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


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

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

                             HYBRID HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 30, 2021

                               __________

       Printed for the use of the Committee on Financial Services

                          Serial No. 117-50
                          
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                              __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
46-009 PDF                 WASHINGTON : 2022                     
          
-----------------------------------------------------------------------------------   
 
                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             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            ANN WAGNER, Missouri
ED PERLMUTTER, Colorado              ANDY BARR, Kentucky
JIM A. HIMES, Connecticut            ROGER WILLIAMS, Texas
BILL FOSTER, Illinois                FRENCH HILL, Arkansas
JOYCE BEATTY, Ohio                   TOM EMMER, Minnesota
JUAN VARGAS, California              LEE M. ZELDIN, New York
JOSH GOTTHEIMER, New Jersey          BARRY LOUDERMILK, Georgia
VICENTE GONZALEZ, Texas              ALEXANDER X. MOONEY, West Virginia
AL LAWSON, Florida                   WARREN DAVIDSON, Ohio
MICHAEL SAN NICOLAS, Guam            TED BUDD, North Carolina
CINDY AXNE, Iowa                     DAVID KUSTOFF, Tennessee
SEAN CASTEN, Illinois                TREY HOLLINGSWORTH, Indiana
AYANNA PRESSLEY, Massachusetts       ANTHONY GONZALEZ, Ohio
RITCHIE TORRES, New York             JOHN ROSE, Tennessee
STEPHEN F. LYNCH, Massachusetts      BRYAN STEIL, Wisconsin
ALMA ADAMS, North Carolina           LANCE GOODEN, Texas
RASHIDA TLAIB, Michigan              WILLIAM TIMMONS, South Carolina
MADELEINE DEAN, Pennsylvania         VAN TAYLOR, Texas
ALEXANDRIA OCASIO-CORTEZ, New York   PETE SESSIONS, 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:
    September 30, 2021...........................................     1
Appendix:
    September 30, 2021...........................................    41

                               WITNESSES
                      Thursday, September 30, 2021

Powell, Hon. Jerome H., Chairman, Board of Governors of the 
  Federal Reserve System.........................................     6
Yellen, Hon. Janet L., Secretary, U.S. Department of the Treasury     4

                                APPENDIX

Prepared statements:
    Powell, Hon. Jerome H........................................    42
    Yellen, Hon. Janet L.........................................    47

              Additional Material Submitted for the Record

Powell, Hon. Jerome H:
    Written responses to questions for the record submitted by 
      Chairwoman Waters..........................................    52
Yellen, Hon. Janet L.:
    Written responses to questions for the record submitted by 
      Chairwoman Waters..........................................    60
    Written responses to questions for the record submitted by 
      Representative Emmer.......................................    73
    Written responses to questions for the record submitted by 
      Representative Hill........................................    69
    Written responses to questions for the record submitted by 
      Representative Posey.......................................    63
    Written responses to questions for the record submitted by 
      Representative Williams....................................    61

