    [Senate Hearing 116-493]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 116-493

                        THE QUARTERLY CARES ACT REPORT TO
                                     CONGRESS

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

                                    HEARING

                                   BEFORE THE

                                  COMMITTEE ON
                       BANKING,HOUSING,AND URBAN AFFAIRS
                              UNITED STATES SENATE

                         ONE HUNDRED SIXTEENTH CONGRESS

                                 SECOND SESSION

                                       ON

    EXAMINING TESTIMONY FROM THE SECRETARY OF THE TREASURY AND THE CHAIRMAN
      OF THE FEDERAL RESERVE, AS REQUIRED UNDER TITLE IV OF THE CARES ACT

                                   __________

                                  MAY 19, 2020

                                   __________

      Printed for the use of the Committee on Banking, Housing, and Urban
                                    Affairs

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                    Available at: https: //www.govinfo.gov /

                                   __________

                        U.S. GOVERNMENT PUBLISHING OFFICE
    45-759 PDF                 WASHINGTON : 2022

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

                COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                          MIKE CRAPO, Idaho, Chairman

    RICHARD C. SHELBY, Alabama           SHERROD BROWN, Ohio
    PATRICK J. TOOMEY, Pennsylvania      JACK REED, Rhode Island
    TIM SCOTT, South Carolina            ROBERT MENENDEZ, New Jersey
    BEN SASSE, Nebraska                  JON TESTER, Montana
    TOM COTTON, Arkansas                 MARK R. WARNER, Virginia
    MIKE ROUNDS, South Dakota            ELIZABETH WARREN, Massachusetts
    DAVID PERDUE, Georgia                BRIAN SCHATZ, Hawaii
    THOM TILLIS, North Carolina          CHRIS VAN HOLLEN, Maryland
    JOHN KENNEDY, Louisiana              CATHERINE CORTEZ MASTO, Nevada
    MARTHA McSALLY, Arizona              DOUG JONES, Alabama
    JERRY MORAN, Kansas                  TINA SMITH, Minnesota
    KEVIN CRAMER, North Dakota           KYRSTEN SINEMA, Arizona

                         Gregg Richard, Staff Director

                    Laura Swanson, Democratic Staff Director

                            Catherine Fuchs, Counsel

                        Tanya Otsuka, Democratic Counsel

               Corey Frayer, Democratic Professional Staff Member

                          Cameron Ricker, Chief Clerk

                          Shelvin Simmons, IT Director

                        Charles J. Moffat, Hearing Clerk

                                      (ii)

                                C O N T E N T S

                                  ----------

                             TUESDAY, MAY 19, 2020

                                                                       Page

    Opening statement of Chairman Crapo..............................     1
        Prepared statement...........................................    50

    Opening statements, comments, or prepared statements of:
        Senator Brown................................................     3
            Prepared statement.......................................    51

                                   WITNESSES

    Steven T. Mnuchin, Secretary, Department of the Treasury.........     5
        Prepared statement...........................................    52
        Responses to written questions of:
            Senator Brown............................................    57
            Senator Toomey...........................................    63
            Senator Rounds...........................................    65
            Senator Perdue...........................................    65
            Senator Tillis...........................................    67
            Senator Kennedy..........................................    67
            Senator McSally..........................................    68
            Senator Moran............................................    68
            Senator Cramer...........................................    70
            Senator Reed.............................................    71
            Senator Menendez.........................................    72
            Senator Tester...........................................    77
            Senator Warren...........................................    78
            Senator Schatz...........................................    87
            Senator Van Hollen.......................................    88
            Senator Cortez Masto.....................................    89
            Senator Jones............................................   100
            Senator Smith............................................   105
            Senator Sinema...........................................   112
    Jerome H. Powell, Chairman, Board of Governors of the Federal
      Reserve System.................................................     7
        Prepared statement...........................................    53
        Responses to written questions of:
            Senator Brown............................................   115
            Senator Toomey...........................................   123
            Senator Rounds...........................................   125
            Senator Perdue...........................................   127
            Senator Tillis...........................................   129
            Senator Kennedy..........................................   130
            Senator McSally..........................................   130
            Senator Cramer...........................................   133
            Senator Reed.............................................   134
            Senator Menendez.........................................   135
            Senator Tester...........................................   140
            Senator Warren...........................................   142
            Senator Schatz...........................................   153
            Senator Van Hollen.......................................   155
            Senator Cortez Masto.....................................   159
            Senator Jones............................................   169

                                     (iii)
                                                                       Page

            Senator Smith............................................   171
            Senator Sinema...........................................   175

                  Additional Material Supplied for the Record

    Letter submitted by CUNA.........................................   183
    Letter submitted by NAM..........................................   186

                                      (iv)

                   THE QUARTERLY CARES ACT REPORT TO CONGRESS

                                  ----------

                             TUESDAY, MAY 19, 2020

                                           U.S. Senate,
              Committee on Banking, Housing, and Urban Affairs,
                                                        Washington, DC.
        The Committee met by videoconference at 9:59 a.m., Hon.
    Mike Crapo, Chairman of the Committee, presiding.

                OPENING STATEMENT OF CHAIRMAN MIKE CRAPO

        Chairman Crapo. This hearing will come to order.
        We are all becoming more familiar with remote hearings, but
    let me offer a few videoconferencing reminders.
        Once you start speaking, there will be a slight delay
    before you are displayed on the screen.
        To minimize background noise, please click the ``mute''
    button until it is your turn to speak or ask questions.
        If there is a technology issue, we will move on to the next
    Senator until it is resolved.
        Because we have a hard stop at 12:15, all Senators and
    witnesses need to be especially mindful of the 5-minute clock,
    and this time I will do my very best to tap the gavel at about
    30 seconds before the 5 minutes is up. And I ask everyone to
    please honor our timeframes today.
        You should all have one box on your screen labeled
    ``clock'' that will show how much time is remaining.
        To simplify the speaking order, Senator Brown and I have
    again agreed to go by seniority.
        With that, today we welcome to this virtual hearing the
    Honorable Steven T. Mnuchin, Secretary of Department of
    Treasury; and the Honorable Jerome H. Powell, Chairman of the
    Board of Governors of the Federal Reserve System.
        We will receive testimony from the Secretary of the
    Treasury and the Chairman of the Federal Reserve, as required
    under Title IV of the CARES Act.
        Congress has appropriated nearly $3 trillion to protect,
    strengthen, and support Americans, to fight the pandemic, and
    also to stabilize the infrastructure of our economic system.
        A large portion of this funding is authorized under Title
    IV of the CARES Act, which provides significant resources for
    loans, loan guarantees, and other investments from Treasury and
    the Federal Reserve's 13(3) emergency lending facilities and
    programs in support of eligible businesses, States,
    municipalities, and tribes.
        Title IV of the CARES Act provided $454 billion as an
    infusion into the Exchange Stabilization Fund to support the
    Federal Reserve's emergency lending facilities that facilitate
    liquidity in the marketplace and support eligible businesses,
    States, local governments, and tribes.
        This unique lending authority, known as ``13(3)
    authority,'' is authorized under Section 13 of the Federal
    Reserve Act and plays a critical role in stabilizing markets.
        Both prior to and after the enactment of the CARES Act, the
    Federal Reserve announced the establishment of or its intent to
    establish several emergency lending facilities to support
    financial markets and businesses, including some that are
    supported and funded by the CARES Act.
        Last week, other members of this Committee and I had a
    robust discussion with Vice Chairman Quarles on these
    facilities and stressed the importance of getting facilities
    like the Main Street Lending Programs and the Municipal
    Liquidity Facility up and running quickly to provide a lifeline
    to struggling businesses, States, and local governments.
        Again, I stress the importance of setting these facilities
    up quickly and allowing broad access.
        There was also a discussion about whether it is acceptable
    for the Treasury to take any losses on investments put into the
    special purpose vehicles that the Fed will lend to for various
    programs.
        The 13(3) facilities are a critical component of a strong
    economic recovery, which reinforces the need to have them
    quickly operational, broadly available. and as flexible as
    possible.
        Title IV also contains robust oversight provisions,
    especially the one that brought us here today, Section 4026.
        It is critical that each Federal agency follow all
    reporting and oversight requirements in the CARES Act.
        Other steps are already being taken to ensure appropriate
    oversight.
        Last week, this Committee voted the Special Inspector
    General for Pandemic Recovery favorably out of Committee, and
    yesterday the Congressional Oversight Committee published its
    initial report on oversight of Title IV.
        The CARES Act is the biggest rescue package in the history
    of Congress, and we need to make sure the dollars and program
    quickly find their mark.
        During this hearing I look forward to hearing more on an
    update of the status of the Treasury loan programs, 13(3)
    emergency facilities, and the Paycheck Protection Program;
    steps the Fed and Treasury have taken, and will continue to
    take, to provide transparency into the loans and loan
    guarantees under the CARES Act; and how the unused funds from
    Title IV will be prioritized and leveraged to provide
    additional liquidity to the economy.
        While not part of Title IV of the CARES Act, SBA and
    Treasury have worked around the clock to ramp up the Paycheck
    Protection Program that has approved over 4.3 million loans to
    small businesses that amount to about $513 billion.
        According to the SBA, the overall loan size for the PPP is
    $118,000, and during the second round of PPP funding, the
    average loan size has been around $70,000.
        On April 28, Treasury and SBA announced that the SBA would
    review all PPP loans in excess of $2 million to make sure that
    the borrowers' self-certification for the loans was
    appropriate.
        Last week, SBA and Treasury provided a safe harbor for
    loans under $2 million.
        Finally, on May 8, 2020, Commerce Committee Chairman Wicker
    and I sent a letter to Secretary Mnuchin on the Payroll Support
    Program requesting a detailed report on the status of the
    program, and on May 12, Treasury announced the new transparency
    measures with regard to the PSP.
        I encourage you to continue your work with the applicants
    and update the information as additional funds are disbursed.
        I commend each of you and your staff for the hard work and
    extraordinary actions you have taken to stabilize the economy
    and provide support to Americans during this trying time.
        Thank you for joining us today to share your agencies'
    activities and plans in response to COVID-19.
        Senator Brown.

               OPENING STATEMENT OF SENATOR SHERROD BROWN

        Senator Brown. Thank you, Mr. Chairman.
        I would like to thank Chairman Crapo for following the best
    advice of health experts and holding a virtual hearing to
    prevent the spread of coronavirus.
        I welcome Secretary Mnuchin and Chairman Powell to the
    Senate Banking and Housing Committee. Thank you for joining us.
        I am still outraged by Leader McConnell's reckless decision
    to keep the Senate in session, putting Capitol Hill workers--
    including Capitol police officers, custodial staff, floor
    staff, and cafeteria workers--putting all workers at risk.
        Leader McConnell has forced workers to go against public
    health authorities' advice for 3 weeks now; he still has no
    plan to get additional help to families and communities. The
    House passed a bill that incorporates many of our plans. The
    American people are rising to the challenge. Their leaders are
    failing them. Leader McConnell says he sees no urgency. Those
    are his words: ``no urgency.''
        Before we begin, I would like to pause for a moment to
    recognize all the workers who have lost their lives on the job
    during this pandemic.
        [Pause.]
        Senator Brown. The coronavirus has been the great revealer.
    It has brought out the best in our communities. We remember the
    spirit of solidarity that created our social safety net during
    the New Deal and inspired World War II victory gardens and
    powered the civil rights movement. Today that spirit of
    solidarity reveals itself in hand-sewn masks and fire escape
    applause for hospital workers and videoconference play dates,
    as millions of individual Americans pull together to do their
    part to flatten the curve.
        But this pandemic also lays bare how corporations that now
    claim their workers are ``essential'' have for too long treated
    them as more of a cost to be minimized.
        Since the bailouts of the financial crisis, many of us have
    been concerned about how our country rewards Wall Street and
    too often ignores the people who make our country work.
        Whenever we have asked why wages for these essential
    workers are stagnant, we are told we cannot afford it.
    Companies would have to raise prices if they paid people more.
    Never mind that CEOs were getting huge raises and Wall Street
    investors huge payouts. Never mind that low prices do not do
    you a lot of good if your wages stay low right along with them.
        Our economy has been paying the price for that--with a
    shrinking middle class, with rising inequality, with lower
    economic growth.
        Now it is pretty clear: When millions of American workers
    are laid off or have their hours cut or were making low wages
    to begin with and are now worried about their future, our
    economy grinds to a halt.
        In fact, the only thing keeping our society running in the
    middle of this crisis is American workers--those who stock our
    shelves and deliver our packages and fill our prescriptions and
    prepare food and care for loved ones.
        A grocery store worker in Ohio told me recently, ``I do not
    feel safe at work and they do not pay me much. I do not feel
    essential. I feel expendable.''
        We are asking people to show up to work and risk their
    health and risk their families' safety--perhaps finally
    realizing the words of Dr. King ringing true, that ``One day
    our society will come to respect the sanitation worker . . .
    for the person who picks up our garbage, in the final analysis,
    is as significant as the physician, for if he does not do his
    job, diseases are rampant. All labor has dignity.''
        Yes, all labor has dignity.
        You might think that at a time when we are demanding more
    from essential workers than ever before, that people who punch
    a clock or swipe a badge, people who take care of our families
    and our elderly--mostly women, often black and brown workers--
    you might think they would all be getting a huge raise.
        Our economy is supposed to reward people whose talents are
    in high demand. That is what we are taught. That is what CEOs
    tell us, right?
        But that is not happening. Workers are getting left behind
    again.
        As essential workers go home to their families--think about
    this--after a long, stressful day, they are wondering how they
    are going to pay the rent, they are wondering how they are
    going to afford another week of groceries. And they wonder
    whether they are going to infect their families after going to
    work.
        Those are the ones that are working. How about the 35
    million Americans who have been laid off from their jobs
    because of this crisis?
        When we passed the CARES Act, we tried to address this. We
    tried to make sure that the trillions of dollars in spending
    would not just go to Wall Street like it usually does. We
    wanted to make sure the Fed and the Treasury got this money
    directly into workers' pockets.
        We did not want to see it go to gas and oil companies,
    whose activities frankly pose an existential threat to
    essential workers and our whole economy.
        Chairman Powell, I appreciate your recent comments about
    how Congress needs to do more to put money directly in workers'
    pockets. I agree, of course, with that.
        If Congress does not act now to put money in the hands of
    the people who actually power our economy--in workers, their
    families, and Main Street businesses in struggling
    communities--we risk making the economic crisis worse.
        Leader McConnell needs to let the Senate take up the House
    bill immediately. Debate it, negotiate it, argue with us, fight
    over it, but do something.
        Congress has an important responsibility also to make sure
    the $500 billion we have already approved for the Fed and
    Treasury is actually getting to workers. And from what we know
    so far, it does not appear that this Administration or the
    Federal Reserve are making workers their priority.
        Today I look forward to hearing from both of you, Mr.
    Secretary and Chairman Powell, not about what you are doing for
    big banks or big corporations--we already know that--and how
    you expect that money to trickle down, but how you are making
    sure the money and the authority Congress gave you actually
    help the people who make this country work.
        I want to hear how it is going to be different this time.
        I want you to explain what you will do to transform our
    economy so that it works for everyone--not just the wealthy and
    the powerful.
        I want to hear about your plans to make our economy work
    for essential workers now and in the future and how to safely
    get those who have lost their jobs back to work.
        Thank you, Mr. Chairman.
        Chairman Crapo. Thank you, Senator Brown.
        We will now move to the testimony. Secretary Mnuchin and
    Chairman Powell, your full written statements will be made a
    part of the record. We will now go to your oral testimony, and
    we will start with you, Secretary Mnuchin.

     STATEMENT OF STEVEN T. MNUCHIN, SECRETARY, DEPARTMENT OF THE
                                TREASURY

        Secretary Mnuchin. Thank you. Chairman Crapo, Ranking
    Member Brown, and members of the Committee, thank you for this
    opportunity to highlight how the Department of Treasury and the
    Federal Reserve are working together to provide liquidity to
    the financial system. Our programs support the flow of much-
    needed credit to American workers, families, businesses,
    States, and municipalities.
        I am testifying today on camera at the request of the
    Committee. I look forward to testifying in person going forward
    in a safe way with proper social distancing according to
    medical guidelines.
        I want to begin by acknowledging the unprecedented
    challenges the American people are experiencing due to the
    COVID-19 pandemic. This disease is impacting families and
    communities across the Nation. Through no fault of their own,
    the American people are also enduring economic challenges. I am
    inspired by our Nation's medical professionals and first
    responders on the front lines taking care of our fellow
    citizens. Thanks to their efforts and unwavering commitment to
    their communities, I am confident that our Nation will emerge
    from the pandemic stronger than ever before.
        President Trump and the entire Administration are committed
    to providing necessary relief to help people get through this
    time. The Treasury Department is working hard to implement the
    CARES Act. We appreciate Congress working with us to enact this
    statute, which is the single largest economic relief effort in
    the history of our country. We also appreciate the feedback we
    have received from Members of Congress on both sides of the
    aisle as we implement a number of the critical programs
    established by the CARES Act.
        We have worked closely with the Small Business
    Administration on the Paycheck Protection Program to ensure
    processing of over 4 million loans for over $500 billion to
    keep tens of millions of hardworking Americans on the payroll.
    We are proud that nearly 400 Community Development Financial
    Institutions and Minority Depository Institutions and many
    small banks and nonbanks are participating in this program.
        We have issued more than 140 million Economic Impact
    Payments for over $240 billion to provide direct relief to
    millions of Americans. The typical family of four received
    approximately $3,400.
        We have distributed about $150 billion to State, local, and
    tribal governments through the Coronavirus Relief Fund for
    essential services. We have also approved nearly $25 billion in
    payroll support to the airline industry to protect this
    critical sector of our economy.
        Turning to the central focus of the hearing today, the
    CARES Act also provided authority for $454 billion in support
    for the Federal Reserve lending facilities to provide liquidity
    to the system.
        Since March 17th, I have approved the following facilities:
    the Commercial Paper Funding Facility, the Primary Dealer
    Credit Facility, the Money Market Mutual Fund Liquidity
    Facility, the Term Asset-Backed Securities Loan Facility, the
    Primary Market Corporate Credit Facility, the Secondary Market
    Corporate Credit Facility, the Main Street Business Lending
    Program, the Municipal Liquidity Facility, and the PPP Lending
    Facility.
        We have committed approximately $200 billion in credit
    support under the CARES Act. We have the remaining money to
    create or expand these programs as needed, and we continue to
    monitor a variety of economic sectors closely and are prepared
    to support these programs with the Federal Reserve as we need
    to move forward.
        We are sympathetic to hardworking Americans and businesses
    enduring tremendous challenges due to COVID-19. We have had to
    take unprecedented steps to shut down significant parts of the
    economy in the interest of public health. As a result, in the
    second quarter of this year, we are continuing to see large
    unemployment and other negative indicators. It is important to
    realize that the large numbers represent real people. This is
    why it is so important to begin bringing people back to work in
    a safe way.
        As we listen to medical experts, we are optimistic about
    the progress being made on vaccines, antiviral therapies, and
    testing. Working closely with the Governors, we are beginning
    to open the economy in a way that minimizes risks to workers
    and customers. We expect economic conditions to improve in the
    third and fourth quarter and into next year.
        I want to conclude by thanking the hardworking people at
    the Treasury, the Federal Reserve, and throughout the
    Administration. Under the leadership of President Trump, I am
    proud to have worked with all of you, on a bipartisan basis, to
    get relief into the hands of hardworking Americans and
    businesses as quickly as possible. While these are
    unprecedented and difficult times, these programs are making a
    major positive impact on people's lives. Together we will
    destroy the COVID-19 virus, and our country will emerge from
    this pandemic stronger than ever.
        Thank you for the opportunity to discuss these efforts
    today, and I look forward to your questions.
        Chairman Crapo. Thank you, Secretary Mnuchin.
        Chairman Powell.

