[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]


                        MONETARY POLICY AND THE
                          STATE OF THE ECONOMY

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

                            VIRTUAL HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                               __________

                           FEBRUARY 24, 2021

                               __________

       Printed for the use of the Committee on Financial Services

                            Serial No. 117-4
                            
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                               __________
                               

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
43-967 PDF                  WASHINGTON : 2021                     
          
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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

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

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

                              ----------                              
                                                                   Page
Hearing held on:
    February 24, 2021............................................     1
Appendix:
    February 24, 2021............................................    53

                               WITNESSES
                      Wednesday, February 24, 2021

Powell, Hon. Jerome H., Chairman, Board of Governors of the 
  Federal Reserve System.........................................     4

                                APPENDIX

Prepared statements:
    Powell, Hon. Jerome H........................................    54

              Additional Material Submitted for the Record

Powell, Hon. Jerome H.:
    Monetary Policy Report of the Board of Governors of the 
      Federal Reserve System, dated February 19, 2021............    60
    Written responses to questions for the record from Chairwoman 
      Waters.....................................................   136
    Written responses to questions for the record from 
      Representative Hill........................................   154
    Written responses to questions for the record from 
      Representative Steil.......................................   160
    Written responses to questions for the record from 
      Representative Timmons.....................................   162

 
                        MONETARY POLICY AND THE
                          STATE OF THE ECONOMY

                              ----------                              


                      Wednesday, February 24, 2021

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 9:59 a.m., via 
Webex, Hon. Maxine Waters [chairwoman of the committee] 
presiding.
    Members present: Representatives Waters, Velazquez, 
Sherman, Scott, Green, Cleaver, Perlmutter, Himes, Foster, 
Beatty, Gottheimer, Lawson, Axne, Casten, Pressley, Adams, 
Tlaib, Dean, Ocasio-Cortez, Garcia of Illinois, Garcia of 
Texas, Williams of Georgia; McHenry, Wagner, Lucas, Posey, 
Luetkemeyer, Huizenga, Stivers, Barr, Williams of Texas, Hill, 
Emmer, Zeldin, Loudermilk, Mooney, Davidson, Budd, Kustoff, 
Hollingsworth, Gonzalez of Ohio, Rose, Steil, Gooden, Timmons, 
and Taylor.
    Chairwoman Waters. The Financial Services Committee will 
come to order.
    Without objection, the Chair is authorized to declare a 
recess of the committee at any time.
    As a reminder, I ask all Members to keep themselves muted 
when they are not being recognized by the Chair. This will 
minimize disturbances while Members are asking questions of our 
witnesses. The staff has been instructed not to mute Members 
except where a member is not being recognized by the Chair and 
there is inadvertent background noise.
    Members are also reminded that they may only participate in 
one remote proceeding at a time. If you are participating 
today, please keep your camera on, and if you choose to attend 
a different remote proceeding, please turn your camera off.
    If Members wish to be recognized during the hearing, please 
identify yourself by name to facilitate recognition by the 
Chair. I would also ask that Members be patient as the Chair 
proceeds, given the nature of conducting committee business 
virtually.
    Today's hearing is entitled, ``Monetary Policy and the 
State of the Economy.''
    I now recognize myself for 4 minutes to give an opening 
statement.
    Welcome back, Chair Powell. Since your last testimony 
before this committee, the COVID-19 pandemic has continued to 
have a devastating impact all across the country. Over 500,000 
people in the United States have lost their lives to the virus, 
and there have been 27.9 million U.S. cases of the virus. The 
economy continues to be in a crisis. Millions of families are 
struggling to make rent or mortgage payments through no fault 
of their own. Roughly one-third of small businesses remain 
closed, and many more are at risk of permanently shutting their 
doors.
    I am so glad that we now have President Biden providing 
leadership from the White House and a real plan to tackle this 
crisis once and for all. With Democrats now in control of the 
Senate, Congress can carry out that plan and provide the nation 
with the relief it so urgently needs. This committee has 
advanced legislation in our jurisdiction to implement President 
Biden's American Rescue Plan, and the full House will take up 
this legislation later this week.
    After the gross, if not criminal mismanagement of the 
crisis by the Trump Administration, Americans have shown that 
they want competent leadership and decisive action to crush 
this virus and put the economy on the road to recovery. But 
even after Congress passes the American Rescue Plan, the 
country still needs the Federal Reserve to adapt and to stand 
ready to use all of the tools at its disposal to ensure an 
equitable and swift recovery.
    It is long overdue for the Federal Reserve to reconsider 
its normal operating procedures and use its authorities to 
tackle the racial wealth and employment gaps. The Fed must act 
vigilantly against ongoing signs of systemic stress, putting a 
stop to the deregulation that preceded this crisis. The Fed 
must continue to be attentive to inequality as it oversees this 
recovery, taking the impact on consumers and small businesses 
into account when considering mergers in the financial 
industry. And the Fed must proceed with greater alacrity 
regarding climate risk in its supervision of financial 
institutions. The Fed has recently taken a few steps in this 
regard, but much more is needed to combat the systemic and 
extensional treatment. I look forward to your testimony, and to 
discussing these matters today.
    I now recognize the ranking member of the committee, the 
gentleman from North Carolina, Mr. McHenry, for 5 minutes.
    Mr. McHenry. Chairman Powell, I would like to commend you 
again for your swift response to the pandemic. The Federal 
Reserve was the fastest-acting part of the Federal response, 
thanks to your foresight and leadership. As we have discussed 
previously, Chair Powell, there is a clear distinction between 
what is fiscal policy within the purview of Congress and what 
is monetary policy within the purview of the Fed. I appreciate 
your work to protect the independence of the Fed, and I know 
that you will continue to do so.
    We have politicians who are talking down our economy, with 
even the Speaker of the House saying, ``The economic crisis is 
accelerating,'' and they are saying this specifically to pass 
their spending packages. Our economy is on the mend, despite 
what politicians parrot as their preferred narrative. The first 
phase of the storm is passing. Now, we have to deal with the 
damage COVID wrought, and it did indeed bring significant 
damage.
    The virus, the shutdowns, schools not reopening, and the 
lack of child care all have had serious consequences. These are 
maladies which the Fed cannot fix. In fact, Congress doesn't 
seem to have the power to do it either. It is Governors and the 
States they lead who are showing the path forward. Money alone 
will not fix it. Vaccines, testing, treatment, and data-driven 
public health decisions will have a larger impact than either 
monetary policy or fiscal policy at this stage of the game. 
What is called for is targeted temporary relief directly 
related to COVID, not a typical stimulus bill in the name of 
COVID relief.
    To be clear, we know there are many Americans still 
suffering. Behind every statistic is a family that is still 
reeling from this crisis. For a year now, we have been working 
to reach those in need. As you have said, Chairman Powell, this 
is a tale of two recoveries. Employment for the top quartile of 
wage earners has fallen by 4 percent, while the bottom quartile 
has dropped by a full 17 percent, so let's dig deeper here. 
More than 4 million Americans have been unemployed for almost a 
year. In the restaurant industry alone, 1 out of 6 businesses 
have been shuttered since last March. And while the 
Congressional Budget Office (CBO) projects the unemployment 
rate, which currently stands at 6.2 percent--which, by the way, 
is lower than the unemployment rate under the first 5\1/2\ 
years of President Obama--will continue to fall this year and 
reach a pre-pandemic size in 2022 without any other additional 
fiscal action.
    There are millions of American families juggling work and 
child care, and just praying that their schools will finally 
reopen. Yes, personal incomes actually increased at the end of 
last year, and the personal savings rate stands at over 13 
percent, a level not seen in 4 decades. Yet, child care costs 
have jumped by almost 50 percent since last year. A year ago, 
women outnumbered men in the workforce, and since the pandemic, 
2.5 million women have left the workforce.
    Given the nature of the shutdown, the temporary aid that we 
provided last year and the Fed's swift actions prevented the 
worst possible outcomes from occurring in this crisis. Now, we 
have to deal with the divide, the uneven recovery that has 
occurred, and as we exit this pandemic, we need to find 
innovative solutions that support finding employment for these 
Americans, and we need to bring those who exited the labor 
force completely back in. And the Fed must also focus on 
regulatory flexibility and provide flexibility to financial 
markets to ensure that we have a less choppy recovery.
    And indeed, Chairman Powell, there are new challenges and 
choppy waters ahead, and I am grateful for your steady hand and 
pragmatic leadership at the Federal Reserve and for our economy 
and for our Government. Thanks so much, and I yield back.
    Chairwoman Waters. Thank you. I now recognize the gentleman 
from Connecticut, Mr. Himes, who is also the Chair of our 
Subcommittee on National Security, International Development 
and Monetary Policy, for 1 minute.
    Mr. Himes. Thank you, Madam Chairwoman, and Chairman 
Powell, thank you for being here today. Let me echo our thanks 
for your incredible intervention and work in addressing the 
economic aspects of this pandemic.
    In 2008, the Federal Reserve took extraordinary actions, 
including the then-controversial use of its emergency lending 
powers, to rescue the financial sector, and the pandemic has 
shown us that the need for the Fed to engage in emergency 
intervention remains. When you last testified before this 
committee in December, we discussed the wisdom, or lack 
thereof, of shutting down those emergency facilities before the 
pandemic was over. And then at the end of last year, we saw 
troubling signs on the horizon of elevated unemployment numbers 
and an uptick in business bankruptcy. Clearly, we are not out 
of the woods, and if 2008 and 2020 have taught us anything, it 
is that crises happen and we need to prepare for them.
    Unlike in 2009, fiscal policy will be heavily deployed and 
our shoulders will be to the wheel. Nonetheless, the Federal 
Reserve is arguably the major player in our capital markets.
    I look forward to hearing from you today, Mr. Chairman, not 
just on where we are, but how this ends. How does it unwind? A 
look at page 43 of your Monetary Report shows the incredible 
interventions, and the question is, how does this unwind and 
where do we go from here? With that, I yield back.
    Chairwoman Waters. Thank you. I now recognize the ranking 
member of the Subcommittee on National Security, International 
Development and Monetary Policy, the gentleman from Arkansas, 
Mr. Hill, for 1 minute.
    Mr. Hill. Thank you, Madam Chairwoman, and I want to echo 
the comments of my friend and chairman, Chairman Himes, of the 
subcommittee. We thank you, Chairman Powell, for the 
extraordinary actions of the Board of Governors during 2020 in 
monetary policy and your extraordinary facilities in using 
Section 13(3). And we also commend the Congress and the 
Executive Branch in 2020 for their fiscal response which gave 
us the resources we needed to fight the pandemic and get our 
economy to the point it is today to open. I agree with Chairman 
Himes that now, it is time to look on the other side of this 
pandemic.
    As we vaccinate America, as we get our businesses open, as 
we see State and local governments having far in excess of the 
tax revenues that they anticipated, and people getting back to 
work, how do we safely open this economy, get those jobs 
available for those 10 million Americans still seeking 
employment? I look forward to your testimony today. I yield 
back, Madam Chairwoman.
    Chairwoman Waters. Thank you. I want to welcome to the 
committee our distinguished witness, Jerome Powell, Chair of 
the Board of Governors of the Federal Reserve System. Chair 
Powell has served on the Board of Governors since 2012, and as 
its Chair since 2017. Chair Powell has previously testified 
before this committee, so I do not believe he needs any further 
introduction. Without objection, your written statement will be 
made a part of the record. And I want to remind Members that 
Chair Powell has a hard stop, and will be with us for 3 hours, 
until 1 p.m. Eastern Time.
    Chair Powell, you are now recognized to present your oral 
testimony.