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

                              ----------                              


                      Thursday, September 30, 2021

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:04 a.m., in 
room 2128, Rayburn House Office Building, Hon. Maxine Waters 
[chairwoman of the committee] presiding.
    Members present: Representatives Waters, Velazquez, Meeks, 
Scott, Green, Cleaver, Himes, Foster, Beatty, Vargas, Gonzalez 
of Texas, Lawson, San Nicolas, Axne, Casten, Pressley, Torres, 
Lynch, Adams, Tlaib, Dean, Garcia of Illinois, Garcia of Texas, 
Williams of Georgia, Auchincloss; McHenry, Lucas, Posey, 
Luetkemeyer, Huizenga, Wagner, Barr, Williams of Texas, Hill, 
Emmer, Zeldin, Loudermilk, Mooney, Davidson, Budd, Kustoff, 
Hollingsworth, Gonzalez of Ohio, Rose, Steil, Gooden, Timmons, 
Taylor, and Sessions.
    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 participating remotely to 
keep themselves muted when they are not being recognized by the 
Chair. The staff has been instructed not to mute Members, 
except when a Member is not being recognized by the Chair, and 
there is inadvertent background noise.
    Also, if you are participating remotely today, please keep 
your camera on. And if you choose to attend a different remote 
proceeding, please turn your camera off.
    As a reminder to all Members, we will conclude today's 
hearing at 12:15 p.m. Members who were unable to ask questions 
at our March 23rd hearing with Secretary Yellen and Chair 
Powell will be given priority to ask their questions today, and 
we will return to our normal order of recognition once those 
Members have asked their questions.
    Today's hearing is entitled, ``Oversight of the Treasury 
Department's and Federal Reserve's Pandemic Response.''
    I now recognize myself for 4 minutes to give an opening 
statement.
    Welcome back, Secretary Yellen and Chair Powell. As this 
pandemic continues, the Biden Administration and Congressional 
Democrats continue to work around the clock to get essential 
relief to individuals, families, and small businesses across 
the country. Following the catastrophic failure of the Trump 
Administration to tackle the pandemic crisis, the Biden 
Administration and Democrats in Congress swiftly moved to enact 
the American Rescue Plan, which provided $1.9 trillion to 
address the impacts of COVID-19.
    The legislation included billions in funding to support 
individuals and families, including renters, homeowners, and 
people experiencing homelessness, as well as small businesses, 
during this crisis. We are also working together to put 
President Biden's Build Back Better agenda into action by 
making long-overdue investments into the nation's housing 
programs, childcare, education, workforce, and other critical 
aspects of our economy, all while being completely paid for.
    Democrats are also working to address the past failures of 
the Trump Administration's approach to the pandemic. For 
example, we are working with Secretary Yellen and the Treasury 
Department to correct administratively-burdensome requirements 
initiated by Republicans that made it harder for renters and 
landlords to obtain relief in the earlier versions of the 
Emergency Rental Assistance Program. My legislation, the 
Expediting Assistance to Renters and Landlords Act of 2021, 
would further speed up relief and cut down unnecessary barriers 
that are standing in the way of aid for renters and landlords.
    Of course, the Federal Reserve has also played a part in 
the response to the pandemic through the creation of emergency 
facilities that have tackled the crisis. Until they were 
prematurely shut down by former Treasury Secretary Mnuchin, 
these facilities played a vital role in stabilizing financial 
markets last year. Moving forward, our committee is committed 
to exploring ideas to ensure that facilities like these can 
more directly protect workers and support small businesses, as 
well as State and local governments, the next time there is a 
crisis.
    Amid Democrats' continuing efforts to ensure that relief 
reaches communities across the country and that our economy is 
strong for the future, Republicans continue to operate 
recklessly. Even now, Republicans are threatening to throw the 
economy into unnecessary turmoil by blocking legislation to 
suspend the debt ceiling. It is completely unacceptable for 
Republicans to hold our nation's economy hostage, especially in 
the middle of this continuing public health crisis and when 
fully one-fourth of the increase in the debt ceiling is 
attributed to Trump's tax scam for the rich.
    Secretary Yellen, Chair Powell, I expect to hear your 
thoughts on these issues and to hear more about what will 
happen if Republicans force the country to default. I also look 
forward to discussing your ongoing work to respond to the 
pandemic today.
    I now recognize the ranking member of the committee, the 
gentleman from North Carolina, Mr. McHenry, for 5 minutes.
    Mr. McHenry. Today, the Financial Services Committee is 
holding its second statutorily-required quarterly hearing on 
the Biden Administration's pandemic response. Now, the only 
problem is that this hearing should have actually occurred in 
the second quarter. It is now the third quarter. But then 
again, that just perfectly encapsulates the incompetence and 
dysfunction of a Democrat-run Washington, where Democrats run 
the House, the Senate, and the White House.
    So, let us just review briefly. The incompetence of the 
Rental Assistance Program, which Republicans have highlighted 
