercial paper market, which ultimately supports businesses 
and jobs across the country. Chairman Powell, could you 
describe the current indicators of how the commercial paper 
market responded to the creation of the facility, and has there 
been a discussion to expand the facility to address liquidity 
issues faced by Tier 2 issuers?
    Mr. Powell. The Commercial Paper Facility has substantially 
healed. As you point out, it really closed there in the 
beginning part of March, as so many markets did, and when we 
announced the facility, the highest-graded borrowers were able 
to start borrowing. So largely, but not completely, that market 
has returned to fairly normal function, and we are watching it 
carefully. I would say we are not currently assessing whether 
to broaden that facility, but should the situation deteriorate, 
we would have that as an option.
    Mr. Lucas. Thank you. Secretary Mnuchin, there have been 
reports that China is restricting global agricultural imports 
due to COVID-19. How are we working to resolve this with China, 
and do you anticipate this impacting the terms of the Phase 1 
trade agreement to purchase $200 billion in U.S. goods and 
services, particularly the commitment to purchase $40 billion 
in U.S. farm products?
    Secretary Mnuchin. Let me just first emphasize that we have 
very serious concerns about the lack of transparency from China 
as it relates to COVID. Having said that, we have every 
expectation that they will support and live up to the Phase 1 
agreement, and they are well on their way for those 
commitments.
    Mr. Lucas. One last question. Native American tribes have 
been hit particularly hard by COVID-19. Tribal employment is 
often concentrated in the arts, recreation, and accommodation 
industries. How has the Federal Reserve and Treasury been 
looking specifically at the economic challenges faced by 
tribes?
    Mr. Powell. As to Main Street, of course, the tribal 
businesses are eligible for participating in Main Street, and 
that is where a lot of the economic activity is there. The 
tribes themselves are not really general obligation issuers, so 
they are not particular candidates for the Municipal Facility.
    Mr. Lucas. Thank you. And with that, Madam Chairwoman, I 
yield back the balance of my time.
    Chairwoman Waters. Thank you. Mr. Sherman, you are now 
recognized for 5 minutes.
    Mr. Sherman. Thank you. Secretary Mnuchin, I am a very nice 
guy, so I won't mention the press reports that say that over $1 
billion in stimulus payments have gone to people who are 
deceased. But I will urge you to adhere quickly to the 
agreement that you have made with the Senate Small Business 
Committee to very quickly release the names and data of all PPP 
borrowers that have borrowed over $150,000.
    Chairman Powell, back on March 12th, I sent you a letter 
urging that you prohibit stock buybacks by banks. You have done 
so. Thank you very much. About 2 weeks ago, you went on the 
record to say, ``I would think that it would be of concern if 
Congress were to pull back their support,'' having just said 
that there are 25 million people who have been dislodged from 
their jobs. I thank you for that advocacy, and I hope Congress 
listens. We need to do more to stimulate this economy under 
these circumstances.
    Secretary Mnuchin mentioned the support that he's providing 
to local and State Governments, but that is all in the form of 
loans, and, of course, almost all State and local governments 
can't run a deficit. So with their revenues down by hundreds of 
billions of dollars, I hope we pass the HEROES Act and actually 
provide aid to State and local governments. And one issue, 
Chairman Powell, for the Main Street Lending Program that is 
particularly relevant to commercial real estate is that if they 
get a loan from you, they violate the loan covenants that they 
have in their existing mortgage, and I look forward to working 
with you on that. One possible solution is the bill that I 
submitted, and we have had hearings on in this committee, the 
Business Borrowers Protection Act. Certainly, getting a loan on 
a program that we have authorized because of the COVID crisis 
should not trigger the violation and make a pre-existing 
mortgage immediately due and payable.
    I spent this morning at the White House with a few of our 
colleagues getting briefed on Russian involvement in 
Afghanistan, and it appears to me, Secretary Mnuchin, that they 
have been bold. They have killed our soldiers, because when 
they do something else that we catch them on, we don't sanction 
them very much. The debate now is whether they took the obscene 
step of putting a bounty on the head of individual soldiers, or 
whether they have limited their involvement in Afghanistan to 
just aiding the Taliban, but not correlating that aid to how 
many dead Americans this or that operation created. And, of 
course, the response from the Administration to this seems to 
be, well, let them into the G-8 and otherwise help them. That 
kind of lax response will lead to more deceased American 
soldiers.
    Under the Chemical Weapons Act, which Congress passed a 
couple of years ago, your Department was supposed to sanction 
Russia for their violation of the Chemical Weapons Act when 
they used poison to try to assassinate a Russian dissident in 
Britain, but you opted for the weakest sanctions allowed by the 
Act. What it does, is it prohibits certain loans from Americans 
to the Russian government, but it doesn't apply to ruble 
transactions. It doesn't apply to loans to state-owned 
enterprises, and it apparently doesn't apply to purchases in 
the secondary market.
    Given the fact that our under-sanctioning of Russia has 
led, at least, to their aiding the Taliban in a general sense 
and, according to press reports, has led to the specific 
putting of a bounty on our soldiers, could you revisit your 
decision on this existing law and impose these bans on ruble 
transactions, state-owned enterprises, and secondary markets?
    Secretary Mnuchin. You covered a lot--
    Mr. Sherman. It must be a tough question. You took off your 
mask.
    Secretary Mnuchin. Let me just comment, we believe we 
followed the law and selected amongst a series of items at the 
time, but I am happy to go back--I recall the situation--and 
look at it again.
    Mr. Sherman. There are credible reports that they put 
bounties on our troops. Please, look at it again.
    Secretary Mnuchin. Again, on that, I just want to be clear. 
For the record, I am not commenting on classified information, 
nor do I think it is appropriate in this setting to talk about 
alleged information that is in the press.
    Chairwoman Waters. Mr. Posey, you are now recognized for 5 
minutes.
    Mr. Posey. Thank you, Madam Chairwoman and Mr. Ranking 
Member, for holding this hearing today to review the Treasury 
and the Federal Reserve's pandemic responses.
    Mr. Secretary, I want to commend your efforts and those of 
the President's team, but most especially you, in working with 
Congress to put relief in place during these extraordinary 
times. The stimulus checks and the Paycheck Protection Program 
have been tremendously successful in bringing much-needed 
relief to hard-hit American families. It has been huge. Nothing 
like it before. It is great, the very best there is.
    Secretary Mnuchin. Thank you.
    Mr. Posey. I also want to commend Chairman Powell for his 
leadership in keeping the financial markets stable and liquid 
in the face of the downturn in the general economic conditions. 