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

        Mr. Powell. Chairman Crapo, Ranking Member Brown, and other
    Members of the Committee, thank you for the opportunity to
    testify today at the first quarterly hearing on the CARES Act.
    This is a worldwide public health crisis, and health care
    workers have been the first responders, showing courage and
    determination and earning our lasting gratitude. So have the
    legions of other essential workers who put themselves at risk
    every day on our behalf.
        As a Nation, we have temporarily withdrawn from many kinds
    of economic and social activities to help slow the spread of
    the virus. Some sectors of the economy have been effectively
    closed since mid-March. People have put their lives and
    livelihoods on hold, making enormous sacrifices to protect not
    just their own health and that of their loved ones, but also
    their neighbors and the broader community. While we are all
    affected, the burden has fallen most heavily on those least
    able to bear it.
        The sacrifices we are all making represent an investment in
    our individual and collective health. As policymakers, we
    should continue to do what we can to help cushion the blow.
        The scope and speed of this downturn are without modern
    precedent, significantly worse than any recession since World
    War II. We are seeing a severe decline in economic activity and
    employment, and already the job gains from the last decade have
    been reversed. Well more than 20 million people have lost their
    jobs, and recent Fed research shows what others have also
    found: that people earning less are the ones being hardest hit.
    This reversal of economic fortune has caused a level of pain
    that is hard to capture in words, as lives are upended amid
    great uncertainty about the future.
        The Federal Reserve is committed to using our full range of
    tools to support the economy in this challenging time. Our
    actions so far fall into four categories:
        First, outright purchases of Treasuries and agency
    mortgage-backed securities to restore functionality in these
    critical markets;
        Second, liquidity and funding measures, including discount
    window measures, expanded swap lines with foreign central
    banks, and several Treasury-backed facilities to support smooth
    money market function;
        Third, with additional Treasury-backing facilities to more
    directly support the flow of credit to households, businesses,
    and State and local governments;
        Fourth, temporary regulatory adjustments to encourage and
    allow banks to expand their balance sheets to support household
    and business customers.
        So far, we have created 11 facilities under Section 13(3)
    of the Federal Reserve Act to support liquidity, funding, and
    the flow of credit. All of these facilities have been
    undertaken with the approval of the Treasury Secretary, and
    many of them are supported by funding from the CARES Act. I
    discuss these facilities in greater length in my written
    statement which I provided to the Committee.
        At the Fed, we are committed to transparency, particularly
    in deploying our emergency powers. Public faith in our
    operations depends on that transparency.
        Thank you, and I will be happy to answer your questions.
        Chairman Crapo. Thank you, Chairman Powell. I will begin
    with you.
        Mr. Chairman, as you know, with regard to the Municipal
    Liquidity Facility, the thresholds for cities and counties are
    established, but they are established at such a level that many
    of the small cities and counties across the United States
    cannot apply for individual loans. You have indicated that it
    would be contemplated that the States be able to apply for
    loans for these smaller cities and counties, and there is a lot
    of concern out there about this. I would like to ask you to
    clarify that it is intended that these dollars do reach these
    small cities and counties, and tell us the process by which
    that can be accomplished.
        Mr. Powell. Thank you, Mr. Chairman. As you have seen, we
    have been gradually expanding the scope of potential borrowers
    in this world. There are 50,000 entities capable of borrowing,
    so we need to draw some lines to be able to handle this.
        But in the first instance, we have said that we will always
    be willing to lend to a State with the purpose of downstreaming
    to counties, cities, and other subdivisions of governmental
    authority within that State. So that is one thing.
        We also lowered the size of the city, and I would tell you
    we are continuing to look at ways to accommodate further
    borrowers, including perhaps in the case of States with
    relatively low populations where the only borrower with access
    may be the State Government itself. We are looking at ways to
    make sure that in those States we address the needs of
    potentially another borrower or two, and that is something we
    will be working on going forward.
        Chairman Crapo. Well, thank you very much.
        Secretary Mnuchin, to you, with regard to the 13(3)
    facilities, the CARES Act appropriates, if I recall correctly,
    $500 billion to be utilized through the Exchange Stabilization
    Fund to help facilitate the implementation of these Section
    13(3) facilities by the Federal Reserve. Most of that has not
    yet played out. Am I correct?
        Secretary Mnuchin. So of the $500 billion, approximately
    $50 billion was in direct lending programs from the Treasury
    and $450 billion was available for the 13(3) facilities. I have
    allocated about half of that, and let me be clear. I am
    prepared to allocate the rest of that. The only reason I have
    not allocated it fully is we are just starting to get these
    facilities up and running. We want to have a better idea as to
    which one of the facilities needs more capital as well as the
    potential for adding additional facilities. So I expect to
    allocate all the capital as needed, as was given to us.
        Chairman Crapo. And so that the listening public can be
    clear about this, the way these facilities work is once the
    money is allocated as you have just indicated to a particular
    facility and the Fed implements that facility, then that money
    can actually be leveraged into much greater amounts of
    liquidity for whatever market or situation that is addressed.
    Is that correct?
        Secretary Mnuchin. That is correct, depending upon the
    credit risk; it depends on the leverage. We have allocated the
    existing capital up to about $2.3 trillion in existing
    facilities. And, Mr. Chairman, let me just make a comment
    because I know there has been a lot of questions as to whether
    the Treasury is willing to take risk with that. I would say the
    answer is absolutely yes. The way these facilities work is in
    the facilities that do not have any credit risk, such as the
    PPP, I approve those without capital allocated. By definition
    any facility that the Fed believes puts them at risk, I do put
    up capital. So by definition, that capital is at risk. And we
    are fully prepared to take losses in certain scenarios on that
    capital.
        Chairman Crapo. Well, thank you. And I have just about 50
    seconds left, and I want to stay with the time. But there have
    been some allegations that just big companies are being
    benefited by these facilities. Could you quickly address that,
    Secretary Mnuchin?
        Secretary Mnuchin. Well, let me just comment. The
    announcement of the Corporate Bond Facility, without putting up
    $1 of taxpayer money, unlocked the entire primary and second
    market for corporate bonds. So companies such as Boeing that I
    had expected would need to borrow from us on a direct basis
    were able to borrow $25 billion in the primary markets. So I
    would say in the best-case scenario, the markets open up and we
    do not need to use these facilities.
        In the case of the Main Street Facility and the Municipal
    Facility, which we expect both to be up and running by the end
    of the month, we expect these to have a big impact on both
    those markets.
        Chairman Crapo. Thank you very much.
        Senator Brown.
        Senator Brown. The workers who have kept our country
    running during this public health emergency, the essential
    workers that we all pay lip service at least to, are often the
    lowest-paid workers in our economy. They are usually women.
    They are disproportionately black and brown workers. Too often
    they do not have a union. They are low-wage workers who do the
    laundry at hospitals, who prepare our food. They put their
    lives on the line to keep our country running. They are still
    worried about paying the bills, staying afloat, and staying
    healthy.
        Mr. Secretary, do you think that is fair?
        Secretary Mnuchin. Mister Senator, I apologize. Due to the
    technical issues, I did not hear the beginning of your
    question. I heard, ``Do you think that is fair?'' But I did not
    hear the question.
        Senator Brown. The people who we call the ``essential
    workers'' and we call out and thank, those essential workers
    are often the lowest-paid workers. They do the laundry; they
    are the custodians, the security people. They prepare our food.
    They put their lives on the line for very low wages. They are
    still worried about paying the bills. Is that fair?
        Secretary Mnuchin. Well, Mr. Senator, I just want to thank
    all the essential workers, whether it be the health care people
    or----
        Senator Brown. Well, the thanking is great, but these are
    people--is it fair that our economy pays the essential workers
    so little in such work conditions?
        Secretary Mnuchin. Mr. Senator, some of those people are
    paid less than others. Again, I----
        Senator Brown. Well, my question is: Is that fair?
        Secretary Mnuchin. Again, Mr. Senator, I do not know what
    specific workers you are referring to----
        Senator Brown. Well, I can lay them all out. I will try the
    Chairman of the Federal Reserve. Mr. Chairman, is it fair that
    those workers who are exposing themselves to this virus that
    are making low wages--we call them ``essential'' by all of our
    definitions. Is that fair?
        Mr. Powell. You know, those are workers who are basically
    in the service sector. That is what is unusual about this, that
    it is all about the service sector, and particularly those
    parts of the service sector where there are lots and lots of
    in-person contact, and those tend to be lower-paid workers, and
    they are definitely the most affected. And I would just say
    that, you know, all of our efforts are to do what we can to
    help those people and create conditions so that they will have
    the best possible chance to get back to work.
        Senator Brown. Well, some of the best things you both could
    do is to support pandemic pay for these workers and support
    another recovery act that included more dollars for these low-
    paid workers, who we continue to celebrate as essential.
        Mr. Secretary, we passed the CARES Act to help millions of
    workers who make our country work. You have set up CARES Act
    programs to lend trillions of dollars to companies. Am I right
    that you are not requiring companies to use the money they
    borrow to keep their workers on the payroll?
        Secretary Mnuchin. Mr. Senator, I am following what was the
    exact letter and spirit of the law that we negotiated with you
    and others on a bipartisan basis. In some of these facilities,
    there are specific requirements, and I assure you that the
    Chair and I are absolutely enforcing those requirements as
    required in both the literal and spirit of the negotiations.
        Senator Brown. Well, that was nice-sounding words, but the
    Administration is willing to send people to work without regard
    for their safety, but the Administration is unwilling to make
    sure that these trillions of dollars in taxpayer money will
    help these workers directly.
        Secretary Mnuchin, let me go somewhere else. Public health
    experts have told us it is not safe to reopen the economy until
    we have worker protections in place that will control the
    spread of COVID, things like testing, contact tracing,
    protective equipment, efforts that the President has clearly
    failed to lead to help our country.
        Secretary Mnuchin, you said there is considerable risk of
    not reopening, that keeping some businesses closed could cause
    permanent economic damage. How many workers will die if we send
    people back to work without the protections they need, Mr.
    Secretary?
        Secretary Mnuchin. Senator, we do not intend to send
    anybody back to work without the protections, and I would say I
    was prepared to come there today. I thought it was safe to
    testify. As a matter of fact, I already was at the Senate this
    morning wearing a mask. And I assure you both myself and
    everybody on the task force, the Vice President and others, are
    following the best medical advice, and I could not be more
    proud of the medical advice that we are getting and the way the
    economy is opening up in a safe way.
        Senator Brown. So how many workers should give their lives
    to increase our GDP by half a percent? That you are pushing
    people back into the workplace, there has been no national
    program to provide worker safety. The President says reopen
    slaughterhouses, nothing about slowing the line down, nothing
    about getting protective equipment. How many workers should
    give their lives to increase the GDP or the Dow Jones by a
    thousand points?
        Secretary Mnuchin. No workers should give their lives to do
    that, Mr. Senator, and I think your characterization is unfair.
    We have provided enormous amounts of equipment. We have worked
    with the Governors. We have done a terrific job of getting----
        Senator Brown. Mr. Secretary, I am not going to let you
    make a political speech about what a great job--we hear that
    from the President in his news conferences--when, in fact, this
    country--the President has still not led an effort to scale up
    testing. He has played State after State, State against State.
    He has played hospital against hospital to get protective
    equipment. Everybody in the country, your comments
    notwithstanding, knows that.
        Chair Powell, you said last week the additional fiscal
    support could be costly but worth it if it helps avoid long-
    term economic damage and leaves us with a stronger economy. So
    Congress needs to think about more than just the national debt
    right now. It is less costly to act today to help people than
    to pay for our failure to act in the future. Is that right, Mr.
    Chairman?
        Chairman Crapo. And if you would answer quickly, Mr.
    Chairman.
        Mr. Powell. Sure. Well, that is what I said. I said it
    could be. This is really a question for Congress to weigh. I
    wanted to call out the risk there, which was the risk of
    longer-term damage to the economy. And that is what I was
    doing, and I said we may need to do more and Congress may as
    well.
        Senator Brown. Thank you. And, Mr. Chairman, one brief
    comment. The Administration thinks we should put more workers
    at risk to juice the stock market. They have not come up with a
    basic plan for how to protect workers when they go back to
    work. When President Trump and Leader McConnell want to give
    away trillions and tax breaks to billionaires, the price tag
    did not matter a couple years ago when that happened. But we
    need to spend money now to keep workers safe in spite of the
    comments of some in the Administration and some in Senate
    leadership.
        Thank you, Mr. Chairman.
        Chairman Crapo. Well, thank you. I think that I would
    disagree with that characterization as well, but let us move on
    to Senator Toomey.
        Senator Toomey. Thank you, Mr. Chairman. Thanks for joining
    us this way.
        I just want to follow up on this discussion about
    additional spending and remind everybody, while we authorized
    something on the scale of $3 trillion, to round things off, of
    direct spending and lending and then authorized the Fed to
    complement that with another roughly $3 trillion, that could
    be--$6 trillion, that is like 30 percent of our entire annual
    economic output. And, in fact, actually more than half of it
    has not yet been spent or lent, so I think you can make a
    pretty strong case that before we rush out and do another
    spending bill, we actually let some of this stuff go to work
    and understand the consequences of what we have already done.
        I appreciate the Chairman observing that his comment--while
    I think it was often mischaracterized as calling on Congress to
    pass a new bill, in fact, it was much more nuanced than that,
    and it acknowledged, among other things, the potential cost of
    new spending. The comment that you made at the Peterson
    Institute, Mr. Chairman, do you still stand by that comment?
        Mr. Powell. I do, I do. Would you like me to expand on
    that, Senator?
        Senator Toomey. You know, I think we have covered it, so I
    appreciate that. Let me move on to follow up on something the
    Secretary said about reopening.
        I think it is worth remembering why we shut down our
    economy in the first place. It was a very specific reason, and
    that was to prevent the virus from spreading so rapidly that so
    many people would get sick so quickly that we would overwhelm
    our hospitals. Well, it has been clear for weeks now that we
    are not going to overwhelm our hospitals, certainly not in
    Pennsylvania, and I know not in most of the country. And so I
    think it is essential that we begin the process of carefully,
    thoughtfully, and safely reopening the economy.
        Secretary Mnuchin, the longer that we continue a shutdown,
    when weeks turn into months, doesn't that necessarily increase
    the risk that some businesses will fail, some jobs will not be
    there to go back to if a lockdown and a shutdown continues
    indefinitely?
        Secretary Mnuchin. That is absolutely the case, Mr.
    Senator. There is the risk of permanent damage. And as I have
    said before, we are conscious of the health issues, and we want
    to do this in a balanced and safe way.
        Senator Toomey. Thank you. I guess for either of you on
    this one, I want to talk a little bit about the Main Street
    programs.
        First, give us your best estimate of when we can expect
    borrowers to actually be able to access funds from these
    programs?
        Mr. Powell. I will go ahead. So on Main Street and,
    frankly, on all of the other facilities, we expect all of them
    to be stood up and ready to go by the end of this month. I do
    not say that it will not be a day or two into June, but that is
    our expectation, and the funds should be flowing directly after
    that.
        Senator Toomey. And very briefly, would it be possible to
    characterize the remaining hurdles you have got to get over in
    order to start actually being operational?
        Mr. Powell. Sure. So all of them are complex and
    challenging, but Main Street is in a class by itself, really.
    It is not the bond market. These are small and medium-size
    companies. They live in a world of bank lending. That is a
    world of negotiated documents, and we are trying to enter that
    world and make loans to qualifying buyers. So we set up, you
    know, big operations at the Federal Reserve Bank of Boston and
    hired service providers, and we are doing all of that to be
    ready to face off against it. It is very diverse, small,
    medium, and large companies, very different industries, very
    different credit needs, some of them asset-based, some of them
    cash-flow-based. So it is a really complex undertaking, and
    people are working literally around the clock, and have been
    for weeks, to get it ready by the end of this month.
        Senator Toomey. Thank you for that.
        I also observe that one of the terms, one of the conditions
    of these facilities is that the banks who are acting as
    lenders--and, by the way, I am hoping that nonbanks can
    participate as well. Business development companies and others
    I think would be effective conduits for these funds. But the
    lender is going to be required to keep some of the risk on
    their own books, and I am wondering what kind of reaction you
    have gotten from lenders and potential borrowers. What kind of
    participation are you anticipating? Do you think there will be
    strong demand for these facilities given the way they have been
    structured?
        Mr. Powell. There are three facilities. We have had a lot
    of outreach--to borrowers, lenders, everybody--going back over
    the last couple of months. And the three facilities will
    probably attract different levels of demand. We are getting a
    good deal of interest and inquiry on them, and I think we will
    find out fairly quickly.
        You should know that we will continue to be prepared to
    adapt, as we have shown, if the uptake is not what we would
    hope, and we will be prepared to go after that and try to find
    ways to address the needs of this area of the economy.
        Senator Toomey. All right. Thank you very much.
        Thanks, Mr. Chairman.
        Chairman Crapo. Thank you.
        Senator Reed.
        Senator Reed. Chairman Powell, thank you for your great
    leadership. I think you recognize that State and local
    governments are absolutely critical to our response to COVID
    but also to our economy. It has been estimated, for example,
    that there are 20 million jobs in State and local government,
    that State and local governments contribute 8.5 percent of
    national GDP, and we all know they are facing dire economic
    circumstances, projected 10 percent budget losses this year, 25
    percent next year.
        How likely will it be for us to have robust recovery if our
    States do not receive additional and flexible fiscal relief,
    not a loan from the Fed which increases their leverage, but
    fiscal grants to the States? How robust can our recovery be if
    this key sector is out of play?
        Mr. Powell. Senator, I do not want to get too into
    individual fiscal proposals. Those are really for you. I have
    tried to stay at a fairly high level on this. I will just echo,
    though, that I think something like 13 percent of the workforce
    is in State and local government. A lot of the critical
    services that people rely on day to day are, you know, provided
    at the State and local level. With balanced budget provisions
    in State Constitutions, that means that when revenue goes down
    sharply, it can mean job cuts and service cuts. So those are
    all important things to consider in going forward.
        Senator Reed. Well, thank you.
        Secretary Mnuchin, I just want to make a comment, because I
    made this comment to you repeatedly. That is, I do believe that
    within the Coronavirus Relief Fund that we passed, you do have
    the flexibility to provide support for the States when it comes
    to lost revenue. This lost revenue was not anticipated in their
    budgets. Far from that. And, second, it is directly related to
    the COVID virus. If you go to most States, it is directly
    related.
        So I would urge you to relook, as you have done with PPP,
    and you have tailored that several times, look back again and
    reconsider the ability to use flexibility in this Coronavirus
    Relief Fund. So that is just a comment, Mr. Secretary. Let me
    return back to Chairman Powell.
        Chairman Powell, we know that unemployment is going to be
    something that will be with us for a while. It is about 15
    percent now. I have seen estimates as high as 20 or 25 percent
    next year. And yet our unemployment insurance programs are
    keyed to a date. They will end at a certain time.
        Do you think it is important for us to have the confidence
    and give confidence to people that they can still receive funds
    like this, even if the date is surpassed, the economy is still
    in disarray, States are still looking at 10 percent
    unemployment rates? Don't they need that certainty so we would
    have to build in some type of test--not a date, but a test for
    unemployment compensation?
        Mr. Powell. Senator, again, that is a question about a
    specific fiscal policy, and that really falls to you. You know,
    we try not to get into too many specifics. I will say, though,
    that the risk that I called out last week and that I have been
    concerned about, and others have, is that long periods of
    unemployment can really affect people's ability to go back to
    work because they lose their networks, they lose their skills,
    they lost contact with the job market. So I think anything that
    keeps people intact hopefully in their job, but in the
    meantime, keep them out of insolvency and things like that,
    should the expansion start later or take longer to get going,
    those are appropriate things for you to look into.
        Senator Reed. Just a final point, Chairman Powell. I think
    we are missing the boat once again. This is sort of like deja
    vu. I was here in 2008, 2009, and 2010, and we leaped in to
    help the mortgage market with both feet, but we did not help
    people avoid foreclosure. It seems to me that that is what we
    will do again unless we have a fiscal program that provides
    resources to keep people in their homes. When they cannot pay
    their rent, when they miss their mortgage payments, that will
    put pressure on the mortgage communities, and you and the Fed
    and the Treasury will rush to help. Wall Street will get the
    help. Main Street will be left behind. There will be, as there
    was in 2008, 2009, and 2010, thousands and thousands of people
    without homes. And any economic recovery is going to be slowed
    by people in those conditions.
        So I would just ask whether you consider this fiscal
    response to the core problem--people cannot pay their rent,
    they cannot pay their mortgage--is probably the best response
    rather than filling in later.
        Mr. Powell. I think you are right. Waves of foreclosures
    can undermine household finances, obviously, and as a result,
    bad household finances are troubled. But, of course, in this
    case there has been some significant forbearance on that, and I
    think, you know, that is, again, something to continue to
    consider.
        Senator Reed. Thank you very much, Mr. Chairman. I thank
    Chairman Powell and Chairman Crapo. Thank you.
        Chairman Crapo. Thank you.
        Senator Scott.
        Senator Scott. Thank you, Mr. Chairman. To the panel, thank
    you all for being with us this morning.
        This is a really important time in our country. There is no
    doubt that the global pandemic has shocked the world and,
    frankly, shuttered a lot of businesses. And because of the
    Paycheck Protection Program, I think the two tranches of the
    Paycheck Protection Program have saved, from my understanding,
    somewhere near 50 million jobs--the first tranche, about 30
    million jobs; the second tranche, about 20 million jobs. And we
    still have about $100 billion left that we can deploy into our
    communities.
        With that said, thinking about the backdrop of $100 billion
    left in the Triple P, Mr. Secretary, I think you know that I
    feel really passionate about helping the underserved
    communities, whether that is Horry County in South Carolina or
    West Virginia and some of the rural parts of West Virginia.
    Very often, small and minority businesses are the lifeblood in
    those small rural communities, and, frankly, we have the
    Minority Business Development Agency that has done a really
    good job of helping to deploy some of the resources from the
    Triple P into those underserved communities.
        My question is: How can we use the MBDA or some other
    mechanism to get more of those resources in our rural
    communities or, frankly, in our inner-city communities where
    perhaps the Paycheck Protection Program has been more
    intimidating for smaller businesses, like barbershops and
    beauty salons, some of the rural gas stations that may not have
    the banking relationship that was necessary at the beginning of
    the program, or their 1099, which means that basically they had
    to wait a week before they were able to get in the cycle? How
    can we help those organizations and agencies like the MBDA
    actually provide the marketing so that more people understand
    the benefits and understand the program of the Triple P? Mr.
    Secretary?
        Secretary Mnuchin. Well, Senator Scott, first of all, thank
    you, because we appreciate the work you have done with us on
    this issue already, and we will continue to work with you and
    others.
        One of the things we are very pleased about the additional
    money is that the average loan size has come down considerably.
    I think we all had certain concerns about in the first tranche
    how larger companies were prioritized. I believe that has now
    been corrected.
        I also could not be more pleased how we have been able to
    get sole proprietors and others into the program. And as I have
    said, fortunately right now we still have a significant amount
    of money left, but we are very much willing to consider the
    bipartisan request of reserving money for CDFIs at the end to
    make sure that the underserved communities are properly served
    in this program. Thank you.
        Senator Scott. Thank you. Mr. Secretary, once again let me
    just say to you, since I can see you on the screen, you have
    done a fabulous job under intense pressure, and without any
    questions, America recognizes the valuable service that you
    have provided to our country, and I am personally thankful for
    your accessibility. Under pressure, you have still been very
    receptive and responsive, and that is to say a lot under the
    current conditions. So thank you very much on that.
        Chair Powell, I heard you talk about forbearance very
    quickly there, and this is an issue that continues to grow in
    importance and really in urgency, whether it is a small
    business, whether it is the residential market or the
    commercial market.
        The one concern I have that continues to grow would be
    commercial mortgage-backed securities. There are a number of
    shopping centers in South Carolina and, frankly, throughout the
    country where, having spoken to some of the folks who own those
    shopping centers, like 20 to 22 percent of the folks are able
    to pay their rent, which means that we are looking at a domino
    effect in the mortgage market, whether it is commercial and,
    frankly, residential, the same concern. I am not sure what the
    answers are. Certainly it is either forbearance or, frankly,
    bankruptcy for many firms.
        What should we expect, what should we anticipate from the
    Fed and from the Treasury as it relates to creating more
    liquidity in that market? And I do not know that there is a
    silver bullet. I do not see a panacea. But what would you both
    suggest that I should tell my constituents on this really
    important issue? Thank you.
        Mr. Powell. It is an important market. As you know, we have
    supported the CMBS market with our open market purchases, and
    that did help that market to keep functioning. In addition,
    legacy CMBS are eligible for our Term Asset Loan Facility,
    which is an asset-backed security. It is an important market.
    We continue to monitor it. You know, the 13(3) facility is a
    lending facility, and that is the tool we have. Not every
    problem can be successfully addressed with such a facility, but
    where it can be, we are willing to take a hard look.
        Senator Scott. OK. Thank you.
        Mr. Secretary, anything to add to that, sir?
        Chairman Crapo. Quickly, please.
        Secretary Mnuchin. Again, I would just add both working
    with the FHFA as well as Ginnie Mae on the agency side and then
    working with the Fed on the securitization side, unfortunately,
    securitizations have certain limitations, but we continue to do
    this. Thank you.
        Senator Scott. Thank you, Mr. Chairman. I may be over my
    time. I cannot see the clock, so I assume that I have 5 more
    minutes left.
        [Laughter.]
        Chairman Crapo. I have been trying to tap. I am not sure if
    everybody is hearing the taps, but I will do something loud.
        Senator Scott. Thank you, sir.
        Chairman Crapo. All right. Thank you.
        Senator Menendez.
        Senator Menendez. State and local governments are facing
    unprecedented budget challenges. We are looking at enormous
    wave of budget shortfalls about to crest, which will lead to a
    devil's cocktail of devastating layoffs, dangerous cuts to
    public safety and essential services, and massive local tax
    increases. Any one of those ingredients alone threatens to make
    this economic crisis even worse, and the combination of all
    three is almost unthinkable.
        The Bureau of Labor Statistics just reported that State and
    local governments laid off nearly 1 million workers in the
    month of April. That is almost 1 million firefighters, police
    officers, teachers, emergency health personnel that should be
    on the front lines of the public health crisis but are
    sidelined instead.
        So, Chairman Powell, let me just start by asking, do you
    agree that our economy will get worse if State and local
    governments are forced to lay off even more firefighters,
    police officers, teachers, and emergency health personnel?
        Mr. Powell. Well, let me say what we are doing, Senator.
    You know, we have a Municipal Liquidity Facility that is there
    to address the short-term liquidity needs that these entities
    have because of their loss of revenue due to the effects of the
    pandemic, and that is really the tool that we have to----
        Senator Menendez. Well, I appreciate that, but that is not
    my question. My question is: If States, counties,
    municipalities continue on the path to lay off--you know, we
    have a million laid off--even more, just from an economic
    situation, doesn't that make the economic recovery even worse?
        Mr. Powell. Essentially yes, Senator, and we have the
    evidence of the global financial crisis and the years afterward
    where State and local government layoffs and lack of hiring did
    weigh on economic growth during that period.
        Senator Menendez. Well, one of the tools that we have to
    alleviate this problem is by using the money Congress provided
    in the CARES Act to bring down borrowing costs for our State
    and local governments so they can set the stage for a strong
    recovery. I was glad to see the Federal Reserve support local
    governments through the Municipal Lending Facility, but,
    frankly, I do not think it is enough.
        In a letter that I and Senators Tillis, Brown, and
    Murkowski sent to you and Secretary Mnuchin last week, we
    called on the Fed to establish another facility, one that would
    purchase medium- and long-term municipal bonds, both directly
    from issuers as well as on the secondary market and thereby
    ensure our State and local governments can continue to finance
    key public services and invest in infrastructure and other
    areas to jump-start our economy and get Americans back to work.
        Will you commit to work on that proposal that the Senators
    sent to you?
        Mr. Powell. Yes, we will take a look at that, Senator. I
    will say, though, that generally with 13(3), what we are trying
    to do is address liquidity needs, and those are really longer-
    term funding needs. But notwithstanding that, we are taking a
    look.
        Senator Menendez. I appreciate that. In a speech last week,
    Mr. Chairman, you said, ``Additional fiscal support could be
    costly, but worth it if it helps avoid long-term economic
    damage and leaves us with a stronger recovery. The tradeoff is,
    of course, for our elected representatives.'' You know, I
    agree. The hit to our States, cities, and counties is
    tremendous, and it is not just specific to my State of New
    Jersey. Projections released by Moody's reveals that every
    State in the Nation is already or will soon face historic
    budget shortfalls. Just to pick a few examples, they found that
    Ohio and Arizona are each facing a fiscal shock totaling about
    20 percent of their entire State budget. And for some States,
    the numbers are even worse, like West Virginia, which is facing
    a 40-percent fiscal shock. Like you said, the Fed cannot be
    expected to solve all of our problems.
        Yesterday I introduced the SMART Act, which is a bipartisan
    bill--three Republicans, three Democrats--to provide $500
    billion in direct support to our State and local governments.
    It is the first bipartisan bill of its kind in the Senate, and
    I think when we have colleagues from Mississippi, Louisiana,
    and Maine on the Republican side, it is not a partisan issue.
        Would that be the type of solution that can get us back in
    terms of the States into fiscal recovery?
        Mr. Powell. Senator, we try to stick to our knitting over
    here, and you know that we have done what we can with the
    Municipal Liquidity Facility. But those questions are really
    for elected representatives.
        Senator Menendez. Well, let me just close on this. A lot of
    minority-owned businesses are not getting access to the
    Paycheck Protection Program as we in Congress intended. I know
    the Secretary has been receptive, I hope you will be receptive
    as well to allowing community development financial
    institutions and minority development institutions get greater
    access to these programs and to the lending facilities set up
    in the CARES Act so these funds can reach businesses in low-
    income and underserved areas of our country. It is just still
    not happening, and I urge--the Secretary, I believe, has been
    rather receptive about this. I would urge you, Mr. Chairman, to
    be receptive as well.
        Chairman Crapo. Thank you.
        We will next move to Senator Sasse, who will be with us by
    telephone. And, Senator Sasse, I will tap at about 30 seconds
    left of your 5 minutes. You can proceed.
        Senator Sasse. Thank you, Chairman. And, gentlemen, thank
    you both for being here. Sorry, but I am in the hallway outside
    of a Judiciary Committee hearing, so I do not have the Zoom
    camera here, but I am grateful for both of your time and
    responsiveness on this.
        I want to start by asking about some of the recent cyber
    attacks. We have obviously seen an increase in schemes directed
    at financial institutions that have been active in trying to
    help with corona response, and I am just curious as to if you
    have any update for us on the cybersecurity attacks we see in
    this space.
        Secretary Mnuchin. Well, I would just comment on that that
    we have a Department within Treasury that is actively working
    on all these issues and coordinates and makes sure that our
    infrastructure--I will just give a pitch for our Secret Service
    bill, moving the Secret Service back to the Treasury because
    the issues I think they can help with is on these cyber-related
    issues. But I can assure you we have all the resources working
    on this jointly and take it very seriously.
        Senator Sasse. [Inaudible] ----institutions that do not
    have the scale to have huge cyber defenses on their own, and
    when we see foreign actors doing stuff like this, it is
    obviously critical that we view this as a whole-of-society
    problem, not just these institutions alone. So thank you for
    your pledge to keep looking at that.
        Chairman Powell, the Fed has done a series of announcements
    over the last 2 months about the 13(3) funding facilities. And
    in the announcement of April 9th, the Fed announced that the
    Term Asset-backed Securities Loan Facility would be expanded to
    include commercial mortgage-backed securities as well as static
    collateralized loan obligations. The Wall Street Journal
    described that expansion as ``the Fed will in effect be buying
    the worst shopping malls in the country and some of the most
    indebted companies.''
        Could you give us your perspective on the Wall Street
    Journal's characterization of this expansion? And are they
    right about the risk levels with some of the commercial
    properties? Obviously, as America goes through this experience
    of corona time, lots and lots of people are not just doing
    telecommuting and distancing for the present, but we see in
    Silicon Valley lots of companies planning to migrate their
    long-term strategy, and I would assume that is a bellwether of
    what we are going to see for commercial property across
    America. The taxpayers should not be on the hook for flooding
    into that space. Can you help us understand how you would
    respond to the Wall Street Journal's argument?
        Mr. Powell. Sure. First, in TALF we are supporting asset-
    backed securities markets broadly, which that is consumers,
    that is car loans, that is credit card loans, things like that,
    in addition to the CMBS you mentioned. Now, we are only buying
    the Triple A-rated piece, and we are only buying it with a
    good-sized hair cut. So the credit risk is actually very, very
    low on this to us, and the same thing is true of the CLOs.
        Senator Sasse. That is helpful, the Triple A point. Thanks,
    Chairman.
        Secretary Mnuchin, I want to go back to some China IP
    issues that you and I have discussed before. Obviously, the
    Chinese Government has been stealing American intellectual
    property for decades to fuel its economic rise, and while we
    have indicted companies and individuals for cyber espionage and
    for some of the theft of this intellectual property, we rarely
    see any sanctions for these crimes. For instance, we have
    indicted Huawei and its subsidiaries and its CFO for a long
    list of crimes, from the theft of trade secrets to sanctions of
    Asians' money laundering, but we have not placed any sanctions
    on Huawei itself.
        How do you and the Treasury Department assess the costs and
    benefits of utilizing sanctions against some of the Chinese
    Communist Party's economic champions like Huawei that obviously
    are not really private sector companies? They built the
    business die, sort of the ostensible private sector side of the
    organization by stealing IP, but the back end of Huawei is
    obviously hooked in not just to the Communist Party but to
    military intelligence. So why do we continue to treat these
    ``companies'' as if they are really private sector? Where do
    you come down on the cost-benefit analysis on utilizing
    sanctions?
        Secretary Mnuchin. Well, I think as a matter of policy, you
    know--and I have said this before--I do not comment on future
    sanctions actions, nor do I comment on specific sanctions on
    specific companies, although I will tell you that the issues
    related to Huawei we do discuss on an interagency basis and do
    coordinate. I would also just comment that I have worked very
    closely with Ambassador Lighthizer obviously on the China
    agreements, and forced technology transfer is a major issue
    that we have been combating.
        Senator Sasse. Fair, Secretary, but we have heard U.S.
    Government officials of both Administrations for two decades
    talk about, you know, agreements that are eventually going to
    have teeth, and they almost never do. Ambassador Lighthizer has
    been a bit of a pit bull on this piece of it, but discussing it
    in the interagency process is not really the same as us pushing
    to help Huawei and their state-based backers understand that IP
    theft has real consequences, not just press releases. So I am
    glad that it is a topic for interagency discussion, but I would
    just say--and I know that the Chairman's gavel there implies
    that I am at time, but I would just say in the intelligence
    community, oversight community in the legislature, this is an
    increasingly bipartisan issue that Republicans and Democrats
    believe that it is important for us to be holding these faux
    private sector companies in China to more account, and the
    Chinese Government needs to know that we mean it, not just say
    eventually, you know, somebody is going to come up the stairs
    if you guys keep stealing IP and they continue to do it. So for
    what it is worth, I think the Article I perspective here on an
    increasingly bipartisan basis is serious.
        Thanks, Chairman.
        Chairman Crapo. Thank you.
        Senator Tester.
        Senator Tester. Thank you, Mr. Chairman and Ranking Member
    Brown. I want to thank both Secretary Mnuchin and Chairman
    Powell for being on the call today. We have all seen what has
    transpired over the last couple months as far as Inspectors
    General go.
        My question is quite simple: Can I get both of your
    commitments, individually of course, that if an IG submits a
    request to you, you would provide any information to them and
    do so in a timely manner?
        Secretary Mnuchin. Yes.
        Mr. Powell. Yes.
        Senator Tester. Good. Secretary Mnuchin, can you tell me
    from your perspective how active has the Congressional
    Oversight Commission been?
        Secretary Mnuchin. I have seen the recent report. I cannot
    comment on what meetings they have had or what they have done
    on that.
        Senator Tester. OK. And you guys, I would assume, comply
    with any requests that they may make, correct?
        Secretary Mnuchin. I see no reason why we would not.
        Senator Tester. OK. Well, I value that and I appreciate
    that from both of you. I think the President has a bit of a
    different opinion, and I say that by what he has said, not by
    what I think about the values of Inspectors General.
        Secretary Mnuchin, do you think it is right to be able to
    remove public servants that their job is independence and
    holding the Government accountable?
        Secretary Mnuchin. I think that--if you are referring to
    the removal of the IG, again, which I only know from what I
    have heard the President say, but, yes, that is within his
    authority.
        Senator Tester. Even if they are doing their job?
        Secretary Mnuchin. Again, that is an appointed position. He
    has the right to withdraw, just as he has nominated a new
    Special Inspector General to work with the CARES Act, which we
    look forward to the Senate confirming so we can work with that
    person.
        Senator Tester. I have a totally different perspective on
    that, and I will tell you why. I know he has the authority to
    remove anybody, including yourself, and I would say that if you
    are doing your job, in the case the Inspector General has been
    doing it on an independent basis, I think it is just--I think
    it is a clear misunderstanding of the three branches of
    Government.
        So I talked to you a little bit about reporting to the IGs,
    and I will tell you, I learned something today I did not know
    before, that nearly half--this is by Senator Toomey--of the
    dollars that we have allocated, the $3 trillion, has neither
    been spent nor lent. So can you guys--we need more transparency
    in these programs, and I think you would agree with that. When
    can we see full information about who is getting the dollars?
        Secretary Mnuchin. Well, let me just comment. When we
    negotiated this bipartisan deal, we agreed to unprecedented
    transparency. So we agreed to release things that are not
    required by 13(3), so I do not know why you have not seen that.
    Everything is posted on our website or the Fed's website. We
    take great pride in the transparency that we have provided and
    we have agreed to as part of the CARES Act.
        Senator Tester. Secretary, you are saying that the
    information about who is getting the dollars and who is getting
    the money is already posted on your website?
        Secretary Mnuchin. Again, what I have said is every single
    commitment we have made is listed on the website, every single
    term sheet, and, yes, it----
        Senator Tester. So every dollar that has gone out is listed
    on your website is what you said. That is what I heard.
        Secretary Mnuchin. Again, within the CARES Act facilities
    with the Fed, when we do individual transactions through them,
    they are listed.
        Senator Tester. Chairman Powell--I look forward to seeing
    that list, by the way, Secretary Mnuchin, and I am going to go
    online and I am going to search it, because I am going to tell
    you that as much transparency as you have said is with this
    program, as the Senator from Montana, as a member of the
    Banking Committee, I am not seeing any of it, quite frankly. I
    am seeing general numbers. I am not seeing any of it. We will
    deal with that at a later date.
        Chairman Powell, I have a question for you. There has been
    $3 trillion that has been put out. Can you give me an idea how
    many dollars, because of the leveraging that the Fed used, has
    actually been infused in the economy?
        Mr. Powell. Well, Senator, our facilities, the big
    facilities to which the equity has been committed, are really
    just coming online, so it is all ahead of us. You know, we have
    taken some time to set these facilities up, so the amount that
    has gone out so far is, in the context of the U.S. economy,
    fairly modest. We have committed, though, to disclose all of
    the borrowers and the amounts in a timely way.
        Senator Tester. I appreciate that. There is $200 billion
    that I believe Secretary Mnuchin said would be leveraged to
    $2.3 trillion. Do you agree with that?
        Mr. Powell. Yes, potentially. We cannot be precise about
    these numbers, but we can leverage their equity at about that
    rate.
        Senator Tester. What is $100 billion among friends? Thank
    you very, very much. I appreciate you both being here. I look
    forward to being able to find the information Secretary Mnuchin
    said was online. Take care. God bless.
        Chairman Crapo. Senator Cotton.
        Senator Cotton. Thank you, Mr. Chairman. Secretary Mnuchin,
    Chairman Powell, thank you both for being here.
        I want to speak about the Primary and Secondary Corporate
    Credit Facilities. As of today, those facilities are available
    to companies that have ratings from public rating agencies like
    S&P and Moody's. As you know, that can be a very expensive
    process. Some companies do not want to go through the cost or
    the rigmarole of getting those ratings but are highly
    creditworthy. These companies often tend to be privately owned,
    sometimes family owned. They can have very large employee
    bases. We have some in Arkansas. In aggregate, they are
    employing thousands of workers. I think probably all the
    Senators on this Committee, maybe all 50 States, have companies
    that are in this category. Oftentimes they sell loans directly
    to insurance companies like life insurers that are rated by the
    National Association of Insurance Commissioners. Those ratings
    are high quality. They are the functional equivalent of a
    public rating agency like an S&P or Moody's.
        Secretary Mnuchin, what is the possibility of opening up
    those facilities to companies that are selling those kind of
    loans with those kind of creditworthiness ratings from the
    NAIC?
        Secretary Mnuchin. Senator Cotton, I have appreciated the
    opportunity that you brought this to our attention, and as I
    have suggested, I am working with the Fed very closely to see
    if we can accommodate using those NAIC ratings, and if indeed
    there is some private ratings that can be done on a level that
    is not costly to the companies. But we are committed to make
    sure that these companies can use the facilities as well.
        Senator Cotton. Chairman Powell, can I get your perspective
    on that question?
        Mr. Powell. Yes. If I understood your description of the
    companies, they sound more like Main Street companies than
    primary or secondary credit market. Those are for investment
    grade issuers who issue public bonds. If I misunderstood, I am
    sorry. But----
        Senator Cotton. On the Main Street Facility, Mr. Chairman,
    I think the limitation that some companies might face is that
    they exceed the employee cap, which I understand to be 10,000.
    It would be similar to the Main Street Lending Facility.
        Mr. Powell. Well, I would just echo what Secretary Mnuchin
    said. We are working on this problem.
        Senator Cotton. Thank you for that. And, Mr. Secretary, any
    thoughts on when that decision might be made so these companies
    can get the certainty on whether they will have access to that
    facility or another facility or perhaps a brand-new facility?
        Secretary Mnuchin. I understand the importance of this, and
    I will commit to try to get back to you within the next week.
    And we want to make sure that if there are companies that slip
    through these two facilities, the Chair and I will work
    together to make sure that we deal with those issues so that
    they have funding.
        Senator Cotton. OK. Thank you both for that, and thank you
    for your work on this question over the last couple weeks.
        Secretary Mnuchin, I now want to turn to a question about
    the Paycheck Protection Program. It is a very specific
    question, but I got it coming in my office this morning from
    one of our small community lenders in Arkansas. I suspect many
    other lenders have the same question. I suspect that banks
    across all of our States have this question. The note we
    received said, ``We are required to file a PPP version of SBA
    Form 1502 by Friday for all the loans we funded, yet the
    guidance and format of the reporting requirements have not been
    issued. We are reaching a critical point in time. As you know,
    banks have to extract this information from our core, and that
    can be both time-consuming and tedious. We ask for a little
    more detail. That detail is as follows: Banks will have to
    extract these data points from our primary core software
    system. This will require programming to mine these data
    points, then merging into the required formats. Then we have to
    inspect for accuracy. This will require several days to
    accomplish. It is not as a simple as pushing a button and the
    data is populated.''
        Mr. Secretary, given that this is Tuesday, the deadline for
    this is Friday, what is the prospect of getting more detailed
    guidance from the SBA as soon as possible or perhaps pushing
    that deadline back a little bit for all of these lending
    institutions to comply with what you need?
        Secretary Mnuchin. Mr. Senator, I believe we have already
    pushed that date back, but I will check on that and confirm it.
    And if there is a specific institution that has a problem,
    please let me know the name, and we will figure out how to
    accommodate that. We want to make sure that we get the
    information, but where there are small and medium-size banks
    that have issues, we will obviously try to figure out how to
    accommodate them.
        Senator Cotton. Thank you very much, and I thank you again
    for Treasury and SBA's willingness to work with all of us over
    these last 2 months to iron out all of these wrinkles as the
    CARES Act is applied in so many different situations. Thank
    you, gentlemen.
        I yield back my time, Mr. Chairman.
        Chairman Crapo. Thank you.
        Senator Warner.
        Senator Warner. Can you hear me?
        Chairman Crapo. Yes.
        Senator Warner. OK, great. Thank you. And thank you,
    gentlemen.
        I want to start, Chairman Powell, from the comments I think
    you have made, and I want to reinforce them. I think we all
    realize and understand that losing a job at any point in your
    lifetime is an enormous challenge. Losing a job in the midst of
    a recession or depression could be devastating. I point to the
    survey that the Fed put out last week that literally said 40
    percent of our fellow Americans who make less than $40,000, 40
    percent of those folks had their jobs disappear between
    February and March. We all know as well that 36 million
    Americans were unemployed. We are Depression levels of
    unemployment. And I think statistics have always shown that
    particularly losing a job during a recession could actually
    incur long-time income losses, up to 19 percent over the coming
    decade, some of the statistics that I have seen.
        So I would again like you to take a moment to say--you
    know, we have to measure overdoing versus underdoing, but with
    this type of devastation, with this type of pain
    disproportionately hitting low- and moderate-income Americans,
    can you speak to us of the results and the long-term scars this
    would present if we do not take aggressive action?
        Mr. Powell. Thank you. I would be glad to. So there is
    clear evidence that we are going to have a situation where
    people are unemployed for long periods of time. That can
    permanently weigh on both their careers and their ability to go
    back to work and also weigh on the economy for years, equally
    so with small and medium-size businesses, which are the jobs
    machine of our great economy. If we allow unnecessary,
    avoidable insolvencies because of effectively a natural
    disaster, that, too, will destroy the work of many families and
    generations, but it will weigh on the economy. So those are
    things to keep in mind.
        As I said earlier, this is the biggest response by Congress
    ever and the fastest and the biggest from us, and still this is
    the biggest shock wave seen in living memory, and the question
    looms in the air: Is it enough? We will have to----
        Senator Warner. I would argue that historically, whether it
    is our country or other Nations, Governments tend to undershoot
    during these periods, and we now have 36 million Americans
    without work, and 40 percent of the folks under $40,000 a year
    losing their work, that this scar could be deep and wide.
        One of the reasons--I am going to turn to you, Secretary
    Mnuchin, and we have discussed this. I think a number of our
    colleagues on both sides of the aisle understand this. You
    know, we did some aggressive things for folks in the airline
    industry. We did some aggressive things for folks under 500.
    But that middle market that the Main Street Facility is
    supposed to address, I am gravely concerned that we need to
    both get that out and we need to be very aggressive with it. I
    did a letter to you all, to you, Secretary, yesterday,
    outlining some of the ideas that I hope you would be willing to
    lean into. But I want to--and you made mention earlier that you
    were willing to have some of that $75 billion at risk in this
    facility. But I would like you to speak to that a little bit
    more, specifically in terms of, as you build out the baseline
    of this facility, how much risk and how much of that capital
    did you expect to potentially lose, and I would love to have
    then the Fed Chairman very quickly echo whether he is willing
    to relook at some of the penalty fees that are, to my
    understanding, Fed regulations but not legislatively mandated.
    Secretary Mnuchin, you first, please.
        Secretary Mnuchin. Thank you. Well, Senator Warner, first
    of all, I want to personally thank you for the time that you
    spent with us during the legislative process in helping to
    craft these different pieces and your availability since then
    to work with us, so we appreciate your thoughts and will
    continue to work with you.
        As it relates to risking capital, as I have said, almost by
    definition, anytime that the Fed thinks they need capital,
    there is a risk to us. We obviously model our various different
    scenarios. We have obviously continued to adapt the Main Street
    Program to let more and more companies into it, and although we
    refer to it as one program, it effectively has three
    subprograms. So we run different scenario analysis. There are
    scenarios within Main Street where we could lose all of our
    capital, and we are prepared to do that. There are scenarios
    where the world gets better and we could actually make a small
    amount of money. But, again, as I have said, no different than
    Secretary Paulson during the TARP period. They did not think
    they were going to make money. Our intention is that we expect
    to take some losses on these facilities. That is our base-case
    scenario.
        Senator Warner. Mr. Chairman, do you want to address it in
    terms of the penalty rate?
        Mr. Powell. I would be glad to. So what we are doing here
    with these programs is we are making loans in times of severe
    stress, where markets are not working, not providing credit on
    reasonable terms, the original purpose of central banks. So
    what rate should we charge? And what we do is we charge a rate
    that is a little bit higher than the normal rate, but in most
    cases much below what the market is currently providing. That
    encourages prompt repayment. It helps those who cannot get
    credit, but not those who want credit from us to save a few
    basis points. And if markets are functioning reasonably well,
    we do not want to replace them. We want to be a backstop to
    those markets.
        Senator Warner. I think, Mr. Chairman, my time is up, but I
    would just urge you, these are extraordinary times, and I hope
    you will lean into this as much as possible.
        Thank you, Mr. Chairman.
        Chairman Crapo. Thank you.
        Senator Rounds.
        Senator Rounds. Thank you, Mr. Chairman.
        Gentlemen, first of all, thanks. I appreciate the work that
    you have done and your organizations have done in making this
    whole thing work as well as it has in a very short period of
    time.
        I would ask, first of all, to Secretary Mnuchin, in
    discussing with our local lenders, they have got a number of
    questions coming in with regard to PPP, and specifically two
    different sections: Number one was the rule in which we asked
    that these loans be literally divvied out and accepted within
    10 days of the time of approval; and, second of all, how that
    relates to a June 30th date for the execution or completion of
    the use of those loans. And, Mr. Secretary, I do not find where
    there is actually a June 30th end date where that has happened
    in order to facilitate forgiveness of that loan.
        Can you talk a little bit about your option or the
    flexibility you have with regard to the PPP and the forgiveness
    of loans and that June 30th date that so many people have
    concerns about?
        Secretary Mnuchin. Well, let me just comment, I think the
    concern that people have, it is even bigger, that we would like
    to get a bipartisan technical fix. As you said, there is the 10
    days to disburse it. We have then given banks another 10 days
    if people have not sent back the documents. And then there is
    the 8-week period. So companies are really having issues with
    not necessarily being able to use it during that 8 weeks. They
    do not want more money, but want flexibility that they can use
    it in longer than an 8-week period. And as it relates to the
    June 30th issue, we are happy to follow up with your staff and
    talk about where that fits into the bill.
        Senator Rounds. Thank you.
        Chairman Powell, I noted with interest a letter from Vice
    Chair Quarles recommending that Congress give regulators
    discretion to loosen certain capital requirements prescribed by
    Section 171 of Dodd-Frank. Do you share the Vice Chair's
    thinking? And what additional measures do you think Congress
    and the Federal Reserve should consider?
        Mr. Powell. I do share that. So the idea is temporarily
    during this period, unusual, unique period in our history, the
    banks have been strong. They have been making loans. They have
    been taking in deposits. And because of the growth in their
    balance sheet, they are constrained by some of these
    regulations because they are taking on board very low risk
    assets. So we have tried to provide relief so they can continue
    to do what they are doing. So I do support that, and we have
    done a number of things, and, you know, we will let you know as
    we see the need for other adjustments.
        Senator Rounds. Thank you, Mr. Chairman.
        Secretary Mnuchin, one thought with regard to--in the
    middle of this COVID-19 pandemic, we still have a discussion
    about and on a regular basis get questions from taxpayers here
    about the amount of money that we have borrowed and what we are
    going to do about it. You are going to play a key role in how
    we lay out that repayment plan. Can you talk a little bit about
    the tools available to you specifically with regard to long or
    ultra-long Treasury bonds? I know it has been a hot topic, and
    I know that most recently you launched a 20-year bond. Can you
    talk about the maturities, how you plan on laying that out, the
    strategy that you are using to best accommodate our needs for
    the immediate liquidity, but also recognizing that you have got
    some tools available? And with these ultra-low interest rates
    that we are at right now, it may very well work to our benefit
    to feather this out over an extended period of time?
        Secretary Mnuchin. Well, thank you. I am glad you asked
    that question because I think it is very important. First, I
    would just answer prior to this we spent a lot of time looking
    at 50- and 100-year bonds and determined that there just was
    not enough demand to make it worth it given borrowing sizes. We
    did get advice on a 20-year, so we have added the 20-year. That
    gives us the ability to both extend the duration as well as to
    raise a significant amount of funds. So it is my intention, as
    you have described, to borrow a lot of money in a short term to
    have the funding, but then to expand our financing in 10-, 20-,
    and 30-year bonds. What I would like to do is lock in a
    significant amount at very low interest rates so that the money
    we are borrowing can be paid back and dealt with over a long
    period of time.
        Senator Rounds. Thank you.
        Thank you, Mr. Chairman.
        Chairman Crapo. Thank you.
        Senator Warren.
        Senator Warren. Thank you, Mr. Chairman.
        Today's hearing takes place in the worst economic crisis of
    our lifetimes. Unemployment is now at Great Depression levels.
    Nearly 40 percent of people making less than $40,000 lost their
    jobs in March alone. Businesses are shuttered and they may
    never reopen.
        Congress passed the CARES Act and put nearly half a
    trillion dollars worth of taxpayer money in corporate bailout
    money in your hands. This is not the PPP or the Small Business
    Fund, but half a trillion dollars for midsize and giant
    corporations. So I want to talk a little bit about where that
    money is going.
        The law gives Treasury and Federal Reserve the authority to
    write detailed rules determining which companies get taxpayer
    relief and how they can spend that money. And over the past few
    weeks, the Fed has been putting out these rules in the form of
    what you call ``term sheets.''
        So, Secretary Mnuchin, you have said that the jobs numbers
    will improve. In fact, on Fox News, you said, ``We will have a
    better third quarter, we will have a better fourth quarter, and
    next year is going to be a great year.''
        Now, to make that happen, people are going to need jobs. So
    does this mean that you will require companies that receive the
    bailout money from taxpayers to keep their workers on payroll?
        Secretary Mnuchin. So let me just comment. I have said
    publicly and I will say again I think the job numbers will get
    worse before they get better. So I just want to be very clear
    that I think that June will be a very difficult quarter.
        As it relates to the CARES Act, I take great pride in the
    bipartisan support on these bills, and these specifics were
    negotiated on a bipartisan basis very clearly in each one of
    these programs, and it is our intent in the 13(3) facilities to
    fulfill both the spirit and the details of the law. So
    different facilities have different requirements.
        Senator Warren. So, I am sorry, Secretary Mnuchin, that is
    not quite right. What the law specifically does is gives you
    the specific authority to determine the terms on which these
    loans are made and who is going to be able to get them for
    these midsize and giant corporations. And so I have a very
    simple question for you. You say the economy is going to
    recover. It is going to take jobs in order for that to happen.
    So what I want to know is: Are you going to require companies
    that receive money from this half a trillion dollar slush fund
    to have to keep people on payroll? It is a simple question. Yes
    or no, are you going to require that?
        Secretary Mnuchin. First, let me say that our number one
    objective is keeping people employed.
        Senator Warren. Good. So are you going to require that----
        Secretary Mnuchin. I want to be very clear.
        Senator Warren. ----of people who are getting taxpayer
    money? That is my question.
        Secretary Mnuchin. Again, we negotiated very significant
    restrictions on employee compensation, on dividends, on
    buybacks, and in the Main Street Facility we have put in a
    provision that we expect people to use their best efforts to
    support jobs. But----
        Senator Warren. But--I am sorry. I have very limited time
    here, Mr. Secretary. Let me understand what you are saying. In
    all the facilities that are not the Main Street Facility, you
    are not putting in any requirement for payroll, and the Main
    Street Facility is something about commercial reasonable effort
    to be able to maintain jobs. In other words, if somebody fires,
    if a corporation fires a bunch of people, then gets Federal
    taxpayer money, you are fine with that; or if they take a bunch
    of Federal taxpayer money, and, well, it did not work out
    commercially for us, then they can fire people.
        So I take it your answer to my question whether or not you
    are going to require as part of the terms of the loan that
    people be kept on payroll is no? Isn't that right, Secretary
    Mnuchin?
        Secretary Mnuchin. That was discussed with people on both
    sides of the aisle, and the determination was made----
        Senator Warren. I am talking about term sheets.
        Secretary Mnuchin. ----at the time----
        Senator Warren. I am sorry, Secretary Mnuchin. I am talking
    about your term sheets that you are putting out, and you are
    telling me you are not going to require the payroll--let me ask
    you one more question. Taxpayers are on the hook here for
    nearly half a trillion dollars. You are not going to require
    that they keep a single person on payroll. There are some
    rules, though, in the term sheets, as you identified earlier,
    like prohibiting companies from getting bailout money, from
    double-dipping in other CARES programs. And by law, companies
    that get this money are going to have to sign agreements
    certifying that they are in compliance.
        So, Secretary Mnuchin, here is what I want to know. Will
    you create a certification process that ensures that executives
    are held personally liable and are subject to criminal
    penalties if they provide false information or misuse bailout
    funds?
        Chairman Crapo. And if you could be brief, Mr. Secretary.
        Secretary Mnuchin. We will review that, and, again, I would
    just comment on programs like the airline programs had very
    specific requirements to keep jobs, which was the intent of
    Congress.
        Senator Warren. That is right, and the rest was left up to
    you, and what you are saying is that you will not do it. You
    know, we are in a situation where 35 million Americans have
    filed for unemployment. You are in charge of over half a
    trillion dollars. You are boosting your Wall Street buddies,
    and you are leaving Americans behind. I think that----
        Secretary Mnuchin. Senator Warren, I think that is a very
    unfair characterization, and these issues were discussed with
    both Republicans and Democrats at the time. You were not
    necessarily part of those discussions, but these were
    completely discussed.
        Senator Warren. You were given the authority to determine
    the terms. You have said it yourself. You are putting out term
    sheets, and those term sheets do not require that a single
    corporation----
        Chairman Crapo. Senator----
        Senator Warren. ----getting billions of dollars in taxpayer
    money retain one job.
        Chairman Crapo. Senator Perdue.
        Senator Perdue. Thank you, Mr. Chairman. Thank you both for
    being here today. I look forward to these quarterly updates.
        Chairman Powell, when you took this responsibility, the Fed
    had about a $5 trillion balance sheet. You worked it down to
    about 3.8. It was about 4 when the COVID-19 crisis hit. With
    the money supply increasing from $3.8 to $5 trillion recently,
    with the debt being at $23 trillion, and with about two-thirds
    of what we have done so far in the $3 trillion relief package
    it looks like goes to debt, and with the potential for more
    movement by the Fed that would take the balance sheet now from
    $4 trillion just in March, the five moves you made takes it up
    to potentially $13.5 trillion. It is around probably $7
    trillion today, and it could go north of 14 if, in fact, the
    Main Street Program is fully levered up. Help us understand, I
    mean, how do you put this genie back in the bottle? Help us
    understand how you are thinking about this demand on capital,
    demand for capital and what it might do to interest rates in
    the short term and the long-term implications of what we have
    just done. This is not a criticism at all. It is just I would
    love to get your thoughts of how we should be thinking about
    that balance sheet given that China, Japan, EU, all the other
    big central banks are doing fairly similar moves, just not as
    dramatically as we have done.
        Mr. Powell. So when we expand our balance sheet, when we
    bought securities, as you know, Senator, so we bought a lot of
    Treasury and MBS securities to get those markets working. As
    these facilities grow, we will also expand our balance sheet,
    and those also--you know, that expands the money supply. I
    would expect that over time--and that time will probably not be
    very soon, but over time the assets that we have on our balance
    sheet from this era will come to maturity. They will roll off,
    and the balance sheet will again very gradually return. This
    will be some years down the road, I would think.
        Senator Perdue. If I could interrupt, I watched how hard it
    was to get us from this 4.1 to 3.8 in the latter stages of that
    and the consternation it had both politically and economically.
    So you are confident that over time we will be able to manage
    that size balance sheet?
        Mr. Powell. So what really matters is the size of the
    balance sheet relative to the size of the economy, and that
    came down quite significantly from the end of 2014 until 2017
    just by holding the balance sheet constant. So it can be done
    in a way that is sort of passive and gradual, and it was for
    about 3 years. We came down from, what, 25 percent of GDP to 16
    or 17 percent of GDP. So it can be done over time.
        In the meantime, I would say it does not have implications
    for inflation. It does not have particularly problematic
    implications. I am not saying there are no limits to this, but
    it is not something that raises financial stability or
    inflation concerns today.
        Senator Perdue. Thank you.
        Secretary Mnuchin, I just want to thank you and echo what
    Tim Scott said earlier, and that is about your availability
    through this crisis. I know you are recently married, and I do
    not know where your wife is these days, sheltering in place. I
    am sure you have not seen much of her. Thank you for all your
    sacrifice in making this thing happen.
        I want to correct the record. We have been told in this
    meeting that there is no data out there, but I want to
    highlight some numbers for us here. First of all, the Dodd-
    Frank bill killed about 4,000 community banks in about 6 years.
    There was a bipartisan bill done in January of 2018 that
    modified the most onerous parts of that and saved our community
    banks, and they are the rock stars in this process, in the PPP
    program, anyway. I have a question, Secretary. Eight hundred
    banks were approved under the SBA system prior to this; almost
    5,000 banks made 4.3 million loans and so far put out $520
    billion to companies under 500 employees. And, by the way, 99.8
    percent of that $520 billion went to companies with fewer than
    500 employees, so it did want we wanted to do. And 93 percent
    of those loans are $350,000 or less.
        My problem is this, Secretary: I think we have on two
    levels, one in the bill itself and one that is happening now in
    what we have done here, is that we have disincented people to
    come back to work. Even now my State is beginning to open up,
    and, by the way, safely. We have two constituent groups out
    there, the military and essential workers, to look at how they
    have managed their protocols and so forth while they manage
    through this crisis. It gives me great confident that we can
    open the economy up. The unemployment premium is keeping people
    from coming back to work. There are employers in my State who
    really want people to come back to work, but they are saying,
    ``No. Why would I do that? I am going to enjoy this premium
    right now, and then call me back in a couple of months.''
        The second thing is a lot of small employers actually
    encouraged a few weeks ago their employees to go on
    unemployment even though they were getting money and they were
    hoping that they would--when the revenues started when they
    opened up, they would begin to then bring the people back and
    then use the loan to pay salaries. How would you help us think
    about how to deal with that? The Labor Department at one point
    said they were going to put some rules out about this premium.
    And the second thing is the enforcement behind if an employer
    wants an employee to come back to work, the employee should no
    longer be qualified for unemployment insurance. Would you
    address that?
        Chairman Crapo. And if you could be brief, please.
        Secretary Mnuchin. Thank you. And let me just say, you
    know, we are aware of the technical problem here, and we want
    to have a technical fix on the unemployment insurance. But,
    specifically, let me just comment on the PPP. If you offer back
    a worker and they do not take that job, they will be required
    to notify the local unemployment insurance agency because that
    person will no longer be eligible for unemployment.
        Chairman Crapo. Thank you.
        Senator Schatz.
        Senator Schatz. Thank you to all of the testifiers and
    panelists.
        Chairman Powell, I want you to take us through two very
    simple scenarios. The first is if Congress takes no additional
    action in the next couple of months, and the other is if
    Congress steps into the breach and passes another fiscal policy
    bill.
        I know you are loath to weigh in on specific policy
    recommendations, but I want you to talk in terms of the overall
    economy about the impact on quarters 3 and 4 should we decide
    to say that the bills that we have passed are enough.
        Mr. Powell. I think it really depends on the path of the
    economy, honestly. As I said, my concern has been the risk and
    possibility of longer-run damage to the economy through
    unnecessary insolvencies on the part of households and
    businesses and long-term unemployment, and that if we find
    ourselves in that place, we may have to do more, and it could
    also be something that Congress would want to do. I think--go
    ahead.
        Senator Schatz. So according to census data, about half of
    small businesses are going to run out of cash within a month.
    States are slowly reopening the economies, but consumer
    behavior is not going to rebound to normal within a month. Do
    you think that there is going to be a strong enough rebound in
    economic activity in the next 1 to 3 months for that alone,
    from what we have already done alone, to prevent thousands of
    small businesses from going under? Or do you think there is a
    need for additional fiscal policy?
        Mr. Powell. I think we are going to see here fairly quickly
    how the reopening goes, and it is very hard to know. We have
    not done this thing before. No one has done this sort of thing
    before. So I think you are going to be getting a lot of
    information fairly quickly here in terms of what may be needed.
    I make my comments on fiscal policy at a general level. I am
    reluctant to talk about timing and specific provisions. It is
    really not the Fed's role. We do try to stick to our knitting.
        Senator Schatz. So why don't you go ahead? I will give you
    an open-ended question. Please provide the panel with some
    comments about the importance of fiscal policy over the next 6
    to 9 months.
        Mr. Powell. So it is a combination of a couple things.
    First, just, as I mentioned, the risk of lasting damage to the
    productive capacity of the economy through the labor force
    because of longer-term unemployment and through unnecessary,
    avoidable insolvencies on the part of small and medium-size
    businesses. Those two things create a real risk.
        The other thing I will point to is what we do is we address
    liquidity problems, not solvency problems. We have lending
    powers, not spending powers. So over time--and this is not a
    certainty; this is a possibility. Over time, solvency problems
    emerge from liquidity problems. Liquidity problems can develop
    into solvency problems with the passage of time. That all
    depends on the path of the economy, how well the reopening
    goes, and, you know, which path we find ourselves on.
        So I think what Congress has done to date has been
    remarkably timely and forceful. I think you could say the same
    about what we have done. I do think we need to take a step back
    and ask, over time, is it enough? And we need to be prepared to
    act further, and I would say we are if the need is there.
        Senator Schatz. It seems to me that the distinction between
    a solvency problem and a liquidity problem applies to big
    institutions, big corporations, even Governments. But when you
    are talking about a small business or a family, there is not
    much of a difference between having a cash-flow problem and
    simply being flat broke. And it seems to me that that
    distinction, which you are able to make and rightly do as the
    head of the Federal Reserve, is a rather abstract one for the
    companies that are eight persons and the families that are sort
    of at economic death's door. They do not distinguish between a
    solvency problem and a liquidity problem. They have run out of
    money.
        Secretary Mnuchin, Section 4114 of the CARES Act states
    that carriers receiving payroll grants shall ``refrain from
    conducting involuntary furloughs or reducing pay rates and
    benefits until September 30, 2020.'' But on April 21st, United
    Airlines received $4.9 billion, and on May 1st, United
    announced that it would reduce 28,000 workers from full-time to
    part-time within 2 weeks. Was that announcement a violation of
    the terms of the Payroll Support Program?
        Chairman Crapo. And, again, please be brief.
        Secretary Mnuchin. We believe right now that they are in
    compliance with the program.
        Senator Schatz. Right now. Were they violating this when
    they first announced it?
        Secretary Mnuchin. Again, I do not want to go through
    specific situations with specific companies. I will say right
    now we believe they are in compliance with the agreement.
        Senator Schatz. Thank you.
        Chairman Crapo. Senator Tillis.
        Senator Tillis. Thank you, Mr. Chairman. And, Chairman
    Powell and Secretary Mnuchin, thank you for your, I think,
    heroic work. Your teams have done a great job under immense
    pressure, and I appreciate it.
        One thing I want to go back to that was mentioned by some
    of my colleagues about the CMBS, I like the fact that the
    Administration expanded TALF to cover legacy CMBS. I think that
    is a good step. I personally believe that commercial real
    estate is under severe stress and is likely to get worse before
    we start seeing a turn and a more positive growth, more
    positive indicators from the economy.
        One thing that I am concerned with, Secretary Mnuchin, is
    right now it looks like we have only got about 15 percent from
    the American Hotel and Lodging Association, about 15 percent of
    forbearances of any kind from the CMBS servicers or service
    providers. That seems like a low number to me. One, I would be
    curious if you think that that is low given the circumstances
    right now, and then what more we may need to do congressionally
    to get the servicers and the borrowers to the table.
        Secretary Mnuchin. It does seem a bit low to me as well. We
    do have a structural problem of loans that are in
    securitizations and how they have to be dealt with with the
    special servicers. So, obviously, as it relates to the banks,
    the banks have much more flexibility, but this is a technical
    issue, and we may need to come back to Congress to work with
    you on a technical fix.
        Senator Tillis. Well, thank you. I would like to hear about
    that. I think that we need to do it because I am gravely
    concerned with the retail shopping, the hotel/lodging industry,
    and those are industries that are largely going to lag behind
    some of the business startups that we are seeing in some
    States. So I would be interested in your feedback.
        I was also kind of curious about the TALF Program and
    potentially other areas where we should expand. I am thinking
    about new issues, CMBS, RMBSs, installment loans. Have you
    thought about that? And have you also thought about less than
    Triple A?
        Secretary Mnuchin. We have thought about----
        Senator Tillis. And that would be----
        Secretary Mnuchin. We have thought about all of those, and
    I would just say, you know, I want to thank the people at the
    Fed and the Treasury who have worked around the clock to get
    these facilities up and running. We have prioritized these. But
    I assure you as the Fed Chair and I have said, we will look at
    all of our options to make sure we support jobs across the
    spectrum.
        Senator Tillis. I would particularly be interested--you do
    not have to expand on it here, but on new issues, I am very
    interested in that, to see what you are gaining, what you think
    is within the realm of possibilities.
        Chairman Powell, do you have anything to add to that?
        Mr. Powell. No; just our commitment, as the Secretary
    suggested, to keep our minds open and looking at evolving those
    facilities as we learn more.
        Senator Tillis. Secretary Mnuchin, I have one question for
    you and then a final question for the both of you. I am
    thinking about more about the tax burden right now on middle-
    class households. Do you think any of our future work here
    should include a treatment for maybe a reduction in the tax
    burden on middle-class households and whether or not that would
    be helpful?
        Secretary Mnuchin. I think that is something that should be
    seriously considered.
        Senator Tillis. Now, the final one that I have--Chairman, I
    am going to keep to the time. I have a growing sense that we
    have a bit of a donut hole, those that are not quite right for
    the Paycheck Protection Program because of their size but not
    quite big enough or the nature of their business to be eligible
    for the upcoming Main Street Lending Facility. So have you all
    looked at--and, Secretary Mnuchin, I appreciate what you said
    about the 8-week covered period. I think there are lot of
    mechanics in there and what can be included as a forgivable
    portion of the proceeds. All of that we need to look at; we
    need to know fairly quickly. We know the covered period is
    going to take congressional action. But when we massage the
    PPP, that may fix the problem for some of these people I
    describe as being in the donut hole. But are you seeing that
    now, I mean, we do not have the full information on the Main
    Street Lending Act, but I get a sense that there are going to
    be some people caught in between. What are your thoughts about
    more we need to do there? That final question is for both you
    and Chairman Powell.
        Secretary Mnuchin. I would say our objective is to make
    sure that there are people that do not fall out in between. So
    between the PPP, the EIDL loans, and the Main Street Program,
    it is our objective to try to cover as many of those companies
    as possible.
        Mr. Powell. In fact, that is one of the reasons why we went
    to a smaller minimum loan level on the Main Street Lending
    Program in the last turn of the term sheet.
        Senator Tillis. Thank you, Chairman Powell and Secretary
    Mnuchin. I also look forward to seeing the Main Street Lending
    Act mobilized in the coming couple weeks. Thank you.
        Thank you, Mr. Chair.
        Chairman Crapo. Thank you.
        Senator Van Hollen.
        Senator Van Hollen. Thank you, Mr. Chairman.
        Secretary Mnuchin, Chairman Powell recently acknowledged
    the need for additional fiscal relief and just in this hearing
    acknowledged in response to Senator Menendez that State and
    local layoffs of police and firefighters, first responders, and
    teachers will make a bad economic situation even worse. Do you
    agree with that assessment?
        Secretary Mnuchin. Well, I have recently provided guidance
    on the $150 billion we sent to the States that they can use
    that money for police, fire, and first responders without
    restrictions. So I hope there would be no layoffs as a result
    of that relief. That was our objective.
        Senator Van Hollen. Right. But in addition to them--so that
    just moves the burden onto other public service providers,
    including teachers, health care workers, public health workers.
    Wouldn't you agree that layoffs of those workers or any workers
    just takes a bad situation and makes it worse?
        Secretary Mnuchin. I think it does, but I think the
    question that Congress and the Senate need to address is who
    should pay for that, which taxing authority, whether it is the
    State or the Federal Government. And I look forward to working
    with the Senate on a bipartisan basis to----
        Senator Van Hollen. Well, Secretary Mnuchin, you said which
    taxing authority. As you know, States have balanced budget
    requirements. The Federal Government does not. It just borrowed
    $3 trillion. It seems to me we need to take action here to
    prevent a bad situation from getting even worse.
        Let me ask you about the PPP program. A bipartisan group of
    Senators has written and spoken to you about some of the
    unilateral and unnecessary conditions the Treasury regulations
    imposed on PPP. In fact, the Small Business Administration IG
    recently said that the 25 percent limit on forgiveness for
    fixed costs did ``not align with the language in the statute.''
        Senator Rounds just raised another issue, which is not a
    design flaw in the statute, in my view, regarding the June 30th
    deadline for qualifying for full forgiveness. The House in the
    HEROES Act reformed both of these provisions. Do you agree with
    the changes that the House made in the HEROES Act with respect
    to PPP?
        Secretary Mnuchin. I am not familiar with their specific
    language, but I am happy to look at it. But I do want to
    comment on the 75-percent issue, and SBA wrote back to the IG
    to disagree with that. And I have spoken to both Cardin and
    Rubio on this. The program was designed for 8 weeks plus
    overhead----
        Senator Van Hollen. Mr. Secretary, I know what your
    position is. I just wanted to highlight the position of the
    Inspector General of the SBA, and in my view, you cannot find
    that 25-percent limitation anywhere in the statute. I challenge
    anyone to take a look and find it there.
        I would ask you to take a look at the Rebuilding Main
    Street Initiative that a number of us had put forward. I do
    think it can get bipartisan support, and I look forward to your
    responses there.
        Let me turn to Chairman Powell and just say that I believe
    that overall the Fed has acted quickly and for the most party
    necessarily and appropriately. But I have serious concerns
    about the actions you have taken with respect to the Secondary
    Market Facility with respect to junk bonds.
        In response to Senator Sasse, you emphasized that, at least
    with the TALF Program, you were essentially helping those with
    Triple A ratings. But when you look at the Secondary Market
    Facility, you have purchased junk bonds, and we have this
    strange situation where the same day we had unprecedented
    damage in terms of unemployment numbers, the stock market was,
    in fact, going up. And you pointed out that, you know, most of
    the people being hurt are those earning less than $40,000 a
    year. In fact, 40 percent of them have lost jobs. And it is not
    clear to me why putting money into junk bonds is helping folks
    on Main Street. In fact, it puts the public in a first loss
    position behind even the most subordinated bond holder and uses
    public funds to take on years and even decades of future cash-
    flows with the price risk.
        Can you respond to that concern?
        Mr. Powell. Thanks. I would be glad to. So the only high-
    yield bonds that we can buy are those of companies that were
    investment grade on March 22 but have been downgraded, so-
    called fallen angels. These are in many cases some very large
    U.S. companies with many, many thousands of employees, and we
    made them eligible for the Primary Market Corporate Credit
    Facility, and we do not want to have, you know, a cliff there
    where the investment grade markets are working well but the
    non-investment-grade markets are not. So we made a very
    limited, narrow set of actions to support market function in
    those markets, including buying ETFs, exchange-traded funds.
    That is a portfolio effect, and that has had an effect to
    improve market function. We may have to be lending money to
    those companies, but even better, they can borrow themselves
    now, and a lot of that has been happening, and that is a really
    good thing.
        So that is kind of why we did it, and it is a fairly narrow
    intervention. We are not buying junk bonds generally across the
    board at all.
        Senator Van Hollen. Mr. Chairman, if I could just follow up
    briefly. I think a lot of those bonds were already in trouble
    before the intervention, and their troubled was not directly
    related to the pandemic. And if you could get back to me and
    just show me where the Fed has the authority to purchase this
    kind of below investment-grade instruments, I would appreciate
    it.
        Thank you.
        Chairman Crapo. Senator Kennedy.
        Senator Kennedy. Chairman Powell, do you believe that
    States and cities are going to experience revenue shortfalls as
    a result of the economic lockdown to try to contain the spread
    of the coronavirus?
        Mr. Powell. Yes, Senator, I do think that is what we are
    seeing.
        Senator Kennedy. Do you think they are going to be
    substantial?
        Mr. Powell. Yes, I do.
        Senator Kennedy. Is your Municipal Liquidity Facility set
    up?
        Mr. Powell. Well, we are probably 10 days away, 2 weeks
    away from it actually being operational. Not quite yet is the
    answer.
        Senator Kennedy. And as I understand it, you basically will
    buy short-term paper like revenue anticipation notes from the
    States, which will allow those States to issue that short-term
    paper at a lower interest rate? Am I correct?
        Mr. Powell. Well, they will be able to issue it at all in
    many cases, so, yes, we are supporting market function there.
    By the way, that should support market function across the
    municipal markets in longer-term maturities, too.
        Senator Kennedy. Do you know how many States are prohibited
    by their Constitution from borrowing money to pay for operating
    expenses?
        Mr. Powell. I think 49 States have a balanced budget
    requirement.
        Senator Kennedy. Yes, sir, but a lot of States have--in
    their State Constitutions they are prohibited from borrowing
    money to operate Government. They can borrow money to build
    things, but not to operate Government. Are you aware of that?
        Mr. Powell. Well, I thought most States could borrow during
    the course of a year for maturities of less than a year to
    smooth out the inflow of cash, revenue anticipation notes, tax
    anticipation notes.
        Senator Kennedy. Right. Have you had a lot of inquiries
    about the Municipal Liquidity Facility?
        Mr. Powell. Yes, Senator, we sure have.
        Senator Kennedy. OK. Secretary Mnuchin, do you agree with
    what the Chairman said?
        Secretary Mnuchin. Yes.
        Senator Kennedy. OK. Let me offer you an observation, Mr.
    Secretary. I am not expecting you to comment on it. It looks to
    me like the game plan is to have Senator McConnell, Senator
    Schumer, Leader McCarthy, Speaker Pelosi, and you go off and
    negotiate a deal on the next package, if there is one. And you
    will bring that deal back to the Republicans and Democrats in
    both Houses. And if the past is any indication, the Republicans
    and Democrats in both Houses who do not get to participate in
    the negotiations will moan and groan and complain and then boo,
    and follow their leaders into the chute like cattle.
        I am not sure that is going to work this time. I think that
    whatever deal you all come up with is going to receive serious
    pushback from both Republicans and Democrats in both Houses for
    a variety of reasons. I could, of course, be wrong, but I doubt
    it.
        Why would we not agree to allow the States to use the $150
    billion that we have already appropriated to them to address
    shortfalls in their revenue base as a result of the
    coronavirus?
        Secretary Mnuchin. Well, Senator Kennedy, I just want to
    comment on the first thing. I have no intention of doing what
    you have just described, nor do I----
        Senator Kennedy. Well, I do not want to debate----
        Secretary Mnuchin. ----think that happened in the past.
        Senator Kennedy. ----that, Mr. Secretary. It has been done
    in the past. It was done the last time. I am not being
    critical----
        Secretary Mnuchin. Senator, there were at least 20 or 30
    Senators, both Republicans and Democrats, that participated in
    the detailed analysis of the last bill.
        Senator Kennedy. Well, I understand, but there are a lot
    more Members in the House than the Senate. And I am not being
    critical. I am just telling you. That is the way it works
    around here, and we all know it.
        Why would you not be supportive--we have already spent $150
    billion in the CARES Act. The States have it. We know they are
    going to have shortfalls. We may not be able to pass another
    bill. I think it is less than 50 percent chance of passing
    another bill. Why would we not allow States, without
    appropriating any new money, to use that money to address
    revenue shortfalls that you and the Chairman of the Fed both
    agree are going to exist and be substantial? And why would we
    not do that today?
        Secretary Mnuchin. Well, Senator Kennedy, I appreciate your
    bill, and I know I had the opportunity to meet with you and
    other Senators with the President. And if there is bipartisan
    support for that, I am sure that the President and I would look
    forward to that.
        Senator Kennedy. What would it take for you to agree to
    support it? How do I demonstrate bipartisan support?
        Secretary Mnuchin. Again, I think I have a call scheduled
    with you later today, so I am happy to talk to your more about
    it. But, again, I think the President and I have said if there
    is bipartisan support for this and the money has already been
    allocated, that is something that I assume we would very
    seriously go along with. But, again, there has to be broad
    bipartisan support.
        Senator Kennedy. Right. How about if there were 60 votes in
    the Senate? Would you consider that bipartisan support?
        Chairman Crapo. And would you please be brief?
        Secretary Mnuchin. Again, I would just say I appreciate----
        Senator Kennedy. How much time do I have?
        Chairman Crapo. You are a minute and 15 seconds over.
        Senator Kennedy. I am sorry. I cannot see my clock.
        Chairman Crapo. We are going to have to figure that out.
    Several have had that problem.
        Senator Kennedy. Would you have him answer that one for me,
    Mr. Secretary, Mr. Chairman?
        Secretary Mnuchin. Again, I leave the details of that up to
    you and the Senators there. I appreciate the unanimous support
    we had previously, but I will leave that to you.
        Senator Kennedy. I am sorry I went over, Mr. Chairman.
        Chairman Crapo. No problem.
        Senator Cortez Masto, can you see your clock? Go ahead.
        Senator Cortez Masto. Thank you for joining us. Let me
    start with Chairman Powell.
        Chairman Powell, it was an interesting conversation you
    were having with Senator Schatz on liquidity problems versus
    the solvency problems. I do know that you have highlighted that
    some of the sectors--airlines and hospitality--are in rough
    financial shape. Because I come from Nevada and it is a
    hospitality-generated State where we get most of our revenue,
    can you speak to the challenges that hospitality and tourism
    sectors face right now?
        Mr. Powell. Sure. So I think sectors of the economy like
    that where the business model is to gather people in one place
    and entertain them, feed them, fly them around, whatever you
    are going to do, those are sectors where it will take some time
    for, I think, the public to return. That will happen, but it
    will take some time for the public to regain confidence and
    adapt to the new world and start traveling, taking vacations,
    going to restaurants, things like that.
        Senator Cortez Masto. And I am glad you brought that up
    because that is one thing that we have not talked about, was
    this notion that when we looked over our businesses--and I
    think we all and I personally, that is what we want. We have
    got to find this balance about opening our businesses in
    general. But they are only going to be as successful as the
    customer confidence that is there to patronize those
    businesses. And that is not just true for the hospitality
    industry. That is true for all businesses.
        I do know that the service and retail has been hardest hit,
    that business, and my understanding from some of the data that
    I have seen is over 2 percent of those businesses have closed
    permanently already. And so how are we to address this consumer
    confidence issue? Because I know that is something that you
    have thought about and talked about publicly, I have seen. What
    should we be doing?
        Mr. Powell. You know, one thing I will say is it affects
    different sectors of the economy differently. The ones we
    talked about are the ones where it is most important. Other
    sectors of the economy may be able to recover much more
    quickly, and we certainly hope so. But, you know, the number
    one thing, of course, is people believing that it is safe to go
    back to work, to go out, and that is about having a sensible,
    thoughtful reopening of the country, something we all want and
    something that we are in the early stages of now. That is what
    it will take for people to regain confidence, I think, and
    resume their activities--again, at a different pace depending
    on the nature of the business, the nature of the activity.
        Senator Cortez Masto. Right. And the health care piece of
    it, right? That they will feel safe going back out if they feel
    safe at--or they are going to be healthy and safe when they go
    into an establishment. Isn't that true?
        Mr. Powell. Yeah, it is the combination of getting the
    virus under control, development of therapeutics, development
    of a vaccine, all of those things, and also just, I think, you
    know, seeing what your eyes are telling you. You can feel it
    already, that people are doing things that they would not have
    done 2 months ago, a little bit at a time, and I just think
    that process will take time.
        Senator Cortez Masto. Yeah, and until that happens, many
    people are relying on local governments and State governments
    as their social safety net, right? They are telling them--
    looking to local government and State Government to tell them
    how they can stay safe, they are opening businesses, where the
    health care facilities are, how they can get testing that is
    needed and contact tracing. Isn't it true that is where they
    rely on their local governments first off?
        Mr. Powell. Yes, and I think that is where the decisions
    will be made, is at State and local government. Also
    businesses, individual businesses. We talked to a lot of
    businesses and nonprofits and leaders in all those areas, and
    what I feel like is certainly for the larger ones, there is a
    very thoughtful process going on about this. But, ultimately,
    people will make their own minds up. You know, you can change
    the formal social distancing measures, but ultimately people
    are going to decide what they should and should not do with
    themselves and with their families. And I think that will boil
    down to having pretty good confidence that it is safe to go
    out.
        Senator Cortez Masto. Yeah, and I agree with you. I also
    know at least in my State that many are waiting and relying on
    their State and local governments to weigh in and help them
    make those determinations and set those guidelines and make
    sure their communities are safe. That is why funding for our
    State and local governments is so important, and I cannot
    stress that enough, not only in the next fiscal package that
    needs to come into State and local governments, but you also
    touched on the Municipal Lending Facility. I would like to see
    more of that available to smaller populated States and local
    governments. Nevada has 3 million population. There has to be a
    way to also give them the opportunity to get the liquidity or
    the funds that they need to ensure that they are providing that
    safety net, that social safety net to consumers in general.
        I know my time is up. Secretary Mnuchin, I have questions
    for you as well. I will submit those for the record. Thank you
    both for joining us today.
        Chairman Crapo. Thank you.
        Before I move to Senator McSally, I will announce to those
    remaining that a vote started about 10 minutes ago, and we
    still have a number left to go, so I ask you to please pay
    attention to the clock. Sorry that it just turns out this way
    at the end of these hearings.
        Senator McSally.
        Senator McSally. Thank you, Mr. Chairman. And, Chairman
    Powell, Secretary Mnuchin, good to see you virtually.
        I want to talk about China. As we know, they unleashed this
    virus on America and the world with their classic Communist
    coverup, deception, continued propaganda campaign, costing now
    over 90,000 American lives, 35 million Americans losing their
    jobs so far. We do not know who Patient Zero is. They destroyed
    samples. They silenced doctors. They kicked out journalists,
    impacted travel, international travel to seed this, and their
    reckless behavior continues to be at the root of all this.
        As you know, this is why we are here today. We are talking
    about the economy, which was very strong, now really
    struggling. People all over Arizona are really struggling
    because of the calamity that has come from this virus.
        I do not think anybody, I should say--actually, let me just
    ask. I do not think either of you think there is any reason
    that we should be rewarding China or Chinese State-owned
    enterprises, or individuals or entities that want China to
    prosper as we implement these massive initiatives to support
    the American economy. Is it fair to say neither of you want
    that to happen?
        Secretary Mnuchin. That is correct.
        Senator McSally. Chairman Powell.
        Mr. Powell. Senator McSally, that is really not a question
    for me. We are working on the economic response to this.
        Senator McSally. I know. But none of us as Americans want
    to see, you know, China or Chinese-owned enterprises
    prospering. So I want to talk about a company called
    ``BlackRock.'' On March 24th, the Federal Reserve Bank of New
    York retained BlackRock as the financial agent to
    operationalize and transact with primary dealers in the Primary
    Market Corporate Credit Facility and the Secondary Market
    Corporate Credit Facility. As you know, these facilities serve
    as markets for companies to sell bonds and obtain loans during
    this situation, this downturn.
        Typically, there is a competition, a competitive bidding
    process, but BlackRock was selected for this one. As you
    probably know, BlackRock is one of the leading investment banks
    in Chinese funds, including helping Chinese companies list and
    go public on American stock exchanges. Chinese companies listed
    on American exchanges prohibit the Public Company Accounting
    Oversight Board, or the PCAOB, from reviewing their audit
    reports.
        On BlackRock's website they have a page titled ``Five Myths
    and Realities about Investing in China.'' According to
    BlackRock, one of the biggest myths about China is that Chinese
    State-owned enterprises do not control their economy. BlackRock
    even tries to back that up with data. I will not go into all of
    it, but it is ridiculous. BlackRock's ode to China does not
    mention anything about human rights abuses, military responses
    to the Hong Kong democracy protests, or even that the country
    is ruled by a Communist Party. Ironic that one of the world's
    largest investment banks and allegedly a staple of free markets
    neglects to mention the fact that Communists actually run
    China, and all while refusing to invest in a number of
    legitimate and legal industries here in America, but that is a
    separate issue.
        So my question is: How and why did BlackRock get selected
    as a financial agent for these facilities? How much money do
    they stand to make as the agent? And what, if anything, will
    prevent BlackRock from taking their profits that they earn to
    invest in their interests in China and Chinese State-owned
    enterprises?
        Mr. Powell. So I guess I will take that. We hired BlackRock
    for their expertise in these markets. They are actually an
    asset manager. They are a very large asset manager which is
    active in the markets that we are concerned with, with the
    Primary Market and Secondary Market Credit Facilities. It was
    done very quickly due to the urgency and the need for their
    expertise. We will rebid the contract as we in practice do
    going forward, and so that is where that is.
        The fees are a matter of public record, and we will be
    happy to supply those to you.
        Senator McSally. So what, if anything, can we do to prevent
    any of their profits from this to actually benefiting China and
    Chinese State-owned companies, which they are severely invested
    in?
        Mr. Powell. I would just say this: All large asset managers
    buy Chinese securities. These are global asset managers. It is
    in no way--I am not here to defend or criticize them for that.
    It is not really relevant to the work we want them to do. What
    we are trying to do is create conditions in which U.S. workers
    can keep their jobs or return to them, and that is what our
    sole focus is. We are not trying to reach out for other public
    policy objectives or deviate from that. We have really a laser
    focus on that, and we concluded that this company was the right
    one to be our fiscal agent in this place. Their views on
    anything else are really not important. What is important is
    that we do everything we can to support employment in the
    United States.
        Senator McSally. Well, let me just say it is important to
    all of us--and thank you for your leadership on this--to
    support our economy, to support jobs, to get our economy back
    on track. But it is also important that we wake up as Americans
    and that we hold China accountable and that they do not--they
    are not allowed to profit because of these investments
    taxpayers have made. So I am going to follow up with you on
    these issues. I really think BlackRock and others need to also
    wake up and do their patriotic duty, see what is going on here.
    China, Communist China, should not be profiting off of
    unleashing this calamity on the world, and that should be
    something that should unite all Americans, even if they work at
    BlackRock.
        Chairman Crapo. Thank you.
        Senator Jones.
        Senator Jones. Thank you, Mr. Chairman.
        Quickly, I will follow up. I agree that we need to hold all
    people accountable. China, the WHO, folks in this
    Administration--everybody needs to be held accountable if they
    had deficiencies in what was going on in this pandemic.
        Secretary Mnuchin, let me say I saw recently that the
    Treasury is going to begin issuing debit cards for Americans
    for their direct payments. You will recall that Senator Cotton
    and I sent a letter shortly after the passage of the CARES Act
    encouraging that. So I appreciate your willingness to do that.
    I think it is going to quickly get money to millions of
    Americans that have not received those direct payments as of
    yet.
        I wanted to also ask you about the Payroll Protection
    Program. As we have talked about a little bit early on, in the
    first round of funding, there were some problems with the
    banks, and there were underserved communities that are not
    getting their funds. And I think we have tried to correct that
    and are doing much better. But the SBA Inspector General issued
    a report in the wake of that that recommended that the agency
    start collecting demographic information on who got those
    loans.
        Can you commit to work with the SBA Administrator to make
    collecting demographic information mandatory for these PPP
    loans so that there is that much-needed transparency?
        Secretary Mnuchin. Well, I can tell you in the forms that
    the lenders are required, there is demographic information. We
    have been advised to make that optional and not mandatory, but
    we very much hope that people provide that. And let me just say
    we are very much committed to make sure that we serve the
    underserved communities with the money we have left.
        Senator Jones. Great. Thank you.
        Chairman Powell, you know, I also saw your speech and read
    your--saw the ``60 Minutes'' piece, and it kind of reminds me,
    in listening to some of the comments about this, of what Judge
    Taylor in ``To Kill a Mocking Bird'' said, that, you know,
    people are going to hear what they want to hear and they are
    going to see what they want to see. What I saw is a call to
    action from that. And one of the things that was talked about,
    that 40 percent of Americans that have lost their jobs and how
    it is affecting our minority communities, not only in their
    health and the disparities, what is being shone, a spotlight,
    is the disparities on so many things.
        You mentioned how this pandemic can exacerbate the existing
    gap of wealth and assets and ownership between minorities and
    even just poor people in general. We started this pandemic with
    about 40 million poor people. It is going to get much bigger
    than that, and it is going to be across racial lines.
        What can we do to try to narrow that gap, to make sure that
    the wealth gap does not get even greater as we open back up
    this economy?
        Mr. Powell. Well, the job losses that have been happening
    have been happening in the service economy, particularly in
    those parts where you are dealing directly with people, and
    that is a lot of less-well-paying jobs and that sort of thing.
    So if you look at the industries that have been really hard hit
    with job losses, it is those industries. It is restaurants, it
    is hotels, it is travel, things like that, and retail.
        I recommend, by the way, that report, ``Survey of Household
    Economics and Decisionmaking,'' which we release annually. We
    just released it, and that is where those statistics come from.
    There is a lot in there. And it is stunning how quickly
    households get into financial trouble, how little many lower-
    income households have in the way of financial resources. These
    are longer-term problems to deal with. I think for now, you
    know, this very much calls on us to do what we can to support
    the economy. And as I mentioned earlier, we have 20-some
    million people out of work. We want to do everything we can to
    create a world where they can go back to their jobs or find new
    jobs. And I think that is something all of us as policymakers
    should be strongly focused on.
        Senator Jones. Well, thank you for that. And it seems to be
    connected to your comments of also making sure that we keep
    people in their livelihoods, to keep the unemployment numbers
    down. You know, I think from our standpoint we have been
    focused on both saving lives and saving livelihoods. And while
    we do not want to give folks incentives to stay on
    unemployment, we certainly do want to give incentives to
    businesses to open carefully.
        I would encourage you, if you have not, to look at the
    Paycheck Security Program that Senator Warner and others and I
    are going to be filing this week so that we can give these
    opportunities, because I am assuming that the more
    opportunities we can give employers to keep people on their
    payroll with benefits, that would aid in opening up the economy
    safely and trying to keep us from getting into that long-term
    recession. Would that be fair?
        Mr. Powell. I will be happy to take a look at your
    legislation, your proposed legislation.
        Senator Jones. Well, thank you, Mr. Chairman. I appreciate
    the opportunity. Thank you for coming, Mr. Secretary and Mr.
    Chairman.
        Chairman Crapo. Thank you.
        Senator Moran.
        Senator Moran. Mr. Chairman, thank you. Had I had more
    time, I would extol the virtues of both the Secretary and the
    Chairman in their efforts, their team, their public service
    during this crisis. In the absence of that time, I hope you
    understand the sentiments that that sentence expresses.
        I want to focus, I guess, Secretary Mnuchin. We have talked
    about PPP, and we have seen the consequences, the positive
    consequences that have come from the program. There are large
    businesses, Main Street, in which the facilities are being
    developed to assist, but I am worried about other businesses. I
    would use an example. Not that I am lobbying for any company,
    but an example that comes to my mind in Kansas is Yellow
    Roadway Trucking Company. It employs almost 30,000 people. It
    is not investment grade. It has leverage, and it is a company
    that, in the absence of assistance, the jeopardy of its
    employees is significant. I think there are a lot of companies
    out there like that. I think there are a number of other
    companies in Kansas like that. And I want to make certain that
    we are doing the things that are necessary to prepare to be of
    assistance to them.
        I think Senator Toomey and Senator Warner earlier indicated
    that very few of us expected Treasury not to have to take
    losses, that there needs to be some risk taking here. And I
    want some kind of assurance that under the B4 program, the B4
    facilities, that these kind of companies that are hugely
    important to the economy can receive some assistance with the
    facilities at Treasury and the Fed.
        Secretary Mnuchin, is there some level of comfort I can
    have?
        Secretary Mnuchin. You have my assurance that we will go
    back and look at that specific company and see what we can do
    and get back to you.
        Senator Moran. I hope it is more than that, because it is
    not just that company. There are a number of companies across
    the country, not just in Kansas, that this is----
        Secretary Mnuchin. We will look at companies like that, and
    as I said before, we want to make sure that there are
    facilities that companies do not fall through the cracks. So
    between all the different facilities, we are trying to do as
    much as we can within our powers.
        Senator Moran. Let me suggest to you that timing is of the
    essence, just as it was in PPP. The circumstances companies
    face today and lay off and furloughing employees are present
    and around the corner. So I encourage the precipitous but
    thoughtful action in addressing these circumstances.
        Let me see if I can get two other questions in. One, do we
    have a timeframe, Mr. Secretary, for further guidance regarding
    PPP loan forgiveness?
        Secretary Mnuchin. There is some guidance that just came
    out on loan forgiveness that we believe deals with most of the
    major issues.
        Senator Moran. And then a second question, Secretary
    Mnuchin. Does Treasury and SBA plan to issue guidance that
    would allow 501(c)(3) organizations to utilize the alternative
    size standards for PPP eligibility?
        Secretary Mnuchin. We are reviewing that specific request,
    so we have had that request, and we are reviewing it.
        Senator Moran. Is that something a decision is close to
    being imminent?
        Secretary Mnuchin. We are going to decide one way or
    another whether we can do that, so yes.
        Senator Moran. OK. Thank you very much. Thank you, Mr.
    Secretary. Thank you, Mr. Chairman.
        Secretary Mnuchin. Thank you.
        Chairman Crapo. Thank you. And you get a gold star, Senator
    Moran, for yielding back a minute or two.
        [Laughter.]
        Chairman Crapo. Our final Senator for questions is Senator
    Smith.
        Senator Smith. Thank you, Mr. Chair, and thank you, Ranking
    Member Brown. And thanks to both of you for being here today.
        Chair Powell, you have talked about how we will not be able
    to solve the economic crisis without solving the public health
    crisis, which I agree with. And, Secretary Mnuchin, you have
    said that we need to reopen the economy, and I quote, ``in a
    thoughtful way,'' which I also agree with. So it seems to me
    that a really important part of being thoughtful is to make
    sure that Americans have accurate information about what is
    going on. So I have no doubt that you will be surprised to hear
    that a lot of us were taken aback when, I do not know, a couple
    of days or so ago, we heard President Trump's son, Eric Trump,
    acting as a surrogate for his father, say this, he said: ``They
    think''--meaning they, the Democrats--``that they are taking
    away Donald Trump's greatest tool, which is to be able to go
    into an arena and fill it with 50,000 people every single time,
    right? So that they will, and you watch, they will milk it
    every single day between now and November 3. And guess what?
    After November 3, coronavirus will magically all of a sudden go
    away and disappear and everybody will be able to reopen.''
        So this is the kind of misinformation that concerns me
    greatly. Secretary Mnuchin, are you aware of any evidence that
    what Eric Trump said, that his assessment is accurate?
        Secretary Mnuchin. I did not see Eric's comments, nor do I
    think in this setting it is appropriate for me to comment on it
    one way or another.
        Senator Smith. Well, I do not think it is accurate, and I
    think it is exactly the kind of misinformation that is so
    damaging to and undermining of both our economic approaches and
    our policy approaches here.
        But let me ask you, Chairman Powell, even before the COVID-
    19 crisis, many Minnesotans were struggling to find an
    affordable place to live. And last year, I spoke with hundreds
    and hundreds of Minnesotans and family community leaders about
    this challenge, housing developers as well, and they all told
    us that at every part of the housing continuum, from housing
    for homeless people and supportive housing, all the way up to
    workforce housing, that this is a significant problem and a
    significant affordability challenge. And so now we have this
    coronavirus challenge.
        So I along with many of my colleagues on this Committee
    have been pushing for support for housing, $11.5 billion for
    homeless assistance, $100 billion for rental assistance, and
    $75 billion to stabilize homeowners.
        Chair Powell, could you talk a little bit about the
    importance of the housing sector in our economy right now and
    what challenges you see ahead for us as we are living through
    this crisis? And I appreciate what you said. The most important
    policy objective should be to keep people in their homes and
    keep them paying the bills.
        Mr. Powell. These are longer-running problems which are, of
    course, under particular pressure right now. But as an example,
    a lot of the jobs are in big urban areas more and more. That is
    where the job creation is. And yet the cost of living in those
    places is higher and higher, very high, and often people who
    are in the service industries providing their services have to
    commute very long times to be able to afford to live in a
    place. So, you know, it is an issue that has been with us for a
    while. It is not one really that the Fed can affect much other
    than by affording, you know, fair lending laws and things like
    that. But we cannot really directly affect those, but they are
    important to our economy.
        Senator Smith. I realize that you do not want to comment
    specifically on the specific policy issues that we have
    confronting us here in Congress, but in general, do you see a
    risk to the housing market as the economy continues to take a
    downturn in the months ahead?
        Mr. Powell. Well, I think there are multiple risks. One is
    just to the extent forbearance does not do the job, you may
    have people losing their homes. Given that this is a natural
    disaster in a way, that is something that would be great to
    avoid. You also see the housing industry coming--I will not say
    to a halt, but under great pressure, activity being slowed,
    that is a lot of jobs right there. So I think, you know, really
    it comes down to sensibly, thoughtfully opening up the economy
    in a way that builds confidence and keeps people safe. I think
    that is really important that we do that well, and if we do,
    you know, these other things will take care of themselves over
    time.
        Senator Smith. This is an issue that I think we should
    continue to work on and talk about, the challenges that people
    will have if they do lose their home. The ripple effect of
    people not being able to pay their rent or their mortgage and
    then the impact that that has all the way up through the
    housing continuum I think is a grave concern. And if you do not
    have a safe place to live, then nothing else in your life
    works. I believe that this is something that is really
    important for us to address in the next package.
        Thank you very much, Mr. Chair.
        Chairman Crapo. Thank you, Senator Smith.
        And we have also been joined now by Senator Sinema, so she
    will be the last questioner. She will be with us on audio only,
    and thank you, Senator Sinema. If you finish in your 5 minutes,
    I may make it to the vote.
        Senator Sinema. Well, thank you, Mr. Chairman, and thank
    you to our witnesses for being here today.
        Every day Arizonans from every corner of my State are
    worried about their health and their future, and that is why my
    office has doubled our State team to better serve Arizonans
    during this difficult time. Our goal is to offer top-notch
    constituent services connecting Arizonans with resources and
    going the extra mile to ensure they get the assistance they
    need.
        I am glad that we are having an oversight hearing today
    because robust congressional oversight is critical to ensuring
    we know where the CARES Act money is going and how it is going
    to be spent. It is also vital to ensuring that Arizonans are
    not stuck in Government bureaucracy. I am focused on cutting
    through that red tape to help Arizonans.
        My first question is for Secretary Mnuchin. Let us start
    with the Economic Injury Disaster Loans. I sent you and
    Administrator Carranza a letter on April 17th outlining my
    concerns with how the Administration has run this program. I
    have not received a response. The CARES Act promises small
    businesses a $10,000 loan advance within 3 days of their
    application. I know Arizonans who went through this process.
    None of them got their loan advance within 3 days, and no one
    received the full $10,000.
        Why aren't they getting that full amount? And why aren't
    they getting it on time?
        Secretary Mnuchin. Well, first of all, let me just
    apologize that you have not received a response. I will look
    into that after this and get back to you.
        As it relates to the EIDL Program, again, that is within
    the SBA, but let me just comment that the SBA had significant
    systems issues getting the EIDL Program up and running. I
    thought the grants were doing much better than the loans, so I
    will follow up and look at that.
        On the loans they are rebuilding the entire system. I
    think, as you know, we have over 5 million loans to process.
    But we will follow up with you.
        Senator Sinema. As you know, the SBA internally changed the
    policy of EIDL to only issue a $1,000 loan advances per
    employee up to $10,000. The original plan was $10,000 per
    company. Who authorized the change? And why was it made?
        Secretary Mnuchin. I believe the SBA Administrator made
    that change, and I believe her thought on that was that there
    was limited money and tried to spread it out amongst as many
    companies as possible.
        Senator Sinema. And she did not think to herself let us go
    back and ask Congress to authorize more funding to pay for that
    which they appropriated and called for in the legislation?
        Secretary Mnuchin. Well, there was additional money in the
    second phase, and we appreciate that Congress reacted to that.
        Senator Sinema. OK, but, Secretary, my question is that the
    SBA made this internal change without getting authorization
    from Congress, and if they are saying they did it because they
    did not have enough money, we then gave more money, and they
    still have not used it to give that money to people as promised
    as the $10,000 in the original legislation.
        Secretary Mnuchin. As I said, I am more than happy to
    follow up with you. I am not involved in some of the direct
    specifics of that, so let me follow up with your office.
        Senator Sinema. I appreciate that, Secretary.
        The last thing I will say about the EIDL loans, my office
    is right now working on over 300 outstanding EIDL cases. Some
    of them are dating all the way back to early and mid-March. Can
    your team commit to working with mine to get these cases moved
    through quickly?
        Secretary Mnuchin. I commit we will work with the SBA to
    follow up. That is not acceptable, so we will follow up with
    the SBA with you.
        Senator Sinema. I appreciate that. I have some questions
    about the Paycheck Protection Program as well. Small business
    owners in Arizona are asking for guidance on how the loan
    forgiveness works, and the lack of guidance has made it
    difficult for small businesses to plan. We received some
    guidance last Friday, and there is more still to come.
        Could you tell me why it is taking so long to get guidance
    for small businesses on the loan forgiveness aspect of PPP?
        Secretary Mnuchin. Well, I would just comment I think you
    know this was a very complicated program that we set up in a
    short period of time. I thought that the guidance we put out
    dealt with all the issues. But if there are specific issues
    that you are hearing from, we will follow up with you and
    provide that clarity.
        Senator Sinema. I appreciate that. We would like to follow
    up specifically.
        As you know, the application to get your PPP loan was only
    one-page long, but the forgiveness application is 11 pages long
    and, according to my staff, requires a minimum of 3 hours to
    complete. This is a real problem for mom-and-pop shops in
    Arizona.
        What efforts can we offer to assist small businesses in
    filling out the complex form?
        Secretary Mnuchin. Well, I can assure you I spent a lot of
    time on the complexity of that. We tried to get it as short as
    we could under the requirements of the law. I hope it does not
    take 3 hours for small business. But, again, we tried to make
    it as short as possible.
        Senator Sinema. I appreciate that.
        Mr. Chairman, I see that my time has expired. I would like
    you to make it to the vote. I have many more questions. I will
    submit some of them in writing.
        Senator Sinema. Thank you so much, Mr. Chairman.
        Chairman Crapo. Thank you, Kyrsten. I really appreciate
    that.
        I understand Senator Brown wants to make a 60-second
    statement. You can do so.
        Senator Brown. I will do 60 seconds. Thank you, Mr.
    Chairman. Another successful hearing. Thank you, Chair Powell
    and Secretary Mnuchin.
        I wear on my lapel, as I have said before, a pin depicting
    a canary in a bird cage instead of the official Senate pin. You
    all know the story. The mine workers took the canary down in
    the mines to warn of poisonous gas. They did not have a union
    strong enough to protect them in those days or a Government
    that cared enough. That is why we had the New Deal with worker
    protections and public health.
        Now, a century later, it is starting to feel like we are
    back in the mines. Millions of American workers do not have a
    union to protect them. After decades of corporate attacks and
    based on the responses we have heard today and what we have
    heard especially from the President over the past few months,
    it seems that once again workers do not have a Government that
    cares enough to protect them. Look at how the Administration
    treats essential workers, women, especially African American
    and Latino workers, putting their lives on the line. Look at
    who they are willing to spend money on. This Administration
    tells us everything we need to know. That is why Congress needs
    to stand up for workers. That is why workers need unions, so we
    can fight back for economic security and safety protections and
    the dignity they deserve and for American values.
        So, Mr. Chairman, thank you for allowing me a last minute
    or so.
        Chairman Crapo. Well, thank you. And I also want to thank
    you, Senator Brown, for your cooperation and working with us to
    have this hearing and help it to work out. I appreciate the
    cooperative way in which we have been able to work on these
    hearings.
        I do disagree with the notion that our Secretary and our
    Chairman here are not working very hard to make sure that the
    support we have voted on gets out to those very people, those
    who have these lower-paying jobs, those who are in the service
    industry, the small businesses, the medium-size businesses, and
    those places that will be needed to stand up our economy as we
    have the opportunity to do so. So we may have a different point
    of view on that, but I do appreciate your support in helping me
    get this hearing set up and working.
        And to our witnesses, Secretary Mnuchin, Chairman Powell, I
    again appreciate your cooperation and work with me as we have
    put together this hearing. We are plowing new ground here in
    the Senate, as is happening across this Nation while we deal
    with COVID-19, and your cooperation in working to get us
    through this hearing and get your report to us is deeply
    appreciated.
        With that, I will say that for Senators who wish to submit
    questions for the record, those questions are due on Tuesday,
    May 26th, and I ask you, our witnesses, to respond to those
    questions as quickly as possible.
        Again, thank you each for participating today, and this
    hearing is adjourned.
        Secretary Mnuchin. Thank you very much to both of you.
        [Whereupon, at 12:32 p.m., the hearing was adjourned.]
        [Prepared statements, responses to written questions, and
    additional material supplied for the record follow:]
                   PREPARED STATEMENT OF CHAIRMAN MIKE CRAPO
        We are all becoming more familiar with remote hearings, but let me
    offer a few videoconferencing reminders.
        Once you start speaking, there will be a slight delay before you
    are displayed on screen.
        To minimize background noise, please click the mute button until it
    is your turn to speak or ask questions.
        If there is a technology issue, we will move to the next senator
    until it is resolved.
        Because we have a hard stop at 12:15, all senators and witnesses
    need to be especially mindful of the five minute clock.
        You should all have one box on your screens labeled ``clock'' that
    will show how much time is remaining.
        At 30 seconds remaining, I will gently tap the gavel to remind
    senators their time has almost expired.
        To simplify the speaking order process, Senator Brown and I have
    again agreed to go by seniority.
        With that, today we welcome to this virtual hearing the honorable
    Steven T. Mnuchin, Secretary, Department of the Treasury; and The
    Honorable Jerome H. Powell, Chairman, Board of Governors of the Federal
    Reserve System.
        We will receive testimony from the Secretary of the Treasury and
    Chairman of the Federal Reserve, as required under Title IV of the
    CARES Act.
        Congress has appropriated nearly $3 trillion to protect, strengthen
    and support Americans, to fight the pandemic, and also to stabilize the
    infrastructure of our economic system.
        A large portion of this funding is authorized under Title IV of the
    CARES Act, which provides significant resources for loans, loan
    guarantees, and other investments from Treasury and the Federal
    Reserve's 13(3) emergency lending facilities and programs in support of
    eligible businesses, States, municipalities, and Tribes.
        Title IV of the CARES Act provided a $454 billion infusion into the
    Exchange Stabilization Fund to support the Federal Reserve's emergency
    lending facilities that facilitate liquidity in the marketplace and
    support eligible businesses, States, local governments, and Tribes.
        This unique lending authority, known as 13(3) authority, is
    authorized under section 13 of the Federal Reserve Act, and plays a
    critical role in stabilizing markets.
        Both prior to and after the enactment of the CARES Act, the Federal
    Reserve announced the establishment of or its intent to establish
    several emergency lending facilities to support financial markets and
    businesses, including some that are funded by the CARES Act.
        Last week, other members of this Committee and I had a robust
    discussion with Vice Chairman Quarles on these facilities and stressed
    the importance of getting facilities like the Main Street Lending
    Programs and the Municipal Liquidity Facility up and running quickly to
    provide a lifeline to struggling businesses, States and local
    governments.
        Again, I stress the importance of setting these facilities up
    quickly and allowing broad access.
        There was also a discussion about whether it is acceptable for the
    Treasury to take any losses on investments put into the special purpose
    vehicles that the Fed will lend to for various programs.
        The 13(3) facilities are a critical component of a strong economic
    recovery, which reinforces the need to have them quickly operational,
    broadly available and as flexible as possible.
        Title IV also contains robust oversight provisions--specifically
    the one that brought us here today, Section 4026.
        It is critical that each agency follow all reporting and oversight
    requirements in the CARES Act.
        Other steps are already being taken to ensure appropriate
    oversight.
        Last week, this Committee voted the Special Inspector General for
    Pandemic Recovery favorably out of committee, and yesterday, the
    Congressional Oversight Committee published its initial report on
    oversight of Title IV.
        The CARES Act is the biggest rescue package in the history of
    Congress and we need to make sure the dollars and program quickly find
    their mark.
        During this hearing, I look forward to hearing more about the
    status of Treasury loan programs, 13(3) emergency facilities, and the
    Paycheck Protection Program; steps the Fed and Treasury have taken, and
    will continue to take, to provide transparency into the loans and loan
    guarantees under the CARES Act; and how the unused funds from Title IV
    will be prioritized and leveraged to provide additional liquidity to
    the economy.
        While not part of Title IV of the CARES Act, SBA and Treasury have
    worked around the clock to ramp up the Paycheck Protection Program that
    has approved over 4.3 million loans to small businesses that amounts to
    about $513 billion.
        According to SBA, the overall loan size for the PPP is $118,000,
    and during the second round of PPP funding, the average loan size has
    been around $70,000.
        On April 28, Treasury and SBA announced that the SBA would review
    all PPP loans in excess of $2 million to make sure borrowers' self-
    certification for the loans was appropriate.
        Last week, SBA and Treasury provided a safe harbor for loans under
    $2 million.
        Finally, on May 8, 2020, Commerce Committee Chairman Wicker and I
    sent a letter to Secretary Mnuchin on the Payroll Support Program (PSP)
    requesting a detailed report on the status of the program and on May
    12, Treasury announced new transparency measures with regards to the
    PSP.
        I encourage you to continue to work with the applicants and update
    the information as additional funds are disbursed.
        I commend each of you and your staff for the hard work and
    extraordinary actions you have taken to stabilize the economy and
    provide support to Americans during this trying time.
        Thank you for joining us today to share your agency's activities
    and plans in response to COVID-19.
                                     ______