since March--there is no solution in sight. The so-called, 
``Biden agenda'' appears to be on the rocks. And Democrats are 
no closer to raising the debt ceiling ahead of the October 18th 
deadline than they were in August when it expired.
    And what do all of these problems have in common? They were 
foreseeable. They are known things, not just to Democrats, but 
to the world. And now, markets are taking notice. Our allies, 
and our adversaries are watching closely to see what happens 
next.
    But in the midst of this chaos, we at least have you two 
individuals in your respective seats. And the two of you 
instill confidence in our financial system, especially in a 
moment like this. And that credibility of your institutions is 
deeply connected with each one of you right now.
    Chairman Powell, your decisive action helped prevent the 
worst of the economic impacts of COVID. You are thoughtful, 
deliberate, and transparent. The antithesis, I would say, of 
dangerous. And to think otherwise is, frankly, reckless and 
unmoored from reality. And anyone who would say that--well, 
frankly, I appreciate their courage to speak their truth. 
Chairman Powell, our country will be better off with your 
continued leadership at the Federal Reserve.
    Secretary Yellen, your experience as Fed Chair and steady 
hand throughout the financial crisis made you a natural pick 
for the Treasury Department, and I am glad you are in your 
seat. That is why I am sorry you are in such a bad situation, 
given this Administration's strategy.
    Bad strategy and a worse fiscal plan from a Democrat-run 
Washington will have consequences, I believe. Consumer prices 
continue to rise. Businesses can't find workers. And the 
government, because of overspending, will not be able to pay 
its bills in a little more than 2 weeks.
    So, what is the plan? All I have heard from Democrats this 
year is a plan to spend more money--$2 trillion in March, more 
than $5 trillion now. And $5 trillion was a compromise, I want 
to remind you that Bernie Sanders and the progressives wanted a 
$6 trillion reconciliation package, and President Biden 
proposed a $6 trillion budget in June. But Democrats couldn't 
agree on that either. So, here we are.
    To be clear, the Biden Administration's Treasury Department 
can't even keep track of the $46 billion of rental assistance. 
So, how are the American people supposed to trust Democrats 
with another $5.5 trillion?
    This isn't a plan. Frankly, it is a heist. The Democrat-run 
Washington tax-and-spend policies will only increase prices 
more for consumers. And they are using you, Madam Secretary, 
and your credibility to sell this bad agenda.
    Over the last several weeks, you have called on Congress to 
address the debt limit. I couldn't agree more. Yesterday, the 
House passed a debt ceiling bill that is doomed in the Senate. 
It was political theater, and they know it, we know it, and the 
American people, in fact, know it as well.
    It is theater designed to distract Americans from the fact 
that Democrats have no idea how to govern. They have known this 
deadline was coming. They knew it the day they took control of 
the Senate. They knew it the day that President Biden was sworn 
into office, and they knew it the day that the Treasury 
Secretary was confirmed.
    The Democrats have been in charge of our country for nearly 
a year, and they did nothing to prepare for this moment--well, 
except spend more money and bring the date forward by which we 
have to address the debt ceiling.
    And I want to be clear: The U.S. Government is run and 
controlled by Democrats. It is defined by dysfunction, 
incompetence, and fiscal irresponsibility. Late in the game, 
asking Republicans to bail out your agenda so you can pass more 
spending is, frankly, absurd. This is no way to run the 
country.
    I yield back.
    Chairwoman Waters. Thank you, Ranking Member McHenry.
    I now recognize the gentleman from Texas, Mr. Green, for 1 
minute.
    Mr. Green. Thank you, Madam Chairwoman.
    Madam Chairwoman, we must raise the debt ceiling. Raising 
the debt ceiling does not authorize new spending. Raising the 
debt ceiling allows the United States to pay its existing 
debts. Congress has raised or suspended the debt ceiling on a 
bipartisan basis 78 times since 1960. There are no secret 
weapons in the Treasury's arsenal that will save us from 
default if this body fails to act responsibly and swiftly.
    Madam Chairwoman, we passed the CARES Act and other 
pandemic relief legislation. Let us come together again and 
stand behind the debts of our nation with the full faith and 
credit of the United States of America. We must raise the debt 
ceiling.
    I yield back.
    Chairwoman Waters. I now want to welcome our distinguished 
witnesses today, whom I believe need little introduction to 
members of the committee.
    First, I want to welcome the Honorable Janet Yellen, 
Secretary of the United States Department of the Treasury, who 
has served in that role since her confirmation in January of 
this year.
    Our second distinguished witness today is the Honorable 
Jerome Powell, the Chair of the Board of Governors of the 
Federal Reserve System, who has served in that role since 
February of 2018.
    You will each have 5 minutes to summarize your testimony. 
You should be able to see a timer on the screen in front of you 
that will indicate how much time you have left. And, without 
objection, your written statements will be made a part of the 
record.
    Secretary Yellen, you are now recognized for 5 minutes to 
present your testimony.