We await full implementation of the Main Street Lending 
Program, and I am looking forward to hearing more about that.
    My first question is, our nation's hoteliers have been 
facing one of the most severe downturns in demand of any sector 
of our economy. Revenues have plummeted as much as 80 percent 
during the shutdown, and extreme curtailment of travel, as you 
know.
    I am wondering--and I would like a response from both of 
you--if you have the authority you need under Section 13(3) of 
the Federal Reserve Act, and more broadly, the CARES Act, to 
address the liquidity and cash flow crisis that the hotel 
sector will be going through?
    Mr. Powell. I will go first. We are not looking for 
additional authority under 13(3). Our authority is, of course, 
to lend to solvent institutions and in programs of broad 
applicability, and any company in any sector that meets those 
tests can borrow at one of our facilities.
    Mr. Posey. Okay.
    Secretary Mnuchin. The only thing I would just add to that 
is that we do appreciate, and certain comments have been made 
by this committee and others as it relates to loans that are in 
securitizations, and particularly hotels and other real estate 
that was properly levered beforehand. It does not lend itself 
as well to the 13(3) facilities, and we continue to look at 
that.
    Mr. Posey. Okay. Mr. Chairman, some of our businesses, 
including, again, the hoteliers, are warning that their 
inability to make payments is threatening the servicing of 
commercial-backed securities, and I just wonder if you can 
bring us up to date on the status of the commercial mortgage-
backed securities (CMBS) market?
    Secretary Mnuchin. As I just mentioned, one of the problems 
of the CMBS market is there are very strict contractual 
obligations, and that is why one of the things I do think we 
need to look at in the next CARES Act is additional funding for 
these industries that are the hardest hit, so they can continue 
to rehire people, so that as occupancy increases, they have 
employees that they can maintain.
    Mr. Posey. Great. Thank you. I recently wrote to both of 
you expressing my concern for businesses that are asset-based 
and I believe they will face hurdles to assessing Main Street 
Lending facilities because of the nature of their business 
challenges, their ability to meet lending criteria, based on 
the earnings before interest, taxes, and amortization, the so-
called EBITA. For example, an aircraft developer in my 
district, especially an R&D organization, falls into this 
category, and I wonder if you could tell me what the 
possibilities are of providing access to Main Street Lending 
facilities for businesses like that? And you can go first, Mr. 
Secretary.
    Secretary Mnuchin. We have discussed looking at asset-based 
financing, and that is something we continue to discuss with 
the Federal Reserve.
    Mr. Posey. Okay. Mr. Powell?
    Mr. Powell. Yes, that is where we are.
    Mr. Posey. Thank you, Madam Chairwoman. I yield back.
    Chairwoman Waters. Thank you. Mr. Clay, you are now 
recognized for 5 minutes.
    Mr. Clay. Thank you so much, Madam Chairwoman, and I thank 
both witnesses for your participation today.
    Mr. Secretary, I am somewhat troubled by recent reports 
that some banks have taken stimulus payments from individuals 
and families, where the garnishment orders are negative account 
balances, to offset unrelated debts owed to them. I find it 
troubling that banks would serve as debt collectors at a time 
like this when families need resources most.
    When will Treasury issue guidelines articulating your 
expectation that financial institutions refrain from taking 
stimulus funds away from their customers during a time like 
this?
    Secretary Mnuchin. Let me first say I agree with you, and 
that I think it would be awfully unfortunate if banks are doing 
that. We have had inquiries about the issue of garnishment, and 
we agree, from a policy standpoint, that there should have been 
no garnishment. Unfortunately, that is something we need to 
address in the next CARES Act if we do additional direct 
payments, because there are certain State laws that were not 
overridden in the existing CARES Act. But my understanding is 
that is a State issue and not a Federal issue. But we agree 
from a policy--
    Mr. Clay. But think about the cruelty of the policy. 
Wouldn't you want to--
    Secretary Mnuchin. As I said, I agree with you on the 
policy.
    Mr. Clay. Couldn't you all issue a blanket--
    Secretary Mnuchin. We have asked our legal department, and 
unfortunately we can't, and that is one of the things we would 
want to fix in the next CARES Act. So, we agree with you from 
the policy standpoint.
    Mr. Clay. Thank you. Chairman Powell, for many nonprofits 
and small businesses, earnings before interest, taxes, 
depreciation and amortization is not a widely used metric. Have 
you considered applying other metrics of debt, future growth, 
or financial health to the Main Street Lending Program so that 
nonprofits and small businesses are fully able to participate?
    Mr. Powell. Yes. As a matter of fact we have, particularly 
for nonprofits, of course, earnings before interest taxes 
doesn't make any sense. So, you don't need to take taxes out. 
They are nonprofits. They don't pay tax. We are looking at a 
range of--and we actually put this out for comment, and we got 
a lot of very thoughtful comments from the nonprofit community, 
looking at cash flow and also financial resources, more 
broadly.
    In terms of companies, EBITA is just basically pre-tax cash 
flow. It is a very widely used metric. But there are other 
metrics, and as the Secretary mentioned, one of them, probably 
the next one in line, is something along the lines of asset-
based, and that is something that we are looking at with the 
Treasury.
    Mr. Clay. Under the Main Street Lending Program, you 
reduced the minimum loan threshold from $1 million to $250,000, 
and then by expanding the program to nonprofits with more than 
50 employees. However, many small businesses may not need 
$250,000.
    Mr. Chairman, has the Fed considered eliminating the 
minimum loan threshold altogether?
    Mr. Powell. We have not considered eliminating it yet, of 
course, and we are just now getting rolling with loans, as you 
know. So we can, once we get up and running, look at lowering 
it again, but you get into a very different kind of lending 
when you are down lower. These are really personal loans rather 
than business loans. They are generally guaranteed by the 
business operator, and we could look at that. But that would be 
something we would look at once we get up and running.
    Mr. Clay. Yes, but it is kind of concerning that you have 
that threshold at $250,000 when, say, a small business in St. 
Louis needs $100,000 to survive through this pandemic until 
they get back on their feet. Any consideration given to 
accommodate that?
    Mr. Powell. Yes. No, we can see ourselves possibly lowering 
the threshold again, but just logistically, for us to be making 
very, very small loans would be difficult, and those people may 
be better dealt with through fiscal policy. But I can see us 
down the road looking at a lower threshold.
    Mr. Clay. I see. Thank you both for your responses, and 
Madam Chairwoman, I yield back.
    Chairwoman Waters. Thank you. Mr. Scott, you are recognized 
for 5 minutes.