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

    Mr. Powell. Thank you, and good morning to all. Chairwoman 
Waters, Ranking Member McHenry, and members of the committee, I 
am pleased to present the Federal Reserve's Semiannual Monetary 
Policy Report.
    At the Federal Reserve, we are strongly committed to 
achieving the monetary policy goals that Congress has given us: 
maximum employment and price stability. Since the beginning of 
the pandemic, we have taken forceful actions to provide support 
and stability to ensure that the recovery will be as strong as 
possible, and to limit lasting damage to households, 
businesses, and communities. Today, I will review the current 
economic situation before turning to monetary policy.
    The path of the economy continues to depend significantly 
on the course of the virus and the measures taken to control 
its spread. The resurgence in COVID-19 cases, hospitalizations, 
and deaths in recent months is causing great hardship for 
millions of Americans and is weighing on economic activity and 
job creation. Following a sharp rebound in economic activity 
last summer, momentum slowed substantially, with the weakness 
concentrated in the sectors most adversely affected by the 
resurgence of the virus. In recent weeks, the number of new 
cases and hospitalizations has been falling, and ongoing 
vaccinations offer hope for a return to more normal conditions 
later this year. However, the economic recovery remains uneven 
and far from complete, and the path ahead is highly uncertain.
    Household spending on services remains low, especially in 
sectors that typically require people to gather closely, 
including leisure and hospitality. In contrast, household 
spending on goods picked up encouragingly in January after 
moderating late last year. The housing sector has more than 
fully recovered from the downturn, while business investment 
and manufacturing production have also picked up. The overall 
recovery in economic activity since last spring is due in part 
to unprecedented fiscal and monetary policy actions, which have 
provided essential support to many households, businesses, and 
communities.
    As with overall economic activity, the pace of improvement 
in the labor market has slowed. Over the 3 months ending in 
January, employment rose at an average monthly rate of only 
29,000. Continued progress in many industries has been tempered 
by significant losses in industries such as leisure and 
hospitality, where the resurgence in the virus and increased 
social distancing have weighed further on activity. The 
unemployment rate remained elevated at 6.3 percent in January, 
and participation in the labor market is notably below pre-
pandemic levels. Although there has been much progress in the 
labor market since the spring, millions of Americans remain out 
of work.
    As discussed in the February Monetary Policy Report, the 
economic downturn has not fallen equally on all Americans, and 
those least able to shoulder the burden have been hardest hit. 
In particular, the high level of joblessness has been 
especially severe for lower-wage workers and for African 
Americans, Hispanics, and other minority groups. The economic 
dislocation has upended many lives and created great 
uncertainty about the future. The pandemic has also left a 
significant imprint on inflation. Following large declines in 
the spring, consumer prices partially rebounded over the rest 
of last year. However, for some of the sectors that have been 
most adversely affected by the pandemic, prices remain 
particularly soft. Overall, on a 12-month basis, inflation 
remains below our 2-percent longer-run objective.
    While we should not underestimate the challenges we 
currently face, developments point to an improved outlook for 
later this year. In particular, ongoing progress in 
vaccinations should help speed the return to normal activities. 
In the meantime, we should continue to follow the advice of 
health experts to observe social distancing measures and wear 
masks.
    I will turn now to monetary policy. In the second half of 
last year, the Federal Open Market Committee (FOMC) completed 
our first-ever public review of our monetary policy strategy, 
tools, and communication practices. We undertook this review 
because the U.S. economy has changed in ways that matter for 
monetary policy. The review's purpose was to identify 
improvements to our policy framework that could enhance our 
ability to achieve our maximum employment and price stability 
objectives. The review involved extensive outreach to a broad 
range of people and groups through a series of Fed Listens 
events.
    As described in the Monetary Policy Report, in August the 
Committee unanimously adopted its revised Statement on Longer-
Run Goals and Monetary Policy Strategy. Our revised statement 
shares many features with its predecessor. For example, we have 
not changed our 2-percent longer-run inflation goal. However, 
we did make some key changes. Regarding our employment goal, we 
emphasized that maximum employment is a broad and inclusive 
goal. This change reflects our appreciation for the benefits of 
a strong labor market, particularly for low- and moderate-
income communities. In addition, we state that our policy 
decisions will be informed by our, ``assessments of shortfalls 
of employment from its maximum level'', rather than by, 
``deviations from its maximum level.'' This change means that 
we will not tighten monetary policy solely in response to a 
strong labor market.
    Regarding our price stability goal, we state that we will 
seek to achieve inflation that averages 2 percent over time. 
This means that following periods when inflation has been 
running below 2 percent, appropriate monetary policy will 
likely aim to achieve inflation moderately above 2 percent for 
some time. With this change, we aim to keep longer-run 
inflation expectations well-anchored at our 2-percent goal. 
Well-anchored inflation expectations enhance our ability to 
meet both our employment and inflation goals, particularly in 
the current low-interest rate environment in which our main 
policy tool is likely to be more frequently constrained by the 
lower bound.
    We have implemented our new framework by forcefully 
deploying our policy tools. As noted in our January policy 
statement, we expect that it will be appropriate to maintain 
the current accommodative target range of the Federal funds 
rate until labor market conditions have reached a level 
consistent with the Committee's assessments of maximum 
employment, and inflation has risen to 2 percent and is on 
track to moderately exceed 2 percent for some time. In 
addition, we will continue to increase our holdings of Treasury 
securities and agency mortgage-backed securities, at least at 
their current pace, until substantial further progress has been 
made toward our goals. These purchases and the associated 
increase in the Federal Reserve's balance sheet have materially 
eased financial conditions and are providing substantial 
support to the economy. The economy is a long way from our 
employment inflation goals, and it is likely to take some time 
for substantial further progress to be achieved. We will 
continue to clearly communicate our assessment of progress 
toward our goals well in advance of any change in the pace of 
purchases.
    Since the onset of the pandemic, the Federal Reserve has 
been taking actions to support more directly the flow of credit 
in the economy, deploying our emergency lending powers to an 
unprecedented extent, enabled in large part by financial 
backing and support from Congress and the Treasury. Although 
the CARES Act facilities are no longer open to new activity, 
our other facilities remain in place. Finally, we understand 
that our actions affect households, businesses, and communities 
across the country. Everything we do is in service to our 
public mission. We are committed to using our full range of 
tools to support the economy and to help ensure that the 
recovery from this difficult period will be as robust as 
possible.
    Thank you. I look forward to your questions.
    [The prepared statement of Chairman Powell can be found on 
page 54 of the appendix.]
    Chairwoman Waters. Thank you, Chairman Powell. I now 
recognize myself for 5 minutes for questions.
    During our committee markup on February 10th, some members 
of our committee tried to suggest that further fiscal action 
was not needed because we are on a swift path to recovery. For 
example, it was noted that the unemployment rate in the United 
States is currently better than it had been for the first 5 
years of the Obama Administration. On that same day, you gave a 
speech that warned against this sort of top-line assessment of 
employment, noting that, ``Employment in January of this year 
was nearly 10 million below its February 2020 level, a greater 
shortfall than the worst of the Great Recession's aftermath.''
    Chair Powell, do you believe our economy is in a healthier 
position right now that it was in 2014, several years into the 
recovery from the Great Recession?
    Mr. Powell. I am reluctant to make that comparison without 
thinking about it further. I will just echo that we have 10 
million fewer people working on payroll jobs than we had just 1 
year ago today, and that the unemployment rate, the reported 
rate, is 6.3 percent, but if you include people who were in the 
labor force and indeed working in February, and a couple of 
other adjustments, you get to almost a 10-percent unemployment 
rate. So, there is a lot of slack in the labor market and a 
long way to go to maximum employment.
    Chairwoman Waters. Thank you. In that same February 10th 
speech, you mentioned that, ``Fully recognizing the benefits of 
a strong labor market will take continued support from both 
near-term policy and longer-run investment.'' Certainly, it 
will take longer-run investments to achieve a true, full 
employment economy that lifts workers' wages and finally closes 
the racial wealth gap. As Congress considers President Biden's 
American Rescue Plan, some of my colleagues have said we 
should, ``wait and see,'' before spending more. Chair Powell, 
does the economy need additional fiscal support from Congress 
right now? Also, how critical is it for Congress to make 
longer-run investments if we want to eliminate the racial 
wealth gap?
    Mr. Powell. What I was really saying, Madam Chairwoman, was 
that we have shown that, over the course of a long expansion, 
we can get to low levels of unemployment, and that the benefits 
to society, including particularly to low- to moderate-income 
people, are very substantial. We have shown that we can do 
that. But it is not really a great strategy to wait until the 
8th or 9th year of an expansion to get those benefits. To 
really improve through this cycle, what I was saying in that 
set of remarks was that it will take the private sector, and it 
will take investments from the public sector, frankly, in the 
workforce, education and training policies that support 
workforce participation. That is what I was really getting at 
there.
    Chairwoman Waters. Thank you for that response. And with 
that, I am going to yield back my time, and I am going to call 
on the ranking member of the committee, the gentleman from 
North Carolina, Mr. McHenry, who is now recognized for 5 
minutes.
    Mr. McHenry. Thank you, Madam Chairwoman. And, in fact, I 
think your labor market speech was a very important one for all 
of us to take note of, and this recovery is different than the 
recovery from the financial crisis. It took much longer for us 
to get to this rate of unemployment than it did post-financial 
crisis. And as I mentioned in my statement that the chairwoman 
of the committee was kind enough to quote from, the labor 
market now is better than it was in President Obama's first 
term of office, so these recoveries are different. Also, you 
had a broad-based recovery that took almost a decade to come 
about with the post-financial crisis, but right now you have 
segments of the economy, like you mentioned in your statement, 
Chair Powell, about hospitality, that are lagging because of 
State shutdowns. But in your testimony, you mentioned the Fed's 
exit strategy is contingent on meeting the Fed's goals for 
economic recovery. How close is the economy to meeting the 
Fed's goals, and what does that look like?
    Mr. Powell. What we have said is that we would be 
purchasing assets, at least at the current pace, until we see 
substantial further progress toward our goals. That is actual 
progress; that is not forecasted progress, so we would want to 
see that we moved. It is what it sounds like. We would like to 
see incoming actual data that show us moving closer to our 
goals, both for inflation and for employment, and that is what 
it will take. And I agree there is an element of judgment in 
that, but we will be communicating as clearly as possible and 
as far in advance as possible how we perceive the path of 
progress toward those goals.
    Mr. McHenry. Okay. Consistent with the mandate.
    Mr. Powell. Very much so.
    Mr. McHenry. What does the labor market look like when the 
Fed has achieved this goal?
    Mr. Powell. I think it is easier to say with liftoff; we 
have been very specific with liftoff. We have said in liftoff, 
we would need to see labor market conditions that are 
consistent with maximum inflation at 2 percent, and inflation 
is expected to move laterally above 2 percent for some time. 
Those are the conditions for liftoff, and they are quite 
specific. We haven't tried to be very specific about the pace 
of asset purchases.
    Mr. McHenry. Okay. Chair Powell, yesterday you also spoke 
about the digital dollar being a high priority for the Fed. I 
think this is a national security issue and an economic 
security issue for sure. You said you are committed to 
transparency to look into the digital Dollar. I think that is 
important. I think that is very important for our system of 
government, I think it is a very important thing for an open 
society, but let's get into a few specifics on that, if we can. 
What can the public expect in terms of learning the details of 
this project going forward, and are you able to share with us 
today what we can expect from the Fed this year, over the 
course of this year, with the Digital Dollar Project?
    Mr. Powell. Yes. This is going to be an important year, and 
this is going to going to be the year in which we engage with 
the public pretty actively, including some public events that 
we are working on, which I am not going to announce today, but 
there are things that we are working on. And the sense of this 
is not, ``Here are the decisions we have made, what do you guys 
think?'' It is going to be, ``These are the tradeoffs.'' There 
are both policy questions and technical questions that 
interrelate between those two, and they are challenging 
questions. And so, we are going to want to have a public 
dialogue about that with all of the interested constituencies, 
and that is the idea of what we are doing.
    In the meantime, we are working on the technical challenges 
and also collaborating with and sharing work with the other 
central banks around the world who are doing this. And 
depending on what we do, we could very well need legislative 
authorization for such a thing, but that isn't clear until we 
see which way we are going. But we will be engaging 
significantly with you and your colleagues on Capitol Hill as 
well.
    Mr. McHenry. I think the project is vital. I think it is 
vital for American competitiveness, but also there is a fear 
that some want to use the digital dollars as a way to kill 
private-sector innovation in our banking system, implementing 
modern monetary policy, modern monetary theory, for example, 
vis-a-vis Fed Accounts. What do you say to folks hoping to 
exploit the Digital Dollar Project in that way?
    Mr. Powell. One thing we need to be very mindful about is 
that we have a functioning financial system, and a banking 
system, and capital markets which intermediate between savers 
and borrowers, and they are the best markets and, I would say, 
the strongest banks in the world. We need to be careful with 
our design of the digital dollar that we don't create something 
that will undermine that very healthy market-based function. 
That is one thing for sure.
    Mr. McHenry. Okay. Final question here, you mentioned the 
labor markets. We talked about the labor markets. As far as the 
fiscal side of the house, what are what the things that we 
should be doing? What are the biggest challenges to getting 
people back to work?
    Mr. Powell. As you well know, unemployment and low activity 
is concentrated in that sector of the economy, in the service 
sector where people gather closely together: travel 
entertainment, leisure, hotels, those sorts of things. The 
single most important policy to getting those sectors reopened 
and getting people back to work, of course, is bringing the 
pandemic to a decisive end as soon as possible. And we are on 
the path to that, but we haven't done it yet, so I think it is 
important that we do that quite decisively this year.
    Mr. McHenry. Thank you, Chair Powell. Thank you for your 
leadership.
    Chairwoman Waters. The gentlewoman from New York, Ms. 
Velazquez, who is also the Chair of the House Committee on 
Small Business, is now recognized for 5 minutes.
    Ms. Velazquez. Thank you, Madam Chairwoman.
    Chairman Powell, I heard you speak about the changes in the 
FOMC's monetary policy framework in your opening statement. It 
is clear that the pandemic has had an outsized impact on women, 
minorities, and younger workers. How will the changes in the 
FOMC's monetary policy framework benefit workers in these 
groups?
    Mr. Powell. What we learned in the course of the last 
expansion was that we could have unemployment at historically 
low levels without seeing troubling inflation arise. So, we 
took that on board in creating our new framework, and as I 
mentioned in my remarks, that means that we won't tighten 
monetary policy just because of a strong labor market. We want 
to see either inflation moving up in a troubling way or other 
risks to achieving our goals, and that puts us in a place where 
we can have low levels of unemployment again. And when we get 
to those low levels, we see that they do benefit low- and 
moderate-income communities who tend to benefit earlier in the 
expansion. That, plus what we said about maximum employment 
being a broad inclusive goal, I think is what I would point to.
    Ms. Velazquez. Thank you. Chairman Powell, in May 2020, the 
OCC finalized a rule substantially revising the Community 
Reinvestment Act (CRA), which the Fed and the FDIC did not sign 
onto. In September 2020, the Fed proposed its own update to the 
CRA. With the change in the Administration, do you expect the 
Fed to re-engage with the OCC and the FDIC on CRA rulemaking, 
and do you think there is an opportunity for a harmonized role 
amongst all three agencies?
    Mr. Powell. I think there is an opportunity for a 
harmonized role among the three agencies, and we are engaged, 
have been engaged, and continue to be engaged with the FDIC and 
the OCC, and we are working on that very thing.
    Ms. Velazquez. Do you have a timeline?
    Mr. Powell. I think we are just getting started.
    Ms. Velazquez. Okay.
    Mr. Powell. There will be a new Comptroller, but, 
nonetheless, we are working on it. And, by the way, it will be 
one that has broad support among the community of intended 
beneficiaries, which was always the Fed's test and my test for 
what it would take for the Fed to support reform of CRA.
    Ms. Velazquez. I am glad to hear that, especially at this 
time when underserved communities, minority, and female 
businesses, and all that has been impacted by this pandemic, 
and CRA is a way to lift up communities of color particularly. 
Chairman Powell, last week Fed Governor Brainard gave a speech 
on the role of financial institutions in tackling the climate 
challenge. In her speech, she stated, ``Climate change is 
already imposing substantial economic costs on the economy, and 
it is projected to have a profound effect on the economy at 
home and abroad.'' Would you agree with her statement, and can 
you give some examples of how you see that to be true?
    Mr. Powell. I think climate change is a very important 
issue, and if you will allow me, I will start by saying that 
the nation's policy on climate change really needs to be set, 
in the first instance, by you, elected Representatives in the 
House and Senate, and then by the Administration through the 
agencies that Congress has created. Our role is really that of 
ensuring that we are using our powers to carry out our mandate 
in supervising financial institutions to make sure that they 
are resilient to all risks, including that of climate change. 
That is what we are doing.
    Ms. Velazquez. And can you explain the steps the Fed will 
be taking over the next 18 to 24 months to ensure that the 
financial system can deal with the future financial and 
economic risks posed by climate change?
    Mr. Powell. Yes. Right now, we are doing a great deal of 
outreach and research and consultation, and, by the way, the 
larger and medium-sized banks are doing the same thing. It is 
really time to do this work and to try to understand climate 
change is a longer-run issue to deal with, and you will see 
that the financial institutions themselves are very focused on 
understanding how it will, over time, affect their business 
model. We are looking at the same thing from the standpoint of 
a regulator and supervisor, so research and basic work to lay 
out a framework which will take some time, but it is time for 
us to do that.
    Ms. Velazquez. Thank you. I yield back.