  STATEMENT OF THE HONORABLE JANET L. YELLEN, SECRETARY, U.S. 
                   DEPARTMENT OF THE TREASURY

    Secretary Yellen. Thank you, Chairwoman Waters, Ranking 
Member McHenry, and members of the committee. It is a pleasure 
to testify today.
    We are in the midst of a fragile, but rapid, recovery from 
the pandemic-induced recession. While our economy continues to 
expand and recapture a substantial share of the jobs lost 
during 2020, significant challenges from the Delta variant 
continue to suppress the speed of recovery and present 
substantial barriers to a vibrant economy. Still, I remain 
optimistic about the medium-term trajectory of our economy, and 
I expect we will return to full employment next year.
    A rebound like this was never a foregone conclusion. In 
fact, the American recovery is stronger than those of other 
wealthy nations. One key factor for our overperformance is the 
policy choices the Congress has made over the past 18 months. 
Those choices include the passage of the CARES Act, the 
Consolidated Appropriations Act, and the American Rescue Plan.
    Treasury, as you know, was tasked with administering a 
large portion of the relief dollars in those bills, and when we 
last met, our Department was busy standing up programs to help 
individual families, State Governments, and organizations of 
every size in between. While we still have much more work to 
do, we have made significant progress, and I wanted to give you 
an update.
    Let us start with families. In July, our Department started 
sending the monthly expanded child tax credit payments to the 
families of nearly 60 million children across the country. To 
date, $46 billion in payments have been made, and we are 
already seeing the impact. Analysis by the Census Bureau found 
that after the first payments in July, food insecurity among 
families with children dropped 24 percent.
    As for State, local, Tribal, and Territorial Governments, 
COVID-19 decimated their budgets. There were mass layoffs, and 
to end the health and economic emergencies, we knew that 
communities would need funding to hire educators to bring kids 
back to school, for example, or frontline workers to administer 
the vaccine. The American Rescue Plan included $350 billion to 
that end, and those dollars are, indeed, helping the machinery 
of local governments get up and running. States and localities 
can rely on relief money that is available instead of resorting 
to painful budget cuts.
    Congress rightly designed the State and local program with 
flexibility in mind. I think many of us knew the recovery could 
run up against some unforeseen challenges, and we wanted 
communities to be able to devote resources where and when they 
saw fit. I want to note that this flexibility is paying off 
now, especially with the spread of the Delta variant. Harris 
County, Texas, for instance, has used this funding to boost its 
immunization rate, offering $100 to each person who gets their 
first vaccine dose.
    For the relief dollars not yet out the door, Treasury is 
doing everything it can to expedite their delivery. The 
Emergency Rental Assistance Program is one example. Prior to 
the pandemic, there was essentially no national infrastructure 
to get money from government coffers to renters and landlords. 
Building that infrastructure has been a massive undertaking for 
States, localities, and Tribes.
    The program is scaling up quickly, with 1.4 million 
payments made to help struggling renters keep a roof over their 
heads. Still, too much of the money remains bottlenecked at the 
State and local levels. That is why our Treasury team has 
worked to eliminate every piece of red tape possible in order 
to ensure more payments can get to renters and landlords, but 
States and localities must also work to remove barriers that 
can speed up distribution of rental assistance funds.
    I will end my remarks there, except to say this: It is 
imperative that Congress address the debt limit. If not, our 
current estimate is that Treasury will likely exhaust its 
extraordinary measures by October 18th. At that point, we 
expect Treasury would be left with very limited resources that 
would be depleted quickly.
    America would default for the first time in history. The 
full faith and credit of the United States would be impaired, 
and our country would likely face a financial crisis and 
economic recession as a result. We must address this issue to 
honor commitments made by this and prior Congresses, including 
those made to address the health and economic impact of the 
pandemic. It is necessary to avert a catastrophic event for our 
economy.
    Representatives, the debt ceiling has been raised or 
suspended 78 times since 1960, almost always on a bipartisan 
basis. My hope is that we can work together to do so again and 
to build a stronger American economy for future generations.
    Thank you, and I am pleased to take your questions.
    [The prepared statement of Secretary Yellen can be found on 
page 47 of the appendix.]
    Chairwoman Waters. Thank you, Secretary Yellen.
    Chair Powell, you are now recognized for 5 minutes to 
present your testimony.