    Mr. Scott. Thank you, Madam Chairwoman. Chairman Powell, we 
all know that job losses have disproportionately impacted 
women, African Americans, and other minorities, but at the same 
time, our capital markets have improved significantly since the 
epidemic. Why is that? Is there something you are doing more so 
to help the capital markets than helping job losses corrected?
    Mr. Powell. No. In fact, the objective of everything we are 
doing, every single thing we are doing is to take the 25 
million people whose working lives have been disrupted and 
create a situation in which they have the best chance to go 
back to their old job or to get a new job. That includes all 
the facilities that we are doing. That is the overriding goal 
of what we are doing, and every one of them helps in that 
direction.
    Mr. Scott. Yes, I know that is your goal, but what I am 
trying to get at is, is it correctable? Are there some things 
you can do to fix this imbalance between staggering lowering 
unemployment and soaring rise in our financial capital markets?
    Mr. Powell. What we have been trying to do is to create 
accommodative financial conditions and supportive financial 
conditions so that when the economy reopens--remember, we sort 
of deliberately closed it down--that expansion can be vigorous 
and strong, and it is just beginning now. Our support for that 
is part of what is driving the job growth that you saw in May, 
which was surprising to the upside.
    Mr. Scott. Yes. Also, while we have both of you all here, I 
want to pick up on what Chairwoman Waters was saying. We have a 
great opportunity here to do both of these things, with our 
housing and homeowner tranche that we are putting forward. This 
goes right into the belly of our economic wheelhouse jobs, 
keeping people secure, because it is coming. When 25 or 30 
million people lose their jobs, how are they going to pay their 
house note? How are they going to pay the rent? How are they 
going to pay utilities? And more than that, how are the banks 
and the financial institutions going to get their mortgage 
payments so that they can make payments for the securitization 
of those mortgages that keeps our financial system healthy?
    So, I want to ask you to make sure that you all start 
talking about these things that we are putting forward. You my 
not agree with us on everything, but this is one that is very 
important.
    Let me go to one other area, to you, Secretary Mnuchin. 
None of the lending facilities established have targeted the 
needs of our agriculture industry. Now, why do I mention that? 
Food. It is coming. I don't know why people can't see this 
crisis. Food shortages are coming. It is almost like the 
farmers have been the forgotten ones. Are they qualifiable as 
small businesses? Many of them don't know. They are sort of out 
there, just dribbling along the misty flats.
    What are you all doing to help lift up and make sure that 
we give our farmers, our rural communities the kind of help 
that they need? Because all of the food chain is going down, 
and you hear about the closures, the food processors are going 
down. Farmers are coming. These are small. Most of them, they 
are very important. Why can't they be qualified as small 
businesses? Where are they? They are getting lost in the 
shuffle. And if we get a food shortage, we are in--
    Chairwoman Waters. Thank you. Mr. Luetkemeyer, you are now 
recognized for 5 minutes. I would encourage all of the Members 
to keep their mask on, please.
    Mr. Luetkemeyer. Thank you, Madam Chairwoman, and thank 
you, Secretary Mnuchin and Chairman Powell, for being here 
today, and for your great leadership during this time. As we 
have gone through this, you guys have been very responsive, and 
you have been very cooperative. I can tell you from discussions 
that we have had in different settings, you have implemented 
lots of suggestions that we have come up with as a group, as a 
Congress, and for that, we are grateful. Leaders make tough 
decisions in tough times, and you have both exhibited the 
ability to make those tough decisions, so thank you very much.
    Both of you, in the past, have expressed your support for 
housing finance reform and GSE credit risk transfer (CRT). In 
prior testimony, you have committed to reviewing your 
prospective policies to determine whether capital relief is 
appropriate for U.S. banking organizations that engage in CRT 
with sound counterparties. FHFA recently re-proposed a capital 
framework for Fannie Mae and Freddie Mac, which adopts much of 
the U.S. banking framework, but in doing so, seems to have 
taken a confused and more punitive approach to certain types of 
CRT.
    I am encouraged by the questions posed in the proposal that 
would seem to indicate that there remains room for revision 
before the rule is final. I ask each of you gentlemen whether 
you still agree that it is appropriate that the Enterprises 
should receive meaningful capital credit for sound CRT 
transactions that they conduct with sound counterparties and 
avoid the accumulation of credit risks on the balance sheets of 
two institutions that remain taxpayer-backed.
    Secretary Mnuchin. Yes. I agree that they should receive 
relief, that we should encourage them to do credit risk 
transfers with creditworthy counterparties, and I can also tell 
you that the Financial Stability Oversight Council (FSOC) is 
beginning to review these issues as well.
    Mr. Luetkemeyer. Chairman Powell, do you want to comment on 
that as well?
    Mr. Powell. No, I do agree, and we are actually in the 
middle of doing a careful review of the whole capital proposal 
as well.
    Mr. Luetkemeyer. Okay. Thank you. As you know, it is hard 
for me to let a hearing go without talking about Current 
Expected Credit Losses (CECL), so we are going to try it one 
more time.
    In March of this year, the Federal Reserve and the FDIC and 
the OCC issued an interim rule to delay for 2 years estimated 
impact on regulatory capital at CECL, followed by a 3-year 
phase-in. In addition, the CARES Act included an optional delay 
in CECL implementation until the end of 2020 or the end of the 
pandemic, which 25 percent of applicable entities actually 
opted for.
    The Department of the Treasury is also conducting a study 
about the impact of Current Expected Credit Losses (CECL)--we 
were directed to do that--and most recently, my colleagues and 
I sent a bipartisan letter to the Financial Stability Oversight 
Council (FSOC), urging for a delay on CECL implementation for 
all entities until 2022, set every entity, both banks and non-
banks, which were not included in the CARES Act, on the same 
footing, and Treasury can conduct the study with the input of a 
real-life scenario that we have ongoing today.
    Given the actions by Congress and the prudential 
regulators, should we delay CECL, as I and my colleagues have 
called for, and should the Treasury examine the real-life 
scenario we have gone through when conducting their study?
    Mr. Mnuchin?
    Secretary Mnuchin. I think that should be seriously 
considered, and yes, we are working on the study.
    Mr. Luetkemeyer. The President issued an Executive Order 
with regards to each agency, going through and looking at all 
of the rules and regulations that were either waived, declined, 
changed, whatever. If they don't work now, why should we 
continue them down the road when we get out of this mess? And 
so, I assume everybody is doing that.
    And this particular accounting principle would seem to fall 
in that area of, we need to be looking at this as something 
down the road that we need to get rid of in its entirety.
    Chairman Powell, would you like to comment on this as well?
    Mr. Powell. No, I would agree.
