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

                     OVERSIGHT OF THE TREASURY DEPARTMENT'S
                    AND FEDERAL RESERVE'S PANDEMIC RESPONSE

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

                                 HYBRID HEARING

                                   BEFORE THE

                        COMMITTEE ON FINANCIAL SERVICES

                         U.S. HOUSE OF REPRESENTATIVES

                         ONE HUNDRED SIXTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                DECEMBER 2, 2020

                                   __________

           Printed for the use of the Committee on Financial Services

                               Serial No. 116-115

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                                  __________

                        U.S. GOVERNMENT PUBLISHING OFFICE
    43-529 PDF                 WASHINGTON : 2022

    -----------------------------------------------------------------------------------

                     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:
        December 2, 2020.............................................     1
    Appendix:
        December 2, 2020.............................................    43

                                   WITNESSES
                          Wednesday, December 2, 2020

    Mnuchin, Hon. Steven T., Secretary, U.S. Department of the
      Treasury.......................................................     5
    Powell, Hon. Jerome H., Chair, Board of Governors of the Federal
      Rreserve System................................................     6

                                    APPENDIX

    Prepared statements:
        Mnuchin, Hon. Steven T.......................................    44
        Powell, Hon. Jerome H........................................    46

                  Additional Material Submitted for the Record

    Waters, Hon. Maxine:
        Written responses to questions submitted to Secretary Mnuchin    58
        Written responses to questions submitted to Chairman Powell..    73
        Letter to Hon. Mark Calabria, Director, FHFA.................    85
        Letter from the Credit Union National Association (CUNA).....    87
        Letter from the National Association of Federally-Insured
          Credit Unions (NAFCU)......................................    90
        Letter from the National Association of REALTORS to Treasury
          Secretary Mnuchin and FHFA Director Calabria...............    94
        Letter of support from PATH (People Supporting the Homeless).    96
        Letter from various midsized nonprofits......................    97

                           OVERSIGHT OF THE TREASURY
                            DEPARTMENT'S AND FEDERAL
                          RESERVE'S PANDEMIC RESPONSE