    Chairwoman Waters. Thank you. The gentlewoman from 
Missouri, Mrs. Wagner, is now recognized for 5 minutes.
    Mrs. Wagner. Thank you, Madam Chairwoman, and Chairman 
Powell, it is good to see you again. Thank you for being here 
today. Thank you for all that you and the Fed have done during 
this unprecedented pandemic. Under the Fed's average inflation 
targeting, you are looking for inflation to be, ``moderately 
above 2 percent for some time'', to make up for undershooting 
inflation in the past. What does, ``moderately above 2 percent 
for some time'', mean specifically, and why do we believe this 
is achievable if the FOMC's 3-year projections for quite some 
time now have been forecasting inflation, in fact, of 2 percent 
or less?
    Mr. Powell. On the first part, what does ``moderately'' 
mean, we don't have a formula, and we are not going to have a 
formula. The sense of it, though, is that we want inflation to 
average 2 percent over time, and the reason we want that is 
that we want inflation expectations to be anchored right at 2 
percent and not somewhat below 2 percent, which is arguably the 
case now. That is really how we are looking at it. In terms of, 
can we get there, I am confident that we can and that we will, 
and we are committed to using our tools to achieve that.
    The 3-year timeframe is actually an arbitrary 3-year 
timeframe chosen by us, and we are just being honest about the 
challenge. We live in a time where there are significant 
disinflationary pressures around the world and where, 
essentially, all major advanced economy central banks have 
struggled to get to 2 percent. We believe we can do it. We 
believe we will do it. It may take more than 3 years, but we 
will update that. Every quarter, we update that assessment, and 
we will see how that goes.
    Mrs. Wagner. Thank you. Chairman Powell, I know you were 
asked a number of times by my colleagues in the Senate 
yesterday whether the Fed intends to extend the exclusion of 
low-risk assets, such as Treasuries and Reserve balances, from 
the supplementary leverage ratio. I strongly supported the 
agency's decision nearly a year ago to make this exclusion in 
recognition, I think, of the fact that thanks to receiving just 
an unprecedented amount of new deposits, largely as a result of 
the Fed's actions, that continues to put pressure on leveraged 
ratios. You indicated, sir, yesterday, that the Fed is still 
considering whether or not to provide an extension. Do you 
agree that the exclusion proved to be an important tool to 
preserve liquidity in the Treasury market?
    Chairman Powell. Yes, I do agree with that, but we are just 
looking at this. I don't really have anything for you on that 
decision, and I didn't have any yesterday, as you pointed out, 
so we are looking at that. We know when the deadline is, and we 
are working on that, and will come forth with something 
relatively soon.
    Mrs. Wagner. I hope it is relatively soon, Mr. Chairman, 
because, given that we are still considering a new stimulus and 
other accommodations to continue economic recovery, I am 
concerned, and I am wondering if you are concerned that 
arbitrarily removing the exclusion on March 31st could put 
additional pressure on the Treasury market? Making sure that 
the SLR is extended, I think, is very, very important as we 
continue this recovery, and, as I said, further stimulus 
actions are considered and put into law. March 31st is nearly 
upon us, Mr. Chairman.
    Mr. Powell. Yes, it is.
    Mrs. Wagner. Oh, come on. Surely you can talk to us a 
little bit more about how important that was over the past year 
in terms of our banking industry and to keep liquidity in the 
market, given the large number of deposits that were extended 
to our banking community.
    Mr. Powell. I am just going to say that we are having 
discussions on it right now internally here, and I really don't 
want to go any further than that. I'm sorry, but we are making 
a decision and we are considering it, and when we have a 
decision, we will come forward. I'm sorry.
    Mrs. Wagner. I respect that, and I look forward to the 
decision. And, Madam Chairwoman, I yield back. Thank you.
    Chairwoman Waters. Thank you. The gentleman from 
California, Mr. Sherman, who is also the Chair of our 
Subcommittee on Investor Protection, Entrepreneurship, and 
Capital Markets, is now recognized for 5 minutes.
    Mr. Sherman. Thank you. Mr. Chairman, it is good to hear 
about your Fed Listens events, but I assure you, your best Fed 
Listens event is right here today. You will not find 50 people 
in better touch and more representative of 320 million 
Americans. I have grown old serving on this committee, and I 
have seen your predecessors come here and Republicans attack 
them for what they regarded as a too-expansionary monetary 
policy, whether the expansionary system be the traditional or 
the relatively newfangled quantitative easing. It is good for 
me to live long enough to see that many of the Republicans are 
moving in our direction toward the need for a somewhat more 
expansionary monetary policy, and I would hope that you would 
be looking at 2\1/4\ percent rather than 2 percent as your 
target.
    I also commend you for the quantitative easing. It has 
allowed you to remit to the Federal Government $50 billion to 
$100 billion in each of the last several years. And so, those 
who criticize your big balance sheet had been unwilling to 
identify which taxes they would raise in order to make up for 
that lost revenue. Also, your quantitative-easing big-balance-
sheet approach is the only tool you have to influence long-term 
interest rates, which I think are much more important to our 
economy, since you have to borrow long term to build a factory 
or build a business. And I prefer monetary policy to an 
expansionary fiscal policy because all of your tools reduce the 
Federal deficit, and all of our tools increase the long-term 
Federal debt.
    I want to focus your attention on LIBOR. It now appears as 
if the LIBOR Index will continue to be published until June of 
2023. It is almost disappointing to get a reprieve in that it 
would reduce the pressure on us to actually solve this problem, 
but it does give us more time. And there is, of course, the 
Alternative Reference Rates Committee (ARRC), and we have 
legislation to facilitate how to deal with what will be $2 
trillion of existing contracts that don't have backup language. 
I wonder if you can confirm for me if, in your view, it is 
necessary to have Federal legislation to have a smooth 
transition after June 2023 when LIBOR is no longer published?
    Mr. Powell. Yes, we think it will be. As you know, many 
LIBOR contracts are going to run out before then, but there 
will be a hard tail, as we say, and we do think Federal 
legislation is the best answer.
    Mr. Sherman. And there are those who think that the private 
sector can just invent a synthetic LIBOR and that would solve 
the problem. Is that as good a solution as Federal legislation?
    Mr. Powell. No. Federal legislation creating a path for a 
backup would be the best solution, we think.
    Mr. Sherman. Thank you. Now, I want to move to something 
that we have talked about before and that some will regard as a 
small issue, and that is the system for avoiding wire fraud. We 
talked about this earlier this month, where usually it is 
somebody trying to buy a home for the first time ever and they 
will remit $10-, $20-, $30-,or $50,000 for their down payment. 
It is their life savings, and they are tricked into wiring the 
money to the wrong account number and they lose it forever. You 
are developing the new FedNow system, and your bureaucrats have 
told us that they don't want to engineer that system to avoid 
this tragedy that occurred, as I said, affecting $150 million 
just last year, that they don't want to do the really simple 
thing of just saying that when you remit money, you identify 
not only the account number you are sending it to, but the name 
of the person you are sending it to.
    And I know your bureaucrats will tell you they don't want 
to do it. I wonder whether you will go back to your agency and 
get personally involved and push them to avoid this tragedy? 
The people at the next Fed Listens session maybe 10 years from 
now would have lost their homes as a result of this. Can you 
commit to getting personally involved in having a system that 
will hopefully protect homeowners or home buyers?
    Mr. Powell. As you know, we have looked carefully at this 
and concluded that payee matching is not the best way to do it, 
and there are just problems in the U.S. system, but we have 
other ways to do it. I will be happy to go back and revisit 
that, though.
    Mr. Sherman. If there is another way, let me know what it 
is, because your staff just told me they don't want to do it. I 
yield back.
    Chairwoman Waters. The gentleman's time has expired. The 
gentleman from Oklahoma, Mr. Lucas, is now recognized for 5 
minutes.
    Mr. Lucas. Thank you, Madam Chairwoman. Chairman Powell, I 
have a tendency to focus on those things that affect my people 
back home up and down Main Street and across the 3rd District 
of Oklahoma. So, let's discuss for a moment, when you were last 
before the committee in June, you noted that the U.S. banking 
system has been a source of strength during the pandemic. The 
Fed's Monetary Policy Report released on February 19th 
reaffirmed this point, stating that, ``Institutions at the core 
of the financial services system remain resilient.'' Do you 
continue to believe that banks are a source of strength, and 
will you elaborate both on what that means for the economy and 
for banks' abilities to lend, yes, absorb losses potentially, 
too, and provide liquidity in distressed markets?
    Mr. Powell. Yes. As you know, we spent and the banks spent 
10 years in a strengthening process--higher capital, better 
risk management, higher liquidity, all of those things--and 
then we received a world historical-sized shock in the form of 
the pandemic. And I think essentially, close to a year into it, 
almost exactly a year into it, what we see so far is that our 
banks have held up quite well, and their capital, big banks' 
capital, has actually increased over the course of the last 
year, while they have also taken $100 billion-plus worth of 
reserves against losses. And so they are able to keep lending.
    At the beginning of the pandemic, they were very important 
because they did absorb that huge flow of deposits, and they 
made all of those loans as companies pulled down their lines of 
credit. Those were paid back early on, but at the very 
beginning, when it mattered a lot, they were a source of 
strength, so I think all that is right. We have to always 
continue to be vigilant on those things, but a first draft of 
history is that the banks are strong. And I would say the same 
for small and medium-sized banks; they have generally held up 
well. There are going to be issues, and as we come out of this, 
there are going to be businesses that fail and there will be 
losses, but it is quite different, a very, very different 
situation than we had after the global financial crisis.
    Mr. Lucas. Absolutely. And, Mr. Chairman, let's discuss for 
a moment a topic that is very important not only to me, but to 
my friends in the Majority on the Financial Services Committee. 
The national unbanked rate has been falling steadily for the 
past decade, and since last calculated in 2019, sets it at 
about 5.4 percent. Still, this represents more than 7 million 
U.S. households without a checking or savings account. 
Unfortunately, the COVID-19 pandemic is likely to contribute to 
an increase in the rate of unbanked households. Chairman 
Powell, what would you suggest to reduce the adverse impact on 
the unbanked and underbanked in the aftermath of the pandemic 
to ensure that no one is left out of the economic recovery?
    Mr. Powell. I think it is a serious problem to address. We 
tend to address it through our community affairs and efforts to 
make sure we have fair lending policies and things like that. I 
also think that there is more that Congress can do, I am sure, 
to ensure that people have education around financial matters. 
And the other piece of it is there are people at the lower end 
of the income spectrum who are living hand-to-mouth. We need a 
strong recovery, we need continued support for monetary policy, 
and we will be providing that as well.
    Mr. Lucas. One last question, Mr. Chairman, and it impacts 
the ability of every Main Street to function. According to the 
FDA, the United States administered more than 63 million doses 
of COVID-19 vaccine. Chairman Powell, can you expand on how 
important to the economic recovery or how dependent the 
recovery is on ramping up that manufacturing and distribution?
    Mr. Powell. Yes. The weakness we see in our economy now is 
unusually concentrated in a set of industries that involve 
people getting really close together--hotels, restaurants, 
travel, entertainment, all of those places. And that is 
millions of people who aren't working and businesses that may 
have been in business for generations going out of business. 
That is what it is, and the way to get after that is by 
successfully, decisively bringing the pandemic to an end as 
soon as possible. That is the single-best growth and economic- 
and prosperity-creating measure that any of us can undertake. 
And that is the vaccination, it is continuing to observe social 
distancing and wearing masks, and hopefully we are on that road 
now. And if we are, there are grounds for optimism in the 
second half of the year for the economy.
    Chairwoman Waters. The gentleman's time has expired. The 
gentleman from Texas, Mr. Green, who is also the Chair of our 
Subcommittee on Oversight and Investigations, is now recognized 
for 5 minutes.
    Mr. Green. Thank you very much, Madam Chairwoman, and I 
thank the witness for appearing. I am always honored to have 
him here before the committee. My question has to do with the 
State Small Business Credit Initiative. This is an initiative 
that was started under a Republican Administration. It has 
served us exceedingly well, and the chairwoman, with her 
insight and foresight, has expanded this program to make sure 
that it covers women and people of color to a greater extent.
    We are talking about having this initiative be funded with 
$10 billion, and this is in the COVID package. And this $10 
billion can drive up to $100 billion of private-sector 
investments into these small businesses. States would be 
required to submit a plan, as well as other jurisdictions, on 
how expeditiously these funds can be delivered to help small 
businesses respond to and recover from the pandemic. A plan to 
encourage the participation of Minority Depository Institutions 
(MDIs), as well as Community Development Financial Institutions 
(CDFIs), would also be a part of this. Mr. Chairman, my 
question to you is simply this, how important is it that small 
businesses receive these capital investments? They sometimes 
find it exceedingly difficult to acquire funds of the type that 
we have in this package. How important is it that these funds 
during this pandemic get to these small businesses?
    Mr. Powell. Small businesses are under a lot of pressure at 
the current time, more so than many of the larger businesses 
that had resources to get through this. I would say MDIs and 
CDFIs are very important channels for reaching them. It is not 
appropriate for me to take a position on this particular 
provision and its inclusion in legislation, but I would just 
say that it is important for small businesses, and you 
mentioned MDIs and CDFIs. As you know, we work very closely 
with those organizations and think highly of the contribution 
they make to our economy.
    Mr. Green. Yes, sir, and I concur with what you said about 
working closely with them. I happen to be aware of some of 
their good works, the community banks. As you know, I am very 
much concerned about them, and some of them are on the margins, 
and this type of assistance to some of these smaller banks can 
be a great help to them. I don't want you to comment on a 
specific bank or specific banks, but I am concerned about the 
need to maintain these institutions that have a niche. They 
have a clientele whose needs won't be met if they don't have 
these institutions that are in the communities. Have you found 
that it is good to have these institutions in these communities 
where the need is not always met?
    Mr. Powell. Yes. We think community banks are a very 
important part of the fabric of our society, and we see them 
under longer-term secular pressures. They have been declining, 
and we don't want to do anything that adds to that through 
regulatory burden, and actually we have a subcommittee. We have 
a community banker on the Board of Governors, and we try to do 
everything we can to not be part of the problem, because people 
are leaving small towns and moving to cities and things like 
that, and that is putting pressure on rural community banks. 
But overall, they know their communities, and we want them to 
operate safely and soundly and successfully in their 
communities.
    Mr. Green. Thank you very much. I have very little time 
left, so what I would like to do is simply acknowledge the 
chairwoman for helping us to get this $10 billion into the 
COVID package. Mrs. Beatty also helped us to modify it, along 
with one of my Republican colleagues, so that the very small 
businesses will get some help. There are small businesses and 
then there are very small businesses, and we don't want to 
leave any of them behind.
    Madam Chairwoman, I thank you very much for the opportunity 
to ask these questions, and I yield back.
    Chairwoman Waters. Thank you very much, and I appreciate 
your comments. I will now recognize the gentleman from Florida, 
Mr. Posey, for 5 minutes.
    Mr. Posey. Thank you very much, Madam Chairwoman. I am 
pleased that we have this opportunity to hear Chairman Powell's 
Semiannual Report on the State of Monetary Policy. We have all 
shared quite a year since the February 2020 hearing when the 
virus was just breaking over the horizon, and we continue to be 
motivated and preoccupied with this horrendous, unprecedented 
event.
    Through no fault of their own, our constituent families and 
their small businesses have experienced perhaps the worst 
economic downturn in our history and theirs. It was absolutely 
right to address the suffering of our workers and their 
families, and we can be proud of the bipartisan response in the 
public laws we have passed, such as the HEROES Act.
    We are now in a period of somewhat less consensus about the 
next thing to do. On the one hand, the Administration and 
others are saying that we need to go big on spending, and this 
week, the House is slated to vote on their $1.9 trillion big 
plan. Notably, the big plan spends money with a wide scope, 
and, of course, the money will likely all need to be borrowed. 
Others are saying that many sectors of the economy are doing 
well, but that in other sectors, like hotels, restaurants, and 
tourism, workers and businesses are still suffering. Thus, many 
people say that targeted relief will be a better approach and 
save us borrowing to the tune of $1.9 trillion, and I associate 
myself with the targeted approach, by the way.
    Mr. Chairman, I am wondering, you have been urging that 
monetary policy can't fully restore the economy, and you have 
made that clear today, and that fiscal policy must play an 
essential role. Just after the Federal Open Market Committee 
meeting on January 29, 2020, you said, ``The labor market 
continues to perform well. The labor market continues to be 
strong. We see strong job creation. We see low unemployment. 
Very importantly, we see labor force participation continuing 
to move up.'' Now, fiscal policy includes taxes as well as 
spending. Things looked really good in January of 2020, in 
fact, far better than, say, 4 years earlier.
    Given your knowledge of fiscal policy, did Fed research 
suggest that the reduction of personal taxes and corporate tax 
and reductions in regulation work to reduce unemployment to 
historic lows generally and among many diverse groups? 
[Inaudible] the answer here.
    Mr. Powell. The longest expansion in our recorded history 
actually began in 2009 and ended last year, as you point out, 
with the arrival of the pandemic. The labor market improved 
steadily and that gathered strength. Actually, the peak job 
creation year in that expansion was 2015. We did reach low 
levels of unemployment, and that includes, particularly, for 
minorities, and there was just a whole lot to like about where 
the labor market was last year. I will just say that many, many 
factors contributed to that long expansion, and I don't know of 
any way to unscramble the omelet on that.
    Mr. Posey. Thank you. Now, what does the effectiveness of 
fiscal policy of low-income and corporate taxes and the policy 
of constrained regulation that started in 2017 teach us about 
the potential effects of increasing taxes and regulation as we 
try to recover from the pandemic?
    Mr. Powell. It is not for me to comment on fiscal policy. 
We have a specific role and specific tools, and I am going to 
stick to that.
    Mr. Posey. So, you don't have any opinion on what lower 
taxes and less regulations do to help an economy recover from 
the pandemic?
    Mr. Powell. I think those are exactly the questions for 
elected officials. Those are right over home plate for you. You 
have given us a specific job--maximum employment and price 
stability--and we use our tools. And we don't get involved in 
what are political judgments around fiscal policy. That is 
really for you and the Administration.
    Mr. Posey. Okay. I just thought it was something that every 