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

    Mr. Powell. Thank you, Chairwoman Waters, Ranking Member 
McHenry, and members of the committee, for the opportunity to 
discuss the measures we have taken to address the hardship 
wrought by the pandemic.
    Since we last met, the economy has continued to strengthen. 
Real GDP rose at a robust pace in the first half of the year, 
and growth is widely expected to continue at a strong pace in 
the second half. The sectors most adversely affected by the 
pandemic have improved in recent months, but the rise in COVID-
19 cases has slowed the recovery.
    Household spending rose at an especially rapid pace over 
the first half of the year, but flattened out in July and 
August, as spending softened in COVID-sensitive sectors. 
Additionally, in some industries, near-term supply constraints 
are restraining activity.
    As with overall economic activity, conditions in the labor 
market have continued to improve. Demand for labor is very 
strong, and job gains averaged 750,000 per month over the past 
3 months. In August, however, gains slowed markedly, with the 
slowdown concentrated in sectors most sensitive to the 
pandemic.
    The unemployment rate was 5.2 percent in August, and this 
figure understates the shortfall in employment, particularly as 
participation in the labor market has not moved up from the low 
rates that have prevailed for most of the past year. Factors 
related to the pandemic appear to be weighing on employment 
growth. These factors should diminish with progress on 
containing the virus.
    The economic downturn has not fallen equally on all 
Americans, and those least able to shoulder the burden have 
been the hardest hit. In particular, despite progress, 
joblessness continues to fall disproportionately on lower-wage 
workers in the service sector and on African Americans and 
Hispanics.
    Inflation is elevated and will likely remain so in the 
coming months before moderating. As the economy continues to 
reopen, we are seeing upward pressure on prices, particularly 
due to supply bottlenecks in some sectors. These effects have 
been larger and longer-lasting than anticipated, but they will 
abate, and as they do, inflation is expected to drop back 
toward our longer-run 2 percent goal.
    The process of reopening the economy is unprecedented. As 
it continues, bottlenecks, hiring difficulties, and other 
constraints could again prove to be greater and more enduring 
than anticipated, posing upside risks to inflation. If 
sustained higher inflation were to become a serious concern, we 
would certainly respond and use our tools to ensure levels that 
are consistent with our goal.
    The path of the economy continues to depend on the course 
of the virus, and risks to the outlook remain. The Delta 
variant has led to a surge in cases, causing significant human 
suffering and slowing the recovery. Continued progress on 
vaccinations would support a return to more normal economic 
conditions.
    The Fed's policy actions are guided by our dual mandate to 
promote maximum employment and stable prices, along with our 
responsibility to promote the stability of the financial 
system. In response to the crisis, we took broad and forceful 
measures to support the flow of credit and to promote the 
stability of the financial system.
    Our actions, taken together, helped unlock more than $2 
trillion of funding to support businesses large and small, 
nonprofits, and State and local governments between April and 
December of 2020. This helped keep organizations from 
shuttering and put employers in a better position to keep 
workers on and to hire them back as the recovery continues.
    These programs have served as a backstop to key credit 
markets and helped to restore the flow of credit from private 
lenders. We have deployed them to an unprecedented extent. Our 
emergency lending tools require the approval of the Treasury, 
and are available only in unusual and exigent circumstances, 
such as those brought on by this crisis.
    Many of these programs were supported by CARES Act funding. 
Those facilities provided essential support through a very 
difficult year and are now closed. The Fed completed its sales 
of assets from the Secondary Market Corporate Credit Facility 
on August 31st. We were able to wind down the facility rapidly 
and efficiently, with no adverse impact on credit conditions.
    We also recently closed the Paycheck Protection Program 
Liquidity Facility (PPPLF) to new lending and are managing the 
paydown of assets in our other CARES Act facilities as they 
wind down. We continue to analyze their efficacy and to review 
the lessons learned.
    The Fed's actions affect communities, families, and 
businesses across the country. Everything we do is in service 
to our public mission. We will do all we can to support the 
economy for as long as it takes.
    Thank you. I look forward to your questions.
    [The prepared statement of Chairman Powell can be found on 
page 42 of the appendix.]
    Chairwoman Waters. Thank you very much, Chair Powell.
    I now recognize myself for 5 minutes for questions.
    Secretary Yellen, your Department reports that as of August 
21st, $7.7 billion in emergency rental assistance had been 
allocated to households, assisting approximately 2 million 
renters. Although spending has increased over the past several 
months, I think we are all concerned that the pace of delivery 
of this critical assistance is not happening quickly enough.
    Can you talk about the challenges you have faced after 
taking over oversight of ERA1 from the Trump Administration? 
What do you believe are the most significant improvements to 
the program guidance you have made, and what impact have you 
seen?
    Secretary Yellen. Yes, thank you for that question.
    This is a critically important program that Treasury has 
been very focused on, in expediting the delivery of these 
rental assistance funds to those who need them.
    As I mentioned in my opening statement, getting these funds 
out has involved creating a national infrastructure where none 
existed before, and that has been a very difficult and slow 
process. Treasury has done everything possible to facilitate 
getting these programs up and running around the country, and 
particularly, we have tried to give States and localities 
flexibility to administer the program in ways that are 
appropriate for different communities to reduce the paperwork 