    Mr. Luetkemeyer. Okay. Thank you. I appreciate that, 
because I think there is a time and a place for rules and 
regulations. There is a time and a place that if they are 
nonfunctioning, we need to get rid of them and start over.
    With the Nationally Recognized Statistical Rating 
Organizations (NRSROs) and the Federal Reserve emergency 
facilities, I know you have heard a lot about this issue from 
members on both sides of the aisle, Chairman Powell, 
especially. The Fed took modest steps to include smaller NRSROs 
in the most recent FAQs, but only if those ratings are 
accompanied by one of the three incumbent NRSROs. I remain 
concerned that the Fed's unilateral and haphazard chairing of 
these NRSROs is going to have serious implications for small to 
mid-sized businesses. Have you examined the impact delineating 
between the large and smalls is having in the marketplace?
    Mr. Powell. As you mentioned, we started out getting these 
facilities set up very quickly, and we just went with the big 
three. After that, I think more than a month ago, we broadened 
it out to another group after taking a look. And we are 
balancing the need to move quickly and to move with 
institutions that we know well, or that are well-known, and 
that we included more and more, and that is a process that we 
are still looking at.
    Mr. Luetkemeyer. Okay. Thank you very much. I yield back, 
Madam Chairwoman.
    Chairwoman Waters. Thank you. Mr. Huizenga, you are now 
recognized for 5 minutes.
    Mr. Huizenga. A point of inquiry, Madam Chairwoman. Should 
that be on the other side of the aisle? Oh, I am sorry. Okay.
    Thank you. I appreciate that. Mr. Chairman and Mr. 
Secretary, the word, ``unprecedented'' has been banned in my 
house by my college graduate--well, he graduated remotely--
because he was looking around and was a little tired of that 
word being used.
    He has a history. His grandfather, my dad, was born in 
1921, on a kitchen table in the hired hand's home. My mother 
was born in 1931 in Flint, Michigan--yes, that Flint, 
Michigan--and had to move to Oklahoma, to the Dust Bowl, in the 
middle of the Depression, to try to survive, when they lost 
their house and my grandfather lost his job.
    We know that there is history behind this. So, I am not 
sure if this is, ``unprecedented.'' It certainly may be 
unprecedented in a way, in the modern era, where we have seen 
the government come in and sort of shut this down.
    But what we do know, from looking at history, is that we 
need to get the economy moving again. Now the question is how, 
whether it is getting kids back to school, as some have 
suggested, because if you can't get kids into school, that is 
not going to then free up those parents to be available to 
work.
    Anecdotally, in my area, I know that manufacturers and 
service companies are having a very difficult time getting 
enough workers to come in to complete a full contingent of line 
workers, for example, or to get a full shift filled. And there 
are various reasons. Some have debated about the $600 
additional per-week kicker as being a bit of a disincentive.
    But nonetheless, we know that we have to address those 
folks who really, truly are not able to get a job, and how do 
we distinguish them from those who are just deciding not to 
take that job?
    One of the things that I have proposed is something called 
the Patriot Bonus. The Patriot Bonus would be a 50 percent tax 
credit to any company that would give a per-hour bump to their 
employees, or a weekly bonus to their employees, or even a one-
time bonus to their employees, to incentivize them to come off 
of that unemployment insurance system and get back engaged in 
the workforce, and I think it is critical that we do that.
    I do want to say, also, thank you for your work on the 
Paycheck Protection Program. I have talked to Cheryl, who owns 
a very popular bagel and coffee shop in my hometown, who knows 
that she survived because of it. And Don, who owns a bowling 
alley in my district, who was able to keep his folks on the 
payroll. Those types of things are critical and were very, very 
important.
    As we are shifting to the Main Street program, I do want to 
draw attention, and Chairman Powell and I had this conversation 
a couple of weeks ago. I brought up La Colombe. La Colombe is a 
Philadelphia-based company that has a manufacturing production 
facility in my district. It is a 26-year-old, fast-growing 
company. You may have gotten their coffee in the can. They 
produce a number of great products. But for the last 6 years, 
they have been really focused on their growth, and that also 
means they have had to borrow a tremendous amount of money, and 
that led to an accumulation of debt. Under some of the rules as 
they are currently written, La Colombe would not qualify to 
participate in the Main Street Lending Program, and I believe 
that the way that the leverage ratio requirements in the 
program are currently drafted really sort of, frankly, punishes 
companies like La Colombe and others who would otherwise be 
viewed as really, frankly, success stories.
    So if it is the way the rules are currently written, it is 
designed to prevent funds from going to companies that have 
this debt, but sometimes those companies might be some of those 
that need it the most.
    I am hoping that you will commit, Mr. Secretary, to working 
with me on that, to address that issue.
    Secretary Mnuchin. Yes. I am not familiar with the company 
but we are happy to follow up with you and see if it can work.
    Mr. Huizenga. Great. And then in the remaining time, I 
talked to Jeff this morning. Jeff is 52. I talked to Jim and 
Eliza. He is 64, she is slightly younger, but she won't tell me 
exactly how old. But what I do want them to know is, I want 
them to hear from you, what do you want to tell them, and the 
rest of Joe and Jane 401k who have their small investments in 
the markets, that are there, frankly, to help them as they 
approach retirement? What assurances can we give them about the 
economy?
    Secretary Mnuchin. I want to tell them and all the other 
people that we are going to work with Congress to make sure we 
can do whatever we can do to get everybody back to work who 
lost their job due to COVID. And I am also extremely optimistic 
about the research that is being done on vaccines and virals 
and us combatting this terrible disease.
    Mr. Huizenga. Thank you.
    Mr. Powell. I would just say--
    Chairwoman Waters. Mr. Meeks, you are recognized for 5 
minutes.
    Mr. Meeks. Thank you, Madam Chairwoman. Mr. Powell, you and 
others at the Fed have written and spoken about the importance 
of maintaining the economy, full employment, as a way to pull a 
greater share of the minority workforce up, which is often the 
first to be laid off and the last to be hired. And while this 
is helpful, this is incredibly frustrating, as it is an 
admission that everyone else gets a head start in the economy, 
and communities of color only get out of the starting block 
after everyone else has been running the race for months, 
years, or decades.
    Let me ask you first, Mr. Powell, would you agree that 
structural discrimination exists in the United States in the 
economy today and impedes the economic success of communities 
of color and is a key to understanding why Black wealth is just 
10 percent that of White communities?
    Mr. Powell. Yes, I do agree.
    Mr. Meeks. Mr. Mnuchin, would you agree also?
    Secretary Mnuchin. I agree we need to do everything we can 
to create a level playing field, yes.