                                  ----------

                          Wednesday, December 2, 2020

                 U.S. House of Representatives,
                       Committee on Financial Services,
                                                       Washington, D.C.
        The committee met, pursuant to notice, at 10:04 a.m., via
    Webex, Hon. Maxine Waters [chairwoman of the committee]
    presiding.
        Members present: Representatives Waters, Sherman, Clay,
    Green, Perlmutter, Foster, Heck, Gottheimer, Lawson, San
    Nicolas, Porter, Axne, Casten, Pressley, Ocasio-Cortez, Wexton,
    Lynch, Gabbard, Adams, Dean, Garcia of Illinois, Garcia of
    Texas, Phillips; McHenry, Wagner, Lucas, Posey, Huizenga,
    Stivers, Barr, Hill, Zeldin, Mooney, Davidson, Budd, Kustoff,
    Gonzalez of Ohio, Rose, Steil, Gooden, Riggleman, Timmons, and
    Taylor.
        Chairwoman Waters. The Financial Services Committee will
    come to order.
        Without objection, the Chair is authorized to declare a
    recess of the committee at any time. I want to remind Members
    of a few matters, including some required by the regulations
    accompanying House Resolution 965, which established the
    framework for remote committee proceedings.
        I would ask all Members on the Webex platform to keep
    themselves muted when they are not being recognized by the
    Chair. 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 has been instructed not to
    mute Members, except when a Member is not being recognized by
    the Chair, and there is inadvertent background noise.
        Members on the Webex platform are also reminded that 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, for Members participating in person, the
    Attending Physician provided guidance.
        I now recognize myself for 4 minutes to give an opening
    statement.
        Today, the committee convenes to conduct oversight over the
    Treasury Department's and Federal Reserve's pandemic response.
    This pandemic continues to have a terrible impact across the
    nation. There have been over 13.4 million coronavirus cases in
    the U.S., which is almost double the amount of cases when
    Secretary Mnuchin and Chair Powell last testified in September,
    and over 267,000 people have lost their lives to the virus.
    Hospitalizations and deaths are surging as this crisis spirals
    out of control. Small businesses are shutting their doors
    permanently, and millions are at risk of eviction, foreclosure,
    and being laid off.
        An historic number of Americans resoundingly voted for a
    new direction last month by overwhelmingly voting for
    President-elect Biden and Vice President-elect Harris. The
    American people have made it clear that they want a government
    that will fight this virus and will protect their families and
    small businesses from the impacts of COVID-19.
        Secretary Mnuchin, on a call last month, many committee
    Democrats and I committed to not going home until we have a
    deal for a stimulus package that is desperately needed across
    the country, but as negotiations continue, I am appalled that
    you would knowingly make matters worse by permanently ending
    essential emergency lending programs, leaving States, cities,
    and small businesses out to dry as the nation faces a dire and
    worsening phase of the pandemic crisis. There is simply no
    justification or justifiable reason to take these tools away,
    with the pandemic crisis worse than it has been, and the Biden
    Administration arriving in January.
        And, Chairman Powell, I am also concerned that the Federal
    Reserve acceded to Treasury's request after publicly indicating
    the importance of extending these Facilities.
        Secretary Mnuchin, I am also very concerned that the
    Treasury Department may be taking actions that will undermine
    housing markets during the pandemic by reportedly working with
    the Federal Housing Finance Agency (FHFA) to rush the
    Government-Sponsored Enterprises (GSEs) out of conservatorship
    before the end of the Trump Administration.
        These actions follow the Trump Administration's obstruction
    of the transition process, delaying important information-
    sharing about the pandemic response and national security
    between the Biden transition team and the current
    Administration. So today, you will be held to account for your
    misguided actions.
        I now recognize the ranking member of the committee, the
    gentleman from North Carolina, Mr. McHenry, for 4 minutes.
        Mr. McHenry. Thank you, Madam Chairwoman.
        And, look, I know there has been a lot of partisan talk by
    my colleagues on the Democratic side of the aisle attacking the
    actions of the Treasury Secretary and even the Federal Reserve.
    And I know committee Democrats and a lot of Democrats in
    Congress said that they wouldn't go home until they had a deal,
    and then they went home for 10 days. So, there is not a whole
    lot of believability coming from our fellow politicians here on
    Capitol Hill right now. It is quite frustrating.
        But, Chairman Powell, Secretary Mnuchin, I want to thank
    you for being with us today and for being so available. I also
    want to commend you for the quick and decisive work that you
    both have done, and I think that is something for which we
    should commend you.
        But, today, I think there is also a reason for optimism.
    The coronavirus vaccines are moving at an unprecedented pace.
    Last month, Pfizer announced its vaccine is 95-percent
    effective, and they are currently seeking regulatory clearance.
    Moderna announced on Monday that its vaccine is 94.1-percent
    effective, and they will also seek regulatory clearance. And
    the British announced today that they are moving forward as
    well with their vaccine distribution.
        This is proof that the public-private partnerships, like
    those in Operation Warp Speed, can lead to phenomenal successes
    in record time. But we know a full economic recovery will occur
    only when Americans can go back to work safely, send their kids
    back to school confidently, and have easy access to testing and
    treatments. And there is still more work to be done.
        And so, I do want to go back to our committee jurisdiction,
    and the Treasury and the Fed's decisive actions back in March
    and April to prevent the worst of this economic crisis and save
    millions of jobs.
        Chairman Powell, the Federal Reserve's emergency lending
    facilities continue to serve as a strong backstop to our
    financial markets and to prevent disorder in the financial
    markets from impacting our real economy. Those programs
    stipulated billions of dollars in private-sector lending and
    successfully operated as lender of last resort.
        And they acted as that necessary source of liquidity in
    those urgent times earlier this year. They ensured the orderly
    flow of credit and the functioning of markets of all sizes,
    including supporting workers in communities across the country.
    So, I want to commend you for that.
        But they are emergency facilities only, and they are
    backstops designed to support the functioning of private
    markets, and they are intended to be a lender of last resort,
    not to replace private markets. And from the start, I have said
    that we need to be forward-thinking and have a plan to wind
    down these firefighting measures, when appropriate.
        And so, I want to thank both the Fed and the Treasury for
    having a plan to wind those measures down appropriately, in
    accordance with the Coronavirus Aid, Relief, and Economic
    Security (CARES) Act law. And I will ask you specifically about
    the additional capacities that you will have with the CARES Act
    expiring on December 31st.
        Additionally, Secretary Mnuchin, thank you for your quick
    work on the Paycheck Protection Program (PPP) that supported
    millions of small businesses. I know we still need additional
    relief for more small businesses in different segments, and
    thank you for continuing to work for a bipartisan agreement
    here on Capitol Hill, and to not play the gamesmanship and
    partisan games that have bedeviled these talks in the last
    couple of months. Thank you for rising above that.
        But there is still work to be done, and I look forward to
    us coming together and having a package that can support small
    businesses and do the responsible things necessary to help
    rebuild our economy and to protect American citizens. Thanks so
    much for being here today, and I look forward to your
    testimony.
        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.
        I thank the witnesses for appearing as well. Mr. Mnuchin
    [inaudible] indicating that the market has recovered
    significantly. This begs the question for my constituents, what
    market? We know it isn't the Federal market [inaudible] The
    free food market, the foods, obviously, have one thing in
    common, and when all the food is gone, the front lines
    [inaudible].
        The supermarkets, the market prices there have gone up 3.9
    percent for the 12 months ending in October. The stock market
    does not measure certain things of influence to my
    constituents. It does not measure the hunger pains that my
    constituents suffer, the depression, and the addiction. It
    doesn't measure the working-class uncertainty and coronavirus
    injury and death.
        My concern today is, what is your agency doing to help the
    grim reality of this pandemic for consumers? I look forward to
    hearing your testimony.
        I yield back.
        Chairwoman Waters. Thank you very much.
        I now recognize the subcommittee's ranking member, Mr.
    Barr, for 1 minute.
        Mr. Barr. Thank you, Madam Chairwoman.
        And thank you to our witnesses for being here today.
        Congress, the Fed, and Treasury acted boldly in the face of
    the economic turmoil brought on by the COVID pandemic, and
    showcased the true reach of the Federal Government's response.
    Through Congress' fiscal policy authority and the Fed's
    emergency lending facilities, we were able to stabilize
    markets, keep workers on the job, and ensure the continued
    functioning of corporate credit markets.
        As we continue on the path of economic recovery, it is
    important that we take stock of the tools used. We must
    evaluate which were effective and which were not, which should
    be redeployed and which can be wound down, and which programs
    are legally set to expire and which programs should be
    reauthorized. That is the role of this committee with oversight
    of the U.S. financial system. I look forward to hearing from
    our witnesses on this and other topics to help inform Congress'
    continued response to the pandemic.
        Secretary Mnuchin and Chairman Powell, I commend you on
    your work to promote economic stability in turbulent times, and
    I thank you for your service.
        I yield back.
        Chairwoman Waters. Thank you.
        I want to welcome today's witnesses to the committee.
        First, I want to welcome the Honorable Steven T. Mnuchin,
    Secretary of the United States Department of the Treasury. He
    has served in his current position since 2017. Mr. Mnuchin has
    testified before the committee on previous occasions, so I do
    not believe he needs any further introduction.
        I also want to welcome our other distinguished witness, the
    Honorable Jerome Powell, Chairman of the Board of Governors of
    the Federal Reserve System. He has served on the Board of
    Governors since 2012, and as its Chair since 2018. Chair Powell
    has previously testified before the committee, so I believe he
    also does not need 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.
        Chairwoman Waters, Ranking Member McHenry, and members of
    the committee, I am pleased to join you today to discuss the
    Department of the Treasury's unprecedented response to support
    the American people throughout the pandemic. We continue to
    work to implement the historic CARES Act with speed,
    efficiency, and transparency, but our job will not be complete
    until we get every American back to work.
        When I last testified before you in September, I stated
    that America was in the midst of the fastest economic recovery
    from any crisis. I am proud to say that while there is still a
    lot more work to be done, that statement is true. In the third
    quarter, GDP grew by 33 percent annually, beating all
    expectations and a previous record of 1950.
        Americans are getting back to work. The October Jobs Report
    showed the economy gained back 12 million jobs since April,
    more than 50 percent of all jobs lost due to the pandemic.
        The unemployment rate has decreased to 6.9 percent, a rate
    not expected by the blue chip to be achieved until the fourth
    quarter of 2021. The historic bipartisan CARES Act provided the
    economic relief that is critical to supporting the economy
    recovering. Additional economic slowdowns, however, continue to
    impair and cause great harm to American business and workers.
        Based upon the recent economic data, I continue to believe
    that a targeted fiscal package is the most appropriate Federal
    response. I strongly encourage Congress to use the $455 billion
    in unused funds from the CARES Act to pass an additional bill
    with bipartisan support. The PPP has unused money of $140
    billion that could be sent out the door immediately to support
    many small businesses. The Administration is standing ready to
    support Congress in this effort to help American workers and
    small businesses that continue to struggle with the impact of
    COVID-19.
        Treasury has been working hard to implement the CARES Act
    in a transparent and efficient manner. We have released a
    significant amount of information on Treasury.gov and
    USAspending.gov. We continue to cooperate with various
    oversight bodies, including the new Special Inspector General
    (IG), the Treasury IG, the Treasury IG for Tax Administration,
    the new Congressional Oversight Commission, and the GAO.
        We have provided regular updates to Congress, and this is
    my ninth appearance before Congress for the CARES Act hearings.
    We have also devoted significant resources to responding to
    inquiries from numerous congressional committees and individual
    Members on both sides.
        We appreciate your interest on these issues, and we remain
    committed to working with you to accommodate Congress'
    legislative purpose to advance the whole-of-government approach
    to defeating COVID-19.
        Chairwoman Waters, I do want to just respond to your
    comment where you said I had no justification and made matters
    worse on my termination of the facilities. I just want to
    emphasize that this was not a political decision; I was merely
    implementing the CARES Act. I am happy to walk you, your staff,
    or other members of the committee through Section 4029, which
    makes it very clear.
        I find it implausible that any member of the committee
    believed, in voting for the CARES Act, that you were
    authorizing me to invest $500 billion in Federal Reserve
    facilities to make loans and purchase corporate bonds in
    perpetuity with no expiration date. That is exactly what you
    would have to believe if you disagree with my interpretation of
    congressional intent on the issue. And since I was personally
    there and negotiated most of these documents, I am very
    familiar with them. But if Congress wants to extend this money
    for Federal purposes for these facilities, Congress can add
    that to new legislation.
        I would like to thank the members of the committee for
    working with us, and I am pleased to answer any additional
    questions. Thank you very much.
        [The prepared statement of Secretary Mnuchin can be found
    on page 44 of the appendix.]
        Chairwoman Waters. Thank you very much, Secretary Mnuchin.
        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
    update you on our ongoing measures to address the hardship
    wrought by the pandemic.
        Our public health professionals continue to deliver our
    most important response, and we remain grateful for their
    service. The Federal Reserve, along with others across the
    government, is using its policies to help alleviate the
    economic burden.
        Since the pandemic's onset, we have taken forceful actions
    to provide relief and stability, to ensure that the recovery
    will be as strong as possible, and to limit lasting damage to
    the economy. Economic activity has continued to recover from
    its depressed second quarter level.
        The reopening of the economy led to a rapid rebound in
    activity, and GDP rose at an annual rate of 33 percent in the
    third quarter. In recent months, however, the pace of
    improvement has moderated. Household spending on goods,
    especially durable goods, has been strong and has moved above
    its pre-pandemic level. In contrast, spending on services
    remains low, largely because of ongoing weakness in sectors
    that typically require people to gather closely, including
    travel and hospitality.
        The overall rebound in household spending is due, in part,
    to Federal stimulus payments and expanded unemployment
    benefits, which provided essential support to many families and
    individuals.
        In the labor market, more than half of the 22 million jobs
    that were lost in March and April have been regained, as many
    people were able to return to work. As with overall economic
    activity, the pace of improvement in the labor market has
    moderated.
        Although we welcome this progress, we will not lose sight
    of the millions of Americans who remain out of work. The
    economic downturn has not fallen equally on all Americans, and
    those least able to shoulder the burden have been the hardest
    hit. In particular, the high level of joblessness has been
    especially severe for lower-wage workers in the service sector,
    for women, and for African Americans and Hispanics. Economic
    dislocation has upended many lives and created great
    uncertainty about the future.
        As we have emphasized throughout the pandemic, the outlook
    for the economy is extraordinarily uncertain and will depend,
    in large part, on the success of efforts to keep the virus in
    check. The rise in new COVID-19 cases, both here and abroad, is
    concerning and could prove challenging for the next few months.