requirements, while also making sure that we have 
accountability and transparency. We have provided technical 
assistance and working to provide more technical assistance, 
and I do think we are seeing a payoff.
    As I mentioned, we have had 1.4 million renters helped by 
this assistance, and the pace at which it is flowing out is 
increasing. Also, I would note that the Act requires Treasury 
to begin to reallocate funds on September 30th from those 
localities that either are not effective in getting assistance 
out or have less need for the funds, and to reallocate them to 
those that are more effective and have demonstrated need.
    Chairwoman Waters. Thank you very much. And I want to thank 
you and your team for working with me on H.R. 5196, the 
Expediting Assistance to Renters and Landlords Act, which would 
make it easier for both renters and landlords to apply for 
assistance and provide for the deeper involvement of Treasury 
to support grantees to get the funds out the door.
    Are there particular provisions that you think would aid 
Treasury's efforts to make the Rental Assistance Program more 
successful? You have given us quite a bit of information about 
what you have been involved with, but is there anything else 
you would like to share?
    Secretary Yellen. Chairwoman Waters, we are very supportive 
of your efforts to try to put in effect changes that would 
expedite the delivery and effectiveness of this program, and we 
look forward to continuing to work with you. I think we have 
offered substantial technical assistance, and we absolutely 
want to work with you to make sure this program is as effective 
as possible.
    Chairwoman Waters. Thank you very much.
    The gentleman from North Carolina, Mr. McHenry, who is the 
ranking member of the committee, is now recognized for 5 
minutes.
    Mr. McHenry. Thank you.
    Chairman Powell, I know it is the policy of the Federal 
Reserve to not comment on fiscal policy, but fiscal policy does 
impact the Fed's economic projection, does it not?
    Mr. Powell. Yes, it does. We make assumptions about fiscal 
policy. And then, once it is enacted, we would put that into 
our models.
    Mr. McHenry. Okay. But your public models are a statement 
about current law rather than proposed policy, is that largely 
correct?
    Mr. Powell. We don't really publish a forecast as the 
Federal Reserve. Individual participants publish their 
forecasts in the Summary of Economic Projections, but that 
would include their personal assessments of likely fiscal 
actions.
    Mr. McHenry. Okay. About these fiscal actions, Secretary 
Yellen, I said this in my opening statement, and I will say 
this to both of you again. I am grateful, as an American, that 
you both are in the seats that you are in right now, because we 
are in a special circumstance here in the fall this year. It 
was a foreseeable, slow-moving disaster, but here we are.
    But the credibility of your relevant agencies and the 
credibility of you two individuals is of substance right now 
and very important to us as the American Government. So, 
Secretary Yellen, you said in July, right before the debt limit 
was reinstated, the CBO said Treasury would probably run out of 
cash sometime in the first quarter of next year--or fiscal 
year, most likely in October or November.
    Secretary Yellen, you began exercising Treasury's authority 
to take extraordinary measures to prevent a default back in 
August. Is that correct?
    Secretary Yellen. Yes. The debt limit, the suspension 
expired on August 1st, and we began using extraordinary 
measures to remain under the debt ceiling.
    Mr. McHenry. But those extraordinary measures are just a 
band-aid for a period of time, right?
    Secretary Yellen. As I indicated, we expect them to be 
exhausted on October 18th.
    Mr. McHenry. And it would be a disaster if we did not raise 
the debt limit?
    Secretary Yellen. It would be a catastrophe if Congress 
failed to raise the debt ceiling.
    Mr. McHenry. Here is the deal for Republicans. Democrats 
control the House and the Senate and the White House. And since 
January 20th, the approach of this Congress is that they do not 
need Republican votes to do anything. That has been the 
approach.
    And now, they want a political cover in the midst of this 
massive amount of new spending to have Republicans raise the 
debt ceiling. That is really the request.
    Here is my question to you, Secretary Yellen. For the seat 
you sit in, do you care whether or not the debt limit is raised 
with Republican votes, or do you just care if it is raised?
    Secretary Yellen. I think it is important that this be done 
on a bipartisan basis. I think it should be bipartisan, in 
recognition of the fact that both Republican Administrations 
and Congresses and Democratic ones have run budget deficits for 
most of the postwar period, with only a few years serving as an 
exception.
    And that requires, on a regular basis, raising the debt 
ceiling. The need to do so has nothing to do with future 
spending or tax plans that haven't been enacted.
    Mr. McHenry. Under the circumstances--
    Secretary Yellen. It is necessary to pay our bills.
    Mr. McHenry. I understand, Secretary Yellen.
    Secretary Yellen. And Republicans and--
    Mr. McHenry. Secretary Yellen?
    Secretary Yellen. --Democrats need to share that 
responsibility.
    Mr. McHenry. Secretary Yellen? As I said to you on the 
phone last week, I have been a part of every single debt 
ceiling increase for the last decade, every fiscal consequence 
of Congress. And some of them have been very bad, but I have 
tried to make things better. I have been a part of the solution 
for the last decade.
    And the call that I received from you last week was the 
first outreach I have had from this Administration to do 
something on a bipartisan basis, and you called me to raise the 
debt ceiling. Not with a plan, not for a fiscal plan, not for 
my buy-in, but simply for my vote. And that, to me, speaks 
volumes.
    Now, I am grateful for the outreach from you, but it speaks 
to the larger issue for the Administration. And I don't envy 
the position you are in. I don't. Because the bad strategy from 
this White House and the leadership of this House and Senate is 
showing that they don't want Republican votes.
    We did bipartisan bills last Congress, in the midst of 
COVID, bipartisan bills, major bipartisan bills. We can work 