    Mr. Meeks. I also believe that our approach to addressing 
the legacy of economic racism and discrimination must include 
equity investments. Communities that have been financially 
excluded for decades, or hundreds of years, that were 
disproportionately impacted by the financial crisis, and now by 
the COVID pandemic, cannot borrow their way out of poverty and 
economic--I believe that sizable equity investments over the 
coming decade into communities of color will be essential to 
substantially lift them out of poverty and build resilience.
    I am working on a proposal for creating a national 
investment fund, pulling together capital from both the private 
sector and the government, to invest in these communities over 
the next decade or more.
    Secretary Mnuchin, do you agree that massive amounts of 
equity investments will be required to lift these communities, 
and that debt alone cannot solve the problem?
    Secretary Mnuchin. I definitely think investments in these 
communities is important, and we look forward to working with 
you on your specific ideas.
    Mr. Meeks. Great. And Mr. Powell, can we count on the funds 
and you working with us?
    Mr. Powell. We would be delighted to.
    Mr. Meeks. Given that, Secretary Mnuchin, the Treasury 
Department has the capacity and the authority to invest Tier 1 
capital into Minority Depository Institutions (MDIs), but has 
never done so. Similarly, the Treasury Department could use 
existing authority to mobilize deposits from trust funds into 
MDIs, either directly or through custodial accounts, but it 
does not do so. And since we agree that we need to have 
investments, would you agree that MDIs play a critical role, as 
we found doing PPP, in providing minority communities access to 
capital, and I will ask you then, will the Treasury use its 
existing authority and capital to provide direct support to 
MDIs?
    Secretary Mnuchin. I will have to review those authorities 
and get back to you. If that is something we have, it sounds 
very interesting. I am not familiar with those specific 
authorities so let me look into it.
    Let me just say also, the CDFIs did a terrific job as well.
    Mr. Meeks. I agree. I should have added the CDFIs. We 
concur on that.
    But I look forward to working with you to make sure that we 
are investing. We have public money as well as private money to 
invest in those MDIs so that they have the capital and the 
wherewithal to move forward. That is the way to govern.
    Mr. Powell, has the Fed made a requirement of all asset 
managers and broker-dealers with which they contract to partner 
with minority firms in fulfilling contracts and transactions?
    Mr. Powell. Yes. We do have obligations, for example, with 
the companies we have contracted with during the pandemic. They 
have to address diversity and inclusion issues at their 
company, and they have to also reach out to minority suppliers 
as well.
    Mr. Meeks. And the Treasury? Secretary Mnuchin?
    Secretary Mnuchin. Yes.
    Mr. Meeks. Okay. So, I am hearing from both of you that you 
will commit to incorporating this as standard to the Federal 
Reserve and the Treasury policies across all capital market 
programs that involve partnership with private sector asset 
managers, broker-dealers going forward, with minority broker-
dealers and asset managers. Is that correct?
    Mr. Powell. That is really part of our rulebook now, 
actually.
    Mr. Meeks. Mr. Mnuchin?
    Secretary Mnuchin. Yes. That is something we will work on 
as well.
    Mr. Meeks. Thank you. I am out of time, so I yield back.
    Chairwoman Waters. Mr. Stivers, you are now recognized for 
5 minutes.
    Mr. Stivers. Thank you, Madam Chairwoman. And thanks for 
being here, Mr. Secretary and Mr. Chairman. I really appreciate 
it.
    Secretary Mnuchin, I am hearing from some lenders that are 
being accused of failing to pay agents who assisted businesses 
in preparation of their Paycheck Protection Program loan 
submissions. And before participating in PPP, I heard comments 
from banks that they were worried they might be exposed to 
legal liability without sufficient safeguards in what is 
essentially a government grant program. But they largely 
participated anyway, because obviously, they felt like they had 
a duty to their customers and the country during a time of 
need.
    Now I am told that many banks are being targeted by 
litigation. It takes advantage of the lack of clarity about how 
agent fees are supposed to be processed and how they work. For 
example, banks don't have precise answers on where the fees 
were supposed to come from, is an agreement between a bank and 
an agent required before any work on the application is 
completed or processed? Is this an issue you are aware of, and 
does Treasury have a plan to offer any additional FAQs to 
clarify the issue of agent fees and when they are due and how 
that works?
    Secretary Mnuchin. I have recently become aware of this 
issue as well. What our guidance did say is that banks could 
pay agent fees out of the fees that they received. That was 
intended to be based upon a contractual relationship between 
the agent and the bank. And to the extent there is any 
confusion on that, we will look at clarifying that.
    Mr. Stivers. It would be great if you could do a clarifying 
FAQ, because I think it will prevent some litigation, or at 
least allow for that litigation to move expeditiously and less 
costly through the process.
    Secretary Mnuchin. We will review that. Thank you.
    Mr. Stivers. Thank you, Mr. Secretary.
    Chairman Powell, Treasury and the International Association 
of Insurance Supervisors (IAIS)have stated publicly that 
proposals to retroactively amend business interruption 
insurance policies to cover COVID-19 claims would endanger 
financial stability. Specifically, IAIS stated that they 
cautioned against initiatives seeking to require insurers to 
retroactively cover COVID-19-related losses such as business 
insurance, and that those things were excluded in the insurance 
contracts. Such initiatives could ultimately threaten 
policyholder protection and financial stability.
    Do you share the concern requiring payoffs of uncovered 
policies and that they could result in insurer insolvencies and 
destabilize our financial system?
    Mr. Powell. Actually, that is an issue that is really kind 
of outside the periphery of our authority, except as you point 
out, to the extent to which it relates to financial stability. 
We are monitoring it, but so far, we haven't taken a position 
on it.
    Mr. Stivers. Please, continue to monitor it. If it results 
in any kind of destabilization of the financial system, that is 
your role. I get it. And I am not asking you to exceed your 
role, but please pay attention to it.
    Chairman Powell, could you kind of give us an overview of 
the current state of municipal finance markets and the 
effectiveness of the Fed's efforts to stabilize those markets?
    Mr. Powell. I would be glad to. The municipal markets, like 
so many other markets, really just about shut down in the 
middle of March, and we announced the municipal liquidity 
facility, and really that announcement has had an enormous 
effect on the functioning of that market. So, you see a lot of 
healing in that market. You see plenty of issuance of issuers 
of different credit ratings and also different kinds of 
issuers, revenue issuers. It hasn't returned to where it was in 
February of 2020, but there has been a lot of progress.
    As an example, the State of Illinois did most of its 
financing in the private markets without our support and then 
came to our facility for its last piece of financing. So, I am 
very pleased that the announcement effect was very strong and 
effective, and is helping a lot of borrowers now.