    A full economic recovery is unlikely until people are confident
    that it is safe to reengage in a broad range of activities.
        Recent news on the vaccine front is very positive for the
    medium-term. For now, significant challenges and uncertainties
    remain, including timing, production, and distribution and
    efficacy across different groups. It remains difficult to
    assess the timing and scope of the economic implications of
    these developments with any degree of confidence.
        The Fed's response has been guided by our mandate to
    promote maximum employment and stable prices for the American
    people, along with our responsibility to promote the stability
    of the financial system. We have been taking broad and forceful
    actions to more directly support the flow of credit in the
    economy.
        Our actions, taken together, have unlocked almost $2
    trillion of funding to support businesses, large and small,
    nonprofits, and State and local governments since April. This,
    in turn, has helped keep organizations from shuttering and has
    put employers in a better position to both keep workers on, and
    to hire them back as the economy continues to recover.
        These programs serve as a backstop to key credit markets
    and have helped restore the flow of credit from private lenders
    through normal channels. We have deployed these lending powers
    to an unprecedented extent. Our emergency lending powers
    require the approval of the Treasury, and are available only in
    very unusual circumstances, such as those we find ourselves in
    today. Many of these programs have been supported by funding
    from the CARES Act, and I have included detailed information
    about those facilities in my written testimony.
        The CARES Act assigns sole authority over its funds to the
    Treasury Secretary, subject to the statute's specified limits.
    The Secretary has indicated that these limits do not permit the
    CARES Act-funded facilities to make new loans or purchases or
    to purchase new assets after December 31st of this year.
        Accordingly, the Fed will return the unused portion of the
    funds allocated to lending programs that are backstopped by the
    CARES Act in connection with their termination at the end of
    the year. As the Secretary noted in his letter, non-CARES Act
    funds and the Exchange Stabilization Fund are available to
    support emergency lending facilities if they are needed.
        Everything the Fed does is in service to our public
    mission. We are committed to using our full range of tools to
    support the economy and to help ensure that the recovery from
    this difficult period will be as robust as possible on behalf
    of communities, families, and businesses across the country.
    Thank you.
        [The prepared statement of Chairman Powell can be found on
    page 46 of the appendix.]
        Chairwoman Waters. Thank you very much, Chair Powell.
        I now recognize myself for 5 minutes for questions.
        Secretary Mnuchin and Chair Powell, just last month the
    Federal Open Market Committee (FOMC) met and, according to the
    minutes, ``a few participants noted that it was important to
    extend the emergency lending facilities beyond year end.''
        A few days later you, Secretary Mnuchin, requested that the
    Fed eliminate its CARES Act emergency lending facilities at the
    end of the year and return $419 billion so that it could not be
    used in the future. Initially, the Fed resisted publicly, but
    the next day, Chair Powell, you acquiesced.
        Secretary Mnuchin, your own Office of Financial Research
    (OFR) warned that we should expect, ``potentially severe losses
    from borrower defaults and bankruptcies.'' Moreover, the
    outlook for States, cities, airports, and hospitals is not
    good.
        And despite what President Trump suggests, it is not
    limited to blue States. For example, the day after New York
    State's credit was downgraded, Mississippi's credit was
    downgraded. With the pandemic worse than at any point since it
    began, it is foolish and reckless to take away emergency
    lending options at this time.
        Secretary Mnuchin, you argue that it was congressional
    intent for these Fed facilities to be shut down at the end of
    the year, but the law does not say that, and even the actions
    of my Republican colleagues belie that novel interpretation.
        Senator McConnell filed a COVID-19 bill that would change
    the law to require the Fed to close all of its facilities after
    January 19, 2021. So, if the law already required this, this
    bill wouldn't be necessary. The CARES Act was passed to
    stabilize the economy during the entirety of the pandemic, not
    until the end of your tenure as Treasury Secretary.
        Secretary Mnuchin, it was reported last week that you
    intend to transfer the unused portion of the CARES Act, that
    $500 billion appropriation, to Treasury's General Fund so that
    the next Secretary can't have access to the fund. However,
    Section 4027 of the CARES Act explicitly states that funds may
    only be transferred on January 1, 2026, not before January 1,
    2026.
        What you are doing is contrary to what is lawful, and it
    puts our entire economy in jeopardy. And, what's more, it has
    also been reported that you are working with Director Calabria
    of the Federal Housing Finance Agency to sell off the
    government stakes in the housing giants, Fannie Mae and Freddie
    Mac, likely destabilizing the entire housing market in the next
    few months.
        As I understand it, Secretary Mnuchin, the Obama
    Administration showed you every courtesy when your team was
    taking the reins. Similarly, the Bush Administration worked
    closely with President Obama's incoming team during the
    financial crisis, even before he was sworn in. They did so
    because they were honoring the decision of the American
    electorate.
        Tell me, Secretary Mnuchin, and Chair Powell, does the
    Secretary's expected successor, Janet Yellen, support what you
    are doing? Does she agree that the emergency lending facilities
    are not needed even though thousands of people are dying each
    day, millions more are being infected each week, tens of
    thousands of small businesses are closing permanently, and our
    cities and States are struggling? Does Ms. Yellen support
    Director Calabria's plans to fundamentally remake the housing
    markets, where millions of people are struggling to pay their
    mortgage and rent each month? Secretary Mnuchin?
        Secretary Mnuchin. Again, let me first comment on--and in
    all due respect, I believe I am following the law. Section 4029
    makes very clear that on December 31, 2020, the authority
    provided under new loans, guarantees, or other investments
    shall terminate.
        Chairwoman Waters. Thank you very much. I am going to
    reclaim my time.
        Do you agree? Do you agree, Mr. Powell?
        Secretary Mnuchin. Let me just continue. The transfer of
    the funds is not up to me. When funds come back, they go into--
        Chairwoman Waters. Reclaiming my time, I need to have an
    answer from Mr. Powell. Do you agree with Secretary Mnuchin?
        Mr. Powell. The Secretary has sole authority over the CARES
    Act funding under the CARES Act. The Fed is not involved in
    that. His reading of the law, thus, is the authoritative one,
    and we accept it.
        Secretary Mnuchin. I would also just say, if I was
    politically-motivated, I wouldn't have extended the four
    facilities in deference to the Fed's view that were non-CARES
    Act facilities. So, had I been trying to be political, I would
    have terminated those.
        Chairwoman Waters. My time has expired.
        I now recognize the distinguished ranking member, Mr.
    McHenry, for 5 minutes for questions.
        Mr. McHenry. Secretary Mnuchin, let me just give you a
    moment to answer. It sounds like you have additional things you
    want to explain in your reading of the CARES Act. The CARES Act
    expires on December 31st of this year. That is in the law. So,
    let me give you the opportunity to give a full answer on your
    decision with the Exchange Stabilization Funds.
        Secretary Mnuchin. Thank you very much. There are three
    sections I direct people to. First, Section 4029, which is the
    termination date of December 31st of 2020 to make new loans,
    loan guarantees, or other investments shall terminate. That is
    perfectly clear.
        Second, Section 4003, which references deposit of proceeds.
    So, when proceeds come in, we allocate proceeds. Whether it is
    the return of an airline loan or money from the Fed, we
    allocate it very clearly in Section 4003.
        Third, as the Chair referenced, Section 4027, which
    references if there was money left over, okay. And there are
    limited uses of what that money can be, either expenses or
    follow-on investments on existing loans. So, if we had to make
    an advance on an existing loan to an airline, that is under
    Section 4027, and any money on 2026 will come back vis-a-vis
    that.
        So, again, Section 4003, Section 4027, Section 4029, and,
    again, I personally negotiated this language. And, again,
    Congress has the ability to change this if they think the money
    should be spent otherwise.
        Mr. McHenry. Secretary Mnuchin, you and I talked regularly
    during those negotiations. I was a strong advocate for as large
    an Exchange Stabilization Fund dollar amount as possible so
    that both the Treasury and the Federal Reserve would have
    maximum firepower to put out what we did not fully understand
    would happen in the coming weeks or coming months with the
    nature of the virus.
        So, we, in the midst of this negotiation, had a very, very
    large Exchange Stabilization Fund (ESF). Absent the CARES Act's
    $454 billion in the Exchange Stabilization Fund, how many
    dollars are allocated to the Exchange Stabilization Fund?
        Secretary Mnuchin. Again, we allocated something like $20
    billion from the ESF for the pre-CARES facilities prior to the
    CARES Act. As I said, in deference to the Fed, those facilities
    don't have this restriction and still exist. And there is still
    something like an additional $50 billion that could be used in
    the future for emergencies, which would support another $500
    billion.
        And, again, I want to thank Congress for giving
    extraordinary authority to the Secretary of the Treasury for
    $500 billion. As people have noted, many people criticized that
    authority. And I am merely following the law and returning that
    authority back, as Congress intended.
        Mr. McHenry. Chairman Powell, these facilities of the Fed
    served a very important purpose in the early days. Their
    utilization in recent months has not significantly changed in
    dollar value of Fed lending facilities, and so the four
    remaining facilities are still important as a lender of last
    resort facility, of course.
        I want to thank you for your work to stand up those
    facilities and your work in the last 8 months of this year to
    stand up more facilities than were stood up in the fullness of
    the financial crisis of 2007, 2008, 2009, 2010. You stood up
    more facilities in 8 months--well, actually, in 3 months, than
    they did in 4 years. So, I thank you and the staff of the
    Federal Reserve for your solid great work to support our
    economy and to ensure that this health crisis, that has become
    an economic crisis, did not become a financial crisis. I want
    to commend you for that.
        Finally, I want to note that I have consistently been an
    advocate of the independence of the Federal Reserve for making
    monetary policy and supporting our economy. I do think it is
    important, an important hallmark, whether it was Chair Yellen
    in your seat, Chairman Powell, or your service as Chairman of
    the Federal Reserve, that we honor the independent policymaking
    and monetary policy decisions of the Federal Reserve. And I
    want to thank you for your leadership.
        I yield back.
        Chairwoman Waters. Thank you very much.
        The gentleman from Guam, Mr. San Nicholas, who is also the
    Vice Chair of the committee, is recognized for 5 minutes.
        Mr. San Nicolas. Thank you, Madam Chairwoman.
        Chairman Powell and Secretary Mnuchin, thank you so much
    for making time to be with us here today. I wanted to open with
    some questions regarding the Main Street Lending Program
    (MSLP), Mr. Chairman. Are you familiar with how much has been
    authorized for the MSLP at this time?
        Mr. Powell. Yes, I am. We made about $5 billion in loans, a
    little better than $5 billion in loans.
        Mr. San Nicolas. Okay. So, we have about $5 billion out
    there in the MSLP. Now, those programs are administered by
    participating banks, correct?
        Mr. Powell. Yes.
        Mr. San Nicolas. Are the banks--
        Mr. Powell. Put it this way: We work through the banking
    system. We access borrowers through the banking system. We
    administer the overall program, but the banks are facing off
    against the actual borrowers.
        Mr. San Nicolas. Right. So, these borrowers who are
    receiving MSLP funds, are they required to be investment-grade
    borrowers?
        Mr. Powell. No.
        Mr. San Nicolas. And that just brings me full circle, Mr.
    Chairman, because the last time we spoke, I was discussing the
    Municipal Liquidity Facility and the Fed's inability to allow
    municipalities that are below investment grade to be able to
    access that liquidity.
        And it was mentioned in our hearings that the Federal
    Reserve does not provide funding to noninvestment grade
    entities. And yet, through the MSLP, indirectly, the Federal
    Reserve, as you have mentioned, is willing to do so for private
    sector entities.
        Mr. Powell. As you will recall, with the Territories, there
    are no investment grade, overall sovereign investment grade.
    But we worked with you and your office to work with one of the
    below sovereign level facilities. The name of it doesn't come
    to mind. And we also worked with you to be in touch with the
    Treasury Department under various loan programs that might be
    useful.
        But, no, the overwhelming majority of municipal borrowers
    are investment grade, and we did limit the facility to that.
        Mr. San Nicolas. The reason why I am raising this point,
    Mr. Chairman, is because I just wanted to highlight the
    inconsistency in the policy, because if investment grade is a
    requirement for the Federal Reserve to be providing financial
    support, particularly as the lender of last resort, and it is
    not imposing that same requirement on private sector entities
    that are accessing the MSLP, I again beg the question, why are
    we doing so for municipal entities trying to access the
    Municipal Liquidity Facility?
        I appreciate your staff trying to work with us in looking
    for workarounds in this environment, but, it is just so
    glaring, Mr. Chairman, that these private companies are not
    investment grade, and they are able to access the support. I am
    glad they are; I want them to. But we are not allowing
    municipal entities who are not investment grade to be able to
    access the specific facilities that we set up for our municipal
    circumstances.
        I just wanted to put that in the record, Mr. Chairman. I am
    hoping that you can go back to the table and reconsider this,
    given these issues that we are bringing to light. And at the
    end of the day, we need a solution for our municipal entities
    that are below investment grade, but are in the same boat as
    all of these private sector entities that are able to access
    capital through the MSLP.
        Thank you, Madam Chairwoman, and I yield back.
        Chairwoman Waters. Thank you very much.
        The gentlewoman from Missouri, Mrs. Wagner, is recognized
    for 5 minutes.
        Mrs. Wagner. Thank you, Madam Chairwoman.
        And welcome, Secretary Mnuchin and Chairman Powell. First,
    I would like to thank you both, both you and your staff for
    your service to our nation and your tireless efforts during
    this pandemic to implement the CARES Act and for propping up
    the Federal Reserve's emergency lending facility.
        While economic data continue to trend in a positive
    direction and we do know that credible and safe vaccines are
    just weeks away, the surge in cases and lockdowns occurring
    across the country could result in our economy backsliding
    again if we do nothing. I want to reiterate the urgency, the
    overdue urgency for Congress to provide immediate targeted
    relief now, not next year. It should have been months and
    months ago. Our nation's hospitals, small businesses, schools,
    many of our hardest-hit industries, and certainly those who
    continue to be unemployed, cannot continue to wait any longer
    for relief.
        Just this week, St. Louis County, which I have the
    privilege of representing, reported an average of 660 new cases
    being added every day, with a total of 51,324 confirmed
    coronavirus cases as of Sunday. Many of my constituents in
    Missouri's Second District are under a mask mandate, and
    restaurants and bars have been completely shuttered and are
    closed down. Capacity limits of gatherings are down to 10
    people.
        Our families and our businesses are asking Congress for
    additional relief to combat this health crisis. Hospitals are
    filling up, and many businesses are worried that they will not
    survive. They are reaching the desperation point. We must stop
    playing partisan politics and come to a bipartisan agreement to
    provide a direct COVID-related stimulus and support now.
        Chairman Powell, according to the data you are seeing, what
    parts of our economy are most in need of fiscal stimulus
    measures provided by Congress?
        Mr. Powell. Thank you. There are many sectors that could
    use some help, and, of course, those decisions are really up to
    you and the Administration. But I will just mention quickly, I
    would start with the labor market. I think we ought to remember
    that, despite the rapid progress in getting people back to
    work, which is so welcome, there are still 10 million people
    who are out of work because of the pandemic. And, that is more
    than lost their jobs in all of the global financial crisis 10
    years ago, which at the time was the biggest recession that we