                  PREPARED STATEMENT OF SENATOR SHERROD BROWN
        I'd again like to thank Chairman Crapo for following the best
    advice of health experts, and holding a virtual hearing to prevent the
    spread of coronavirus.
        I am still outraged by Leader Mitch McConnell's reckless decision
    to keep the Senate in session, putting Capitol Hill workers--including
    Capitol police officers, custodial staff, floor staff, and cafeteria
    workers--putting all workers at risk.
        Leader McConnell has forced workers to go against public health
    authorities' advice for three weeks now, and he still has no plan to
    get additional help to families and communities. The House passed a
    bill that incorporates many of our plans. The American people are
    rising to this challenge--and their leaders are failing them. Leader
    McConnell says he sees no urgency--his words, no urgency.
        Before we begin, I'd like to pause here for a moment to recognize
    all the workers who have lost their lives on the job during this
    pandemic.
        The coronavirus has been the great revealer. It's brought out the
    best in our communities--we remember the spirit of solidarity that
    created our social safety net during the New Deal, and inspired World
    War II victory gardens, and powered the Civil Rights movement. And
    today that spirit of solidarity is now revealing itself in hand-sewn
    masks, and fire escape applause for hospital workers, and video
    conference play-dates, as millions of individual Americans pull
    together to do their part to flatten the curve.
        But this pandemic is also laying bare how corporations that now
    claim their workers are ``essential,'' have for too long treated them
    as more of a cost to be minimized.
        Since the bailouts of the financial crisis, many of us have been
    concerned about how our country rewards Wall Street, but ignores the
    people who make our country work.
        Whenever we've asked why wages for these essential workers are
    stagnant, we're told we can't afford it--companies would have to raise
    prices if they paid people more. Never mind that CEOs were getting huge
    raises and Wall Street investors huge payouts. Never mind that low
    prices don't do you a lot of good if your wages stay low right along
    with them.
        Our economy has been paying the price for that--with a shrinking
    middle class, rising inequality, and lower economic growth.
        Now it's pretty clear: when millions of workers are laid off, or
    have their hours cut, or were making low wages to begin with and are
    now worried about their future, our economy grinds to a halt.
        In fact, the only thing keeping our society running in the middle
    of this crisis is American workers--those who stock our shelves and
    deliver our packages and fill our prescriptions and care for our loved
    ones.
        A grocery store worker in Ohio told me recently, ``I don't feel
    safe at work and they don't pay me much. I don't feel essential--I feel
    expendable.''
        We are asking people to show up to work and risk their health, and
    their families' safety--perhaps finally realizing that the words of Dr.
    King ring true--that ``One day our society will come to respect the
    sanitation worker.for the person who picks up our garbage, in the final
    analysis, is as significant as the physician, for if he doesn't do his
    job, diseases are rampant. All labor has dignity.''
        ALL labor has dignity.
        You might think that at a time when we're demanding more from our
    essential workers than ever before, that people who punch a clock or
    swipe a badge, people who take care of our families and our elderly--
    mostly women, often black and brown workers--you might think they'd all
    be getting a huge raise.
        Our economy is supposed to reward people whose talents are in high
    demand. That's what we're all taught and that's what the CEOs tell us,
    right?
        But that's not happening. Workers are getting left behind, again.
        As essential workers go home to their families after a long,
    stressful day, they're wondering how they're going to pay the rent, or
    how they're going to afford another week of groceries. Aand they wonder
    whether they're going to infect their families.
        And those are the ones that are working--how about the 35 million
    Americans who have been laid off from their jobs because of this public
    health crisis?
        When we passed the CARES Act, we tried to address this. We tried to
    make sure that the trillions of dollars in spending wouldn't just go to
    Wall Street like it always does. We wanted to make sure that the
    Federal Reserve and the Treasury got this money into workers' pockets.
        We certainly didn't want to see it go to oil and gas companies,
    whose activities pose an existential threat to essential workers and
    our whole economy.
        Chairman Powell--I appreciate your recent comments about how
    Congress needs to do more to put money directly in workers' pockets--I
    agree.
        If Congress does not act now to put money in the hands of the
    people who actually power our economy--in workers, their families, and
    Main Street businesses in struggling communities--we risk making the
    economic crisis worse.
        Leader McConnell needs to let the Senate take up the House bill
    immediately.
        Congress also has an important responsibility to make sure the $500
    billion we've already approved for the Fed and Treasury is actually
    getting to workers. And from what we know so far, it does not appear
    that this Administration or the Federal Reserve are making workers
    their priority.
        Today I look forward to hearing from both of you, Mr. Secretary and
    Chair Powell, not about what you're doing for big banks or big
    corporations and how you expect that money to trickle down, but how
    you're making sure the money and authority Congress gave you actually
    help the people who make this country work.
        I want to hear how it's going to be different this time.
        I want you to explain what you will do to transform our economy so
    that it works for everyone--not just the wealthy and powerful.
        I want to hear about your plans to make our economy work for
    essential workers, and how to safely get those who have lost their jobs
    back to work.
        Thank you, Mr. Chairman.
                                     ______

                    PREPARED STATEMENT OF STEVEN T. MNUCHIN
                     Secretary, Department of the Treasury
                                  May 19, 2020
        Chairman Crapo, Ranking Member Brown, and Members of the Committee,
    thank you for this opportunity to highlight how the Department of the
    Treasury and the Federal Reserve are working together to provide
    liquidity to the financial system. Our programs support the flow of
    much-needed credit to American workers, families, businesses, States,
    and municipalities.
        I want to begin by acknowledging the unprecedented challenges the
    American people are experiencing due to the COVID-19 pandemic. This
    disease is impacting families and communities across the Nation.
    Through no fault of their own, the American people are also enduring
    economic challenges. I am inspired by our Nation's medical
    professionals and first responders on the front lines taking care of
    their fellow citizens. Thanks to their efforts and their unwavering
    commitment to their communities, I am confident that our Nation will
    emerge from the pandemic stronger than ever before.
        President Trump and the entire Administration are committed to
    providing necessary relief to help people get through this time. The
    Treasury Department is working hard to implement the CARES Act. We
    appreciate Congress working with us to enact this statute, which is the
    single largest economic relief effort in the history of our country. We
    also appreciate the feedback we have received from Members of Congress
    on both sides of the aisle as we implement a number of critical
    programs established by the CARES Act.
    CARES Act Programs
        We have worked closely with the Small Business Administration on
    the Paycheck Protection Program (PPP) to ensure the processing of more
    than 4.2 million loans for over $530 billion to keep tens of millions
    of hardworking Americans on the payroll. We are proud that nearly 400
    Community Development Financial Institutions and Minority Depository
    Institutions, and many more small and nonbank lenders, are
    participating in this program.
        We have issued more than 140 million Economic Impact Payments for
    over $240 billion to provide direct relief to millions of Americans.
    The typical family of four received $3,400.
        We have distributed almost $150 billion to States, local, and
    tribal governments through the Coronavirus Relief Fund for essential
    services. We have also approved nearly $25 billion in payroll support
    to the airline industry to protect this critical sector of our economy.
    Exchange Stabilization Fund
        Turning to a central focus of this hearing, the CARES Act also
    provided authority for $454 billion in support for Federal Reserve
    lending facilities to provide liquidity to the financial system.
        Since March 17, I have approved the following facilities:

        The Commercial Paper Funding Facility

        Primary Dealer Credit Facility

        Money Market Mutual Fund Liquidity Facility

        Term Asset-Backed Securities Loan Facility

        Primary Market Corporate Credit Facility

        Secondary Market Corporate Credit Facility

        Main Street Business Lending Program

        Municipal Liquidity Facility, and the

        PPP Lending Facility.

        We have committed up to $195 billion in credit support under the
    CARES Act. We have the remaining $259 billion to create or expand
    programs as needed, as we continue to monitor a variety of economic
    sectors closely.
    Economic Environment
        We are sympathetic to hardworking Americans and businesses enduring
    tremendous challenges due to the COVID-19 pandemic. We have had to take
    unprecedented steps to shut down significant parts of the economy in
    the interest of public health. As a result, in the second quarter of
    this year, we are continuing to see large unemployment and other
    negative indicators. It is important to realize that the large numbers
    represent real people. This is why it is so important to begin bringing
    people back to work in a safe way.
        As we listen to medical experts, we are optimistic about the
    progress being made on vaccines, antiviral therapies, and testing.
    Working closely with governors, we are beginning to open the economy in
    a way that minimizes risks to workers and customers. We expect economic
    conditions to improve in the third and fourth quarters.
    Conclusion
        Under the leadership of President Trump, I am proud to have worked
    with all of you, on a bipartisan basis, to get relief into the hands of
    hardworking Americans and businesses as quickly as possible. While
    these are unprecedented and difficult times, these programs are making
    a positive impact on people. Together we will destroy the COVID-19
    virus, and our country will emerge from the pandemic stronger than
    ever.
        Thank you for the opportunity to discuss our efforts today, and I
    look forward to your questions.
                                     ______

                     PREPARED STATEMENT OF JEROME H. POWELL
           Chairman, Board of Governors of the Federal Reserve System
                                  May 19, 2020
        Chairman Crapo, Ranking Member Brown, and other Members of the
    Committee, thank you for the opportunity to discuss the extraordinary
    steps the Federal Reserve has taken to address the challenges we are
    facing.
        I would like to begin by acknowledging the tragic loss and
    tremendous hardship that people are experiencing both here in the
    United States and around the world. The coronavirus outbreak is, first
    and foremost, a public health crisis, with the most important responses
    coming from those on the front lines in hospitals, emergency services,
    and care facilities. On behalf of the Federal Reserve, let me express
    our sincere gratitude to those individuals who put themselves at risk
    day after day in service to others and to our Nation.
        The forceful measures that we, as a country, are taking to control
    the spread of the virus have substantially limited many kinds of
    economic activity. Many businesses remain closed, people have been
    advised to stay home, and basic social interactions have been greatly
    curtailed. People have put their lives and livelihoods on hold at
    significant economic and personal cost. All of us are affected, but the
    burdens are falling most heavily on those least able to carry them.
        It is worth remembering that the measures taken to contain the
    virus represent an investment in our individual and collective health.
    As a society, we should do everything we can to provide relief to those
    who are suffering for the public good.
        Available economic data for the current quarter show a sharp drop
    in output and an equally sharp rise in unemployment. By these measures
    and many others, the scope and speed of this downturn are without
    modern precedent and are significantly worse than any recession since
    World War II. Since the pandemic arrived in force just two months ago,
    more than 20 million people have lost their jobs, reversing nearly 10
    years of job gains. This precipitous drop in economic activity has
    caused a level of pain that is hard to capture in words, as lives are
    upended amid great uncertainty about the future. In addition to the
    economic disruptions, the virus has created tremendous strains in some
    essential financial markets and impaired the flow of credit in the
    economy.
        The Federal Reserve's response to this extraordinary period has
    been guided by our mandate to promote maximum employment and stable
    prices for the American people, along with our responsibilities to
    promote stability of the financial system. We are committed to using
    our full range of tools to support the economy in this challenging time
    even as we recognize that these actions are only a part of a broader
    public-sector response. Congress's passage of the Coronavirus Aid,
    Relief, and Economic Security Act (CARES Act) was critical in enabling
    the Federal Reserve and the Treasury Department to establish many of
    the lending programs that I discuss below.
        In discussing the actions we have taken, I will begin with monetary
    policy. In March, we lowered our policy interest rate to near zero, and
    we expect to maintain interest rates at this level until we are
    confident that the economy has weathered recent events and is on track
    to achieve our maximum-employment and price-stability goals.
        In addition to monetary policy, we took forceful measures in four
    areas: open market operations to restore market functioning; actions to
    improve liquidity conditions in short-term funding markets; programs in
    coordination with the Treasury Department to facilitate more directly
    the flow of credit to households, businesses, and State and local
    governments; and measures to allow and encourage banks to use their
    substantial capital and liquidity levels built up over the past decade
    to support the economy during this difficult time.
        Let me now turn to our open market operations and the circumstances
    that necessitated them. As tensions and uncertainty rose in mid-March,
    investors moved rapidly toward cash and shorter-term Government
    securities, and the markets for Treasury securities and agency
    mortgage-backed securities, or MBS, started to experience strains.
    These markets are critical to the overall functioning of the financial
    system and to the transmission of monetary policy to the broader
    economy. In response, the Federal Open Market Committee undertook
    purchases of Treasury securities and agency MBS in the amounts needed
    to support smooth market functioning. With these purchases, market
    conditions improved substantially, and thus we have slowed our pace of
    purchases. While the primary purpose of these open market operations is
    to preserve smooth market functioning and effective policy
    transmission, the purchases will also foster more accommodative
    financial conditions.
        As a more adverse outlook for the economy associated with COVID-19
    took hold, investors exhibited greater risk aversion and pulled away
    from longer-term and riskier assets as well as from some money market
    mutual funds. To help stabilize short-term funding markets, we
    lengthened the term and lowered the rate on discount window loans to
    depository institutions. The Board also established, with the approval
    of the Treasury Department, the Primary Dealer Credit Facility (PDCF)
    under our emergency lending authority in section 13(3) of the Federal
    Reserve Act. Under the PDCF, the Federal Reserve provides loans against
    good collateral to primary dealers that are critical intermediaries in
    short-term funding markets. Similar to the large-scale purchases of
    Treasury securities and agency MBS I mentioned earlier, this facility
    helps restore normal market functioning.
        In addition, under section 13(3) and together with the Treasury
    Department, we set up the Commercial Paper Funding Facility, or CPFF,
    and the Money Market Mutual Fund Liquidity Facility, or MMLF. Both of
    these facilities have equity provided by the Treasury Department to
    protect the Federal Reserve from losses. Indicators of market
    functioning in commercial paper and other short-term funding markets
    improved substantially and rapid outflows from prime and tax-exempt
    money market funds stopped after the announcement and implementation of
    these facilities.
        In mid-March, offshore U.S. dollar funding markets also came under
    stress. In response, the Federal Reserve and several other central
    banks announced the expansion and enhancement of dollar liquidity swap
    lines. In addition, the Federal Reserve introduced a new temporary
    repurchase agreement facility for foreign monetary authorities. These
    actions helped stabilize global U.S. dollar funding markets, and they
    continue to support the smooth functioning of U.S. Treasury and other
    financial markets as well as U.S. economic conditions.
        As it became clear the pandemic would significantly disrupt
    economies across the world, markets for longer-term debt also faced
    strains. The cost of borrowing rose sharply for those issuing corporate
    bonds, municipal debt, and asset-backed securities (ABS) backed by
    consumer and small business loans. Effectively, creditworthy
    households, businesses, and State and local governments were unable to
    borrow at reasonable prices, which would have further reduced economic
    activity. In addition, small and medium-sized businesses that
    traditionally rely on bank lending faced large increases in their
    funding needs as they struggled with possible closure or substantially
    curtailed revenues.
        To support the longer-term, market-based financing that is critical
    to economic activity, the Federal Reserve took a number of bold steps.
    These steps were designed to ensure that credit would flow to borrowers
    and thus support economic activity. With credit protection provided by
    the Treasury Department, on March 23 the Board announced that it would
    support consumer and small business lending by establishing the Term
    Asset-Backed Securities Loan Facility (TALF). The TALF will lend
    against ABS backed by newly issued auto loans, credit card loans, and
    other consumer and small business loans. In turn, these loans will
    support consumers seeking to obtain these important types of credit.
        The Federal Reserve also took action with the Treasury Department
    under section 13(3) to support the credit needs of large employers
    through the Primary Market Corporate Credit Facility and the Secondary
    Market Corporate Credit Facility. These facilities primarily purchase
    bonds issued by U.S. companies that were investment grade on March 22,
    2020. By purchasing these bonds, the Federal Reserve is able to lower
    the borrowing costs for investment-grade companies and thus facilitate
    economic activity.
        The Federal Reserve is also preparing to launch the Main Street
    Lending Program, which is designed to provide loans to small and
    medium-sized businesses that were in good financial standing before the
    pandemic. Importantly, with these and other facilities that the Federal
    Reserve has not employed before, public input has been crucial in their
    development. For example, in response to comments received, we lowered
    the minimum loan size and raised the maximum loan size across the three
    lending facilities within the program; in addition, we expanded the
    size of firms allowed to borrow under the program to companies with up
    to 15,000 employees. These changes should help the program meet the
    needs of a wider range of employers that may need bridge financing to
    support their operations and the economic recovery. We will continue to
    adjust facilities as we learn more.
        To bolster the effectiveness of the Small Business Administration's
    Paycheck Protection Program (PPP), the Federal Reserve is supplying
    liquidity to lenders backed by their PPP loans to small businesses. And
    to help State and local governments better manage cash flow pressures
    in order to continue to serve households and businesses in their
    communities, the Federal Reserve, together with the Treasury
    Department, established the Municipal Liquidity Facility under section
    13(3) authority to purchase short-term debt directly from U.S. States,
    counties, cities, and certain multistate entities. The two corporate
    credit facilities, the Main Street Lending Program, and the Municipal
    Liquidity Facility all have equity provided by the Treasury Department
    to protect the Federal Reserve from losses. The passage of the CARES
    Act by Congress was critical in enabling the Federal Reserve and the
    Treasury Department to establish these real economy emergency lending
    programs that have the capacity to make more than $2.6 trillion in
    loans.
        The tools that the Federal Reserve is using under its 13(3)
    authority are for times of emergency, such as the ones we have been
    living through. When economic and financial conditions improve, we will
    put these tools back in the toolbox.
        The final area where we took steps was in bank regulation. The
    Board made several adjustments, many temporary, to encourage banks to
    use their positions of strength to support households and businesses.
    Unlike the 2008 financial crisis, banks entered this period with
    substantial capital and liquidity buffers and improved risk-management
    and operational resiliency. As a result, they have been well positioned
    to cushion the financial shocks we are seeing. In contrast to the 2008
    crisis when banks pulled back from lending and amplified the economic
    shock, in this instance they have greatly expanded loans to customers.
    Federal Reserve Board Vice Chair for Supervision Randal Quarles spoke
    to you about these topics last week.
        The Federal Reserve has been entrusted with an important mission,
    and we have taken unprecedented steps in very rapid fashion over the
    past few months. In doing so, we embrace our responsibility to the
    American people to be as transparent as possible. We are deeply
    committed to transparency, and recognize that the need for transparency
    is heightened when we are called upon to use our emergency powers. This
    is particularly the case when Congress appropriates taxpayer funds to
    back lending programs that the Fed administers. In connection with the
    CARES Act facilities--including the two corporate credit facilities,
    the Main Street Lending Program, the Municipal Liquidity Facility, and
    the TALF--we will be disclosing, on a monthly basis, names and details
    of participants in each facility; amounts borrowed and interest rate
    charged; and overall costs, revenues, and fees for each facility.
        Thank you, I'd be happy to take your questions.
            RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN
                         FROM STEVEN T. MNUCHIN

    Q.1. The Administration has identified a range of needs among
    companies in the U.S. defense industrial base for urgent
    financial assistance. Section 4003(b)(3) of the CARES Act made
    available $17 billion specifically to address the needs of
    businesses critical to maintaining national security. Some of
    businesses identified by the Administration may also be
    eligible to receive forgivable loans under the Paycheck
    Protection Program. In the CARES Act, Congress also
    appropriated funding for activities under the Defense
    Production Act to bolster the domestic production of urgently
    needed medical supplies and equipment.
        What steps are you taking, in coordination with Defense
    Secretary Esper, to ensure that defense industrial base
    companies in need of financial assistance receive aid first out
    of the national security or PPP funding Congress provided,
    rather than out of the DPA funding Congress provided primarily
    to bolster additional production of medical supplies and
    equipment?

    A.1. Under section 4003(b)(3) of the Coronavirus Aid, Relief,
    and Economic Security (CARES) Act, ``businesses critical to
    maintaining national security'' may be eligible for a loan from
    Treasury, subject to certain conditions and restrictions set
    forth in the statute. Treasury consulted with the Department of
    Defense, as well as the Office of the Director of National
    Intelligence, regarding the implementation of this statutory
    eligibility requirement. Based on input received in that
    consultation, Treasury issued guidance that a business is
    eligible for a loan if (1) it is performing under a ``DX''-
    priority rated contract or order under the Defense Priorities
    and Allocations System regulations (15 CFR part 700); (2) it is
    operating under a valid top-secret facility security clearance
    under the National Industrial Security Program regulations (32
    CFR part 2004); or (3) based on a recommendation and
    certification by the Secretary of Defense or the Director of
    National Intelligence that the applicant business is critical
    to maintaining national security, the Secretary of the Treasury
    determines that the applicant business is eligible. Treasury
    has been working diligently to review the applications
    submitted by all companies that meet these criteria.
        With respect to the Paycheck Protection Program (PPP),
    Treasury and the Small Business Administration (SBA) have
    worked closely with Congress, lenders, and other stakeholders
    to ensure that as many workers and small businesses as possible
    can readily participate in the opportunities afforded by this
    program. Treasury has posted to its website a series of
    documents, including interim final rules that implement the
    PPP, a set of frequently asked questions, fact sheets, and
    other documents to address specific lender and borrower
    questions about eligibility and the application process, among
    other topics.

    Q.2. How many nondepository CDFIs that were not SBA-approved
    7(a) lenders prior to the CARES Act have been approved to
    participate in PPP? Of these, how many have participated in
    PPP? For each nondepository CDFI lender that was not a 7(a)
    lender prior to the CARES Act that has been approved to
    participate in PPP, please provide the amount of business loans
    or other commercial financial receivables the CDFI originated,
    maintained, and serviced during a consecutive 12 month period
    in the past 36 months.

    A.2. Treasury and SBA have undertaken extensive and ongoing
    efforts to encourage lending to underserved and rural
    borrowers. These efforts have included recruiting lenders that
    operate in underserved communities to participate in PPP and
    facilitating their approval of PPP loans, as well as educating
    underserved borrowers about the opportunities that exist for
    them through PPP. Guidance was issued to all lenders asking
    them to redouble their efforts to assist eligible borrowers in
    underserved and disadvantaged communities. This was done to
    ensure that individuals, businesses, and other entities in
    underserved and rural markets, including veterans and members
    of the military community, small business concerns owned and
    controlled by socially and economically disadvantaged
    individuals, women, and businesses in operation for less than
    two years, all benefited from PPP.
        Treasury and SBA have worked closely with Congress,
    regional and community banks, fintech lenders, Community
    Development Financial Institutions (CDFIs), Minority Depository
    Institutions (MDIs), the Department of Agriculture, and other
    stakeholders to ensure that as many workers and small
    businesses as possible can readily participate in the
    opportunities afforded by this program, with particular focus
    on underserved borrowers, including minorities, women, and
    rural entrepreneurs. Treasury and SBA extensively recruited
    lending institutions that typically operate in underserved
    communities to participate as PPP lenders. An important focus
    of our efforts to serve underserved communities has been to
    harness the role of CDFIs and MDIs. Hundreds of CDFIs were
    contacted and advised of their eligibility to participate in
    the PPP. As of August 8, 2020, when the PPP closed to new loan
    applications, 432 CDFIs and MDIs had participated and provided
    221,000 loans totaling more than $16.4 billion (308 CDFIs
    provided over 114,000 loans totaling more than $7.5 billion).

    Q.3. Are Treasury or the Federal Reserve requiring the
    companies, including the banks' customers which use loan
    programs to report payroll information that will allow Congress
    to assess whether funds are being used to keep workers employed
    and paid? If not, how do you intend to assess whether funds are
    being used to keep workers employed and paid?

    A.3. Main Street Lending Program borrowers undertake to make
    commercially reasonable efforts to retain employees during the
    term of the Main Street loans. Specifically, borrowers should
    undertake good-faith efforts to maintain payroll and retain
    employees, in light of their capacities, the economic
    environment, available resources, and need for labor. Main
    Street does not require specific recordkeeping or reporting
    regarding employment.

    Q.4. Highly leveraged energy sector companies were already
    facing downgrades prior to the coronavirus outbreak, yet you
    recently made revisions to lending programs that will allow
    many of these companies to receive bailouts. Why is it
    appropriate to provide funds to prop up businesses that were
    failing regardless of the impacts of the coronavirus outbreak?
    In your role as Chair of the Financial Stability Oversight
    Council, did you consider the ramifications of further
    subsidizing an industry that contributes to climate change
    given the likelihood that the effects of climate change will
    lead to more volatile and less stable financial markets? If so,
    please provide your analysis. The Administration opposes the
    spending package recently passed by the House. Why does it make
    sense to spend billions propping up failing companies that put
    our economy at risk but not to spend money on workers that need
    to feed their families and pay rent?

    A.4. In April, at the direction of the President, Secretary
    Mnuchin and Energy Secretary Brouillette began working together
    to consider ways in which to support the oil and gas sector and
    the many thousands of hardworking Americans it employs.
    Although the U.S. energy industry is of critical and strategic
    importance to the U.S. economy, and U.S. energy independence is
    a key policy priority of the Administration, Secretary Mnuchin
    was clear in stating that any such support must not be a
    ``bailout'' and-unless specifically directed otherwise by
    Congress-should be available under terms that are consistent
    with the CARES Act and broadly applicable to all businesses and
    industries across the U.S. economy.
        The changes made to the Main Street Lending Program (Main
    Street) were made in response to over 3,500 comments received
    from the public representing a diversity of stakeholders. On
    April 30, 2020, in response to concerns from the public
    regarding the breadth of availability of Main Street loans for
    small and medium-sized businesses, the Federal Reserve amended
    the program's initial terms to expand the available loan
    options as well as the pool of businesses eligible to borrow.
    The changes to the Main Street were designed to allow an even
    wider range of American companies and industries to access the
    program in order to help support their workers and operations,
    without favoring any particular sectors.

    Q.5. Over the past several decades, the number of small banks
    in the United States has decreased, while larger banks continue
    to increase in number and size. Recent laws and regulations
    have made it easier for big banks to buy smaller banks and out
    compete the remaining banks in the local community. This makes
    the disparity between small banks and large banks much more
    pronounced, and also has the effect of reducing the number of
    communities that have access to a bank. We have seen this
    disparity play out in Treasury and SBA's rollout of the PPP
    program. How is the Treasury Department addressing the
    distribution of PPP loans based on the location and size of
    participating lenders? What is Treasury doing to ensure that
    small lenders in rural and low- and moderate-income are able to
    issue PPP loans in their communities on an equal footing with
    larger banks?

    A.5. Treasury and SBA have posted information about the size of
    lenders in the PPP program and the number and volume of loans
    they have made. As of August 8, 2020, when the program closed
    to new loan applications, lenders with more than $50 billion in
    assets were responsible for 36 percent of PPP lending amount,
    lenders with between $10 billion and $50 billion in assets were
    responsible for 19 percent of PPP lending amount, and lenders
    with less than $10 billion in assets were responsible for 45
    percent of PPP amount. No single lender has comprised more than
    4.4 percent.
        Treasury and SBA have undertaken extensive and ongoing
    efforts to encourage lending to underserved and rural
    borrowers. These efforts have included recruiting lenders that
    operate in underserved communities to participate in PPP and
    facilitating their approval of PPP loans, as well as educating
    underserved borrowers about the opportunities that exist for
    them through PPP. Guidance was issued to all lenders asking
    them to redouble their efforts to assist eligible borrowers in
    underserved and disadvantaged communities. This was done to
    ensure that individuals, businesses, and other entities in
    underserved and rural markets, including veterans and members
    of the military community, small business concerns owned and
    controlled by socially and economically disadvantaged
    individuals, women, and businesses in operation for less than
    two years, all benefited from PPP.
        Treasury and SBA have worked closely with Congress,
    regional and community banks, fintech lenders, CDFIs, MDIs, the
    Department of Agriculture, and other stakeholders to ensure
    that as many workers and small businesses as possible can
    readily participate in the opportunities afforded by this
    program, with particular focus on underserved borrowers,
    including minorities, women, and rural entrepreneurs. Treasury
    and SBA extensively recruited lending institutions that
    typically operate in underserved communities to participate as
    PPP lenders. An important focus of our efforts to serve
    underserved communities has been to harness the role of CDFIs
    and MDIs. Hundreds of CDFIs were contacted and advised of their
    eligibility to participate in the PPP. As of August 8, 2020,
    when the PPP closed to new loan applications, 432 CDFIs and
    MDIs had participated and provided 221,000 loans totaling more
    than $16.4 billion. The program has resulted in $106 billion
    provided to businesses in Historically Underutilized Business
    Zones (HUBZones), accounting for more than 20 percent of all
    PPP funding. Data also show that the loans have been broadly
    distributed and made across diverse areas of the economy, with
    27 percent of the funds going to low- and moderate-income
    communities, which is in proportion to their percentage of the
    population.

    Q.6. Please provide the following data related to the Paycheck
    Protection Program:
        The name of each lender participating in PPP and the number
    and dollar amount of loans it made under the PPP, including a
    breakout of loans by borrower State, borrower ZIP code,
    industry, loan size, and, as available, borrower demographic
    information.
        The total amount of lender compensation fees paid to each
    PPP lender.
        The total amount each lender paid in broker fees.

    A.6. Treasury and SBA are committed to implementing the CARES
    Act with transparency and accountability. Information regarding
    approved PPP loans and program participation is provided on our
    websites, including data to help inform your and the public's
    understanding of borrower participation, such as the number and
    dollar amount of loans, number of loans by amount, distribution
    by lender size and type, list of top lenders, average loan
    size, and loan distribution across industries and States.
        Additionally, SBA has made additional data regarding PPP
    loans publicly available in a manner that balances the
    interests of transparency with protections for small
    businesses, sole proprietors, and independent contractors. SBA
    disclosed the business names, addresses, NAICS codes, zip
    codes, business types, demographic data, jobs supported, and
    loan amount ranges as follows: $150,000-350,000; $350,000-1
    million; $1-2 million; $2-5 million; and $5-10 million. These
    categories account for nearly 75 percent of the loan dollars
    approved. For loans below $150,000, SBA disclosed the specific
    loan amounts along with NAICS codes, zip codes, business types,
    demographic data, and jobs supported, but no personally
    identifiable borrower information.
        This approach to public disclosure will allow Americans to
    see how their tax dollars are being spent while ensuring that
    America's entrepreneurs and job creators are able to compete
    fairly as our economy safely reopens. Unlike other SBA loans,
    PPP loan amounts are calculated based on payroll data, which
    employers typically treat as commercially sensitive or
    proprietary. In general, a borrower's specific PPP loan amount
    will reveal the borrower's nonpublic payroll information-
    including the personal income of independent contractors and
    sole proprietors that received PPP loans.
        In addition to these public disclosures, SBA worked with
    congressional committees and the Government Accountability
    Office to provide full access to all PPP loan-level
    information-including, but not limited to, all borrower names
    and loan amounts-in a manner that afforded appropriate
    confidential treatment for nonpublic personally identifiable
    and commercially sensitive business information.
        We respectfully refer you to SBA for additional information
    on the fees paid to lenders.

    Q.7. The CARES Act authorized the United States Postal Service
    to borrow up to $10 billion from the Treasury to cover
    operating expenses at terms mutually agreed upon by the
    Treasury and the USPS. Please provide an update on the
    negotiations with the USPS on the status of the loan's
    disbursement. Will you commit to providing the loan to USPS
    without imposing any unrelated conditions requiring changes to
    USPS postal management or operations?

    A.7. On July 28, 2020, Treasury and the USPS agreed on terms
    regarding the additional $10 billion in lending authority
    included in the CARES Act. As mandated in the CARES Act, the
    USPS may only use such borrowed funds for operating expenses.
    No conditions requiring changes to USPS postal management or
    operations were included. Additionally, this term sheet has
    been provided to the House Oversight Committee and publicly
    released.

    Q.8. As you know the CARES Act provided both loans and payroll
    support funding to air carriers. Both the loans and payroll
    support funding required air carriers to meet certain
    conditions. Is there any air carrier that you believe is not in
    compliance with the terms and conditions of the CARES Act?

    A.8. The Department of the Treasury expects all participants in
    the Payroll Support Program (PSP) to comply with the
    requirements of the CARES Act, which are also incorporated into
    the terms of each carrier's Payroll Support Program Agreement.
    Treasury has posted program guidance on its website, including
    a form of Payroll Support Program Agreement setting forth
    statutory requirements and other terms under which payroll
    support is provided. \1\ As with each of the CARES Act programs
    Treasury is implementing, we will continue to work to ensure
    that the PSP is efficient and effective. To that end,
    Treasury's agreement with each recipient of payroll support or
    a Treasury loan requires the company to comply with the
    requirements under the CARES Act and to provide reporting to
    enable Treasury to monitor compliance. When Treasury identifies
    a participant in these programs that is not complying with its
    obligations under the CARES Act, we will take appropriate
    action.
    ---------------------------------------------------------------------------
         \1\ See https://home.treasury.gov/policy-issues/cares/preserving-
    jobs-for-american-industry.

    Q.9. I have heard of instances where pilots and flight
    attendants have been downgraded in hours or position and
    status, and therefore pay, as a result of a change in the air
    craft. These instances include scenarios where flight
    attendants or pilots, for example, are moved off of
    international flights or, in the case of pilots, moved from
    captain to first officer because they were assigned to a
    narrow-body aircraft instead of a wide-body international
    aircraft. Are reductions in pay due to a downgrade in aircraft
    ---------------------------------------------------------------------------
    violations of the CARES Act?

    A.9. Treasury incorporated the requirements of the CARES Act
    into a PSP agreement that must be executed by each PSP
    recipient and Treasury. Each PSP agreement reflects the
    requirements in section 4114(a) of the CARES Act, which
    prohibits recipients from ``conducting involuntary furloughs or
    reducing pay rates and benefits until September 30, 2020.''
    Treasury has also imposed reporting requirements to enable it
    to monitor PSP recipients' compliance with the PSP agreements,
    and each recipient is required to provide quarterly
    certifications that it is in compliance with the terms and
    conditions of the agreement. The agreement also makes clear
    that PSP funds must be used exclusively to continue paying
    employee salaries, wages, and benefits-the funds may not be
    used for any other purpose.

    Q.10. The President recently stated he supports ``looking
    into'' banks committed to no longer investing in oil and gas
    drilling in the Arctic. Has the President discussed this with
    you or someone at your agency? Have you or anyone at your
    agency started any investigation, or initiated any proceeding
    to ``look into'' banks which have committed to not investing in
    Arctic oil and gas development?

    A.10. Treasury has not initiated any investigation or
    proceeding with respect to this issue.

    Q.11. Have you limited funds appropriated by Congress through
    the CARES Act, or any other law, to banks that have committed
    to stop financing Arctic oil and gas development?

    A.11. No, Treasury has administered the programs Congress
    provided for under the CARES Act in a manner consistent with
    the text of the statute.

    Q.12. Have you been directed by anyone, up to and including the
    President, to use the authorities and resources at your
    disposal to tip the scales in any way regarding banks or other
    investors with commitments to not finance new development in
    the Arctic?

    A.12. Treasury has not taken any action with respect to a bank
    or other investor with respect to this issue.

    Q.13. To what extent has Treasury studied the degree to which
    State and local revenue needs have been met by the Coronavirus
    Relief Fund in the CARES Act? How great is the unmet need among
    State and local governments and how does the Administration
    intend to help meet it? Please provide any Treasury analyses on
    State and local revenue.

    A.13. Treasury endeavored to establish maximum flexibility in
    developing guidance for the Coronavirus Relief Fund; however,
    the CARES Act does not allow the use of CRF funds to supplement
    lost revenue.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR TOOMEY
                         FROM STEVEN T. MNUCHIN

    Q.1. Many in Congress have expressed concern about the impact
    of job loss and unemployment upon low-income workers, and the
    Federal Reserve's Report of the Well Being of US Households in
    2019 found that 39 percent of Americans with a household income
    of less than $40,000 had seen at least one job loss in March.
    However, the report also stated that most workers expected
    their job losses to be temporary, with nine in 10 people who
    were furloughed or who had lost a job saying that their
    employer indicated that they would return to their job at some
    point.
        As you stated in the hearing, ``where people are unemployed
    for long periods of time, that can permanently weigh on both
    their careers and their ability to go back to work, and also
    weigh on the economy for years.'' While unemployment benefits
    are an important source of needed liquidity for displaced
    workers and can smooth consumption, having workers continue to
    be unemployed for longer than necessary may be harming our
    ability to quickly recover and restore long-term income
    stability. A recent University of Chicago working paper found
    that 68 percent of unemployed workers who are eligible for UI
    will under the CARES Act receive benefits which exceed lost
    earnings, and that the median wage replacement rate under the
    CARES Act is 134 percent of prior wages.
        How would you expect long-term (beyond July 31st, 2020)
    wage replacement rates above 100 percent to impact efficient
    labor reallocation and an eventual economic recovery?
        Would you expect a targeted proportional system of
    unemployment benefits that caps wage replacement rates at 100
    percent to sufficiently smooth consumption for displaced
    workers?

    A.1. Economists believe that in most cases, increased benefit
    generosity leads to reduced likelihood of unemployed workers
    looking for and finding new work. There is not much evidence
    that enhanced UI benefits deterred job search early in the
    recession, as labor demand problems clearly dominated labor
    supply problems. However, since the spring, the economy has
    created over 10.6 million jobs in as little as four months, and
    there is now no question that labor demand has come roaring
    back. Thus, if unemployment insurance benefits were continued
    at very high replacement rates, we would expect this to
    meaningfully slow down job creation as some workers preferred
    to stay home receiving benefits in excess of their earned wages
    from work.
        A further problem with replacement rates at 100 percent or
    above is that since FICA taxes are not withheld from UI
    benefits, and in many States UI benefits are not taxed as
    income, pretax replacement rates of 100 percent can wind up
    being meaningfully higher than 100 percent in after-tax terms.
        A targeted proportional system of benefits that, when
    factoring in benefits from the underlying unemployment
    insurance (UI) program (including CARES Act programs) and any
    Federal supplement to the weekly benefit amount, caps
    replacement rates at 100 percent or lower would be preferred to
    a fixed benefit amount. This approach would not have as large
    negative labor supply effects as having two-thirds of workers
    receive benefits in excess of their previous wages. Capping
    wages at a level somewhat below 100 percent would be even more
    effective at achieving the dual goals of helping households pay
    for essentials and getting America back to work.
        Note that UI is a State and Federal partnership, and State
    laws individually set wage replacement rates, which typically
    are targeted at a 50 percent wage replacement up to a specified
    weekly benefit amount. A 100 percent wage replacement structure
    would create downward pressure on the labor market supply by
    acting as a disincentive to return to work and increase
    employer costs by making it harder for employers to hire more
    workers. Especially now, with State economies reopened and
    robust job growth, any potential restructuring of the
    fundamental premises of the UI system must align with the
    States, the U.S. Department of Labor, and must balance both the
    tax and benefit implications of the changes.

    Q.2. On May 15th, 2020, the Small Business Administration and
    Treasury Department released the Paycheck Protection Program
    loan forgiveness application. The 11-page application is quite
    extensive and lengthy as it reflects the various forgiveness
    requirements implemented over the past several weeks. Many
    small businesses, some of whom received very small loans, may
    have to hire or rely on an outside source to complete the
    application accurately.
        Secretary Mnuchin, will SBA and Treasury consider releasing
    a revised and shortened version for borrowers with smaller
    loans?

    A.2. SBA published an EZ version of the forgiveness application
    that requires fewer calculations and less documentation for
    eligible borrowers. In addition, Treasury has posted to its
    website a series of documents, including interim final rules
    that implement the PPP, a set of frequently asked questions,
    fact sheets, program reports, and other documents to address
    specific lender and borrower questions about eligibility and
    the application and forgiveness process, among other topics.
    This includes guidance to reflect the PPP Flexibility Act's
    amendments to the PPP to, among other things, extend the
    covered period for loan forgiveness to 24 weeks after the date
    of loan disbursement and to lower the percentage of a
    borrower's PPP loan proceeds that must be used for payroll
    costs. This also includes a set of frequently asked questions
    on loan forgiveness.
        Treasury and the SBA will continue to provide additional
    guidance, as appropriate, to help small businesses and other
    eligible borrowers get the assistance they need.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR ROUNDS
                         FROM STEVEN T. MNUCHIN

    Q.1. The CARES Act created a tax credit known as the Employee
    Retention Credit to encourage businesses to keep employees on
    their payroll. I understand that with this new credit, along
    with a similar tax credit created by previous COVID relief
    legislation, employers are able to request an advance payment
    of the credit using the IRS Form 7200. Unfortunately, I've
    heard that it may take up to four weeks to receive these
    advance payments.
        A number of legislative proposals would significantly
    expand the Employee Retention Credit but I am concerned that
    this would further delay advance payments. Is the current
    system underpinning the Form 7200 process capable of expansion?
    In lieu of the Form 7200, is the Treasury considering other
    systems that would be capable of handling an increased volume,
    and if so, how long would those systems take to implement?

    A.1. Eligible employers that pay qualified wages for purposes
    of the Employee Retention Credit are able to retain an amount
    of all Federal employment taxes equal to the amount of the
    qualified wages paid, rather than depositing them with the IRS.
    The Federal employment taxes that are available for retention
    by these employers generally include Federal income taxes
    withheld from employees, the employees' share of Social
    Security and Medicare taxes, and the employer's share of Social
    Security and Medicare taxes with respect to all employees.
        If the Federal employment taxes yet to be deposited are not
    sufficient to cover the employer's cost of qualified wages, the
    employer is able to file a request for an advance payment from
    the IRS using Form 7200, Advance Payment of Employer Credits
    Due to COVID-19. While the IRS has established a manual system
    for processing the Form 7200, which does place constraints on
    the volume that can be handled, the process for employers to
    retain amounts of employment taxes, rather than deposit them,
    is not subject to those same constraints.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR PERDUE
                         FROM STEVEN T. MNUCHIN

    Q.1. Bans on Merger and Acquisitions--Secretary Mnuchin, as you
    know some in Congress are urging passage of legislation that
    would prohibit merger and acquisition activity. Merger and
    acquisitions are an important part of economic activity, and in
    a crisis like the one we are facing, it may provide a life line
    for some business who may not have means of staying
    operational. Ensuring these businesses have the ability to
    partner with others also preserves jobs and important services
    in all of our States. Further, there are already sufficient
    government tools to protecting against inappropriate merger
    activity. Even, President Obama's CEA Advisor, Jason Furman,
    agreed recently by saying that a merger prohibition was
    ``particularly misguided when some mergers can save jobs in the
    midst of an economic crisis''.
        Secretary Mnuchin, would you agree that a prohibition on
    mergers would be misguided, and would you agree there are
    already appropriate tools to manage these mergers to ensure
    workers and markets are protected?

    A.1. A blanket prohibition on all merger and acquisition
    activity in the economy would be inappropriate. For further
    information, I respectfully refer you to the Justice
    Department.

    Q.2.  U.S. Listing of Chinese Companies--Secretary Mnuchin,
    recently US-listed Chinese companies have been in the headlines
    for accounting scandals that have wiped away hundreds of
    millions in shareholder equity. Many members of Congress have
    voiced their view that Chinese companies are inherently risky
    to U.S investors because they are not subjected to PCOAB
    oversight. While I share concerns that these companies are not
    subjected to PCAOB oversight, I disagree that the solution to
    the problem is to force the delisting of all Chinese companies
    on U.S. exchanges. Afterall, delisting Chinese firms off U.S.
    stock exchanges not only would remove the soft power we have
    over these companies, but we wouldn't protect U.S. investors
    since asset managers, mutual funds, and retail investors will
    continue to purchase them wherever they are listed regardless
    if they are listed on a U.S. exchange or not.
        I am interested in your view on this situation, do you
    believe delisting all Chinese companies is the best solution to
    tackling this problem?

    A.2. Under the Sarbanes-Oxley Act of 2002, the Public Company
    Accounting Oversight Board (the PCAOB) is charged with ensuring
    the integrity of the work of audit firms. A cornerstone of this
    is allowing the PCAOB to examine the work papers of an auditing
    firm related to its audit of a U.S.-listed company. However,
    China unfortunately prohibits the PCAOB from accessing audit
    work papers for Chinese companies listed in the U.S. This is a
    problem that must be addressed for two reasons. First, if the
    PCAOB cannot examine the work of auditing firms as required by
    Sarbanes-Oxley, U.S. investors are exposed to a greater risk of
    fraud. Second, high-quality financial reporting and auditing
    are the bedrock of our financial system and have made U.S.
    capital markets the most robust in the world. It is imperative
    that we maintain the highest standards.
        On June 4, President Trump issued a memorandum tasking the
    President's Working Group on Financial Markets (the PWG) with
    examining risks to investors in U.S. financial markets from
    China's failure to allow the PCAOB to do its job. In response,
    the PWG issued a report unanimously recommending five actions
    that U.S. government agencies can take to protect investors in
    U.S. financial markets relating to this audit issue. These
    recommendations considered the impact on investors and the
    continued fair and orderly operation of U.S. financial markets.
        The first recommendation touches on your question most
    directly. The PWG recommends that the Securities and Exchange
    Commission enhances listing standards to require, as a
    condition to initial and continued exchange listing in the
    United States, PCAOB access to work papers for the audit of a
    listed company. For companies from noncooperating jurisdictions
    (so-called ``NCJs'') that are unable to satisfy that standard
    as a result of governmental restrictions, this standard may be
    satisfied by providing a co-audit from an audit firm where the
    PCAOB has sufficient access to audit work papers. For example,
    if a current auditor is a Chinese subsidiary of an
    international accounting firm, the U.S. entity of the
    international accounting firm could agree to undertake a co-
    audit and provide access of its work papers to the PCAOB. To
    reduce market disruption, the recommended new listing standards
    could provide for a transition period until January 1, 2022 for
    currently listed companies to come into compliance. However,
    there would be no transition period for new listings. I would
    like to emphasize that we are simply leveling the playing
    field, holding Chinese firms listed in the U.S. to the same
    standards as everyone else.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR TILLIS
                         FROM STEVEN T. MNUCHIN

    Q.1. As I mentioned in the hearing, I am concerned that
    companies in need of financial assistance do not meet the
    eligibility criteria for the existing Federal Reserve (Fed) and
    Treasury programs. The Fed's programs are largely limited to
    investment grade (IG) companies with certain leverage criteria
    that gets harder to satisfy the longer the pandemic goes. These
    programs have excluded otherwise well run companies that are
    not IG, or somehow don't fit the specific criteria--companies
    that are sometimes even deemed essential by the Cybersecurity
    and Infrastructure Security Agency within the Department of
    Homeland Security.
        What is the Federal Reserve and Treasury doing to help
    well-managed non-IG companies that have weathered the initial
    storm without any government assistance, but may need access to
    liquidity in the next couple of months?