    Mr. Stivers. Finally, I just want to say thank you, 
Secretary Mnuchin, and thank you, Chairman Powell, for your 
incredible leadership and availability through this crisis. 
This hasn't been easy. Clearly, mistakes will happen when we 
are in uncharted waters. But you both have been bold in your 
leadership. You have made a difference. You have helped 
businesses survive. You helped the economy survive. Thank you 
for your incredible leadership, and we wouldn't be doing as 
well without it. There is more work to be done. I appreciate 
everything you have done and hope you will continue to focus on 
small businesses and medium-sized businesses around Main 
Street, because they are still struggling. Thank you so much.
    Chairwoman Waters. Mr. Green, you are now recognized for 5 
minutes.
    Mr. Green. Thank you, Madam Chairwoman. I thank the 
witnesses for appearing as well, and I would like to lay a 
proper predicate for my questions.
    According to the latest Home Mortgage Disclosure Act (HMDA) 
data, in 2019 the vast majority of home purchase loans went to 
White borrowers, at approximately 10 times that of loans that 
went to Black and Asian Americans and Pacific Islanders (AAPI) 
borrowers. Here are the numbers: the share that went to White 
borrowers, 60.3 percent; to Hispanic borrowers, 9.2 percent; to 
AAPI borrowers, 5.7 percent; and to Black borrowers, 7 
percent--60.3 percent to White borrowers, 7 percent to Black 
borrowers.
    And even when lending discrimination does not result in 
outright denials of credit, it drives up borrowing costs for 
minority home buyers. Loans to Black and Hispanic borrowers 
continue to be higher-priced for both conventional and 
nonconventional loans in 2019. Home purchase loans were higher-
priced for the following share of borrowers: to Black 
borrowers, 20.3 percent; to Hispanic borrowers, 23 percent; and 
to White borrowers, 8.3 percent.
    Consistently we see empirical evidence indicating that 
there is invidious discrimination in lending, especially as it 
relates to people of color. So here are my questions, dear 
friends. Adjusting for education, credit score, assets, and 
other relevant factors, do you believe that invidious 
discrimination in lending exists against borrowers of color?
    I have been collecting these pictures. I keep them in my 
office. These are pictures of people who denied the existence 
of invidious discrimination as it relates to people of color.
    So my question to you is, do you believe that this 
invidious discrimination exists in lending as it relates to 
people of color? If you do believe so, would you kindly extend 
a hand into the air?
    [Hands raised.]
    Mr. Green. Okay. Would you kindly hold them up? I'd just 
like to get a good picture of you, Mr. Secretary. Thank you 
very much.
    Next question. Do you believe that this invidious 
discrimination against borrowers of color can be addressed with 
legislation? Can we craft legislation to help end this 
invidious discrimination? If you think so, would you kindly 
raise a hand? Legislation. Can we craft legislation?
    [Mr. Powell raises his hand.]
    Chair Powell seems to think so. Mr. Mnuchin?
    Secretary Mnuchin. Can I respond to the answer?
    Mr. Green. You can respond, but if you will be so kind as 
to let me know where you are going first. Sometimes, when 
people finish, I don't know what they said. This wouldn't apply 
to you, of course.
    Secretary Mnuchin. I think we have legislation, so I think 
we need to do a better job. So I will say we can look at 
legislation, but I think it is more than just legislation.
    Mr. Green. Okay. I agree with you that it is more than 
legislation, but would you agree that legislation can be a part 
of the remedy? If you would kindly extend a hand.
    [Secretary Mnuchin raises his hand.]
    Mr. Green. Thank you. Now, I am in agreement with you. We 
have a couple of pieces of legislation. H.R. 149, the Housing 
Fairness Act, helps to deal with discrimination in housing as 
it relates to people of color and others as well. And then, 
H.R. 166, the Fair Lending for All Act, would put an end to 
this race-based lending and discrimination. That is two pieces 
of legislation, and hopefully, they will move in Congress.
    But here is my final question. I believe that it is time 
for us to reconcile in this country. We have survived COVID but 
didn't reconcile. We survived the invidious discrimination that 
exists now, segregation, but we haven't reconciled. If we had a 
Department of Reconciliation with a Secretary of 
Reconciliation, would you work with a Secretary of 
Reconciliation, your departments, the agencies that you 
represent, would you work with such a person to help us 
reconcile in this country? If so, raise your hand.
    Okay.
    Secretary Mnuchin. Not knowing what that is, I guess--if 
there is a department then--
    Mr. Green. I can tell you, it would be a department 
designed to eliminate invidious discrimination and racism. That 
is what it would be all about, at the Cabinet level, hopefully.
    Thank you both. And thank you, Madam Chairwoman. I yield 
back.
    Chairwoman Waters. Thank you. Mr. Barr, you now are 
recognized for 5 minutes.
    Mr. Barr. Thank you, Madam Chairwoman, and to Secretary 
Mnuchin and Chairman Powell, I want to thank you both for the 
very decisive and aggressive actions that you have both taken 
from the outset of this pandemic. I think both the Fed and the 
Treasury, through the emergency lending, and with the tools 
that we have given you through the Exchange Stabilization Fund, 
really made a difference in making a bad situation a lot less 
bad, given the circumstances. So, thank you for your actions.
    And as an example of the agility that you have shown, 
Secretary, let me thank you, in particular, for responding 
favorably to a letter that Representative Hill and I sent to 
you about streamlining and making less bureaucratic the loan 
forgiveness application under the PPP program. That was 
tremendously helpful for both borrowers and lenders, cutting 
that red tape. The EZ form is very welcome, and I appreciate 
the fact that you were responsive to that.
    Let me ask you a follow-up question about commercial real 
estate. We have had a couple of questions from Mr. Sherman, and 
Mr. Posey. This is a problem we have not addressed yet. And I 
am hearing from many commercial property owners and borrowers 
in my district, and across the country, especially hoteliers, 
where occupancy rates remain very, very low. Shopping center 
owners--retail clearly has not recovered. And other businesses 
have been significantly disrupted by the pandemic.
    I think we are going to see, without intervention, a wave 
of foreclosures and defaults. And Secretary, you did identify 
the problem with the inflexibility of these servicing 
agreements. But I think you mentioned that we might need 
additional legislation to allow hoteliers to hire back workers. 
That is really not the issue. The issue is debt. They can't 
service their debt because they don't have revenue.
    So my question is, both of you all recently received a 
letter from me, Congressman Taylor, Congressman Heck, and 
Congressman Lawson, plus over 100 of our colleagues, urging the 
Fed and Treasury to establish a facility to assist commercial 
real estate borrowers, especially those with CMBS loans. 