person would have some opinion on one way or the other. I see 
my time has expired, Madam Chairwoman. I yield back. Thank you.
    Chairwoman Waters. Thank you very much. The gentleman from 
Missouri, Mr. Cleaver, who is also the Chair of our 
Subcommittee on Housing, Community Development, and Insurance, 
is now recognized for 5 minutes.
    We will move on if he is not available. The gentleman from 
Colorado, Mr. Perlmutter, who is also the Chair of our 
Subcommittee on Consumer Protection and Financial Institutions, 
is recognized for 5 minutes.
    Mr. Perlmutter. Thank you, Madam Chairwoman. Mr. Chairman, 
thanks for being here. And thanks for your service, especially 
during this past year.
    I am going to ask you about four different areas. The first 
is going to be on that supplemental leverage ratio, to see if I 
can get an answer out of you that Mrs. Wagner didn't. The 
second will be on State and local governments and support for 
them. The third will be on the bubble that you may see 
existing, and the fourth will be on credit cards. Hopefully, I 
can get to all of these.
    Last year, in April, the Federal Reserve and the FDIC eased 
capital requirements for financial institutions by allowing 
firms to exclude U.S. Treasuries and deposits held at the 
Federal Reserve from the supplementary leverage ratio (SLR). 
This was a welcome policy which helped stabilize the Treasury 
market and gave flexibility to financial institutions in a time 
of uncertainty. And I know, with respect to your answers to 
Mrs. Wagner as well as to the Senate, that you all are sort of 
deciding what you want to do in that area. But I am going to 
ask you a more general question. If regulators do not extend 
the SLR relief, do you think the additional capital 
requirements will have a meaningful effect on the bank's 
ability to lend into the recovery?
    Mr. Powell. I am just going to say again that if I start 
answering these questions and get pulled down that slope, you 
know where I am going to wind up. So, really, that is something 
that is under consideration right now and I am just going to 
have to leave it at that.
    Mr. Perlmutter. Okay. Let's take the flip side and see if I 
can get you to answer this. I know that a number of 
institutions are interested in expanding their dividend 
program. Is the Federal Reserve considering allowing banks to 
offer more dividends?
    Mr. Powell. We don't have a decision on that. That is 
another thing that we will be looking at as well. What has been 
happening is we have been restricting banks from share 
repurchases and dividends, and as a result of that, they have 
actually built capital. And as time goes on, we will be looking 
at that on a quarter-by-quarter basis, and that is coming up. 
It is not today's decision.
    Mr. Perlmutter. I know Mrs. Wagner is going to feel good 
that you didn't answer either one of us, so I appreciate that, 
and I am sure she does, too.
    Let's turn to State and local governments. On pages 24 and 
25 of your report, and it is Graphs 27 and 28, there appears to 
be a precipitous drop-off in revenues and taxes collected and 
employment at the State and local government levels. In the 
legislation that we are considering, there is substantial 
assistance to State and local governments. Is this one of the 
areas of the economy that the Fed has been concerned about?
    Mr. Powell. We were quite concerned at the beginning 
because of the example of the global financial crisis, where 
weak revenues really weighed on the recovery through some 
years. I am not going to comment directly on the proposal that 
is under consideration right now, right in front of you this 
week. What we see is that revenues have performed better than 
expected. They are about flat overall. In some States, they are 
down a lot, and in other States, they are actually up. So, we 
have a good picture of revenues. We have a picture of 
employment, and employment is down 1.3 million or so. A lot of 
that is education, which means people who work in schools, and 
that should be addressed by the reopening of the schools.
    The thing we don't have a great picture of, and you may be 
able to get it, is more the expenses. What are the COVID-
related expenses? It is a complicated picture, and there are 
differences across the States. States have very different 
positions on this, and I know it is a question you are 
considering and I am sure your experts are focused on all of 
these.
    Mr. Perlmutter. In Colorado, and looking at your report, 
obviously my State has a lot of leisure industry, tourism, and 
energy production, and it has hit us particularly hard in terms 
of employment and revenues.
    Do you see any bubbles that are of concern to you, whether 
it is stock valuations or real estate? Because on page 30--and 
I know my time is about to expire--you say that you see real 
estate prices are at all-time highs but vacancy rates are at 
some all-time highs as well.
    Mr. Powell. I see your time is actually up, according to my 
clock. But will I have time to answer this, Madam Chairwoman?
    Chairwoman Waters. You have 10 seconds.
    Mr. Perlmutter. Go ahead and answer.
    Mr. Powell. Okay. I can't answer that in 10 seconds. We 
have a broad framework for financial stability, one of the four 
pillars of which is asset prices. And there are some asset 
prices that are elevated by some measures, yes. Other aspects 
of the financial stability framework, leverage in the financial 
system is moderate, funding risk is moderate. I would say 
leveraging the non-financial system has gone up because of the 
pandemic. It's a very mixed picture.
    Mr. Perlmutter. I thank you for your answers. And I thank 
the Chair for the extra time. I yield back.
    Chairwoman Waters. Thank you. The gentleman from Missouri, 
Mr. Luetkemeyer, is now recognized for 5 minutes.
    Mr. Luetkemeyer. Thank you, Madam Chairwoman, and welcome, 
Chairman Powell. It's great to see you again, and thank you for 
your great leadership during the pandemic and this past year. 
It has been a trying time for all of us, and I think you have 
done a good job of steering the Fed through this storm, as the 
ranking member talked about a while ago.
    One of the things that is concerning to me is I saw an 
article in a recent paper here with regards to the greening of 
the banking system, and my good friend, Congressman Barr of 
Kentucky, headlined a letter to the Fed, and I was one of the 
other 45 Members who signed onto it, with regards to the Fed's 
including climate stuff into their stress tests.
    And while I understand the need for that, to an extent, it 
certainly is concerning for me, from the standpoint that in an 
article here, a gentleman by the name of Ike Brannon, who is an 
economist and president of Capital Policy Analytics, was 
talking about the stress test and he said that it is a long-
term goal of many who advocated that the Fed take this step, 
but he says, ``I think they have designs that go beyond climate 
change. Creating a system whereby the government can use its 
financial regulatory power to direct the economy away from 
businesses and industries it disapproves of is very much a goal 
of many Democrats in Congress and the administration.''
    Mr. Chairman, that sounds an awful lot like Operation Choke 
Point to me. Operation Choke Point was something that we put 
the dagger in the heart of several years ago, and to resurrect 
that, to use climate change as an excuse to go after businesses 
who are doing illegal business in an illegal way, producing 
products and services we need as an economy, is wrong. And I am 
just wondering where you stand on that?
    Mr. Chairman?
    Mr. Powell. Sorry. First, let me say that the climate 
stress scenarios are completely different from the stress 
tests. It is not the same thing at all. But you really asked 
about a different question, sorry, which was--what was the 
question you asked?
    Mr. Luetkemeyer. Basically, it is about how you are 
weaponizing the regulatory system to do choke points on banks 
that do not necessarily comply with what your climate agenda 
may be.
    Mr. Powell. We are not climate policymakers. Climate 
policymakers are democratically elected people and those they 
delegate that authority to. So, we are not thinking of it that 
way. As you know, as an institution, we have had a long-held 
reluctance, resistance, and unwillingness, really, to engage in 
the allocation of credit. We think that is for the private 
sector, and if Congress wants to allocate credit in particular 
ways, that is fine. We don't want to get involved in that, and 
it is not something we are looking to do.
    What we are doing is--go ahead. I will let you go.
    Mr. Luetkemeyer. I would just make the point that we found, 
during the Obama-Biden Administration, that Operation Choke 
Point was alive and well. It was instituted by them, it was 
carried out by them, and we tried to get rid of it during this 
past Administration. So, it is something that is there. It is 
something that we talked about a lot, but let me move on.
    With regards to the Executive Orders that are coming out of 
the Administration right now, they are very concerning to me 
from the standpoint that by taking one of the Executive Orders 
off the books that President Trump put in place, take two rules 
off the books for every one that he puts on, it is a signal to 
me that look out, here come the rules and regulations. And 
another one that they took off the books was one with regards 
to guidance, which is extremely important to me. The Financial 
Stability Oversight Council (FSOC), of which you are a member, 
came out and supported the overall rule of not enforcing 
guidance and had a policy-wide FSOC policy with regards to 
enforcement of that guidance. The Administration came out with 
an Executive Order that said they are going to enforce guidance 
across the entire Administration. Now that Executive Order has 
been rescinded as well.
    My question to you is, do you see yourself relaxing some of 
the constraints that were in place as a result of the rule with 
regards to guidance? Is this something you are thinking about, 
or are you going to continue to comply with the rule that says 
you are not going to enforce guidance?
    Mr. Powell. We do not enforce guidance, and that is not 
something we are changing.
    Mr. Luetkemeyer. Okay. It is concerning to me in that 
respect because it is something that I think we have worked 
hard to push out, and now we have a new regulator at the 
Consumer Financial Protection Bureau (CFPB), who looks like 
Richard Cordray 2.0, but we will wait and see once that comes 
out.
    Chairwoman Waters. Thank you. The gentleman from Missouri, 
Mr. Cleaver, who is also the Chair of our Subcommittee on 
Housing, Community Development, and Insurance, is now 
recognized for 5 minutes.
    Mr. Cleaver. Thank you, Madam Chairwoman, and thank you for 
this hearing. I look forward to this every year.
    Mr. Chairman, thank you for being with us today, and 
although I want to do the majority of my discussion with you 
about CRA, I have to go to this New York Times article and ask, 
what is your response to the article, which essentially is 
suggesting that particularly as it relates to economies, that 
African Americans are not even represented at the level they 
are in any other particular area? I think the quote was, in the 
article, ``Black people are less represented within the Fed 
than they are in the field, as a whole.''
    Can you give us your take on the article? Is it accurate? 
Is it fair? What do you think?
    Mr. Powell. I am not the one to judge whether it is 
accurate or fair. It is not whether it is fair. I would say 
that we are not where we want to be on this. We do work hard at 
it. It is something that I am personally committed to, and all 
of the leadership of the Fed, and the whole Fed, is very 
focused on strengthening our workforce diversity. We are out 
there aggressively recruiting, encouraging young minority kids 
to get interested in economics. I do that. I meet with people 
every year on that. Also, we go to Historically Black and 
Hispanic Colleges, and when we find candidates, we recruit them 
hard.
    It is challenging, and I would just say we are doing a lot, 
and I would be happy to come up and share it with you in a lot 
of detail. But the results are not where we would like them to 
be, and we are wide open to ideas and suggestions, as well, and 
we will just keep working on it, and believe me, we are working 
hard at it.
    Mr. Cleaver. I appreciate your candor on that, and I know 
the Kansas City Fed, for example, annually, they were bringing 
up Black students from Kansas City to Washington, trying to 
give them this experience in hopes that some of them would 
eventually want to do this. And I don't think there has been 
any intentionality on your part. I am just trying to figure out 
what we can do with you to be helpful, and maybe we could talk 
about that at a later point.
    I am very concerned about the CRA issue. It came about in 
1977, I think, or somewhere around that time. The initial 
charge, of course, was that the litigant institutions, banking 
institutions, were not giving attention to certain areas of the 
city, and they were not investing, and in some cases not even 
depositing in those areas.
    We have CRA right now. But I am having difficulty, and I 
intended to talk to the Chair about this earlier and I didn't 
do it. I am not sure that I can put my fingers on CRA projects, 
or what they are doing in my local community. Maybe they are 
more visible elsewhere. Are you convinced that CRA is where it 
ought to be, or should we have some 21st Century changes in 
CRA, because maybe, as our Chair has said, and I say it 
wherever I go, one of the issues we are having in that area is 
lack of affordable housing. And so, maybe it is time to look at 
a new way in which we can do CRA, where it would be more 
effective, and more visible.
    Mr. Powell. We place a very high priority on CRA. We think 
it is an incredibly important law, and we want it to be as 
effective as it can possibly be. And that is really what is 
behind the effort that we put into our proposal. We took a 
tremendous amount of input from the groups who were intended to 
benefit from it, but also from the financial institutions, who 
were also eager to make their communities better. That is very 
much the spirit in which we approached this project. If you 
have particular ideas, we would love to hear them, though.
    Mr. Cleaver. Regulatory is just having a coordinated 
approach on CRA, and maybe that is something that we ought to 
talk about when we have the time, because I think my time is 
running out.
    Madam Chairwoman, thank you very much.
    Chairwoman Waters. Thank you very much. The gentleman from 
Michigan, Mr. Huizenga, is now recognized for 5 minutes.
    Mr. Huizenga. Thank you, Madam Chairwoman, and Mr. 
Chairman, I am glad you are here. I want to do a quick, just 
sort of technical check. There was a Washington Post article, 
and a number of other articles, talking about your time 
yesterday at the Senate. You talked about the 6.3-percent 
January unemployment, but that it is closer to 10 percent. Are 
you talking about the U-6 number that is typically published by 
Department of Labor?
    Mr. Powell. No, I wasn't, although it is not dissimilar. I 
was really saying that if you haven't looked for a job in the 
last 4 weeks, then you are not considered unemployed. You are 
considered out of the labor force. A whole bunch of people, a 
couple million people dropped out of the labor force who were 
actually working, and they are not counted as unemployed. But I 
am saying for this exercise, we should think of them as 
unemployed. They don't want to come back in.
    Mr. Huizenga. Which I talked about extensively during the 
recovery. You didn't need to look at the unemployment level. 
You needed to look at the U-6 number that the Department of 
Labor publishes.
    Mr. Powell. Same idea.
    Mr. Huizenga. Okay. I think it has been explored, and you 
have acknowledged that there is a completely uneven recovery 
happening in the economy. You and I have had a chance to talk 
about this in person as well. My district, which is an 
agricultural producer--I am home to Gerber Baby Foods, I have 
the Heinz pickle plant, I have Tyson Foods, I have a number of 
specialty crops, blueberries, pickles, asparagus, et cetera--we 
are heavily agriculture but we are also a heavy manufacturing 
district. But the third leg of our economic stool, throughout 
Michigan but especially concentrated in my district, is in that 
hospitality and tourism area. Housing fully recovered, as you 
had said. Manufacturing, at least in our area, especially 
automotive, office furniture, those types of things, mining and 
other manufacturing, are very, very strong.
    What we are seeing, though, is a desperation in that 
hospitality area. And I guess it begs the question of whether 
the economy is actually in crisis, writ large, or do we have 
pockets of crisis within a reasonably healthy economy. I will 
give you a quick second to answer that, and then I want to move 
on to the real estate question that my friend, Mr. Perlmutter, 
was talking about, and I want to explore that a little bit 
more.
    Mr. Powell. The losses are concentrated in those industries 
that we talked about, that you mentioned. It is also the case 
that a number of other industries are short of where they would 
be if there had not been a pandemic. So, there is an amount of 
slack around, but it is really concentrated in those 
industries, which, by the way, are a big chunk of people. There 
are 10 million fewer people working, so it is a big number.
    Mr. Huizenga. I will note that in Michigan, we have 25-
percent occupancy allowed for a restaurant, for example. 
Theaters are very sparsely populated. You can't do those types 
of things. At some point or another, this isn't a Federal 
issue. It is a local and State issue as to allowing those 
concentrations of people, as you know.
    Can you elaborate a little bit more on what is happening in 
that commercial real estate space especially? We are seeing 
very strong residential but commercial spaces, that Mr. 
Perlmutter was going after.
    Mr. Powell. Significant challenges certainly for hotels, 
clearly, but also for offices. And the question is going to be, 
how quickly can we get the pandemic over with and find out what 
equilibrium demand is going to be after that? People will still 
be staying at hotels. They will be traveling. But office space, 
certainly in major cities--there may be more commuting. We 
don't know.
    Mr. Huizenga. I think there are going to be more hiccups 
within that business space, business traveling as well as what 
work is going to look like.
    And I have just a minute here, but one of the things I 
guess I am getting at is there is a concern a lot of us have 
with this additional stimulus that is going to be getting put 
into the economy, certainly the stimulus that the Fed has been 
providing. I want to know, is there a risk of overheating the 
economy writ large by using these broad monetary tools and 
others to address underperformance in select areas such as 
hospitality and some of these more concentrated? In other 
words, are we creating a bubble in some of these other areas?
    Mr. Powell. Our tools work in the aggregate, as you know, 
at the economy-wide level, and I would just say that we do 
expect inflation to move up, both because of base effects, as I 
discussed yesterday, and also because we could have a surge in 
spending as the economy reopens. We don't expect that to be a 
persistent, longer-term force, so while you could see prices 
move up, that is a different thing from persistent high 
inflation, which we do not expect. And if we do get it, then we 
have the tools to deal with it, and we will use them.
    Chairwoman Waters. The gentleman's time has expired. The 
gentleman from Connecticut, Mr. Himes, who is also the Chair of 
our Subcommittee on National Security, International 
Development and Monetary Policy, is now recognized for 5 
minutes.
    Mr. Himes. Thank you, Madam Chairwoman, and thank you, 
Chairman Powell. As you have noticed, we have a robust debate 
going on around here about a major fiscal package. I am 
certainly influenced by what I saw 10 years ago, when our 
fiscal response to another financial crisis was, in my opinion, 
deeply inadequate. I also believe that when thousands of 
Americans are dying every week still, it is far better to risk 
doing too much than to risk doing too little.
    Nonetheless, the concerns that are being raised about 
inflation, I think are valid, and need to be considered. I 
remember the early 1980s, late 1970s, when inflation destroyed 
the savings of the middle class and reduced confidence in the 
economy, and it was very, very painful getting out of that.
    My question for you, Mr. Chairman, is, do you believe that 
there is some combination of expansionary fiscal and monetary 
policy that could lead to inflation? And I have two very 
specific questions: What, to you, are the leading indicators of 
that, and the other specific question is, is there some 
combination of challenge supply chains and surging demand that 
leads to an unhealthy level of inflationary pressure, and are 
you seeing any of those indicators at concerning levels at the 
moment?
    Mr. Powell. We know that inflation dynamics evolve over 
time, but they don't tend to change overnight. And I remember 
well. I was in college during the 1970s. I remember well high 
inflation and this feeling of powerlessness on the part of 
anyone to deal with it, until finally Paul Volcker did exactly 
that. And we have been in a low-inflation, dis-inflationary 
mode ever since.
    What I see is an economy where there is still a great deal 