    A.1. The Main Street Lending Program provides bridge financing
    to small- and medium-sized businesses with up to 15,000
    employees or $5 billion in revenue. Main Street does not have a
    rating requirement, and most borrowers are not Investment
    Grade.
                                    ------

           RESPONSES TO WRITTEN QUESTIONS OF SENATOR KENNEDY
                         FROM STEVEN T. MNUCHIN

    Q.1. Section 1102 of the CARES Act, requires eligible borrowers
    to make good faith certifications for both loan eligibility and
    loan forgiveness and seeks to hold lenders ``harmless.'' An
    interim final rule notes, ``The lender does not need to conduct
    any verification if the borrower submits documentation
    supporting its request for loan forgiveness and attests that it
    has accurately verified the payments for eligible costs . . .
    The Administrator will hold harmless any lender that relies on
    such borrower documents and attestation from a borrower.''
    While it is understandable that normal processes and
    verifications are set aside during these unprecedented times,
    we must also utilize tools and technologies that are available
    to assess for potential fraud.
        Do you agree that the government should be looking at ways
    to deter fraud in these programs and can you please explain and
    detail how Treasury is working to deploy fraud management tools
    and technologies to deter bad actors and help with loan
    approvals and forgiveness decisions? Can you also detail what
    lookback procedures are in place to protect taxpayer dollars?

    A.1. On July 23, 2020, SBA issued a procedural notice to
    lenders that included procedures for forgiveness loan reviews.
    I respectfully refer you to the SBA for more information.
                                    ------

           RESPONSES TO WRITTEN QUESTIONS OF SENATOR MCSALLY
                         FROM STEVEN T. MNUCHIN

    Q.1. Short-term funding provisions are essential for nonprofits
    right now, especially those with more than 500 employees that
    are not eligible for the Paycheck Protection Program.
    Nonprofits provide critical services to the most vulnerable.
    Nonprofits often lack the ability to raise funds the way for-
    profit enterprises can, and taking on additional debt can
    severely affect the services nonprofit organizations provide.
    What actions is Federal Reserve and Treasury considering for
    nonprofits employers with between 500 and 10,000 employees?

    A.1. On September 4, the Federal Reserve Bank of Boston
    announced that two new Main Street Lending Program loan
    facilities for nonprofit organizations were fully operational.
    These new facilities are designed to help credit flow to small-
    and medium-sized nonprofit organizations that were in sound
    financial condition prior to the pandemic and have solid post-
    pandemic prospects.

    Q.2. As an investor in the Federal Reserve facilities (through
    the Exchange Stabilization Fund) and as the Chairman of the
    Financial Stability Oversight Council (FSOC), you have a broad
    perspective to consider this issue and act to provide liquidity
    assistance. Can you provide the indicators you are using to
    guide your decision making as it relates to the necessity for a
    mortgage servicer liquidity facility?

    A.2. Treasury is actively monitoring the mortgage market and
    the associated impact of COVID-19. We have focused considerable
    resources on delivering authorized support to households and
    businesses struggling as a consequence of the necessary public
    health response. On March 26, 2020, Secretary Mnuchin announced
    the creation of a Financial Stability Oversight Council Task
    Force on Nonbank Mortgage Liquidity, which first convened on
    March 30 to discuss conditions and activities in the mortgage
    servicing markets and remains in regular discussions. Treasury
    will continue to work to promote stable markets, including for
    residential mortgage lending.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR MORAN
                         FROM STEVEN T. MNUCHIN

    Q.1. You mentioned during the hearing that between the PPP, the
    EIDL loans and the Main Street programs, it is your objective
    to help as many companies as possible and to ensure that
    companies do not ``fall through the cracks'' of these programs.
    As you know there are many companies that are doing all that
    they can to support their local economy, to keep their doors
    open, workers employed, including those that are helping to
    serve first responders but unfortunately due to the employee
    threshold, investment grade requirement and/or asset threshold,
    these great companies are falling through the cracks and as a
    result do not benefit from these programs.
        What are you doing to ensure that these companies are
    getting the help that they need to stay in business and when
    should we expect to see some additional changes to the programs
    so that these companies no longer have to decide whether or not
    to close their doors for good?

    A.1. With respect to the PPP, Treasury has posted to its
    website a series of documents, including interim final rules
    that implement the PPP, a set of frequently asked questions,
    fact sheets, program reports, and other documents to address
    specific lender and borrower questions about eligibility and
    the application and forgiveness process, among other topics.
    This includes guidance to reflect the PPP Flexibility Act's
    amendments to the PPP, including by:

        Extending the covered period for loan forgiveness
            from eight weeks after the date of loan disbursement to
            24 weeks after the date of loan disbursement, providing
            substantially greater flexibility for borrowers to
            qualify for loan forgiveness. Borrowers who have
            already received PPP loans retain the option to use an
            eight-week covered period.

        Lowering the requirements that 75 percent of a
            borrower's loan proceeds must be used for payroll costs
            and that 75 percent of the loan forgiveness amount must
            have been spent on payroll costs to 60 percent for each
            of these requirements. If a borrower uses less than 60
            percent of the loan amount for payroll costs during the
            forgiveness covered period, the borrower will continue
            to be eligible for partial loan forgiveness, subject to
            at least 60 percent of the loan forgiveness amount
            having been used for payroll costs.

        Increasing to five years the maturity of PPP loans
            that are approved by SBA (based on the date SBA assigns
            a loan number) on or after June 5, 2020.

        In addition, the SBA published an EZ version of the
    forgiveness application that requires fewer calculations and
    less documentation for eligible borrowers. Treasury and the SBA
    will continue to provide additional guidance, as appropriate,
    to help small businesses and other eligible borrowers get the
    assistance they need.
        The Main Street Lending Program provides bridge financing
    to small and medium-sized businesses and nonprofit
    organizations. Businesses and nonprofit organizations with less
    than 15,000 employees or less than $5 billion in 2019 revenue
    have access to 5 year loans under five Main Street loan
    facilities, with loan sizes ranging from $250,000 to as high as
    $300,000,000. The Federal Reserve and the Treasury are
    continuously evaluating feedback from borrowers, lenders, and
    other stakeholders to determine how to adapt the Main Street
    facilities so as to make them accessible to an even broader
    spectrum of American businesses and nonprofit organizations.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR CRAMER
                         FROM STEVEN T. MNUCHIN

    Q.1. On April 28, 2020, Eighteen of my colleagues and I sent
    you a letter in opposition to the increasing tactic of the
    Nation's large financial institutions discrimination or
    debanking of legal and complaint industries such as the
    firearms, oil and gas, and coal industry based on politics or
    social popularity, not financial standing. Our letter focused
    specifically on what efforts were being made at the SBA and
    other regulatory agencies to ensure equal access to Federal
    recovery and stimulus funds. Have you seen this letter? Do you
    have any thoughts?
        But this question leads up to a more important question
    which I have been wanting to ask--Mr. Secretary, do you believe
    a financial institution which accesses or utilizes the
    taxpayer's Federal Reserve's Open Window, Federal Deposit of
    Insurance (FDIC) or Automated Clearing House (ACH) should be
    allowed to discriminate against a legal and complaint business
    based on social or political policy?

    A.1. The Secretary shares your interest in making stimulus
    programs available to as many of America's job creators and
    their employees as feasible, and expects that participating
    lenders will not discriminate against particular companies or
    industries that are otherwise eligible under program rules.

    Q.2. Recent reports have been published saying the Treasury
    Department is considering extending the safe harbor by one-year
    for wind and solar tax credits. Yesterday, I sent you a
    bipartisan letter asking in light of these reports will you
    consider a similar one-year extension for companies wanting to
    use the 45Q tax credit? I noted in my letter, these are the
    same companies that have been waiting for the final rules on
    45Q two years after the deadline has passed.

    A.2. We recently extended deadlines for the production tax
    credit and investment tax credit that were due to expire in
    2020 or 2021. Although the section 45Q credit is similar to the
    production tax credit and investment tax credit in terms of the
    beginning of the construction framework and safe harbors, the
    potential deadlines are still several years away. That said, we
    will continue to monitor the situation because we understand
    how important certainty is in the planning and development of
    these projects. We also encourage stakeholders to submit
    comments on the recently issued proposed regulations and
    include recommendations for changes or flexibility in the rules
    that could be helpful during unforeseen circumstances.

    Q.3. You recently announced that Treasury and the SBA will
    audit any PPP loans in excess of $2 million to verify whether
    the business ``really'' needed the loan. Many small businesses,
    including those in the manufacturing industry, have payroll
    costs that necessitated a loan of $2 million or more to keep
    their workers paid during the crisis. How are Treasury and the
    SBA going to ensure that these companies' loans are not
    retroactively put at risk?

    A.3. Borrowers with loans of $2 million or more may have an
    adequate basis for making the required good-faith
    certification, based on their individual circumstances in light
    of the language of the certification and SBA guidance. On June
    1, the SBA issued an interim final rule describing its loan
    review procedures and related lender and borrower
    responsibilities. Treasury and SBA have also posted guidance on
    frequently asked questions on loan forgiveness, as well as on
    procedures for lenders' submissions of PPP loan forgiveness
    decisions to SBA and SBA loan forgiveness reviews. Treasury and
    SBA will continue to provide additional guidance, as
    appropriate, to help small businesses and other eligible
    borrowers get the assistance they need.

    Q.4. The CARES Act makes clear that PPP loan forgiveness should
    be tax free--yet recent IRS guidance would deny the
    deductibility of business expenses paid with PPP funds, which
    is contrary to congressional intent. This guidance makes it
    harder for small businesses to keep workers on payroll during
    this crisis. Will you commit to reversing this guidance,
    pursuant to congressional intent in the CARES Act, and allow
    small manufacturers to receive the full benefit of the PPP?
    Also on the PPP issue, are you considering allowing companies
    to renew their loans instead of reapplying? Will you allow
    companies extra time to use unspent funds?

    A.4. Neither the initial receipt of the borrowed cash under a
    PPP loan nor the forgiveness of a PPP loan result in taxable
    income. The IRS has issued guidance \1\ that section 265 of the
    Internal Revenue Code denies a double benefit if:
    ---------------------------------------------------------------------------
         \1\ https://www.irs.gov/pub/irs-drop/n-20-32.pdf.

      1.  a PPP loan borrower uses the cash from the loan to pay
            business expenses that would otherwise be tax
            deductible (payroll, rent, mortgage interest,
    ---------------------------------------------------------------------------
            utilities, etc.); and

      2.  the PPP loan is forgiven.

        That is, section 265 applies to deny a deduction for the
    otherwise deductible expenses up to the amount of the loan
    forgiveness. In addition, the IRS guidance identifies long-
    established authorities that deny deductions for otherwise
    deductible payments for which the taxpayer receives
    reimbursement. Otherwise deductible expenses that give rise to
    PPP loan forgiveness are reimbursed by the forgiveness of the
    PPP loan and therefore would not be deductible for this reason
    as well.
        Treasury and the SBA will continue to provide additional
    guidance, as appropriate, to help small businesses and other
    eligible borrowers get the assistance they need.
                                    ------

             RESPONSES TO WRITTEN QUESTIONS OF SENATOR REED
                         FROM STEVEN T. MNUCHIN

    Q.1. As you may know, CNBC has reported that the
    ``Congressional Budget Office projects GDP dropping 38 percent
    in the second quarter as 26 million Americans remain
    unemployed.''
        In light of these projections, are the Federal Reserve and
    the Department of the Treasury considering either expanding the
    forthcoming Main Street Lending Program or creating a different
    program to facilitate lending to U.S. businesses with more than
    15,000 employees so that they may also get assistance with
    keeping workers on the job?

    A.1. The purpose of the Main Street Lending Program is to
    provide bridge financing for small- and medium-sized businesses
    and nonprofit organizations to help them through the COVID-19
    crisis. Other Federal Reserve facilities focus on the financing
    needs of large businesses and State and local governments.
                                    ------

                   RESPONSES TO WRITTEN QUESTIONS OF
                SENATOR MENENDEZ FROM STEVEN T. MNUCHIN

    Q.1. The Small Business Administration (SBA) Inspector General
    found that the SBA and Treasury failed to direct lenders to
    prioritize underserved communities, including minority- and
    female-owned businesses, as mandated by Congress when the
    agencies implemented the Paycheck Protection Program (PPP)
    under the CARES Act. Compounding SBA and Treasury's failure to
    release guidance prioritizing underserved borrowers, Treasury
    took almost a month after passage of the CARES Act to release
    guidance for non-SBA approved CDFIs to participate in the PPP
    program. As you know, CDFIs offer financial services to
    underserved communities.
        Why was the CDFI guidance delayed for almost a month?

    A.1. In light of the urgency to launch the program, SBA and
    Treasury determined that the most effective way to ensure PPP
    loans could reach underserved communities was to make sure that
    we had a substantial number of lenders participating that were
    positioned to reach borrowers who had had less well-established
    banking relationships. These efforts included issuing an
    Interim Final Rule before the program launched detailing who is
    eligible to make PPP loans (including hundreds of CDFIs, among
    other types of lenders).

    Q.2. How is Treasury working with CDFIs to ensure they are
    prepared to offer PPP loans to underserved small businesses,
    including women and minority-owned small businesses?

    A.2. Treasury and SBA have undertaken extensive and ongoing
    efforts to encourage lending to underserved and rural
    borrowers. These efforts have included recruiting lenders that
    operate in underserved communities to participate in PPP and
    facilitating their approval of PPP loans, as well as educating
    underserved borrowers about the opportunities that exist for
    them through PPP. Guidance was issued to all lenders asking
    them to redouble their efforts to assist eligible borrowers in
    underserved and disadvantaged communities. This was done to
    ensure that individuals, businesses, and other entities in
    underserved and rural markets, including veterans and members
    of the military community, small business concerns owned and
    controlled by socially and economically disadvantaged
    individuals, women, and businesses in operation for less than
    two years, all benefited from PPP.
        Treasury and SBA have worked closely with Congress,
    regional and community banks, fintech lenders, CDFIs, MDIs, the
    Department of Agriculture, and other stakeholders to ensure
    that as many workers and small businesses as possible can
    readily participate in the opportunities afforded by this
    program, with particular focus on underserved borrowers,
    including minorities, women, and rural entrepreneurs. Treasury
    and SBA extensively recruited lending institutions that
    typically operate in underserved communities to participate as
    PPP lenders. An important focus of our efforts to serve
    underserved communities has been to harness the role of CDFIs
    and MDIs. Hundreds of CDFIs were contacted and advised of their
    eligibility to participate in the PPP. As of August 8, 2020,
    when the PPP closed to new loan applications, 432 CDFIs and
    MDIs had participated and provided 221,000 loans totaling more
    than $16.4 billion. The program has resulted in $106 billion
    provided to businesses in HUBZones, accounting for more than 20
    percent of all PPP funding. Data also show that the loans have
    been broadly distributed and made across diverse areas of the
    economy, with 27 percent of the funds going to low- and
    moderate-income communities, which is in proportion to their
    percentage of the population.

    Q.3. It is my understanding that while Treasury has attempted
    to identify and reach all citizens eligible for a direct
    payment under the CARES Act, significant challenges remain to
    ensuring that unbanked Americans get their payment in a fast,
    safe and efficient manner.
        What specific actions has Treasury taken to identify and
    deliver payments to underbanked and unbanked citizens?

    A.3. The IRS launched the Non-Filers tool and a substantial
    communications effort that together have helped millions of
    individuals, including the unbanked and underbanked, who are
    not otherwise required to file a tax return, to provide the
    information the IRS needed to issue an Economic Impact Payment.
    The Treasury Department, Fiscal Service, and the IRS also
    collaborated with other Federal agencies, including the
    Consumer Financial Protection Bureau, the Social Security
    Administration, and the Federal Deposit Insurance Corporation
    (FDIC) to provide information on the Non-Filers tool. With
    regard to the FDIC, information included instructions on how to
    find, open, and provide new bank account information to the IRS
    for the purpose of receiving an Economic Impact Payment. The
    Treasury Department and the IRS initially prioritized mailing
    checks to people with low AGI, starting with individuals with
    an AGI of less than $10,000, then mailed checks to individuals
    with progressively higher AGI amounts.
        In addition, 2.1 million payments were automatically
    delivered electronically to Direct Express cardholders, who are
    mostly unbanked and use the Direct Express card program to
    electronically receive their monthly benefit payments. The
    Treasury Department has issued approximately four million
    Economic Impact Payments on Economic Impact Payment debit cards
    (EIP Cards), through the Treasury Department's safe,
    convenient, and secure U.S. Debit Card program. The U.S. Debit
    Card program provides debit card services to Federal agencies
    for electronic delivery of certain payments. To facilitate the
    use of these EIP Cards, the IRS has provided general
    information and FAQs at https://www.EIPcard.com and on IRS.gov.
    To inform payees on how to receive their Economic Impact
    Payment on an existing general purpose reloadable debit card
    (GPR Card), the IRS included information in FAQs regarding how
    an account and routing number of a GPR Card can be provided to
    the IRS through the Get My Payment portal or the Non-Filers
    tool.

    Q.4. How many Americans are still owed a payment under the
    CARES Act?

    A.4. As of September 18, 2020, Treasury and the IRS have issued
    more than 163 million Economic Impact Payments totaling more
    than $273 billion to individuals for whom the IRS has the
    necessary information. Treasury and the IRS have worked
    extensively to identify and reach out to eligible individuals
    who have not received an Economic Impact Payment.

    Q.5. Is Treasury developing additional efforts to reach these
    people?

    A.5. The IRS has engaged other Federal agencies to assist in
    outreach efforts to Federal program beneficiaries who may not
    have a filing obligation to use the Non-Filer portal \1\ on the
    IRS website to claim an Economic Impact Payment. In addition,
    on September 8, the IRS announced that they will be sending
    letters to roughly 9 million Americans who typically do not
    file Federal income tax returns and may be eligible for, but
    have yet to claim, an Economic Impact Payment.
    ---------------------------------------------------------------------------
         \1\ See https://www.irs.gov/coronavirus/non-filers-enter-payment-
    info-here.

    Q.6. Has the Administration considered using digital payments
    as potential means of disbursing these funds? If so, please
    describe any hurdles to implementation that have been
    identified. If not, please explain why this solution has not
    ---------------------------------------------------------------------------
    been considered.

    A.6. As of September 18, 2020, Treasury and the IRS have issued
    more than 163 million Economic Impact Payments totaling more
    than $273 billion to individuals for whom the IRS has the
    necessary information. The IRS and Fiscal Service accelerated
    the rate of delivery of Economic Impact Payments to many
    eligible Americans by successfully shifting such delivery away
    from paper checks and to:

      1.  Direct deposit through information obtained through the
            Get My Payment portal and Non-Filers tool on IRS.gov
            (where the taxpayer can input their bank account
            information).

      2.  Debit cards (which are funded electronically).

      3.  Bank accounts based on information provided by the Bureau
            of the Fiscal Service, Social Security Administration,
            and the Department of Veterans Affairs.

        Treasury and the IRS found that these methods of
    disbursement provided payment in a safe, secure, convenient,
    and timely fashion.

    Q.7. If there is a second round of direct payments, will the
    Administration consider digital disbursement technologies to
    ensure the vulnerable are not delayed in receiving their
    payments, nor be forced to pay unfair fees to access their
    money?

    A.7. If there is a second round of direct payments, Treasury
    and the IRS would make those payments in a safe, secure,
    convenient, and timely fashion. The use of digital
    disbursements technologies can be further evaluated,
    specifically with respect to how the Federal Government would
    balance fraud protection requirements against ease of access to
    funds for consumers. In addition, if the payment mechanism
    requires the Federal Government to sponsor an account for the
    recipient, reasonable fees may be required for optional
    services to ensure that taxpayers do not unfairly bear the
    costs of digital account ownership by individual citizens.

    Q.8. As you know, State and local governments are under
    tremendous financial strain. Many of us in Congress believe
    that direct assistance from the Federal Government and support
    in the form of lending facilities under Section 4003 of the
    CARES Act are critical to preventing additional layoffs of
    public workers, dangerous cuts to public safety and essential
    services, and large local tax increases. It is also important
    that we consider how the private sector can assist State and
    local governments to better manage their cash and serve as a
    source of financing for infrastructure and other public
    services.
        Has the Treasury identified any impediments to greater
    investment by the private sector in the municipal bond market?

    A.8. One impediment concerns disclosures. Greater investment in
    the municipal market by the private sector can be achieved if
    bond issuers commit to the disclosure of important financial
    and operational information in a format that is timely,
    complete, and comparable. As you know, the disclosure
    requirements and practices in the municipal bond market are not
    as stringent as in corporate funding markets. Another
    impediment is scale. Municipal infrastructure projects and
    associated processes are characterized by factors that may make
    it difficult for private investors to meaningfully scale local
    investments into broader business practices. For example,
    idiosyncratic and often small proposed projects, combined with
    bespoke State and local government processes (e.g.,
    procurement, permitting, contracting), may contribute toward a
    challenging environment for scalable private investment
    practices. Finally, there is often a mismatch between a
    municipal project need and the expertise and availability of
    private market operators willing to assume the risks in a
    public-private partnership.

    Q.9. Is the Treasury currently seeking any legislative changes
    to enable the private sector to provide additional capital to
    State and local governments? If so, please share those
    proposals.

    A.9. Treasury is not currently seeking any legislative changes
    related to this topic.

    Q.10. We are now 3 months into the COVID-19 pandemic and are
    economy is under massive strain. More than 100,000 small
    businesses have closed their doors forever. Additionally, three
    out of four businesses have experienced declines in revenue.
    Our businesses are in a free fall and the Main Street lending
    facility could be a life line for businesses, if implemented
    properly.
        With the roll-out of the Paycheck Protection Program (PPP),
    we saw how lending institutions and the Small Business
    Administration's systems were overwhelmed by the loan demand.
    How are you preparing banks for the volume of Main Street loan
    applications they will receive? What are you doing to prepare
    your own systems for the massive loan volume?

    A.10. The Federal Reserve and the Department of Commerce, in
    conjunction with SBA, have conducted webinars to explain the
    Main Street Lending Program to eligible lenders. All five Main
    Street facilities are operational and have the capacity to
    process the loan volume.

    Q.11. Are you allowing banks to limit loan applications to
    existing customers? And, if so, will they be allowed to
    prioritize their biggest customers?

    A.11. The Federal Reserve is encouraging banks to accept
    applications for Main Street loans from new customers. More
    than 550 banks have registered for the Main Street Lending
    Program. Approximately, 180 banks in all 50 States and U.S.
    territories have agreed to be listed on the Federal Reserve
    Bank of Boston website as accepting new customers for Main
    Street loans. Many other banks accept Main Street loan
    applications from new customers but have asked not to be listed
    on the website.

    Q.12. I have heard concerns that the earnings metrics the
    Federal Reserve and Treasury intend to use for the Main Street
    lending facilities are ill-suited for important sectors of our
    economy that employ hundreds of thousands of Americans.
        As you develop final guidance for these facilities, are you
    examining whether the Federal Reserve and Treasury could use
    additional metrics for different industries to ensure that as
    many sectors of our economy as possible can utilize the
    program?

    A.12. The Federal Reserve and the Treasury are continuously
    evaluating feedback from borrowers, lenders, and other
    stakeholders to determine how to adapt the Main Street
    facilities so as to make them accessible to an even broader
    spectrum of American businesses and nonprofit organizations.

    Q.13. Borrowers from commercial mortgage-backed securities
    (CMBS), like hotels, shopping centers, and housing complexes,
    attest that they are under significant financial hardship. In
    many cases, their tenants are not able to pay rent and their
    mortgage servicers are not offering flexibility. Several
    affected entities are concerned about their ability to meet
    their financial obligations over a protracted period of time.
        Does the Treasury or Federal Reserve have plans to address
    these concerns in the CMBS market, and if so, how?

    A.13. Treasury and the Federal Reserve continue to monitor the
    market impact of the COVID-19 pandemic on commercial real
    estate borrowers, including those whose loans are in CMBS.
    Treasury continues to work with the Federal Reserve to assess
    the efficacy of existing facilities established under the
    Federal Reserve's 13(3) emergency lending authority, and will
    evaluate appropriate changes necessary to promote the flow of
    credit and support a robust economic recovery.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR TESTER
                         FROM STEVEN T. MNUCHIN

    Q.1. Tribes have experienced a number of issues so far with the
    Coronavirus Relief Fund including questions about the formula,
    data breaches, and lack of clarity on guidance.
        How will you ensure Tribes have the guidance they need to
    respond to community needs using Tribal Coronavirus Relief
    funds in the coming months?

    A.1. Treasury has worked closely with tribes throughout the
    application process. Prior to and during the first round of
    funding, Treasury and BIA held two joint tribal consultations
    and provided a written comments period from March 31, 2020,
    through April 13, 2020. Treasury also held discussions with
    Native American associations and tribal financial experts to
    consider a process that would be familiar to tribes, and
    provide verifiable and objective information.
        Treasury has provided extensive guidance in response to
    requests from tribes for clarification as to the permissible
    uses of CRF funds.

    Q.2. What measures has Treasury put in place to prevent another
    Tribal Coronavirus Relief data breach from occurring again?

    A.2. Treasury will endeavor to continue to only provide data
    with those essential to implementing Title V of the CARES Act
    within their official duties.

    Q.3. Recent data on the availability of credit suggests that it
    has not been this difficult to obtain a mortgage since 2014,
    and constraints on the availability of credit are particularly
    acute for borrowers of non-QM loans and jumbo loans. Because
    these mortgages are frequently packaged and sold as residential
    mortgage-backed securities (RMBS) to private investors, the
    recent illiquidity in secondary market private RMBS exacerbates
    the lack of funding for such mortgages.
        Non-agency RMBS is the largest asset class by volume within
    all ABS, comprising approximately 30 percent of the market, but
    is one of the few asset classes which is not currently eligible
    under the Term Asset-backed Lending Facility (TALF) program.
        Are there plans to allow AAA RMBS securities as eligible
    collateral under TALF?
        As many States move forward with reopening, Montana being
    one of them, what assistance and guidance are you providing
    PHAs in regards to reopening?
        Would jumbo AAA RMBS and non-QM RMBS be eligible? Would
    other sub asset classes--such as reperforming loans for
    borrowers coming off a credit event--be eligible as well?
        What support can Treasury lend to the Fed under TALF to
    support the housing market so that financing is available for
    self-employed or nontraditional borrowers who rely on non-QM
    mortgages, or to borrowers who live in high-cost areas who rely
    on jumbo financing?
        What metrics will you use in making these determinations?

    A.3. Treasury and the Federal Reserve are actively monitoring
    the mortgage market and the associated impact of COVID-19. We
    have focused considerable resources on delivering authorized
    support to households and businesses struggling as a
    consequence of the necessary public health response. Treasury
    will continue to monitor the market, including the residential
    mortgage lending market. Treasury continues to work with the
    Federal Reserve to assess the efficacy of existing facilities
    established under the Federal Reserve's 13(3) emergency lending
    authority, and will evaluate appropriate changes necessary to
    promote the flow of credit and support a robust economic
    recovery. No decision has been taken to expand the eligible
    collateral for TALF at this time.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARREN
                         FROM STEVEN T. MNUCHIN

    Q.1. Airline Assistance--The CARES Act provided $50 billion in
    taxpayer funds to assist passenger airlines. The CARES Act
    specifies that, as a condition of receiving financial
    assistance, carriers must ``refrain from conducting involuntary
    furloughs or reducing pay rates and benefits until September
    30, 2020.'' A small number of carriers, including Delta Air
    Lines, have received financial assistance and subsequently cut
    the hours of full-time workers. Why has Treasury taken no
    action against companies that accepted payroll assistance and
    then cut worker hours, thereby reducing take home pay for
    workers?

    A.1. Treasury incorporated the requirements of the CARES Act
    into a PSP agreement that must be executed by each PSP
    recipient and Treasury. Each PSP agreement reflects the
    requirements in section 4114(a) of the CARES Act, which
    prohibits recipients from ``conducting involuntary furloughs or
    reducing pay rates and benefits until September 30, 2020.''
    Treasury has also imposed reporting requirements to enable it
    to monitor PSP recipients' compliance with the PSP agreements,
    and each recipient is required to provide quarterly
    certifications that it is in compliance with the terms and
    conditions of the agreement. The agreement also makes clear
    that PSP funds must be used exclusively to continue paying
    employee salaries, wages, and benefits-the funds may not be
    used for any other purpose.

    Q.2. Treasury has issued guidance in a series of Q&A documents
    that clarify the Department's view of how carriers and
    contractors can comply with many terms of the payroll
    assistance program, including the rules on stock buybacks,
    dividends, and executive compensation. That guidance states
    that the assistance is ``intended to preserve aviation jobs and
    compensate air carrier industry workers by providing
    continuation of payment of employee wages, salaries, and
    benefits.'' However, even after public reports have emerged
    that some carriers have begun cutting hours of workers,
    Treasury has not issued guidance on whether cutting employee
    hours or mandating unpaid time off for employees violates the
    CARES Act. Does the Treasury Department plan to issue guidance
    regarding whether cutting employee hours violates Section 4114
    of the CARES Act for airlines receiving financial assistance
    under the payroll relief provisions? If yes, when will you
    release this guidance? If no, why not?

    A.2. Treasury incorporated the requirements of the CARES Act
    into a PSP agreement that must be executed by each PSP
    recipient and Treasury. Each PSP agreement reflects the
    requirements in section 4114(a) of the CARES Act, which
    prohibits recipients from ``conducting involuntary furloughs or
    reducing pay rates and benefits until September 30, 2020.''
    Treasury has also imposed reporting requirements to enable it
    to monitor PSP recipients' compliance with the PSP agreements,
    and each recipient is required to provide quarterly
    certifications that it is in compliance with the terms and
    conditions of the agreement. The agreement also makes clear
    that PSP funds must be used exclusively to continue paying
    employee salaries, wages, and benefits--the funds may not be
    used for any other purpose.

    Q.3. Have you, or any person in the Treasury Department,
    consulted with any representatives of Delta Air Lines regarding
    compliance with Section 4114 of the CARES Act, and did Treasury
    Department provide Delta Air Lines with any guidance regarding
    complying with CARES Act provisions? If so, when did this take
    place, who was involved, and what guidance was provided?

    A.3. Treasury has not provided guidance to Delta Air Lines
    regarding compliance with the CARES Act's prohibition on
    involuntary furloughs or reducing pay rates and benefits, other
    than Treasury's publicly issued guidance and the requirements
    set forth in the PSP agreement.

    Q.4. Did any airline receiving financial assistance for payroll
    relief under the CARES Act seek guidance from the Treasury
    Department regarding whether reducing employee hours, or
    implementing unpaid mandatory time off, complies with Section
    4114 of the CARES Act? Did anyone at Treasury provide that
    guidance? If so, when did this take place, who was involved,
    and what guidance was provided?

    A.4. The guidance Treasury has provide regarding compliance
    with section 4114 of the CARES Act is set forth in the terms of
    the PSP agreement and in the guidance documents that Treasury
    has publicly issued.

    Q.5. CARES Act Oversight--Will you commit to provide the
    Congressional Oversight Commission with any documents or
    materials it requests in a timely manner?

    A.5. We have dedicated teams of people working around the clock
    responding to near-daily requests from Congress and six
    oversight bodies, including the Congressional Oversight
    Commission, related to either the CARES Act or the COVID-19
    pandemic more generally. Treasury is and will continue working
    with the Congressional Oversight Commission to timely
    accommodate the Commission's interests, including by providing
    documents and materials in a manner consistent with the
    Executive Branch's constitutional tradition of accommodation
    among our branches.

    Q.6. Will you commit to provide the Special Inspector General
    for Pandemic Relief with any documents or materials he requests
    in a timely manner?

    A.6. We have dedicated teams of people working around the clock
    responding to near-daily requests from Congress and six
    oversight bodies, including the Special Inspector General for
    Pandemic Relief (SIGPR), related to either the CARES Act or the
    COVID-19 pandemic more generally. Treasury is and will continue
    working with the SIGPR to ensure that office has access to the
    information necessary to fulfill its obligations under the law.

    Q.7. Will you commit to provide the Pandemic Response
    Accountability Committee with any documents or materials it
    requests in a timely manner?

    A.7. We have dedicated teams of people working around the clock
    responding to near-daily requests from Congress and six
    oversight bodies, including the Pandemic Response
    Accountability Committee (PRAC), related to either the CARES
    Act or the COVID-19 pandemic more generally. Treasury has
    worked diligently to accommodate oversight needs from all of
    our oversight bodies, including the PRAC, and will continue to
    provide information to accommodate their various interests
    related to the CARES Act.

    Q.8. Will you commit to submit to the Senate Banking Committee
    majority and minority a weekly list of any instances in which
    you have denied the Special Inspector General for Pandemic
    Relief or the Pandemic Relief Accountability Committee
    information in the course of their oversight?

    A.8. We have dedicated teams of people working around the clock
    responding to near-daily requests from Congress and six
    oversight bodies, including the Special Inspector General for
    Pandemic Relief and PRAC, related to either the CARES Act or
    the COVID-19 pandemic more generally. Treasury has worked
    diligently to accommodate oversight needs from all of our
    oversight bodies. Treasury will work with the Senate Banking
    Committee to timely accommodate requests by the Committee in a
    manner consistent with the Executive Branch's constitutional
    tradition of accommodation among our branches.

    Q.9. Will you commit to requiring companies that participate in
    lending facilities backstopped with CARES Act money to disclose
    detailed information regarding how they use this financial
    assistance?
        Will you commit to requiring companies to disclose
    compensation and workforce data, including the mean, median,
    and minimum wages of all non-executive employees; the number of
    workers before and after the receipt of assistance; and the
    salaries of executives, including bonuses and capital
    distributions?
        Will you commit to making this information public?

    A.9. Treasury is committed to transparency when implementing
    the CARES Act provisions. Among other voluntary measures,
    Treasury and SBA agreed with the bipartisan leaders of the U.S.
    Senate Small Business Committee to make public additional data
    regarding PPP, ensuring that the interests of both transparency
    and protections for small businesses are served. Treasury has
    also implemented transparency measures for the Payroll Support
    Program, including making available online a list of
    participants, with amounts of assistance provided and, where
    applicable, financial instruments provided to the Federal
    Government as appropriate compensation for the provision of
    financial assistance. Further, the Federal Reserve Board is
    reporting substantial amounts of information on a monthly basis
    for the liquidity and lending facilities using CARES Act
    funding, including the:

        Names and details of participants in each facility;

        Amounts borrowed and interest rate charged; and

        Overall costs, revenues, and fees for each
            facility.

        Treasury will continue to work to ensure they fulfill their
    statutory reporting requirements, and will continue
    administering the programs Congress provided for under the
    CARES Act in a manner consistent with the text of the statute,
    which was the result of earnest bipartisan negotiations that
    resulted in overwhelmingly bipartisan support in both the House
    and the Senate.

    Q.10 Conflicts of Interest--Please describe how are you working
    with the Treasury Department ethics officials to address and
    manage or to prohibit conflicts of interest that may arise in
    connection with the Administration and execution of the
    authorities provided under the CARES Act?

    A.10. The Department has a robust ethics program, which I fully
    support. Department ethics officials acted swiftly to educate
    employees on potential conflicts of interests that could arise
    from changes to or expansion of their official duties due to
    implementation of the CARES Act. This included the provision of
    general and targeted advice on the criminal conflict of
    interest statute, 18 U.S.C. 208, the impartiality and misuse
    of position provisions of the Standards of Ethical Conduct for
    Employees of the Executive Branch, 5 CFR part 2635, subparts E
    and G, and the Ethics Pledge, EO 13770.

    Q.11. How is the Treasury Department prohibiting or addressing
    conflicts arising in the selection or hiring of contractors or
    advisors?

    A.11. Department ethics officials have been involved in the
    provision of ethics advice to prospective and new employees and
    detailees with CARES Act implementation responsibilities, with
    the aim of detecting facially problematic ethics issues prior
    to appointment or assignment, so that critical CARES Act work
    could be readily accomplished. Employees involved in the
    selection or hiring of contractors have also received guidance
    on the criminal conflict of interest statute, 18 U.S.C. 208,
    and the impartiality provisions of the Standards of Ethical
    Conduct for Employees of the Executive Branch, 5 CFR part 2635,
    subpart E.

    Q.12. How is the Treasury Department prohibiting or addressing
    conflicts arising in the management, administration, or
    distribution of funds, grants, loans, loan guarantees, or other
    investments authorized under Section 4003 of the CARES Act?

    A.12. All Treasury employees who work on CARES Act
    implementation duties, including under Section 4003, are
    expected to comply with the criminal conflicts of interest
    statute, the Standards of Ethical Conduct, the Ethics Pledge
    (as applicable), and other ethics laws and regulations.
        Department ethics officials have educated employees on the
    need to remain vigilant for potential conflicts arising from
    new or expanded duties and have provided individual ethics
    advice to employees. Treasury ethics officials remain as a
    resource to employees on all ethics matters.

    Q.13. Please describe any post-employment restrictions or
    guidelines beyond 18 U.S.C. 207 the Treasury Department is
    implementing to safeguard against conflicts and to ensure
    Treasury Department employees and officials are administering
    the CARES Act without regard to future employment
    opportunities.

    A.13. The Department has not issued restrictions or guidance
    beyond 18 U.S.C. 207 and the Ethics Pledge with respect to
    post Federal employment activities. Employees seeking or
    negotiating for non-Federal employment, or who otherwise have
    an arrangement concerning prospective employment, must abide by
    the recusal and other requirements in the conflicts statute, 18
    U.S.C. 208, the Standards of Ethical Conduct, 5 CFR part 2635,
    subparts D and F, and the STOCK Act.

    Q.14. After your term as Secretary, will you commit not to work
    for--or accept compensation from--any company with which you
    made a loans, loan guarantee, and other investment authorized
    under Section 4003 of the CARES Act?

    A.14. After my term as Secretary, I will abide by the
    restrictions in 18 U.S.C. 207 and the Ethics Pledge.

    Q.15. Will you commit to not make any loans, loan guarantee,
    and other investment authorized under Section 4003 of the CARES
    Act to any company with which you have a personal financial
    interest?

    A.15. During my term as Secretary, I will abide by all
    applicable ethics laws and regulations, the terms of my Ethics
    Agreement, and the conflicts of interest provisions of the
    CARES Act. I will seek guidance from Treasury ethics officials
    should any potential conflict of interest arise.

    Q.16. Lobbying--Will you commit to monthly, public disclosures
    of all lobbying related to CARES Act spending or lending?

    A.16. Treasury has been following and will continue to follow
    applicable law regarding contact with the public related to the
    CARES Act.

    Q.17. Please provide a list of all lobbying contacts between
    any political appointee at the Treasury Department and any
    company seeking funds or loans made available under the CARES
    Act, including:
        Date of contact,
        Names of Treasury Department officials receiving the
    contact,
        Name of entity making the contact, and
        Any electronic or physicals documents or communications
    related to such lobbying contacts.

    A.17. Treasury has been following and will continue to follow
    applicable law regarding contact with the public related to the
    CARES Act.

    Q.18. Will you commit to restrict any future CARES Act-related
    lobbying activity to public, written submissions and prohibit
    closed door meetings and phone calls between Treasury
    Department officials and companies seeking relief (beyond
    general policy clarification)?

    A.18. Treasury has been following and will continue to follow
    applicable law regarding contact with the public related to the
    CARES Act.

    Q.19. Whistleblowers and Other Issues--Will you commit to take
    no retaliatory action against any whistleblowers at the
    Treasury Department (including any contractors or employees of
    contractors) who attempt to report waste, fraud, corruption, or
    abuse or be victims of misconduct?

    A.19. The Department is aware of its responsibilities under the
    Whistleblower Protection Act and other relevant laws and takes
    its compliance obligations seriously.

    Q.20. How will you ensure that taxpayer money received by
    companies won't be shifted into tax havens, eroding our tax
    base and further deepening our debt?

    A.20. Treasury is administering the programs Congress provided
    for under the CARES Act in a manner consistent with the text of
    the statute, which was the result of earnest bipartisan
    negotiations that resulted in overwhelmingly bipartisan support
    in both the House and the Senate.

    Q.21. Student Loans--The Department of Education has been
    subject to scrutiny by members of congress and litigation
    brought by individual borrowers due to its repeated illegal
    garnishment of student loan borrowers' wages in violation of
    the CARES Act. \1\ The Treasury Department, as the
    administrator of the Debt Collection Improvement Act and the
    Treasury Offset Program, as well as the recipient of all funds
    collected through Administrative Wage Garnishment (AWG), has
    played a key role in this scandal. Please answer the following
    questions regarding the status of borrowers and their debts as
    of March 13, 2020, broken down by account assigned to each
    private collection agency:
    ---------------------------------------------------------------------------
         \1\  https://www.booker.senate.gov/news/press/sen-booker-rep-
    pressley-lead-colleagues-in-rebuking-administration-for-unlawful-wage-
    garnishment
    ---------------------------------------------------------------------------
        How many borrowers were under an AWG order when the stop
    collections order went into effect? Please provide demographic
    breakdowns by the State, county, age, race, and gender of
    borrowers.
        How many borrowers were making payments under AWG when the
    stop collections order went into effect? Please provide
    demographic breakdowns by State, county, age, race and gender
    of borrowers.
        What was the total debt volume of these borrowers under an
    AWG order when the stop collections order went into effect?
        What was the average dollar amount garnished from
    borrowers' wages (please provide this amount per month and per
    pay period, if available) under the AWG orders then in effect?

    A.21. The Department of Education manages all aspects of AWG to
    collect its student loans. Fiscal Service does not conduct AWG
    to collect the Department of Education's student loan debts and
    has no information on which student loan borrowers are subject
    to wage garnishment.

    Q.22. Please provide a week-by-week analysis of the following
    question about the total amount of money collected through an
    AWG order after the stop collections order went into effect,
    beginning March 13, 2020 through the date these responses are
    provided [broken up by accounts assigned to each private
    collection agency]:
        What is the total amount of payments that have been
    received by the Department of Treasury under an AWG order since
    the stop collections order began?
        What is the total number of borrowers that the Department
    of Treasury has received garnished wages from since the stop
    collections order began?

    A.22. Fiscal Service does not conduct AWG to collect student
    loan debts and has no information regarding payments received
    as a result of the Department of Education garnishing wages.

    Q.23. According to the Department of Education's FAQs published
    on April 1, 2020, borrowers who have had their wages improperly
    garnished after March 13, 2020 will see a refund of those
    monies. Please provide a week-by-week analysis of the following
    questions about refunds returned to borrowers by the Department
    of Treasury as a result of improper garnishments after the stop
    collection order, beginning March 13, 2020 through the date
    these responses are provided [broken up by private collection
    agencies]:
        How many borrowers were issued refunds?
        What was the total dollar amount of refunds issued to
    borrowers?
        What is the average time it took for each refund to be
    issued after the Department of Education received payments made
    by employers?
        How many borrowers have claimed their refunds either
    through a deposited check or direct deposit into a bank
    account?
        What is the number of borrowers and the total dollar amount
    of unclaimed refunds issued to borrowers?

    A.23. Federal agencies determine if any funds in their
    possession need to be refunded. Fiscal Service's role in the
    process is limited to disbursing any such funds pursuant to the
    certification that the Federal agency provides when it requests
    disbursement. In that capacity, Fiscal Service has limited
    information regarding the underlying purpose for the payment
    and has no means of determining whether a certified payment is
    for the purpose of refunding monies. Only the Department of
    Education can provide information regarding any refunds it has
    made.

    Q.24. Please provide any guidance the Department of Treasury
    has provided to the Department of Education and/or employers
    regarding the suspension of AWG?

    A.24. Fiscal Service conducts AWG and other debt collection
    actions on behalf of several Federal agencies through its
    Cross-Servicing Program. The Department of Education does not
    refer debts to the Cross-Servicing Program, and Fiscal Service
    has provided no guidance to it regarding suspension of AWG.
    With regard to other Federal agencies, Fiscal Service has
    advised that it will suspend all collection tools, to include
    AWG, if a Federal agency makes its own independent
    determination that it has the authority to suspend the laws and
    regulations governing collection of its debts, including the
    relevant portions of the Federal Claims Collection Standards
    (31 CFR Parts 900-904).

    Q.25. Climate Change--Earlier this year, the Canadian
    government announced a program to provide financing for
    businesses in response to the ongoing novel coronavirus 2019
    disease (COVID-19) pandemic. As one of the conditions for
    receiving funds, Canada is requiring that companies receiving
    assistance under this program ``commit to publish annual
    climate-related disclosure reports consistent with the
    Financial Stability Board's Task Force on Climate-related
    Financial Disclosures, including how their future operations
    will support environmental sustainability and national climate
    goals.'' \2\
    ---------------------------------------------------------------------------
         \2\ Justin Trudeau, Prime Minister of Canada, ``Prime Minister
    announces additional support for businesses to help save Canadian
    jobs'', press release, May 11, 2020, https://pm.gc.ca/en/news/news-
    releases/2020/05/11/prime-minister-announces-additional-support-
    businesses-help-save.
    ---------------------------------------------------------------------------
        Despite the significant economic impacts of the climate
    crisis, \3\ ``U.S. regulators have been slow to respond to the
    threats that a warming planet can pose to financial assets.''
    \4\ Would you support requiring major corporations to disclose
    climate-related risks so investors and the public can
    accurately assess climate-related threats as a condition for
    receiving Federal bailout funds?
    ---------------------------------------------------------------------------
         \3\ New York Times, ``Climate Change's Giant Impact on the
    Economy: 4 Key Issues,'' Neil Irwin, January 17, 2019, https://
    www.nytimes.com/2019/01/17/upshot/how-to-think-about-the-costs-of-
    climate-change.html; Brookings Institution, ``Ten facts about the
    economics of climate change and climate policy,'' Ryan Nunn, Jimmy
    O'Donnell, Jay Shambaugh, Lawrence Goulder, Charles Kolstad, and
    Xianling Long, October 23, 2019, https://www.brookings.edu/research/
    ten-facts-about-the-economics-of-climate-change-and-climate-policy/.
         \4\ Reuters, ``U.S. regulator homes in on climate risks to U.S.
    markets,'' Ann Saphir, December 11, 2019, https://www.reuters.com/
    article/us-climate-change-market-risks/u-s-regulator-homes-in-on-
    climate-risks-to-u-s-markets-idUSKBN1YF2D5.

    A.25. Treasury is administering the programs Congress provided
    for under the CARES Act in a manner consistent with the text of
    the statute, which was the result of earnest bipartisan
    negotiations that resulted in overwhelmingly bipartisan support
    in both the House and the Senate. With respect to the CARES Act
    programs that Treasury administers, Treasury is committed to
    ensuring that participating businesses comply with all of their
    ---------------------------------------------------------------------------
    statutory reporting requirements.

    Q.26. Recent studies estimate that climate change may cause
    ``permanent damage that would far eclipse the scale of the
    2007-2008 financial crisis.'' \5\ A 2018 report by 13 Federal
    agencies also found that without significant climate action, as
    much as ten percent of the American economy may be wiped out by
    2100. \6\ Additionally, a separate report argued climate change
    may lead to tens of trillions of dollars in global damages and
    will ``universally hurt worker health and productivity.'' \7\
    Meanwhile, the Trump administration has exacerbated the climate
    crisis by weakening safeguards on air pollution, emissions,
    fossil fuel extraction, and more. \8\ According to government
    data, these changes may cause thousands of more premature
    deaths across the country. \9\
    ---------------------------------------------------------------------------
         \5\ Center for American Progress, ``Climate Change Threatens the
    Stability of the Financial System,'' Gregg Gelzinis and Graham Steele,
    November 21, 2019, https://www.americanprogress.org/issues/economy/
    reports/2019/11/21/477190/climate-change-threatens-stability-financial-
    system/.
         \6\ New York Times, ``U.S. Climate Report Warns of Damaged
    Environment and Shrinking Economy,'' Coral Davenport and Kendra Pierre-
    Louis, November 23, 2018, https://www.nytimes.com/2018/11/23/climate/
    us-climate-report.html; U.S. Global Change Research Program, ``Fourth
    National Climate Assessment,'' November 23, 2018, https://
    nca2018.globalchange.gov/.
         \7\ Moody's Analytics, ``The Economic Implications of Climate
    Change,'' Chris Lafakis, Laura Ratz, Emily Fazio, and Maria Cosma, June
    2019, https://www.moodysanalytics.com/-/media/article/2019/economic-
    implications-of-climate-change.pdf.
         \8\ New York Times, ``The Trump Administration Is Reversing Nearly
    100 Environmental Rules. Here's the Full List.,'' Nadja Popovich, Livia
    Albeck-Ripka, and Kendra Pierre-Louis, May 6, 2020, https://
    www.nytimes.com/interactive/2020/climate/trump-environment-
    rollbacks.html.
         \9\ New York Times, ``Cost of New E.P.A. Coal Rules: Up to 1,400
    More Deaths a Year,'' Lisa Friedman, August 21, 2018, https://
    www.nytimes.com/2018/08/21/climate/epa-coal-pollution-deaths.html.
    ---------------------------------------------------------------------------
        News reports show that you have ``cast doubt about climate
    policies that [you believe] could inhibit growth and under
    [your] watch the Treasury Department has rejected policies. to
    fight climate change'' and that during your tenure, ``the Trump
    administration has systematically disengaged the Treasury
    Department from all aspects of addressing climate change.''
    \10\ Additionally, while you have been Treasury Secretary, the
    Administration ``eliminated the agency's Office of Environment
    and Energy, reassigning its staff elsewhere within the Treasury
    Department.'' \11\
    ---------------------------------------------------------------------------
         \10\ New York Times, ``Finance Ministers Grapple Over Economic
    Threat of Climate Change,'' Alan Rappeport and Lisa Friedman, February
    23, 2020, https://www.nytimes.com/2020/02/23/us/politics/g20-climate-
    change.html.
         \11\ Id.
    ---------------------------------------------------------------------------
        Please describe how the Treasury Department is
    incorporating climate-related economic risks in financial
    regulations. Please describe how the Trump administration's
    rollbacks of environmental regulations are affecting economic
    and financial stability.
        Please describe the rationale for eliminating the Office of
    Environment and Energy. Please describe how the Treasury
    Department is meeting the functions of the Office of
    Environment and Energy after its elimination.

    A.26. Treasury is not a financial regulator and therefore is
    unable to incorporate climate-related economic risks in
    financial regulations.

    Q.27. In the third quarter of 2019, oil and gas companies were
    responsible for 91 percent of defaulted U.S. corporate debt.
    \12\ Thirty-seven oil companies received over $1.9 billion in
    tax benefits by using a provision in the Coronavirus Aid,
    Relief, and Economic Security (CARES) Act. For example,
    Marathon received a $411 million benefit, and Occidental
    expects to receive $195 million because of a carryback
    provision. \13\
    ---------------------------------------------------------------------------
         \12\ New York Times, ``Coronavirus May Kill Our Fracking Fever
    Dream,'' opinion, Bethany McLean, April 10, 2020, https://
    www.nytimes.com/2020/04/10/opinion/sunday/coronavirus-texas-fracking-
    layoffs.html.
         \13\ Bloomberg, ``1A`Stealth Bailout' Shovels Millions of Dollars
    to Oil Companies'', Jennifer Dlouhy, May 15, 2020, https://
    www.bloomberg.com/news/articles/2020-05-15/-stealth-bailout-shovels-
    millions-of-dollars-to-oil-companies?sref=L459Uwzi.
    ---------------------------------------------------------------------------
        How will the Department of the Treasury ensure the long-
    term stability of the U.S. energy and financial systems?

    A.27. In April, at the direction of the President, Secretary
    Mnuchin and Energy Secretary Brouillette began working together
    to consider ways in which to support the oil and gas sector and
    the many thousands of hardworking Americans it employs.
    Although the U.S. energy industry is of critical and strategic
    importance to the U.S. economy, and U.S. energy independence is
    a key policy priority of the Administration, Secretary Mnuchin
    was clear in stating that any such support must not be a
    ``bailout'' and-unless specifically directed otherwise by
    Congress-should be available under terms that are consistent
    with the CARES Act and broadly applicable to all businesses and
    industries across the U.S. economy.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR SCHATZ
                         FROM STEVEN T. MNUCHIN

    Q.1. I have heard reports that small businesses in Hawaii are
    cancelling their PPP loans because the rules that the SBA and
    Treasury imposed have undermined the usefulness of these loans.
    By requiring that 75 percent of PPP funds go to payroll, small
    businesses in high cost cities like Honolulu can't cover their
    rent with the remaining 25 percent of the funds. Without the
    ability to pay their rent, they can't stay in business. This 75
    percent requirement is an arbitrary one-size-fits-all standard
    that works against the purpose of the program of helping small
    businesses stay in business.
        Will you consider removing that new requirement of the
    program?

    A.1. Treasury has posted to its website a series of documents,
    including interim final rules that implement the PPP, a set of
    frequently asked questions, fact sheets, program reports, and
    other documents to address specific lender and borrower
    questions about eligibility and the application and forgiveness
    process, among other topics. This includes guidance to reflect
    the PPP Flexibility Act's amendments to the PPP, including by
    lowering the requirements that 75 percent of a borrower's loan
    proceeds must be used for payroll costs and that 75 percent of
    the loan forgiveness amount must have been spent on payroll
    costs to 60 percent for each of these requirements. If a
    borrower uses less than 60 percent of the loan amount for
    payroll costs during the forgiveness covered period, the
    borrower will continue to be eligible for partial loan
    forgiveness, subject to at least 60 percent of the loan
    forgiveness amount having been used for payroll costs. Treasury
    and the SBA will continue to provide additional guidance, as
    appropriate, to help small businesses and other eligible
    borrowers get the assistance they need.

    Q.2. According to a Census survey, a third of small businesses
    think it will take longer than 6 months for their businesses to
    recover. And Fed Chair Powell has said it could take a year for
    the economy to gain momentum again. While the CARES Act
    envisioned that any outstanding PPP loans could be repaid over
    a ten-year period, Treasury and the SBA set the term at two
    years.
        Do you think 2 years may be too short given the likelihood
    that some industries may take longer to recover? (For example,
    travel, tourism, live events, etc. may take much longer to
    recover)
        Would you consider lengthening the repayment period,
    particularly for businesses in particularly hard-hit
    industries?

    A.2. Treasury has posted to its website a series of documents,
    including interim final rules that implement the PPP, a set of
    frequently asked questions, fact sheets, program reports, and
    other documents to address specific lender and borrower
    questions about eligibility and the application and forgiveness
    process, among other topics. This includes guidance to reflect
    the PPP Flexibility Act's amendments to the PPP, including by
    increasing to five years the maturity of PPP loans that are
    approved by SBA (based on the date SBA assigns a loan number)
    on or after June 5, 2020.

    Q.3. Treasury and the SBA also imposed a requirement that
    businesses expend their PPP loan as soon as it is disbursed,
    rather than allowing businesses to choose their 8-week period,
    as long as it ended before June 30th. As a result, small
    businesses that had already laid off their workers scrambled to
    rehire people as soon as their loan was disbursed. If they had
    trouble finding people to rehire, they are now stuck with an
    unforgivable loan. If they were able to rehire people, they
    will have to lay off these workers again because economic
    activity will not sustain full payrolls by the time the 8-week
    period is up.
        Will you consider loosening this requirement to provide
    small businesses with more flexibility to use their PPP loans
    in the way that helps them the most?

    A.3. Treasury has posted to its website a series of documents,
    including interim final rules that implement the PPP, a set of
    frequently asked questions, fact sheets, program reports, and
    other documents to address specific lender and borrower
    questions about eligibility and the application and forgiveness
    process, among other topics. This includes guidance to reflect
    the PPP Flexibility Act's amendments to the PPP, including by
    extending the covered period for loan forgiveness from eight
    weeks after the date of loan disbursement to 24 weeks after the
    date of loan disbursement, providing substantially greater
    flexibility for borrowers to qualify for loan forgiveness.
    Borrowers who have already received PPP loans retain the option
    to use an 8-week covered period.
                                    ------

                   RESPONSES TO WRITTEN QUESTIONS OF
               SENATOR VAN HOLLEN FROM STEVEN T. MNUCHIN

    Q.1. Secretary Mnuchin, on May 1, I sent a letter to you and
    Administrator Carranza to issue guidance on forgiveness and
    also issue a step-by-step guide for borrowers. Without a
    clearly defined timeline and process for repayment of the loan,
    small business owners and nonprofit organizations do not have
    the information necessary to make informed financial decisions
    for their businesses or organizations. I have heard from small
    businesses owners and nonprofit organizations in Maryland who
    have decided to forgo desperately needed assistance because
    they do not have this important information.
        You recently issued an 11-page application that PPP
    borrowers have to fill out to apply for loan forgiveness. I am
    concerned however, that the length of this application is too
    long, especially for borrowers who took out small loans? I am
    also concerned that you have yet to issue formal guidance on
    forgiveness. Are you planning on streamlining this application?
    When do you plan to issue formal guidance?

    A.1. SBA published an EZ version of the forgiveness application
    that requires fewer calculations and less documentation for
    eligible borrowers. In addition, Treasury has posted to its
    website a series of documents, including interim final rules
    that implement the PPP, a set of frequently asked questions,
    fact sheets, program reports, and other documents to address
    specific lender and borrower questions about eligibility and
    the application and forgiveness process, among other topics.
    This includes guidance to reflect the PPP Flexibility Act's
    amendments to the PPP to, among other things, extend the
    covered period for loan forgiveness to 24 weeks after the date
    of loan disbursement and to lower the percentage of a
    borrower's PPP loan proceeds that must be used for payroll
    costs. This also includes a set of frequently asked questions
    on loan forgiveness. Treasury and the SBA will continue to
    provide additional guidance, as appropriate, to help small
    businesses and other eligible borrowers get the assistance they
    need.
                                    ------

                   RESPONSES TO WRITTEN QUESTIONS OF
              SENATOR CORTEZ MASTO FROM STEVEN T. MNUCHIN

    Q.1. According to Treasury Guidance and FAQ so far, the use of
    disbursements will not be subject to other reporting that is
    normally requires such as The Federal Funding Accountability
    and Transparency Act (FFATA) reporting. However, States have
    not seen specific guidance for documentation or reporting for
    auditing and management. States have been informed that the
    Treasury's Inspector General is involved in determining this
    exemption.
        When can States expect to see this type of guidance?

    A.1. On July 2, 2020, the Treasury Office of the Inspector
    General (OIG) released guidance pertaining to the CRF Reporting
    and Record Retention Requirements, which was supplemented on
    August 29, 2020, with Frequently Asked Questions. We understand
    that the Office of Management and Budget expects to have the
    final addendum to the 2020 Compliance Supplement published in
    the Federal Register by October 31, 2020, which will include
    the compliance requirements that auditors need to test and
    report on for the CRF.
        The Treasury guidance is clear that revenue replacement is
    not an eligible use of funds for State and local governments.
    However, the guidance included a section that said payments may
    be used for economic support in the absence of a stay-at-home
    order if deemed necessary by the State. Included was an example
    of a grant program to assist small businesses that close in
    order to promote social distancing or small businesses that
    have reduced customer demand as a result of the COVID-19 public
    health emergency.

    Q.2. To what extent the grant would be essentially replacing
    lost revenue for private businesses?

    A.2. Revenue replacement of governments is not permitted given
    the statutory requirement that expenditures covered with
    payments from the Fund have not been accounted for in the most
    recently adopted budget. This requirement does not relate to
    small business subrecipients of payments from the Fund.

    Q.3. Can you clarify whether assisting small businesses like
    this would qualify as an eligible expense?

    A.3. Assistance may be provided to small businesses as long as
    that assistance complies with Treasury's guidance and is used
    for permissible expenditures detailed in the CRF guidance.

    Q.4. I led the Nevada Delegation in writing a letter requesting
    the Treasury Department and the Federal Reserve to prioritize
    loans to businesses uniquely impacted by COVID-19. In Nevada,
    our economy relies on our hospitality, gaming, and tourism
    employers, and we want to ensure industries bearing the brunt
    of the crisis be aided in order to stabilize the marketplace
    and preserve American jobs. At the encouragement of the Nevada
    delegation and other congressional partners, the SBA reversed
    its previously issued guidance to allow for businesses with
    gaming revenue to apply for PPP.
        Can you commit that otherwise eligible gaming business,
    continue to be eligible for the Main Street lending program,
    like the SBA PPP program now allows?