    had had in a long, long time.
        So, there is a lot of work left to do there. The
    unemployment insurance programs are expiring at year's end. I
    think that is an area where I would certainly look.
        Another thing that comes up all the time in our discussions
    is smaller businesses. We met with a group of community bankers
    a week or so ago, and they were telling us there are just a lot
    of smaller businesses in their communities that will struggle
    to make it through this winter because, as you say, in
    Missouri's Second District--and it is true all over the
    country--COVID is moving up, and with the cold weather, people
    are staying in, and it is going to be tough on a lot of small
    businesses. That is another place where I would look.
        Finally, I do think for State and local governments, and
    this differs State to State, revenue is down, and maybe not so
    much in some States, but in some States by a lot, and costs are
    going up. And I think they deliver critical services. They are
    living under balanced budget requirements, and so they lay
    people off, and they have laid off more than a million people
    already. So, that is another area where I think it would be
    profitable to look.
        Mrs. Wagner. Thank you, I appreciate that.
        Secretary Mnuchin, I will ask you a similar question. You
    have mentioned the need for a targeted fiscal package with $455
    billion in unused funds from the CARES Act that did need to be
    returned to Treasury, given the law.
        How do you suggest we appropriate this money to support the
    most-vulnerable segments of our population?
        Secretary Mnuchin. My single-highest priority would be to
    activate the $140 billion in PPP funds that are not spent, that
    we could immediately send out to the hardest-hit small
    businesses whose revenue is down dramatically.
        I also think Congress should consider extending some of the
    unemployment insurance programs that expire at the end of the
    year.
        Mrs. Wagner. I appreciate that. And the Paycheck Protection
    Program is estimated to have saved more than 50 million jobs,
    including many jobs across Missouri's Second Congressional
    District.
        Chairwoman Waters. The gentlelady's time has expired.
        Mrs. Wagner. Thank you. I yield back.
        Chairwoman Waters. The gentleman from Illinois, Mr. Casten,
    is recognized for 5 minutes.
        Mr. Casten. Thank you very much. We really appreciate you
    all being here today.
        I was really pleased that the Federal Reserve's financial
    stability report identified climate change as a risk to
    financial stability. The report stated that, ``different
    sectors of the economy and geographic regions face different
    risks that will diverge from historical patterns.'' It also
    said that levered financial institutions may be exposed to
    losses from disasters made more likely by climate change.
        Chairman Powell, while there is more to explore about how
    to incorporate these risks into modeling, do you think it is
    appropriate for financial institutions to incorporate climate
    risk into credit risk assessment?
        Mr. Powell. Let me say this for starters: Climate change is
    an important issue. I want to say that society's broad response
    to climate change really has to come from elected
    Representatives. I think there is a role for the Fed here, and
    we are working our way through understanding what that will be.
        But one thing is the public will expect that, in our
    supervision and regulation of financial institutions and
    financial market infrastructure, that they will be resilient,
    we will make sure that they are resilient to climate change
    risks. And I do think that it does fall on banking institutions
    and CCPs and other financial market infrastructures to evaluate
    that and incorporate it in their own operations and also, I
    would think ultimately, in the credit that they extend.
        Mr. Casten. I think I will take that as a yes, because I
    was really just asking if it was appropriate for financial
    institutions to incorporate. What role the Fed has is, of
    course, a separate question.
        I certainly agree with you, and I asked the question
    because I am really concerned with the OCC's latest rule that
    would prevent banks from integrating climate-related risks into
    their credit assessments, despite the fairly significant
    financial risk that climate poses.
        The OCC rule specifically says that the risks of lending,
    ``would not change based on the sector in which the firm
    operates,'' which is categorically false. I don't know how you
    would tell banks that somehow they need to ignore the dynamics
    in the sector without imposing significant systemic risk on the
    banking sector, not allowing banks to account for the sector of
    the economy where it sits just defies logic and market
    fundamentals.
        The report also stated that, within the financial system,
    increased transparency, through improved measurement and
    disclosure, would improve the pricing of climate risks. What
    additional transparency would be helpful to appropriately
    assess the overall risk to the financial system due to climate
    change?
        Mr. Powell. I am glad you read that box in our Financial
    Stability Report. We are really at the beginning of the process
    of thinking our way through these things, and so are other
    market regulators and central banks and financial institutions
    around the world.
        The point there was that we are going to need transparency
    about how financial institutions are thinking about these
    risks, how they are incorporating it in their business model.
    We don't actually regulate transparency. That is really more of
    a market regulator job, what is a required disclosure.
        I think we are all moving in that direction, but in terms
    of the interaction between financial regulators and financial
    institutions, we are at the beginning of the work.
        Mr. Casten. Would a standardization of climate-related risk
    disclosures from publicly traded companies be useful for you in
    order to continue that work?
        Mr. Powell. I think that is certainly where we are headed
    over time. Again, it is not our responsibility. That would be
    the market regulator's responsibility. But I do think that is
    where we will be going.
        Mr. Casten. Thank you. And I yield back the balance of my
    time.
        Chairwoman Waters. Thank you.
        The gentleman from Kentucky, Mr. Barr, is recognized for 5
    minutes.
        Mr. Barr. Thank you, Madam Chairwoman.
        Chairman Powell, some in the press this morning and some of
    my colleagues have seemed to try to make the argument that you
    and the Treasury Secretary are in disagreement about the
    Exchange Stabilization Fund, but I don't detect much of a
    disagreement.
        What I heard the Secretary say is that his decision to not
    extend the $430 billion left in the Exchange Stabilization Fund
    is rooted in his interpretation of the statute of the CARES
    Act. And what I heard you say is that you believe that the
    Secretary, under the law, has the authoritative interpretation
    of that and you accept that.
        Now, obviously, you stated yesterday that you think it is
    perhaps premature to be pulling back from emergency lending
    programs, but I heard the Treasury Secretary say that it is
    within Congress' ability to authorize that, so I don't see a
    disagreement here.
        But given the modest takeup in some of the emergency
    lending programs, particularly Main Street, wouldn't it be wise
    for Congress to repurpose at least some of that $430 billion
    towards what, admittedly, has been an effective program, the
    Paycheck Protection Program?
        Mr. Powell. I hope you won't mind if I use just a couple of
    seconds to clarify what is going on.
        Mr. Barr. Sure.
        Mr. Powell. As I said earlier, the Secretary has sole
    authority over CARES Act funds. He reads the statute and reads
    it to say that there is no support for lending after December
    31st. We accept that. We don't have a role in reading it. That
    is one thing. Our thinking is not about the CARES Act money; it
    is more about support for the economy.
        Mr. Barr. Sure.
        Mr. Powell. We were concerned that the public might
    misinterpret this as the Fed stepping back and thinking that
    our work is done, and that is very much not the case. So, we
    needed to send a signal to the public to that effect.
        And, as the Secretary pointed out in his letter and as we
    pointed out in our letter, there is Exchange Stabilization Fund
    money that is available to support the reestablishment of these
    facilities or other facilities, if they are needed and they
    meet the legal requirements and that kind of thing.
        Mr. Barr. Let me just ask this, though: Wouldn't it be wise
    for Congress at this point, before the end of the year, to
    repurpose some of those CARES Act funds towards the Paycheck
    Protection Program, given the concerns of the small businesses
    that you referenced?
        Mr. Powell. I would just say that what I am hearing from
    across the aisle and on both sides of the Hill is the desire to
    do something to fund these causes, as the Secretary just talked
    about, and others. And I think that would certainly be a help
    for the economy. As to where that money comes from, that is
    really up to you.
        Mr. Barr. One area where there is, I think, significant
    bipartisan support is for streamlining the forgiveness process.
    A recent survey in Kentucky found that 27 percent of community
    banks in Kentucky would not participate in a new round of PPP
    without streamlined forgiveness and clear rules of the road.
        Many of the businesses in my district who have applied for
    forgiveness tell me that the process from the Small Business
    Administration (SBA) is slow and cumbersome. It is a big
    problem if lenders will not participate in a second round
    because of inadequate streamlining of the forgiveness rules.
        Secretary Mnuchin, you previously indicated your support
    for legislation to streamline PPP forgiveness. Is this still
    the case, and what more can we do to ensure participation by
    community lenders in a new round of PPP?
        Secretary Mnuchin. I do support that. And we have created
    three different forms for forgiveness, using what authorities
    we have, and making it as simple as possible for loans that are
    less than $50,000.
        But I know there is bipartisan support to pass a bill. I
    believe it is all loans $150,000 or less. And we fully support
    that, subject to audit.
        Mr. Barr. Thank you.
        Chairman Powell, the statutory language in the CARES Act
    temporarily suspends accounting rules related to troubled debt
    restructuring (TDR), and that expires on December 31st. It is
    important that Congress extend this important tool to allow
    lenders to continue to work with their customers.
        What authorities do you have at the Fed to extend TDR
    relief administratively versus what Congress must do to ensure
    lenders can continue to accommodate borrowers?
        Mr. Powell. We actually don't have authority to extend TDR.
    It is an accounting rule. We have a lot of authority, though,
    and we will use it to make sure that banks continue to work
    with their borrowers, to encourage them to do so, I should say.
        Mr. Barr. There is some uncertainty among the auditing
    community about whether life insurers would qualify for TDR
    relief under CARES. This is a problem, because insurers make up
    over 13 percent of the commercial real estate lending market, a
    sector that is deeply impacted by the pandemic.
        Chair Powell, do you agree that life insurers, given their
    participation in the commercial real estate lending market,
    should qualify for TDR relief?
        Mr. Powell. I would have to check on that, and get back to
    you. Thanks.
        Mr. Barr. We think that is an important thing to look into.
        My time has expired. I yield back.
        Chairwoman Waters. Thank you very much.
        The gentleman from New Jersey, Mr. Gottheimer, is
    recognized for 5 minutes.
        Mr. Gottheimer. Thank you, Madam Chairwoman.
        And thank you, Chairman Powell and Secretary Mnuchin, for
    being here today.
        The COVID-19 pandemic, as we have been talking about, has
    caused ongoing global health and economic crises. While certain
    aspects of our economy are recovering, millions of Americans
    and thousands of my constituents are in dire need of help. We
    can't go home from Washington, given what is going on, without
    risking a double-dip recession.
        As you said earlier this month, Chairman Powell, further
    support is likely to be needed to avoid another spread of the
    virus, and to help individuals. We are obviously in the lame
    duck session of Congress. The American people have waited long
    enough. Our families, our businesses, and our communities are
    all suffering, and it would be unconscionable for any party to
    walk away from so many who are hurting right now.
        Yesterday, the Problem Solvers Caucus joined a bipartisan
    group of Senators in releasing a new $908 billion emergency
    short-term stimulus package. It is intended to be a critical
    downpayment to get through the next months.
        If I can start with you, Secretary Mnuchin, have you had a
    chance to review the framework, by chance?
        Secretary Mnuchin. First, let me just say I really
    appreciate the work that you have personally done, and the
    Problem Solvers have done, in trying to reach bipartisan
    solutions.
        I did review it briefly yesterday after my testimony, and I
    will be spending more time on it today. Again, I would urge
    Congress to move quickly on the PPP, for which there seems to
    be enormous bipartisan support. But, again, thank you
    personally for your efforts.
        Mr. Gottheimer. Thank you, Mr. Secretary. And I appreciate
    the work we have done together on this. And obviously, I hope
    this will be something that if we can get the support here, the
    Administration might support.
        If I could turn to Chairman Powell, would you speak to the
    urgency for fiscal relief, and what do you believe is at stake
    this winter for the economy and for families if we don't get an
    emergency package done in the next week?
        Mr. Powell. My view is that it would be very helpful and
    very important that there be additional fiscal support for the
    economy, really to get us through the winter. We have made a
    lot of progress faster than we expected, and now we have a big
    spike in COVID cases, and it may weigh on economic activity.
    People may pull back from activities they were previously
    involved in, or not get involved in new activities. So, I think
    it would be helpful if we could get that done, if you could get
    that done.
        Mr. Gottheimer. Thank you so much, Mr. Chairman.
        Just to follow up on that, obviously, local governments are
    struggling now, through no fault of their own. It is putting
    law enforcement, firefighters, teachers and their [inaudible]
    on the line. What do you think the impact will be, if we can't
    get extra resources to our State and local governments, on the
    economy?
        Mr. Powell. These are really decisions for you, but I would
    say that State and local governments provide critical services.
    You mentioned them. And State and local governments live with
    balanced budget requirements, unlike the Federal Government.
    And what happens when revenues soften and expenses go up is you
    see layoffs. And that was a big part of the story in the slow
    recovery from the global financial crisis a decade ago. We now
    have a little more than a million in layoffs so far.
        State and local governments are some of the very largest
    employers in the country, and they provide those critical
    services. I think that is a worthy place for you to look, in
    terms of where support might be appropriate.
        Mr. Gottheimer. Do you see it as sort of, just to follow up
    on that point, a ripple effect? In New Jersey, about a third of
    our businesses already, small businesses, have already gone
    out, including about 28 percent of restaurants. When you add
    that with the revenue declines for the State and local
    governments, and all of these businesses coming out, what do
    you see on the other side of the virus? And, again, with the
    vaccine, but what can be the economic [inaudible] that all of
    this brings along after the virus is behind us?
        Mr. Powell. I think, as you suggest, that you have a near-
    term and medium-term difference. The near-term does look
    challenging through the winter. Small businesses--we are
    hearing all over that small businesses are really under
    pressure. And then, sometime in the middle of next year, it
    really does look like that may be the light at the end of the
    tunnel--we all hope so--and that the economy could be very
    healthy.
        The problem is, of course, people who lose their homes now
    or businesses that go out of business, these are sometimes
    small businesses that might have generations of sort of human
    capital built up in their activities. And once they are gone,
    they can't just be recreated. So, you could lose parts of the
    economy, and that will mean a slower recovery.
        I like to think of it as a bridge over this chasm that was
    created by the pandemic. We are trying to get as much of the
    economy and as many of the workers across that bridge to the
    post-pandemic economy. And I think we have done well at that,
    but there is still some work left to do.
        Mr. Gottheimer. Thank you so much.
        And I yield back.
        Chairwoman Waters. The gentleman's time has expired.
        The gentleman from Ohio, Mr. Gonzalez, is recognized for 5
    minutes.
        Mr. Gonzalez of Ohio. Thank you, Madam Chairwoman, for
    holding this hearing, and I thank both of our witnesses for all
    of your work throughout this pandemic. I sincerely believe that
    we will look back a decade, or 2 decades from now, and the work
    that you two did together will be looked at in the most
    favorable light. And so, I couldn't be more grateful for your
    service, so thank you both for that.
        Look, we can see the light at the end of the tunnel with