of slack. I see the prospect of really significant progress as 
we put the pandemic behind us. As we see that data, we have in 
place guidance that tells markets clearly when we will begin to 
taper asset purchases and when we will begin to raise interest 
rates, in that case, when the expansion is very far advanced. 
So, we have our tools, we have them in place, and we think that 
this is the appropriate policy stance.
    As I mentioned, inflation is something I remember well, and 
I am very familiar with the history of the 1960s--
    Mr. Himes. Mr. Chairman, sorry to interrupt, but my 
question is more about--I know where you are today, but I am 
curious about what you consider the leading indicators, and in 
particular, whether you are concerned about supply chains, 
because, of course, they are a challenge?
    Mr. Powell. Things like supply chains, unless they are 
permanently challenged, there could be a--take an example of 
the chips issue, the microchips issue right now. The automobile 
industry is having a hard time getting them. So, this is a 
significant economic issue, and if there is a shortage of cars, 
then prices of cars might go up. That doesn't necessarily lead 
to inflation, because inflation is a process that repeats 
itself year on year on year. As we get back up to full economic 
activity, you could hit supply chain constraints along the way, 
but that doesn't necessarily mean you will have a higher 
inflationary process, if the Fed maintains its credibility and 
if inflation expectations remain anchored, which they weren't 
in the 1960s.
    Mr. Himes. Thanks, Mr. Chairman. I have one more question, 
again sort of rooted in the experience of 10 years ago. As 
somebody who was closely involved in the Dodd-Frank Act, it is 
very gratifying to hear you say--I think you said that the 
banking sector has held up quite well. I remember, 11 years 
ago, we were promised by some that Dodd-Frank was going to 
crush the American capital markets. We were promised by others 
that at the first sign of a stiff breeze, it would all come 
apart. And, son of a gun, it held up pretty well.
    But I am always concerned about the risk that we don't see. 
Getting off of monetary policy, issuance volume in the high 
yield market, and I know these are a little bit outside of the 
banking sector, but in my remaining 40 seconds, give me a sense 
of what is concerning to you that could challenge the stability 
of the financial sector?
    Mr. Powell. Our policy is accommodative because 
unemployment is high and the labor market is far from maximum 
employment. We think that is appropriate. We do monitor all of 
those things carefully. It is true that some asset prices are 
elevated, by some measures. It is true that overall asset 
prices, I would say, are somewhat elevated. At the same time, 
we have a very resilient banking system and we have spent a lot 
of time making the capital markets more resilient as well.
    Overall, we are in a situation where monetary policy is 
working through financial conditions to support economic 
activity, and that is an appropriate thing.
    Mr. Himes. Thank you, Madam Chairwoman.
    Chairwoman Waters. The gentleman's time has expired. The 
gentleman from Ohio, Mr. Stivers, is now recognized for 5 
minutes.
    Mr. Stivers. Thank you, Madam Chairwoman. I appreciate it. 
Chairman Powell, thank you very much for being here today. I 
want to thank you for your steady hand of leadership during 
these very turbulent times. I also want to thank you for being 
the most accessible Federal Reserve Chair in the last decade. 
During my time here, through three Federal Reserve Chairs, you 
have been absolutely the most accessible to us as policymakers, 
and I really appreciate that.
    I want to acknowledge your comments earlier about an 
appropriate direction forward for vaccinations, to ensure we 
can open up the economy, and job training if we want to create 
jobs and get people to your maximum employment target. I am not 
going to have you comment on whether the current COVID response 
bill focuses on that, because I know you don't want to be put 
in the middle of that. But I think it is fair to say anybody 
who researches it will see that the job training money rounds 
to zero, and there is not enough focus on vaccinations, in my 
opinion.
    I do want to move to something that I think you can and 
will be willing to talk about, and that is in the hospitality, 
travel, and entertainment industries, do you believe banks in 
the capital markets are currently able to serve their capital 
needs with the regulatory flexibility you have given them?
    Mr. Powell. Yes, I do believe that.
    Mr. Stivers. Okay. Thank you. I think that one of the 
problems, though, let me ask, is when they are so shuttered and 
their capacity is reduced, are banks and the capital markets as 
willing to give them money?
    Mr. Powell. Yes, I think what we see is banks are leaning 
in to businesses. They are working with their customers and 
leaning into businesses that look like they have good 
prospects. You get to a place, though, with some of the 
companies that are really under a lot of pressure where they 
may be having a hard time getting funding.
    Mr. Stivers. Right. I understand. And I think that speaks 
to the fact that as policymakers, we have been very reluctant 
to do targeted relief to specific industries. But given the 
uncertain recovery--and I am not going to ask you to comment on 
this, because I think it is a question for policymakers--I do 
believe that we should focus a little more on some targeted 
relief to some of those industries. That is why I am a sponsor 
of the Restaurant Act and this new Gym Act, and some other 
things, in the hospitality, travel, and entertainment 
industries, and I think that would be smart of policymakers, 
moving forward.
    I do want to allow you, because I don't think I have heard 
you say it, to comment on the Federal Reserve's independence. 
Just remind us whether you work for any President or you are 
independent.
    Mr. Powell. We have certain legal independence, and we 
think that has served the public well, and we are able to make 
decisions without considering politics, and our lives don't 
change when elections happen, until, of course, the President 
has the power of appointment.
    Mr. Stivers. Thank you.
    I do want to quickly move to digital currency. You had a 
great interaction with Ranking Member McHenry about some of 
your concerns on the policy questions. You brought it up, and I 
just want to quickly speak to the potential dis-intermediation 
that could occur with the digital dollar. While I think it is 
important to keep the dollar the reserve currency of the world, 
I think we need to take a special look at dis-intermediation, 
and I want to just remind you of something I showed you a few 
hearings ago, of one of the last bank notes from the Citizens 
National Bank of Ripley, in 1929, that my grandfather had to 
sign. I think our financial institutions might be able to play 
a role in a digital dollar, and I just want you to think 
through those things. I don't want to ask you to comment on it 
without thinking about it, but I hope you are committed to 
working with our financial institutions.
    Mr. Powell. Yes, for sure.
    Mr. Stivers. Thank you. And the final thing I want to talk 
about is something Mr. Cleaver talked about, and I want to take 
a step back and not just focus on CRA but focus on the gap in 
home ownership, the racial gap in home ownership. And I am 
curious if the Federal Reserve is paying attention to that as 
an issue as opposed to the four corners of a CRA document, but 
the issues related to reducing the racial gap in home 
ownership.
    I know Mr. Cleaver and I, on the Housing and Insurance 
Subcommittee, are very focused on that and trying to work on 
some things to build a sustainable model. The last time we did 
this, under Barney Frank, we created subprime lending that 
ultimately blew up the financial markets. I want to make sure 
that when we do it, we create a sustainable model that can 
bridge that gap and bring up the minority home ownership rates 
significantly. Is that something the Fed is willing to work on 
with us?
    Mr. Powell. We would be happy to look at that. Our 
principal role there is to ensure, using our tools, that that 
gap is not a function of discrimination, and it will be to some 
extent. But we use our tools to go after lending discrimination 
and try to minimize that.
    Mr. Stivers. Thanks. Thanks for your great leadership. I 
yield back my time.
    Chairwoman Waters. Thank you. The gentlewoman from Ohio, 
Mrs. Beatty, who is also the Chair of our Subcommittee on 
Diversity and Inclusion, is now recognized for 5 minutes.
    Mrs. Beatty. Thank you, Madam Chairwoman, and thank you to 
Chairman Powell for being here today and providing us with your 
testimony on the state of monetary policy. I want to start by 
revisiting a topic that I have raised with you several times 
over your tenure, and that is, of course, diversity at the 
Federal level. Certainly, this is a topic that I think you can 
respond to and it won't have an effect on the economy, as maybe 
some of the other questions.
    Last month, The New York Times released an article 
entitled, ``Why Are There So Few Black Economists at the 
Fed?'', which found that of the 417 economists who are employed 
by the Board of Governors, only 2 were Black--that is 2 out of 
417, or 0.5 percent. While I understand that many will say that 
something is difficult to find or difficult to hire, just keep 
in mind, 2 out of 417.
    I also understand that we need to do more to increase the 
numbers of Black Ph.D. economists in general, because they only 
make up 3 to 4 percent of the population, and the Federal 
Reserve's representation is still lower than this number. 
Further, the Reserve Banks around the country only have about 
1.3 percent economists who are Black.
    My question to you, Chairman Powell is--and let me just 
say, for the record, I appreciate you contacting me, meeting 
with me, and always making great strides with the Office of 
Minority and Women Inclusion (OMWI) and other things that you 
have done in this area--are there any concrete steps that the 
Federal Reserve can take, or that you are taking, to increase 
the number of Black economists within its ranks? And do you 
believe that the Federal Reserve's role as the nation's central 
bank has a role to play in encouraging diversity and inclusion, 
and the word, ``equity'', is very important to me, in the 
economic field, in general?
    Mr. Powell. I think we do have a role. We are a very larger 
hirer, I think by some measures the largest hirer of economists 
in the United States, including the 12 Reserve Banks and the 
Board of Governors. So, we are an important factor, and as you 
know, diversity is a high priority for me, and for my 
colleagues, and for our staff.
    What we have been doing is recruiting very aggressively, 
and going to not just the old, traditional schools, but also 
Historically Black Colleges and Universities, and Hispanic ones 
as well, and recruiting hard when we find appropriate 
candidates. We also have, at different levels, an internship 
program, and we do the same thing there. Sort of more from an 
upstream perspective, we also want to increase the supply, 
because there is a fairly limited supply. We don't seem to be 
getting our share, and we don't know exactly why that is but we 
are looking into it.
    So, we are doing everything we can. Nobody here is 
comfortable with these numbers, and we are wide open to 
suggestions on how to do better.
    Mrs. Beatty. Thank you. I have one last question, if I have 
time. Over the course of next year, tens, and perhaps hundreds 
of millions of Americans will be receiving the vaccinations and 
will finally be hopefully placing this pandemic behind us. 
Looking out to an economic environment post-pandemic, in 2022, 
let's say, what do you believe will be the potential lagging 
economic impacts of this pandemic? Who and what should the 
Congress be focusing on to address this from an economic 
standpoint?
    Mr. Powell. Interesting. The parts of the economy that are 
not open right now, or not fully opened, will open up, and 
people will go back to work. But what we are going to find, 
based on some of the surveys we have heard about, is that not 
all of those jobs are going to come back, because people have 
started to implement automation and things like that. These are 
service sector jobs, and that has been an ongoing process. It 
will have been accelerated. So many of those people may find it 
hard to get back to work, and I think they are going to need 
further support, so I would be looking at that, over time, as 
the livelihood that they had in the service sector may not be 
easy to replace. There just may not be enough jobs. There is 
going to be a need for training and replacement support in the 
meantime, so that these people can hang onto the lives that 
they have had and find new work.
    Mrs. Beatty. Thank you, and I yield back.
    Chairwoman Waters. Thank you very much. The gentleman from 
Kentucky, Mr. Barr, is now recognized for 5 minutes.
    Mr. Barr. Chairman Powell, thank you for your dependable 
leadership, especially during the pandemic, and, once again, we 
appreciate your accessibility to Members of Congress, 
especially during this tumultuous time in our economy.
    As Congressman Luetkemeyer pointed out, in December I led a 
letter to you with 46 of my House Republican colleagues, 
outlining the methodological challenges with injecting climate 
change scenarios into supervisory stress tests. We urged you to 
take a measured, thoughtful, data-driven approach as you study 
climate impacts, while some on the other side have urged the 
Fed to stray outside its mandate and take a more active role in 
fighting climate change.
    In your response, you stated that, ``Congress has entrusted 
the job of directly addressing climate risks to a number of 
Federal agencies, not including the Federal Reserve'', and that 
you will consider climate impacts only when doing so falls 
within our congressionally directed mandates. In January, the 
Fed announced the creation of the Supervision Climate Committee 
(SCC), led by Kevin Stiroh. In a press release about the Stiroh 
announcement, New York Fed President Williams said, ``Climate 
change has become one of the major challenges we face which 
impacts all aspects of the Fed's mission.'' President Williams' 
statement seems contrary to the stated board position from your 
letter and your response to me. Can you please clarify his 
statement and how the new SCC fits within the Board's limited 
mandate?
    Mr. Powell. I am not familiar with the context of that 
statement. I will just say, though, that we do see the job of 
the Supervision Climate Committee and our job, frankly, is to 
ensure that the institutions that we regulate and supervise are 
resilient to all the risks they face, and that includes climate 
risk. That is a conversation that we are having, and by the 
way, all of the large and medium-sized financial institutions 
are already having that conversation, too.
    Mr. Barr. Let's drill down a little bit about how 
expansively the Fed would get into this, because, as you know, 
the Fed recently joined as a member of the Network for the 
Greening of the Financial System (NGFS). The NGFS has made some 
recommendations that, if implemented in the United States, 
could have harmful effects on U.S. banks and the businesses 
they serve. Our letter asked that you not import any NGFS 
standards that would harm the financial system or U.S. 
businesses, and in your response you committed to this.
    How do you plan to evaluate NGFS proposals through the lens 
of upholding this commitment?
    Mr. Powell. As I said in the letter, my colleague and I 
said in the letter that we are not going to import anything 
into the United States that we don't think is appropriate for 
the betterment and support and safety and soundness of the U.S. 
financial system. But we are actually at a much earlier stage 
than any of that conversation would suggest. We are really 
engaged in outreach and in thinking about frameworks. We are 
talking to these institutions. We are talking to supervisory 
institutions here in the United States and around the world. 
So, we are at an earlier stage.
    Mr. Barr. And that is good to hear, but I do worry that 
injecting climate risk scenarios into stress tests could 
perpetuate the trend of de-banking legally operating businesses 
like fossil fuels. In your letter, you commit that the Fed will 
not dictate what lawful industries regulated firms can serve. 
Even without a directive from the Fed, climate scenarios and 
stress tests may compel firms to de-bank certain industries to 
satisfy the spirit of the tests.
    My comment here is that limiting capital allocations to 
specific industries may itself have implications on financial 
stability and economic growth through lost jobs, higher energy 
prices, and compromised energy security.
    And my final point here, I would like the Fed to keep in 
mind that choking off capital to fossil energy will not only 
produce the kind of reliability challenges we saw last week in 
Texas; it will undermine the Fed's maximum employment mandate.
    Final question on inflation, yesterday, you said you 
weren't concerned about the threat of inflation, but some of 
the economic indicators are blinking warning lights for me--
high asset prices, rapidly rising bond yields, elevated 
commodity process, historically high year-over-year increase in 
the money supply as measured by M2--and these are on top of the 
unprecedented monetary and fiscal stimulus enacted last year 
and the $2 trillion fiscal blowout this week. Within the bounds 
of the Fed's new monetary policy framework for a long-term 
running average target for inflation, how high are you willing 
to let inflation get, and for how long, before you step in?
    Mr. Powell. We don't have a formula in mind. I would just 
say that, as I said earlier, we do expect inflation to move up, 
both because of some technical calculation reasons called base 
effects, but also because we will have a surge in spending, 
perhaps later this year. We don't expect that will be 
particularly large, or even more, that it will be persistent, 
because it is in the nature of a one-time [inaudible], whereas 
inflation is a process that gets going over a period of years. 
And we don't think, and we are committed to the idea that it 
will not become a persistent thing. It is ultimately the 
credibility of the Fed and our commitment to our price 
stability mandate that holds inflation where it is. We have not 
changed that.
    Mr. Barr. Thank you for monitoring that closely. I believe 
my time has expired, and I yield back.
    Chairwoman Waters. Thank you. The gentleman from Florida, 
Mr. Lawson, is now recognized for 5 minutes.
    Mr. Lawson?
    Mr. Lawson. Can you hear me?
    Chairwoman Waters. Yes. I can hear you.
    Mr. Lawson. Okay. Thank you very much. Thank you, Madam 
Chairwoman, for calling this hearing. The Federal Reserve 
warned of a significant rise in business bankruptcies and steep 
drops in commercial real estate prices in a report published on 
Friday. Commercial real estate, which I have a great deal of 
interest in, might be high again after the pandemic. Some 
economists say an increase in people working from home could 
result in less demand for office space, while stepped-up online 
purchases could force more shutdowns of brick-and-mortar retail 
and additional vacancies at shopping centers.
    My question to you, sir, is, what is the Federal Reserve 
plan for commercial real estate?
    Mr. Powell. We don't have a plan specifically for 
commercial real estate. I will say that we do see a number of 
sectors of commercial real estate that are under pressure, as 
you suggest, particularly offices, hotels, things like that, 
which are directly affected by the pandemic. And the best thing 
that can happen for the commercial real estate sector is for 
the economy to get back to full operating status, by which I 
mean get the pandemic behind us.
    Mr. Lawson. Okay. And there has been a lot of interest, 
even last year, in this particular situation, especially as it 
relates to hotels, the number of people who have been laid off 
in that industry, which is significantly higher in that 
particular area than maybe it is in bailing out the airline 
industry. Do you see any similarity in the retail industry as 
related to the airline industry that we bailed out?
    Mr. Powell. Do I see a similarity between the retail 
industry--those decisions are not decisions for us. That was a 
decision made by Congress and the Administration as to the 
provision of the particular funding for airlines. We are not 
part of that discussion.
    Mr. Lawson. Okay. Thank you. It has been suggested by some 
that all of our challenges with unemployment, homelessness, and 
poverty will be solved if we simply lift local restrictions and 
open up our economy. But since the beginning of this crisis, 
you have stressed that the path of the economy continues to 
depend significantly on the course of the virus. Will you 
please elaborate on why this is the case, and will the economy 
fully recover so people don't feel safe and comfortable that 
the virus is contained?
    Mr. Powell. Yes, I will. The big parts of the economy that 
are not operating at full capacity are the ones that are 
affected directly by COVID. The rest of the economy has largely 
recovered, or even fully recovered. But that part of the 
economy has not, and that is travel and leisure, hotels, 
entertainment, all of those things. What those sectors really 
need is an end to the pandemic, and people will then become 