Secretary, you testified that you have $250 billion remaining 
in the Exchange Stabilization Fund (ESF).
    To both of you, does the Fed currently have the authority 
to establish such a facility, and do you feel that market 
conditions in commercial real estate warrant action by the Fed 
and Treasury?
    Secretary Mnuchin. Let me just appreciate and thank you for 
your letter. This is a large challenge, so working with the 
Fed, we have not yet figured out a way to set up a facility. It 
is not out of a lack of interest or a lack of desire. There are 
structural problems.
    And let me just add, in many of these cases, these 
companies don't need more debt. They need support. So one of 
the things we will want to look at in the next CARES Act, as I 
said, is additional support for these hardest-hit industries. 
As the Chair has said, there is a difference between lending 
and spending.
    Mr. Barr. Right. Chairman Powell?
    Mr. Powell. I just would echo, and I have your letter right 
here, that I have been very focused on this. And you said it in 
your comments, and it is in the letter, that more debt may not 
be the answer here. Debt doesn't solve every problem you have. 
People can't currently service debt. You have hese inflexible 
arrangements.
    So, there is a serious problem here that needs to get 
fixed, and we are racking our brains to see how it could be 
something we could do by lending. But that is really what we 
can do, is create more debt.
    Mr. Barr. I would encourage you to consider, in some cases, 
that the covenants against additional indebtedness may be too 
restrictive, that these owners could take on additional debt to 
get them through this period of time. But I look forward to 
working with you, whatever the answer is.
    Quickly, on Main Street, Chairman Powell, I have heard from 
a number of lenders and business owners who have indicated that 
the terms of Main Street may discourage borrowers from applying 
and lenders from participating. Some lenders had welcomed the 
changes made recently by the Fed, but many are still far from 
enthusiastic about participating.
    What has been the response thus far from the lender 
community, and how is the Fed going to encourage lender 
participation, given the hesitations?
    Mr. Powell. We have had a lot of interest. We do webinars. 
We do outreach. And as I mentioned earlier, we have had 
something like 300, a little more than 300 now, I think, turn 
up. What the banks tell us is, though, is that it is sort of a 
mixed thing. They are not getting a ton of interest from 
borrowers, and many of them say that they expect that will 
change--over the course of the next few months, they do expect 
the demand from borrowers will increase. And I will just echo 
that we continue to be open to playing with the formula and 
making adjustments going forward.
    Mr. Barr. My time has expired, but the reason why Main 
Street doesn't work for commercial real estate is that EBITDA 
limitation, as you know. But thank you. I yield back.
    Chairwoman Waters. Thank you very much. Mr. Powell, the 
issue of rules that we have talked about is on my radar. We 
will continue to talk about this issue and pay attention to 
what you are saying to us about it.
    With that, Mr. Cleaver, you are recognized for 5 minutes.
    Mr. Cleaver. Thank you very much, Madam Chairwoman. 
Secretary Mnuchin, thank you for being here. Chairman Powell, 
thank you for being here again.
    I know that you have been asked by a number of Members 
before me about the issue with Black and Brown business owners 
being left out of that pot that was clearly intended to help 
during these down times. And so I am frustrated, like a lot of 
people, not only in Congress, but a lot of people around the 
country.
    What is your philosophy, Mr. Secretary--well, maybe not 
your philosophy, but what do you have to say as to why weren't 
rural and minority businesses more equally supported in the 
emergency program? And what do you think happened?
    Secretary Mnuchin. Let me just first say that we need to 
all do a better job at making sure that we have sources of 
funds for those businesses and to support those businesses. In 
the PPP, we have worked with lots of different people to make 
sure the CDFIs and the MDIs get there. But across-the-board, we 
can always be doing a better job.
    Mr. Cleaver. Thank you. I guess I am where I am now because 
I am here dealing with these minority businesses right now, and 
if I say we all agree we need to do a better job, do you have 
any ideas on specifically, what we can do better?
    Secretary Mnuchin. We would be happy to work with you on 
that. We have been working with Robert Smith and a bunch of 
external people to try to figure out how we can use the CDFIs, 
how we can make sure MDIs have more access to capital. And I 
think there is a lot of good ideas out there that we need to 
continue to explore before we have one solution. I think there 
are multiple solutions.
    Mr. Cleaver. Okay.
    Mr. Powell. Mr. Cleaver, I will just add that we are doing 
a great deal of outreach with MDIs and CDFIs to get them access 
to the programs that we are doing, including the PPP. And in 
fact, we have a meeting with the National Bankers Association 
tomorrow, on July 1st. So, we are doing a lot of outreach, and 
we think it is having an effect.
    Mr. Cleaver. Thank you. Actually, after you appeared before 
our committee, I did have an approximately 40-minute meeting 
with Esther George here, at the Kansas City Fed office. And I 
said I appreciated her going into detail about the issues that 
we were raising as best as she could.
    So, thank you for doing that. I appreciate that. I just was 
hoping that the Secretary would understand the pressure that 
these businesses are under, which means that as representatives 
of theirs, we are also in a tremendously pressurized situation. 
I was hoping that I could go back and say, ``This is what we 
are going to do henceforth.''
    But I appreciate where we are. You can't respond to any 
classified intelligence, so I won't ask those questions. But I 
am, nevertheless, going to send you a letter, and I don't even 
expect a response. I am doing this for my own personal historic 
concern, and that is, I am sure that the next generation and 
the generation after that will be asking us, ``Grandpa, what 
did you do?'' ``Grandma, what were you doing during those times 
when things were going off the rails?''
    So, thank you both for appearing, and I yield back, Madam 
Chairwoman.
    Chairwoman Waters. Thank you very much. Mr. Tipton, you are 
recognized for 5 minutes.
    Mr. Tipton. Thank you, Madam Chairwoman. I appreciate, Mr. 
Secretary, and Chairman Powell, you both taking the time to be 
here.
    And I do appreciate all of the efforts that you have made 
to stimulate the economy and to help our folks at home. I did 
want to bring up an issue that we have heard back in our 
district. As you know, under the CARES Act, the government did 
provide for communities of 500,000 or more people to be able to 
apply directly to Treasury for assistance. In Colorado, that 
translated into 59 of the 64 counties in Colorado were unable 
to be able to receive direct assistance. In full recognition, 
obviously, the traditional dollars went in over and above the 
direct assistance that was able to be applied for.
    And I guess, Mr. Secretary, I would like to be able to see 
from you, has there been any oversight to be able to do what I 
believe was the congressional intent, to be able to get those 
dollars back into small communities, like those that I 
represent, and have we had any sort of examination of how those 
dollars are being spent by the States?