together in a responsible manner. But to ask for my vote the 
week before it comes up in the House is not in keeping with the 
realities of the situation.
    We have the tools. We have the votes to get this thing done 
through Congress. It is just a question of who votes for it.
    Secretary Yellen. I would like to point out that in 2017, 
when the White House and both Houses of Congress were 
controlled by the Republicans, and a reconciliation bill was in 
progress that led to the 2017 tax cuts, the debt ceiling was 
raised, and it was done on a bipartisan basis.
    [Gavel sounding.]
    Mr. McHenry. In 2011 and 2013, I voted for a bill that 
President Obama signed. So, I am willing to participate in a 
bipartisan way.
    Chairwoman Waters. The gentleman's time has expired.
    Mr. McHenry. It is just a question of who votes for it and 
the circumstances of $7 trillion of new spending this year.
    Chairwoman Waters. The gentleman from New York, Mr. Meeks, 
who is also the Chair of the House Committee on Foreign 
Affairs, is now recognized for 5 minutes.
    Mr. Meeks. Thank you, Madam Chairwoman.
    And I have to just say initially that I am kind of shocked 
at Ranking Member McHenry saying that because he wasn't asked 
for a vote, something is going to determine whether or not 
American people, Democrats and Republicans, will suffer if we 
don't raise this debt ceiling. And I have been here for 22 
years between whether it is Democratic or Republican 
Administrations, and each time, when it came to the credit of 
the United States and our economy, it didn't make a difference 
to me whether or not the Administration was Democrat or 
Republican or whether or not someone called me to ask me for my 
vote. I am here to try to do the best thing for the American 
people, not play politics.
    And when it comes to the credit for the United States and 
the economy moving on, it is not about who is the President or 
who called and asked me for a vote. It is about doing the right 
thing for the American people, Democrats and Republicans. And 
moving up this debt to make sure that we don't default on our 
debts is essential to that, and it is essential to our 
responsibility as Members of Congress, and not to say, ``Oh, 
nobody called me for a vote.'' That is simply not our 
responsibility.
    Madam Secretary, there are consequences if we don't pass 
and increase the debt ceiling, like the increase in the 
corporate borrowing, for a home or a car, or through one's 
credit cards, of which folks on the other side will say, I 
don't have to deal with that, but then it is going to be--play 
politics with it.
    I was wondering, as we are recovering from this economy, 
what setbacks will a default on debt cost American households? 
Be they Democratic, Republican, Independent, nonvoters, what 
would it cost us?
    Secretary Yellen. I think it would be catastrophic for the 
economy and for individual families. Nearly 50 million seniors 
could stop receiving Social Security payments or see them 
delayed. Our troops would not know when they would get their 
next paycheck. We have 30 million families who rely on the 
monthly child tax credit, and they would not receive that 
relief, at least on time.
    And as we saw in 2011, when the debt ceiling was raised at 
the absolute last minute, and investor and consumer confidence 
was shaken in the run-up, we saw a marked increase in interest 
rates, and a marked drop in the stock market. And when U.S. 
interest rates go up and the credit rating of the United States 
was downgraded, that means higher interest payments for 
everyone who has a loan. Whether it is a small business, a 
homeowner with a mortgage, a credit card payment, anyone who 
borrows would see higher interest costs of their debt.
    Mr. Meeks. We must raise the debt ceiling for the benefit 
of the American people. I don't care what party they are from.
    Let me go to Chairman Powell. The Fed is rightly focused on 
controlling inflation while boosting employment, with the aim 
of guiding our economy back to its pre-pandemic normal. And at 
the European Central Forum, you mentioned that it is urgent for 
the Fed to resolve the tension between these two policy goals 
since taming prices by raising interest rates would weaken our 
labor market.
    As the Fed considers its monetary policy, how will you 
manage the tradeoffs between controlling prices and ensuring 
full employment, and how do you plan to resolve the tension 
between the two that you spoke on on Wednesday?
    Mr. Powell. That is the very difficult situation we find 
ourselves in. Almost all the time, inflation is low when 
unemployment is high, and so interest rates work on both 
problems now.
    Right now, we think we are far away from full employment. 
So, that gives us incentive to keep accommodative policy 
strong, to keep accommodative policy in place. Inflation is 
well above target, and we have an expectation that that high 
inflation will abate because we think the factors that are 
causing it are temporary and tied to the pandemic and the 
reopening of the economy.
    And what we say is, we just have to balance the two. But I 
would say our expectation is that inflation will come down, and 
we won't ultimately face that difficult tradeoff of having the 
two goals in tension.
    Mr. Meeks. Thank you. Madam Chairwoman, 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 Secretary Yellen, thank you for finally taking the time 
to appear before this committee. I know that the ranking member 
has formally requested your presence at least twice within the 
last few months, with no response.
    Last week, Treasury released the latest data on its 
Emergency Rental Assistance Program. As you know, $46 billion 
was made available to supposedly help COVID-impacted, low-
income families pay off their back rent and to help make mom-
and-pop property owners whole in Missouri's Second 
Congressional District and beyond.
    After more than 9 months and an entire summer of 
Republicans pushing Treasury, your own data still shows that 
more than 83 percent of your funds remain unspent, while 
millions of renters and property owners remain stuck in limbo. 
It certainly doesn't sound to me like it has been, in your 
words, ``an expedited program.''
    Now, I have a series of yes-or-no questions. Because my 
time is limited, I would appreciate and will insist upon a 
simple, ``yes,'' or ``no.''
    First, Madam Secretary, do you consider Treasury's 