    A.4. The Main Street Lending Program has used the borrower
    eligibility criteria as modified and clarified by SBA
    regulations for purposes of the PPP issued on or before April
    24, 2020, which include businesses with legal gaming revenue.
    Additionally, the Secretary has exercised his authority under
    section 4003(c)(3)(A)(iii) of the CARES Act to grant a waiver
    from the dividend prohibition in section 4003(c)(3)(A)(ii)(II)
    of the CARES Act to permit a tribal business, the ownership
    interests of which are wholly or majority owned by one or more
    tribal governments, to pay dividends or make equivalent capital
    distributions to its tribal government owners. This waiver may
    help facilitate Main Street borrowing by tribal gaming
    businesses.

    Q.5. Chairman Jerome Powell spoke about the difference in
    interventions to handle liquidity problems versus those due to
    insolvency. For firms where a loan program does not address a
    pending insolvency threat, are there warrants or equity stakes
    that the government can take in a business to keep it solvent
    while ensuring the taxpayers get repaid? If so, how would those
    warrants be structured?

    A.5. The Main Street Lending Program offers loans to small and
    medium-sized businesses and nonprofit organizations that were
    in sound financial condition before the COVID-19 pandemic and
    have solid post-pandemic prospects to help them maintain
    operations until the economy recovers. The program offers a
    range of secured and unsecured senior loan options for
    borrowers that meet minimum criteria and bank underwriting
    standards. Eligible borrowers must certify that they do not
    expect to enter into bankruptcy within the 90 days of taking a
    Main Street loan. If Main Street borrowers require a
    restructuring or workout, the Main Street Special Purpose
    Vehicle may agree to reductions in interest (including
    capitalized interest), extended amortization schedules and
    maturities, and higher priority ``priming'' loans. Main Street
    loans are full-recourse loans and are not forgivable. Under
    section 4003(d)(3) of the CARES Act, the principal amount of a
    Main Street loan cannot be reduced through loan forgiveness. In
    addition, under Federal Reserve regulations, the Federal
    Reserve cannot provide financing based upon equity stakes.

    Q.6. If funds were provided as grants to businesses, what do
    you recommend firms provide in return? Would retaining
    employment, staying current with taxes and rent and any debt
    obligations to appropriate conditions for a grant or equity
    stake?

    A.6. Funds provided under CARES Act section 4003 take the form
    of loans, loan guarantees, and other investments, and may not
    be forgiven (section 4003(d)(3)). However, loans, loan
    guarantees, and other investments under sub-sections
    4003(b)(1), (2), and (3) require that the U.S. government
    receive a warrant, equity instrument, or senior debt instrument
    for the benefit of taxpayers (section 4003(d)(1)). Businesses
    receiving such funds are subject to restrictions on stock
    buybacks and payment of dividends and other capital
    distributions, may not reduce employment levels by more than 10
    percent from the levels on March 24, 2020, and must be U.S.
    businesses with significant operations in and a majority of
    their employees based in the United States (section
    4003(c)(2)). Note that funds provided under CARES Act section
    4003(b)(4), including the Main Street Lending Program, are made
    available through programs or facilities established by the
    Federal Reserve, which does not make grants or take equity
    stakes.

    Q.7. Does the Treasury Department plan to provide one-time or
    ongoing assistance to companies through its programs?

    A.7. The Federal Reserve's Main Street Lending Program offers
    medium-term loans to small and medium-sized businesses and
    nonprofit organizations that were in sound financial condition
    before the COVID-19 pandemic to help maintain their operations
    until the economy recovers. Borrowers may borrow multiple loans
    in any one of the facilities that cumulatively amount to the
    aggregate limit of the facility. Main Street will accept loan
    participations through the end of the year.

    Q.8. What are you doing to build on the experience with other
    industry-specific initiatives to help bus carriers? Are bus
    companies able to access capital from CARES programs?

    A.8. The Main Street Lending Program offers loans to all types
    of small and medium-sized businesses that meet the eligibility
    criteria, including the motor coach industry, to help maintain
    their operations until the economy recovers. This includes
    motor coach businesses that were in sound financial condition
    before the COVID-19 pandemic and have solid post-pandemic
    prospects. Following the submission of over 3,500 public
    comments representing a diversity of stakeholders, the Federal
    Reserve amended the program's initial terms to expand the
    available loan options as well as the pool of businesses
    eligible to borrow. The changes to the Main Street Lending
    Program were designed to allow an even wider range of American
    companies and industries to access the program in order to help
    support their workers and operations.

    Q.9. Congress expects the Federal Reserve to release names and
    other information about participants in the facilities it set
    up in response to the CARES Act. I appreciate the steps that
    the Federal Reserve has already taken to increase transparency,
    such as disclosing borrowers, amount borrowed and what rate of
    interest, and the overall costs, revenues, and fees from
    various facilities on a monthly basis.
        How will you guard against any favoritism or unfairness in
    access or terms?

    A.9. The Main Street Lending Program purchases loan
    participations of eligible borrowers that meet the minimum
    criteria and the underwriting criteria of the eligible lenders
    that have underwritten the loan. All borrowers and lenders are
    required to certify their compliance with the conflict of
    interest provisions in section 4019 of the CARES Act, and
    lenders are also subject to various statutory and regulatory
    requirements aimed at preventing favoritism and unfairness.

    Q.10. Does the Treasury plan to release disclosures for other
    programs not directly authorized under the CARES Act?

    A.10. Treasury will continue to work to ensure they fulfill
    their statutory reporting requirements, and will continue
    administering the programs Congress provided for under the
    CARES Act in a manner consistent with the text of the statute,
    which was the result of earnest bipartisan negotiations that
    resulted in overwhelmingly bipartisan support in both the House
    and the Senate.

    Q.11. The CARES Act prohibited companies that receive support
    through the Federal Reserve programs that make direct loans
    from paying dividends or buying back their own stock until 12
    months after the loan is repaid. The CARES Act also imposes
    limits on executive compensation for companies that receive
    direct loans.
        What is your oversight plan to ensure that no dividends are
    paid or stocks are purchased and that executive compensation is
    capped as Congress intended?

    A.11. Under the Main Street Lending Program, Eligible Borrowers
    must undertake to comply with the restrictions on dividends,
    stock repurchases and compensation. A material breach of these
    undertakings would trigger acceleration of the Main Street
    loan.

    Q.12. The CARES Act permitted the Treasury Department to waive
    restrictions on dividends, stock buybacks and executive
    compensation. If you waive those prohibitions and limitations
    for specific companies, how--and how quickly--will you let
    Congress know?

    A.12. For the Main Street Lending Program, the Secretary
    exercised his authority under section 4003(c)(3)(A)(iii) of the
    CARES Act to grant a waiver from the dividend prohibition in
    section 4003(c)(3)(A)(ii)(II) to permit a tribal business, the
    ownership interests of which are wholly or majority held by one
    or more tribal governments, to pay dividends or make equivalent
    capital distributions to its tribal government owners. The term
    ``tribal government'' as used in this Frequently Asked Question
    (FAQ) refers to a federally or State recognized Indian tribe
    and does not include Alaska Native corporations. The Secretary
    immediately notified the committees specified in section
    4003(c)(3)(A)(iii), and any future waivers will be notified in
    the same manner.

    Q.13. The CARES Act restricts Fed financing to ``businesses
    that are created or organized in the United States or under the
    laws of the United States and that have significant operations
    in and a majority of its employees based in the United
    States.''
        Will you ensure that any company that receives financing is
    a U.S.-based company?

    A.13. All recipients of funds under section 4003 of the CARES
    Act must certify that they are created or organized in the
    United States or under the laws of the United States, and have
    significant operations in and a majority of their employees
    based in the United States. The proceeds of a Main Street loan
    may not be used for the benefit of the borrower's foreign
    parents, affiliates or subsidiaries, if any.

    Q.14. Will you prohibit aid to companies that may have
    undergone a tax inversion before, changed its incorporation to
    the U.S. recently, or is a U.S. subsidiary of a foreign
    company?

    A.14. Under the Main Street Lending Program, a borrower may be
    a subsidiary of a foreign company, provided that the borrower
    itself is created or organized in the United States or under
    the laws of the United States, and on a consolidated basis has
    significant operations in and a majority of its employees based
    in the United States. However, a Main Street borrower that is a
    subsidiary of a foreign company must use the proceeds of a Main
    Street loan only for the benefit of the borrower, its
    consolidated U.S. subsidiaries, and its other affiliates that
    are U.S. businesses. The proceeds of a Main Street loan may not
    be used for the benefit of any borrower's foreign parents,
    affiliates, or subsidiaries.

    Q.15. Will Treasury require disclosure of beneficial owners in
    order to prevent shell structures?

    A.15. Main Street Lending Program lenders require
    identification of beneficial owners under existing anti-money
    laundering and know your customer rules. In addition, in order
    to certify their compliance with the conflict of interest
    provisions of CARES Act section 4019, borrowers are required to
    determine the beneficial owner of any 5 percent or greater
    equity interest in the borrower.

    Q.16. I am disappointed by Treasury's handling of tribal
    financial data. These are some of the hardest hit communities,
    with the most limited capacity to respond to economic
    emergencies. Instead of acting expeditiously to get CARES Act
    funding out the door, Treasury missed the statutory deadline to
    distribute that money, and leaked sensitive financial
    information in the process. I'd like to understand why this
    happened, and what plans Treasury has to ensure it doesn't
    happen again.
        Who did Treasury share the Tribal data with?

    A.16. When determining the methodology for distribution of CRF
    funds to tribal governments, Treasury shared data with those
    essential to carrying out the disbursement of CRF funds within
    their official duties.

    Q.17. For what purposes did the department share that data with
    them?

    A.17. Treasury shared data only with those essential to
    carrying out the disbursement of CRF funds within their
    official duties.

    Q.18. What kinds of safeguards does Treasury normally have for
    handling sensitive or potentially proprietary data?

    A.18. As always, Treasury endeavors to protect sensitive or
    potentially proprietary data.

    Q.19. Why did Treasury ask for these specific data points,
    since it appears that they are even going to use the answers
    for their CRF formula?

    A.19. Treasury requested many data points from tribes with the
    intention of determining how to distribute CRF funds.

    Q.20. It's imperative that Treasury provide tribes across the
    country with the supports they need to take full advantage of
    the CARES Act resources. These are some of the hardest hit
    communities, with the most limited capacity to respond to
    economic emergencies.
        Has the Department heard from any Tribes with concerns
    about needing guidance on allowable uses? How is the Department
    helping with those requests? Are there any ideas from Tribes
    that the Department has advised would likely be disallowed?

    A.20. Treasury has worked closely with tribes throughout the
    application process. Prior to and during the first round of
    funding, Treasury and BIA held two joint tribal consultations
    and provided a written comment period from March 31, 2020,
    through April 13, 2020. Treasury also held discussions with
    Native American associations and tribal financial experts to
    consider a process that would be familiar to tribes, and
    provide verifiable and objective information.

    Q.21. Some Tribes have flagged concerns about the requirement
    that all funds be spent by the end of the year, especially in
    view of the potential for future waves of coronavirus.
        Has Treasury heard any similar concerns? Would you be
    willing to work with us to expand the flexibility of tribes to
    spend those dollars outside of this calendar year if need be?

    A.21. The CARES Act stipulates that CRF funds must be used for
    unbudgeted expenditures between March 1, 2020 and December 30,
    2020 related to COVID-19. A change in statute is required to
    extend the date.

    Q.22. I'm extremely concerned that the course of action
    Treasury and SBA have adopted in the implementation of the
    CARES Act has resulted in the near systematic exclusion of
    Tribes. The decision to apply the gaming revenue prohibition to
    the PPP--which resulted in a majority of Tribal business
    concerns being unable to access the entire first tranche of PPP
    funding. Then, a decision made for the second PPP tranche that
    limited which financial institutions could participate.
    Congress clearly intended for PPP to work more with minority
    serving financial institutions--including Native CDFIs. Because
    Indian Country has significant issues with underbanking, Tribes
    and Native businesses often don't have preexisting
    relationships with mainstream financial institutions. So, this
    agreement was especially important for Indian Country. But, the
    decision was made by the Administration to set a PPP asset
    limit of $50m--which disqualified MOST Native CDFIs and
    effectively shut Native businesses out of the program again.
    The asset threshold was later lowered to $10m, but that still
    excluded the majority of Native CDFIs. The end result, though,
    is there's two rounds of PPP where Tribes have had limited to
    no access because of Administrative decisions.
        How will you make sure that these sorts of administrative
    barriers don't prevent Tribes from accessing COVID-19 economic
    recovery resources moving forward?

    A.22. Any U.S. federally insured depository institution is an
    eligible lender under the Main Street Lending Program, and
    gaming businesses have always been eligible for Main Street
    loans. In addition, following extensive outreach to tribes,
    lenders to tribal businesses, and other stakeholders, the
    Secretary granted a waiver allowing Main Street borrowers that
    are wholly or partly owned by tribal governments to pay
    dividends or other capital distributions to their tribal
    government owners, and the Federal Reserve has made clear that
    tribal economic enterprises that do not have legal existence
    apart from the tribes themselves may nevertheless be eligible
    under Main Street. Both of these steps were intended to
    facilitate tribal access to the program.

    Q.23. Will you commit to making sure the Administration
    administers COVID-19 programs in a way that ensures the maximum
    possible Tribal inclusion?

    A.23. With respect to PPP borrowers, the Secretary shares your
    interest in making the PPP available to as many of America's
    job creators and their employees as feasible. Treasury has
    posted to its website a series of documents, including interim
    final rules that implement the PPP, a set of frequently asked
    questions, fact sheets, and other documents to address specific
    lender and borrower questions about eligibility and the
    application process, among other topics. This includes a SBA
    interim final rule posted on April 24, 2020, providing that a
    business that is otherwise eligible for a PPP loan is not
    rendered ineligible due to its receipt of legal gaming
    revenues.
        With respect to PPP lenders, to further ensure that the PPP
    reached all communities in need of relief during the COVID-19
    pandemic, SBA, in consultation with Treasury, set aside $10
    billion of Round 2 funding to be lent exclusively by CDFIs, in
    addition to the statutory set-asides in the PPP and Health Care
    Enhancement Act of $30 billion for community financial
    institutions and small banks and credit unions and an
    additional $30 billion for banks and credit unions with assets
    between $10 billion and $50 billion. SBA and Treasury also
    considered applications for participation as PPP lenders from
    CDFIs and minority-, women-, veteran-, and military-owned
    lenders based on factors including those described on SBA Form
    3507, including in cases where the lender does not meet all of
    the requirements listed on that form. \1\
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         \1\ https://www.sba.gov/funding-programs/loans/coronavirus-relief-
    options/paycheck-protection-program.
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        As described in the previous question above, the Secretary
    and the Federal Reserve have already taken steps to facilitate
    tribal access to the Main Street Lending Program, and welcome
    suggestions from stakeholders on how to make the program even
    more inclusive.

    Q.24. One concern I have is that our minority-owned businesses,
    because they often lack some of the traditional lending
    relationships, have not been able to access PPP to the extent
    that is needed.
        Will we be getting PPP data on demographics? Or at least be
    able to see how many loans were made in majority-minority
    neighborhoods?

    A.24. Treasury and SBA have undertaken extensive and ongoing
    efforts to encourage lending to underserved and rural
    borrowers. These efforts have included recruiting lenders that
    operate in underserved communities to participate in PPP and
    facilitating their approval of PPP loans, as well as educating
    underserved borrowers about the opportunities that exist for
    them through PPP. Guidance was issued to all lenders asking
    them to redouble their efforts to assist eligible borrowers in
    underserved and disadvantaged communities. This was done to
    ensure that individuals, businesses, and other entities in
    underserved and rural markets, including veterans and members
    of the military community, small business concerns owned and
    controlled by socially and economically disadvantaged
    individuals, women, and businesses in operation for less than 2
    years, all benefited from PPP.
        Treasury and SBA have worked closely with Congress,
    regional and community banks, fintech lenders, CDFIs, MDIs, the
    Department of Agriculture, and other stakeholders to ensure
    that as many workers and small businesses as possible can
    readily participate in the opportunities afforded by this
    program, with particular focus on underserved borrowers,
    including minorities, women, and rural entrepreneurs. Treasury
    and SBA extensively recruited lending institutions that
    typically operate in underserved communities to participate as
    PPP lenders. An important focus of our efforts to serve
    underserved communities has been to harness the role of CDFIs
    and MDIs. Hundreds of CDFIs were contacted and advised of their
    eligibility to participate in the PPP. As of August 8, 2020,
    when the PPP closed to new loan applications, 432 CDFIs and
    MDIs had participated and provided 221,000 loans totaling more
    than $16.4 billion. The program has resulted in $106 billion
    provided to businesses in HUBZones, accounting for more than 20
    percent of all PPP funding. Data also show that the loans have
    been broadly distributed and made across diverse areas of the
    economy, with 27 percent of the funds going to low- and
    moderate-income communities, which is in proportion to their
    percentage of the population.
        Treasury and SBA are committed to implementing the CARES
    Act with transparency and accountability. Information regarding
    approved PPP loans and program participation is provided on our
    websites, including data to help inform your and the public's
    understanding of borrower participation, such as the number and
    dollar amount of loans, number of loans by amount, distribution
    by lender size and type, list of top lenders, average loan
    size, and loan distribution across industries and States.
        Additionally, SBA has made additional data regarding PPP
    loans publicly available in a manner that balances the
    interests of transparency with protections for small
    businesses, sole proprietors, and independent contractors. SBA
    disclosed the business names, addresses, NAICS codes, zip
    codes, business types, demographic data, jobs supported, and
    loan amount ranges as follows: $150,000-350,000; $350,000-1
    million; $1-2 million; $2-5 million; and $5-10 million. These
    categories account for nearly 75 percent of the loan dollars
    approved. For loans below $150,000, SBA disclosed the specific
    loan amounts along with NAICS codes, zip codes, business types,
    demographic data, and jobs supported, but no personally
    identifiable borrower information.
        This approach to public disclosure will allow Americans to
    see how their tax dollars are being spent while ensuring that
    America's entrepreneurs and job creators are able to compete
    fairly as our economy safely reopens. Unlike other SBA loans,
    PPP loan amounts are calculated based on payroll data, which
    employers typically treat as commercially sensitive or
    proprietary. In general, a borrower's specific PPP loan amount
    will reveal the borrower's nonpublic payroll information-
    including the personal income of independent contractors and
    sole proprietors that received PPP loans.
        In addition to these public disclosures, SBA worked with
    congressional committees and the Government Accountability
    Office to provide full access to all PPP loan-level
    information--including, but not limited to, all borrower names
    and loan amounts--in a manner that afforded appropriate
    confidential treatment for nonpublic personally identifiable
    and commercially sensitive business information.
        Finally, Treasury and SBA are working to gather additional
    information on program participants. The PPP Loan Forgiveness
    Application Form 3508 and Form 3508EZ both request voluntary
    disclosure of veteran status, gender, race, and ethnicity from
    loan recipients. I respectfully refer you to SBA for additional
    information.

    Q.25. On Friday, the Treasury and SBA released an 11-page loan
    forgiveness application for the PPP Program with instructions
    for how to complete it. This document provides clarity on a
    number of issues such as when the 8-week forgiveness period
    begins. Oversight of these grants to businesses is essential.
    However, we still do not have detailed guidance on how the
    program will be administered.
        What are the steps for lenders and the SBA to process these
    applications?
        What system(s) are going to be used to transmit this
    information to SBA?
        What role will lenders have in the forgiveness process?
        Can you provide a timeline of development of the guidance?
        Can you provide an update on when clear and full
    forgiveness guidance will be issued for small businesses and
    lenders?
        What can we expect to see in the guidance when it is
    released?
        What will happen in an instance where the statute is
    revised after a borrower has already submitted an application
    for forgiveness? How will those applicants be handled?

    A.25. Treasury has posted to its website a series of documents,
    including interim final rules that implement the PPP, a set of
    frequently asked questions, fact sheets, program reports, and
    other documents to address specific lender and borrower
    questions about eligibility and the application and forgiveness
    process, among other topics. This includes guidance to reflect
    the PPP Flexibility Act's amendments to the PPP to, among other
    things, extend the covered period for loan forgiveness to 24
    weeks after the date of loan disbursement and to lower the
    percentage of a borrower's PPP loan proceeds that must be used
    for payroll costs. This also includes a set of frequently asked
    questions on loan forgiveness, as well as a procedural notice
    on procedures for lender submission of PPP loan forgiveness
    decisions to SBA and SBA loan forgiveness reviews. \2\ In
    addition, SBA published an EZ version of the forgiveness
    application that requires fewer calculations and less
    documentation for eligible borrowers. Treasury and the SBA will
    continue to provide additional guidance, as appropriate, to
    help small businesses and other eligible borrowers get the
    assistance they need.
    ---------------------------------------------------------------------------
         \2\ This includes detail on the financial services technology
    provider that SBA has partnered with to make available a secure SaaS
    platform to accept loan forgiveness decisions, supporting
    documentation, and requests for forgiveness payments.

    Q.26. A recent Census report found that three out of four small
    businesses have sought financial assistance through the
    Paycheck Protection Program.
        As you have worked on this program over the last few
    months, what have been the major concerns from the small
    businesses who are not applying to the program?
        What other steps should Congress be looking at to support
    businesses for whom PPP was not the best option?

    A.26. The Secretary shares your interest in making the PPP
    available to as many of America's job creators and their
    employees as feasible. Treasury looks forward to working with
    you and your staff as you consider additional enhancements to
    the program.

    Q.27. In the summary reports issued for the separate rounds of
    PPP funding, there is a breakdown on the number of
    participating lenders based on their asset size (less than
    $10B, between $10B and $50B, and over $50B). On the Summary for
    the Second Round of funding, there were 148 lenders over $50B
    in assets that participated--yet according to the Fed (as of
    the end of last year), there were only 38 insured institutions
    with consolidated assets over $50B.
        What clarity can you provide on the disparity between these
    two numbers?

    A.27. As of August 8, 2020, when the program closed to new loan
    applications, over 5.2 million loans had been approved for more
    than $525 billion to borrowers across America. This includes
    1.7 million loans for more than $190 billion that had been
    approved by 34 lenders with assets over $50 billion.

    Q.28. As evidenced by recent DOJ actions, the Paycheck
    Protection Program (PPP) has faced increasing challenges
    associated with fraud. The increasing rates of fraud have
    hindered the program's ability to meet its underlying
    objectives to assist small businesses looking to keep employees
    on their payroll and prevent rising levels of unemployment. The
    program, unwittingly, has created a new avenue for criminals to
    perpetrate their frauds against U.S. consumers and small
    businesses by attempting to disguise emails, websites and other
    communications as coming from legitimate actors or government
    entities, when in reality they are coming from nefarious
    actors. Frequently, the first step in a fraudster's arsenal to
    perpetrate a fraud scheme, such as the schemes that are
    impacting the PPP, is to utilize a malicious VPN or other
    online anonymizing tools such as bots to mask their true
    identity and location. Without sophisticated tools to detect
    the use of such devices, VPNs and such tools will continue to
    enable fraudsters to perpetrate their crimes without leaving a
    trace.
        As the Treasury and the Federal Reserve work to bolster
    these programs and prevent the increased rates of fraud they're
    currently facing, what role will advanced, multisource
    geolocation data play in fostering a more effective ID
    verification and authentication process, to ensure that the PPP
    and similar programs are able to fulfill their intended
    objectives, and that these coveted funds reach the hands of the
    individuals that need them most?

    A.28. I respectfully refer you to the SBA for information on
    this issue.

    Q.29. The Federal Reserve has used its Section 13(3) authority
    to lend to businesses and local governments and other powers to
    allocate $2.3 trillion of credit through nine programs, backed
    by $215 billion of Treasury funds.
        Do you agree with the Congressional Budget Office estimates
    that the Fed's programs will not increase the Federal deficit,
    because loans that default are likely to be offset by other
    loans repaid with interest that result in a net gain for the
    government?

    A.29. The CBO prepares its estimates under its own statutory
    mandate and in a manner that is separate and independent from
    the administration of the 13(3) facilities. At this time
    Treasury has not evaluated CBO's estimates.

    Q.30. We are aware of problems facing borrowers of the
    commercial mortgage-backed securities, who are impacted by the
    shutdowns of public spaces.
        Has Treasury examined problems facing commercial mortgage-
    backed securities?
        Has Treasury considered using funds to support borrowers of
    CMBS?

    A.30. Treasury and the Federal Reserve continue to monitor the
    market impact of the COVID-19 pandemic on commercial real
    estate borrowers, including those whose loans are in commercial
    mortgage-backed securities (CMBS). Treasury continues to work
    with the Federal Reserve to assess the efficacy of existing
    facilities established under the Federal Reserve's 13(3)
    emergency lending authority, and will evaluate appropriate
    changes necessary to promote the flow of credit and support a
    robust economic recovery.

    Q.31. Prior to this crisis, the travel industry was coming off
    a decade of growth and many travel businesses were in strong
    financial shape. Now, due to the travel restrictions, business
    closures and quarantines in place across the U.S., travel
    businesses have virtually no customers or revenue. The impacts
    have been catastrophic
        The response by Congress and the Administration has focused
    largely on small businesses, which are absolutely vital to the
    economy. While 83 percent of travel businesses are small
    businesses, more than 50 percent of travel industry workers are
    employed by mid- to large-sized businesses with more than 500
    employees.

    A.31. The Main Street Lending Program offers loans to small and
    medium-sized businesses, including in the travel industry, that
    were in sound financial condition before the COVID-19 pandemic
    and have solid post-pandemic prospects to help maintain their
    operations until the economy recovers. The program offers a
    range of secured and unsecured senior loan options for
    borrowers that meet eligibility criteria and bank underwriting
    standards.

    Q.32. What type of financial assistance is the Treasury
    planning establish for our Nation's nonprofits, like
    destination marketing organizations, many of which are
    ineligible for programs like PPP under the CARES Act?

    A.32. On September 4, the Federal Reserve Bank of Boston
    announced that two new Main Street Lending Program loan
    facilities for nonprofit organizations are fully operational.
    These new facilities are designed to help credit flow to small-
    and medium-sized nonprofit organizations that were in sound
    financial condition prior to the pandemic and have solid post-
    pandemic prospects.

    Q.33. The Las Vegas Convention and Visitors Authority is a
    quasigovernmental entity that is critical for driving
    visitation to Las Vegas. The Authority's funding, which is tied
    to local occupancy taxes, has plummeted--jeopardizing its
    important mission and forcing it to lay off workers.
    Unfortunately, quasigovernmental entities are unable to obtain
    financial relief.
        What kinds of relief are available for quasigovernmental
    entities?
        Is there are a way to ensure the Coronavirus Relief Fund
    has more flexibility so quasigovernmental entities, like the
    Las Vegas Convention and Visitors Authority, can receive
    assistance?

    A.33. Treasury is willing to discuss this issue with you as the
    Department considers further guidance on the use of CRF funds
    for quasigovernmental entities.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR JONES
                         FROM STEVEN T. MNUCHIN

    Q.1. Economic Impact Payments--As you know, the Internal
    Revenue Service (IRS) has been issuing $1,200 Economic Impact
    Payments to eligible Americans since April, to help them cope
    with the financial effects of the pandemic. However, as of May
    15, 2020, the IRS anticipated that 150 million payments still
    needed to be sent out. There have been projections that it
    could take up to 20 weeks--or 5 months--for all of the paper
    checks to be sent.

    A.1. As of September 18, 2020, Treasury and the IRS have issued
    more than 163 million Economic Impact Payments totaling more
    than $273 billion to individuals for whom the IRS has the
    necessary information. The IRS and Fiscal Service accelerated
    the rate of delivery of Economic Impact Payments to many
    eligible Americans by successfully shifting such delivery away
    from paper checks and to:

      1.  Direct deposit through information obtained through the
            Get My Payment portal and Non-Filers tool on IRS.gov
            (where the taxpayer can input their bank account
            information).

      2.  Debit cards (which are funded electronically).

      3.  Bank accounts based on information provided by the Bureau
            of the Fiscal Service, Social Security Administration,
            and the Department of Veterans Affairs.

    Q.2. 8.4 million households lack a bank account and 20 million
    currently do not have home access to broadband. As a result,
    the majority of recipients of paper checks are those that need
    it most. What are you doing to ensure Economic Impact Payments
    are getting to the most financially vulnerable individuals and
    families in the shortest time frame possible?

    A.2. The Treasury Department and the IRS initially prioritized
    mailing checks to people with lower adjusted gross income
    (AGI), starting with individuals with an AGI of less than
    $10,000, then mailed checks to individuals with progressively
    higher AGI amounts. The Treasury Department and the IRS
    continue to conduct a sweeping public awareness campaign to
    share information and details about Economic Impact Payments. A
    significant goal of these outreach efforts is to reach those
    Americans without adequate broadband access to ensure every
    individual who is eligible for an Economic Impact Payment
    receives their payment.

    Q.3. Paycheck Protection Program (PPP) --PPP General: Are the
    Treasury and SBA keep track of applicant's approval history for
    PPP loans to see if they were denied a loan with different
    lenders? If so, please provide that information.

    A.3. I respectfully refer you to the SBA for more information.

    Q.4. Racial Disparity--What is the Treasury Department and SBA
    doing to ensure underserved small businesses in the communities
    hardest hit by COVID-19 are recipients of Federal funds? Please
    be as specific as possible.

    A.4. Treasury and SBA have undertaken extensive and ongoing
    efforts to encourage PPP lending to underserved and rural
    borrowers. These efforts have included recruiting lenders that
    operate in underserved communities to participate in PPP and
    facilitating their approval of PPP loans, as well as educating
    underserved borrowers about the opportunities that exist for
    them through PPP. Guidance was issued to all lenders asking
    them to redouble their efforts to assist eligible borrowers in
    underserved and disadvantaged communities. This was done to
    ensure that individuals, businesses, and other entities in
    underserved and rural markets, including veterans and members
    of the military community, small business concerns owned and
    controlled by socially and economically disadvantaged
    individuals, women, and businesses in operation for less than
    two years, all benefited from PPP.
        Treasury and SBA have worked closely with Congress,
    regional and community banks, fintech lenders, CDFIs, MDIs, the
    Department of Agriculture, and other stakeholders to ensure
    that as many workers and small businesses as possible can
    readily participate in the opportunities afforded by this
    program, with particular focus on underserved borrowers,
    including minorities, women, and rural entrepreneurs. Treasury
    and SBA extensively recruited lending institutions that
    typically operate in underserved communities to participate as
    PPP lenders. An important focus of our efforts to serve
    underserved communities has been to harness the role of CDFIs
    and MDIs. Hundreds of CDFIs were contacted and advised of their
    eligibility to participate in the PPP. As of August 8, 2020,
    when the PPP closed to new loan applications, 432 CDFIs and
    MDIs had participated and provided 221,000 loans totaling more
    than $16.4 billion. The program has resulted in $106 billion
    provided to businesses in HUBZones, accounting for more than 20
    percent of all PPP funding. Data also show that the loans have
    been broadly distributed and made across diverse areas of the
    economy, with 27 percent of the funds going to low- and
    moderate-income communities, which is in proportion to their
    percentage of the population.

    Q.5. CDFIs and MDIs--Are the Treasury Department and Federal
    Reserve working with CDFIs, including nondepository CDFIs, and
    minority depository institutions to help them navigate the PPP
    and the PPP Lending Facility so that they can have more success
    there? If so, please provide specific steps being taken.

    A.5. As noted above, since enactment of the CARES Act, Treasury
    and SBA have worked tirelessly and closely with Congress, with
    borrowers, and with lenders of all sizes-including regional and
    community banks, CDFIs, and MDIs-to ensure the broadest
    possible segment of small businesses can access the PPP and to
    encourage PPP lending to underserved and rural borrowers.
    Treasury and SBA extensively recruited lending institutions
    that typically operate in underserved communities to
    participate as PPP lenders. An important focus of our efforts
    to serve underserved communities has been to harness the role
    of CDFIs and MDIs. For example, hundreds of CDFIs were
    contacted and advised of their eligibility to participate in
    the PPP. Treasury and SBA staff hosted tele-townhall forums
    with trade associations representing CDFI lenders to
    specifically engage with these lenders and understand how to
    better serve their customers in underserved communities.
    Guidance was also issued to all lenders, including CDFIs,
    asking them to redouble their efforts to assist eligible
    borrowers in underserved and disadvantaged communities to
    expand economic opportunity. Treasury and SBA worked with the
    Federal Reserve to establish the Payroll Protection Program
    Liquidity Facility to enable PPP lenders, including both bank
    and nonbank lenders as well as CDFIs and MDIs, to pledge PPP
    loans to the Federal Reserve as collateral for Federal Reserve
    borrowings to enhance lender liquidity and enable PPP lenders
    to expand lending capacity. The availability of this liquidity
    has greatly benefited nonbank and smaller PPP lenders that lend
    to underserved communities and that lend to the smallest
    businesses. And, SBA, in consultation with Treasury, set aside
    $10 billion of Round 2 funding to be lent exclusively by CDFIs
    to further ensure that the PPP reached all communities in need
    of relief during the COVID-19 pandemic. Treasury and SBA
    participated in a roundtable discussion focusing on MDIs'
    experiences as lenders in the PPP, including their work to
    serve small businesses in low- and moderate-income communities.
    As of August 8, 2020, when the PPP closed to new loan
    applications, 308 CDFIs had participated from across the
    country, providing over 114,000 loans for more than $7.5
    billion.

    Q.6. Loan Forgiveness--The first PPP loan disbursements were
    more than a month ago, yet Treasury only issued guidance late
    Friday on how companies will qualify and apply for loan
    forgiveness. Manufacturers and other small businesses still
    need clarity so they can ensure they are taking the right steps
    to receive full loan forgiveness--as Congress intended. Can you
    commit to publicly releasing this week additional plain
    language guidance on loan forgiveness procedures for lenders
    and small businesses out there?

    A.6. Treasury has posted to its website a series of documents,
    including interim final rules that implement the PPP, a set of
    frequently asked questions, fact sheets, program reports, and
    other documents to address specific lender and borrower
    questions about eligibility and the application and forgiveness
    process, among other topics. This includes guidance to reflect
    the PPP Flexibility Act's amendments to the PPP to, among other
    things, extend the covered period for loan forgiveness to 24
    weeks after the date of loan disbursement and to lower the
    percentage of a borrower's PPP loan proceeds that must be used
    for payroll costs. This also includes a set of frequently asked
    questions on loan forgiveness. In addition, SBA published an EZ
    version of the forgiveness application that requires fewer
    calculations and less documentation for eligible borrowers.
    Treasury and the SBA will continue to provide additional
    guidance, as appropriate, to help small businesses and other
    eligible borrowers get the assistance they need.

    Q.7. Safe Harbor--The SBA and Treasury Department recently
    released guidance that small businesses receiving loans for
    less than $2 million will automatically be certified as in
    ``good faith.'' I applaud this decision as it will give small
    business owners assurance that the SBA will not audit them
    during this stressful time. Is there a process in place to
    certify ``good faith'' loans that are above $2 million? What is
    the status of the money returned from large corporations during
    the first round? Would you be open to designating those funds
    to go to lending by CDFIs and MDIs so that underserved
    communities benefit from the larger companies returning the
    funds?

    A.7. On June 1, the SBA issued an interim final rule describing
    its loan review procedures and related lender and borrower
    responsibilities. Treasury and SBA have also posted guidance on
    frequently asked questions on loan forgiveness, as well as on
    procedures for lenders' submissions of PPP loan forgiveness
    decisions to SBA and SBA loan forgiveness reviews. Treasury and
    SBA will continue to provide additional guidance, as
    appropriate, to help small businesses and other eligible
    borrowers get the assistance they need. Treasury looks forward
    to working with you and your staff as you consider additional
    enhancements to the program. Treasury respectfully refers you
    to SBA for information regarding returned funds.

    Q.8. Factoring--I would like to understand why a large number
    of small businesses, called factors, with fewer than 500
    employees have been denied access to PPP loans.
        Factors are being denied on the basis that they are
    considered ``lenders'' under U.S. Code 13 CFR 120.110. Factors
    purchase existing accounts receivable. They do not lend money.
    Further, a recent Federal court decision in Michigan trust
    concluded the exclusion violated the CARES Act.
        Can you please look into this and address the situation or
    explain why factors should not be permitted to participate?

    A.8. The Secretary shares your interest in making the PPP
    available and accessible to as many of America's job creators
    and their employees as feasible. Treasury has posted to its
    website a series of documents, including interim final rules
    that implement the PPP, a set of frequently asked questions,
    fact sheets, program reports, and other documents to address
    specific lender and borrower questions about eligibility and
    the application and forgiveness process, among other topics.
    \1\ Treasury and the SBA will continue to provide additional
    guidance, as appropriate, to help small businesses and other
    eligible borrowers get the assistance they need.
    ---------------------------------------------------------------------------
         \1\ See https://home.treasury.gov/policy-issues/top-priorities/
    cares-act/assistance-for-small-businesses.

    Q.9. State and Local Governments--The Treasury Department
    issued guidance that States were not allowed to used their
    distribution from the Coronavirus Relief Fund to replace lost
    revenue. Just as stay-at-home ordinances affects businesses'
    revenue, it affects government revenue. Local governments
    across Alabama may be forced to lay off police, firefighters
    and sanitation workers due decreased revenues that they were
    not expecting when approving their budgets.
        Would you support in a Covid-4 package allowing States and
    local governments to use a portion of the Coronavirus Relief
    Fund to cover predetermined expenses like keeping police and
    firefighter on the streets and allowing sanitation workers to
    pick up our garbage? If not, why, given the negative impact the
    repercussions of these layoffs would have on families across
    Alabama and other States?

    A.9. While Treasury does not allow for CRF dollars to be used
    in order to supplement lost revenues, it does allow for CRF
    funds to be put towards payroll expenses for public safety,
    public health, health care, human services, and similar
    employees whose services are substantially dedicated to
    mitigating or responding to the COVID-19 public health
    emergency.

    Q.10. Commercial Mortgage-Backed Securities (CMBS)--Borrowers
    of commercial mortgage-backed securities, whose properties have
    been shut down by government public safety precautions, are
    under undue significant financial hardship because they stuck
    between tenants that are not paying and mortgage servicers who
    are not offering flexibility. These are owners of hotels,
    shopping centers and certain housing entities. They are
    extremely worried about their ability to meet their financial
    obligations over a protracted time period with no rents coming
    in. There is not a clear regulatory framework for CMBS but the
    concerns remain. What efforts has the Treasury Department taken
    to support those borrowers?

    A.10. The Treasury and the Federal Reserve continue to monitor
    the market impact of the COVID-19 pandemic on commercial real
    estate borrowers, including those whose loans are in CMBS.
    Treasury continues to work with the Federal Reserve to assess
    the efficacy of existing facilities established under the
    Federal Reserve's 13(3) emergency lending authority, and will
    evaluate appropriate changes necessary to promote the flow of
    credit and support a robust economic recovery.

    Q.11. Mortgage Servicers--As you know, the CARES Act limited
    assistance to only localities with a population that exceeds
    500,000. In Alabama, only Jefferson County met the population
    threshold and the funding allocation is limited to ``necessary
    expenditures incurred due to the public health emergency,''
        At the same time, more that 8 percent of households
    nationwide have entered mortgage forbearance. This means that
    mortgage servicing companies are now responsible for making the
    property taxes, hazard insurance, and homeowners association
    dues, and other assessments for 4.7 million mortgages each
    month.
        These are not an insignificant portion of a borrower's
    monthly payment, accounting for 25 percent to 30 percent
    depending on the State, and the property type. They are also
    vital to the financial stability of my State. Without
    additional Federal assistance to local governments in Alabama,
    I am very concerned about any delays that may occur in
    advancing property taxes payments.
        Have you thought about the risks to cities and counties of
    a liquidity crunch because of any delay or shortfall in State
    and local tax payments due from escrow accounts in the coming
    months? Have you considered standing up a liquidity facility
    now to help mortgage servicers make these property tax and
    insurance advances on behalf of home owners?

    A.11. Treasury is actively monitoring the mortgage market and
    the associated impact of COVID-19. We have focused considerable
    resources on delivering support to households and businesses
    struggling as a consequence of the necessary public health
    response. Treasury will continue to work to promote stable
    markets, including for residential mortgage lending.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR SMITH
                         FROM STEVEN T. MNUCHIN

    Q.1. COVID-19 is having a massive impact on Tribes, first
    because disparities in health and a shortage of safe, stable
    housing mean the virus is more devastating in Tribal
    communities. And second, because Tribes made the decision to
    voluntarily close their enterprises to protect public health,
    they have seen a massive loss of government revenue and also
    big peaks in unemployment.
        Even today, Tribal governments are still fighting to get
    the full $8 billion that Congress intended for them, even as
    Treasury has indicated that it plans to allocate some of this
    money to Alaska Native corporations, which are for profit
    corporations, not Tribal governments.
        It's been over 50 days since the CARES Act passed, and
    still only 60 percent of the $8 billion has been distributed.
    It took Treasury over a month to get a single dollar out the
    door. How do you square these delays with the Federal
    Government's unique trust and treaty responsibilities to Tribal
    nations?

    A.1. Treasury has completed making payments to tribal
    governments, other than amounts that have not been paid to
    Alaska Native corporations pending litigation on that issue.

    Q.2. Do you agree that Tribal governments, like their State and
    local counterparts, have a unique need for relief funds so they
    can provide essential government services to their members?

    A.2. Title V of the CARES Act sought to provide relief to
    State, territorial, local, and tribal governments by covering
    the cost of unbudgeted for expenditures related to the COVID-19
    public health emergency.
        Treasury guidance clarifies specific expenditures for which
    CRF fund recipients can use these funds in accordance with that
    statute; in many cases those expenditures relate to essential
    government services.

    Q.3. We still don't know what exact formula Treasury used to
    distribute the first $4.8 billion dollars, and how you plan to
    distribute the rest. What formula did you use?

    A.3. Please see Tribal Allocation Methodology on Treasury's
    website here: https://onect.treasuryecm.gov/--layouts/15/
    UniversalCT/pages/CTHome.aspx?Id=2020-SE-5528 and here https://
    home.treasury.gov/system/files/136/Tribal-Allocation-
    Methodology-for-Second-Distribution.pdf.

    Q.4. Will you make public future distribution formulas you are
    using to distribute these Tribal Relief Funds? For past and
    future allocations? When?

    A.4. As with previous methodologies used for the payments of
    CRF funds to tribal governments, Treasury intends to include
    the methodology for future payments to tribal governments if
    such payments may be required in the future.

    Q.5. In Minnesota and across the country, people experiencing
    homelessness are especially vulnerable to COVID-19. People
    living in shelters, or encampments, or in their cars don't have
    the most basic thing we all need, a safe place to call home.
    Many of them are youth, or moms with children. They don't have
    a permanent address, and many of them have not filed a tax
    return, so how do they get the direct recovery assistance that
    they need so desperately.
        Has Treasury done outreach to homeless service providers or
    local Continuums of Care and asked them to help identify people
    experiencing homelessness and work with them to claim their
    payment?

    A.5. The Treasury Department and the IRS have conducted
    outreach with homeless service providers as well as other
    organizations that work closely with the homeless and other
    underserved groups. The IRS has made tens of thousands of
    contacts with a variety of nonprofits, social service agencies,
    State and local organizations, and many others with millions of
    members to share information related to Economic Impact
    Payments. This includes food banks, faith-based organizations,
    and SNAP organizations.
        For example, as of June 12, 2020, the IRS has reached out
    to more than 4,500 homeless shelters with information on how to
    obtain an Economic Impact Payment. The IRS has shared
    information with the Department of Housing and Urban
    Development, including the Continuum of Care Program, \1\ to
    provide information to individuals experiencing homelessness to
    assist them in submitting information needed to obtain an
    Economic Impact Payment. The IRS will also continue to reach
    out to other national organizations dedicated to assisting
    these individuals and others who are eligible to receive an
    Economic Impact Payment.
    ---------------------------------------------------------------------------
         \1\ See https://www.hud.gov/hudprograms/continuumofcare.

    Q.6. The CARES Act required you to conduct a public awareness
    campaign on the availability of these payments for non-tax
    filers. In late April, the IRS published some promotional
    materials encouraging these individuals to sign up at IRS.gov
    to receive their payments.
        Is this the extent of your public awareness campaign? How
    would you expect these individuals to access the Internet when
    places like libraries and cafes have been closed by stay-at-
    home orders?

    A.6. Treasury and the IRS have continued to actively carry out
    the public awareness campaign. This is one of the biggest
    communications and outreach efforts the IRS has undertaken,
    with more than 100 products being created and more taking place
    each week in advance of the October 15 deadline to use the Non-
    Filers tool. In addition to sharing extensive material with the
    news media, social media, and websites, this national public
    awareness campaign has included partnering with a wide spectrum
    of community and professional groups across the country-with
    special emphasis being given to working with organizations that
    interact with those who may not normally file a tax return,
    including organizations and social service groups that assist
    underserved communities. Thousands of these contacts have taken
    place, and the IRS has created special tools and products, like
    partner kits, to help share information about Economic Impact
    Payments to those with-and without-Internet access. As more
    areas have reopened, this effort has continued to reach an
    increasing number of people.

    Q.7. Please describe the full range of steps actions the
    Department of Treasury has taken to provide recovery rebate
    payments to individuals experiencing homelessness.

    A.7. In addition to the outreach efforts described in a
    previous question, the IRS has taken special steps to reach
    potential organizations nationwide that might assist
    individuals experiencing homelessness and share IRS-related
    Economic Impact Payment resources with them. The IRS has asked
    these organizations to act as a ``trusted partner'' to receive
    payments on behalf of their homeless clients. More than 300
    organizations agreed when asked by the IRS if they would act as
    a ``trusted partner'' allowing homeless persons to use their
    physical address to receive an Economic Impact Payment. In
    addition, organizations across the country continue to work in
    local communities with the homeless and other under-served
    communities to share Economic Impact Payment information,
    including information on how homeless individuals can provide a
    mailing address for a payment. These efforts range from (i)
    volunteer efforts at IRS-supported Volunteer Income Tax
    Assistance and Tax Counseling for the Elderly sites, as well as
    low-income taxpayer clinics; to (ii) sharing information with
    social service groups, nonprofits, faith-based institutions,
    and an array of Federal, State, and local agencies such as the
    Consumer Financial Protection Bureau. Thousands of
    organizations have been reached and these efforts continue.

    Q.8. Some advocates and members of the homeless community have
    suggested that the IRS send checks using the Postal Service's
    General Delivery service, which can deliver mail to people
    without a permanent address. The IRS has not indicated whether
    they would consider this.
        What is your view on this proposal? Will you work with the
    Postal Service and take advantage of this vitally important
    service that many people experiencing homelessness are already
    familiar with?

    A.8. The Treasury Department and the IRS are considering the
    potential effectiveness of partnering with the Postal Service
    to leverage its General Delivery service to reach those
    Americans experiencing homelessness. Our successful partnership
    with the Department of Veterans Affairs has helped ensure that
    Veterans and their beneficiaries who receive Federal benefits
    receive their Economic Impact Payments automatically and
    without additional paperwork. Since the enactment of the CARES
    Act, we have continued to explore ways to improve our ability
    to deliver this much-needed relief to the American people.

    Q.9. Accessing loans under the Paycheck Protection Program has
    been a challenge for many business owners, especially for
    business owners of color and native businesses, who are less
    likely to have a lending relationship with a bank that will
    accept their PPP application.
        Is it acceptable for the largest banks in the country to be
    only processing PPP applications for existing customers, for
    most of the time that they were accepting PPP applications?
        Should the largest banks in the country, like JPMorgan
    Chase, Wells Fargo, Bank of America, and Citi, be allowed to
    prioritize PPP loans for some customers over others? Or should
    they be processed on a first come, first served basis?
        What steps have you taken to ensure all eligible businesses
    are able to access PPP loans?

    A.9. The Secretary shares your interest in making the PPP
    available and accessible to as many of America's job creators
    and their employees as feasible. 45 percent of the approved PPP
    lending amount was lent by lenders with less than $10 billion
    in assets. With an average loan size of approximately $100,000,
    the program is serving the smallest of businesses.
        Treasury and SBA have undertaken extensive and ongoing
    efforts to encourage lending to underserved and rural
    borrowers. These efforts have included recruiting lenders that
    operate in underserved communities to participate in PPP and
    facilitating their approval of PPP loans, as well as educating
    underserved borrowers about the opportunities that exist for
    them through PPP. Guidance was issued to all lenders asking
    them to redouble their efforts to assist eligible borrowers in
    underserved and disadvantaged communities. This was done to
    ensure that individuals, businesses, and other entities in
    underserved and rural markets, including veterans and members
    of the military community, small business concerns owned and
    controlled by socially and economically disadvantaged
    individuals, women, and businesses in operation for less than
    two years, all benefited from PPP.
        Treasury and SBA have worked closely with Congress,
    regional and community banks, fintech lenders, CDFIs, MDIs, the
    Department of Agriculture, and other stakeholders to ensure
    that as many workers and small businesses as possible can
    readily participate in the opportunities afforded by this
    program, with particular focus on underserved borrowers,
    including minorities, women, and rural entrepreneurs. Treasury
    and SBA extensively recruited lending institutions that
    typically operate in underserved communities to participate as
    PPP lenders. An important focus of our efforts to serve
    underserved communities has been to harness the role of CDFIs
    and MDIs. Hundreds of CDFIs were contacted and advised of their
    eligibility to participate in the PPP. As of August 8, 2020,
    when the PPP closed to new loan applications, 432 CDFIs and
    MDIs had participated and provided 221,000 loans totaling more
    than $16.4 billion. The program has resulted in $106 billion
    provided to businesses in HUBZones, accounting for more than 20
    percent of all PPP funding. Data also show that the loans have
    been broadly distributed and made across diverse areas of the
    economy, with 27 percent of the funds going to low- and
    moderate-income communities, which is in proportion to their
    percentage of the population.

    Q.10. In addition, I sent you a letter on May 7 raising several
    question about the PPP program, which I repeat below.
        What steps are you taking to ensure PPP borrowers are made
    fully aware of the requirements of the program, including
    requirements to qualify for loan forgiveness?
        What, if any, documents are provided to borrowers to
    understand the rules of the loan and forgiveness? Are borrowers
    required to acknowledge that they understand the program rules
    before obtaining a loan?
        Is there any requirement for lenders to consider whether
    PPP is the best program for borrowers, in comparison to other
    economic support options that may be available, before
    processing a loan application? Are fees paid to lenders
    structured in a way that they incentivize good lending
    practices and proper treatment of customers?
        What steps are you taking to prepare for the millions of
    requests for loan forgiveness that will arise in coming weeks?
    What processes have been established to help borrowers
    understand how to obtain forgiveness, and when will you publish
    final rules on loan forgiveness?
        Do you believe lenders be prepared to handle the large
    volume of requests that will soon arrive? Are lenders
    appropriately incentivized to handle the requests in an
    appropriate and timely manner?

    A.10. More than 5 million PPP loans were approved by nearly
    5,500 lenders, helping to support an estimated 51 million jobs
    and more than 80 percent of small business payroll. As of
    August 8, 2020, this included over 102,000 PPP loans to
    borrowers in Minnesota for more than $11.2 billion. With an
    average loan size of approximately $100,000, the program is
    serving the smallest of businesses. PPP loans have also been
    broadly distributed, with about 27 percent of the funds going
    to low and moderate income communities, which is in proportion
    to their percentage of the population.
        Treasury has posted information to its website to address
    specific lender and borrower questions about eligibility and
    the application and forgiveness process, among other topics.
    This includes guidance to reflect the PPP Flexibility Act's
    amendments to the PPP to, among other things, extend the
    covered period for loan forgiveness to 24 weeks after the date
    of loan disbursement and to lower the percentage of a
    borrower's PPP loan proceeds that must be used for payroll
    costs. This also includes an SBA Procedural Notice on
    procedures for lender submission of PPP loan forgiveness
    decisions to SBA and SBA forgiveness loan reviews. Treasury and
    SBA will continue to provide additional guidance, as
    appropriate, to help small businesses and other eligible
    borrowers get the assistance they need.

    Q.11. On April 23, I wrote to you to urging that a number of
    business types that were previously denied PPP loans be made
    eligible for the program. Thank you for heeding my request and
    making rural electric cooperatives, agricultural cooperatives,
    rural hospitals and Tribal businesses eligible for the program.
    The two remaining business types I noted in my letter are small
    banks and credit unions, who cannot use PPP loans for their own
    operations.
        Do you plan to make credit unions and community banks
    entities eligible for PPP? Why or why not?

    A.11. Treasury and SBA will continue to provide additional
    guidance, as appropriate, to help small businesses and other
    eligible borrowers get the assistance they need.

    Q.12. The CARES Act directed Treasury and the Federal Reserve
    to set up a lending program for midsize businesses. You said
    you intended to comply with both the letter and the spirit of
    the CARES Act.
        One provision of the CARES Act says that the Treasury
    Secretary ``shall endeavor'' to establish a lending program for
    midsize businesses and that any borrower applying for a loan
    under the midsize business lending program must certify that
    ``the recipient will not outsource or offshore jobs for the
    term of the loan and 2 years after[wards].''
        Yet, when the Fed unveiled the term sheets for the Main
    Street Lending Facility, there doesn't seem to be any mention
    of a certification for not moving jobs offshore.
        Do you think firms getting taxpayer-funded bailout should
    be required to keep their jobs in the United States?
        Why wasn't this a requirement in your agreement with the
    Fed to require firms to agree not to move jobs or production
    overseas?
        What about other Treasury-Fed lending programs, besides the
    midsize business lending program? Don't you think that any firm
    receiving a Federal grant or loan should be required to agree
    that they won't move jobs offshore?
        In what ways did you ``endeavor'' to implement the program
    as described in the CARES Act, in keeping with both the spirit
    and letter of the law?
        Why isn't the offshoring provision required in the Main
    Street Lending Program? What steps did you take in an effort to
    implement that provision?
        Besides the offshoring provision, please describe the steps
    you took to comply with both the letter and spirit of Section
    4003(c)(3)(D)(i)(I) through (X) of the CARES Act, including why
    you ultimately chose to implement each requirement or not.

    A.12. The Main Street Lending Program was designed to support
    credit provision to U.S. businesses that were in good financial
    condition before the COVID-19 crisis to help maintain their
    operations and employment until the economy recovers. Main
    Street is not a grant program, and the terms of loans under the
    program are not intended to be better than market.
        Under section 4003(c)(3)(C) of the CARES Act, a borrower
    must be ``businesses that are created or organized in the
    United States or under the laws of the United States and that
    have significant operations in and a majority of its employees
    based in the United States.'' An eligible borrower may be,
    however, a subsidiary of a foreign company, provided that the
    borrower itself is created or organized in the United States or
    under the laws of the United States, and the borrower on a
    consolidated basis has significant operations in and a majority
    of its employees based in the United States. Any borrower that
    is a subsidiary of a foreign company must use the proceeds of a
    Main Street loan only for the benefit of the borrower, its
    consolidated U.S. subsidiaries, and other affiliates of the
    borrower that are U.S. businesses. The proceeds of a Main
    Street loan may not be used for the benefit of such borrower's
    foreign parents, affiliates, or subsidiaries. Main Street
    borrowers are also fully subject to the CARES Act's
    restrictions on officer and employee compensation, dividend
    payments, and stock buybacks.
        With respect to Section 4003(c)(3)(D)(i)(I) through (X) of
    the CARES Act, we believe that Main Street has fulfilled
    Congress's intent to balance support to small- and medium-sized
    businesses with guarding taxpayer funds. The program provides
    medium-term loans to companies that were in sound financial
    condition before the crisis, and have solid post-pandemic
    prospects, to bridge the economic disruption caused by the
    coronavirus. While economic conditions have improved
    considerably since work began on designing Main Street, we have
    continued to make changes to the program to address public
    comments. We recognize that there remains, nonetheless, a
    degree of uncertainty over the short to medium-term impact of
    the virus on economic activity, and potential changes that
    companies may need to make to be successful in the short and
    long-term. In the interim, restricting borrowers' flexibility
    to adjust to these challenging times may limit their
    sustainability, resulting in increased losses of both jobs and
    taxpayer funds. We underscore that recent business surveys have
    indicated that there is limited unmet demand for credit.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR SINEMA
                         FROM STEVEN T. MNUCHIN

    Q.1. In Arizona and across the country, COVID-19 harmed many
    small business that provide renewable energy and stalled
    projects that were near completion but faced pandemic-related
    supply chain and employment disruptions. Under existing rules,
    if projects are not completed on time they risk losing
    eligibility for tax benefits. I was pleased to hear the
    Treasury Department was considering extending the continuity
    safe harbor for both the production tax credits (PTC) and
    energy investment tax credits (ITC) from four to five years for
    projects that began construction in 2016 or 2017. I'm asking
    Treasury to consider extending continuity safe harbor
    protections for all eligible projects from 2016 to the present,
    as all have faced COVID-19 related delays and challenges. It is
    my hope that the forthcoming guidance will capture projects
    that meet either one of the two safe harbor tests, the five
    percent investment test, or the begin construction test. Will
    the Treasury Department guidance extend ITC safe harbor for all
    eligible projects that began between 2016 and the present, that
    meet either of the two safe harbor tests?

    A.1. Notice 2020-41 \1\7 was issued on May 27, 2020, providing
    relief for taxpayers developing PTC and ITC eligible renewable
    energy projects by extending the four-year ``continuity safe
    harbor'' for certain projects that began construction in 2016
    or 2017. The Notice also provides a ``3.5 month safe harbor''
    for services or property paid for by the taxpayer on or after
    September 16, 2019 and received by October 15, 2020. This
    guidance provides taxpayers with flexibility to satisfy the
    beginning of construction requirements despite current delays
    and disruptions. We will continue to monitor the impact of
    COVID-19 on this industry and will consider additional relief
    as needed.
    ---------------------------------------------------------------------------
         \1\ See https://www.irs.gov/pub/irs-drop/n-20-41.pdf.

    Q.2. On May 5, the Treasury Department finally released $4.8
    billion of the $8 billion in the Coronavirus Relief Fund
    allocated by the CARES Act for Tribal communities. This
    announcement came over a month after Congress passed the CARES
    Act with a statutory deadline for these funds to be distributed
    to Tribes before 30 legislative days. Unfortunately, three
    weeks have gone by and the full amount has still not been
    distributed. This is unacceptable. Tribes in Arizona need all
    available resources to fight the coronavirus pandemic now. When
    will the Treasury Department disburse the total amount of CARES
    Act funding to Tribal communities? Do you have any information
    on the specifics of the formula that will distribute these
    ---------------------------------------------------------------------------
    funds?

    A.2. Treasury has completed making payments to tribal
    governments, other than amounts that have not been paid to
    Alaska Native corporations pending litigation on that issue.
    The distribution methodology can be found on Treasury's website
    at https://home.treasury.gov/system/files/136/Coronavirus-
    Relief-Fund-Tribal-Allocation-Methodology.pdf and https://
    home.treasury.gov/system/files/136/Tribal-Allocation-
    Methodology-for-Second-Distribution.pdf.

    Q.3. Thousands of hotels have been shuttered due to the COVID-
    19 pandemic, with revenues down 80 percent. According to an
    American Hotel and Lodging Association survey, only 15 percent
    of commercial mortgage-backed security (CMBS) borrowers have
    received any kind of forbearance or debt relief from their
    servicers. Mass foreclosures in the CMBS market would be
    catastrophic to Arizona communities that rely on tourism. What
    proposal is the Administration considering to prevent
    unprecedented mass foreclosures in the hotel CMBS market?

    A.3. Treasury and the Federal Reserve continue to monitor the
    market impact of the COVID-19 pandemic on commercial real
    estate borrowers, including those whose loans are in CMBS.
    Treasury continues to work with the Federal Reserve to assess
    the efficacy of existing facilities established under the
    Federal Reserve's 13(3) emergency lending authority, and will
    evaluate appropriate changes necessary to promote the flow of
    credit and support a robust economic recovery.

    Q.4. As we continue to combat this pandemic, business owners
    are worried about their survival right now and in the coming
    weeks and months as our country slowly reopens. Do you believe
    that businesses will need an ongoing source of financial
    assistance to provide confidence to reopen and rehire as
    opposed to one-time debt options?