    Secretary Mnuchin. Let me just say, we agree with you. We 
thought the purpose was that we sent money to cities above 
500,000. The reason why we didn't do it to less was purely 
administrative. We have put out guidance saying that the States 
should distribute money down. We have also had discussions with 
the Inspector General to review this. So, we appreciate your 
comments.
    Mr. Tipton. Thank you, and I appreciate the recognition 
that the small communities happen to--when we look at small 
businesses--that was my real life--we create 7 out of 10 jobs, 
and a lot of that does happen to be in rural America. And I 
appreciate your attention to that as we are looking forward to 
any other package that may come forward.
    One of the biggest aspects, I think, that you have both 
spoken to is the ability to be able to get the economy going 
and to make sure that we are going to be able to create jobs 
once again. But providing access to credit is going to be 
ultimately critical to being able to do that. We have some that 
are tempted to wipe that credit slate clean during the 
pandemic. But I believe it is important that we do have an 
accurate and a full credit profile to be able to have risk 
mitigation that will help ultimately reignite lending in the 
country quickly.
    Secretary Mnuchin, would you speak maybe to the importance 
of being able to maintain unaltered and complete credit 
profiles so that lenders can evaluate the creditworthiness of 
borrowers?
    Secretary Mnuchin. Yes. I believe that is very important.
    Mr. Tipton. One of the bigger issues that we are hearing on 
PPP is that lenders across the country, big and small, readily 
answered the call to be able to make those loans out to our 
small businesses during the crisis. And since there was 
essentially no guidance when lenders began providing PPP loans, 
what can agencies do, Mr. Secretary, to the extent to hold them 
harmless in terms of provisions to the entirety of the PPP 
process and adequately protecting the lenders who are trying to 
do the right thing?
    Secretary Mnuchin. The lenders were merely intended to be 
an intermediary. They were the fastest way that we could get 
money to the businesses. Most of the certifications were 
certifications that the borrowers had to make and that they 
would be liable for. There were a few things that the lenders 
had to do, which was check the payroll and payroll documents. 
But yes, it was supposed to be predominantly a pass-through 
mechanism.
    Mr. Tipton. Okay. Thank you. And there is an interim final 
rule on lender fees out of the SBA, indicating that if they 
conduct loan review and determined that the borrower was 
ineligible for a PPP loan, the lender is not eligible for the 
processing fee. The SBA was also able to draw a claw-back 
feature of the fee, within one year, if they determined that a 
borrower is ineligible for the PPP loan.
    Considering that those lenders, as we noted, did act in 
good faith through the PPP process and have dedicated 
significant amounts of resources to be able to help the 
economy, why did the agencies decide to take this approach?
    Secretary Mnuchin. Let me just say I hope that is a very 
small number of loans that that turns out to be. But the 
thought of the taxpayers paying fees to loans that weren't made 
seems to be unfair, and I would just say, in general, I think 
the fees were very attractive to the lenders. So, if there were 
a small number of loans that they made where that was the case, 
I think they were still well-compensated.
    Mr. Tipton. Thank you, Mr. Secretary, and I yield back, 
Madam Chairwoman.
    Chairwoman Waters. Thank you. Mr. Perlmutter, you are 
recognized for 5 minutes.
    Mr. Perlmutter. Thank you, Madam Chairwoman. Gentlemen, 
thank you for your testimony today. And thank you for your 
leadership in the first 3 months of this emergency.
    The pandemic dealt a real blow to the economy, and you 
helped cushion the blow. But we are not out of this thing, by 
any stretch of the imagination. Around Colorado, we see 
California, Utah, Arizona, and Texas with rising case numbers, 
rising hospital patients, rising death counts. And we also know 
that at the end of July, the Pandemic Unemployment Insurance 
payments cease, as it is currently written. We know that a 
number of the moratoria on evictions and foreclosures begin to 
cease. And the 8 weeks provided under the PPP, certainly for 
those initial takers of the loans, start to run out.
    So, I see a brick wall at the end of July. And Mr. 
Secretary, you played a key role in helping to fashion the 
fiscal pieces of this, the CARES Act. We call what we have done 
as this next iteration the HEROES Act, so that law enforcement, 
teachers, transportation workers, and medical staff don't get 
laid off, in addition to the ones who have already been laid 
off by local governments, by State Governments, and by school 
districts.
    I asked Mr. Powell a question when he was in front of our 
committee a couple of weeks ago, on State and local government 
assistance to backfill the tax revenue.I will say, though, from 
a standpoint, State and local governments employ something like 
13 million people. States have to balance their budgets. And 
revenues go down and expenses go up, and what States do is they 
cut costs. And we have seen State and local governments lay off 
1.5 million people already. State and local governments provide 
essential services, as we all know, so you know they are a 
great and a big employer, and I would say it is certainly worth 
considering.
    If we don't do something, 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. Secretary, as you again are sort of in the middle, 
between the House and the Senate and the White House, where are 
you on assisting State and local and school districts to help 
backfill the lost revenue that we have seen hit them already?
    Secretary Mnuchin. Let me just first say, within the 
context of the last CARES bill, we tried to issue guidance that 
was as flexible as possible, particularly for firefighters, 
first responders, and policemen, so that States could use that 
money, and have a safe harbor, and didn't need to let any of 
those people go, which, as you said, this would be the worst 
time, when we need to support all of those people.
    I am committed to working with both the Democrats and the 
Republicans, in the House and the Senate. In July, as you said, 
we have a lot of important features that all come to an end, 
and I commit to continuing to have these conversations, and I 
take great pride in the fact that we had enormous bipartisan 
support in the previous bills, and I look forward to working 
with everyone.
    Mr. Perlmutter. And I would just ask you, because what we 
have seen--as a Democrat, we passed this. The Senate has been 
sitting on it, even as time is ticking. And in Colorado, for 
instance, we are looking at probably a $2.5 to $3 billion drop 
in tax revenues this year, and will see it again next year, and 
probably the year after that.
    And so, I would just ask you to really push on that one, or 
there are going to be a lot of people laid off at just the 
worst time, in very essential services.
    And so, gentlemen, you have done a heck of a job. You get 
patted on the back now, but we are still in this emergency, and 
now we have to focus on going forward, which is this next 
iteration, or there is going to be a lot of trouble come the 
end of the summer.
    With that, I yield back.
    Chairwoman Waters. Thank you very much. I would like to 
thank our witnesses for their testimony today.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
This hearing is now adjourned.
[Whereupon, at 2:45 p.m., the hearing was adjourned.]


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