confident again that it is okay to stay in hotels, okay to go 
on vacations, okay to go to bars and restaurants. I frankly 
think that will take some time. And I think that is the single 
key factor in getting that done, that process started and then 
completed, will be bringing the pandemic to a decisive end as 
soon as possible.
    Mr. Lawson. Back in January, you stated that the winter 
months were going to be extremely hard on the recovery of the 
economy. Have you seen that your statement has been pretty much 
right, in terms of where we stand at this point in the recovery 
of the economy?
    Mr. Powell. Yes. We did go through a very large spike in 
cases, as you know. They are coming down sharply now. The 
economy did kind of go sideways through January. I mentioned in 
my testimony, 29,000 jobs a month; it was much higher last 
summer.
    And I think as the pandemic recedes, or it continues to 
recede--new cases are way down, hospitalizations are way down--
then we will begin to see, maybe fairly soon, the job numbers 
start to creep back up, and hopefully this time, that will be 
consistent with keeping the virus under control, getting it 
really under control.
    Mr. Lawson. Okay. Thank you. And with that, I yield back.
    Chairwoman Waters. Thank you very much. The gentleman from 
Texas, Mr. Williams, is now recognized for 5 minutes.
    Mr. Williams of Texas. Thank you, Madam Chairwoman, and 
also, Mr. Chairman, thank you for being before our committee 
today in this virtual setting.
    You mentioned that there could be 6 percent growth--we have 
talked about that all day today--by the end of the year. I 
completely agree the [inaudible] are there for the economy to 
easily rebound at this pace. The biggest obstacle I see that 
would prevent the level of growth from becoming a reality is 
individual States forcing businesses to remain closed. Now for 
States like mine, the great State of Texas, that have 
responsibly opened their economies, people are getting back to 
work, and in December, Texas added 64,000 jobs, while States 
that are still under heavy lockdowns, like California, had over 
2,000 jobs lost over that same period.
    As we talk about the next step in COVID relief, it needs to 
be focused on getting people back to work. So, Mr. Chairman, 
what would be the best allocation of resources that would 
incentivize reopening the economy?
    Mr. Powell. I would again--as you know, I am reluctant to 
comment. I shouldn't comment on the legislation that is under 
consideration, and I won't do that. But I will say again that I 
think at this point, the single biggest thing is to get people 
vaccinated and get the pandemic under control, in a decisive 
kind of a way, and then the economy can fully reopen and people 
can get confident again that it is okay to resume their normal 
activities.
    Mr. Williams of Texas. Okay. I will buy that. My district 
contains some very rural areas that do not have access to 
reliable broadband internet, and the COVID-19 pandemic has 
exposed how necessary it is to be connected to the internet if 
you want to run a business, take advantage of telehealth 
capabilities, or educate your children. We have some strange 
stories of people having to find hotspots in my district, and 
drive for hours to get there.
    Mr. Chairman, can you tell us what it would mean for the 
economy or the economic recovery if we were able to get 
investment in broadband infrastructure for the thousands of 
American people who are currently being left behind in this 
digital world?
    Mr. Powell. Again, without commenting on the bill, I would 
say that broadband is just an essential piece of 21st Century 
infrastructure, and having good broadband everywhere in the 
country will help people in rural areas, and poorer people who 
may not have access, and things like that. It is a very 
important piece of infrastructure for us to have as a nation.
    Mr. Williams of Texas. Well, it is. Like I said, in my 
district, a lot of rural America still does not have it and we 
need to get that, and I think we agree on that.
    Lastly, during the Trump Administration, you were applauded 
for maintaining the independence of the Federal Reserve and 
focusing on your dual mandate of price stability and full 
employment. You are going to be pushed once again, during the 
Biden Administration, to use the power of the Federal Reserve 
to pursue additional political goals, such as addressing income 
inequality or climate changes. And I just want to reiterate 
that some of my colleagues have already brought that up, and 
Congress is the body that must debate and act on these 
ancillary issues, not the Federal Reserve.
    In closing, Mr. Chairman, can you tell us why it is 
important for the Federal Reserve to stay independent and not 
act on the political needs of the moment?
    Mr. Powell. I will be happy to. The independence of the Fed 
from direct political control is an institutional arrangement 
that we think has served the country well, and that is why we 
have it. It is not something that is in the Constitution. It is 
a practice that we have. We don't engage in political 
discussions over here. We don't take politics into 
consideration, or election cycles, or anything like that. 
Nonetheless, we try to be extremely transparent and really work 
hard to stay in contact with the body that has oversight 
responsibility in our system of government, which is the two 
committees on Capitol Hill. That is where our oversight 
responsibility is, and we take that very seriously.
    Mr. Williams of Texas. I want to thank you for the job you 
are doing, and I appreciate the hard work that you have 
generated these last several years. Thank you very much.
    And, Madam Chairwoman, I yield back.
    Chairwoman Waters. Thank you. The gentlewoman from Iowa, 
Mrs. Axne, is now recognized for 5 minutes.
    Mrs. Axne. Thank you, Madam Chairwoman, and thank you, 
Chairman Powell, for being here. It is good to see you.
    I want to focus on the labor market a little bit here. You 
said a couple of weeks ago that published unemployment rates 
have dramatically understated the deterioration in the labor 
market. And as I understand it, that difference is mostly about 
the decline in labor force participation, is that correct?
    Mr. Powell. Yes, that is correct.
    Mrs. Axne. That is something that I clearly see in Iowa. 
Our unemployment, in December, actually fell back below 3.5 
percent, but that ignores about 130,000 Iowans who have just 
left the labor force completely. Is that something that you 
will be looking at closely when it comes to determining if the 
economy is at full employment, those folks who have literally 
just left the market?
    Mr. Powell. Yes, it is. We say that we look at a broad 
range of things, and it is important to say that we look at the 
employment rate and employment-to-population, in particular, as 
a statistic that combines labor force participation and 
unemployment.
    Mrs. Axne. Okay, good. I am happy to hear that.
    Changing course here a little bit, we have seen about 4 
million people leave the labor force. Almost 60 percent of 
those have been women, despite them making up, of course, less 
of the labor force before the pandemic hit. And then, we hit a 
33-year low last month, and more than 1 million more women have 
lost their jobs than men. I would ask you, Chairman Powell, 
what do you think is the reason for this kind of disparity, and 
is that something you are going to consider when you are 
evaluating full employment?
    Mr. Powell. It is a combination of two things, I believe, 
one of which is that women in the labor force are 
overrepresented in those public-facing, service-sector jobs. 
The other just is with the closure of many schools, parents are 
staying home, and that burden has fallen more on mothers than 
it has on fathers. Those are the two pieces of that, I think.
    Both of those should dissipate, and we should go back to 
hopefully something closer to where we were, where people 
worked if they wanted to work and they did child care if they 
wanted to do that instead. As the pandemic comes to an end, we 
hope that people will once again be able to make those choices 
without taking into account the fact that the schools are 
closed, for example.
    Mrs. Axne. Thank you. Listen, I am so glad to hear you 
bring up child care, because apparently more than $50 billion a 
year is what the lack of child care costs our country. Do you 
think that helping families find affordable child care could 
help the economy, and do you think that would help us get back 
to full employment more quickly?
    Mr. Powell. I do think that is an area that is worth 
looking at. And again, I don't want to comment on the--I don't 
know what is in your discussions, but I don't want to comment 
on that. I will say many other countries, our peers, our 
competitors, advanced economy democracies, have a more built-up 
function for child care and they wind up having substantially 
higher labor force participation among women. We used to lead 
the world in female labor force participation a quarter century 
ago, and we no longer do. And it may just be that those 
policies have put us behind.
    Mrs. Axne. I appreciate you saying that. Countries like 
Germany, the UK, and Canada have moved forward with higher 
levels of that participation because of those programs, and it 
is absolutely something we need to address in this country. 
Obviously, even before the pandemic, it was prohibitively 
expensive for families. I have been there. I have 2 boys, and 
at the most expensive time, even 15 years ago, you had to save 
$20,000 after taxes, and that was 15 years ago, for a couple of 
kids. So, I know that this is really hurting Americans and 
there are child care deserts.
    The lack of child care and paid leave, as well, really 
limits the choices for women in America, and every time one of 
them leaves the workforce to take care of a child, it sets 
their career back multiple years. I just want to be clear; this 
isn't just a women's issue. It is a family issue. It is an 
economic issue, and I worry that the current crisis for child 
care could get even worse. It is why it is so important to 
address these types of long-term issues if we are going to be 
back to where we need to be as a country.
    I would also encourage you to look at how paid family 
leave, paid sick leave, all of those issues impact opportunity 
for women and for families, which, in turn, of course, impacts 
our overall economy.
    I want to thank you for the work that you are doing. I 
appreciate everything that you are doing to make sure that we 
are informed and keeping our country moving forward. And I 
would encourage you to take a look at those issues. And lastly, 
I would say, on the paid family leave, is that something else 
that you would be considering looking at when it comes to the 
labor market?
    Mr. Powell. Yes. Those are decisions that lie in your 
hands, but I do think it is worth looking at these. As the 
United States falls behind in labor force participation, we 
need to be asking why that is the case, and what are the ways 
we can be more competitive?
    Mrs. Axne. Thank you.
    Chairwoman Waters. Thank you. The gentlelady's time has 
expired. The gentleman from Arkansas, Mr. Hill, is now 
recognized for 5 minutes.
    Mr. Hill. Thank you, Madam Chairwoman. Chairman Powell, it 
is great to see you. Thanks for your time on Capitol Hill this 
week, and we do appreciate, as everyone has said, your 
extraordinary leadership of the Board of Governors during this 
tough past year.
    Since last March, the Fed has purchased more than $1.8 
trillion of U.S. Treasury securities, and last week you 
reiterated, as you did yesterday in the Senate, that the Fed 
remains patiently accommodative in its monetary policy 
position. But this extraordinary accommodation is now coupled 
with the decision that the Treasury has recently announced, 
Chair Yellen, that they are planning on drawing down their cash 
account they hold at the Fed by almost $1 trillion, and would 
inject that directly into the economy.
    Chairman Powell, has Secretary Yellen discussed with you 
drawing down the Treasury account?
    Mr. Powell. As a matter of long practice, I don't discuss 
my private conversations with elected representatives or with 
the Treasury Secretary. But, of course, we are well aware--
there is an ongoing staff-level dialogue between Treasury and 
the Fed and the New York Fed about the Treasury general account 
and what the plans are for that. So, we are well aware of it.
    Mr. Hill. If $1 trillion was drawn out of that account and 
injected, do you think that could cause short-term interest 
rates, something you are very concerned about at the Board of 
Governors and a very keen focused monetary policy, could that 
cause short-term rates to go negative?
    Mr. Powell. It could put downward pressure on short-term 
rates. Of course, our principal concern is that the Federal 
funds rate be within the range that the FOMC has wanted it to 
be. And we have the tools to make sure that is the case, and if 
that is the case, and it will be the case, then it will be 
within our range and we will be where we need to be, that is 
going to tend to work against the other short-term money market 
rates going too low.
    Mr. Hill. No, it is a key point and that is why I am 
concerned about that impact in the market, understanding it. 
For example, I assume the Board of Governors, from a monetary 
policy reaction to that, if short-term rates went negative, 
that you could raise the rates on the interest rate on excess 
reserves (IOER) range that you have. Would that be a tool that 
you could take into effect?
    Mr. Powell. Yes. I haven't made any decisions about this at 
all, but, of course, that and also the rate on the reverse repo 
facility, are the two things that we can move. Those are our 
two administered rates, and so those would be the tools that we 
could use, among others, frankly, but those are things that we 
can do.
    Mr. Hill. Certainly, in light of what Ann Wagner asked 
about a few minutes ago, on the supplemental leverage ratio, 
these things kind of come together in the banking system, and 
managing those expectations, either the level of short-term 
rates or the dislocation in rates and the Fed's reaction to it, 
or that kind of cash coming out into the banking system and 
thus aggravating that supplemental leverage ratio, these are 
important issues, and I would encourage the Board to consider 
action sooner rather than later, because of that March 31st 
date.
    Chairman Himes raised a really interesting question, and 
Mr. Barr did as well, about the indicators you look at when you 
are evaluating this inflation move. We have mentioned the raw 
commodity index, and I think other Members have mentioned that. 
It is up 18 percent year over year. Gold is up 15 percent year 
over year. But the one I always watch, and we saw it come into 
play in the run-up to the last financial crisis, is residential 
real estate. As you know, 24 percent of the Consumer Price 
Index (CPI) is an imputed rent that the Bureau of Labor 
Statistics uses. I have never bought it. I don't know if you 
have ever bought it. But it is up about 3 percent right now. 
But if you look at the prices of existing homes, I think they 
are up 12 percent. New home prices are up 8 percent. Is that 
one that you particularly focus on, that imputed residential 
rent, since it is about 25 percent of the CPI, and how do you 
look at that issue?
    Mr. Powell. We do, of course, follow a broad, broad range 
of prices. Half of our mandate is price stability, so we have a 
lot of attention paid to many different things. And the most 
important thing, really, is that inflation expectations are the 
anchor, and we have great tools for looking at that, including 
a new common index of inflation expectations.
    You asked about real estate housing, residential real 
estate prices, and the high levels of increases we saw this 
year, and there were a bunch of one-time factors. There was a 
suppression of demand at the beginning and an increase in 
demand as that industry reopened. Rates are low. People are 
working at home. All of those things tend to--rates will be low 
for some time. But it won't be forever, and all of those things 
tend to push up demand. Our best estimate is that we will see 
these increases but at a much lower level.
    Chairwoman Waters. Thank you.
    Mr. Hill. Thank you, and I yield back. Thank you, Mr. 
Chairman.
    Chairwoman Waters. The gentleman from Illinois, Mr. Casten, 
is now recognized for 5 minutes.
    Mr. Casten. Thank you, Madam Chairwoman. Chair Powell, it 
is so nice to see you again, and I mean this genuinely. You 
have a hard job and you are always biased in favor of clarity 
rather than opacity as you balance some of the political 
tensions of your job. And we appreciate that, and the country 
appreciates that. It makes our jobs easier.
    I mention that at the start because I want to sail into 
issues that are political but shouldn't be, and it has been the 
subject of a lot of my colleagues' questions, around climate 
change. The transition to a greener economy, as lots of smart 
people have said, imposes physical risks and transitional 
risks. The physical risks I don't think present much of a 
political challenge. What has happened in Texas, nobody 
suggests that we shouldn't be dealing with those types of 
physical risks to our economy.
    The transitional risks are hard, though, because converting 
to a clean energy system means converting to an energy system 
that has lower marginal operating costs, which leads to a 
rising tide. It is good for the economy, but the fact that a 
rising tide lifts the average boat doesn't mean it lifts every 
boat, and at core that transfer is a--the transitional risk is 
a wealth transfer from energy producers to energy consumers. 
You pay less for energy but now somebody has to write off their 
fossil fuel reserves. That, in my view, informs much of the 
political conversation that exists.
    I will get to it in a minute, why I start that way, but 
first I just want to follow up on what Chair Velazquez asked. 
On Monday, Secretary Yellen said that climate change is a part 
of the broader mandate of the Treasury Department. Do you agree 
that the economic risks of climate are part of your broader 
mandate as well?
    Mr. Powell. I think that we have a mandate to ensure the 
safety and soundness of financial institutions, and that 
involves making sure that they manage and understand all of the 
risks that they face, which includes climate change risks.
    Mr. Casten. Okay. Well, I certainly do. I think some of the 
estimates are north of $20 trillion a year, a year of loss.
    Last week, Fed Governor Brainard noted that there had been 
over $5.2 trillion in losses associated with the physical risks 
of climate change. Since 1980, 70 percent of that, which is not 
[inaudible], and, of course, that is accelerating. What is the 
Fed doing specifically about the exposure that the financial 
sector has to those physical losses from climate change?
    Mr. Powell. As I mentioned, we are really in the early 
stages of understanding this. Right now, we are doing a lot of 
outreach. We are talking to different size financial 
institutions and other external constituencies, our fellow 
regulators here in the United States and around the world, to 
try to--we don't have a framework for thinking about this. 
There are tremendous data gaps. It is just early days. And, by 
the way, if you talk to certainly the large and medium-sized 
financial institutions, you will find that they are very 
actively doing the same thing. They are trying to think about 
what are the implications, longer-run implications, and near-
term implications of this? How do I think about it?
    And so, I would just stress that it is early days, and I 
also want to stress that the nation's climate policy has to be 
decided by elected people. We are not climate policymakers here 
who can decide the way climate change will be addressed by the 
United States. We are a regulatory agency that regulates a part 
of the economy, and part of that job will be to ensure, as I 
said, but we are not the [inaudible] here.
    Mr. Casten. I don't meant to be rude, but I have more 
questions I want to get to. I completely agree, and that is why 
I led off by noting that there is this political challenge 
because of the wealth transfer, because we are political 
creatures on our side of the dais here. And you noted to Mr. 
Luetkemeyer that stress tests and scenario analysis are very 
different, and I totally agree. The beauty of scenario analysis 
is that it is flexible, and it can accommodate more 
information, particularly as we get into some of these 
transition risks. The downside is that they are flexible, and, 
therefore, they are going to be subject to political pressure.
    We can't do those very well from our end, but as you think 
about how to build the modeling infrastructure in the Fed, how 
are you thinking about how to build that in a way that is 
accurate, that captures the risks, but allows you to maintain 
the political independence you need?
    Mr. Powell. That is a good way to capture it. It is quite a 
challenging exercise. These are scenarios, and, by the way, 
some of the banks are already running these scenarios. They are 
already thinking about it. They are supposed to be informative. 
They are supposed to be an illustrative kind of thing. They are 
not at all like stress tests. And it is just worth this level 
of thinking, how do we model this and what are the implications 
of how we model it for our business today?
    One thing worth mentioning is that the Bank of England is 
ahead on this. They are working on this, so we are very closely 
monitoring and in ongoing discussions with them. I just think 