    A.4. Treasury has taken action to provide fast and direct
    economic assistance to American workers and their families,
    small businesses, and those hit hardest by the COVID-19 global
    pandemic. Treasury is monitoring economic conditions closely,
    and we look forward to continued discussions with you and your
    staff to address critical issues.

    Q.5. Per its April 30 guidance, the Federal Reserve ruled that
    the Term Asset-Backed Securities Loan Facility (TALF) will not
    consider collateral without a credit rating from the highest
    investment-grade rating category from a major nationally
    recognized statistical rating organizations (NRSROs) as
    eligible collateral. Right now, the consumers and small
    business owners turning to personal loans are those most in
    need of support and access to credit at this difficult time. Is
    the Fed considering approving investment-grade personal loans
    as eligible collateral under TALF to ensure that these American
    consumers and small business owners are not left out?

    A.5. Treasury continues to work with the Federal Reserve to
    assess the efficacy of existing facilities established under
    the Federal Reserve's 13(3) emergency lending authority, and
    will evaluate appropriate changes necessary to promote the flow
    of credit and support a robust economic recovery. No such
    decision has been taken to expand TALF at this time.

    Q.6. Per its April 30 guidance, the Federal Reserve ruled that
    TALF will only consider collateral with a credit rating in the
    highest long-term or short-term investment-grade rating
    category from at least two NRSROs. Self-employed borrowers
    generally experience greater income volatility and rely on
    unconventional forms of documentation to access credit. As
    such, the self-employed often struggle to access credit
    affordably. However, like other small businesses, self-employed
    business owners are important contributors to Arizona's
    economy. Are there plans to allow AAA residential mortgage-
    backed securities as eligible collateral under TALF?

    A.6. Treasury continues to work with the Federal Reserve to
    assess the efficacy of existing facilities established under
    the Federal Reserve's 13(3) emergency lending authority, and
    will evaluate appropriate changes necessary to promote the flow
    of credit and support a robust economic recovery. No such
    decision has been taken to expand TALF at this time.

    Q.7. Given record high unemployment levels in Arizona, mortgage
    forbearance and delay of evictions are a very temporary
    solution. Servicers of home loans backed by Fannie Mae, Freddie
    Mac, and Ginnie Mae are not only required to make mortgage
    payments on behalf of the borrowers, but also payments on
    property taxes, homeowners and mortgage insurance, and
    homeowner association dues. As more and more homeowners enter
    forbearance, both independent mortgage servicers and community
    banks will need liquidity support. How do your organizations
    plan to deal with mass forbearance and provide liquidity to
    struggling servicers? Service transferring is already a chaotic
    process for borrowers. Can a program be created to avoid
    borrowers having their service transferred during such a
    critical time?

    A.7. Treasury is actively monitoring the mortgage market and
    the associated impact of COVID-19. We have focused considerable
    resources on delivering authorized support to households and
    businesses struggling as a consequence of the necessary public
    health response. On March 26, 2020, Secretary Mnuchin announced
    the creation of a Financial Stability Oversight Council Task
    Force on Nonbank Mortgage Liquidity, which first convened on
    March 30 to discuss conditions and activities in the mortgage
    servicing markets and remains in regular discussions. Treasury
    will continue to work to promote stable markets, including for
    residential mortgage lending.

    Q.8. Requiring servicers to advance property taxes, hazard
    insurance, homeowners association dues, and other assessments
    is no small task. Servicers typically advance these amounts
    when borrowers face financial shortfalls or after a natural
    disaster without any problem, however, the national scale of
    this pandemic is unpresented and our municipal and county
    budgets are already strained. Both Fannie Mae and Ginnie Mae
    have taken steps to moderate the servicer advancing burdens for
    principle and interest. Have your organizations contemplated
    the risks to cities and counties if liquidity is not restored?
    Have you considered standing up a liquidity facility to help
    servicers make these tax and insurance advances, particularly
    in cities and counties that are not able to access the
    Municipal Liquidity Facility?

    A.8. Treasury is actively monitoring the mortgage market and
    the associated impact of COVID-19. We have focused considerable
    resources on delivering authorized support to households and
    businesses struggling as a consequence of the necessary public
    health response. On March 26, 2020, Secretary Mnuchin announced
    the creation of a Financial Stability Oversight Council Task
    Force on Nonbank Mortgage Liquidity, which first convened on
    March 30 to discuss conditions and activities in the mortgage
    servicing markets and remains in regular discussions. Treasury
    will continue to work to promote stable markets, including for
    residential mortgage lending.

    Q.9. Nonprofits serve on the front lines of the coronavirus
    pandemic helping feed Arizona families, providing Arizonans
    safe shelter, and connecting Arizonans to critical health
    services. To continue their important work and meet growing
    need they may need access to the 13(3) facilities. What can you
    do to ensure that nonprofits with up to 10,000 employees
    receive additional financial assistance?

    A.9. On September 4, the Federal Reserve Bank of Boston
    announced that two new Main Street Lending Program facilities
    were fully operational. This program is designed to help credit
    flow to small- and medium-sized nonprofit organizations that
    were in sound financial condition prior to the pandemic and
    have solid post-pandemic prospects. Nonprofit organizations
    with 15,000 employees or fewer, or 2019 annual revenues of $5
    billion or less, are eligible.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN
                         FROM JEROME H. POWELL

    Q.1. Are Treasury or the Federal Reserve requiring the
    companies, including the banks' customers which use loan
    programs to report payroll information that will allow Congress
    to assess whether funds are being used to keep workers employed
    and paid? If not, how do you intend to assess whether funds are
    being used to keep workers employed and paid?

    A.1. The emergency lending facilities are intended to promote
    the flow of credit to households, business, and communities.
    Our efforts have been targeted at achieving our dual mandate,
    including the creation of an environment where the unemployed
    have the best possible chance to return to their old jobs or
    find new ones as the economy recovers. Our facilities were
    designed in compliance with both the Coronavirus Aid, Relief,
    and Economic Security Act (CARES Act) and section 13(3) of the
    Federal Reserve Act, which do not mandate that funds are used
    to keep workers employed and paid. For our Main Street Lending
    Program (Main Street), we do expect borrowers to make
    commercially reasonable efforts to maintain their payrolls.
    This means that businesses that participate in the program are
    expected to make good-faith efforts to maintain payroll and
    retain employees in light of their capacities, the economic
    environment, their available resources, and their business need
    for labor. Borrowers' commercially reasonable efforts to
    maintain payrolls may take different forms across the broad
    range of businesses eligible for Main Street. The Federal
    Reserve and the Department of the Treasury (Treasury
    Department) will monitor Main Street's impact on small and
    medium-sized businesses and the resulting effects of that and
    the other 13(3) facilities on the economic recovery and
    employment broadly rather than on a borrower-by-borrower basis.
        Recognizing that the manner for best supporting their
    operations and payroll will likely vary considerably across
    borrowers, Main Street borrowers are not required to disclose
    the intended use of funds. They do, however, face restrictions
    on their use. Main Street borrowers are generally restricted
    from repaying existing debt ahead of schedule until the Main
    Street loans are repaid. Main Street borrowers are also subject
    to the CARES Act restrictions on compensation, stock
    repurchases, and capital distribution restrictions that apply
    to direct loan programs. Further, Main Street borrowers may not
    use the proceeds of a Main Street loan for the benefit of its
    foreign parents, affiliates, or subsidiaries.
        Overall, providing credit to businesses, large and small,
    should help to ensure that their workers remain employed and
    paid through this very difficult period. The Federal Reserve
    will continue to consider adjustments to Main Street's terms
    and conditions, as appropriate.

    Q.2. Highly leveraged energy sector companies were already
    facing downgrades prior to the coronavirus outbreak, yet you
    recently made revisions to lending programs that will allow
    many of these companies to receive bailouts. Why is it
    appropriate to provide funds to prop up businesses that were
    failing regardless of the impacts of the coronavirus outbreak?
    Pursuant to the Federal Reserve's role on the Financial
    Stability Oversight Council, did you consider the ramifications
    of further subsidizing an industry that contributes to climate
    change given the likelihood that the effects of climate change
    will lead to more volatile and less stable financial markets?
    If so, please provide your analysis.

    A.2. As noted above, the emergency lending facilities were
    established to support the flow of credit to households,
    businesses and communities. We hope the assistance will help
    them to be in a position to make the recovery as strong as
    possible. Pursuant to section 13(3) of the Federal Reserve Act,
    the Federal Reserve is prohibited from lending to entities that
    are insolvent. To meet that requirement, we have structured the
    facilities to provide access to businesses across the economy
    that were in sound financial condition prior to COVID-19.
        The Federal Reserve is monitoring the conditions in the
    financial system and economy to take actions needed to support
    the economy, maintain the flow of credit to households and
    businesses, and promote our maximum employment and price
    stability goals. Accordingly, and as needed, the Federal
    Reserve Board (Board) and the Secretary of the Treasury
    (Secretary) may make adjustments to the terms and conditions of
    the programs, including pricing and eligibility requirements.
    For example, following the initial announcement of Main Street,
    the Board received a number of comments requesting adjustments
    to the maximum loan size, leverage levels, and ability to use
    the proceeds to refinance debt from a wide variety of potential
    lenders and borrowers. In response to these comments, the scope
    and eligibility of the Main Street facilities were expanded.
        The Federal Reserve remains committed to understanding the
    risk climate change poses to the real economy and financial
    system. As I have mentioned in previous letters to you and
    other Members of Congress, staff across the Federal Reserve
    System are conducting research to understand the ways in which
    climate-related risks may transmit to the real economy and
    financial system. This work includes assessing how the
    financial sector's exposure to energy companies could affect
    the financial system and real economy. Staff research also
    supports the Board's participation in several forums with other
    U.S. and international regulators where the evaluation of the
    effects of climate change on the financial system are
    particularly relevant.

    Q.3. The Administration opposes the spending package recently
    passed by the House. Based on your comments that fiscal
    stimulus is needed, does it make more sense to spend billions
    propping up failing companies that put our economy at risk than
    it does to spend more money on families that need to pay rent?

    A.3. The CARES Act and other fiscal policy actions are
    providing direct help to families, businesses, and communities.
    This support can make a critical difference to helping both
    families and businesses in a time of need, as well as limiting
    long-lasting damage to our economy. Ultimately, however, it is
    the responsibility of the Congress and the Administration to
    decide on the appropriate size and composition of any
    additional fiscal stimulus.

    Q.4. The Federal Open Market Committee minutes from April 28-
    29, 2020 note that the activities of some nonbank financial
    institutions present vulnerabilities to the financial system
    that could worsen in the event of a protracted economic
    downturn and that these institutions and activities should be
    monitored closely. What is the Federal Reserve, on its own and
    as a member of the Financial Stability Oversight Council, doing
    to monitor these institutions and their activities? What
    particular types of nonbank financial institutions or
    activities are particularly vulnerable and how does the Federal
    Reserve plan to address those vulnerabilities? Has the Federal
    Reserve taken these vulnerabilities into account when creating
    its 13(3) facilities? Will the Federal Reserve propose to
    designate any of these nonbank financial institutions
    systemically important?

    A.4. Nonbank financial institutions (NBFI) include a diverse
    group of entities such as insurance companies, finance
    companies, government-sponsored enterprises, hedge funds,
    security brokers and dealers, issuers of asset-backed
    securities, mutual funds, and money market funds. These NBFIs
    have diverse business models and practices, many of which
    differ greatly from those of banks. Even so, these institutions
    and activities can pose similar vulnerabilities to those of
    banks, including high leverage, excessive maturity
    transformation, and complexity, all of which can lead to
    financial stability risks, as manifested in the wake of COVID-
    19. The Federal Reserve has been closely monitoring these
    institutions and their activities on a continuous basis, both
    on its own and as a member of the Financial Stability Oversight
    Council (FSOC), as reflected in various publications including
    the Federal Reserve's Financial Stability Reports (FSR) and the
    FSOC Annual Reports.
        The FSOC conducts regular assessments of systemic risks
    posed by the activities of nonbank financial institutions under
    its activities-based approach to designation. These assessments
    occur through discussions at the Systemic Risk Committee and
    publications from the FSOC and its members, such as the FSOC
    Annual Report, the Federal Reserve's FSR, and the Office of
    Financial Research's Financial Stability Risk Assessment.
    Designations of institutions as systemically important are a
    matter for the entire FSOC to address, and any questions about
    designations and the work of the FSOC are most appropriately
    directed to the Secretary, who serves as the Chair of the FSOC.
        The Federal Reserve's May 2020 FSR highlights several
    vulnerabilities for NBFIs, including dealer balance sheet
    constraints, potential runs in money market funds, fire sale
    risks arising from liquidity transformation by asset managers
    and insurers, liquidity strains associated with deleveraging by
    leveraged investors such as hedge funds, and funding stress
    faced by mortgage servicers. \1\ The FSR describes these risks
    in more detail, as well as actions that the Federal Reserve
    took in March of this year to help alleviate these pressures.
    Staff continue to monitor these vulnerabilities and work with
    relevant regulators through the FSOC to consider potential
    solutions.
    ---------------------------------------------------------------------------
         \1\ www.federalreserve.gov/publications/2020-may-financial-
    stability-report-purpose.htm.
    ---------------------------------------------------------------------------
        Amid the tensions and uncertainties of mid-March and as a
    more adverse outlook for the economy took hold, investors
    exhibited greater risk aversion and pulled away from longer-
    term and riskier assets as well as from some money market
    mutual funds. The Federal Reserve, together with the Treasury
    Department, established several emergency lending facilities
    under the emergency lending authority in section 13(3) of the
    Federal Reserve Act to ensure the smooth functioning of various
    markets and to mitigate the financial stability risks arising
    from vulnerabilities in the financial system. For example, to
    stabilize the short-term funding markets, the Federal Reserve
    established the Primary Dealer Credit Facility, the Commercial
    Paper Funding Facility, and the Money Market Mutual Fund
    Liquidity Facility. To support the longer-term financing of
    businesses, States, and localities, the Federal Reserve
    launched the Term Asset-Backed Securities Loan Facility, the
    Primary Market Corporate Credit Facility, the Secondary Market
    Corporate Credit Facility and the Municipal Liquidity Facility
    (MLF). We also launched Main Street and the Paycheck Protection
    Program Liquidity Facility to boost credit flows to small and
    medium-sized businesses.

    Q.5. Millions of Americans are unable to make their credit card
    and auto loan payments because of the economic effects of the
    coronavirus pandemic. \2\ What are the concentrations of
    consumer debt in each sector of the financial system? How is
    the Federal Reserve analyzing the levels of consumer debt at
    banks and nonbanks, including the likelihood of charge-offs and
    losses occurring simultaneously and the effect on financial
    stability?
    ---------------------------------------------------------------------------
         \2\ https://www.wsj.com/articles/millions-of-americans-skip-
    credit-card-and-car-payments-11589985381

    A.5. Banking organizations entered this crisis in strong
    financial condition. Within the banking industry, consumer
    lending is dominated by a few large banking organizations,
    including a handful of auto and credit card companies. Credit
    card lending is concentrated at a small number of the large
    banking organizations, while nonbanks account for about one-
    half of mortgage origination and servicing and two-thirds of
    auto lending.
        We expect substantial deterioration in consumer credit
    quality given the high unemployment caused by COVID-19.
    However, the extent of deterioration is difficult to estimate
    due to the uncertain paths of the virus and the economic
    recovery. Moreover, recent actions by the Government and
    private lenders have mitigated some of the negative effects of
    the crisis on consumer credit. For example, the stimulus
    payments and unemployment insurance expansions included in the
    CARES Act have assisted individuals and households in covering
    short-term expenditures. The CARES Act also provides mortgage
    payment forbearance for up to 12 months for borrowers in
    federally backed loans that are experiencing COVID-19-related
    hardship. In addition, the Board, along with the other Federal
    financial institution regulatory agencies, issued guidance to
    encourage financial institutions to work constructively with
    borrowers affected by COVID-19 and provide additional
    information regarding loan modifications in light of the CARES
    Act. \3\ This guidance notes that when working with borrowers,
    lenders and servicers should adhere to consumer protection
    requirements, including fair lending laws, to provide the
    opportunity for all borrowers to benefit from these
    arrangements. Most lenders, bank and nonbank alike, report
    working with their borrowers and are offering various
    forbearance programs that provide additional short-term relief.
    ---------------------------------------------------------------------------
         \3\  ee press release at https://www.federalreserve.gov/
    newsevents/pressreleases/bcreg20200407a.htm.
    ---------------------------------------------------------------------------
        The Federal Reserve dedicates substantial resources to
    provide oversight of consumer lending in supervised
    institutions. We closely supervise institutions with larger
    consumer loan exposures through processes such as the
    Comprehensive Capital Analysis and Review and the Horizontal
    Capital Review, and through the work of dedicated supervisory
    teams. Current supervisory activities include monitoring for
    the potential effects of the expiration of the forbearance and
    consumer assistance programs on consumer credit. Forbearance
    programs are not standardized across firms or for product
    types, clouding analysis of the timing and severity of losses.
    However, the programs are likely to extend the timing of COVID-
    19-related losses into 2021.
        The Federal Reserve also monitors closely credit
    performance changes at nonbank lenders, such as credit unions
    and finance companies, to achieve a more comprehensive picture
    of the stress households may have in meeting their debt
    obligations. In addition, the Federal Reserve pays close
    attention to developments in the asset-backed securities market
    as this market provides important liquidity for lending to
    households.

    Q.6. You previously said ``we have the evidence from the global
    financial crisis and the years afterwards that State and local
    governments' layoffs and lack of hiring did weigh on economic
    growth.'' Can you describe in greater detail the extent to
    which State and local governments' layoffs and lack of hiring
    slowed the economic recovery after the Great Recession? Do you
    expect a similar impact to occur in the economic downturn
    related to COVID-19? Do you have similar concerns about the
    economic impacts of cuts to services at the State and local
    levels?

    A.6. State and local governments confronted significant fiscal
    strain following the Great Recession. As a result, their
    employment fell for several years. More broadly, the overall
    purchases of these governments fell for four years following
    the recession-with outlays for infrastructure falling
    particularly sharply-and rose only anemically for several years
    thereafter. It is well documented that these outcomes weighed
    on broader economic growth. \4\
    ---------------------------------------------------------------------------
         \4\ See, for example, the analysis in Cashin, Lenney, Lutz, and
    Peterman, ``Fiscal Policy and Aggregate Demand in the U.S. Before,
    During and Following the Great Recession'', Finance and Economics
    Discussion Series 2017-061. Washington: Board of Governors of the
    Federal Reserve System.
    ---------------------------------------------------------------------------
        State and local governments are currently confronting acute
    budget pressure as the sharp decline in economic activity
    caused by COVID-19 has pushed down their tax collections. The
    Federal Reserve has established the MLF in order to help these
    governments better manage the cash flow pressures they are
    confronting, and Congress and the Administration have provided
    direct support to the States and localities through the CARES
    Act and other actions. The extent to which State and local
    governments will impose a drag on economic activity going
    forward will depend importantly on the path of the broader
    economic recovery--and the corresponding extent to which these
    governments' tax bases recover-and the extent to which these
    governments receive additional support from the Federal
    Government. That said, it is the responsibility of the Congress
    and the Administration to decide on the appropriate size and
    composition of any additional fiscal stimulus.

    Q.7. If banks are meant to do meaningful underwriting as part
    of the Main Street Lending Programs (MSLP), and the Federal
    Reserve and the Treasury have designed the MSLP to minimize
    losses, why is the risk of loss on the loans shared on a pari
    passu basis between the participating bank and the MSLP SPV?

    A.7. Under Main Street, lenders are required to retain five
    percent of each loan participated to the Main Street special
    purpose vehicle (SPV) and to share losses with the Main Street
    SPV on a pari passu basis. The Federal Reserve and Treasury
    Department believe that this level of risk sharing will
    incentivize prudent underwriting and risk management standards
    and, therefore, limit downside risk to taxpayers. At the same
    time, pari passu risk-sharing creates balance sheet capacity
    for eligible lenders and facilitates a ``true sale'' of the
    participation interest to the Main Street SPV.

    Q.8. Why did the Federal Reserve and Treasury select the
    participation rates of 95 percent and 85 percent for the Main
    Street Lending Programs?

    A.8. On June 8, the Board amended the terms of the Main Street
    facilities to enable more small and medium-sized businesses to
    receive Main Street loans. Part of this expansion included
    raising the Main Street SPV's participation rate to 95 percent
    for loans across all of the Main Street facilities.
        The Board and Treasury Department considered several
    factors in sizing the rate of participation in Main Street
    eligible loans and upsized tranches. The agencies created Main
    Street facilities that purchase sizable (but less-than-100
    percent) participations in loans in order to maintain a level
    of risk sharing that creates balance sheet capacity for
    eligible lenders, while at the same time providing eligible
    lenders a strong incentive to apply prudent underwriting and
    risk management standards. A 95 percent participation provides
    an appropriate balance of these considerations.

    Q.9. The Federal Reserve FAQs for the Primary Market Corporate
    Credit Facility and Secondary Market Corporate Credit Facility,
    and for the Term Asset-Backed Securities Loan Facility,
    initially indicated the Federal Reserve would accept ratings
    only from the three largest credit rating agencies.
        On May 26, 2020, updated FAQs expanded the universe of
    acceptable credit rating agencies beyond just the three largest
    firms, but two ratings are still required, with one from one of
    the three largest firms. In addition, the updated FAQs omit
    certain Securities and Exchange Commission registered NRSROs.
        Please explain the process by which the Federal Reserve
    determined the NRSRO ratings it will accept and the two rating
    requirement, including that one of the two required ratings be
    from of the three largest firms. Also, does the Federal Reserve
    intend to announce additional updates or whether it will expand
    the universe of acceptable NRSROs?
        Furthermore, given that thousands of companies are sole-
    rated by a credit rating agency that is not one of the three
    largest, and under the FAQ, the Federal Reserve will not accept
    a second rating from one of the three largest firms assigned
    after March 22, 2020, will those companies be ineligible for
    every Federal Reserve lending facility?
        Finally, why did the Federal Reserve initially limit major
    credit rating agencies to the three largest NRSROs despite the
    long-standing policy goals, in particular since the 2008
    financial crisis, to avoid reliance solely on ratings and
    reinforcing the market concentration of those firms?

    A.9. The emergency lending facilities were established to
    support the flow of credit to households, businesses, and
    communities. In addition, under the law, the loans the Federal
    Reserve extends must be satisfactorily secured and sufficiently
    protect taxpayers from loss.
        The Federal Reserve's initial priority was to announce the
    establishment of these facilities as quickly as possible, and
    therefore the facilities first used credit ratings from only
    the three largest nationally recognized statistical rating
    organizations (NRSROs), given that the most widespread credit
    ratings used are from these three NRSROs.
        To promote the flow of credit in a manner consistent with
    the law, the Federal Reserve undertook an analysis to determine
    whether to expand the list of eligible NRSROs. As part of this
    analysis, the Federal Reserve considered the design and focus
    of each facility, and the role that each NRSRO plays in the
    relevant market. Specifically, the Federal Reserve sought to
    balance the benefits of using ratings from the NRSROs most
    relied on by investors with the need to ensure broad access to
    our programs. That analysis led the Federal Reserve to include
    three additional NRSROs in its facilities. The Federal Reserve
    hopes this change expands access to its facilities, while
    continuing to protect against taxpayer losses. The Federal
    Reserve will continue to monitor its facilities to ensure they
    are working as intended.

    Q.10. The President recently stated he supports ``looking
    into'' banks committed to no longer investing in oil and gas
    drilling in the Arctic. Has the President discussed this with
    you or someone at your agency? Have you or anyone at your
    agency started any investigation, or initiated any proceeding
    to ``look into'' banks which have committed to not investing in
    Arctic oil and gas development?

    A.10. It is not the practice of the Federal Reserve to confirm,
    or deny, whether we have commenced an examination or civil
    investigation involving a particular supervised financial
    institution.
        The Federal Reserve recognizes the importance of ensuring
    public access to financial services for all legal businesses in
    an environment that promotes trust and confidence. The Federal
    Reserve's supervisory responsibilities over the banking system
    generally are discharged with the objective of ensuring the
    safety and soundness of the financial system. In exercising
    these responsibilities, the Federal Reserve does not regulate
    decisions by a banking organization with respect to the types
    of financial services the organization chooses to furnish or
    not to furnish, so long as the organization's activities are
    conducted prudently and in compliance with applicable law.

    Q.11. Have you limited funds appropriated by Congress through
    the CARES Act, or any other law, to banks that have committed
    to stop financing Arctic oil and gas development?

    A.11. The determination of how funds are appropriated under the
    CARES Act with regard to section 13(3) facilities is made by
    the Secretary. As required by section 13(3) of the Federal
    Reserve Act, all of our emergency lending facilities are broad
    based. In addition, they each have neutrally defined
    eligibility requirements. Neither the eligibility criteria, nor
    any other term or condition of any of our facilities in any way
    relates to bank actions with respect to Arctic oil and gas
    development.

    Q.12. Have you been directed by anyone, up to and including the
    President, to use the authorities and resources at your
    disposal to tip the scales in any way regarding banks or other
    investors with commitments to not finance new development in
    the Arctic?

    A.12. As noted, the section 13(3) facilities established by the
    Federal Reserve with the support of the Secretary have
    neutrally defined eligibility requirements intended to help the
    real economy and in particular, households and businesses,
    respond to the financial hardships resulting from the impact of
    COVID-19 and efforts to contain it. I have not been directed by
    any person to take any action relating to commitments to not
    financing new development in the Arctic.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR TOOMEY
                         FROM JEROME H. POWELL

    Q.1. Many in Congress have expressed concern about the impact
    of job loss and unemployment upon low-income workers, and the
    Federal Reserve's Report of the Well Being of US Households in
    2019 found that 39 percent of Americans with a household income
    of less than $40,000 had seen at least one job loss in March.
    However, the report also stated that most workers expected
    their job losses to be temporary, with nine in 10 people who
    were furloughed or who had lost a job saying that their
    employer indicated that they would return to their job at some
    point.
        As you stated in the hearing, ``where people are unemployed
    for long periods of time, that can permanently weigh on both
    their careers and their ability to go back to work, and also
    weigh on the economy for years.'' While unemployment benefits
    are an important source of needed liquidity for displaced
    workers and can smooth consumption, having workers continue to
    be unemployed for longer than necessary may be harming our
    ability to quickly recover and restore long-term income
    stability. A recent University of Chicago working paper found
    that 68 percent of unemployed workers who are eligible for UI
    will under the CARES Act receive benefits which exceed lost
    earnings, and that the median wage replacement rate under the
    CARES Act is 134 percent of prior wages.
        How would you expect long-term (beyond July 31st, 2020)
    wage replacement rates above 100 percent to impact efficient
    labor reallocation and an eventual economic recovery?
        Would you expect a targeted proportional system of
    unemployment benefits that caps wage replacement rates at 100
    percent to sufficiently smooth consumption for displaced
    workers?

    A.1. In the current economic environment, it is difficult to
    assess the effects of high replacement rates on efficient labor
    reallocation. Much depends on what the efficient level of
    reallocation is at present, and that is extremely difficult to
    ascertain. For example, to the extent that layoffs are
    temporary and workers remain attached to their prior employers,
    reallocation will not be efficient. The July employment report
    showed that over 70 percent of those who have lost their jobs
    are on temporary layoff, which is a very high number by
    historical standards. Whether temporary layoffs will remain
    elevated (and for how long) is hard to judge.
        The level of efficient reallocation may also be low
    currently because employment relocation-a necessary part of
    many reallocations-is difficult for public health reasons. In
    addition, to the extent that a wage replacement rate is only
    temporarily high, it may not reduce efficient reallocation by
    much because in a depressed and uncertain labor market, many
    unemployed individuals will not want to pass up an opportunity
    of steady, gainful employment that may not come again soon.
        A targeted proportional system of unemployment benefits
    that caps wage replacement rates at 100 percent may not
    sufficiently smooth consumption for some families. For example,
    some families may have lost income that is not covered by
    unemployment insurance. In addition, families that are also
    incurring unusually large health-related or other emergency
    expenditures may struggle to maintain their typical
    consumption.

    Q.2. I strongly support the Federal Reserve's efforts to
    provide liquidity to midsize companies through the Main Street
    facility. It is important for the Federal Reserve to think
    carefully about how that facility will be governed. In
    particular, commercial lenders typically gain certain rights
    when a loan becomes troubled. While it is reasonable for the
    Federal Reserve to have similar rights with respect to the loan
    participations it acquires through the Main Street facility, it
    must avoid having politics injected into lending decisions.
        To that end, what steps is the Federal Reserve taking to
    ensure that any decisions it makes as a lender under the Main
    Street facility will be free from political influence?

    A.2. Under the Main Street Lending Program (Main Street), the
    Federal Reserve Board authorized the Federal Reserve Bank of
    Boston to establish a special purpose vehicle (SPV) to purchase
    participations in eligible loans originated by eligible
    lenders. Lending decisions will be made by eligible lenders,
    which will apply their own underwriting standards when
    evaluating the creditworthiness of a borrower, in addition to
    the minimum requirements set out in facility term sheets. The
    Main Street Loan Participation Agreement \1\ sets out terms
    governing the Main Street SPV's voting rights with respect to
    its participation in Main Street loans, both during the life of
    the loans and in work-out scenarios. In general, the Loan
    Participation Agreement contains commercially standard terms,
    adjusted as appropriate for the unique features of Main Street.
    \2\ While the SPV has the right to vote on specific core
    matters relating to the administration of the loan, eligible
    lenders will retain non-core rights and are expected to service
    each Main Street loan in accordance with the standard of care
    set out in the Loan Participation Agreement (i.e. to exercise
    the same duty of care in approaching such proceedings as it
    would exercise if it retained a beneficial interest in the
    entire loan). Consistent with Section 13(3) of the Federal
    Reserve Act and the Federal Reserve's obligations under the
    Coronavirus Aid, Relief, and Economic Security Act (CARES Act),
    the Main Street SPV will make commercially reasonable decisions
    to protect taxpayers from losses on Main Street loans and will
    not be influenced by non-economic factors when exercising its
    voting rights under the Loan Participation Agreement, including
    with respect to a borrower that is the subject of a work-out or
    restructuring. \3\ Further information on the Main Street
    facilities and the criteria for eligible lenders can be found
    at www.federalreserve.gov/monetarypolicy/mainstreetlending.htm.
    ---------------------------------------------------------------------------
         \1\ The Main Street Loan Participation agreement and other legal
    forms and agreements can be found at https://www.bostonfed.org/
    supervision-and-regulation/supervision/special-facilities/main-street-
    lending-program/information-for-lenders/docs.aspx.
         \2\ Among other deviations from market-standard terms, the
    Participation Agreement gives the Main Street SPV additional rights
    that can be used to prevent any reduction in the principal amount of
    the portion of any Main Street loan that is participated to the Main
    Street SPV, as prohibited under section 4003(d)(3) of the CARES Act.
         \3\ See Frequently Asked Questions J.4-J.6 available at https://
    www.bostonfed.org/mslp-faqs.

    Q.3. Please respond to the following regarding flows of prime
    money market fund (PMMF) liquidity in March 2020:
        What were the gross redemptions from publicly offered PMMFs
    from March 11 to March 18, 2020? For comparison, what were the
    gross redemptions from PMMFs from January 13 to January 17,
    2020; and also from October 11 to October 18, 2019?
        Separately, for each of the above three time frames, please
    provide the gross purchases into PMMFs.
        Separately, for each of the above three time frames, please
    break the answer down between gross redemptions or purchases,
    as the case may be, of PMMFs with stable NAVs open only to
    natural person investors and PMMFs with fluctuating NAVs open
    to both natural persons and non-natural persons.

    A.3. In mid-March 2020, amid very large outflows from prime
    money market funds (MMFs), institutional funds (which are open
    to investors other than ``natural persons'') experienced the
    largest net outflows. \4\ From March 11 to March 18, 2020, when
    prime MMFs saw outflows totaling $85 billion, institutional
    prime MMFs had $67 billion in outflows. Retail prime MMFs,
    which are open only to natural persons and thus represent a
    different segment of the market, had $19 billion in outflows in
    this time frame.
    ---------------------------------------------------------------------------
         \4\ Net flows are gross purchases less gross redemptions. Net
    flows provide the best overall representation of the pressure arising
    from investor flows on money market funds to buy assets (when net flows
    are positive) or sell assets (when net flows are negative). We do not
    separately analyze data on gross purchases and gross redemptions for
    money market funds. The Securities and Exchange Commission collects
    data on gross purchases and gross redemptions for money market funds.
    ---------------------------------------------------------------------------
        From January 13 to January 17, 2020, prime MMFs had net
    inflows of $1.6 billion: approximately $0.2 billion into
    institutional funds and $1.3 billion into retail funds. From
    October 11 to October 18, 2019, prime MMFs had net inflows of
    $10 billion: approximately $6 billion into institutional funds
    and $4 billion into retail funds.
        Institutional prime MMFs have consistently experienced
    heavier outflows than retail prime MMFs in episodes of stress,
    including in mid-March 2020, and also during the 2008 run on
    MMFs. Heavier outflows from institutional MMFs may occur
    because their shareholders have more resources to monitor funds
    carefully and may face strong incentives to avoid losses or
    liquidity constraints on their shares.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR ROUNDS
                         FROM JEROME H. POWELL

    Q.1. Vice Chair Quarles mentioned in a recent hearing before
    this committee that the Federal Reserve has closely studied the
    impact of the COVID-19 pandemic on the banking system and that
    such analysis will inform each bank's Stress Capital Buffer.
        While I appreciate the Board's efforts on this front, many
    of the macroeconomic effects of COVID-19 weren't fully
    reflected in the financial services sector until after the
    Board's initial COVID-19 analysis had been completed.
        For the sake of transparency and so that financial
    institutions can benefit from the fullness of understanding of
    how the Board views the impact of the COVID-19 pandemic on bank
    capital, will the Board release its pandemic analysis in a
    timely fashion?

    A.1. On June 25, the Federal Reserve Board (Board) released the
    results of its stress tests for 2020 and additional sensitivity
    analyses that the Board conducted to assess the resiliency of
    large banking organizations under three hypothetical recession
    scenarios that could result from COVID-19. In the three
    scenarios, the unemployment rate peaked at between 15.6 percent
    and 19.5 percent, which is significantly higher than any of the
    Board's pre-COVID-19 stress test scenarios.
        The Board also released the results of its full stress
    test, which was designed before COVID-19. The Board will use
    the results of that test to set the new stress capital buffer
    (SCB) requirement for large banking organizations, which will
    take effect, as planned, in the fourth quarter.
        In addition to releasing the results of the test, the Board
    has determined that the changes in financial markets and the
    macro-economic outlook could have a material effect on each
    firm's risk profile and financial condition. The Board is
    therefore requiring large banking organizations to update and
    resubmit their capital plans later this year to reflect current
    stresses, which will help firms re-assess their capital needs
    and maintain strong capital planning practices during this
    period of uncertainty. The Board will conduct additional
    analysis each quarter to determine if adjustments to this
    response are appropriate.

    Q.2. Dodd-Frank requires that banks' annual stress test include
    four scenarios but the Stress Capital Buffer is based on the
    results for just one of those scenarios--the Supervisory
    Severely Adverse scenario. How does the Board believe financial
    institutions should use the other three scenarios when the
    Supervisory Severely Adverse scenario sets the binding
    requirement in the Stress Capital Buffer?

    A.2. Large banking organizations are subject to four scenarios
    in the Board's stress testing and capital planning program: the
    supervisory severely adverse scenario, the supervisory baseline
    scenario, the Bank Holding Company (BHC) baseline scenario and
    the BHC stress scenario. The SCB requirement is calculated
    based on the results of the supervisory severely adverse
    scenario in the Board's annual stress test, but a large banking
    organization's capital planning process should be informed by
    all the information included in the results of the four
    scenarios. A firm's risk identification and capital planning
    process also includes designing its own scenario. Further, the
    Board's supervisory assessment of capital planning is evaluated
    in part from the results of the stress tests, including those
    from all applicable scenarios.

    Q.3. I understand that the Stress Capital Buffer has integrated
    the Board's regulatory capital rule with the Comprehensive
    Capital Analysis and Review (CCAR) framework. As a result, CCAR
    now serves as a way for banks to calculate the Stress Capital
    Buffer required to cover potential losses. Following this
    integration, the Board has taken a step forward to remove the
    quantitative objection to capital distributions since the
    Stress Capital Buffer now determines capital distributions.
        What will the Board's objectives be for CCAR in the future
    following these changes? And what metrics will the Board use
    when it evaluates capital distributions in the future?

    A.3. Under the SCB rule issued in March 2020, the results of
    the Federal Reserve's supervisory stress tests and firms'
    planned dividends are used to calculate a firm-specific SCB
    requirement, which informs the size of the buffer requirements
    to which each large firm is subject. A firm is subject to
    automatic distribution limitations if its capital ratios fall
    below the minimum plus buffer requirements.
        The Comprehensive Capital Analysis and Review will continue
    to be an integral part of the Board's supervisory program for
    large banking organizations, by assessing both the capital
    plans and the capital planning practices that these firms use
    to assess their capital needs.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR PERDUE
                         FROM JEROME H. POWELL

    Q.1. Federal Reserve Balance Sheet--Chair Powell, this is not a
    criticism of the Federal Reserve's actions, rather more a
    question aimed at the path forward. Over the past 3 months, the
    Federal Reserve's balance sheet has expanded from $4.1 trillion
    to nearly $7 trillion today. In fact, if the Fed maximizes the
    lending powers granted under the CARES Act, the balance sheet
    can easily expand to nearly $14 trillion.
        Given the fiscal deficit that we have incurred and will
    continue to incur for the foreseeable future, have we monetized
    the national debt?

    A.1. The Federal Reserve's chosen level of asset holdings is
    never intended or designed to fund the government. As always,
    the Federal Reserve's actions are guided by its mandate to
    promote maximum employment and stable prices for the American
    people, along with the responsibility to promote the stability
    of the financial system. Moreover, from the perspective of a
    consolidated government balance sheet, because the Federal
    Reserve funds its balance sheet with interest-paying reserves,
    the Federal Reserve's asset purchases represent a shortening of
    the maturity structure of government debt and not a
    monetization of the debt.
        In recent months, the Federal Reserve's asset purchases
    have been directed toward supporting the flow of credit to
    households, businesses, and State and local governments. In
    particular, as the public health crisis intensified in mid-
    March 2020, the functioning of the Treasury market and the
    market for agency mortgage-backed securities deteriorated
    sharply. These markets are critical to the overall functioning
    of the financial system and to the transmission of monetary
    policy to the broader economy. If left unchecked, these strains
    could have severely aggravated what was already a very large
    shock to the financial system.
        By most metrics, liquidity in these markets greatly
    improved in short order. Accordingly-starting in early April
    2020-the Federal Reserve began to significantly slow the size
    of its purchases. Going forward, the Federal Reserve's holdings
    of securities will be determined by the needs to support market
    functioning and the flow of credit, consistent with the Federal
    Reserve's congressionally-mandated mission.

    Q.2. Does the expanded Fed balance sheet and our out of control
    debt situation undermine your ability to tackle future
    inflationary pressures?

    A.2. In the near term, the ongoing public health crisis will
    weigh heavily on economic activity, employment, and inflation.
    In fact, recent inflation readings have been soft and the
    Federal Open Market Committee's (FOMC) June economic
    projections show participants anticipated that the 12-month PCE
    inflation measure would likely run well below the FOMC's 2
    percent objective for some time. As a result, the FOMC expects
    to maintain the current, low Federal funds rate target range
    until it is confident that the economy has weathered recent
    events and is on track to achieve maximum employment and price
    stability.
        Of course, going forward, the FOMC will closely watch the
    incoming data on inflation and inflation expectations. At each
    future meeting, the FOMC will evaluate all data on the U.S.
    economy and choose the appropriate stance of policy to continue
    to move the economy toward its mandated objectives. As the FOMC
    noted in its recent statement, it is committed to using its
    full range of tools to support the U.S. economy in this
    challenging time, thereby promoting its maximum-employment and
    price-stability goals.

    Q.3. The Great Deleveraging--In a post-Covid environment, the
    world will be flushed with debt, both private and public. Back
    in January, the Institute of International Finance projected
    global debt to be at $253 trillion or 322 percent of GDP. I
    cannot imagine how much we will be facing in January 2021.
        We have failed to learn the lessons of the past crisis and
    while household debt has dropped, we have failed to control the
    excesses in government spending and cheap money propagated
    asset bubbles.
        Deleveraging will be painful and exceptionally so for the
    lower bounds of our economy. In your view, what are indicators
    that you are looking for before you would recommend fiscal
    tightening and what are recommendations that you would like to
    see beyond monetary policy that would assist in removing our
    dependency from this glut of debt?

    A.3. The details of fiscal policy decisions are for elected
    representatives, who hold the powers of taxation and spending.
    While it is important for fiscal policymakers to take actions
    over time that put the Federal budget and debt on a sustainable
    path in the longer run, the time to make that a top priority is
    when the economy is strong, and unemployment is low.

    Q.4. The Fed and Congress has flooded the market with cheap
    credit to prevent the wide scale collapse of the economy, I am
    bothered by colleagues who are seeking to widen the scale of
    the intervention or attempting to pick winners and losers. How
    do we avoid the path of Japan or Europe where their
    interventions in the past recessions have created zombie
    companies or zombie industrial sectors?

    A.4. Our 13(3) facilities are intended to function as backstops
    to the private markets, with pricing designed to encourage
    borrowers to use private financing if it is available. The
    tools that the Federal Reserve is using under its 13(3)
    authority are for times of emergency such as now, and we will
    put these tools back in the toolbox when economic and financial
    conditions improve. Our 13(3) facilities are designed to have
    broad, neutrally defined eligibility requirements and to lend
    to borrowers that were in sound condition prior to the onset of
    COVID-19.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR TILLIS
                         FROM JEROME H. POWELL

    Q.1. As I mentioned in the hearing, I am concerned that
    companies in need of financial assistance do not meet the
    eligibility criteria for the existing Federal Reserve (Fed) and
    Treasury programs. The Fed's programs are largely limited to
    investment grade (IG) companies with certain leverage criteria
    that gets harder to satisfy the longer the pandemic goes. These
    programs have excluded otherwise well run companies that are
    not IG, or somehow don't fit the specific criteria--companies
    that are sometimes even deemed essential by the Cybersecurity
    and Infrastructure Security Agency within the Department of
    Homeland Security.
        What is the Federal Reserve and Treasury doing to help
    well-managed non IG companies that have weathered the initial
    storm without any government assistance, but may need access to
    liquidity in the next couple of months?

    A.1. Section 13(3) of the Federal Reserve Act and the Federal
    Reserve Board's (Board) Regulation A require that a lending
    Reserve Bank be secured to its satisfaction and that the
    collateral be assigned a lendable value. The eligibility
    criteria for creditworthiness, including the requirement that
    eligible companies in the corporate credit facilities be
    investment grade, help satisfy this requirement and
    appropriately protect taxpayers from the risk of loss
    associated with the loan. The facilities broadly seek to
    support creditworthy companies that rely on capital markets to
    fund their operations during unusual and exigent circumstances.
    While our corporate credit facilities are designed primarily to
    support markets that serve investment grade companies, we
    wanted to prevent a gulf opening up between those markets and
    the other markets that serve high-yield issuers. Therefore, the
    corporate credit facilities are open to so-called ``fallen
    angels''--companies that would have been investment grade but
    for the COVID-19 shock. The Secondary Market Corporate Credit
    Facility (SMCCF) is also purchasing a limited quantity of high-
    yield exchange traded funds (ETFs). Support to the market for
    issuers that access the facility also supports the credit
    markets more broadly, including for those that do not access
    the facility or are not eligible to access the facility. In
    addition, noninvestment grade companies may be eligible to
    borrow under the Main Street Lending Program if the lending
    bank's internal risk rating of the company is equivalent to a
    supervisory rating of ``pass.'' The Federal Reserve is
    monitoring conditions closely and may reevaluate the terms and
    conditions of facilities as needed.
                                    ------

           RESPONSES TO WRITTEN QUESTIONS OF SENATOR KENNEDY
                         FROM JEROME H. POWELL

    Q.1. With respect to qualifying eligibility to participate in
    the Primary Market Corporate Credit Facility (PMCCF) to those
    companies that have a rating from the largest nationally
    recognized statistical rating organization (NRSROs)
        What is the basis for treating smaller NRSROs differently
    from the largest NRSROs, particularly in light of the fact that
    their regulator, the SEC, does not differentiate among them?
        By limiting eligibility in the PMCCF to only those
    companies that have investment grade ratings from one of the
    three largest NRSROs, aren't you effectively limiting access to
    these important sources of funding to only the Nation's largest
    companies?
        Is that consistent with the goals and objectives of the
    CARES Act and the other Fed/Treasury programs that are
    addressed to the crisis?

    A.1. The emergency lending facilities, including the Primary
    Market Corporate Credit Facility (PMCCF), were established to
    support the flow of credit to households, businesses, and
    communities. In addition, under the law, the loans the Federal
    Reserve extends must be satisfactorily secured and sufficiently
    protect taxpayers from loss.
        Our initial priority was to announce the establishment of
    these facilities as quickly as possible, and therefore the
    facilities, including the PMCCF, first used credit ratings from
    the three largest nationally recognized statistical rating
    organizations (NRSRO), given that the most widespread credit
    ratings used are from these three NRSROs.
        Consistent with our objectives to promote the flow of
    credit in a manner consistent with the law, the Federal Reserve
    undertook an analysis to determine whether to expand the list
    of eligible NRSROs. As part of this analysis, we considered the
    design and focus of each facility, and the role that each NRSRO
    plays in the relevant market. Specifically, we sought to
    balance the benefits of using ratings from the NRSROs most
    relied on by investors with the need to ensure broad access to
    our programs. That analysis led the Federal Reserve to include
    three additional NRSROs in its facilities. Our hope is that
    this change expands access to its facilities, while continuing
    to protect against taxpayer losses. We will continue to monitor
    the facilities to ensure they are working as intended.
                                    ------

           RESPONSES TO WRITTEN QUESTIONS OF SENATOR MCSALLY
                         FROM JEROME H. POWELL

    Q.1. Consumer spending is 70 percent of GDP, and much of that
    is supported by consumer credit. Data shows that the demand for
    online personal loans remains high, but the liquidity has been
    badly disrupted. As a result interest rates are increasing on
    personal loans. Do you have a timetable for the Federal Reserve
    adding at least the highest rating grade for personal loans to
    the TALF program?

    A.1. As you note, an individual or family's ability to purchase
    goods and services depends crucially on their ability to access
    credit at affordable terms. Indeed, that is a key motivation
    for the Term Asset-Backed Securities Loan Facility (TALF)
    program. TALF-eligible loan collateral includes several types
    of asset-backed securities (ABS) that provide key support for
    consumer spending, including auto, credit card, and student
    loan ABS. In determining the types of collateral that are
    eligible for TALF loans, the Federal Reserve Board (Board)
    considers whether accepting an asset class will provide
    material support to the economy, such as by facilitating
    consumer spending. The Board also considers whether inclusion
    of the asset class is appropriate under the restrictions of
    section 13(3) of the Federal Reserve Act. For example, the
    Board and Reserve Banks must take steps to ensure the
    protection of the taxpayer, including by assigning a ``lendable
    value to all collateral.''
        Personal loan ABS may not be good candidates for the TALF
    given these restrictions. Unlike auto, credit card, and student
    loan ABS, personal loan ABS is a fairly new asset class, and
    comprehensive information is not available about the
    performance of personal loan ABS in stressed economic periods.
    Likewise, only a small share of personal loan ABS is routinely
    rated triple-A by the rating agencies.
        The Board will continue to evaluate the feasibility of
    adding other asset classes to or expanding the scope of
    existing asset classes eligible for the TALF.

    Q.2. It has come to our attention that borrowers of commercial
    mortgage-backed securities, whose properties have been shut
    down by government public safety precautions, are under undue
    significant financial hardship because they are stuck between
    tenants that are not paying and mortgage servicers who are not
    offering flexibility. These are owners of hotels, shopping
    centers and certain housing entities. They are extremely
    worried about their ability to meet their financial obligations
    over a protracted time period with no rents coming in. There is
    not a clear regulatory framework for CMBS but the concerns
    remain.
        What are you doing to help commercial real estate and other
    industries that were excluded from the Federal Reserve's
    facilities programs?
        Would you consider a plan to utilize the remaining funding
    allocated to the Treasury Department under Title IV of the
    CARES Act to support those borrowers?
        Do you think it would be appropriate to change the leverage
    constraints so the facilities are more effective in providing
    assistance to commercial real estate?
        What measures are you planning to take to ensure lenders
    that utilize the TALF program provide appropriate relief to
    borrowers to ensure that permanent jobs loss does not incur as
    a result of imminent foreclosures due to the lack of
    forbearance being granted in the CMBS market?

    A.2. The Federal Reserve is closely monitoring the situation in
    the commercial mortgage-backed securities (CMBS) market and the
    commercial real estate market more broadly and recognizes the
    current challenges in the market. The actions taken by the
    Federal Reserve to support the broader economy have alleviated
    some of the strains in the commercial real estate market. The
    Federal Reserve's purchases of Agency CMBS, as part of open-
    market operations, and the inclusion of legacy, non-agency
    CMBS, as TALF-eligible collateral, have improved spreads and
    liquidity in the CMBS market. The Main Street Lending Program
    (Main Street) and the Paycheck Protection Program Liquidity
    Facility have helped provide small and medium-sized businesses
    financing to maintain operations, including paying rent to
    their landlords. The Corporate Credit Facilities are also
    providing support to some segments of the commercial real
    estate industry. The Federal Government and the Federal Reserve
    continue to be willing to adjust the parameters of these
    programs to allow for more flexible use of these programs by
    borrowers and financial institutions.
        Even with these actions, as you note, certain commercial
    real estate borrowers continue to experience significant
    distress. For example, since late February 2020, the lodging
    and retail sectors have experienced precipitous declines in
    demand as a result of COVID-19. In June, looking only at
    mortgages funded by CMBS, borrowers accounting for about 24
    percent of mortgages in the lodging sector and 18 percent of
    mortgages in the retail sector were more than 30 days
    delinquent. Other sectors--for example, the multi-family
    sector--have experienced less-severe increases in
    delinquencies. However, the Federal Reserve's main tool-
    lending-may not be an effective solution for commercial
    properties that have suffered large revenue losses and already
    have large debt burdens. Loans extended under emergency lending
    facilities under Section 13(3) of the Federal Reserve Act--
    including those facilities that utilize funding allocated to
    the Department of the Treasury under Title IV of the
    Coronavirus Aid, Relief, and Economic Security Act (CARES
    Act)--are generally not subordinate to other debt, and the
    Federal Reserve must take steps to ensure that the taxpayer
    will be repaid. In addition, many commercial property owners
    are barred by their loan agreements from taking on more debt.
        Regarding TALF, the program is designed to support the flow
    of credit to households and businesses by providing liquidity
    to the ABS market. TALF accepts as collateral triple-A non-
    agency CMBS issued before March 23. TALF has been effective in
    achieving its objectives, as evidenced by the significant
    narrowing of CMBS spreads since its announcement. However, the
    program is not an appropriate vehicle to address forbearance in
    the non-agency CMBS market. In a typical CMBS structure,
    decisions about loan modifications are made by the special
    servicer appointed by the holders of the junior bonds, not by
    the triple-A bondholder. The TALF borrower, therefore, has
    little influence over the modification decisions made by the
    CMBS trust. When a securitization already exists and is trading
    in the marketplace, changing the rules of its pooling and
    servicing agreement is extremely difficult. Further, imposing
    additional restrictions on which CMBS are eligible collateral
    for TALF loans could run counter to the program's goals of
    increasing market liquidity.
        We are committed to using our tools to help employers get
    through the current difficult period. We will continue to
    monitor economic conditions, including those in commercial real
    estate, as well as the efficacy of existing facilities. We will
    consider changes in our approach as warranted by developments.

    Q.3. Short-term funding provisions are essential for nonprofits
    right now, especially those with more than 500 employees that
    are not eligible for the Paycheck Protection Program.
    Nonprofits provide critical services to the most vulnerable.
    Nonprofits often lack the ability to raise funds the way for-
    profit enterprises can, and taking on additional debt can
    severely affect the services nonprofit organizations provide.
    What actions is Federal Reserve and Treasury considering for
    nonprofits employers with between 500 and 10,000 employees?

    A.3. Nonprofit organizations are a critical part of our
    economy, employing millions of people, providing essential
    services to communities, and supporting innovation and the
    development of a highly skilled workforce. We announced on June
    15 that we would be seeking public feedback on a proposal to
    expand Main Street to provide access to credit for nonprofit
    organizations described in sections 501(c)(3) and 501(c)(19) of
    the Internal Revenue Code that meet minimum eligibility
    criteria. \1\ The Board received comments from a wide range of
    stakeholders, and in response, on July 17, we announced revised
    term sheets that expanded the range of nonprofit organizations
    eligible to obtain Main Street loans. Under the updated terms,
    the Federal Reserve will offer loans to small and medium-sized
    nonprofits that were in sound financial condition before COVID-
    19. Nonprofit organizations will need to meet various
    eligibility criteria to qualify, including financial
    eligibility criteria based on operating performance, liquidity,
    and ability to repay debt. For additional information on the
    proposed nonprofit facilities, please see the facility term
    sheets. \2\
    ---------------------------------------------------------------------------
         \1\ www.federalreserve.gov/newsevents/pressreleases/
    monetary20200615b.htm
         \2\ For the Nonprofit Organization Expanded Loan Facility term
    sheet, see https://www.federalreserve.gov/newsevents/pressreleases/
    files/monetary20200717a1.pdf. For the Nonprofit Organization New Loan
    Facility term sheet, see https://www.federalreserve.gov/newsevents/
    pressreleases/files/monetary20200717a2.pdf.
    ---------------------------------------------------------------------------
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR CRAMER
                         FROM JEROME H. POWELL

    Q.1. There are over 6,200 nonprofits that employ more than 500
    workers (according to GuideStar), but they are not eligible for
    the forgivable loans established in the CARES Act. Nonprofit
    organizations with more than 500 employees employ over 25
    percent of the nonprofit workforce or over 3 million Americans.
    Congress included nonprofits in the Main Street Lending
    Program, but the Federal Reserve has stated that nonprofits are
    not currently eligible.
        As a result, there have not been any relief loan options
    provided to charities with more than 500 employees. I have
    heard from many social service groups who have seen an increase
    in demand as well as increased costs associated with keeping
    staff and clients safe. I have in hand a letter from several
    voluntary health charities, such as Alzheimer's Association,
    American Heart Association, American Lung Association, and
    American Cancer Society, who are working overtime to support
    patients and families most at risk of contracting COVID-19 or
    developing dangerous complications and not able to access any
    of the forgivable loans.

    A.1. Nonprofit organizations are a critical part of our
    economy, employing millions of people, providing essential
    services to communities, and supporting innovation and the
    development of a highly skilled workforce. We announced on June
    15 that we would be seeking public feedback on a proposal to
    expand the Main Street Lending Program (Main Street) to provide
    access to credit for nonprofit organizations described in
    sections 501(c)(3) and 501(c)(19) of the Internal Revenue Code
    that meet minimum eligibility criteria. \1\ The Federal Reserve
    Board received comments from a wide range of stakeholders, and
    in response, on July 17 we announced revised term sheets that
    expanded the range of nonprofit organizations eligible to
    obtain Main Street loans. Under the updated terms the Federal
    Reserve will offer loans to small and medium-sized nonprofits
    that were in sound financial condition before COVID-19.
    Nonprofit organizations will need to meet various eligibility
    criteria to qualify, including financial eligibility criteria
    based on operating performance, liquidity, and ability to repay
    debt. For additional information on the proposed nonprofit
    facilities, please see the facility term sheets. \2\
    ---------------------------------------------------------------------------
         \1\ www.federalreserve.gov/newsevents/pressreleases/
    monetary20200615b.htm
         \2\ For the Nonprofit Organization Expanded Loan Facility term
    sheet, see https://www.federalreserve.gov/newsevents/pressreleases/
    files/monetary20200717a1.pdf. For the Nonprofit Organization New Loan
    Facility term sheet, see https://www.federalreserve.gov/newsevents/
    pressreleases/files/monetary20200717a2.pdf.
    ---------------------------------------------------------------------------
                                    ------

             RESPONSES TO WRITTEN QUESTIONS OF SENATOR REED
                         FROM JEROME H. POWELL

    Q.1. As you may know, CNBC has reported that the
    ``Congressional Budget Office projects GDP dropping 38 percent
    in the second quarter as 26 million Americans remain
    unemployed.''
        In light of these projections, are the Federal Reserve and
    the Department of the Treasury considering either expanding the
    forthcoming Main Street Lending Program or creating a different
    program to facilitate lending to U.S. businesses with more than
    15,000 employees so that they may also get assistance with
    keeping workers on the job?

    A.1. The employee size and revenue eligibility metrics under
    the Main Street Lending Program (Main Street) were adopted to
    enable the program to support small and medium-sized businesses
    that are unable to receive sufficient assistance through other
    programs, such as the Small Business Administration's Paycheck
    Protection Program, or that may not have reached the scale
    needed to issue the kinds of capital market instruments that
    would be purchased under the Federal Reserve's Primary Market
    Corporate Credit Facility (PMCCF). Larger companies may wish to
    consider whether the PMCCF, which extends credit to Coronavirus
    Aid, Relief, and Economic Security Act (CARES Act)-eligible
    businesses without imposing restrictions related to revenues or
    number of employees, meets their needs. Like Main Street,
    borrowers under the PMCCF must meet facility-specific
    eligibility criteria. As of June 29, the PMCCF is operational
    and available for use.
                                    ------

                   RESPONSES TO WRITTEN QUESTIONS OF
                 SENATOR MENENDEZ FROM JEROME H. POWELL

    Q.1. The Municipal Liquidity Facility only offers loans that
    must be paid back in three years. All of the private market
    business lending facilities offer four year lending, even
    though the businesses borrowing from those facilities could
    pose a greater credit risk to taxpayers than States and
    localities.
        What is the rationale for offering States and localities a
    shorter loan term than private corporations?
        Does the Federal Reserve expect that absent additional
    assistance from the Federal government, the fiscal pressures on
    States and localities will still be there 3 years from now?

    A.1. The purpose of the Municipal Liquidity Facility (MLF) is
    to restore market functioning by increasing the availability of
    funding to eligible issuers through purchases of their short-
    term notes, so that municipalities can better manage cash flow
    pressures in order to continue to serve their communities. The
    36-month maturity limit reflects the purpose of the MLF to
    provide near-term financing to eligible issuers facing severe
    liquidity constraints resulting from the increase in State and
    local government expenditures related to COVID-19 and the
    decrease and delay of certain tax revenue, while allowing
    eligible issuers access to funding over more than one budget
    cycle. By addressing the cash management needs of eligible
    issuers, the MLF also was intended to encourage private
    investors to reengage in the municipal securities market,
    including across longer maturities. With the MLF and other
    facilities in place as a backstop to the private market, many
    parts of the municipal bond market have significantly recovered
    from the unprecedented strains experienced earlier this year.
    Municipal bond yields have declined considerably, issuance has
    been robust in recent months-particularly for issuers rated AA
    or higher who make up about 80 percent of the municipal
    securities market--and market conditions have improved. \1\
    ---------------------------------------------------------------------------
         \1\ See Board of Governors of the Federal Reserve System (2020),
    Financial Stability Report (Washington: Board of Governors, May),
    https://www.federalreserve.gov/publications/2020-may-financial-
    stability-report-purpose.htm.
    ---------------------------------------------------------------------------
        We will continue to closely monitor conditions in the
    primary and secondary markets for municipal securities and will
    evaluate whether additional measures are needed to support the
    flow of credit and liquidity to State and local governments.

    Q.2. Similarly, the rates the Federal Reserve is offering to
    investment-grade municipalities isn't far below the rates the
    Federal Reserve is offering to private companies in the Main
    Street lending programs, even though municipal bonds
    historically have had much lower rates of default.
        Please explain the Federal Reserve's rationale for pricing
    the municipal lending facility at the rates specified in the
    latest term sheet.
        Do you believe that the pricing could discourage States and
    municipalities from using the facility and potentially
    stigmatize those that choose to do so--making it harder for
    those who borrow from the facility to go back to the private
    market in the future?