    two vaccines awaiting approval, and I think the bridge comment
    is exactly correct. We are looking to bridge from now until,
    call it April 1st or whenever that is. And I was pleased to
    join a group of bipartisan and bicameral Members yesterday as
    my colleague, Mr. Gottheimer, just mentioned, with the Problem
    Solvers Caucus to hopefully provide that bridge, and I hope we
    will be able to do that.
        Chairman Powell, before I move into some questions on that,
    going back to the Exchange Stabilization Fund a bit, the main
    purpose was to provide liquidity to the financial system to
    stabilize the financial system. As these programs expire, do
    you see the same or similar risks to the liquidity inside the
    financial system as you did, say, back in March or April, or do
    you feel like we are in a much better place today?
        Mr. Powell. We are clearly in a much better place. To be
    clear, the utilization of these facilities, most of them, is
    very, very low now. Nonetheless, we see them as serving a
    backstop function that a central banker would want, and we
    would want to leave that backstopping function in place for
    some additional period of time but not forever.
        If you look back at what we did in the global financial
    crisis, we left them out there until we were well past the
    difficulty, and then we unplugged them, put them in the attic,
    and put them away. None of them became a permanent feature of
    the landscape, and we hope these don't either. So, that is the
    way we think about it.
        Mr. Gonzalez of Ohio. Thank you. That is helpful. And
    hopefully, as we debate the next package, we can consider that.
        Secretary Mnuchin, in recent months, we have heard Speaker
    Pelosi on multiple occasions state effectively that nothing is
    better than something with respect to additional relief. In
    your estimation, is nothing better than something for my
    constituents back home?
        Secretary Mnuchin. No. Something is clearly better than
    nothing. And, again, I would urge Congress to do something, if
    it is just the PPP or more.
        Mr. Gonzalez of Ohio. And, of course, that is an obvious
    statement, which I think everybody knows, but for whatever
    reason, the Speaker has chosen that path. My understanding is
    you have continued dialogue with her. I am not going to ask you
    to divulge sort of the specifics of those conversations, but
    you have been involved in a lot of deals in your life,
    certainly as Treasury Secretary.
        As you have had these discussions, how would you
    characterize them with respect to willingness to actually get a
    deal done? Because I think there are a lot of people who like
    to talk around here, but when it gets down to it, actually
    don't do that much with respect to closing a deal. How would
    you characterize the discussions?
        Secretary Mnuchin. I would say the good news is when we
    really needed to get this done last March, it got done with
    overwhelming bipartisan support. Republicans and Democrats came
    together in an unprecedented response. When we needed to extend
    the PPP, people came together in an unprecedented response.
        Unfortunately, since that period of time, things for which,
    in my opinion, there should be absolute bipartisan support, and
    we could get done, unfortunately, the Speaker has had--a half a
    loaf is not good enough and wanted a full loaf. So, again, I
    would encourage Congress, particularly over the next few weeks
    in the lame duck, let's try to get something done.
        Mr. Gonzalez of Ohio. No. I couldn't agree more, and I--
    again, to state another obvious point, my colleagues on the
    other side of the aisle are in the Majority. And in order for
    this to actually get done, we are all going to have to come
    together to do it, but really, the pressure needs to come from
    them. And I hope that they will use the leverage that they have
    to encourage the Speaker to put a real bipartisan bill forward,
    because as Chairman Powell said, and as you have said, as
    common sense demands, it is obvious that we need a bridge here,
    that there are people struggling. There are small businesses
    struggling. There are people who are unemployed who are
    struggling. And I can almost guarantee you to the person that
    every single one of them would prefer something to nothing. And
    I hope that this body will come to common sense and actually
    get that done.
        And with that, I yield back.
        Chairwoman Waters. Thank you.
        And I object to all of the fault being placed on the
    Speaker's back. I would advise the President to get involved
    and get off the golf course.
        Mrs. Axne, you are now recognized for 5 minutes.
        Mrs. Axne. Thank you, Madam Chairwoman, and I thank both of
    our witnesses for being here.
        As we all know, we are in dire straits right now. Iowa has
    now had increasing unemployment claims for 6 straight weeks.
    And, of course, I would like to remind everybody that we need
    to pay attention to the level of unemployment, not just the
    direction. This is all happening when week after week, we see
    initial claims higher than the worst that we saw in the Great
    Recession. That is 36 weeks in a row where we have seen record
    unemployment claims across this country.
        Meanwhile, The Century Foundation recently estimated that
    12 million people would lose their unemployment benefits the
    day after Christmas if we don't act. That seems very terrible
    for this country.
        Chairman Powell, what are the economic impacts of removing
    that support at a time when this recovery is so fragile?
        Mr. Powell. This is if the unemployment programs run out
    and expire at the end of the year. We would be concerned that
    the unemployment rate for people in the bottom quartile, for
    example, is about 20 percent still, and those are people with
    relatively low savings, low wealth. And we would be concerned
    that they would be vulnerable to losing their houses or their
    rental and just be in a very difficult place. So, we think that
    is an appropriate place to look for further help.
        Mrs. Axne. I appreciate that. As we all know, 1 in 8
    Americans are going hungry, more than 3 million businesses have
    closed, and we are approaching 100,000 people now hospitalized
    with COVID. So I am wondering, for either one of you, does
    seeing this kind of need and the discussion that we have had
    today show the importance of passing another COVID aid package?
    And how quickly do we need to get that done?
        Mr. Powell. I would just urge, as the Secretary has done,
    that this is a good time. This would really help the economy
    through these winter months and beyond. And, again, we can see
    the vaccines coming, but we have a bit more of the bridge to
    build, and I think it would be very important for the economy
    to receive that help.
        Secretary Mnuchin. I would agree with that, as I have
    echoed.
        Mrs. Axne. Thank you.
        And, Secretary Mnuchin, I did want to discuss the CDC's
    eviction moratorium that currently expires on December 31st. A
    study recently showed that 430,000 cases of COVID and more than
    10,000 deaths are due to lifting the earlier State and local
    eviction moratorium. Are there plans to extend that to possibly
    protect 10 million households from eviction this January?
        Secretary Mnuchin. I think, as you know, that wasn't our
    first choice. Our first choice was really assistance to those
    people, but I will discuss that with the President, and
    extending it.
        And, Chairwoman Waters, I have been speaking to the
    President every day and updating him on the state of the
    negotiations. He would like us to see additional funding.
        Mrs. Axne. Thank you. I hope we can get that done quickly
    so that we don't have a 20-day gap here where millions of
    people are going to get evicted. Soc, please get back to us and
    the chairwoman on what we can expect from that. Thank you.
        I would also like to discuss what you are doing with the
    $450 billion of funds for the CARES Act. I know we have had
    some discussion here. I am going to set aside the question of
    whether what you are doing is legal, because I want to get into
    why you are doing this. One explanation I have seen is that
    it's because you think Congress should use this for fiscal aid,
    and I don't disagree with that.
        The problem with this, though, is that if Congress wants to
    reappropriate money from the Exchange Stabilization Fund (ESF),
    we can do that the same as we can from the General Fund. The
    only real difference I can see is that leaving it in the ESF
    makes it a heck of a lot easier for a future Treasury Secretary
    to use this money quickly to provide for economic support. So,
    why are you choosing to make it harder to support the economy
    in the future?
        Secretary Mnuchin. I just want to clarify, because there is
    a bunch of confusion. Whether it sits in the general account,
    whether it sits in the ESF, all of this is completely governed
    by the law. And as I have said, I extended the pre-CARES Act
    facilities. If I was looking to do something that was
    political, I wouldn't have extended those.
        My result in not extending the CARES Act is merely an
    administration of my obligation under this law. It doesn't
    matter what account it is in. That has nothing to do with it.
    The money is administered pursuant to the law. And if Congress
    wants to change the law, that is fine. And the reason why I
    believe Mitch McConnell has put some new language in isn't in
    my interpretation of the law; it is because many of you seem to
    be confused and he wants to clarify it.
        Mrs. Axne. Reclaiming my time, Thank you, Mr. Secretary,
    but that is just not accurate. The CARES Act is very clear that
    existing investments can remain there, and that is what you
    have made happen with the Fed's facilities, so that answer
    isn't acceptable.
        Why are you looking for a way not to help American people
    right now? This isn't your money; it is taxpayer money, and it
    should be quickly available to the American people right now
    when we need the help. So, I see you undermining the American
    people on your way out the door. You need to reverse this
    decision so that these programs can keep supporting people.
        Chairwoman Waters. The gentlelady's time has expired.
        Mrs. Axne. Thank you for your service, and I yield back.
        Chairwoman Waters. Thank you.
        The gentleman from Tennessee, Mr. Rose, is recognized for 5
    minutes.
        Mr. Rose. Thank you, Chairwoman Waters, and Ranking Member
    McHenry. And I thank you, Secretary Mnuchin and Chair Powell,
    for being here today for this third oversight hearing required
    by the CARES Act. I want to thank you also for the great work
    by both the Department of the Treasury and the Federal Reserve
    throughout this pandemic response. Your fast action has allowed
    businesses in my district in Tennessee and across the country
    as well to keep their doors open, and to keep employees on the
    payroll.
        I also want to underscore the importance and impact of the
    CARES Act on stabilizing the economy. We continue to see strong
    economic recovery, and I hope we can continue that trend as we
    work towards the great American comeback.
        Congress has already provided approximately $1 trillion
    through bipartisan legislation, including the CARES Act, to
    stabilize State and local economies and support communities,
    including frontline workers, teachers, students, school
    employees, and employers and employees.
        In your testimony, you pointed out that $455 billion in
    unused funds remain from the CARES Act. Back in Tennessee,
    folks are talking about how these funds sit unused while House
    Democrats continue to discuss spending an additional $3.4
    trillion, and that is with a ``T,'' trillion, in the Health and
    Economic Recovery Omnibus Emergency Solutions (HEROES) Act.
        In Middle Tennessee, there have been several industries
    that are enjoying their best year ever while others have been
    completely devastated by the government-imposed shutdowns due
    to the coronavirus pandemic. The American private bus and motor
    coach industry is one of the latter. The motor coach industry
    plays a vital role in our travel, tourism, and music
    industries, and provides nearly 600 million passenger trips per
    year. In the wake of the pandemic, nearly all of the 3,000
    companies in the industry at some point were completely shut
    down, 36,000 vehicles were parked, and most of the over 88,000
    employees were laid off.
        We have billions of dollars sitting unused, and yet this
    industry still needs relief. Congress must act to provide
    targeted relief.
        Secretary Mnuchin, as a proponent yourself of targeted
    relief, can you detail what you would do to provide targeted
    aid to this devastated industry?
        Secretary Mnuchin. Yes. And let me just say, there is more
    than the $450 billion unused. There is actually another $140
    billion in PPP on top of that. But I would support $20 billion
    in additional money in payroll support to the airlines,
    identical to what we have done before in the CARES Act. I think
    that would be very meaningful in terms of employment and saving
    the industry.
        Mr. Rose. And I appreciate that, but unfortunately, that
    assistance didn't reach the motor coach industry, and so they
    have not enjoyed that same targeted relief that we saw go to
    the airline industry.
        Do you believe that the aid that you described should be
    included in an end-of-year package?
        Secretary Mnuchin. I apologize. I thought you were asking
    about the airlines. I would support additional aid to the motor
    coach industry as well.
        Mr. Rose. Thank you. Lastly, would you be willing to commit
    to having Treasury staff brief my staff and Senator Marsha
    Blackburn's staff before the end of the year on ways that
    Treasury might be able to provide targeted assistance to the
    bus and motor coach industry using any existing funds?
        Secretary Mnuchin. We would be happy to. I don't think,
    unfortunately, we can use existing funds, but we would be more
    than happy to go through that with your staff.
        Mr. Rose. Thank you.
        Thanks to President Trump's Operation Warp Speed, and the
    great American innovative industries that we have, we are
    getting closer and closer to widely distributing a vaccine. In
    Tennessee, if the FDA authorizes emergency use, we are
    expecting to see distribution beginning in mid-December.
        Chair Powell, could you speak to the effect that
    distributing an effective vaccine would have on our economy?
        Mr. Powell. Yes. Clearly, in the medium-term, which is to
    say, sometime in the middle of next year, we are not well-
    positioned to give a precise estimate of when that might be,
    people will regain confidence that they can gather in various
    activities that now seem too risky because of COVID, and that
    will have a very positive effect on economic activity, on
    spending, and on hiring. So, we do see very positive things
    coming.
        I just would add, though, as I said in my testimony, the
    path is a little bit uncertain because we are still learning,
    going to be learning, about the efficacy of the vaccines and
    also about the speed of the rollout and who will get them and
    in what order and what the effect will be on the public. But,
    overall, I think we see a very positive set of developments
    coming at a somewhat uncertain time but not so long into the
    future.
        Mr. Rose. Thank you, Chairwoman Waters. I yield back.
        Chairwoman Waters. Thank you.
        The gentlewoman from California, Ms. Porter, is recognized
    for 5 minutes.
        Ms. Porter. Thank you, Madam Chairwoman.
        Chair Powell, would you say the economic crisis caused by
    the pandemic is over?
        Mr. Powell. I'm sorry. I couldn't hear exactly what you
    said. I apologize.
        Ms. Porter. That's okay. Would you say the economic crisis
    caused by the pandemic is over?
        Mr. Powell. No, I would not.
        Ms. Porter. Okay. How long do you think it will take before
    we know?
        Mr. Powell. I think--well, before we know, I think we will
    know a lot in the next 4 to 6 months about vaccines. The real
    issue, though, is what are going to be the effects of people
    whose jobs may have changed or gone away? It is really the
    new--the post-pandemic economy is going to be different, and we
    are going to learn a lot about that in the second half of next
    year. And I think those people are going to need help, some of
    them.
        Ms. Porter. And I think that is, Chair Powell, a very fair
    answer. We can't know unless we have a crystal ball exactly how
    the recovery from this is going to proceed.
        Now, Secretary Mnuchin, who is also here with us today,
    apparently disagrees with you. In fact, Secretary Mnuchin is so
    certain that the economic crisis is over that he wants to ban
    the Fed from using any more of the $500 billion that Congress
    set aside in the CARES Act to help the economy. Two weeks ago,
    he wrote to you to request that you return the remaining $455
    billion because our economy, in his opinion, simply doesn't
    need it anymore.
        In response, you, Chair Powell, said that the outlook for
    the economy is extraordinarily uncertain. The Federal Reserve
    would prefer that the full speed of emergency facilities
    established during the pandemic continue to serve their
    important role as a backstop for our still strained and
    vulnerable economy.
        Needless to say, it is highly concerning that the two
    people tasked with stabilizing our economy do not agree on
    whether the markets are stable. But it actually doesn't matter
    what either of you two think because Secretary Mnuchin simply
    doesn't have the authority to recall the $455 billion.
        I am reading aloud now from Section 4027 of the CARES Act:
    ``On or after January 1, 2026, any funds that are remaining
    shall be transferred to the General Fund,'' in other words,
    sent back to the Treasury.
        Secretary Mnuchin, is it currently the year 2026? Yes or
    no?
        Secretary Mnuchin. First, let me comment. I do believe
    there is an economic emergency.