there is a lot of work to do here before we can really make 
progress.
    Mr. Casten. Thank you. I yield back.
    Chairwoman Waters. Thank you. The gentleman from New York, 
Mr. Zeldin, is now recognized for 5 minutes.
    Mr. Zeldin. Thank you, Madam Chairwoman, for holding 
today's hearing, and Ranking Member McHenry. Chairman Powell, 
you are one of the unsung heroes of responding to the pandemic. 
I want to thank you and your team for your efforts throughout 
2020. That has also included standing up and fine-tuning the 
liquidity facilities. For example, the original Municipal 
Liquidity Facility (MLF) had excluded Suffolk County, which is 
my home County, but the Federal Reserve and Treasury listened 
to the concerns that I and others raised, and lowered the 
population thresholds for the eligible issuers. This provided 
an important possible backstop for local governments concerned 
about liquidity when they issue debt.
    I appreciate the Federal Reserve's attention to this 
critical market, and the commitment to remain vigilant of any 
problems as they arise, because we do need all levels of 
government working together.
    Another issue with which I am concerned is the rising 
national debt, which now stands at over $27 trillion. The 
scariest part of this issue is that the fastest-growing part of 
our Federal budget is paying interest on our national debt, and 
that is right now operating at a time when interest rates are 
historically low.
    You testified before the Joint Economic Committee, on 
November 13, 2019, and you said, ``In a downturn, it would also 
be important for fiscal policy to support the economy. However, 
as noted in the Congressional Budget Office's recent long-term 
budget outlook, the Federal budget is on an unsustainable path 
with high and rising debt. Over time, this outlook could 
restrain fiscal policymakers' willingness or ability to support 
economic activity during a downturn. In addition, I remain 
concerned that high and rising Federal debt can, in the long 
term, restrain private investment and thereby reduce 
productivity and overall economic growth. Putting the Federal 
budget on a sustainable path would aid the long-term vigor of 
the U.S. economy and help ensure that policymakers have the 
space to use fiscal policy to assist in stabilizing the economy 
if it weakens.''
    The national debt stood at roughly $23 trillion at that 
time. Since then, we have gone through a downturn due to 
widespread lockdowns as a result of the pandemic, and Congress 
has passed five bipartisan COVID-19 response bills. We are 
still struggling with a fragile economy, and many restaurants, 
small service-industry businesses, and others still need 
assistance to succeed in rebounding from the pandemic.
    I have been supportive of targeted help. This can't be an 
across-the-board handout, because someone is going to have to 
pay the bill. We definitely shouldn't be appropriating more 
funding in areas where they haven't even used the funding that 
has already been appropriated.
    Chairman Powell, I wanted to ask you to talk a little bit 
more about what you said in November of 2019, and why it still 
matters at this time for the future.
    Mr. Powell. I would be glad to. We are all on an 
unsustainable fiscal path, which just means that even in good 
times, the debt is growing faster than the economy. That is 
kind of one definition of unsustainability, and we need to get 
off that path. We will get off that path. I would say the time 
to prioritize those concerns is not now. The time to prioritize 
those concerns is when we are close to full employment, when 
the taxes are rolling in, and we can do it without so much 
pain. Right now, fiscal policy is, I think, appropriately 
working, as I suggested in those remarks. Fiscal policy really 
came to the rescue in this episode with the CARES Act and the 
subsequent things that have been done.
    I do think it is important to save that firepower for big 
times, times when it is really needed, and this is one of those 
times.
    Mr. Zeldin. At this time, Congress is about to pass a $1.9 
trillion COVID-19-related bill, but a lot of that spending 
won't be until 2022 or later. Some of that spending isn't even 
to be spent until 2024 or later. And I just want to know what 
your thoughts are on so much of that funding in this week's 
bill not even being used this year?
    Mr. Powell. I don't think it is appropriate for me to 
insert myself into these discussions, which are really the 
province of you and your elected colleagues. We have a narrow 
and important mandate, and we are generally not consulted or 
part of these discussions, and that is appropriate.
    Mr. Zeldin. Chairman Powell, I appreciate your leadership. 
You really did a fantastic job responding to the pandemic, and 
I yield back.
    Chairwoman Waters. Thank you. The gentlewoman from 
Massachusetts, Ms. Pressley, is now recognized for 5 minutes.
    Ms. Pressley. Thank you, Madam Chairwoman, and thank you, 
Chairman Powell.
    When you last appeared in front of this committee, one year 
ago, you thanked me for sharing the history of the Humphrey-
Hawkins hearings and the legacy of Coretta Scott King and her 
advocacy for a Federal jobs guarantee. Today, we are in the 
midst of the greatest economic disaster since the Great 
Depression, and during the height of that crisis, the Federal 
Government created 4 million job in the winter of 1933.
    Chairman Powell, you have noted that the goal of maximum 
employment will require more than supportive monetary policy. 
Would a Federal jobs program succeed where monetary policy and 
the private sector have been unable to meet the need?
    Mr. Powell. I was speaking really about the longer term and 
the need to have policies that support people, that give them 
the skills and training that they need to take part and also 
policies that support participation in the labor market. I 
think it is up to you to pick the particular policies, but I do 
think it can't just be a matter of monetary policy, because we 
can help, over the course of an expansion, but there are 
longer-term issues that will support maximum employment over 
time that are really in your hands.
    Ms. Pressley. Agreed, and the Federal Government can create 
jobs that meet the scale and speed necessary, I think, to meet 
this need.
    Last week, I introduced H.R. 145, a Federal jobs guarantee, 
calling for just that. A central demand of the Civil Rights 
Movement, a job guarantee is about more than just jobs and the 
dignity of work. It is about the necessary public services and 
critical but long-neglected physical and care infrastructure we 
can provide. A Federal job guarantee is our opportunity to 
achieve a just recovery as well as long-term economic equity.
    In this pandemic, as you are aware, Mr. Chairman, women 
have lost 5.3 million jobs, 1 million more than men. Women of 
color have sustained the highest unemployment rates. In fact, 
in December alone, 154,000 women, Black women, left the 
workforce, the result of lost jobs and the caregiving crisis. 
The reality is devastating, but you recently noted that even 
the sobering unemployment data that we have has incredible gaps 
in measurements, specifically that if we considered the near 4 
million people who have stopped looking for jobs, the actual 
unemployment rate would not be 6.3 percent, as reported by the 
Bureau of Labor Statistics, but close to 10 percent.
    Chairman Powell, how does the undercounting of unemployment 
prevent us from achieving an equitable economic recovery, and 
what does this mean for women of color specifically?
    Mr. Powell. I think that the numbers--by the way, this is 
not a criticism of the Bureau of Labor Statistics. They are 
very transparent about what they do. Conceptually, I think that 
you include those people who were in the labor force working 
and now they are out of the labor force but they are actually 
unemployed, from my way of thinking.
    Women, and women of color in particular, are 
overrepresented in those public-facing, service-sector jobs, 
which have been so hard hit. Think hotels and restaurants. And 
so, this downturn has just been terrible from the standpoint of 
affecting a group that already was financially less able to 
withstand those kinds of things, from that standpoint, 
particularly since we had begun to make some progress on those 
issues, those long-standing disparities.
    So, we are in a situation where the best thing we can do is 
get those sectors open as soon as possible, and in the meantime 
give people the support they need so they can continue the 
lives that they have had.
    Ms. Pressley. Sure. That undercounting, though, I do 
believe is just another way that our economy renders invisible 
and further marginalizes those workers consistently, who are 
the last ones hired and the first ones fired, which is 
particularly true for our disabled workers, LGBTQ, Black women, 
those who have been disproportionately, to your point, employed 
in the service sector, low-wage jobs, that have been deemed 
essential but are often treated as if they are dispensable. And 
that is not true only in a pandemic.
    So, Chairman Powell, looking to past recoveries for the 
workers shouldering the heaviest burdens of this pandemic, will 
they recover their jobs as quickly as they lost them? What are 
your projections there?
    Mr. Powell. We don't have great confidence in our ability 
to project that, but I would say as the economy reopens there 
should be a wave, really, of people going back to work in those 
sectors. The question is going to be, some of them will not be 
able to go back to work because, we are hearing, there are 
surveys suggesting that those companies have been figuring out 
ways to do their business with fewer workers. They are doing 
that all the time, but that process may have been accelerated 
because of this episode.
    So, it is pretty likely that some of those people will not 
be able to go back to their old jobs, and they are going to 
need continued support and help to find their way in this post-
pandemic economy, which will be a different economy.
    Chairwoman Waters. The gentlelady's time has expired. The 
gentleman from Georgia, Mr. Loudermilk, is now recognized for 5 
minutes.
    Mr. Loudermilk. Thank you, Madam Chairwoman, and Chairman 
Powell, thank you for being here. And let me tell you, in the 4 
years that I have been on this committee, it has been a roller 
coaster ride, especially with the pandemic, and I appreciate 
how you have worked with us during that time.
    I also want to thank you for the final rule that the Fed 
issued with the OCC and the FDIC back in November, that 
provided temporary relief for community banks from asset 
thresholds. As you know, pandemic relief programs, particularly 
PPP, have resulted in rapid growth of our financial 
institutions' balance sheets, and as a result, several hundred 
community banks were on the verge of being subject to 
additional regulations because of having PPP on their books. I 
appreciate you and the other agencies addressing that, and I 
think that is an illustration of how we can put partisanship 
aside and do what is best for the American people and for our 
banks.
    I would also like to discuss the Community Reinvestment 
Act, as others have done today as well. I appreciate your 
comment earlier today that you are working with the OCC and the 
FDIC to get on the same page. As you know, the pandemic has 
accelerated the use of digital platforms such as mobile and 
online banking. What I would like to know is, will you and the 
Fed take that into account during the CRA reforms?
    Mr. Powell. Yes. That is very much part of our--we 
understand that banking has changed, and that is one of the 
important ways in which it has changed, and that requires a 
rethink. It has been a quarter of a century since we had one, 
and that is a big part of why we are at the table.
    Mr. Loudermilk. I appreciate that. Last week, we had a 
markup on this huge bill that is coming to the Floor, and I 
would appreciate it if our colleagues on the other side would 
have the same outlook of addressing the changes in technology 
as we attempted to have fintech included in the package but 
were not able to do so. Hopefully, going forward, that will 
also become a bipartisan issue that we can work on together.
    Another question, Chairman Powell, could you remind us what 
you see for the economic outlook for 2021? I believe you said 
that the economy should bounce back strongly, and may grow at a 
rate of 6 percent this year. Is that true?
    Mr. Powell. Someone asked a question yesterday, ``Could it 
be 6 percent?'', and I said, ``Yes, it could be 6 percent.'' 
There is a range of estimates. We are constantly updating 
things, but we will be doing another round of estimates for 
growth this year at our March meeting. We do quarterly updates. 
Of course, we are updating in real time, in the meantime.
    But the bigger point is it all depends on getting the 
pandemic under control and getting people vaccinated, and it 
depends, to some extent, on these other strains that may be 
around. They haven't really had much of an effect yet, 
apparently, on infection rates, and we hope that continues. But 
as I mentioned in my testimony, there is reason for optimism 
about the second half of the year, if we do get the pandemic 
under control, and that is what many people are forecasting 
now. Of course, we are going to wait and see the actual data 
before we act on it. We are not acting on forecasts when it 
comes to our policies at this point.
    Mr. Loudermilk. So, whether it is 4.5 percent, 5 percent, 
or 6 percent, you still believe that we should bounce back 
strongly?
    Mr. Powell. Yes, I do. I think that is the base case. I 
think there is plenty of risk, but I would say that is 
certainly the base case.
    Mr. Loudermilk. That is good to hear. I think we have laid 
the foundation over the past 4 years of a strong economy, as 
long as we don't undo a lot of that. But I want to take a step 
back and think about, really, the economy in general and our 
ability to recover and the fact that you think that we are 
going to have a strong recovery.
    As I mentioned earlier, later this week the Majority party 
in the House will attempt to pass a $2 trillion bill that 
economists are saying is 6.5 times bigger than what is actually 
needed. In fact, less than 9 percent of it would go to actually 
combatting the virus through public health spending, which, as 
you have indicated already, is really what the key to this 
economy is, getting the virus itself, the health care aspect, 
under control and constraint. And only 9 percent of this bill 
is dealing with that.
    I am not going to ask you to comment on fiscal policy, 
because I know that is not your job. But Congress should take 
the Fed's economic projects into account and recognize the 
economy is on a strong track to recover, and recover strongly. 
The bill is many times bigger than it should be, and it will 
spend trillions on items that have nothing to do with COVID, 
and continue to accelerate the debt that this nation has, that 
is running quickly out of control
    And with that, Madam Chairwoman, I yield back.
    Chairwoman Waters. Thank you. The gentlewoman from Texas, 
Ms. Garcia, is now recognized for 5 minutes.
    Ms. Garcia of Texas. Thank you, Madam Chairwoman, and thank 
you for hosting Chairman Powell for this very important 
hearing. Chairman Powell, it is a pleasure to see you again, 
and thank you for all the work that you have done to get us 
through this pandemic. I mentioned to someone that you just 
about threw everything but the kitchen sink at the issue, and, 
quite frankly, that is what was required to make sure that all 
parts of the economy will get back on track.
    As a former local city official--in fact, I was city 
controller in Houston--I am always concerned about the 
municipal bond markets and what is happening for cities in 
terms of maybe their obligations on any debt, being able to 
continue to issue debt, and getting past this pandemic. And I 
know that all of us have called for the extension of the 
Municipal Liquidity Fund (MLF), but because it was shut down at 
the end of 2020, States and cities can no longer rely on the 
MLF as a backstop.
    According to recent analysis from the Philadelphia Fed, 
State and local government employment has lowered by 1.3 
million since the pandemic, nearly double the losses from the 
2008 recession, and States are using reserves, Federal aid, and 
the capital markets to contend with budget deficits prior to 
the extreme austerity. I spoke to my mayor during our district 
work week this last couple of weeks, and the City of Houston 
was already at about a $120 million shortfall, and that is not 
even looking at the decrease in plummeting collections on 
property taxes, because the City of Houston, about 40 percent 
relys on property taxes.
    What can we do, given the absence of the MLF and the 
precarious fiscal conditions that States and cities face, what 
sorts of steps can be taken to avoid further public sector job 
losses or disruption in the municipal bond market?
    Mr. Powell. The municipal bond market, I am happy to say, 
has continued to function very well, even after the Facility 
closed. And again, I am happy to say that I was concerned that 
it was serving a purpose as a useful backstop, and it ended at 
the end of December, and nonetheless, the market is working 
just fine.
    In terms of other support, it is not for us to say. I would 
say that the disparities between different cities and States 
are enormous in this situation. Some cities and States are 
actually better off. The ones that are leveraged to either 
energy or tourism are not better off, because those are the 
areas that have been hit by the pandemic. But that is really a 
question for fiscal authorities, in terms of where their help 
would be appropriate. In terms of access to financing, it is 
really there, that the municipal bond market is open, and right 
across the credit spectrum and the maturity spectrum there has 
been the ability to finance.
    Ms. Garcia of Texas. Okay. Thank you. Also, in one of our 
previous visits, I had asked you about--I was curious as to why 
the poverty rates were not looked at more closely, just like we 
look at unemployment. Because as you have noted already, the 
unemployment number is not perhaps the best true number of the 
people who are out of jobs, and certainly there are a lot of 
poor people who are not included in those numbers because they 
not only do not have jobs--not only part of the labor market, 
they are also not on unemployment.
    And I did note in your February report, on page 19, that 
you noted that food pantries saw a significant increase in 
demand in 2020, and there was a sharp increase in the number of 
families reporting that they did not have sufficient money to 
buy food. What else do you all do to track that in terms of 
poverty rates, the number of people who are reliant on the SNAP 
program, the number of people who are reliant on other public 
benefits, to get us a better picture of how many people may not 
be working?
    Mr. Powell. We do look at all of that data. We don't 
collect that data. Other parts of the government do. And I 
think we have all been struck--how could you not be struck by 
the uptick in the food area, where people are standing in line, 
these miles-long car lines, to get food. Some families are 
clearly in a place where they need help from the government 
just to feed their families. It is a sign that support is 
needed, and we really need to get the economy opened up as soon 
as possible.
    Ms. Garcia of Texas. Thank you. I believe my time is up. I 
yield back.
    Chairwoman Waters. Thank you. The gentleman from Ohio, Mr. 
Davidson, is now recognized for 5 minutes.
    Mr. Davidson. Thank you, Madam Chairwoman. Chairman Powell, 
thank you for your time. And I want to commend the Federal 
Reserve for the work that was done at the end of March to 
provide liquidity and stability to our economy to deal with the 
massive surge in demand for U.S. dollars. And we are just so 
grateful that the U.S. dollar has become the world's reserve 
currency. In a time of crisis, not just Americans but people 
all around the world want our dollar. It is indeed a source of 
our strength as a country, to have a strong dollar that has 
become the world's reserve currency. It does great things for 
our capital markets, and, frankly, it helps enable the deficit 
spending that we have continued to do, because we certainly 
haven't saved for bad times. We are able to navigate them 
because we still can borrow.
    I wonder, sir, do you have a definition of sound money?
    Mr. Powell. We target inflation that averages 2 percent 
over time. That is what we consider to be--
    Mr. Davidson. That is the policy, but when you talk about 
sound money, what would you say constitutes sound money?
    Mr. Powell. The public has confidence in the currency, 
which they do, and which the world does. That is really what it 
comes down to, that people believe that the United States 
currency is perfectly reliable and stable in value.
    Mr. Davidson. Okay. As a store of value, it clearly isn't 
stable in value. It is not. But as a store of value, the U.S. 
dollar really, is it diluted as a store of value when M2 goes 
up by more than 25 percent in one year? Does the printing of 
more U.S. dollars somehow diminish the value of the dollars 
that others hold?
    Mr. Powell. There was a time when monetary aggregates were 
important determinants of inflation, but that has not been the 
case for a long time. You will see, if you look back, the 
correlation between movements in different aggregates--you 
mentioned M2--and inflation, is just very, very low. And you 