    A.2. Under Section 13(3) of the Federal Reserve Act and the
    Federal Reserve Board's (Board) Regulation A, the interest rate
    on the eligible notes must be set at a rate that is a premium
    to the market rate in normal circumstances, affords liquidity
    in unusual and exigent circumstances, encourages repayment of
    the eligible notes, and discourages use of the facility as the
    unusual and exigent circumstances that motivated the program
    recede and economic conditions normalize. Under the Municipal
    Liquidity Facility (MLF), the pricing methodology is based on
    the overnight indexed swap (OIS) rate for a comparable maturity
    plus a fixed spread that corresponds with the ratings of the
    eligible notes and their relevant tax status. On August 11, the
    Federal Reserve Board announced revised pricing for the MLF.
    The revised pricing reduces the interest rate spread on tax-
    exempt notes for each credit rating category by 50 basis points
    and reduces the amount by which the interest rate for taxable
    notes is adjusted relative to tax-exempt notes.
        The fixed spread over OIS that applies for each credit
    rating category under the MLF was chosen because it meets the
    legal requirements. Our pricing methodology adjusts the
    interest rate based on credit rating, maturity, and tax status
    because these factors affect the pricing of similar municipal
    debt in markets during normal times. In addition, the interest
    rate on the facility is set at a level that is supportive of
    borrowers facing more severe challenges. The Federal Reserve
    will monitor conditions to assess the efficacy of the facility
    and any unintended consequences.

    Q.3. Please describe in detail the metrics the Federal Reserve
    will use to judge the efficacy of the Municipal Liquidity
    Facility.

    A.3. On June 2, the State of Illinois became the first
    Municipal Liquidity Facility (MLF) borrower when it issued $1.2
    billion, 12-month general obligation notes to the facility at a
    rate of 3.82 percent. This is more than 100 basis points lower
    in yield than comparable short-term notes that the State issued
    in the primary market in May.
        However, the efficacy of the facility is not measured by
    take-up. The Federal Reserve established the MLF to help
    support State and local governments' ability to serve
    households and businesses in their communities. That ability
    depends crucially on access to municipal securities markets.
    With that in mind, to measure the effectiveness of the MLF, the
    Federal Reserve is closely monitoring conditions in the primary
    and secondary markets for municipal securities. In particular,
    we are monitoring liquidity conditions, market access, market
    pricing, and volatility. Since the period of heightened market
    volatility in mid-March and the announcement of the MLF,
    conditions in municipal bond markets have generally improved.
    For example, spreads on general obligation bonds, which rose
    significantly in mid-March, have steadily decreased, reflecting
    greater investor demand for these securities. Moreover, after
    depressed primary issuance activity in March and April,
    issuance activity has been robust in May and June.
        Conditions in the secondary market have also improved, with
    transaction costs and bid wanted amounts returning to more
    normal levels.

    Q.4. We are now three months into the COVID-19 pandemic and are
    economy is under massive strain. More than 100,000 small
    businesses have closed their doors forever. Additionally, three
    out of four businesses have experienced declines in revenue.
    Our businesses are in a free fall and the Main Street lending
    facility could be a life line for businesses, if implemented
    properly.
        With the roll-out of the Paycheck Protection Program (PPP),
    we saw how lending institutions and the Small Business
    Administration's systems were overwhelmed by the loan demand.
    How are you preparing banks for the volume of Main Street loan
    applications they will receive? What are you doing to prepare
    your own systems for the massive loan volume?

    A.4. The Federal Reserve took significant steps to prepare for
    the full roll-out of the Main Street Lending Program (Main
    Street):

        Main Street Portal. The Main Street special purpose
            vehicle (SPV), which is managed by the Federal Reserve
            Bank of Boston (FRBB), has contracted with a vendor to
            serve as credit administrator. The FRBB, working with
            this credit administrator, has created a portal to
            register eligible lenders and facilitate intake of loan
            participations from preregistered lenders for purchase.
            The system has substantial on-demand computing capacity
            and the credit administrator constantly monitors system
            usage. The vendor has also trained call center and
            support staff and is prepared to increase available
            resources as needed. In addition to facilitating loan
            intake, the online portal will also facilitate credit
            monitoring of the portfolio during the life of the
            loans.

        Legal Documents. In the course of our outreach
            efforts, lenders stressed the importance of providing
            clarity in program legal documents regarding program
            terms, conditions, and associated liability. We have
            worked hard to provide potential Main Street borrowers
            and lenders with clarity and certainty regarding these
            requirements. The FRBB has posted all of the key legal
            documents online, including a form loan participation
            agreement, lender registration documents, lender and
            borrower certification and covenant documents, and a
            set of instructions for lender-required documentation.
            The FRBB has also established a Main Street website for
            centralized access to information for lenders and
            borrowers.

        Outreach. To provide potential lenders with
            information on Main Street and to address their
            questions in real time, the Federal Reserve has posted
            more than 10 webinars explaining aspects of the program
            with question and answer sessions. The Board and FRBB
            also have established online mailboxes where members of
            the public can submit questions. These mailboxes are
            actively monitored, and questions submitted are
            addressed on a bilateral basis or through guidance on
            the program, including in the form of FAQs. To access
            additional information, lenders and borrowers are
            encouraged to access the Main Street website. \2\
    ---------------------------------------------------------------------------
         \2\ www.federalreserve.gov/monetarypolicy/mainstreetlending.htm.

        Main Street is, of course, a credit program and not a grant
    program. Participation is a function of eligibility
    requirements and the extent to which the program terms and
    conditions are attractive to both borrowers and lenders. We
    will monitor the use of the program closely and make
    adjustments if needed in the future, including to address any
    ---------------------------------------------------------------------------
    operational issues.

    Q.5. Are you allowing banks to limit loan applications to
    existing customers? And, if so, will they be allowed to
    prioritize their biggest customers?

    A.5. Main Street includes three for-profit facilities, as well
    as two recently announced nonprofit facilities, each with
    unique features, designed to meet the needs of different types
    of borrowers, including banks' existing customers and new
    customers. The Main Street Expanded Loan Facility (MSELF) and
    Nonprofit Organization Expanded Loan Facility (NOELF) require
    that an eligible borrower have an existing term loan or
    revolving credit facility with an eligible lender. However,
    under the Main Street New Loan Facility (MSNLF), Main Street
    Priority Loan Facility (MSPLF), and Nonprofit Organization New
    Loan Facility, lenders may extend loans to new or existing
    customers. The Federal Reserve has specifically designed the
    terms and conditions of the MSNLF, MSPLF, and NONLF to allow
    for lending to new customers. With respect to the MSNLF and
    MSPLF, the Federal Reserve has issued FAQs providing guidance
    for how to apply the facilities' underwriting criteria with
    respect to new customers. We expect similar guidance will be
    available for the NONLF when that facility becomes operational.
    Q.6. I have heard concerns that the earnings metrics the
    Federal Reserve and Treasury intend to use for the Main Street
    lending facilities are ill-suited for important sectors of our
    economy that employ hundreds of thousands of Americans.
        As you develop final guidance for these facilities, are you
    examining whether the Federal Reserve and Treasury could use
    additional metrics for different industries to ensure that as
    many sectors of our economy as possible can utilize the
    program?

    A.6. Main Street is designed to augment the supply of loans
    made to businesses with established cash flows prior to COVID-
    19 that need assistance to maintain operations and payroll
    through these current unusual and exigent circumstances. By
    focusing on bridge financing to businesses with interrupted
    operations and cash flows, Main Street both directly addresses
    the near-term needs of borrowers and supports the provision of
    credit by lenders who may find it especially challenging to
    assess near-term cash flows owing to the uncertain outlook for
    COVID-19 and economy. This is a large portion of the business
    community and business lending. Within this type of lending,
    adjusted earnings before interest, taxes, depreciation, and
    amortization (EBITDA) is a key underwriting metric used by
    lenders in evaluating the credit risk of small and medium-sized
    businesses. As a result, it is one of the factors that
    determines the maximum loan size that borrowers are eligible to
    receive within Main Street.
        The Federal Reserve also recognizes that nonprofit
    organizations' liquidity positions and ability to repay are not
    generally evaluated by lenders based on EBITDA. Understanding
    this and the critical role nonprofit organizations play in the
    economy, the Federal Reserve announced on June 15 that it would
    be seeking public feedback on a proposal to expand Main Street
    to provide access to credit for nonprofit organizations. The
    Board received comments from a wide range of stakeholders, and
    in response, on July 17 we announced revised term sheets that
    expanded the range of nonprofit organizations that would be
    eligible to obtain Main Street loans. Under the updated terms,
    the Federal Reserve will offer loans to small and medium-sized
    nonprofits that were in sound financial condition before COVID-
    19. Nonprofit organizations will need to meet various
    eligibility criteria to qualify, including financial
    eligibility criteria based on operating performance, liquidity,
    and ability to repay debt.33 Additional details on the proposed
    nonprofit facilities can be found at www.federalreserve.gov/
    monetarypolicy/mainstreetlending.htm.
        The Federal Reserve further recognizes that, for some
    borrowers, collateral values or other factors are more
    indicative of the ability to obtain credit than cash flows.
    Staff continue to monitor lending conditions broadly and, while
    credit conditions have tightened overall, credit appears to be
    available generally against good collateral when such
    collateral is available. If these conditions were to change
    significantly, the Federal Reserve would carefully evaluate
    whether its authorities could further support the availability
    of credit. We remain alert to the possibility that changes to
    market conditions may warrant changes to the terms and
    conditions of the Federal Reserve's emergency lending programs.

    Q.7. Borrowers from commercial mortgage-backed securities
    (CMBS), like hotels, shopping centers, and housing complexes,
    attest that they are under significant financial hardship. In
    many cases, their tenants are not able to pay rent and their
    mortgage servicers are not offering flexibility. Several
    affected entities are concerned about their ability to meet
    their financial obligations over a protracted period of time.
        Does the Treasury or Federal Reserve have plans to address
    these concerns in the CMBS market, and if so, how?

    A.7. The Board has been closely monitoring the situation in the
    commercial mortgage-backed securities (CMBS) market and
    recognizes the concerns that you have outlined in your
    question. Several of the Federal Reserve's initiatives to
    support the broader economy have proven beneficial to the CMBS
    market, such as the purchases of Agency CMBS as part of open-
    market operations and the inclusion of legacy CMBS as TALF-
    eligible collateral. Spreads and liquidity in the CMBS market
    have improved significantly since the Federal Reserve started
    these programs. Main Street and the Paycheck Protection Program
    Liquidity Facility may also support CMBS borrowers by providing
    small and medium-sized businesses financing to maintain their
    operations-including paying rent-until conditions normalize.
    Other Federal Reserve programs, such as the corporate credit
    facilities, are also providing support to some segments of the
    commercial real estate industry.
        Even with these actions, as you note, certain CMBS
    borrowers continue to experience significant distress. Since
    late February 2020, the lodging and retail sectors have
    experienced precipitous declines in demand as a result of
    COVID-19. In June, looking only at mortgages funded by CMBS,
    borrowers accounting for about 24 percent of mortgages in the
    lodging sector and 18 percent of mortgages in the retail sector
    were more than 30 days delinquent. Other sectors-for example,
    the multi-family sector-have experienced less-severe increases
    in delinquencies.
        We are committed to using our policy tools to help
    employers get through the current difficult period. However,
    loans made through a Federal Reserve facility may not be an
    effective solution for hotel and retail commercial properties
    that have suffered large revenue losses and already have large
    amounts of debt. Loans extended under the Federal Reserve's
    13(3) authority are generally not subordinate to other debt,
    and the Federal Reserve must take steps to ensure that the
    taxpayer will be repaid. In addition, many CMBS borrowers may
    be barred by their loan agreements from taking on more debt.
        We will continue to monitor economic conditions, including
    those faced by CMBS and other commercial real estate borrowers,
    as well as the efficacy of existing facilities. We will
    consider changes in our approach as warranted by future
    developments.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR TESTER
                         FROM JEROME H. POWELL

    Q.1. Recent data on the availability of credit suggests that it
    has not been this difficult to obtain a mortgage since 2014,
    and constraints on the availability of credit are particularly
    acute for borrowers of non-QM loans and jumbo loans. Because
    these mortgages are frequently packaged and sold as residential
    mortgage-backed securities (RMBS) to private investors, the
    recent illiquidity in secondary market private RMBS exacerbates
    the lack of funding for such mortgages.
        Non-agency RMBS is the largest asset class by volume within
    all ABS, comprising approximately 30 percent of the market, but
    is one of the few asset classes which is not currently eligible
    under the Term Asset-backed Lending Facility (TALF) program.
        Are there plans to allow AAA RMBS securities as eligible
    collateral under TALF?

    A.1. In determining whether a certain type of asset-backed
    securities (ABS) should be eligible collateral for Term Asset-
    Backed Lending Facility (TALF) loans, the Federal Reserve
    Board's (Board) considers whether accepting an asset class will
    provide material support to the economy and whether inclusion
    of the asset class is appropriate under the restrictions of
    section 13(3) of the Federal Reserve Act. In particular, under
    section 13(3), the Board and Reserve Banks must take steps to
    ensure the protection of the taxpayer, including by assigning a
    ``lendable value to all collateral.'' To satisfy this
    restriction, we prioritize categories of ABS where a large
    share of issuance is routinely rated triple-A by the rating
    agencies and where comprehensive information is available about
    credit performance in different economic environments,
    including stressed conditions.
        As you noted, one of the largest ABS categories not
    currently eligible as TALF collateral is residential mortgage-
    backed securities (RMBS), and a large share of RMBS issuance is
    typically rated triple-A by the rating agencies. However, some
    RMBS have performed poorly in times of stress, and RMBS
    collateralized by mortgages with low or nonstandard
    documentation have a particular history of underperformance.
    The types of ABS currently accepted as TALF collateral
    generally have a long history of performing well in stressed
    economic conditions, and the Board relies on that history of
    strong performance to ensure that TALF loans are made in a
    manner consistent with section 13(3).
        The Board recognizes that the current exclusion of all RMBS
    from TALF affects credit availability in some sectors of the
    mortgage market and continues to consider whether adding
    certain types of RMBS to the list of TALF-eligible collateral
    is consistent with the 13(3) requirements and the policy aims
    of the TALF. In this analysis, we are assessing separately how
    jumbo, non-QM, and re-performing RMBS measure against the
    considerations articulated above. This analysis is being
    conducted in consultation with our colleagues at the U.S.
    Department of the Treasury, which has provided a $10 billion
    equity investment in the TALF special purpose vehicle using
    funds appropriated to the Exchange Stabilization Fund under
    section 4027 of the Coronavirus Aid, Relief, and Economic
    Security Act (CARES Act).

    Q.2. As many States move forward with reopening, Montana being
    one of them, what assistance and guidance are you providing
    PHAs in regards to reopening?

    A.2. While direct oversight and support for public housing
    authorities (PHAs) are not under the purview of the Board, we
    are sympathetic to the challenges that PHAs face during these
    difficult times. The Federal Reserve System's Community
    Development Offices have worked to collect information about
    the economic impact of actions undertaken to respond to the
    public health crisis through outreach, data collection and
    analysis to help inform the work of agencies and community
    organizations working to support low- and moderate-income (LMI)
    populations. Through conversations with relevant stakeholders
    and a review of the results of the April and June 2020 rounds
    of the Federal Reserve System's survey of LMI communities on
    the effects of COVID-19, we know that many organizations
    providing affordable housing services are incurring significant
    unanticipated expenses. \1\ Among these unexpected expenses are
    increased cleaning and sanitization costs to protect the health
    of their residents, increased carrying costs for new properties
    or those under renovation for which construction has been
    halted, and the provision of personal protective equipment for
    their staff members.
    ---------------------------------------------------------------------------
         \1\ https://www.frbatlanta.org/community-development/publications/
    national-COVID-19-survey
    ---------------------------------------------------------------------------
        The simultaneous decline in rental revenues as residents
    lose their employment has exacerbated this increase in
    expenses. Based on the Census Bureau's Household Pulse Survey
    and other sources, we know that employment and housing
    disruption are most significant for the very lowincome
    households that it is the mission of PHAs to serve. Therefore,
    we are closely monitoring conditions in affordable rental
    markets to identify any stresses that may either reverberate
    through the financial system or negatively impact renters,
    especially low-income renters.

    Q.3. Would jumbo AAA RMBS and non-QM RMBS be eligible? Would
    other sub asset classes--such as reperforming loans for
    borrowers coming off a credit event--be eligible as well?

    A.3. Please see response to Question 1.

    Q.4. What support can Treasury lend to the Fed under TALF to
    support the housing market so that financing is available for
    self-employed or nontraditional borrowers who rely on non-QM
    mortgages, or to borrowers who live in high-cost areas who rely
    on jumbo financing?

    A.4. Please see response to Question 1.

    Q.5. What metrics will you use in making these determinations?

    A.5. Please see response to Question 1.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARREN
                         FROM JEROME H. POWELL

    Q.1. On December 13, 2019, I signed a letter to you regarding
    climate-related financial and economic risks. \1\ In this
    letter, my colleagues and I stated, ``The Fed's supervisory
    framework and analytical tools need to account for the fact
    that our financial system faces new risks from climate
    change.'' \2\
    ---------------------------------------------------------------------------
         \1\ Letter from Senators Schatz, Warren, Smith, Klobuchar,
    Whitehouse, Baldwin, and Harris to Federal Reserve System Chair Jerome
    Powell, December 13, 2019.
         \2\ Id.
    ---------------------------------------------------------------------------
        In your response, you stated, ``Congress has principally
    entrusted other agencies with the task of addressing climate
    change. However, as your letter notes, there are ways in which
    climate-related risks could have relevance for the Federal
    Reserve Board (Board) as it fulfills its mission.'' \3\
    Additionally, earlier this year, you stated, ``The public has
    every right to expect and will expect that we will ensure that
    the financial system is resilient and robust against the risks
    of climate change.'' \4\
    ---------------------------------------------------------------------------
         \3\ Letter from Federal Reserve System Chair Jerome Powell to
    Senator Warren, February 10, 2020.
         \4\ Reuters, ``Fed Has a Role in Combating Climate Change Risk,
    Powell Says'', Ann Saphir, January 29, 2020, https://www.reuters.com/
    article/us-usa-fed-climatechange/fed-has-a-role-in-combating-climate-
    change-risk-powell-says-idUSKBN1ZT031.
    ---------------------------------------------------------------------------
        Given the threats of climate change on the financial
    system, \5\ please explain how you view the Federal Reserve
    Board's role in combatting the climate crisis and its
    associated economic risks.
    ---------------------------------------------------------------------------
         \5\ Center for American Progress, ``Climate Change Threatens the
    Stability of the Financial System'', Gregg Gelzinis and Graham Steele,
    November 21, 2019, https://www.americanprogress.org/issues/economy/
    reports/2019/11/21/477190/climate-change-threatens-stability-financial-
    system/.
    ---------------------------------------------------------------------------
        Has the Federal Reserve System hired or contracted climate
    economists to work on evaluating climate change risks? Have you
    or other senior Federal Reserve System officials been briefed
    or advised by climate scientists or climate economists inside
    or outside of government on these issues?

    A.1. Economic research to understand the specific transmission
    channels between climate-related risks and the financial system
    is essential to understanding the impact of those risks on the
    Federal Reserve's mission. This research remains at an early
    stage, and the Federal Reserve is working to foster and develop
    it. These efforts are active and ongoing, and they will help us
    assess the ways climate-related risks may affect the economy,
    financial stability, and the safety and soundness of financial
    institutions. Moreover, as mentioned below, the Federal Reserve
    Board (Board) staff participate in several forums with other
    U.S. and international regulators where the evaluation of the
    effects of climate change on the financial system are
    particularly relevant.
        Regarding the second part of your question, the Federal
    Reserve does have a range of staff who conduct and publish
    academic research on climate-related financial risks; I have
    attached, as Appendix A, a list of publications by several of
    those staff with my response.

    Q.2. You also stated, ``The Board and Reserve Banks are
    exploring new sources of climate-related data and computational
    resources, research projects involving existing supervisory
    data collections, and participation in conferences and
    workshops to share our efforts with the public. These efforts,
    which are in their early stages, span several areas within the
    Board and the Reserve Banks.'' \6\
    ---------------------------------------------------------------------------
         \6\ Letter from Federal Reserve System Chair Jerome Powell to
    Senator Warren, February 10, 2020.
    ---------------------------------------------------------------------------
        Please provide a detailed timeline for the Federal
    Reserve's timeline for this research, publicizing their
    findings, and operationalizing the findings in the Federal
    Reserve's supervision.

    A.2. Much of the research mentioned in Appendix A has been
    published and presented in academic seminars and conferences.
    The Federal Reserve has made a concerted effort in recent years
    to make more information about supervision, regulation, and
    financial stability work available to the public. This
    engagement and transparency is especially important in an area
    of research that is still emerging, such as the analysis of
    climate-related financial risks, and we expect to make as much
    of our own research on this topic public as possible.

    Q.3. Earlier this year, when asked why the Federal Reserve
    System has not joined ``dozens of other global central banks in
    the Network for Greening the Financial System, an international
    effort to better understand risks from rising temperatures,''
    reports show that you indicated that ``it is just a matter of
    time.'' \7\
    ---------------------------------------------------------------------------
         \7\ Reuters, ``Fed Has a Role in Combating Climate Change Risk,
    Powell Says'', Ann Saphir, January 29, 2020, https://www.reuters.com/
    article/us-usa-fed-climatechange/fed-has-a-role-in-combating-climate-
    change-risk-powell-says-idUSKBN1ZT031.
    ---------------------------------------------------------------------------
        Will you commit to joining the multitude of foreign central
    banks and financial regulators that are focusing on climate
    risk at the Network for Greening the Financial System (NGFS)?

    A.3. While the timeline of the Network for Greening the
    Financial System's (NGFS) activities is in flux as a result of
    COVID-19, the Federal Reserve remains engaged with the NGFS
    secretariat and its members, continues to participate in its
    meetings as a guest, and is following its work closely. We
    continue to discuss with the NGFS what role the Federal Reserve
    could potentially play in NGFS work, particularly as its
    steering committee considers how to align its governance
    structure with the best practices of other international
    organizations. Any role would need to be consistent with the
    mandate and scope of activities Congress has authorized for the
    Federal Reserve.

    Q.4. Do you think the United States has a competitive advantage
    when it comes to leading global efforts on financial regulation
    at international coordinating bodies when the Federal Reserve
    is not a member of the NGFS?

    A.4. As I described in a previous letter to you, the Federal
    Reserve has considerable expertise in understanding the impact
    of severe weather events, ranging from economic forecasting, to
    financial stability monitoring, to prudential supervision, to
    continuity of operations. I continue to believe that this
    expertise, our active participation in the emerging research
    dialogue on climate-related financial risks, and our commitment
    to evidence-based policymaking position us well to contribute
    to the assessment and measurement of climate-related financial
    risks. Our peers in other jurisdictions are working to make
    similar contributions, and we continue to benefit from their
    efforts.

    Q.5. I am an original cosponsor of the Climate Change Financial
    Risk Act of 2019. \8\ This bill would create new climate risk
    scenarios for financial institution stress tests. It would
    require the Federal Reserve, along with an advisory group of
    climate experts, to develop three stress test scenarios: one
    assuming 1.5 degrees Celsius of warming above pre-industrial
    levels, one assuming 2 degrees of warming, and one assuming
    ``business as usual'' warming. \9\ These tests will quantify
    how expected physical and transition risks will affect economic
    conditions, and will require financial institutions to define
    how they will adapt their practices to limit climate impacts.
    The Federal Reserve will have the power to reject plans and
    prohibit institutions from proceeding with capital
    distributions.
    ---------------------------------------------------------------------------
         \8\ Climate Change Financial Risk Act of 2019, S. 2903, https://
    www.congress.gov/bill/116th-congress/senate-bill/2903.
         \9\ Office of Senator Schatz, ``Schatz Introduces New Legislation
    To Ensure U.S. Financial System Is Prepared for Climate Change,''
    November 20, 2019, https://www.schatz.senate.gov/press-releases/schatz-
    introduces-new-legislation-to-ensure-us-financial-system-is-prepared-
    for-climate-change.
    ---------------------------------------------------------------------------
        Do you support the Federal Reserve conducting stress tests
    to measure resilience to climate-related financial risks? If
    not, what measures do you support to incorporate climate risk
    scenarios in overseeing large financial institutions?
        The Bank of England recently stated, ``Climate change
    creates risks to both the safety and soundness of individual
    firms and to the stability of the financial system.'' \10\
    Accordingly, they have decided to stress test the United
    Kingdom's largest banks and insurance companies against the
    physical and transition risks associated with climate change.
    \11\ Will the Federal Reserve follow suit and develop climate-
    related stress tests?
    ---------------------------------------------------------------------------
         \10\ Bank of England, ``Discussion Paper: The 2021 biennial
    exploratory scenario on the financial risks from climate change,''
    December 2019, https://www.bankofengland.co.uk/-/media/boe/files/paper/
    2019/the-2021-biennial-exploratory-scenario-on-the-financial-risks-
    from-climate-
    change.pdf?la=en&hash=73D06B913C73472D0DF21F18DB71C2F454148C80.
         \11\ Climate News Network, ``Bank of England Unveils Climate
    Stress Test'', Kieran Cooke, January 1, 2020, https://
    climatenewsnetwork.net/bank-of-england-unveils-climate-stress-test/.

    A.5. Federal Reserve staff and other central banks are engaged
    in research to better understand the translation of climate
    risk to economic and financial risk, as would be required to
    conduct a stress test. Further research in this new and rapidly
    evolving field is a prerequisite to any regulatory or
    supervisory steps, including any changes to stress testing
    requirements. We are committed to making as much of this
    research as public as possible to inform the common effort by
    academics and Congress to more fully understand climate-related
    ---------------------------------------------------------------------------
    financial risks.

    Q.6. Following the Banking, Housing, and Urban Affairs
    Committee hearing on December 5, 2019, I submitted questions
    for the record for Federal Reserve System Vice Chair for
    Supervision Randal Quarles. \12\
    ---------------------------------------------------------------------------
         \12\ Questions for the Record from Senator Warren to Federal
    Reserve System Vice Chair for Supervision Randal Quarles, December 12,
    2019.
    ---------------------------------------------------------------------------
        In response to my question regarding incorporation of
    climate risks in assessing financial stability, Vice Chair
    Quarles stated, ``staff across the Federal Reserve System
    conduct extensive research on a range of issues related to the
    effects of climate change, including how climate-related risks
    can be amplified by the financial system.'' \13\ Recent
    reports, however, have described the ``likelihood that the Fed
    won't account for long-term climate risks, like stranded fossil
    fuel assets, as it directs the world's largest asset manager to
    revive the U.S. economy.'' \14\
    ---------------------------------------------------------------------------
         \13\ Letter from Federal Reserve System Vice Chair for Supervision
    Randal Quarles to Senator Warren, May 11, 2020.
         \14\ E&E News, ``Fed Faces Climate Test as It Tries To Rescue
    Economy'', Avery Ellfeldt, April 16, 2020, https://www.eenews.net/
    stories/1062883505.
    ---------------------------------------------------------------------------
        Please provide specific information about the staff
    research on climate-related risks and the financial system and
    how the Federal Reserve System has incorporated staff research
    in its supervision of financial institutions.

    A.6. As noted in my response to question 1a, I have attached
    Appendix A. This list of research undertaken by Federal Reserve
    System staff on climate-related financial and economic risks
    covers a wide range of sub-topics, including the effect of
    climate-related risks on asset prices, consumer spending,
    industrial production, savings behavior, credit availability,
    and fiscal outcomes. It also reflects the emerging State of
    this area of the economic literature, as well as the number of
    questions that would still benefit from careful analysis. As I
    noted in a previous letter to you, we expect to continue
    participating actively in these efforts, and to work to
    understand the transmission of climate-related risks to the
    financial system. As we understand these transmission
    mechanisms better, this research will assist us in our
    supervisory work.

    Q.7. Vice Chair Quarles also stated, ``Federal Reserve staff
    and I remain in frequent contact with our supervisory
    colleagues in other jurisdictions, following closely their own
    climate-related projects.'' \15\
    ---------------------------------------------------------------------------
         \15\ Letter from Federal Reserve System Vice Chair for Supervision
    Randal Quarles to Senator Warren, May 11, 2020.
    ---------------------------------------------------------------------------
        Please provide a list of supervisory institutions in other
    jurisdictions with whom the Federal Reserve staff and you have
    communicated regarding climate-related financial risks.
        Please describe how these communications have informed the
    Federal Reserve's efforts to incorporate climate-related risks
    in its supervision of large financial institutions.

    A.7. The Federal Reserve is an active member of international
    standard-setting bodies, such as the Basel Committee for
    Banking Supervision and the International Association of
    Insurance Supervisors, as well as the Financial Stability
    Board, which is chaired by Vice Chair Quarles. The membership
    of these groups includes dozens of central banks, supervisors,
    and finance ministries; each group has climate-related projects
    underway to which we are actively contributing.
        We also have attended meetings of the NGFS as a guest, and
    Federal Reserve staff have held bilateral meetings with staff
    from other central banks and supervisors on climate-related
    issues. These include staff from De Nederlandsche Bank, the
    European Central Bank, the Bank of Japan, Japan Financial
    Services Agency, and the Bank of England.
        These conversations have offered staff useful perspectives
    on the nature of the work being undertaken at foreign
    institutions, as well as the challenges that those institutions
    have faced. Further, some staff have been able to engage on
    existing and potential future research papers.

    Q.8. In response to my question regarding how the Federal
    Reserve has assessed if the financial system is resilient to
    climate-related risks or taken any actions to increase
    resilience to the climate crisis, Vice Chair Quarles's response
    instead focused on near-term severe weather events, rather than
    long-term climate impacts, and stated that the Federal Reserve
    does not directly model ``how changes in temperatures over long
    periods of time affect economic activity (modeling being a
    separate matter from the extensive economic analysis of this
    question that we do).'' \16\
    ---------------------------------------------------------------------------
         \16\ Id.
    ---------------------------------------------------------------------------
        Given the significant differences between climate and
    weather, \17\ please describe how the Federal Reserve System is
    differentiating between severe weather impacts and climate
    change in its analysis of climate-related risks.
    ---------------------------------------------------------------------------
         \17\ New York Times, ``How the Weather Gets Weaponized in Climate
    Change Messaging'', Brad Plumer, March 1, 2019, https://
    www.nytimes.com/2019/03/01/climate/weather-climate-change.html.

    A.8. Changes in longer-term climate trends could affect the
    frequency, severity, location, and impact of severe weather
    events. As Appendix A reflects, Federal Reserve staff have
    undertaken a range of research to examine the effect of severe
    weather events and other natural disasters on economic and
    financial outcomes. These kinds of analyses are an important
    input into efforts to model the economic and financial effects
    of long-run climate trends. Researchers in the field have begun
    to work on this second distinct challenge, and our staff are
    ---------------------------------------------------------------------------
    both following closely and contributing to that work.

    Q.9. Earlier this year, the Canadian government announced a
    program to provide financing for businesses in response to the
    ongoing novel coronavirus 2019 disease (COVID-19) pandemic. As
    one of the conditions for receiving funds, Canada is requiring
    that companies receiving assistance under this program ``commit
    to publish annual climate-related disclosure reports consistent
    with the Financial Stability Board's Task Force on Climate-
    related Financial Disclosures, including how their future
    operations will support environmental sustainability and
    national climate goals.'' \18\
    ---------------------------------------------------------------------------
         \18\ Justin Trudeau, Prime Minister of Canada, ``Prime Minister
    announces additional support for businesses to help save Canadian
    jobs,'' press release, May 11, 2020, https://pm.gc.ca/en/news/news-
    releases/2020/05/11/prime-minister-announces-additional-support-
    businesses-help-save.
    ---------------------------------------------------------------------------
        Despite the significant economic impacts of the climate
    crisis, \19\ ``U.S. regulators have been slow to respond to the
    threats that a warming planet can pose to financial assets.''
    \20\
    ---------------------------------------------------------------------------
         \19\ New York Times, ``Climate Change's Giant Impact on the
    Economy: 4 Key Issues'', Neil Irwin, January 17, 2019, https://
    www.nytimes.com/2019/01/17/upshot/how-to-think-about-the-costs-of-
    climate-change.html; Brookings Institution, ``Ten facts about the
    economics of climate change and climate policy,'' Ryan Nunn, Jimmy
    O'Donnell, Jay Shambaugh, Lawrence Goulder, Charles Kolstad, and
    Xianling Long, October 23, 2019, https://www.brookings.edu/research/
    ten-facts-about-the-economics-of-climate-change-and-climate-policy/.
         \20\ Reuters, ``U.S. Regulator Homes in on Climate Risks to U.S.
    Markets'', Ann Saphir, December 11, 2019, https://www.reuters.com/
    article/us-climate-change-market-risks/u-s-regulator-homes-in-on-
    climate-risks-to-u-s-markets-idUSKBN1YF2D5.
    ---------------------------------------------------------------------------
        Will you require companies that receive money from
    taxpayers to keep workers on their payroll?

    A.9. By promoting the flow of credit to households and
    business, our facilities are intended to support the provision
    of liquidity in the economy, which will help businesses
    maintain their operations and employees through this
    challenging period. Our facilities were designed in compliance
    with both the Coronavirus Aid, Relief, and Economic Security
    Act (CARES Act) and section 13(3) of the Federal Reserve Act.
    For our Main Street Lending Program, we do expect borrowers to
    make commercially reasonable efforts to maintain their
    payrolls. Overall, providing credit to businesses, large and
    small, should help to ensure that their workers can remain
    employed and paid through this very difficult period. We will
    continue to monitor our facilities to ensure they are working
    as intended.

    Q.10. Do you consider climate change a threat to the stability
    of our financial system, especially in the wake of the
    coronavirus crisis?

    A.10. The Federal Reserve is committed to promoting a safe,
    flexible, and stable financial system. This mandate requires us
    to examine a wide range of risks to the financial system. As I
    mentioned in my response to question 1a, economic research to
    understand the specific transmission channels between climate-
    related risks and the financial system is essential to
    understanding the impact of those risks on the Federal
    Reserve's mission. This research remains at an early stage, and
    the Federal Reserve is working to foster and develop it. These
    efforts are active and ongoing and will help us assess the ways
    climate-related risks may affect the economy, financial
    stability, and the safety and soundness of financial
    institutions.

    Q.11. In the third quarter of 2019, oil and gas companies were
    responsible for 91 percent of defaulted U.S. corporate debt.
    \21\ Thirty-seven oil companies received over $1.9 billion in
    tax benefits by using a provision in the Coronavirus Aid,
    Relief, and Economic Security (CARES) Act. For example,
    Marathon received a $411 million benefit, and Occidental
    expects to receive $195 million because of a carryback
    provision. \22\
    ---------------------------------------------------------------------------
         \21\ New York Times, ``Coronavirus May Kill Our Fracking Fever
    Dream'', opinion, Bethany McLean, April 10, 2020, https://
    www.nytimes.com/2020/04/10/opinion/sunday/coronavirus-texas-fracking-
    layoffs.html.
         \22\ Bloomberg, `` `Stealth Bailout' Shovels Millions of Dollars
    to Oil Companies'', Jennifer Dlouhy, May 15, 2020, https://
    www.bloomberg.com/news/articles/2020-05-15/-stealth-bailout-shovels-
    millions-of-dollars-to-oil-companies?sref=L459Uwzi.
    ---------------------------------------------------------------------------
        How will the Federal Reserve ensure the long-term stability
    of the U.S. energy and financial systems?

    A.11. In the wake of COVID-19, we are monitoring corporate
    insolvencies carefully from both a supervisory and financial
    stability perspective. As part of that monitoring, we are
    paying careful attention to default risk in different sectors
    and considering what the repercussions of that risk are for
    financial stability more broadly. Additional information on the
    Federal Reserve's approach to monitoring financial system
    vulnerabilities, including those in the nonfinancial corporate
    sector, can be found in our latest Financial Stability Report.
    \23\ In terms of the U.S. energy sector, Federal law assigns
    regulatory responsibility to other agencies.
    ---------------------------------------------------------------------------
         \1\ 1 www.federalreserve.gov/publications/2020-may-financial-
    stability-report-purpose.htm
    ---------------------------------------------------------------------------

    APPENDIX A

                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR SCHATZ
                         FROM JEROME H. POWELL

    Q.1. According to Census data, about half of small businesses
    will run out of cash within a month. States are beginning to
    reopen their economies, but consumer behavior is not going to
    return to normal within a month.
        How many small businesses does the Fed estimate will have
    to close permanently within the next month?
        What economic indicators will the Fed monitor in the next
    couple of weeks to gauge the economy's recovery?

    A.1. COVID-19 poses a critical risk of insolvency to small and
    medium-sized businesses. These firms are the heart of our
    economy and widespread insolvencies could cause long-lasting
    economic harm. In order to bolster the effectiveness of the
    Paycheck Protection Program (PPP), the Federal Reserve launched
    the Paycheck Protection Program Liquidity Facility, which
    supplies liquidity to lenders backed by their PPP loans to
    small businesses. In addition, the Federal Reserve's Main
    Street Lending Program (Main Street) facilities are now
    available to provide credit to small and medium-sized firms
    that were in sound financial condition prior to COVID-19.
        Going forward, the financial health of small businesses is
    highly uncertain and will likely remain challenging. The number
    of insolvencies will depend upon multiple factors, including
    the pace of the broader economic recovery. The Federal Reserve
    will be carefully monitoring this issue through the use of
    information such as small business loan performance data and
    the surveys produced by organizations such as the National
    Federation of Independent Business.

    Q.2. You have warned that there could be serious, long-term
    economic harm from avoidable insolvencies-both at the household
    and business level.
        In order to avoid unnecessary insolvencies, how quickly
    should Congress act? If we wait until we see bankruptcies
    increase, isn't that too late to use fiscal policy to prevent
    them?

    A.2. As stated in my previous response, the current economic
    downturn poses the threat of insolvency for many businesses and
    households; such insolvencies could do significant longer-run
    damage to the economy. Maintaining the flow of credit is
    therefore essential for mitigating damage to the economy and
    laying the groundwork for the recovery. To directly support the
    flow of credit to households, to businesses of all sizes, and
    to State and local governments, the Federal Reserve has
    established several lending facilities. These facilities
    benefit the economy by providing financing where it is not
    otherwise available, helping employers to retain their workers
    and households to meet their obligations. By backstopping
    financial markets, these facilities aim to increase the
    willingness of private-sector lenders to issue credit, thereby
    easing financial strain for families and firms. Furthermore,
    the Coronavirus Aid, Relief, and Economic Security Act (CARES
    Act) and other legislation provides additional, direct support
    to households and businesses, which should help reduce the
    prevalence of firm and household financial strain. Going
    forward, though, household and business insolvency remains a
    significant concern. That said, the size, composition, and
    timing of any additional fiscal support for households and
    firms is ultimately a decision for Congress and the
    Administration.

    Q.3. Data from before the COVID pandemic show that household
    debt increased to a new high of $14 trillion in the first
    quarter of 2020, which is $1.6 trillion higher than the
    previous peak in 2008. Many Americans will take on more debt to
    get through the pandemic, and many will fall behind in paying
    their bills.
        Do you think policies that would help reduce Americans'
    debt burden would help speed our economic recovery?

    A.3. Total household debt reached a record high of $14 trillion
    in nominal terms in the first quarter of 2020. Real debt,
    however, remained about $1.1 trillion below its previous peak
    in 2008. In addition, real income grew over this period and
    interest rates on household debt are much lower than in 2008.
    As a result, the aggregate household debt service ratio-the
    ratio of total required household debt payments to total
    disposable income-remained at a subdued level.
        The rapid rise in unemployment and the curtailment of
    incomes for many people brought by COVID-19 has limited their
    ability to keep up with their debt obligations. To help
    borrowers weather this shock and manage their debt obligations,
    several programs-such as mortgage and Federal student loan
    forbearance programs-were implemented.
        Government policies that help reduce households' debt
    burdens would likely have positive economic effects, including
    near-term growth and increased spending by those households. In
    such a scenario, aggregate demand could go up in the near term
    as borrowers see their debt payments reduced, and some
    borrowers' credit scores could be boosted. This improvement of
    consumers' balance sheets and creditworthiness could expand
    their credit access, leading to more borrowing and increased
    aggregate demand.
        The extent to which such policies would promote overall
    economic growth would depend on many competing factors that
    lawmakers and the Administration will need to carefully
    consider, including the costs of such policies in a time of low
    interest rates against potential increases in employment and
    economic growth.

    Q.4. Do you think the damage to people's credit scores from
    late payments as a result of COVID will weigh on Americans'
    financial health or the economy?

    A.4. Provisions under the Coronavirus Aid, Relief, and Economic
    Security Act (CARES Act) relating to credit reporting allow
    consumers affected by the pandemic to obtain relief while
    minimizing the impact on their credit scores. The law requires
    creditors to report as ``current'' any credit obligations on
    which they have provided an accommodation to a COVID-19-
    affected borrower who was current prior to the accommodation.
    Indeed, partly due to these measures and lender-provided loan
    forbearance, so far we have not seen a widespread increase in
    delinquencies for household credit, nor a material
    deterioration of credit scores. Maintaining household credit
    performance and stable credit scores is important for ensuring
    a smooth flow of credit to the household sector, which in turn
    will play an important role in helping to facilitate a robust
    economic recovery.
        To support consumers in managing their finances during
    COVID-19, the Federal Reserve Board has issued numerous
    statements and rules to encourage banks to work with their
    customers, support implementation of provisions of the CARES
    Act under our supervision, increase banks' flexibility in
    accommodating consumers' access to credit, and remind banks of
    their obligation to comply with consumer laws and regulations,
    including fair lending. The various actions are listed on the
    COVID-19 page of our public website. \1\ As an overview,
    several of the regulatory and supervisory statements to support
    financial institutions and consumers in this crisis include:
    ---------------------------------------------------------------------------
         \1\ https://www.federalreserve.gov/COVID-19.htm

        Forbearance and credit workouts: We have issued
            guidance encouraging banks and mortgage servicers to
            work with customers and borrowers to provide
            forbearance. \2\
    ---------------------------------------------------------------------------
         \2\ https://www.federalreserve.gov/newsevents/pressreleases/
    bcreg20200403a.htm

        CARES Act examination procedures: We have issued
            public examination procedures to inform the industry of
            how we intend to supervise State member banks for
            compliance with the credit reporting and mortgage
            forbearance provisions of the CARES Act. \3\
    ---------------------------------------------------------------------------
         \3\ https://www.federalreserve.gov/supervisionreg/caletters/
    caltr2011.htm

        Small dollar loans: We have issued principles
            describing how banks can extend responsible small
            dollar loans to help borrowers cover temporary cash-
            flow imbalances, unexpected expenses, or income
            shortfalls. \4\
    ---------------------------------------------------------------------------
         \4\ https://www.federalreserve.gov/newsevents/pressreleases/
    bcreg20200520a.htm

        Appraisals: We have temporarily deferred the
            requirement for appraisals to facilitate mortgage
            credit. \5\
    ---------------------------------------------------------------------------
         \5\ https://www.federalreserve.gov/newsevents/pressreleases/
    bcreg20200414a.htm

        Access to savings: We have suspended limits on the
            number of withdrawals from savings accounts to provide
            consumers greater access to their funds. \6\
    ---------------------------------------------------------------------------
         \6\ https://www.federalreserve.gov/newsevents/pressreleases/
    bcreg20200424a.htm

        Community Reinvestment Act (CRA) consideration for
            activities: We have issued a statement indicating that
            CRA credit would be provided for activities that serve
            the needs of lower-income consumers and communities,
            \7\ with interagency guidance issued to clarify
            activities that will be considered as responsive under
            CRA. \8\
    ---------------------------------------------------------------------------
         \7\ https://www.federalreserve.gov/supervisionreg/caletters/
    caltr2004.htm
         \8\ https://www.federalreserve.gov/supervisionreg/caletters/
    caltr2010.htm

        In addition, consistent with its supervisory authority, the
    Federal Reserve will examine banks under its jurisdiction for
    compliance with the CARES Act provisions that are intended to
    mitigate any negative impact on credit scores due to loan
    accommodations.
                                    ------

                   RESPONSES TO WRITTEN QUESTIONS OF
                SENATOR VAN HOLLEN FROM JEROME H. POWELL

    Q.1. On May 4, the Federal Reserve Bank of New York announced
    that it plans to use the Term Asset-Backed Loan Facility (TALF)
    to purchase Exchange Traded Funds (ETFs) that may own bonds
    rated below investment grade. How did the Federal Reserve reach
    this decision, and how does it measure the trade-offs of
    purchasing such ETFs?

    A.1.I understand from further discussions with your staff that
    your question is referring to purchases made by the Secondary
    Market Corporate Credit Facility (SMCCF). Market functioning in
    the corporate credit market has been impaired based on metrics
    such as prices, bid ask spreads, trading volumes, and price
    volatility as well as limited primary market issuance from high
    yield issuers. The Federal Reserve decided that by purchasing
    Exchange Traded Funds (ETFs) that have exposure to high-yield
    issuers, the SMCCF would be able to provide support to this
    segment of the corporate bond market and limit discontinuities
    between the different segments of the market. Such
    discontinuities can lead to extreme outcomes where companies
    downgraded a single notch-from low investment-grade to the
    upper end of high-yield-find themselves facing sharply higher
    funding costs and thus are under increased pressure to cut
    costs, including by reducing their workforces.
        The increased risk associated with acquiring securities
    issued by high-yield companies is managed by investing through
    instruments that allow for the creation of a diversified
    portfolio and by the increased amount of the U.S. Department of
    the Treasury's (Treasury) equity allocated to support these
    purchases. The Federal Reserve and the Treasury also limit the
    amount of risk to the SMCCF from purchases of high-yield ETFs
    by ensuring that the large majority of ETF purchases target the
    investment grade corporate bond market.

    Q.2. What specific authority is the Federal Reserve for its
    Secondary Market Facility? Is the Federal Reserve using its
    13(3) authorities, if so please explain? Has the Federal
    Reserve ever used this authority to buy junk debt? Please
    explain the legal authority the Federal Reserve is relying on
    to justify its use of the Secondary Market Facility to purchase
    junk bond debt.
        For assets not guaranteed as to interest and principal by
    the U.S. government, what is the qualifying collateral, as
    required by Section 13(3),that secures these assets in an
    amount sufficient to protect taxpayers from losses?

    A.2. The Federal Reserve, with the approval of the Secretary of
    the Treasury (Secretary), established the SMCCF pursuant to
    authority under section 13(3) of the Federal Reserve Act. In
    unusual and exigent circumstances, the Federal Reserve Board
    (Board), by the affirmative vote of not less than five members,
    may authorize any Federal Reserve Bank, subject to such
    conditions and during such periods as the Board may determine,
    to extend credit to any participant in a program or facility
    with broad-based eligibility. In particular, section 13(3)
    allows the SMCCF to purchase certain types of debt instruments.
    \1\ Section 4003 of the Coronavirus Aid, Relief, and Economic
    Security Act (CARES Act) also contemplates that the Federal
    Reserve may establish programs or facilities that purchase
    obligations or other interests in secondary markets to provide
    liquidity to the financial system. \2\ The Federal Reserve has
    not previously used this authority to purchase high yield
    corporate debt instruments.
    ---------------------------------------------------------------------------
         \1\ The Federal Reserve Act allows the lending Reserve Bank ``to
    discount for any participant in any program or facility with broad-
    based eligibility, notes, drafts, and bills of exchange when such
    notes, drafts, and bills of exchange are indorsed or otherwise secured
    to the satisfaction of the Federal Reserve bank.'' 12 U.S.C. 343(3).
         \2\ See, e.g., 12 U.S.C. 4003(b)(4)(B).
    ---------------------------------------------------------------------------
        In the case of the SMCCF, the Federal Reserve Bank of New
    York (FRBNY) has recourse to all of the assets owned by the
    special purpose vehicle (SPV), including any earnings and fees
    accumulated in the course of the operation of the SPV.
    Moreover, the equity provided by the Treasury in connection
    with the SMCCF further protects the FRBNY from loss. Market
    participants use credit ratings to assess the likelihood that a
    company's debt will be repaid. Likewise, the SMCCF uses credit
    ratings to identify which debt instruments it may purchase and
    how much Treasury equity will be allocated to protect against
    losses from those instruments. The historical default rates of
    companies rated below investment grade are higher than those of
    companies rated above investment grade, but the SMCCF adjusts
    for heightened credit risk by allocating more Treasury equity
    to support purchases of companies rated below investment grade.
    In particular, the SMCCF leverages the Treasury equity at 10 to
    1 when acquiring corporate bonds of issuers that are investment
    grade, but only at 7 to 1 when acquiring corporate bonds of
    issuers that were previously rated investment grade but are now
    rated one rating grade below investment grade. \3\
    ---------------------------------------------------------------------------
         \3\ The SMCCF also purchases exchange-traded fund (ETF) shares,
    and leverages the Treasury equity at between 10 to 1 and 3 to 1,
    depending on the risk profile of the ETF.
    ---------------------------------------------------------------------------
        The loans made by the Federal Reserve to support purchases
    made in the corporate credit facilities are secured by the
    equity provided to the facilities by the Treasury and by all of
    the assets acquired by the facilities.

    Q.3. Why has the Federal Reserve decided to pursue this avenue
    to buy junk ETFs?

    A.3. Please see the response to Question 1.

    Q.4. The Treasury Department has agreed to make a $75 billion
    equity investment in the corporate facilities. If there are
    losses on these assets, who will bear the costs?

    A.4. The Secretary, using funds appropriated in the CARES Act,
    has agreed to make a $75 billion equity investment in the
    corporate credit facilities. The Treasury's equity investment
    is designed to protect the Federal Reserve from losses on the
    facilities' purchases by providing first-loss credit
    protection. The facilities leverage this equity prudently. For
    example, the Primary Market Corporate Credit Facility (PMCCF)
    requires $1 of Treasury equity for each $10 spent to purchase a
    corporate bond or syndicated loan of an investment-grade
    issuer. The PMCCF requires $1 of Treasury equity for each $7
    spent to purchase a corporate bond or syndicated loan of an
    issuer that was previously rated investment-grade but has
    fallen to one rating grade below investment grade since the
    facility was established. The Treasury's equity requirements
    under the SMCCF are set up similarly to the PMCCF, as discussed
    in the answer to Question 2. In all cases, the corporate credit
    facilities have calibrated the Treasury leverage based on the
    nature of the asset being purchased, which incorporates risk
    sensitivity and protects against taxpayer loss.

    Q.5. What assurance is there that the proceeds received by
    investors in return for these secondary market purchases will
    be used to support the same companies or any U.S. company for
    that matter?

    A.5. The corporate bond market experienced significant
    dislocations with the onset of COVID-19. By facilitating market
    functioning, the SMCCF is intended to reduce the risk that
    secondary market prices for corporate bonds become subject to
    fire sales or price dislocations. These price dislocations are
    important because they affect the primary markets through which
    American companies access capital. Potential buyers may
    purchase bonds sold at distressed prices in the secondary
    market rather than buying newly issued bonds directly from
    companies, reducing the availability of new credit to fund
    companies. In addition, there is a direct relationship between
    the secondary market and the primary market, as most new
    corporate bond prices are set based on secondary market
    spreads. By providing support to the secondary market, the
    SMCCF reduces the cost of new credit and increases the
    availability of new credit to borrowers who might otherwise not
    be able to access the market at reasonable rates.
        The SMCCF only transacts with eligible sellers that are
    created or organized in the United States or under the laws of
    the United States. Likewise, the SMCCF has purchased U.S.-
    listed ETFs whose investment objective is to provide broad
    exposure to the market for U.S. corporate bonds and, through
    its Broad Market Index purchase program, bonds of issuers that
    are created or organized in the United States or under the laws
    of the United States.

    Q.6. The Federal Reserve has hired the firm BlackRock to serve
    as an investment manager for this facility. How is the Federal
    Reserve ensuring BlackRock is acting in the best interest of
    the Federal Reserve and the public?

    A.6. On May 11, Corporate Credit Facilities LLC (CCF), an SPV
    created to facilitate the operations of SMCCF, entered into an
    Investment Management Agreement (IMA) with BlackRock Financial
    Management, Inc. (BlackRock) in connection with the SMCCF. The
    FRBNY is the sole managing member of the CCF.
        Pursuant to the IMA, BlackRock acts as a fiduciary to the
    CCF in performing investment management services. In order to
    best advance the CCF's objectives as a fiduciary, BlackRock is
    required to follow FRBNY's specific and detailed investment
    guidelines and to buy and sell corporate bonds, corporate
    loans, and corporate bond ETFs on a best execution basis.
    BlackRock is required to communicate with the CCF on a daily
    basis regarding its planned purchase activity for the day and
    respond to requests for updates from the CCF on market
    functioning and asset purchases.
        The IMA imposes stringent requirements on BlackRock to
    protect confidential information and to mitigate conflicts of
    interest. Confidential information gained by BlackRock or its
    affiliates or their respective directors, officers, or
    employees in the course of this engagement may not be leveraged
    for matters unrelated to the CCF. BlackRock's compliance with
    the rigorous information barrier and conflict of interest
    mitigation provisions the Federal Reserve has imposed under the
    IMA is subject to audit and review by FRBNY, the Board, and
    other governmental authorities with oversight responsibilities
    under applicable law.
        These are select examples of provisions relating to the
    Federal Reserve's efforts to ensure that Blackrock is acting in
    the best interest of the public. The IMA, including the
    investment guidelines, is available in full on the FRBNY
    website. \4\
    ---------------------------------------------------------------------------
         \4\ See www.newyorkfed.org/medialibrary/media/markets/SMCCF-
    Investment-Management-Agreement.pdf.
    ---------------------------------------------------------------------------
                                    ------

                   RESPONSES TO WRITTEN QUESTIONS OF
               SENATOR CORTEZ MASTO FROM JEROME H. POWELL

    Q.1. We know that people over 70, African Americans, Native
    Americans, and Latinos are disproportionately more likely to be
    facing health crises and death due to COVID-19.
        What does the research show about the economic hardship for
    African Americans, Native Americans, and Latinos in terms of
    loss of income and employment as well as financial hardship due
    to the COVID-19 pandemic?
        We know that young adults, African American and Latino
    income, wealth and homeownership rates continued to lag behind
    whites following the financial crisis of 2008, has the Federal
    Reserve undertaken any analysis regarding economic hardship for
    African Americans, Latinos and young adults following this
    pandemic? If so, what interventions would reduce financial
    hardship for these households?
        Are minorities overrepresented in the 40 percent of workers
    with household incomes under $40,000 a year who are now
    unemployed? If so, at what percentage?

    A.1. The deterioration in labor market conditions induced by
    the COVID-19 shock has been sudden, severe, and widespread.
    Still, workers in some industries, occupations, demographic
    groups, and locations have experienced more-significant
    employment declines than others. Although disparities in labor
    market outcomes often arise during recessions, factors unique
    to this episode have also contributed to the recent divergence.
    In particular, with respect to race and ethnicity, some
    minority groups have experienced a disproportionate share of
    the job losses induced by COVID-19. According to the Census
    Bureau's Current Population Survey, the employment-to-
    population ratio for African Americans fell by 8.6 percentage
    points from February to June, while that for Hispanics fell 9.1
    percentage points. Both declines were significantly larger than
    the 6.5 percentage point decline for the overall population.
    \1\
    ---------------------------------------------------------------------------
         \1\ Sample-size limitations make it difficult to infer with
    precision the magnitude of employment declines for Native Americans,
    and the Bureau of Labor Statistics reporting of employment statistics
    for that group is also more limited.
    ---------------------------------------------------------------------------
        Furthermore, these racial and ethnic minorities tend to
    have lower incomes and smaller amounts of financial assets than
    the overall population, and are therefore less able to
    financially weather an extended period of unemployment and the
    large associated losses in labor earnings. \2\
    ---------------------------------------------------------------------------
         \2\ Akee, et al. (2019) link the universe of U.S. income tax
    filers for 2000-2014 to individual-level information on race and
    ethnicity from multiple censuses and American Community Survey data,
    and document that African Americans, Hispanics, and Native Americans
    have persistently lower incomes than whites. (See Randall Akee, Maggie
    R. Jones, and Sonya R. Porter, 2019, ``Race Matters: Income Shares,
    Income Inequality, and Income Mobility for All U.S. Races,''
    Demography, 56, 999-1021, https://doi.org/10.1007/s13524-019-00773-7.)
    Dettling, et al. (2017) use data from the Survey of Consumer Finances
    to show that in 2016 (the most-recent survey year) African Americans
    and Hispanic families had considerably less wealth than white families,
    while ``other'' families (a diverse group including those identifying
    as Asian, American Indian, Alaska Native, Native Hawaiian, Pacific
    Islander, other race, and all respondents reporting more than one
    racial identification) had lower net worth than white families but
    higher net worth than African Americans and Hispanic families. (See
    Lisa J. Dettling, Joanne W. Hsu, Lindsay Jacobs, Kevin B. Moore, and
    Jeffrey P. Thompson, 2017. ``Recent Trends in Wealth-Holding by Race
    and Ethnicity: Evidence from the Survey of Consumer Finances,'' FEDS
    Notes. Washington: Board of Governors of the Federal Reserve System,
    September 27, 2017, https://doi.org/10.17016/2380-7172.2083.)
    ---------------------------------------------------------------------------
        Consistent with these results, responses to the Federal
    Reserve Board's (Board) latest Survey of Household Economics
    and Decisionmaking (SHED) show that in late 2019 (before the
    onset of COVID-19), a large share of adults were either unable
    to pay their monthly bills or were one modest financial setback
    away from failing to pay monthly bills in full-and that this
    share was larger for African American and Hispanic families.
    \3\
    ---------------------------------------------------------------------------
         \3\ The SHED is an annual survey conducted by the Federal Reserve
    Board that measures the economic well-being of U.S. households and
    identifies potential risks to their finances. The 2019 SHED (which was
    released in May 2020) showed that at the time of the survey (October
    2019), 16 percent of adults were not able to pay all of their current
    month's bills in full, and an additional 12 percent of adults said they
    would be unable to pay all of their current month's bills if they had
    an unexpected $400 expense that they had to pay. Both of these shares
    were significantly larger for African Americans and Hispanic families
    than for white families, at all levels of education. (See Board of
    Governors of the Federal Reserve, ``Report on the Economic Well-Being
    of U.S. Households in 2019,'' available at https://
    www.federalreserve.gov/consumerscommunities/shed.htm.)
    ---------------------------------------------------------------------------
        Regarding the second question, the June 2020 Monetary
    Policy Report to Congress noted that a supplement to the SHED
    conducted in April 2020 (after the onset of COVID-19) found
    that among households with an annual income of $40,000 or less,
    nearly 40 percent of individuals who were employed in February
    experienced job loss in March or early April, compared with 20
    percent of the overall population. Unfortunately, the SHED data
    cannot be used to meaningfully break down the population with
    annual income under $40,000 by race and ethnicity due to
    sample-size limitations. However, other research has shown that
    African Americans, Hispanics, and Native Americans tend to be
    overrepresented in the lower parts of the income distribution
    and underrepresented at the top. \4\
    ---------------------------------------------------------------------------
         \4\ See Akee, et al. (2019), cited above.

    Q.2. I led the Nevada Delegation in writing a letter requesting
    the Treasury Department and the Federal Reserve to prioritize
    loans to businesses uniquely impacted by COVID-19. In Nevada,
    our economy relies on our hospitality, gaming, and tourism
    employers, and we want to ensure industries bearing the brunt
    of the crisis be aided in order to stabilize the marketplace
    and preserve American jobs. At the encouragement of the Nevada
    delegation and other congressional partners, the SBA reversed
    its previously issued guidance to allow for businesses with
    gaming revenue to apply for PPP.
        Can you commit that otherwise eligible gaming business,
    continue to be eligible for the Main Street lending program,
    like the SBA PPP program now allows?