        Ms. Porter. Secretary Mnuchin, reclaiming my time.
        Secretary Mnuchin. You are putting words in my mouth that
    are not correct.
        Second of all, okay--
        Ms. Porter. Reclaiming my time.
        Secretary Mnuchin. --the answer is that 4027--
        Chairwoman Waters. The time belongs to the gentlelady.
        Ms. Porter. Madam Chairwoman?
        Reclaiming my time, Mr. Mnuchin, would you start by
    answering my next question, and I will ask you others. Is today
    the year 2026? Yes or no?
        Secretary Mnuchin. Of course, it is not 2026. It's
    ridiculous to ask me that question and waste our time.
        Ms. Porter. Secretary Mnuchin, I think it is ridiculous
    that you are playacting to be a lawyer when you have no legal
    degree.
        Secretary Mnuchin. Actually, I have plenty of lawyers at
    the Department of the Treasury who advise me, so--
        Ms. Porter. Mr. Mnuchin--
        Secretary Mnuchin. --I am more than happy to follow up with
    Chairwoman Waters and the ranking member and explain all of the
    legal provisions. I am more than happy to make that access.
        Ms. Porter. Secretary Mnuchin, are you, in fact, a lawyer?
        Secretary Mnuchin. I do not have a legal degree. I have
    lawyers who report to me.
        Ms. Porter. Thank you.
        Chair Powell, are you, in fact, a lawyer?
        Mr. Powell. I am a former lawyer, a recovering lawyer.
        Ms. Porter. You have a legal degree, correct?
        Mr. Powell. Yes, I do.
        Ms. Porter. Okay. Secretary Mnuchin, you are trying to tell
    Chairman Powell to send over any remaining funds right now, and
    you are claiming, falsely in my opinion, that is what the law
    says. And you have gotten into a disagreement with someone who
    is actually a lawyer--
        Secretary Mnuchin. Are you a lawyer?
        Ms. Porter. --and, Congress, which actually wrote the law
    about what it says. So, let's go through with what the law
    actually says.
        Secretary Mnuchin. Okay. Actually, I wrote the law with
    Congress, for what it is worth. And, by the way, it is not $450
    billion he is returning. I think it is approximately $175
    billion.
        Ms. Porter. Reclaiming my time, there was no question
    there.
        Secretary Mnuchin, the CARES Act already says in exhibit--
    in Section 4027, it says that you have to stop making any new
    investments, new investments, in Fed lending programs at year's
    end. It doesn't say that the Fed programs must stop making
    loans or purchases. You are making a decision that is not
    aligned with the statute or congressional intent.
        Chairwoman Waters. The gentlelady's time has expired.
        The gentleman from Wisconsin, Mr. Steil, is recognized for
    5 minutes.
        Mr. Steil. Thank you, Madam Chairwoman.
        Secretary Mnuchin, thank you for being here. Would you like
    to further your comments for just a minute on the last exchange
    there as to your rationale? I feel like you got cut off there
    for a minute.
        Secretary Mnuchin. Thank you very much. And, again, I think
    what I will do is follow up with the chairwoman and the ranking
    member so we clarify both 4027 and 4029. Again, I have had
    these discussions with the Senate. And, again, if there is any
    misunderstanding on this, again, this can be changed.
        Mr. Steil. I appreciate it. Thank you very much, and thank
    you for being here.
        Chairman Powell, the Fed balance sheet currently stands at
    $7.2 trillion, more than $3 trillion above where we started at
    the beginning of the year. At the hearing on June 17th, I asked
    you how the Fed would manage its balance sheet going forward to
    mitigate inflationary pressures. I think we need to keep this
    issue in mind in light of the unusual monetary and fiscal
    tactics we have been required to employ this year to maintain
    the economic growth and stability that we have had.
        When we spoke, you commented that during the last recovery,
    going back a ways, the Fed waited until it was, ``well down the
    path of recovery,'' before deciding what to do. You asserted
    that the balance sheet, I think in your words, ``doesn't
    present issues at the current time,'' suggesting that
    addressing the balance sheet size was not a priority.
        It is now 6 months later. Our economy has begun to recover.
    The unemployment rate has fallen from approximately 10 percent
    to closer to 7 percent. Multiple vaccine trials have been
    successful, and we are expecting distribution in the not-too-
    distant future. We are not out of the woods yet, but there is
    cause, I think, for optimism about our economic recovery.
        Could you comment on the indicators that you are watching
    closely as you consider taking steps to begin to restore the
    Fed's balance sheet to its prepandemic levels?
        Mr. Powell. Sure. Our priority remains supporting the
    economy until we are really well through this. We are going to
    keep our rates low and keep our tools working until we feel
    like we really are very clearly past the danger that is
    presented to the economy from the pandemic. So, we are not
    considering pulling back any of our support for the economy,
    and we are not going to, until we feel very confident that it
    is no longer necessary.
        The time will come to start thinking about balance sheet
    issues, and we have the model of what we did in the last
    financial recovery. And I was at the Fed during those years
    when we were considering that. That time will come. It is well
    into the future. I think we know how to do it, and that is
    slowly and carefully.
        I think we have also seen all of these years of large
    balance sheets, and understandably, people were concerned after
    quantitative easing began that there would be inflationary
    pressures or market distortionary problems, but we really
    didn't see them. So, we don't want the balance sheet to be, in
    the long run, any bigger than it needs to be, but the main
    thing for us is to keep the support that the economy needs
    until we are confident that it no longer needs it.
        Mr. Steil. Thank you for your comments. If I can shift
    gears, Chairman Powell, as you know, LIBOR is linked to almost
    $400 trillion in financial contracts, so the implications of
    the transition away from the benchmark are quite significant. I
    am especially concerned about some of the tough legacy
    contracts which reference LIBOR and are unchangeable.
        On Monday, the Fed, the FDIC, and the OCC issued a
    statement recognizing some of these developments and
    reiterating, among other things, that banks should transition
    away from the U.S. dollar LIBOR as soon as practical. Are you
    concerned that some financial market participants may continue
    to reference LIBOR in contracts even after the relevant phase-
    out dates?
        Mr. Powell. As you know, we have provided guidance to
    market participants that we would strongly discourage the use
    of LIBOR for new contracts after the end of 2021. And then,
    there is a proposal which will go out for comment, but the idea
    would be that LIBOR would cease to be published, would cease to
    exist, except in the tail in the remaining outstanding
    contracts at June 30, 2023.
        It is very important that people understand that LIBOR
    should not be assumed to continue to be published after that.
    That does mean there will be a so-called hard tail, and we do
    think that will take legislation, and we have been working with
    Congress and also at the New York State level on that. So, we
    think that is important but not urgent from a time standpoint,
    but something that we will need to get done.
        Mr. Steil. Thank you very much. Thank you both for being
    here.
        I yield back.
        Chairwoman Waters. Thank you.
        The gentlewoman from Massachusetts, Ms. Pressley, is
    recognized for 5 minutes.
        Ms. Pressley. Thank you, Madam Chairwoman.
        Chairman Powell, you have consistently publicly called for
    greater fiscal aid. You testified that, ``the risk of overdoing
    it is less than the risk of underdoing it.'' I agree with you
    here, Chairman Powell. This is not a question of either/or. We
    absolutely need further stimulus, but Congress has also
    provided the Fed with over $450 billion to support lending to
    cities, States, and small businesses.
        Now, in fact, in your March 23rd press release announcing
    these emergency lending facilities, you state 3 times that the
    Fed, ``is committed to using its full range of tools and
    authorities.'' Yet, in less than 24 hours, you gave up any
    resistance to Secretary Mnuchin's arbitrary demand to shutter
    these facilities by the end of the year, including the
    municipal liquidity in Main Street lending facilities.
        So, I want to just build on my colleague, Representative
    Axne's, line and justfurther sort of enumerate and unpack the
    sobering landscape likely before us. So, yes or no, please,
    with the ongoing pandemic, do you expect the number of cities
    and States facing historic budget shortfalls to continue to
    rise? Chairman Powell, yes or no?
        Mr. Powell. I don't really have a strong expectation on
    that, but that may be right.
        Ms. Pressley. I will take that as a yes.
        Do you expect further State and municipal credit
    downgrades, making it more difficult for State and local
    governments to borrow? There have been 337 downgrades so far.
    Do you expect that to happen? It is a yes or a no.
        Mr. Powell. I think it is probable.
        Ms. Pressley. Okay. I will take that as a yes.
        Are we facing an unprecedented wave of small business
    closures? Yes or no?
        Mr. Powell. I think that is uncertain. Unprecedented wave?
    I don't know that we know that.
        Ms. Pressley. Okay. Is the rescue of small businesses
    essential to any long-term economic recovery? Yes or no?
        Mr. Powell. Yes. It is important.
        Ms. Pressley. And would failure to provide relief to
    cities, States, and small businesses further widen existing
    inequalities, including, but not limited tox, the racial and
    gender wealth gaps? Yes or no?
        Mr. Powell. Look, I think it is--
        Ms. Pressley. Yes or no?
        Mr. Powell. I think it--I'm sorry. Yes-or-no questions for
    these questions--I am just going to answer you, which is that I
    think it is important that these groups--
        Ms. Pressley. Reclaiming my time.
        Mr. Powell. --get additional fiscal support. Thank you.
        Ms. Pressley. Please don't--I don't want you to filibuster
    here, okay, because these issues are of great import. And part
    of your job is forecasting, so I am leaning in on your
    expertise. So, again, yes or no, will this exacerbate racial
    and gender wealth gaps, failing to provide relief to cities and
    States and small businesses?
        Mr. Powell. I think there is a risk of that. I think there
    is a risk of that, yes.
        Ms. Pressley. Chairman Powell, the Federal Reserve lends at
    a ratio of 10 to 1, so if Congress set aside $400 billion to
    cover any potential losses, you can lend up to how much to
    these facilities? What is that amount?
        Mr. Powell. Whatever 10 times the amount of equity that has
    been pledged, so it would have been several multiple trillion,
    $4 trillion or so. Of course, that borrowing happened. It just
    didn't happen in the facility.
        Ms. Pressley. Over $4 trillion. So, you have a
    responsibility to support maximum employment. Yet in the midst
    of a global pandemic, you have been complicit in eliminating
    over $4 trillion in potential relief to cities, States, and
    small businesses. And then adding insult to injury, the
    Secretary wants to move this money to Treasury's General Fund,
    conveniently out of reach of the incoming Administration and in
    direct violation of the CARES Act.
        I know there has been this sort of, Jedi mind trick going
    on here, but we know what our intentions are. We can read. And
    the funds are supposed to be available for up to 5 years, so I
    am not even sure why we have been going back and forth on that.
        But I did also just want to ask about--let me for a moment
    turn to Secretary Mnuchin, just building on the line from my
    colleague, Congresswoman Porter, here. What does it state in
    Section 4027, subsection C, paragraph 2 of the CARES Act? I
    just want to make sure we are all operating with the same
    information.
        Secretary Mnuchin. Section 4027 allows, to the extent we
    have made, for example, an existing loan to an airline. If we
    need to advance additional money to that airline in a
    protective capacity, or if we have expenses, that is what 4027
    applies to. And, again, it says very clearly that there are
    certain funds that can be used until 2026, and will continue to
    be available in Section 4027. Sections 4027 and 4029 work
    together. Section 4029 has the December 31st--
        Ms. Pressley. I will just reclaim my time. I am reclaiming
    my time because, I don't know, we must be reading a different
    text. So, Mr. Secretary, Section 4027, subsection 2, paragraph
    2--
        Chairwoman Waters. The gentlelady's time has expired. Thank
    you.
        Ms. Pressley. Thank you.
        Chairwoman Waters. The gentleman from Texas, Mr. Gooden, is
    recognized for 5 minutes.
        Mr. Gooden. Thank you, Madam Chairwoman.
        Secretary Mnuchin, thank you for your prior support for
    credit risk transfer (CRT) as a means of reforming Freddie Mac
    and Fannie Mae, as expressed in Treasury and the
    Administration's housing reform plan. Does that support still
    exist? And do Treasury and the Administration still support CRT
    for the GSEs, and more importantly, the de-risking of Fannie
    Mae and Freddie Mac that protects taxpayers?
        Secretary Mnuchin. Yes.
        Mr. Gooden. Would you like to elaborate on that?
        Secretary Mnuchin. I think credit risk transfer is a very
    effective mechanism of supporting the institutions. I also
    think that capital accumulation is something that is very
    important, and ultimately capital raising, so that taxpayers
    are not at risk.
        Mr. Gooden. Thank you. As you know, I, and many of my
    colleagues in both Chambers of Congress and a variety of
    stakeholders who have filed comments, have urged FHFA to ensure
    a robust, risk-based CRT market in the new capital framework
    for the GSEs. And while I support the capitalization of the
    Enterprises, I have real concerns about the impact of FHFA's
    capital rule on the CRT market.
        The Financial Stability Oversight Council (FSOC) and
    Treasury provided a brief 4-page review of FHFA's 400-plus page
    proposed capital rule with little to no analysis of the impact
    on the markets for CRT or mortgage-backed securities.
        Do you think FHFA's capital rule provides adequate capital
    relief for CRT? And has Treasury, FSOC, or the Office of
    Financial Research examined the effects this rule could have on
    the CRT market or access to mortgage credit?
        Secretary Mnuchin. We have done some work on that, and we
    would be happy to follow up with you on it.
        Mr. Gooden. Thank you. I would appreciate that.
        Mr. Powell, you were filibustered earlier. Did you have any
    further comments? The floor is yours. I will give it to you. I
    have 3 minutes.
        Mr. Powell. Thank you. I just would say that, for example,
    the municipal facility--the level of municipal borrowing is set
    to exceed the all-time annual record this year, and that is
    because of the backstop of this facility. You don't measure the
    success of the facility by the amount of lending it does. It
    succeeded in restoring borrowing in the markets at very low
    levels for municipalities and other State and local government
    entities across the credit spectrum: small; medium; and large.
    So, I would just say that I think it has been quite a success.
        Mr. Gooden. Thank you. I appreciate it.
        Madam Chairwoman, I yield back.
        Ms. Dean. [presiding]. The gentlewoman from New York, Ms.
    Ocasio-Cortez, is recognized for 5 minutes.
        Ms. Ocasio-Cortez. Thank you both so much for coming to
    offer your testimony today and your expertise.
        Secretary Mnuchin, not to belabor the point, but I did want
    to dive back in here to Sections 4027 and 4029 that you are
    referencing. I do think it is important that we discuss this
    because you are bringing it up as the main rationale as to why
    you are kind of bringing these funds back into the Exchange
    Stabilization Fund.
        So, first and quickly, Section 4027 of CARES explicitly
    states that unused funds are to be returned to the Exchange
    Stabilization Fund on January 1, 2026, correct?
        Secretary Mnuchin. That is correct, and that will occur on
    January 1, 2026.
        Ms. Ocasio-Cortez. And that is with respect to the unused
    funds. Now, Section 4029--
        Secretary Mnuchin. No, it is not the unused; it is the
    unused funds in the ESF at that time, that is correct.
        Ms. Ocasio-Cortez. Yes. Thank you.
        Section 4029 refers to rescinding authority to making new
    loans, right? So, the law explicitly does contemplate--it has
    that Section A, B, and C--and it does explicitly contemplate
    that remaining funding as of January 1, 2021, which is in just
    a matter of weeks, to be available for restructuring,
    modification, amendment, and administrative costs. Is that
    right?
        Secretary Mnuchin. That is correct.
        Ms. Ocasio-Cortez. I was wondering if I could give you the
    opportunity to discuss, instead of choosing to return those
    funds--and you are choosing to return those funds, right?
        Secretary Mnuchin. No, I am not choosing to return those
    funds. Whether the funds are returned or the funds aren't
    returned, 4029 governs both direct and indirect. So, again, I
    could have allocated all $500 billion on day one to the Federal
    Reserve. I allocated $200 billion. It really is irrelevant.
    Section 4029 governs the same provision, whether money is
    sitting in any of the accounts. That was the purpose of 4029.
    If you don't read it that way for 4029, then it shouldn't have
    existed. There was no purpose to have the December 31, 2020,
    date. And, again, I personally negotiated these documents.
        Ms. Ocasio-Cortez. I understand. And I am trying to seek
    some clarification because we are in such a desperate position.