see that now, where inflation is 1.4 percent for this year.
    Mr. Davidson. Yes, you keep using that, and you keep using 
it to talk about inflation, and I don't think that is the only 
proxy for whether the dollar is a store of value and an 
efficient means of exchange. It is clearly still the world's 
reserve currency, but we are putting it under a pretty big 
stress test by diluting the value of the dollars. And I think 
one of the indicators of that is when the U.S. Government 
issues debt, all of this spending that we have done as a 
country isn't really funded, is it? There is not a true market 
demand for this much debt. It is being lent. When there is 
borrowing, there is actually a lender. How much has the Federal 
Reserve had to purchase to bridge the gap between market demand 
for Treasuries and the actual need to finance the spending?
    Mr. Powell. That is not at all what is happening. We don't 
have to purchase any of this. We purchased it because it is 
providing and supporting the economy in keeping with our 
mandate. There is plenty of demand for U.S. Treasury paper 
around the world.
    Mr. Davidson. So, all of it would sell? Are you bidding up 
the price then? Is it your contention that you are inflating 
asset prices by increasing this purchase?
    Mr. Powell. No. I think that we could sell all of our debt. 
The reason we do it--by the way, we issue debt--we issue United 
States obligations in the form of reserves when we buy 
Treasuries. We are not actually changing the amount of 
obligations outstanding on the part of the Treasury. What we 
are doing is we are substituting an overnight reserve for a 
Treasury bill. It has no effect on the overall outstanding 
obligations of the United States when we do that.
    Mr. Davidson. Right. The growth of the Federal Reserve's 
balance sheet, you don't think that has anything to do with the 
disconnect between Wall Street and Main Street? Let's just 
take, as an example, the confidence people have expressed in 
Bitcoin and other cryptocurrencies. And well-respected, proven 
investors like Ray Dalio, who said, ``Cash is trash,'' isn't it 
because the U.S. dollar is being destroyed by fiscal and 
monetary policy?
    Mr. Powell. It is hard to say that it is being destroyed. 
Another way to look at the dollar is, you can ask, 
domestically, what can it purchase, and that is a question of 
inflation. You can also look at it in terms of a basket of 
other currencies, and--
    Mr. Davidson. Yes, I understand, but if you look at--
    Mr. Powell. --the dollar is--
    Mr. Davidson. --the key to this is the Fed has done a 
horrible job at predicting asset bubbles. They have. And if the 
pensions are going up because the market prices are going up--
people with marketable securities have their basket of wealth 
going up--and wages aren't, teachers, for example, they have a 
great pension but their current consumption isn't going up. So, 
CPI lags what is going on in the investment. I think it is a 
big concern, and I would just implore you and the other members 
of the Fed to pay attention to monetary inflation, not just 
price inflation.
    Chairwoman Waters. The gentleman's time has expired. The 
gentlewoman from Georgia, Ms. Williams, is now recognized for 5 
minutes.
    Ms. Williams of Georgia. Thank you, Madam Chairwoman, and 
thank you, Chairman Powell, for joining us today.
    Chairman Powell, the American people are looking to us to 
deliver a strong economic recovery, and as we work to vaccinate 
more Americans and end this pandemic, we are going to need 
smart fiscal and monetary policy to combat our country's 
economic downturn.
    So, Chairman Powell, you previously credited the past 
stimulus payments and unemployment benefits for helping 
jumpstart the economy. Given the current state of the economy, 
do you still believe these are tools that can both boost 
aggregate economic activity as well as help those 
disproportionately impacted by the pandemic?
    Mr. Powell. In principle, yes, I think that is what those 
tools do. I am not commenting on the bill, though, that you are 
working on right now. I don't want to be heard to be supporting 
or not supporting the fiscal package that you are voting on 
this week.
    Ms. Williams of Georgia. Understood. Do you believe that 
decisions made about fiscal and monetary policy can help 
determine the speed of a full economic recovery?
    Mr. Powell. Very much so.
    Ms. Williams of Georgia. Could failure to use these tools 
delay our return to full employment, even if we get folks 
vaccinated quickly?
    Mr. Powell. Again, I am not going to comment on fiscal 
policy. We are committed to using our tools until the economy 
is fully recovered.
    Ms. Williams of Georgia. Chairman Powell, in your expert 
opinion, in what ways could monetary and fiscal policy be 
employed at this time to ensure our economic recovery is 
inclusive of communities of color and addresses racial economic 
disparities?
    Mr. Powell. Our tools lift the entire economy and aren't 
targeted toward particular groups. But I will say that what we 
saw in the last couple of years of the long expansion, was that 
at very low levels of unemployment, very high levels of 
employment, high levels of participation, we saw benefits going 
to those at the lower end of the spectrum, which means 
disproportionately African Americans, other minorities, and 
women. And we saw that happening pretty consistently over the 
last 2 years.
    With our tools, what we can do is try to get us back to 
that place where we have a strong labor market, high levels of 
employment, high levels of participation, wages are moving up, 
and those benefits can be shared really broadly. That is really 
the main thing. It is not the only thing, but it is the main 
thing that we can do.
    Ms. Williams of Georgia. Thank you so much, Chairman 
Powell. And, Madam Chairwoman, I yield back the balance of my 
time.
    Chairwoman Waters. --is recognized for 5 minutes.
    Mr. Budd. Madam Chairwoman, the sound cut out. Would you 
verify that it is me, the gentleman from North Carolina?
    Chairwoman Waters. Yes. The gentleman from North Carolina, 
Mr. Budd, is now recognized for 5 minutes.
    Mr. Budd. Thank you, Madam Chairwoman. Chairman Powell, 
again, thanks for being here today. [Inaudible] massive $1.9 
trillion COVID relief bill. So, based on past relief bills, it 
would be safe to assume that we are going to see an increase in 
deposits stemming from that $1.9 trillion, but [inaudible] SLR, 
the temporary supplemental ratio, leverage ratio, would that be 
beneficial for banks to handle these deposits?
    Mr. Powell. The temporary exemptions from the SLR that we 
put in place last year expire at the end of March, and we are 
in the process of looking at that right now. I have nothing to 
announce on that today. It is a conversation my colleagues and 
I are having. I am reluctant to get into the merits of the 
arguments at this point, because it is something that I don't 
want to presume or get ahead of that conversation.
    Mr. Budd. I understand, and I understand you may not want 
to commit to this part, but have you considered finalizing the 
2018 interagency proposal?
    Mr. Powell. We are looking at what to do on the 
supplemental leverage ratio, and I really would rather just 
leave it at that for now, if I can.
    Mr. Budd. Understood. Chairman Powell, yesterday you 
mentioned that the digital dollar is a high-priority project 
for the Fed. I appreciate that. You also went on to mention 
that the Fed is more focused on getting it done right rather 
than getting it done fast. So, getting it done right, 
especially for a project like this, we can all appreciate that. 
Now, I know the U.S. dollar is the reserve currency of the 
world, and we hope that doesn't change any time soon.
    But with that being said, a lot of other countries are just 
leaps and bounds ahead of us when it comes to digital currency. 
A couple of them, I think, are the digital Yuan, Sweden's 
krona, also in Ukraine, and even in Uruguay, in the e-peso. Is 
there any worry that the U.S. is falling way behind the rest of 
the world in the development of a central bank digital currency 
(CBDC), and does this staggered start put the U.S. at a 
disadvantage?
    Mr. Powell. No, I don't. We are the reserve currency of the 
world, and that is because of our great democratic 
institutions, our vibrant economy, and just that we are the 
incumbent and we have relatively low inflation. The value of 
the dollar has been relatively stable for some years now. And 
so, I think we will be that.
    I think it is a very, very important decision that we make, 
and there are potential pitfalls. There are issues around 
privacy and how you structure it. And, again, to do it as 
quickly as possible and get it wrong would be a very bad idea. 
We are going to be careful. I do think that we have the time to 
think this through carefully. I am not concerned that other 
countries are experimenting with this. But I have to say, it is 
possible now. Technology has made it possible, and it is 
happening, and the private sector is doing it too. We 
understand that we need to be in a position of really 
understanding it and doing it, if it is the right thing for 
Americans.
    Mr. Budd. Thank you. We are quickly approaching the one-
year mark of the first implementations of the lockdowns, and 
since then we have been battling the continuing public health 
crisis and the economic fallout that has come from that. How 
much longer can our economy sustain the current level of 
unemployment, and also on top of that, the lack of economic 
growth, before we really begin to suffer even more negative 
economic impacts?
    Mr. Powell. A major concern since the very beginning has 
been people out of the labor market for too long. They lose 
their skills. They lose touch with the industry they worked in. 
``Scarring'' is the technical term. But really, it is just 
people losing the lives and livelihoods that they have had. We 
have been very concerned that we look after those people, and 
also that we get the economy reopened as quickly as it safely 
can be, and, of course, that does rely heavily on the pandemic 
being brought to a decisive end as soon as possible.
    Mr. Budd. Any timeline? We are now in February. If we 
continue as is, how long before this scarring, as you called 
it, really has a negative economic impact that is even more 
permanent?
    Mr. Powell. It is very hard to say. I would say that we 
seem to be on a path to avoid. We haven't seen the kind of 
scarring, either among smaller businesses or among people, that 
we have been concerned about. We haven't seen that. The labor 
market has come back faster. The level of bankruptcies has been 
lower. It is happening, but it is happening at a much slower 
pace. You see the cases coming down. You see vaccinations 
happening. We have the prospect of getting back to a much 
better place in the second half of this year.
    Mr. Budd. I understand. Thank you, Madam Chairwoman. I 
yield back.
    Chairwoman Waters. Thank you. The gentlewoman from 
Michigan, Ms. Tlaib, is now recognized for 5 minutes.
    Ms. Tlaib. Thank you, Madam Chairwoman. And thank you, 
Chairman Powell, for being with us this afternoon.
    I wanted to start by talking a little bit about my 
district. When we did discuss the state of the economy, I 
believe our hyperfocus on the stock market always has us 
forgetting the dire situation for our low-wage workers. And 
let's remember that half of the American people do not own a 
single share of stock. And we continue to hear about how the 
stock market is booming, and the economy is bouncing back, but 
where I come from, Mr. Chairman, we are not seeing that 
recovery.
    The national unemployment rate in December was 6.7 percent, 
nationally again. But in Wayne County, Michigan, the district I 
represent, it was nearly double, 12.4 percent. We know that 
software engineers, investment bankers, and attorneys might be 
able to do their jobs remotely, but if you are a taxi driver, a 
restaurant server, or a barber, you cannot work from home. As 
of last month, unemployment in the lowest-paying job tier was 
at 20 percent, below pre-pandemic levels. This is why I 
continue to call for recurring monthly payments of $2,000.
    Chairman Powell, in your opinion, what would sending a 
$2,000 check, a $2,000 survivor check to every American mean 
for the health of our economy, and what would it mean for our 
nation's most economically vulnerable?
    Mr. Powell. I am very sorry. I don't want to talk about a 
provision that is actually in the current bill. I will echo, 
though, that, yes, we see the unemployment rate. Your situation 
is not uncommon. There are many communities where the 
unemployment rate is 20 percent now, and higher. So, we do get 
it that some parts of the economy have a long way to go.
    Ms. Tlaib. And I think this is why the majority of 
Americans actually support monthly $2,000 checks that would 
lift and help millions out of poverty. Our immediate priority, 
as you all know, should be taking care of our American people 
struggling to make ends meet.
    The Federal Reserve's own Monetary Policy Report shows that 
Black and Brown communities are overwhelmingly left behind 
during this economic recovery, Mr. Chairman. What is the 
Federal Reserve doing specifically to address both the racial 
and socioeconomic disparities that exist in the economic 
fallout from the COVID pandemic? Can you speak about that?
    Mr. Powell. Sure. Our monetary policy tools really lift the 
whole economy, but we made fundamental changes in our monetary 
policy framework last year, and did so in part because of what 
we saw happening in low- and moderate-income minority 
communities in times of very low unemployment. We have said 
that we won't tighten monetary policy just because of a very 
tight labor market. We would want to see actual inflation or 
other issues that would potentially derail the recovery.
    That, I think, will, in the long run, because it's 
something that does benefit lower-income people, communities of 
color.
    Ms. Tlaib. So, specifically direct payments? Is that what I 
am hearing?
    Mr. Powell. No. Really just that we will keep our rate, our 
policy rate low, and encourage the economy to become very 
strong before we start tightening policy, and that is the 
guidance that we have given, by the way.
    Ms. Tlaib. I don't know. My residents at home want to be 
able to pay their rent, their water bill, their utilities. I am 
not sure if that is going to work in Black and Brown 
communities, Mr. Chairman.
    But last month, over 100 leading economists urged Congress 
to pass a strong stimulus package, as you know, with 
comprehensive recovery from the pandemic. Though I think we 
need to look at some of these economists who are saying that 
direct checks to individuals, like many other countries have 
done a number of times, and that is also very much tied into 
the unemployment rate. There are different kinds of triggers. I 
think we need you to take a lead in how we can really, truly 
help address some of the racial and socioeconomic disparities. 
Many of these communities, Mr. Chairman, were already in 
survival mode before this pandemic, and now are really, truly 
suffering.
    And Chairwoman Waters knows the stories in my district. I 
even mentioned one woman who said, ``Please, Rashida, help me 
find another place to put my child in an early childhood 
education program.'' I said, ``Don't worry. I will find you a 
different place that can do it virtually.'' She said, ``You 
don't understand. I need to be able to send her somewhere 
physically so that she can eat twice a day.''
    So, we need to understand the dire need on the ground. And, 
Mr. Chairman, I know that you have to look at it more as a 
bigger picture, but understand that your Federal Reserve's own 
report says that you are failing in servicing, again, 
communities like mine, and we need to do more and be much more 
aggressive.
    Thank you so much, and I yield back.
    Chairwoman Waters. Thank you very much, Ms. Tlaib. The 
gentleman from Tennessee, Mr. Kustoff, is now recognized for 5 
minutes.
    Mr. Kustoff. Thank you, Madam Chairwoman. Thank you for 
calling today's hearing along with the ranking member. Chair 
Powell, thank you very much for your leadership over this last 
year, during the tenure of your chairmanship, but especially 
the last year, because the economy really is performing much 
better than probably any of us would have thought a year ago, 
at the onset of the pandemic. And your leadership is, in large 
part, a result of that.
    I do want to ask you, though, and I realize that we can all 
selectively pick out economic data, but on the heels of two 
things, one the retail sales numbers that came out last week, 
they were much stronger than I think anybody expected, and 
also, Chair Powell, with the CBO report that came out several 
weeks ago that predicted that the economy would grow by 4.6 
percent in 2021, without any stimulus. So, before I continue 
with the question that you won't ask, I am going to ask you, 
what are some of the reasons that you think the economy has--
would you agree that the economy has performed better than we 
would have thought?
    Mr. Powell. I just think, as a matter of fact, it has 
performed better. If you look at where generally private sector 
and our forecasts were in April or May of last year, what has 
happened is the economy has recovered more quickly, generally, 
continually. And even as waves of COVID have happened, the 
economy has proven able to deal with those. People have found 
ways to cope. Businesses have found ways to cope.
    So, we are still a long way from our goals, but we are not 
living the downside cases that we were so concerned about in 
the first half of last year, and that is something to be very 
grateful for.
    Mr. Kustoff. Chair Powell, with that, with the CBO report, 
with the economic data that we have seen, the fact that in the 
other stimulus packages that we passed last year we have 
roughly $1 trillion that hasn't gone into the economy that we 
have appropriated, from a timing perspective--and I know you 
have advocated to go big--from a timing perspective, would we 
be better off, would we, as a nation, be better off waiting for 
some of that money to start circulating through the economy 
before approving another stimulus?
    Mr. Powell. That is an important question for people who 
are elected to deal with those issues, and it is really not 
something that you want your Federal Reserve, which we have 
this independence and I think the other side of it is stick to 
your job. And I think I just would defer to those of us who 
have stood for public election, which nobody elected us.
    Mr. Kustoff. Fair enough. If I could, one thing I think 
everybody can agree on is the need to get our children back 
into schools. We know all the concerns the parents have, that 
students have, that teachers have, that educators have. I do 
want to ask you, though, has the Federal Reserve done any 
analysis on what school closures have done to employment in the 
United States? Is there any data on that?
    Mr. Powell. Yes, there is quite a lot of data on that, and 
there is also research that people are doing that tries to 
quantify--it is very difficult to do this with confidence, but 
tries to quantify the burden that kids who miss a year of in-
person schooling will bear through their economic lives and the 
effect that will have on the economy. There is a lot of data 
and a lot of research. If you have something specific, we will 
be happy to find that for you.
    Mr. Kustoff. I was going to ask you about where you were 
just going a moment ago. But in terms of the school closures on 
parents, grandparents, family members, the fact that their 
children, relatives are at home, is that affecting employment 
in any way, these school closures?
    Mr. Powell. Yes, in particular for women. Women's labor 
force participation dropped more, and is still below that of 
men. The net drop went down and then moved back up, but the net 
drop is still larger than that for me, and that is because 
women have taken on more of the child care duties than men 
have, in this time when kids are going to be at home. They are 
not going to be at school, in many places.
    Mr. Kustoff. Thank you, Chair Powell. And last, if I could, 
is my China question. About a month ago, China released some 
statistics that showed that their economy in fact grew 2.3 
percent last year in the face of a pandemic. Very quickly, do 
you believe that data?
    Mr. Powell. It is always a good question, and I don't have 
anything new to say on that. We don't have the kind of 
transparency into their data collection that we have for many 
other nations. But directionally, it is probably about right. 
We don't know how precise it is or how accurate it is in 
measuring activity, but it is probably better at measuring the 
change than the level, if you know what I mean.
    Mr. Kustoff. Thank you, Chair Powell. My time has expired. 
I yield back. Thank you, sir.
    Chairwoman Waters. Thank you all, so very much. And I would 
like to thank our distinguished witness for his testimony here 
today.
    The Chair notes that some Members may have additional 
questions for this witness, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to this witness and to place his responses in the record. Also, 
without objection, Members will have 5 legislative days to 
submit extraneous materials to the Chair for inclusion in the 
record.
    This hearing is adjourned.
    [Whereupon, at 12:58 p.m., the hearing was adjourned.]

                            A P P E N D I X

                           February 24, 2021
                           
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