    A.2. Yes. On April 24, the Small Business Administration (SBA)
    issued an interim final rule modifying, for purposes of the
    SBA's Paycheck Protection Program (PPP), its regulation deeming
    legal gaming businesses to be ``Ineligible Businesses'' for
    normal course SBA lending. Under the revised rule, ``[a]
    business that is otherwise eligible for a PPP Loan is not
    rendered ineligible because of its receipt of legal gaming
    revenues.'' \5\
    ---------------------------------------------------------------------------
         \5\ See 85 FR 23450, 23451 (published April 28, 2020).
    ---------------------------------------------------------------------------
        The Main Street Lending Program (Main Street) incorporates
    the SBA's definition of Ineligible Businesses, as modified by
    the SBA for purposes of the PPP on or before April 24. \6\ As
    such, a business that is otherwise an eligible borrower for
    purposes of Main Street is not rendered ineligible solely due
    to its receipt of legal gaming revenues. Main Street Frequently
    Asked Question (FAQ) E.1 provides that the Main Street
    ``Ineligible Business'' definition incorporates the SBA's
    interim final rule permitting legal gaming businesses to borrow
    by citing and linking to the rulemaking.
    ---------------------------------------------------------------------------
         \6\ See the Main Street FAQs at www.bostonfed.org/mslp-faqs.
    ---------------------------------------------------------------------------
        Please note that, like any potential borrower in any
    industry, a gaming business must satisfy the other Main Street
    eligibility criteria and an eligible lender's underwriting
    criteria in order to receive a Main Street loan.

    Q.3. Vice Chair Quarles spoke before this Committee last week.
    We urged him to move quickly to set up the Main Street Lending
    Program. We need to make credit available to businesses who
    have liquidity problems due to the pandemic.
        What are the employee retention provisions in the Main
    Street Lending Program?
        Will the Fed require applicants to the Main Street Lending
    Program to disclose the intended use of these funds and
    disclose those to the public?
        Will the Fed consider requiring the same or similar
    employment protection policies that is has in its other
    programs like the Primary Market Corporate Credit Facility?

    A.3. Main Street was established under Section 13(3) of the
    Federal Reserve Act (FRA), with approval of the Treasury
    Secretary and an equity investment using funds appropriated by
    the Coronavirus Aid, Relief, and Economic Security Act (CARES
    Act). Main Street is designed to provide support for lending to
    small and medium-sized businesses in sound financial condition
    before COVID-19 in order to assist such businesses in
    maintaining operational capacity and payroll.
        The CARES Act was the product of careful bipartisan
    negotiations in Congress, and the legislation does not include
    a requirement that businesses participating in lending programs
    established by the Federal Reserve maintain payrolls. However,
    as indicated in the Main Street term sheets, eligible borrowers
    should make commercially reasonable efforts to retain employees
    during the term of the loan. ``Commercially reasonable
    efforts'' is a standard used in commercial contracts and is
    familiar to businesses. This means that businesses that
    participate in the program are expected to make good-faith
    efforts to maintain payroll and retain employees in light of
    their capacities, the economic environment, their available
    resources, and their business need for labor.
        Borrowers' commercially reasonable efforts to maintain
    payrolls may take different forms across the broad range of
    businesses eligible for Main Street. Because of the facts and
    circumstances that may inform a borrower's judgment in respect
    of this expectation, the Federal Reserve and the U.S.
    Department of the Treasury (Treasury Department) will not
    assess the commercial decisions of individual borrowers. The
    Federal Reserve and Treasury Department will monitor Main
    Street's impact on small and medium-sized businesses and the
    resulting effects on the economic recovery and employment
    broadly rather than on a borrower-by-borrower basis. The
    Federal Reserve will continue to consider adjustments to Main
    Street's terms and conditions, as appropriate.
        Recognizing that the manner for best supporting their
    operations and payroll will likely vary considerably across
    borrowers, Main Street borrowers are not required to disclose
    the intended use of funds. They do, however, face restrictions
    on their use. Main Street borrowers are generally restricted
    from repaying existing debt ahead of schedule until the Main
    Street loans are repaid. Main Street borrowers are also subject
    to the CARES Act restrictions on compensation, stock
    repurchases, and capital distribution that apply to direct loan
    programs. Further, Main Street borrowers may not use the
    proceeds of a Main Street loan for the benefit of foreign
    parents, affiliates, or subsidiaries.
        The Federal Reserve is committed to transparency and will
    disclose information associated with the Main Street
    facilities, including the names of lenders and borrowers,
    amounts borrowed and interest rates charged, and overall costs,
    revenues and other fees, on a monthly basis.

    Q.4. Congress expects the Federal Reserve to release borrower
    names and other information about participants in the
    facilities it set up in response to the CARES Act. I appreciate
    the steps that the Federal Reserve has already taken to
    increase transparency, such as disclosing borrowers, amount
    borrowed and what rate of interest, and the overall costs,
    revenues, and fees from various facilities on a monthly basis.
        How will you guard against any favoritism or unfairness in
    access or terms?

    A.4. The Board is committed to guarding against favoritism or
    unfairness in access or terms for its facilities. The
    facilities are designed to provide broad-based eligibility with
    transparent and neutrally objective eligibility criteria for
    participation and creditworthiness. In all of our lending
    programs, we expect lenders to consider loan applications from
    borrowers and assess each potential borrower's financial
    condition at the time of the loan application, regardless of
    whether that potential borrower is an existing customer or a
    new customer. We continue to monitor all of our programs to
    ensure that their terms and conditions are being met.

    Q.5. Does the Fed plan to release disclosures for other
    programs not directly authorized under the CARES Act, such as
    purchasing asset-backed securities?

    A.5. The Federal Reserve is deeply committed to ensuring
    transparency and accountability in the establishment and
    operation of facilities established pursuant to section
    4003(b)(4) of the CARES Act and section 13(3) of the FRA.
    Section 13(3) of the FRA allows the Board, in unusual and
    exigent circumstances, to authorize any Federal Reserve Bank to
    extend credit to any participant in a program or facility with
    broad-based eligibility. The Board has established 13
    facilities pursuant to this authority; nine of the facilities
    have received equity investments from the Treasury Department
    with funds appropriated under the CARES Act: the Term Asset-
    Backed Securities Loan Facility (TALF), Secondary Market
    Corporate Credit Facility (SMCCF), Primary Market Corporate
    Credit Facility (PMCCF), Main Street New Loan Facility (MSNLF),
    Main Street Expanded Loan Facility (MSELF), Main Street
    Priority Loan Facility (MSPLF), Nonprofit Organization Expanded
    Loan Facility (NOELF), Nonprofit Organization New Loan Facility
    (NONLF) and Municipal Liquidity Facility (MLF).
        Both the FRA and the CARES Act require the Federal Reserve
    to provide an initial report to the Committee on Banking,
    Housing, and Urban Affairs of the Senate and the Committee on
    Financial Services of the House of Representatives (the
    Committees) within seven days after the Board authorizes any
    loan or other financial assistance pursuant to those sections.
    The seven-day reports generally do not include transaction
    information as facilities are usually not operational by the
    time the report is filed. The Board provided to the Committees
    its initial reports for each facility within seven days after
    authorization, and these reports also were posted on the
    Board's public website.
        After the initial report, the Federal Reserve is required
    to provide updates to the Committees at least every 30 days
    regarding the value of collateral; the amount of interest,
    fees, and other revenue or items of value received in exchange
    for the assistance; and the expected or final cost to the
    taxpayers of such assistance. To enhance transparency, the 30-
    day reports will contain enhanced amounts of information on a
    monthly basis for the liquidity and lending facilities using
    CARES Act funding, as well as for the Paycheck Protection
    Program Liquidity Facility, including the names and details of
    participants in each facility; amounts borrowed and interest
    rates charged; and overall costs, revenues, and fees for each
    facility. For the programs that are targeted at financial
    market functioning, the Federal Reserve will provide a full
    accounting of transactions in these facilities but on a delayed
    schedule. Real-time disclosure would risk stigmatizing
    participation in these facilities and undermining the Federal
    Reserve's ability to assure that these systemically important
    markets continue their critical function in times of severe
    market stress. The delay in disclosure will be no longer than
    it needs to be to ensure that participants do not hesitate to
    participate.
        The Federal Reserve has provided, and will continue to
    provide, periodic updates concerning each operational facility
    at least every 30 days.

    Q.6. The CARES Act prohibited companies that receive support
    through the Federal Reserve programs that make direct loans
    from paying dividends or buying back their own stock until 12
    months after the loan is repaid. The CARES Act also imposes
    limits on executive compensation for companies that receive
    direct loans.
        What is your oversight plan to ensure that no dividends are
    paid or stocks are purchased and that executive compensation is
    capped as Congress intended?

    A.6. Under the Main Street facilities, the Chief Executive
    Officer and Chief Financial Officer (or officers performing
    similar functions) of the eligible borrower must certify that
    the borrower meets each of the borrower certifications and
    covenants. These certifications and covenants include
    compensation, stock repurchase, and capital distribution
    restrictions. If borrowers fail to follow the certification and
    covenants outlined in the term sheets of the Main Street
    facilities, they will be required to the repay the proceeds
    obtained through the facility immediately. Moreover, if the
    Federal Reserve finds evidence of a knowing material
    misrepresentation, we will refer the matter to law enforcement
    authorities.

    Q.7. The CARES Act restricts Fed financing to ``businesses that
    are created or organized in the United States or under the laws
    of the United States and that have significant operations in
    and a majority of its employees based in the United States.''
        Will you ensure that any company that receives financing
    from the Federal Reserve is a U.S.-based company?
        Will you prohibit aid to companies that may have undergone
    a tax inversion before, changed its incorporation to the U.S.
    recently, or is a U.S. subsidiary of a foreign company?
        Will the Fed require disclosure of beneficial owners in
    order to prevent shell structures?
        As the Federal Reserve permits investments in Exchange
    Traded Funds (ETFs), how will the Fed ensure that none of the
    investments of ETFs include non-U.S. companies?

    A.7. The Federal Reserve is committed to complying with the
    restrictions set forth in the CARES Act, including the
    provision that borrowers participating in Federal Reserve
    facilities in which the Treasury Department has invested funds
    appropriated under the CARES Act must be created or organized
    in the United States or under the laws of the United States and
    have significant operations in and a majority of its employees
    based in the United States. U.S. subsidiaries of foreign
    companies are eligible to participate in these facilities as
    long as the subsidiary is created or organized in the United
    States or under the laws of the United States and on a
    consolidated basis has significant operations in and a majority
    of its employees based in the United States. In addition, in
    the PMCCF and Main Street, we also require that subsidiaries of
    foreign companies use facility proceeds to support their U.S.
    businesses and U.S. employees.
        The SMCCF purchases U.S.-listed Exchange Traded Funds (ETF)
    whose investment objective is to provide broad exposure to the
    market for U.S. corporate bonds. The preponderance of ETF
    holdings are of ETFs whose primary investment objective is
    exposure to U.S. investment-grade corporate bonds, and the
    remainder are in ETFs whose primary investment objective is
    exposure to U.S. high-yield corporate bonds. In some limited
    cases, the holdings of ETFs may include underlying bonds that
    would otherwise be ineligible for purchase by the SMCCF.

    Q.8. As you are aware, the Fed has hired the BlackRock
    investment firm to buy high-yield exchange-traded funds, newly
    issued corporate bonds, and existing investment grade corporate
    bonds.
        Will the Fed prohibit BlackRock from making trades based on
    what they learned while providing the financing until after the
    Fed announced all of its purchases publicly?
        Will the Fed prohibit BlackRock executives, who are allowed
    to view both confidential information and interact with the
    rest of the firm outside the ``ethical wall'' while providing
    financing, from making trades until after the Fed announced all
    of its purchases publicly?
        Will the Fed institute any disclosure or transparency
    requirements to ensure the public is aware of financial firms
    which help administer Federal relief, and what compensation
    they may receive?

    A.8. The investment management agreement with BlackRock for the
    corporate credit facilities is public and can be found on the
    Federal Reserve Bank of New York's public website. \7\ The
    agreement provides clarity into the internal controls required
    by BlackRock or any subsequent investment managers and provides
    additional transparency on the Federal Reserve's relationship
    with the investment manager.
    ---------------------------------------------------------------------------
         \7\ www.newyorkfed.org/medialibrary/media/markets/SMCCF--
    Investment--Management--Agreement.pdf.
    ---------------------------------------------------------------------------
        Confidential information gained by BlackRock or its
    affiliates or their respective directors, officers, or
    employees in the course of this engagement may not be leveraged
    for matters unrelated to the corporate credit facilities. This
    restriction prohibits, without limitation, use of any
    confidential information for the benefit of BlackRock, for the
    benefit of any other BlackRock client, or to inform any
    financial transaction, render any advice or recommendation, or
    attempt to influence any market or transaction for the benefit
    of any individual or entity other than the corporate credit
    facilities. This obligation survives the termination or
    expiration of the investment management agreement.
        BlackRock employees providing investment management,
    trading, and/or advisory services to the corporate credit
    facilities or the Federal Reserve Bank of New York-for the
    duration of when they have access to material nonpublic
    information plus a two-week cooling off period-are prohibited
    from providing investment management, trading, or advisory
    services to anyone other than the corporate credit facilities
    in any of the asset classes held by BlackRock and must also
    refrain from purchasing for him/herself investments in any of
    the asset classes held by BlackRock, unless authorized by the
    Chief Compliance Officer of the Federal Reserve Bank of New
    York. The two-week period is intended to ensure that material
    nonpublic information loses its value in the market. To be
    clear, even after the two-week cooling off period, material
    nonpublic information may not be leveraged for matters
    unrelated to the corporate credit facilities. Additional
    information is available in Exhibit G of the investment
    management agreement, which sets forth the Information Barrier
    and Conflicts of Interest Mitigation procedures.
        Compensation for the investment manager is also detailed
    under Exhibit D of the investment management agreement, ``Fee
    Schedule and Payment Procedures.'' For the other vendors with
    whom the Federal Reserve has contracted to operationalize its
    emergency facilities, information has been made available or
    will be made available about their compensation details. \8\
    ---------------------------------------------------------------------------
         \8\ For the Commercial Paper Funding Facility agreements, see
    www.newyorkfed.org/markets/commercial-paper-funding-facility. For the
    MLF agreements, see www.newyorkfed.org/markets/municipal-liquidity-
    facility. For the TALF agreements, see www.newyorkfed.org/markets/term-
    asset-backed-securities-loan-facility.

    Q.9. After a major price-fixing scandal, international banking
    regulators sought to phase out LIBOR by the end of 2021. The
    plan was to replace it with SOFR--the Secured Overnight
    Financing Rate.
        Why has the Federal Reserve picked LIBOR as the benchmark
    for the Main Street Lending Program?
        As the Fed buys debt from potentially hundreds of
    companies, why will the Fed keep issuing loans tied to a
    controversial reference rate?
        Since the Fed's Main Street Lending facility provides loans
    with a four-year maturity, is that going to make the transition
    from LIBOR to SOFR in 2021 more difficult?

    A.9. Under the initial Main Street term sheets released for
    comment on April 8, the Federal Reserve and Treasury Department
    proposed a SOFR-based interest rate. The agencies received
    significant feedback during the comment period from potential
    participants that quickly implementing new systems to issue
    loans based on SOFR would require diverting resources from
    challenges related to COVID-19. Although financial institutions
    are transitioning to more robust reference rates, LIBOR remains
    the most common base rate used in business lending, even though
    firms cannot rely on LIBOR being published after the end of
    2021. Consistent with the recommendations of the Alternative
    Reference Rates Committee, Main Street lenders and borrowers
    are advised to include fallback contract language to be used
    should LIBOR become unavailable during the term of the loan.

    Q.10. The Federal Reserve has used its Section 13(3) authority
    to lend to businesses and local governments and other powers to
    allocate $2.3 trillion of credit through nine programs, backed
    by $215 billion of Treasury funds.
        Do you agree with the Congressional Budget Office estimates
    that the Fed's programs will not increase the Federal deficit,
    because loans that default are likely to be offset by other
    loans repaid with interest that result in a net gain for the
    government?
        In addition to loans, the Federal Reserve could take an
    equity stake in companies receiving assistance, would returns
    on those warrants help offset the size of the programs? If so,
    by how much?

    A.10. Consistent with section 13(3) of the FRA, and Regulation
    A, the design of our facilities helps to ensure that taxpayers
    are protected from loss. In particular, when designing our
    facilities, we model our lending to prevent losses even in
    severely adverse scenarios. Furthermore, we only make loans to
    borrowers that we believe are solvent, in programs of broad
    eligibility.
        In addition, under Regulation A, interest rates on eligible
    notes under each of our facilities are set at a rate that is a
    premium to the market rate in normal circumstances. Overall,
    the Federal Reserve believes that the facilities as designed
    will protect taxpayers from losses. Although these actions do
    not guarantee there will not be losses on some loans, they do
    help prevent them. Moreover, consistent with section 13(3) of
    the FRA, our emergency facilities provide emergency liquidity
    for strained credit markets. These programs are not spending or
    investment programs. Moreover, the Federal Reserve does not
    receive warrants from companies that access our facilities.
        The Federal Reserve will continue to monitor these
    facilities to ensure they are working as intended, including
    that they adequately protect taxpayers from losses.

    Q.11. What are you doing to assess and prepare for the
    possibility that a long-lasting economic downturn could
    potentially threaten the solvency of US banks both large and
    small?

    A.11. The banking system is more resilient and better placed to
    sustain financing to the real economy as a result of the
    regulatory reforms enacted, and measures taken by the banking
    industry, in the aftermath of the 2008 global financial crisis.
    These reforms have helped the banking system to serve as a
    source of strength and to support the flow of credit to
    households and businesses during these challenging times. We
    have encouraged banks to make prudent use of their existing
    buffers of capital and liquidity.
        In response to COVID-19, the Board has focused on
    heightened monitoring of banking organizations and targeting
    exam resources to high-risk institutions. We are also actively
    working with the Office of the Comptroller of the Currency, the
    Federal Deposit Insurance Corporation, and State counterparts
    to ensure consistent responses and approaches to supervising
    banking organizations of all sizes during the crisis. For
    example, the agencies have jointly developed guidance and
    statements related to COVID-19, including an Interagency
    Examiner Guidance for Assessing Safety and Soundness
    Considering the Effect of the COVID-19 Pandemic on
    Institutions. The guidance and statements highlight potential
    risks to banking organizations related to COVID-19 to help the
    banking organizations prepare for these risks.
        With respect to the largest banks, the Board recently
    finalized a stress capital buffer framework that uses a
    forward-looking analysis to help ensure that large banking
    organizations have sufficient capital to survive a severe
    recession while still being able to lend to households and
    businesses. As part of our stress testing approach this year,
    the Board conducted sensitivity analyses to assess the
    resiliency of large banking organizations under three
    hypothetical recessions, which could result from COVID-19. In
    light of the results from these analyses, the Board took
    several actions to help ensure large firms remain resilient
    despite the economic uncertainty from COVID-19. In particular,
    for the third quarter of this year, the Board is requiring
    large banks to preserve capital by suspending share
    repurchases, capping dividend payments, and allowing dividends
    according to a formula based on recent income. The Board is
    also requiring banks to update and resubmit their longer-term
    capital plans. The Federal Reserve will closely monitor the
    condition of the large banks and the broader financial system
    in the coming months, including through additional COVID-19-
    related analysis and will consider additional actions as
    appropriate.

    Q.12. What are you doing to build on the experience with other
    industry-specific initiatives to help bus carriers? Have you
    crafted programs so that these companies can get access to
    capital?

    A.12. Consistent with section 13(3) of the FRA, all of our
    emergency lending facilities have broad, neutrally defined
    eligibility requirements and pricing mechanisms and are
    designed to minimize credit allocation while also minimizing
    risks to the taxpayer. Like many other industries affected by
    COVID-19, bus carriers may benefit from Federal Reserve
    programs, such as Main Street, depending on their size and
    other characteristics. The overall objective of Main Street is
    to promote lending to businesses that were in sound financial
    condition prior to COVID-19 and to meet the needs of a broad-
    range of eligible businesses across every sector of the
    economy. Like other program eligibility requirements, the Main
    Street eligibility requirements were designed to be broad.
    Specific eligibility requirements and terms under each of Main
    Street's facilities can be found in the facility term sheets.
    \9\ For more information on Main Street, please see
    www.federalreserve.gov/monetarypolicy/mainstreetlending.htm.
    ---------------------------------------------------------------------------
         \9\ For the MSNLF, see www.federalreserve.gov/newsevents/
    pressreleases/files/monetary20200608a1.pdf. For the MSPLF, see
    www.federalreserve.gov/newsevents/pressreleases/files/
    monetary20200608a2.pdf. For the MSELF, see www.federalreserve.gov/
    newsevents/pressreleases/files/monetary20200608a3.pdf.

    Q.13. Prior to this crisis, the travel industry was coming off
    a decade of growth and many travel businesses were in strong
    financial shape. Now, due to the travel restrictions, business
    closures and quarantines in place across the U.S., travel
    businesses have virtually no customers or revenue. The impacts
    have been catastrophic.
        The response by Congress and the Administration has focused
    largely on small businesses, which are absolutely vital to the
    economy. While 83 percent of travel businesses are small
    businesses, more than 50 percent of travel industry workers are
    employed by mid- to large-sized businesses with more than 500
    employees.
        What type of financial assistance are the Treasury and
    Federal Reserve planning establish for our Nation's nonprofits,
    like destination marketing organizations, many of which are
    ineligible for programs like PPP under the CARES Act?

    A.13. Nonprofit organizations are a critical part of our
    economy, employing millions of people, providing essential
    services to communities, and supporting innovation and the
    development of a highly skilled workforce. We announced on June
    15 that we would be seeking public feedback on a proposal to
    expand Main Street to provide access to credit for nonprofit
    organizations described in sections 501(c)(3) and 501(c)(19) of
    the Internal Revenue Code that meet minimum eligibility
    criteria. \10\ The Board received comments from a wide range of
    stakeholders, and in response, on July 17 we announced revised
    term sheets that expanded the range of nonprofit organizations
    eligible to obtain Main Street loans. Under the updated terms,
    the Federal Reserve will offer loans to small and medium-sized
    nonprofits that were in sound financial condition before COVID-
    19. Nonprofit organizations will need to meet various
    eligibility criteria to qualify, including financial
    eligibility criteria based on operating performance, liquidity,
    and ability to repay debt. For additional information on the
    nonprofit facilities, please see the facility term sheets. \11\
    ---------------------------------------------------------------------------
         \10\ https://www.federalreserve.gov/newsevents/pressreleases/
    monetary20200615b.htm
         \11\ For the Nonprofit Organization Expanded Loan Facility term
    sheet, see https://www.federalreserve.gov/newsevents/pressreleases/
    files/monetary20200717a1.pdf. For the Nonprofit Organization New Loan
    Facility term sheet, see https://www.federalreserve.gov/newsevents/
    pressreleases/files/monetary20200717a2.pdf.
    ---------------------------------------------------------------------------
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR JONES
                         FROM JEROME H. POWELL

    Q.1. Racial Disparity--What steps has the Federal Reserve taken
    to ensure and track that its lending facilities will reach the
    hardest hit communities, particularly communities of color?
    Please be as specific as possible.
        Can the Federal Reserve provide Congress the data on the
    race of the ownership of the entities using the facilities?

    A.1. We generally collect information on borrowers related to
    the terms of the loan they are getting from us (such as their
    credit rating) or the eligibility for the loan (such as
    certifications related to the Coronavirus Aid, Relief, and
    Economic Security Act (CARES Act)). We publish detailed
    information on borrowers and loan terms every month. In
    addition, contracts with our facility vendors are public and
    generally require them to make efforts to seek diverse
    subcontractors.
        We are committed to ensuring the Main Street Lending
    Program (Main Street) is widely known throughout the business
    community and among depository institutions, including among
    minority and women-owned businesses and minority depository
    institutions (MDIs). To that end, we have made an intentional
    effort to reach minority and women-owned businesses as well as
    MDIs as part of our Main Street outreach. For example, on June
    24, the Federal Reserve held a webinar targeted at reaching
    minority and women-owned businesses to walk through the program
    and take questions from attendees. In advance of the webinar,
    we reached out to a wide range of diverse businesses
    associations and organizations with strong connections to
    minority communities to help get the word out. In addition, on
    July 1, the Federal Reserve and the National Bankers
    Association, through our Partnership for Progress program, held
    a briefing on the Main Street for MDIs.
        The Paycheck Protection Program Liquidity Facility (PPPLF)
    has a wide reach across the country and a variety of
    communities and we have found that community banks have been
    especially active participants. The Federal Reserve conducted
    outreach, including a series of webinars about the PPPLF, to
    ensure that eligible institutions have the necessary
    information to access the program. Additionally, we partnered
    with community development staff and conducted specific
    outreach with the Opportunity Finance Network, the Community
    Development Bankers' Association, and others to ensure that
    Community Development Financial Institution (CDFI) loan funds
    are able to access the PPPLF. There are currently nearly 80
    participants in the PPPLF that are either MDIs or CDFIs or
    both. We will continue to conduct outreach as needed to support
    the broadest possible access to Paycheck Protection Program
    (PPP) lenders.

    Q.2. Are the Treasury Department and Federal Reserve working
    with CDFIs, including nondepository CDFIs, and minority
    depository institutions to help them navigate the PPP and the
    PPP Lending Facility so that they can have more success there?
    If so, please provide specific steps being taken.

    A.2. The employee size and revenue eligibility metrics under
    Main Street were adopted to enable the program to support small
    and medium-sized businesses that are unable to receive
    sufficient assistance through other programs, such as the SBA's
    PPP, or that may not have reached the scale needed to issue the
    kinds of capital market instruments that would be purchased
    under the Federal Reserve's Primary Market Corporate Credit
    Facility (PMCCF). Larger companies may wish to consider whether
    the PMCCF, which extends credit to CARES Act-eligible
    businesses without imposing restrictions related to revenues or
    number of employees, meets their needs. Like Main Street,
    borrowers under the PMCCF must meet facility-specific
    eligibility criteria. As of June 29, the PMCCF is operational
    and available for use.

    Q.3. Main Street Lending Facility--While Main Street funding is
    vital for small and medium manufacturers and should be
    implemented now, larger manufacturers are also suffering from
    liquidity crises and also need relief. When will the term
    sheets and regulations be written and loans made available for
    larger manufacturers with more than $5 billion in sales or
    15,000 jobs? They were included in the CARES Act and also are
    counting on the Fed and the Treasury.

    A.3. The employee size and revenue eligibility metrics under
    Main Street were adopted to enable the program to support small
    and medium-sized businesses that are unable to receive
    sufficient assistance through other programs, such as the SBA's
    PPP, or that may not have reached the scale needed to issue the
    kinds of capital market instruments that would be purchased
    under the Federal Reserve's Primary Market Corporate Credit
    Facility (PMCCF). Larger companies may wish to consider whether
    the PMCCF, which extends credit to CARES Act-eligible
    businesses without imposing restrictions related to revenues or
    number of employees, meets their needs. Like Main Street,
    borrowers under the PMCCF must meet facility-specific
    eligibility criteria. As of June 29, the PMCCF is operational
    and available for use.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR SMITH
                         FROM JEROME H. POWELL

    Q.1. Accessing loans under the Paycheck Protection Program has
    been a challenge for many business owners, especially for
    business owners of color and native businesses, who are less
    likely to have a lending relationship with a bank that will
    accept their PPP application.
        Is it acceptable for the largest banks in the country to be
    only processing PPP applications for existing customers, for
    most of the time that they were accepting PPP applications?
        Should the largest banks in the country, like JPMorgan
    Chase, Wells Fargo, Bank of America, and Citi, be allowed to
    prioritize PPP loans for some customers over others? Or should
    they be processed on a first come, first served basis?

    A.1.The goal of the Small Business Administration's (SBA)
    Paycheck Protection Program (PPP) was to provide funding to
    small businesses to help them keep their workers on their
    payrolls during COVID-19. In response, lenders mobilized to
    operationalize lending though the PPP as quickly as possible.
    These loans are supporting more than 51 million jobs and over
    80 percent of all small business employees, and the SBA reports
    that 98 percent of PPP loans were for $1 million or less. \1\
    ---------------------------------------------------------------------------
         \1\ U.S. Department of Treasury, Press Release, ``SBA and Treasury
    Announce Release of Paycheck Protection Program Loan Data'', available
    at https://home.freasurv.gov/news/press-releases/sm-052.
    ---------------------------------------------------------------------------
        Depending on the circumstances, financial institutions
    choosing to work only with existing customers may raise fair
    lending concerns, such as that of redlining. In addition,
    prioritizing certain customers, such as high net worth
    applicants, or applying additional eligibility requirements,
    such as minimum loan amounts, may raise consumer protection
    concerns regarding fair access and fair treatment. These
    protections apply to loans made through the PPP, just as they
    do to other types of small business lending. As in all lending
    activities, State member banks under the supervision of the
    Federal Reserve are expected to have effective consumer
    compliance management systems in place to ensure that all of
    their lending activities adhere to fair lending and other
    applicable consumer protection laws. We recognize that
    financial institutions moved swiftly to assist borrowers
    affected by COVID-19 and that in some instances there may have
    been legitimate reasons for limiting PPP loans to existing
    customers, given, for example, the speed with which PPP loans
    needed to be made and Bank Secrecy Act requirements. When
    exercising supervisory and enforcement responsibilities, the
    Federal Reserve will take into account the unique circumstances
    impacting borrowers and institutions resulting from COVID-19.
    Examiners will also take into account an institution's good-
    faith efforts that demonstrate their efforts to serve borrowers
    and comply with consumer protection laws while deploying
    capital that was critical to support their communities.

    Q.2. Do you believe banks are meeting the credit needs and
    convenience of their communities when it comes to PPP loans, if
    they're only lending to existing customers? Do you have fair
    lending concerns about the practices of any institutions
    related to PPP?

    A.2.With every policy action that the Federal Reserve has
    undertaken, meeting the convenience and needs of consumers and
    communities and helping them weather the financial impacts of
    COVID-19 has been foremost on our minds. Each of the facilities
    were established to support the flow of credit to households,
    businesses, and communities. Several of our lending facilities
    were specifically aimed at providing liquidity to consumers and
    small and midsize businesses, including the Term-Asset Loan
    Facility, the Paycheck Protection Program Lending Facility
    (PPPLF), and Main Street. In addition, the Board has urged
    banks to work with their customers, and issued statements and
    rules to support banks' efforts to exercise flexibility in
    accommodating consumers' access to credit, while reminding
    banks of the importance of complying with consumer laws and
    regulations, including fair lending. \2\
    ---------------------------------------------------------------------------
         \2\ The various actions in response to COVID-19 can be found at
    https://www.federalreserve.gov/COVID-19.htm.
    ---------------------------------------------------------------------------
        With respect to whether the PPP is meeting the convenience
    and needs of communities, small business lending undertaken by
    banks under the SBA's PPP is an important part of the Federal
    COVID-19 response to support consumers, households, businesses,
    and communities. The PPP provides loans to small businesses so
    that they can keep their workers on the payroll by extending
    credit to eligible financial institutions that originate PPP
    loans. To bolster the effectiveness of the PPP, the Board
    launched the PPPLF to supply liquidity to participating
    financial institutions through term financing backed by PPP
    loans to small businesses. The PPPLF extends credit to eligible
    financial institutions that originate PPP loans, taking the
    loans as collateral at face value.
        In terms of evaluations under the Community Reinvestment
    Act (CRA) assessment of whether a bank is meeting the
    convenience and needs of its communities, PPP loans that meet
    the Community Reinvestment Act's (CRA) small business loan
    definitions will be considered as retail loans under the
    lending test. In addition, PPP loans greater than $1 million
    will be considered as community development loans if they have
    a primary purpose of community development, for example by
    promoting economic development or helping to revitalize or
    stabilize low- or moderate-income geographies or distressed or
    underserved nonmetropolitan middle-income geographies. \3\
    ---------------------------------------------------------------------------
         \3\ For more information, see CA 20:10, ``Community Reinvestment
    Act (CRA) Consideration for Activities in Response to the Coronavirus''
    at https://www.federalreserve.gov/supervisionreg/caletters/
    caltr2010.htm.

    Q.3. Businesses can't wait a few months for PPP loans--they
    need them now. How will you be enforcing the Community
    Reinvestment Act when it comes to PPP, to make sure banks are
    doing a meaningful job reaching all of the businesses in need
    ---------------------------------------------------------------------------
    in their communities?

    A.3. The Board has worked with the Office of the Comptroller of
    the Currency (OCC) and Federal Deposit Insurance Corporation
    (FDIC) to release interagency frequently asked questions (FAQs)
    that address the CRA treatment of PPP loans, among other
    topics. \4\ This particular FAQ makes clear that the CRA
    treatment of PPP loans will follow existing CRA rules,
    including a focus on smaller loans to small businesses and
    ensuring a primary purpose of community development as defined
    under the CRA. The FAQ notes that PPP loans to businesses that
    meet existing CRA small business standards would count for CRA
    purposes. However, for PPP loans made to larger businesses,
    some fact-specific determinations will be considered, such as
    the location of the business. As indicated in the Federal
    Reserve System's Small Business Credit Survey, there are unmet
    credit needs for the smallest businesses, including many
    minority-owned and womenowned businesses, and we encourage
    banks to work to responsibly meet these credit needs for these
    businesses as well. \5\
    ---------------------------------------------------------------------------
         \4\ See https://www.federalreserve.gov/supervisionreg/caletters/
    caltr2010.htm.
         \5\ See https://www.fedsmallbusiness.org/medialibrary/
    FedSmallBusiness/files/2020/2020-sbcs-employer-firmsreport.pdf.
    ---------------------------------------------------------------------------
        The Board also has taken steps to broaden the eligible
    lenders for the Federal Reserve's PPP Liquidity Facility
    (PPPLF) to include nondepository Community Development
    Financial Institutions (CDFIs) that are eligible PPP lenders.
    \6\ This step will help provide these lenders with additional
    liquidity needed to make PPP loans, resulting in additional
    options for business in lower-income communities and for women-
    and minority-owned firms given CDFIs' focus on these target
    markets.
    ---------------------------------------------------------------------------
         \6\ See https://www.federalreserve.gov/newsevents/pressreleases/
    monetary20200430b.htm.

    Q.4. The CARES Act directed Treasury and the Federal Reserve to
    set up a lending program for midsize businesses.
        One provision of the CARES Act says that the Treasury
    Secretary ``shall endeavor'' to establish a lending program for
    midsize businesses and that any borrower applying for a loan
    under the midsize business lending program must certify that
    ``the recipient will not outsource or offshore jobs for the
    term of the loan and 2 years after[wards].''
        Yet, when the Fed unveiled the term sheets for the Main
    Street Lending Facility, there doesn't seem to be any mention
    of a certification for not moving jobs offshore.
        Do you think firms getting taxpayer-funded bailout should
    be required to keep their jobs in the United States?
        Why wasn't this a requirement in your agreement with the
    Fed to require firms to agree not to move jobs or production
    overseas?
        What about other Treasury-Fed lending programs, besides the
    midsize business lending program? Don't you think that any firm
    receiving a Federal grant or loan should be required to agree
    that they won't move jobs offshore?
        In what ways did you endeavor to implement the program as
    described in the CARES Act, in keeping with both the spirit and
    letter of the law?
        Why isn't the offshoring provision required in the Main
    Street Lending Program? What steps did you take in an effort to
    implement that provision?
        Besides the offshoring provision, please describe the steps
    you took to comply with both the letter and spirit of Section
    4003(c)(3)(D)(i)(I) through (X) of the CARES Act, including why
    you ultimately chose to implement each requirement or not.

    A.4. The Main Street Lending Program (Main Street) is designed
    to facilitate support to small and medium-sized businesses as
    effectively and efficiently as possible, while protecting
    taxpayer funds. Main Street is designed to help enable such
    businesses to maintain their operations during this difficult
    time period.
        In section 4003(c)(3)(D)(i) of the Coronavirus Aid, Relief,
    and Economic Security Act (CARES Act), Congress set out a
    possible design for a facility to provide assistance to
    midsized businesses, which included restrictions on outsourcing
    or offshoring jobs during the term of the loan and for 2 years
    after the loan was repaid. Congress clarified in section
    4003(c)(3)(D)(ii) of the CARES Act, however, that Main Street
    could be designed at the Federal Reserve Board's (Board)
    discretion under its authority in Section 13(3) of the Federal
    Reserve Act without such restrictions. The Board used this
    authority in designing Main Street in a manner that would
    comply with all applicable laws and would best facilitate the
    flow of credit to small- and medium-sized business borrowers.
        While Main Street's terms do not include restrictions on
    offshoring, Main Street borrowers are required to commit that
    they will use the proceeds of the Main Street loan only for the
    benefit of the borrower, its consolidated U.S. subsidiaries,
    and other affiliates of the borrower that are U.S. businesses.
    Borrowers may not use the proceeds of the loan for the benefit
    of their foreign parents, affiliates, or subsidiaries.
        In addition, Main Street requires certifications and
    covenants that are similar to several of the other conditions
    set out in section 4003(c)(3)(D)(i) of the CARES Act, including
    the following restrictions which are imposed by section 13(3)
    of the Federal Reserve Act, other sections of the CARES Act, or
    the Main Street term sheets:

        U.S. Business Requirement: Under section
            4003(c)(3)(C) of the CARES Act, eligible borrowers must
            be ``businesses that are created or organized in the
            United States or under the laws of the United States
            and that have significant operations in and a majority
            of its employees based in the United States.'' This
            requirement is substantially similar to the
            requirements in sections 4003(c)(3)(D)(i)(IV) and (VI).

        Direct Loans: Eligible borrowers must commit to
            comply with the restrictions that apply to direct loan
            programs under section 4003(c)(3)(A)(ii) of the CARES
            Act, except that an S corporation or other tax pass-
            through entity that is an eligible borrower may make
            distributions to the extent reasonably required to
            cover its owners' tax obligations in respect of the
            entity's earnings. Certain of these requirements are
            similar to the requirement in section
            4003(c)(3)(D)(i)(VII) of the CARES Act.

        Solvency: Borrowers must certify that they are
            solvent and are not in bankruptcy, resolution, or
            another type of insolvency proceeding at the time of
            borrowing to effectuate compliance with section 13(3)
            of the Federal Reserve Act. This requirement is
            substantially similar to the requirement in section
            4003(c)(3)(D)(i)(V) of the CARES Act. In addition,
            under the Main Street term sheets, each borrower must
            certify that that it has a reasonable basis to believe
            that, as of the date of origination of the Main Street
            loan and after giving effect to such loan, the borrower
            has the ability to meet its financial obligations for
            at least the next 90 days and does not expect to file
            for bankruptcy during that time period.

        Availability of Credit: To effectuate compliance
            with Section 13(3) of the Federal Reserve Act and
            Regulation A, each borrower must certify that it is
            unable to secure ``adequate credit accommodations''
            because the amount, price, or terms of credit available
            from other sources are inadequate for the borrower's
            needs during the current unusual and exigent
            circumstances. This requirement is similar to section
            4003(c)(3)(D)(i)(I) of the CARES Act.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR SINEMA
                         FROM JEROME H. POWELL

    Q.1. In its April 30 guidance, the Federal Reserve determined
    that nonbank financial institutions would not be considered as
    eligible lenders under the Main Street Lending Program.
    However, the Federal Reserve is open to considering options to
    expand the list of eligible lenders in the future. Since April
    30, has the Federal Reserve made any further determinations
    regarding eligible lenders? If so, will that broader list
    include business development companies (BDCs) to ensure that
    funds are able to reach Main Street businesses?

    A.1. At this time, nonbank financial institutions that are
    unaffiliated with depository institutions are not considered
    eligible lenders for the purposes of the Main Street Lending
    Program (Main Street). The Federal Reserve continues to
    consider options to expand the list of eligible lenders in the
    future. Currently, eligible lenders include: U.S. federally
    insured depository institutions (including banks, savings
    associations and credit unions), U.S bank holding companies,
    U.S. savings and loan holding companies, U.S. branches or
    agencies of foreign banks, U.S. intermediate holding companies
    of foreign banking organizations, and U.S. subsidiaries of the
    foregoing. Any changes to the list of eligible lenders will be
    announced on the Main Street website. \1\
    ---------------------------------------------------------------------------
         \1\ www.federalreserve.gov/monetarypolicy/mainstreetlending.htm

    Q.2. Since March, occupancy rates for hotels, fitness centers,
    and entertainment venues have hit all-time lows. Business
    owners are now looking towards the Main Street Lending Program
    as their best lifeline for making it through the pandemic. I'm
    concerned that some of the lending limits based on leverage
    will prevent many businesses in these industries from
    participating. Is the Federal Reserve looking at unique
    business characteristics for different sectors when determining
    lending limits based on leverage? Is it doing so with an eye
    towards providing additional flexibility in future guidance,
    such as increasing the maximum loan size and modifying the
    borrower eligibility formulas to ensure businesses with high
    ---------------------------------------------------------------------------
    debt costs, such as hotels, can utilize the program?

    A.2. Main Street is designed to be broad-based and not to
    target lending to any particular sector of the economy. We
    adopted criteria based on adjusted earnings before interest,
    taxes, depreciation, and amortization (EBITDA) because it is a
    key underwriting metric used by lenders in evaluating the
    credit risk of small and medium-sized businesses across
    industries. Lenders and borrowers regularly agree to adjust a
    borrower's EBITDA to accommodate differences in business models
    across industries, as well as one-time events that may
    positively or negatively impact a borrower's earnings. To
    account for differences based on industry or business models, a
    Main Street lender may adjust a borrower's EBITDA in the same
    way it has previously adjusted EBITDA when lending to that
    borrower or similarly situated borrowers, as applicable. When
    applied prudently, these adjustments provide a lender with a
    more accurate representation of a business's earnings capacity
    over time. Allowing for leverage of four or six times adjusted
    EBITDA is within the normal range of practice in lending to
    business borrowers.
        We will continue to monitor lending conditions broadly and
    consider adjustments to Main Street terms and conditions, as
    appropriate.

    Q.3. Arizona is experiencing an all-time high in unemployment.
    Thousands of Arizonans are still struggling to successfully
    file for unemployment and receive benefits. I am concerned that
    with expanded unemployment benefits expiring at the end of
    July, the program will end before Arizonans see any relief.
    Does the Federal Reserve expect coronavirus-related layoffs to
    be reversed before the July deadline?

    A.3. We expect that the recovery of the labor market will take
    some time. Indeed, at the June meeting of the Federal Open
    Market Committee (FOMC), participants' median expectation was
    for the unemployment rate to remain above its longer-run level
    at least through the end of 2022. \2\ While payroll employment
    rebounded strongly in May, June, and July, only about 40
    percent of the jobs lost in March and April have been recouped.
    \3\ Looking ahead, many indicators (including high-frequency
    indicators such as initial claims for unemployment insurance,
    mobility data, and employment in small businesses) suggest that
    the pace of improvement in the labor market has slowed. \4\
    Furthermore, weekly COVID-19 case counts remain high, and some
    States have ramped up restrictions again. These developments
    might further restrain improvements in the labor market.
    ---------------------------------------------------------------------------
         \2\ The FOMC's Summary of Economic Projections for the June 2020
    FOMC meeting is available at https://www.federalreserve.gov/
    monetarypolicy/fomcprojtabl20200610.htm.
         \3\ After falling by 22.2 million over March and April, nonfarm
    payroll employment increased by 9.3 million over May, June, and July.
         \4\ For example, after declining at a rapid clip through early
    June, initial claims for unemployment insurance have moved down more
    slowly, on net, since then and stood at a still-elevated level of 1.1
    million in the week ending August 15.

    Q.4. In its guidance, the Federal Reserve has ruled that
    eligible issuers for its emergency lending facilities must be
    rated by major nationally recognized statistical rating
    organizations (NRSROs). In some cases, such as the Primary
    Market Corporate Credit Facility, eligible issuers must be
    rated by the three largest NRSROs specifically. Restricting
    eligibility to issuers with ratings from incumbent agencies
    unnecessarily excludes Arizona companies and BDCs, especially
    those with ratings from other tops NRSROs approved by the
    Securities and Exchange Commission. I am also concerned that
    the decision may undermine market confidence in rating agencies
    overall. The Federal Reserve stated it would consider expanding
    eligibility to other NRSROs. When will this consideration take
    place? If the Federal Reserve is considering expansion, what
    ---------------------------------------------------------------------------
    criteria will be used to make its determination?

    A.4. The emergency lending facilities, including the Primary
    Market Corporate Credit Facility, were established to support
    the flow of credit to households, businesses, and communities.
    In addition, under the law, the loans the Federal Reserve
    extends must be satisfactorily secured and sufficiently protect
    taxpayers from loss.
        The Federal Reserve's initial priority was to announce the
    establishment of these facilities as quickly as possible, and
    therefore the facilities first used credit ratings from the
    three largest nationally recognized statistical rating
    organizations (NRSROs), given that the most widespread credit
    ratings used are from these three NRSROs.
        Consistent with our objectives to promote the flow of
    credit in a manner consistent with the law, the Federal Reserve
    undertook an analysis to determine whether to expand the list
    of eligible NRSROs. As part of this analysis, the Federal
    Reserve considered the design and focus of each facility, and
    the role that each NRSRO plays in the relevant market.
    Specifically, the Federal Reserve sought to balance the
    benefits of using ratings from the NRSROs most relied on by
    investors, with the need to ensure broad access to our
    programs. That analysis led the Federal Reserve to include
    three additional NRSROs in its facilities. The Federal Reserve
    hopes this change expands access to its facilities, while
    continuing to protect against taxpayer losses. The Federal
    Reserve will continue to monitor its facilities to ensure they
    are working as intended.

    Q.5. In its April 30 guidance, the Federal Reserve set the
    terms for its Municipal Liquidity Facility program to limit the
    purchasing of short-term notes to cities with over 250,000
    residents and counties with over 500,000. I've heard directly
    from Arizona mayors and county leaders who do not meet these
    requirement but are in dire financial straits. Has the Federal
    Reserve made any further determinations regarding resident caps
    since guidance was release? If not, what kind of relief can the
    Federal Reserve provide to smaller counties and cities across
    the country?

    A.5. At this time, the Municipal Liquidity Facility (MLF) will
    purchase up to $500 billion in shortterm notes directly from
    U.S. States, including the District of Columbia, U.S. counties
    with a population of at least 500,000 residents, and U.S.
    cities with a population of at least 250,000 residents. To
    provide relief to smaller counties and cities, eligible States,
    cities, and counties may use the proceeds of eligible notes
    sold to the special purpose vehicle under the MLF to purchase
    the notes of, or otherwise assist, any of their political
    subdivisions or other government entities. Under this facility,
    political subdivisions and other government entities are
    defined as any county, city, municipality, township, village,
    school district, special district, utility, authority, agency
    or other unit of government, as determined by the eligible
    State, city, or county. In recognition that it can be difficult
    in some cases, for various reasons, for States to borrow on
    behalf of their cities and counties, we announced on June 3,
    that every State can have at least two cities and counties that
    are able to directly issue to the MLF. Additional information
    on the eligibility requirements under the MLF can be found in
    the facility term sheet. \5\
    ---------------------------------------------------------------------------
         \5\ The MLF term sheet, effective June 3, 2020:
    www.federalreserve.gov/newsevents/pressreleases/files/
    monetary20200603a1.pdf.
    ---------------------------------------------------------------------------
        The Federal Reserve will continue to closely monitor
    conditions in the primary and secondary markets for municipal
    securities and will evaluate whether additional measures are
    needed to support the flow of credit and liquidity to State and
    local governments.

    Q.6. Under the CARES Act, the Paycheck Protection Program (PPP)
    was intended to target relief for businesses in underserved and
    rural markets, and for businesses owned by veterans, women, and
    minorities. A month after passage of the CARES Act, the
    Treasury allowed nondepository Community Development Financial
    Institutions (CDFIs) to be eligible PPP lenders in order to
    meet this end. As such, the Federal Reserve allowed CDFIs to
    participate in its PPP Liquidity Facility (PPPLF). With the
    exception of the PPPLF, CDFIs do not have access to any other
    13(3) facility. On May 8, 2020, the Small Business
    Administration (SBA) Inspector General released a flash report
    on the implementation of the PPP, which found the SBA did not
    follow Congressional intent in serving low-income and
    disadvantaged areas. CDFIs will need more liquidity support
    than the purchase of their PPP loans to assist the SBA and meet
    demand. Is the Federal Reserve open to considering the
    inclusion of CDFIs in its other facilities? Why was the
    determination to exclude CDFIs from other 13(3) facilities
    made?

    A.6. Main Street considers eligible lenders to be U.S.
    federally insured depository institutions (including banks,
    savings associations, and credit unions), U.S. bank holding
    companies, U.S. savings and loan holding companies, U.S.
    branches or agencies of foreign banks, U.S. intermediate
    holding companies of foreign banking organizations, or any U.S.
    subsidiary of any of the foregoing. At this time, nonbank
    financial institutions are not considered eligible lenders for
    purposes of Main Street. However, the Federal Reserve
    recognizes the role that Community Development Financial
    Institutions play in provisioning credit for minority and low-
    to-moderate income communities and is considering options to
    expand the list of eligible lenders in the future.

    Q.7. Per its April 30 guidance, the Federal Reserve ruled that
    the Term Asset-Backed Securities Loan Facility (TALF) will not
    consider collateral without a credit rating from the highest
    investment-grade rating category from a major nationally
    recognized statistical rating organizations (NRSROs) as
    eligible collateral. Right now, the consumers and small
    business owners turning to personal loans are those most in
    need of support and access to credit at this difficult time. Is
    the Fed considering approving investment-grade personal loans
    as eligible collateral under TALF to ensure that these American
    consumers and small business owners are not left out?

    A.7. As you note, only asset-backed securities (ABS) with
    triple-A ratings from at least two nationally recognized
    statistical rating organizations are eligible collateral for
    Term Asset-Backed Securities Loan Facility (TALF) loans. In
    reaching this determination, the Federal Reserve Board (Board)
    balanced two considerations. First, the Board generally accepts
    as TALF collateral ABS asset classes that fund a material share
    of economic activity, such as credit card, auto, and student
    loan ABS, and ABS collateralized by small business loans with
    Small Business Administration guarantees. The objective of
    facilitating the flow of credit to consumers and businesses is
    typically not at odds with the restriction that only triple-A
    securities are TALF-eligible. In most major classes of ABS, a
    large share of the underlying bonds are rated triple-A, so
    enough triple-A TALF-eligible ABS exist for the program to
    achieve its objective.
        Second, under the restrictions of section 13(3) of the
    Federal Reserve Act, the Board and Reserve Banks must take
    steps to ensure the protection of the taxpayer, including by
    assigning a ``lendable value to all collateral.'' Restricting
    TALF-eligible collateral to bonds with triple-A ratings helps
    ensure that the Board and the Reserve Banks are complying with
    section 13(3).
        In the case of personal loans, although these loans provide
    access to credit to some consumers and small businesses, other
    forms of credit are more economically significant for
    consumers. In addition, the majority of personal-loan borrowers
    obtain these loans from banks, not from the nonbank lenders
    that are dependent on ABS for funding. As a result, personal
    loans are still available currently to consumers. Finally,
    personal loan ABS are difficult to reconcile with the section
    13(3) restrictions. As you note, only a small share of these
    ABS obtain triple-A ratings, and because they are a relatively
    new asset class, comprehensive information is not available
    about their performance in stressed economic periods.
        The Board will continue to evaluate the feasibility and
    efficacy of adding other asset classes to or expanding the
    scope of existing asset classes eligible for the TALF.

    Q.8. Per its April 30 guidance, the Federal Reserve ruled that
    TALF will only consider collateral with a credit rating in the
    highest long-term or short-term investment-grade rating
    category from at least two NRSROs. Self-employed borrowers
    generally experience greater income volatility and rely on
    unconventional forms of documentation to access credit. As
    such, the self-employed often struggle to access credit
    affordably. However, like other small businesses, self-employed
    business owners are important contributors to Arizona's
    economy. Are there plans to allow AAA residential mortgage-
    backed securities as eligible collateral under TALF?

    A.8. In determining whether a certain type of ABS should be
    eligible collateral for TALF loans, the Board considers whether
    accepting an asset class will provide material support to the
    economy and whether inclusion of the asset class is appropriate
    under the restrictions of section 13(3) of the Federal Reserve
    Act. In particular, under section 13(3), the Board and Reserve
    Banks must take steps to ensure the protection of the taxpayer,
    including by assigning a ``lendable value to all collateral.''
    To satisfy this restriction, we prioritize categories of ABS
    where a large share of issuance is routinely rated triple-A by
    the rating agencies and where comprehensive information is
    available about credit performance in different economic
    environments, including stressed conditions.
        Residential mortgage-backed securities (RMBS) is one of the
    largest ABS categories not currently eligible as TALF
    collateral, and a large share of RMBS issuance is typically
    rated triple-A by the rating agencies. However, some RMBS have
    performed poorly in times of stress, and RMBS collateralized by
    mortgages with low or nonstandard documentation have a
    particular history of underperformance. The types of ABS
    currently accepted by the TALF generally have a long history of
    performing well in stressed economic conditions. The Board
    relies on that history of strong performance to ensure that the
    TALF is consistent with section 13(3).
        The Board recognizes that the exclusion of RMBS from TALF
    has an effect on mortgage credit availability and continues to
    consider whether some types of RMBS can be accepted by the TALF
    in a manner consistent with section 13(3).

    Q.9. Given record high unemployment levels in Arizona, mortgage
    forbearance and delay of evictions are a very temporary
    solution. Servicers of home loans backed by Fannie Mae, Freddie
    Mac, and Ginnie Mae are not only required to make mortgage
    payments on behalf of the borrowers, but also payments on
    property taxes, homeowners and mortgage insurance, and
    homeowner association dues. As more and more homeowners enter
    forbearance, both independent mortgage servicers and community
    banks will need liquidity support. How do your organizations
    plan to deal with mass forbearance and provide liquidity to
    struggling servicers? Service transferring is already a chaotic
    process for borrowers. Can a program be created to avoid
    borrowers having their service transferred during such a
    critical time?

    A.9. The Federal Housing Finance Agency (FHFA), Fannie Mae,
    Freddie Mac, and Ginnie Mae have announced helpful measures
    that will make it easier for mortgage servicers to carry out
    the forbearance requirements of the Coronavirus Aid, Relief,
    and Economic Security (CARES) Act. Moreover, the Federal
    financial regulatory agencies and the State regulators have
    taken a number of steps, including those listed below, to
    clarify the responsibilities of mortgage servicers and to
    address issues related to the transfer of residential
    mortgages.

        In April, the Board joined other Federal financial
            institution regulators, the Consumer Financial
            Protection Bureau (CFPB), and State regulators in
            issuing a COVID-19 emergency joint policy statement,
            \6\ which outlined various practices and policies to
            provide mortgage servicers clarity and to assist them
            in complying with the CARES Act provisions providing
            forbearance to consumers impacted by COVID-19. The CFPB
            issued related FAQs related to mortgage forbearance.
            \7\
    ---------------------------------------------------------------------------
         \6\ www.federalreserve.gov/newsevents/pressreleases/
    bcreg20200407a.htm (April 7, 2020); revised from
    www.federalreserve.gov/newsevents/pressreleases/bcreg20200322a.htm
    (March 22, 2020). See also, www.federalreserve.gov/newsevents/
    pressreleases/bcreg20200403a.htm (April 3, 2020).
         \7\ https://files.consumerfinance.gov/f/documents/cfpb--mortgage-
    servicing-rules-COVID-19--faqs.pdf (April 3, 2020).

        In April, the CFPB outlined practices to provide
            mortgage servicers clarity, facilitate compliance, and
            prevent harm to consumers during the transfer of
            residential mortgages. \8\
    ---------------------------------------------------------------------------
         \8\ www.consumerfinance.gov/about-us/newsroom/cfpb-outlines-
    mortgage-loan-transfer-process-prevent-consumerharm/.

        In May, the CFPB and State regulators issued a
            consumer guide to mortgage relief options. \9\
    ---------------------------------------------------------------------------
         \9\ www.consumerfinance.gov/about-us/newsroom/cfpb-csbs-consumer-
    guide-mortgage-relief-options/

        In June, the CFPB and the State regulators issued
            additional guidance to mortgage servicers to assist
            them in complying with the CARES Act provisions
            providing forbearance to consumers impacted by COVID-
            19. \10\
    ---------------------------------------------------------------------------
         \10\ www.consumerfinance.gov/about-us/newsroom/cfpb-and-state-
    regulators-provide-guidance-assist-borrowersCOVID-19/

        These regulators continue to be in close communication with
    each other and with other agencies, and stakeholders that have
    responsibilities for mortgage servicers. We continue to closely
    ---------------------------------------------------------------------------
    monitor developments in this area.

    Q.10. Requiring servicers to advance property taxes, hazard
    insurance, homeowners association dues, and other assessments
    is no small task. Servicers typically advance these amounts
    when borrowers face financial shortfalls or after a natural
    disaster without any problem, however, the national scale of
    this pandemic is unpresented and our municipal and county
    budgets are already strained. Both Fannie Mae and Ginnie Mae
    have taken steps to moderate the servicer advancing burdens for
    principle and interest. Have your organizations contemplated
    the risks to cities and counties if liquidity is not restored?
    Have you considered standing up a liquidity facility to help
    servicers make these tax and insurance advances, particularly
    in cities and counties that are not able to access the
    Municipal Liquidity Facility?

    A.10. Mortgage-backed securities (MBS) guarantors such as
    Fannie Mae, Freddie Mac, and Ginnie Mae have a strong incentive
    to ensure that servicers advance payments to cities, counties,
    insurers, and other entities, since a foreclosure stemming from
    a tax lien or homeowners' association dues lien would affect
    the MBS guarantor's ability to recover its own losses in the
    event of a borrower default. These guarantors are continuously
    assessing whether the servicers have the resources to live up
    to their responsibilities under the servicing agreements.
        As you note, the steps that Fannie Mae, Freddie Mac, Ginnie
    Mae, and the FHFA have taken have moderated the strains
    associated with advances of principal and interest, and thereby
    left servicers with more cash available to meet their other
    obligations. Mortgage servicers that also originate mortgages
    have been able to use the proceeds from the recent high levels
    of mortgage refinancing activity to fund tax and insurance
    advances.
        All the entities with a regulatory stake in the solvency
    and stability of mortgage servicers noted above continue to be
    in close communication with each other. At the Federal Reserve,
    we continue to monitor developments with mortgage servicers
    closely. We remain prepared to use our full set of tools to
    support the flow of credit to households and businesses.

    Q.11. Nonprofits serve on the front lines of the coronavirus
    pandemic helping feed Arizona families, providing Arizonans
    safe shelter, and connecting Arizonans to critical health
    services. To continue their important work and meet growing
    need they may need access to the the 13(3) facilities. What can
    you do to ensure that nonprofits with up to 10,000 employees
    receive additional financial assistance?

    A.11. Nonprofit organizations are a critical part of our
    economy, employing millions of people, providing essential
    services to communities, and supporting innovation and the
    development of a highly skilled workforce. We announced on June
    15 that we would be seeking public feedback on a proposal to
    expand Main Street to provide access to credit for nonprofit
    organizations described in sections 501(c)(3) and 501(c)(19) of
    the Internal Revenue Code that meet minimum eligibility
    criteria. \11\ The Board received comments from a wide range of
    stakeholders, and in response, on July 17 we announced revised
    term sheets that expanded the range of nonprofit organizations
    eligible to obtain Main Street loans. Under the updated terms,
    the Federal Reserve will offer loans to small and medium-sized
    nonprofits that were in sound financial condition before COVID-
    19. Nonprofit organizations will need to meet various
    eligibility criteria to qualify, including financial
    eligibility criteria based on operating performance, liquidity,
    and ability to repay debt. For additional information on the
    nonprofit facilities, please see the facility term sheets. \12\
    ---------------------------------------------------------------------------
         \11\ www.federalreserve.gov/newsevents/pressreleases/
    monetary20200615b.htm
         \12\ For the Nonprofit Organization Expanded Loan Facility term
    sheet, see https://www.federalreserve.gov/newsevents/pressreleases/
    files/monetary20200717a1.pdf. For the Nonprofit Organization New Loan
    Facility term sheet, see https://www.federalreserve.gov/newsevents/
    pressreleases/files/monetary20200717a2.pdf.
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