    Given the unfortunate gridlock, I think if--that we are all
    kind of in--we are all aligned in interest in trying to figure
    out where we can explore maximum flexibility as offered by the
    statute, and so I am just curious.
        Instead of choosing to kind of return--or rather, instead
    of returning these funds, instead of reading the interpretation
    as returning these funds to ESF, could you use, could we use
    this modification statute to recapitalize loans?
        Secretary Mnuchin. Recapitalize existing loans?
        Ms. Ocasio-Cortez. Yes.
        Secretary Mnuchin. Again, in my example, we have made
    airline loans.
        Ms. Ocasio-Cortez. Yes.
        Secretary Mnuchin. So, people are focusing on the Section
    13(3), these facilities. This governs both the direct loans and
    the indirect loans. In the case of an airline loan that we have
    already made, and we need to make protective advances after
    December 31, 2020, the statute allows us to do that. And,
    again, it doesn't matter whether I had allocated $500 billion.
    I just want to put this in perspective. Of the $190 billion I
    allocated, that would have done $2 trillion of lending, I
    believe we have done about $25 billion in total. So, this is
    irrelevant in the broader scheme of things.
        Ms. Ocasio-Cortez. And to kind of turn to your airline
    example, are there other examples of advances that could be
    provided ahead of the sunset date?
        Secretary Mnuchin. Again, on any of the existing underlying
    loans. So if there is a Main Street loan that has already been
    made, and that Main Street loan needs a protective advance
    after December 31, 2020, that can be done. The difference
    between Sections 4027 and 4029 has to do with existing loans
    versus new loans. So, again, it is very clear. Section 4029
    says that making new loans, loan guarantees, or other
    investments shall terminate.
        Ms. Ocasio-Cortez. Thank you very much.
        Ms. Dean. The gentleman from South Carolina, Mr. Timmons,
    is now recognized for 5 minutes.
        Mr. Timmons. Thank you, Madam Chairwoman.
        I want to first align myself with the comments from my
    colleagues on both sides of the aisle. We need to help small
    businesses across this country. It is critical. It is past
    time. Businesses in my district in the State of South Carolina
    are struggling. We have tourism-related businesses that are set
    back. We have businesses--bars, restaurants, yoga studios--that
    are struggling, and that is in South Carolina, where we are
    mostly reopened.
        Here in D.C., they just went to 25-percent capacity for
    restaurants. The hotel I am staying in has permanently closed
    their restaurant and their rooftop bar until the restrictions
    are lifted.
        We need to help the businesses that are being put out of
    work by the government. Government closures are helpful in
    certain cities, but in others, we need to safely reopen. And
    any business that is being closed because of the government
    must get relief. It is a taking, and it is wrong.
        So, first, we need to get additional PPP loans. We need to
    help the businesses that are struggling the most, but we have
    to be surgical about it. We don't need to paint with a broad
    brush.
        To that end, my first question is to both of you. There is
    no denying that the Federal Government has spent an exorbitant
    amount of money this year to combat both the health and
    economic toil of the virus. As our national debt climbs towards
    $30 trillion, it could very well hit $30 trillion next year
    between the next COVID relief package and deficit spending for
    next year, but we as policymakers are looking to provide
    targeted relief for our constituents.
        How do we get the best bang for our buck? In other words,
    what type of economic relief or stimulus will be the most
    effective in preserving and creating jobs? And, secondly, how
    would you recommend policymakers address our mounting debt over
    the next few years?
        Secretary Mnuchin. I would say for small businesses, the
    simplest and most effective thing that can be done is to
    authorize me to use the $140 billion sitting in the accounts of
    the General Fund for additional PPP loans. We spent a lot of
    time on 4027 and 4029. I, unfortunately, don't have the legal
    authority to spend this money, and I would like the legal
    authority. That would be the simplest thing to do.
        Mr. Timmons. My next question is, is that enough? What
    about the businesses that have had 97-percent revenue loss,
    whether it is an event venue or a minor league baseball team or
    any other business that has been totally shut down? They are
    not looking at this as, we need more PPP loans. They are
    looking at it from the perspective that the government has
    literally ended all revenue. What do we do for those
    businesses?
        Secretary Mnuchin. The good news about PPP loans is, if you
    use the money correctly, they go and immediately become grants
    and they are forgiven. And I do agree, we should pass
    legislation to simplify the grant forms. And I agree with you,
    stages, restaurants, entertainment business, and $140 billion
    isn't enough. I would allocate $300 billion to this
    immediately.
        Mr. Timmons. I couldn't agree with you more, and I
    appreciate that sentiment, and I urge everyone involved that we
    pass this immediately. It needs to be done before Christmas.
    And I don't think it is productive talking about whether the
    President is playing golf or not. Everyone is at fault.
    Politics are what is to blame, and we need to rise above the
    politics and we need to get this done.
        Secretary Mnuchin, yesterday, before the Senate Banking
    Committee, you indicated that Fannie and Freddie should not be
    released from conservatorship without appropriate capital. Can
    you expound on that a bit? Does that mean that they should have
    at least the required amount of capital under the FHFA's new
    capital rule? And would that be the minimum capital level or
    the minimum capital level plus the buffer specified in the 2020
    rule?
        Secretary Mnuchin. Let me just be clear. Despite the fact
    that the Director and I are having conversations, we have made
    no decisions at Treasury whatsoever yet. We are contemplating,
    but there could be a scenario where at some point, between
    basically the zero capital they have and the full capital
    requirement, there would be a consent order, and they would be
    released subject to a consent order. But as I said yesterday,
    there has to be significant capital for them, in my opinion, to
    be released.
        Mr. Timmons. Thank you.
        I want to really thank both of you for all of the work you
    have done in the last year. It has been truly remarkable. And I
    am optimistic that we are going to get on the other side of
    this pandemic soon and get our economy back up and running.
        And with that, I yield back. Thank you.
        Ms. Dean. The gentleman yields back.
        The gentlewoman from Virginia, Ms. Wexton, is recognized
    for 5 minutes.
        Ms. Wexton. Thank you, Madam Chairwoman. And thank you very
    much, Secretary Mnuchin and Chairman Powell, for joining us
    here today and for all of your work during this pandemic.
        Secretary Mnuchin, one of the facilities that you are
    allowing to expire at the end of the year is the Main Street
    Lending Program which, as we have discussed, has had a number
    of issues and I would submit has been really kind of a
    disappointment. It was designed to support up to $600 billion
    in lending to small businesses and medium-sized businesses, but
    in 8 months, it has only supported about $5 billion of loans to
    about 420 companies.
        Do those numbers sound right to you, Secretary Mnuchin?
        Secretary Mnuchin. They do. And I would acknowledge that I
    am disappointed as well that there wasn't more take-up. It was
    something the Fed and Treasury worked very hard on, but it was
    very difficult to design a program that could really be used.
        Ms. Wexton. One of the loans that [inaudible] was to
    Wellshire Financial Services, which is a company that is in car
    title lending. And I assume you are familiar with this loan
    because it has been reported in the media lately. Are you
    familiar with this loan that was made?
        Secretary Mnuchin. I am really not familiar with the loan.
    I have seen certain things in the media, but I don't have
    access to the underlying loan documents and the underlying loan
    files that the Fed has.
        Ms. Wexton. So, you didn't have a role in making this loan
    because it was only between the lender and the borrower, right?
        Secretary Mnuchin. I had no role other than setting the
    policies with the Fed Chair for the facilities.
        Ms. Wexton. Okay.
        Secretary Mnuchin. And I assume the loan complies, but I
    don't know.
        Ms. Wexton. One of the policies, though, was that those
    loans would not be available to finance or lending
    institutions, correct?
        Secretary Mnuchin. I believe that is correct, but I am not
    familiar with the details of the loan, as I said.
        Ms. Wexton. I will tell you a little bit about it, because
    they were able to exploit a loophole in the law by organizing
    in Texas as a consumer credit access company rather than a
    lender, and they did that in Texas to avoid their usury laws
    there. And now, they have a $25-million loan from the U.S.
    Government, taxpayer-funded, at 3 percent, which they are
    lending out to people at 350 percent.
        Assuming that is correct, would you agree that this
    violates the spirit and the intent of the law and the
    regulations?
        Secretary Mnuchin. I would, and I would expect that loan
    will be reviewed and audited.
        Ms. Wexton. Okay. So you agree that it is not a good look,
    especially given that it has come to light that the owner of
    the company is a major donor to the President?
        Secretary Mnuchin. Again, as I have said, I don't know the
    specifics of the loan, but I agree, based upon what you are
    saying, that was not the spirit and the intent of the use of
    the loans.
        Ms. Wexton. Can I get a commitment from you here today that
    you will review that loan and consider clawing back the money?
        Secretary Mnuchin. You will have to get that from the Fed,
    because they administer the program. I don't administer it. I
    don't have that ability. But I am sure Chair Powell will
    respond to that.
        Ms. Wexton. Chairman Powell, can we get a commitment from
    you to consider clawing back the money, and to review this loan
    to Wellshire Financial Services?
        Mr. Powell. It is really inappropriate for me to try to
    comment on individual loans. Like the Secretary, I am not
    involved in the process. I will say this. People make
    representations. We set out clear rules, they have to be
    obeyed, and we will always look. And if they are not obeyed or
    if incorrect representations are made, then the consequences
    will follow. And we will look at all of the loans in that
    light.
        Ms. Wexton. Very good. Thank you.
        Secretary Mnuchin, a lot of discussion has been taking
    place in this hearing today about whether these programs have
    to expire at the end of the calendar year, or whether you are
    allowing them to expire. And I understand that you are saying
    your reading and your interpretation is that they must expire,
    and you don't have any discretion in that. I can't help but
    suspect that had the results of the election for President been
    different, your interpretation would be different. But I would
    inquire, have you had an opportunity to speak to incoming
    Treasury Secretary Yellen?
        Secretary Mnuchin. I have.
        Ms. Wexton. Okay. Very good. And have you discussed with
    her your intention to end these facilities?
        Secretary Mnuchin. I have discussed it with her. We are
    cooperating with the transition. I had a very good working
    relationship with her when she was the Fed Chair. And I have
    advised her that my reading of this and my interpretation was
    nonpolitical and was following the law. So, yes, I did advise
    her of that.
        Ms. Wexton. And was she disappointed or did she disagree
    with your interpretation of the law?
        Secretary Mnuchin. She didn't reflect an interpretation one
    way or another.
        Ms. Wexton. Thank you very much.
        I will yield back.
        Ms. Dean. The gentlewoman yields back.
        The gentleman from Texas, Mr. Taylor, is recognized for 5
    minutes.
        Mr. Taylor. Thank you, Madam Chairwoman. I appreciate that.
    I appreciate this hearing, and I appreciate you gentlemen's
    hard work during an unprecedented 2020, one that we really
    didn't see coming.
        I want to talk about the policy decisions that are being
    made in this building versus broad help, which is what we did
    in the spring, versus targeted help, which I think is something
    that we are talking more about. Heretofore, I have heard some
    reluctance to go to targeted specific help, and I will use
    airlines as an example. That is something we made a decision on
    in the spring, that we were going to give targeted, specific
    help to the airline industry, because there is a need there.
        [Audio malfunction.]
        Mr. Taylor. Madam Chairwoman, can we get that--
        Chairwoman Waters. If you would suspend for a moment until
    we get the audio straightened out.
        I think you can resume now.
        Mr. Taylor. Okay. Thank you.
        And so as we think about--something I have been very
    concerned about is the hospitality space, largely because the
    unemployment numbers are so enormous. We are talking in the
    range of 10 million people who are currently unemployed as a
    result of COVID, and approximately half are just in one
    specific sector, in the hospitality space. So it is my concern
    or belief that we need to be targeted in this building.
        And I will point out that the Problem Solver package that
    came out yesterday, the PPP reload, was designed specifically.
    It is a much smaller number by saying you have to have a 35-
    percent drop in revenue, so that created a limiter of kinds to
    say, hey, if you are doing well, you are not going to be able
    to get a PPP reload. And I have businesses in my district that
    do telemedicine, and their sales are up 100, 200, or 300
    percent because telemedicine is a big thing. They are doing
    better. They don't need a PPP loan. They still have business
    problems, but it is not a PPP reload that they need.
        Chairman Powell, would you concur that it is time to begin
    to think more about specific, targeted help rather than broad
    help into sectors that are in harm's way?
        Mr. Powell. I think the timing and the scope and the
    components of this are really up to you. I would say I do see a
    number of areas, and I mentioned them earlier, including small
    businesses, that do need help, and I think that would be
    probably very helpful for the economy were that to happen.
        Mr. Taylor. And I will point out it is probably better for
    the taxpayer rather than just handing out tons of money
    everywhere, to be specific.
        Secretary Mnuchin, would you like to speak to the need of
    targeted assistance versus broad assistance?
        Secretary Mnuchin. Yes. I agree completely. And as you have
    rightly said, if we are going to do more PPP loans, we should
    have a provision that companies' revenues are down. That is
    pretty straightforward.
        Mr. Taylor. Okay. I certainly appreciate your guidance and
    insight, and I will continue to advocate on that front.
        And I have to admit I have been somewhat entertained by the
    discussion about Section 4029, which I have had to pull up and
    read just to make sure I was thinking about it correctly, and I
    will just read 4029(b). ``On December 31, 2020, the authority
    to provide under this subtitle to make new loans, loan
    guarantees, or other investments shall terminate.'' That seems
    very clear in terms of--that is 4029(b).
        So, the ability for you to make new loans, Mr. Secretary,
    new loans, loan guarantees, or other investments terminates.
    That is what the law says. I think that is what you are saying.
        Secretary Mnuchin. It is. And as I have said, if anybody on
    this committee doesn't think that is what it said, and they
    think that doesn't apply, then they would have given me
    unlimited authority to use this money forever.
        Mr. Taylor. Sure.
        Secretary Mnuchin. And I don't know why 4029 would have
    been inserted. So, I haven't had anybody rightfully explain if
    4029 doesn't--what was the purpose of it?
        Mr. Taylor. Sure. And 429B, again, it could have said
    December 31, 2021, in which case it would go on for another
    year, but it is clearly the end of this year that is the
    termination of your authority under the law.
        And I just want to say that I am a believer in equal
    protection under the law, and I commend you for following the
    law and reading the law and not trying to twist it into
    something that it was never meant to be. The law seems very
    clear to me, Mr. Secretary, and I certainly applaud your
    efforts to comply with it despite a lot of bizarre efforts to
    try to twist it into something that it is not.
        Secretary Mnuchin. Thank you.
        Mr. Taylor. Thank you.
        Secretary Mnuchin. I wish we spent as much time talking
    about PPP loans as we have as Sections 4027 and 4029. And I
    would also just say, when we passed this law, we thought it was
    highly unlikely that we would need to be using these at this
    period of time.
        Mr. Taylor. Thank you, Mr. Secretary.
        Madam Chairwoman, I yield back.
        Chairwoman Waters. Thank you.
        The gentleman from Massachusetts, Mr. Lynch, is recognized
    for 5 minutes.
        Mr. Lynch. Thank you, Madam Chairwoman.
        I want to thank Chairman Powell and Secretary Mnuchin for
    attending this hearing and for helping the committee with its
    work.
        So, let's talk about January 1st, because we have much
    pandemic-related support that is going away right now unless
    action is taken. We also had last week, I think, 827,000 new
    unemployment claims. Again, going back to the rental assistance
    that is pandemic-related, that is scheduled to expire December
    31st as well.
        Chairman Powell, we are going to be in a bad place, I
    think, on January 1st. And even if there were a last-ditch
    effort to--by Congress to put something in place, what we saw
    in the CARES Act was there was a considerable lag time before
    we could actually get the help out to the American people,
    whether that was small businesses or people waiting for
    stimulus checks or supplemental unemployment benefits, working
    with the States.
        Is there a power that you have, independent of Congress, in
    terms of appropriations? Let's take renters' assistance for
    right now, the forbearance that we might allow renters who
    don't have the ability to pay their rent. Of course, we would
    have to protect the small landlords, the landlords who are out
    there who are getting pressure from banks and mortgage
    companies to render payment to them, and then ultimately to the
    bondholders as well, that underwrote those mortgages and are
    expecting payments.
        Do you have independent power that might provide relief in
    the short term until Congress can get its act together and come
    to agreement on a larger package similar to what we did in the
    CARES Act?
        Mr. Powell. Sir, we do have broad powers, but we don't have
    those kind of powers. Those are really powers that fall to the
    legislature. Nobody elected us. You created us under statute.
    You gave us very specific powers, and they don't involve--
        Mr. Lynch. I understand that. But I was here in 2008, and
    the folks on your side of the table were doing their darnedest
    to rescue Wall Street. And now, it is Main Street that is--and
    so, I am just asking for the same consideration and the same
    sense of urgency when it is regular workers or just average
    families who are struggling to pay their rent. I would just
    like to see that level of urgency and seriousness that I saw
    back in 2008 when we were trying to rescue the big banks. I
    have to be honest, I think that I see a little bit of laissez-
    faire with respect to average families. I don't see that sense
    of urgency.
        And, Mr. Secretary, with all due respect, you seem way too
    eager to give away or give back or render back the resources
    that were available. I didn't see a long and hard discussion
    about how we can get this money out to the people who need it.
    Rather, it was, well, this is what the law says, so I am going
    to do it. And I didn't see any extraordinary effort on the part
    of Treasury to find a way, going to court, asking for an
    interpretation to say, do I have the ability to continue this,
    these payments and this relief to the American people or am I
    prohibited from doing so, rather than huddling with the lawyers
    who work for you. And I have lawyers who work for me as well. I
    didn't see an extraordinary effort on your part to try to find
    a way to make sure that the incoming Administration has some
    resources to deal with this problem.
        Secretary Mnuchin. I just want to be clear. I spent the
    last 4 months trying to work with Congress to get additional
    legislation passed. I have been on probably a hundred calls.
        Mr. Lynch. We all have.
        Secretary Mnuchin. What people need is a fiscal response.
    These programs were not used. So, let me just be clear: People
    need--and, again, people need more PPP money. They need grants.
    They need airline support. They need unemployment insurance.
    These facilities were not being used. And I have worked every
    day to try to get Congress to pass more legislation. So, I
    don't appreciate that comment that I haven't worked hard.
        Mr. Lynch. Well, sir, I would just say that what I saw when
    Wall Street was on the hook was creativity to the nth degree in
    ways of repurposing money to make sure they got what they
    needed. And I would just--
        Chairwoman Waters. The gentleman's time has expired.
        Mr. Lynch. I yield back.
        Chairwoman Waters. The gentleman from New York, Mr. Zeldin,
    is recognized for 5 minutes.
        Mr. Zeldin. Thank you, Madam Chairwoman.
        Secretary Mnuchin, feel free to use some of my time here to
    complete your thought. I will yield to you.
        Secretary Mnuchin. Thank you. I was just saying if I had
    any legal authority or I could get the President to sign an
    Executive Order tomorrow to send out the $140 billion to small
    businesses that need PPP loans, I would do that.
        And, again, for all of the conversations we have had on
    these facilities, which were barely being used, most of which
    did support big corporations, I might add, and not Main Street,
    enough money to Main Street, Main Street needs more money,
    grants, PPP. Thank you.
        Mr. Zeldin. Thank you, Secretary Mnuchin and Chairman
    Powell, for being here today. And thank you to Chairwoman
    Waters and Ranking Member McHenry for holding this hearing.
        Secretary Mnuchin and Chairman Powell, I want to start off
    by saying thank you to both of you for your leadership during
    this pandemic, especially as it pertains to standing up and
    fine-tuning these needed liquidity facilities.
        First off, I would share that, with regard to the Paycheck
    Protection Program, I have heard from business owners in my
    district, from local mayors and others about how the Paycheck
    Protection Program has not only saved small businesses and
    small business jobs but saved the entirety of Main Streets in
    the First Congressional District of New York.
        With regards to the facilities, the original Municipal
    Liquidity Facility term sheet excluded my home County of
    Suffolk where my constituents live, but the Federal Reserve and
    Treasury listened to the concerns that I and others raised
    about lowering the population thresholds for eligible issuers.
    This provided greater access to a much-needed backstop
    financing tool for many State and local governments and
    entities, like the MTA.
        I want to say thank you for your attention to this critical
    market and the commitment to remaining vigilant of any problems
    as they arise, because we need all levels of government to work
    together. This is not a time to be Republicans first or
    Democrats first. This is a time to be Americans first.
        Secretary Mnuchin, late one night, got on the phone with my
    local Democrat county executive to talk to us about the
    Municipal Liquidity Facility and getting eligibility for
    Suffolk County, and you listened to our concerns.
        The Municipal Liquidity Facility is set to expire at the
    end of this month, and all unused CARES Act funds at the
    liquidity facilities, to my understanding, will be returned to
    the Treasury Department, but I want to make sure Congress,
    Treasury, and the Federal Reserve are working together and
    remaining vigilant into 2021 as well. To ensure adequate
    municipal debt liquidity, the Municipal Liquidity Facility
    should remain in operation into 2021, until we know for sure we
    are out of the woods.
        The onus is not just on the Federal Reserve and Treasury.
    Congress needs to step up to the plate and get a COVID-19
    relief bill across the finish line.
        Secretary Mnuchin, I know how hard you have been working
    over the course of what has been many months, which is why I am
    glad that you had an opportunity here to help clear the record
    as to the allegations and the charges that were just being made
    in your direction. You have been working extremely hard, and I
    want to thank you for your efforts in negotiating the next
    bill.
        Congress provided support for State and some local
    governments in the CARES Act, but limited the support for local
    governments with more than 500,000 in population.
        Chairman Powell, in a Senate Banking Committee hearing in
    May, you talked about the negative effects on the overall
    economy that come about when State and local governments face
    serious fiscal constraints, citing evidence from the 2008
    financial crisis. It is clear that fiscal solvency at all
    levels of government is important for economic recovery.
        Can you elaborate on the importance of the health of all
    levels of government for the health and growth of the overall
    U.S. economy?
        Mr. Powell. State and local governments, as you suggest,
    provide critical services--fire, police, sanitation, all of
    those things that people depend on for public safety--and live
    under balanced budget requirements in essentially all of the
    States. So, what happens when costs go up and revenues go down
    is that they lay people off. They have laid off more than a
    million people so far. And that was a big problem in the years
    after the global financial crisis. We hope it doesn't become a
    big problem here.
        But these are critical government services, and, as I have
    said, it is up to Congress and the Administration, but I think
    that is an important area to look at for further support.
        Mr. Zeldin. Again, I thank you both for all of your efforts
    since we were first hit by this pandemic.
        And again, thank you, Chairwoman Waters, and Ranking Member
    McHenry, for holding this hearing. I yield back.
        Chairwoman Waters. Thank you.
        The gentlewoman from Hawaii, Ms. Gabbard, is recognized for
    5 minutes.
        Ms. Gabbard. Thank you very much, Madam Chairwoman.
        Thank you both for making the time to come and have this
    discussion today.
        Secretary Mnuchin, you made a comment about how you wish
    there were more questions about the PPP program. I wanted to
    ask you to talk a little bit about that today, given a comment
    you just made and also the news that has come out about how
    some of the largest businesses that qualified under PPP took
    the majority of the money.
        So, as we look to a new stimulus package, whether it is
    this year or it comes out early next year, what improvements
    would you recommend that the PPP program take on to ensure that
    the majority of those dollars are actually going to the small
    businesses within our communities, who are barely keeping their
    heads above water, trying to survive?
        Secretary Mnuchin. Thank you. When we created the original
    program, the entire economy was shut down. But now that that is
    not the case, I agree with you, it should be much more
    targeted. I think it should be focused on the smaller
    businesses. I think it should be focused on a revenue decline.
        Chairwoman Waters and I worked on a set-aside to make sure
    there was money available for underserved areas. I think that
    is something that should be done again. We have signed up many
    more Community Development Financial Institutions (CDFIs) since
    then that are ready to go.
        I also very much support a program of investing $10 billion
    to $12 billion in CDFIs so that they can do $100 billion of
    lending. I think there is big bipartisan support. I have spoken
    to Chairwoman Waters, Senators Warner and Crapo, and others.
    So, I think there are a lot of things that could be done very,
    very quickly that would have a big impact.
        Ms. Gabbard. There is no question that the need is there
    and the frustration, especially as these reports come out about
    where the money has gone, and a lot of folks have been left
    stranded.
        I want to pivot for a second in a different direction that
    hasn't been covered today in the area of sanctions. I served on
    the House Foreign Affairs Committee for my first 6 years in
    Congress. And both in Congress as well as in the Executive
    Branch, sanctions are often one of the first go-to actions to
    take within the realm of foreign policy, for a variety of
    reasons.
        I recently pulled the list of U.S. sanctions that we have
    on countries and industries and individuals around the world,
    and it is a very exhaustive list, as I am sure you are aware,
    with some sanctions even going back decades.
        Can you speak to the Department of the Treasury's process
    and whether or not you work with other Federal agencies and
    departments, like the Department of State, Department of
    Defense and others, to assess the effectiveness of these
    economic sanctions once they have been levied? And if you do
    that, how often, really with the intent of saying, okay, these
    sanctions have been put in place, are they achieving the
    intended objective and, if not, what are they doing and what
    unintended negative consequences are there?
        Secretary Mnuchin. First, let me just say I really
    appreciate you bringing up this subject, and I would be more
    than happy to follow up with you offline. I spend an enormous
    amount of my time--really, before the pandemic, I was spending
    50 percent of my time on the sanctions. I think they are very,
    very effective foreign policy tools.
        We coordinate 100 percent with the State Department, the
    National Security Council, and the intelligence agencies on
    anything we do. We have a robust interagency process. I am
    going to encourage Chair Yellen to spend time on this. I also
    want to thank the committee and Congress. You have given us a
    lot of funding over the last 4 years. We have increased the
    number of people we have in these areas.
        And these are very effective tools, combined with our
    strong military. But in many cases, they are very, very
    powerful tools and don't put our military in harm's way.
        Ms. Gabbard. Before my time runs out, if you can speak
    briefly, and if not, I would like to follow up with you, I
    would love to know what specific mechanisms and measures of
    effectiveness you and these other Departments use in order to
    make sure that they are achieving an intended objective as well
    as what measures of impact do you use to say, hey, these
    sanctions against this country were intended for this purpose,
    but it is actually stopping this country from getting medicine
    and food and basic supplies, creating a negative humanitarian
    effect.
        Secretary Mnuchin. That is a very thoughtful question, I
    might just add. In the best-case scenario, we see a specific
    action as a result of the sanction and we remove the sanctions,
    but we also work very hard on humanitarian issues and issuing
    licenses for them.
        Chairwoman Waters. The gentlelady's time is up.
        The gentleman from Ohio, Mr. Davidson, is recognized for 5
    minutes.
        Mr. Davidson. Thank you.
        Madam Chairwoman, thank you for the recognition. Chairman
    Powell and Secretary Mnuchin, thank you for the time you have
    given us today. I really appreciate the way you have handled
    our questions and the way you have pointed out what the law
    that Congress passed actually says and, frankly, for faithfully
    following that law.
        We do need fiscal policy, not just monetary policy, and,
    frankly, we need Congress. From the way it sounds, some of my
    colleagues would just strike Article I from the Constitution
    and have the Executive Branch do everything.
        I am glad that this body stays relevant, and I am hopeful
    that we can do some of the good things that did happen.
        Let me highlight a couple of things that my constituents in
    the Eighth District of Ohio share with me. One, Chairman
    Powell, the Federal Reserve had a very robust and very swift
    and decisive response in the last half of March and in the
    early days of April. Those first 2, 3 weeks, there was a true
    liquidity crisis that was hitting our markets and truly global,
    because the demand for dollars wasn't just here in our markets;
    the demand was global.
        You saw OPEC countries dump oil into the market, sucking
    cash, U.S. dollars into their countries, as a way for them to
    get liquidity. But you saw holders of all sorts of assets,
    including municipal bonds, generally considered very safe and
    liquid, disappear. There was no buy side.
        So, the Federal Reserve's response in providing liquidity
    there, to me, fits right in line with the whole purpose of the
    broad authority under Section 13(3). But, nevertheless, we saw
    under 13(3) some distortions that have carried over as we have
    seen the size of the Fed's balance sheet grow, and some of the
    questions on that, I think are relevant. How big does it grow?
    Well, big enough to make sure we provide economic stability--
    that was the clear intent of the CARES Act--but not so big that
    it causes true economic distortions.
        And where the inflation is showing up isn't in consumer
    prices. A lot of people fear and, frankly, know that it is in
    marketable securities on Wall Street. And while that benefits
    retirement savings, it accentuates the wealth gap.
        Secretary Mnuchin, thanks for calling attention to the
    Payroll Protection Plan. That was tremendous for Ohio's Eighth
    District. In our district, we had about 9,000 loans made, and
    80 percent of them were for $150,000 or less. So, they were
    small loans, overwhelmingly made by smaller lenders.
        And what was the effect of that? We had over 100,000 people
    in Ohio's Eighth District stay on payroll. The loan did go to
    the businesses, of course, but for the purpose of keeping
    payroll happening. And the benefit was that so many of these
    individuals and their families kept benefits, health insurance,
    and other things that come with employment. So, it has been a
    tremendous source of stability.
        So, I congratulate my colleagues on the success of the
    Payroll Protection Plan, but, frankly, on Treasury and the SBA
    and others, all of the banks that made this functional.
        The concern I have is the slow-walking of forgiveness on
    the back end. So, I hope you can give some attention to that.
    And, as time dwindles swiftly, I want to get to one topic that
    is emerging. We have seen the rise of digital assets and,
    frankly, to the extent that some people have proposed a central
    bank digital currency as a response to our monetary situation
    right now.
        And I think it is important that we do that very
    thoughtfully [audio malfunction].
        Chairwoman Waters. I think there are some technical
    difficulties here.
        We are past our hard stop, and I apologize for that. We are
    5 minutes past. And so, I would like to thank our distinguished
    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.

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