Emergency Rental Assistance Program to be a success? Yes or no?
    Secretary Yellen. Yes.
    Mrs. Wagner. Amazing. Are you aware that in December of 
2020, when Congress appropriated the first $25 billion for the 
Emergency Rental Assistance Program, funds were to be used by 
December of 2021? Yes or no?
    Secretary Yellen. Yes.
    Mrs. Wagner. Do you know why Congress set that initial 
deadline?
    Secretary Yellen. To make sure that funds got to those who 
are in need.
    Mrs. Wagner. Right. To get it out the door to renters and 
landlords, ASAP. Madam Secretary, are you aware that just this 
past March, Democrats extended the timeframe for the Emergency 
Rental Assistance Program to the years 2022 and, are you ready 
for this, 2025, for the two respective programs? Yes or no?
    Secretary Yellen. Yes. There is significant need, and it 
will continue, and I think that was appropriate.
    Mrs. Wagner. In 2025, ma'am?
    Secretary Yellen. Yes.
    Mrs. Wagner. Does extending the program's deadline 
incentivize grantees to get funds out? By extending this, does 
it incentivize grantees to get funds out the door? Yes or no?
    Secretary Yellen. We are doing everything we can in the 
States and localities--
    Mrs. Wagner. Well, it is not fast enough.
    Secretary Yellen. --to get it out the door. As I indicated 
in my opening statement, and in a written response to a 
previous question, the infrastructure to do this had to be 
built, and the pace at which money is getting out the door is 
increasing.
    Mrs. Wagner. There was plenty of time for the 
infrastructure to be set. Our Fed programs, our Paycheck 
Protection Program (PPP), all of those expeditiously got money 
to people who needed it. This is a complete and abject failure.
    Secretary Yellen. I'm sorry. This was--
    Mrs. Wagner. Secretary Yellen, I want to read a quote to 
you from a Treasury official to journalists on September 24th, 
``To simply take the amount of money that has gone out in the 
first 5 or 6 months and then compare that to what was allocated 
for 4 or 5 years is just a meaningless number.''
    Secretary Yellen, is getting money out the door as soon as 
possible a meaningless gauge, particularly when we are talking 
about a pandemic-related eviction crisis? Yes or no?
    Secretary Yellen. Our objective is to get the money out the 
door.
    Mrs. Wagner. Well, it hasn't gotten out the door; 83 
percent of it is still sitting in Treasury coffers.
    Secretary Yellen. I'm sorry, 1.4 million--
    Mrs. Wagner. Ma'am, my constituents in St. Louis and I do 
not find it meaningless when we are talking about emergency 
assistance meant to keep individuals and families in their 
homes today during a pandemic, not years and years later, out 
to 2025.
    Moving on, Chairman Powell, with spiking energy prices and 
bottlenecks in supply chains around the world, there are 
concerns that a rise in inflation, may not be as transitory as 
you originally predicted. Given our current economic situation, 
and the fact that Democrats want to pass trillions and 
trillions more in spending, what makes you believe we will not 
see more sustained higher inflation, especially when we have 
seen significant consumer price increases, et cetera, et 
cetera?
    Mr. Powell. As I mentioned in my opening remarks, we do 
think that inflation will remain elevated until the supply-side 
bottlenecks are resolved, and we think that it will then move 
back down toward our goal.
    Mrs. Wagner. Timeframe?
    Mr. Powell. These are not things that we control. We don't 
control who supplies the semiconductors, for example.
    Mrs. Wagner. Not very transitory, sir. It seems pretty dug 
in.
    Mr. Powell. I would say that, remember, this is a function 
of supply-side bottlenecks over which we have no control. But I 
would say that we do expect in the first half of next year to 
see some relief, depending on the bottleneck in question, and 
inflation should move down over the course of that time.
    Mrs. Wagner. This is not a time to be spending trillions 
and trillions of dollars. I yield back.
    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.
    Secretary Yellen, I would like to pick up with what 
Chairwoman Waters was asking on the Emergency Rental Assistance 
Program (ERAP). Can you please explain the type of resistance 
the Treasury Department continues to face from some State and 
local governments? How is the Treasury Department trying to 
expedite this funding to tenants and landlords who need it the 
most despite these challenges?
    Secretary Yellen. In cases where States and other grantees 
launched their programs late, they faced an array of 
complications. The most significant involved obtaining the 
necessary authorizations from a grantee's governing body, and 
there were procurement challenges that arise when grantees have 
to engage outside partners and contractors.
    We have received a lot of feedback indicating that the 
guidance that Treasury has released really does give State and 
local programs the tools they need to move forward 
expeditiously. And I would also note the partnering with HUD to 
send out technical experts who can help grantees accelerate 
their programs and help them document best practices.
    Ms. Velazquez. Thank you.
    Early on, New York was one of the lowest-performing States 
in distributing ERAP funding. But significant progress has been 
made, and the State now ranks first nationally with more than 
$1.2 billion in payments made or obligated.
    Unfortunately, more assistance is needed. The Treasury 
Department is required to start reallocating excess first-round 
funds at the end of September. Can you tell us how this process 
will unfold?
    Secretary Yellen. Thank you for that question.
    Our objective will be to maximize the number of eligible 
households that are served by ensuring that resources of the 
program are appropriately aligned with each grantee's needs and 
ability to deliver reassistance. And reallocation will be 
really critical in achieving that objective.
    Our frameworkwe will identify localities that have excess 
funds. We will use clear expenditure benchmarks that increase 
over time. We will strive to keep reallocated funds within the 
same State when it is possible and afford a venue for voluntary 
reallocation among grantees.
    Ms. Velazquez. Thank you.
    Under the American Rescue Plan, Secretary Yellen, Democrats 
reauthorized the State Small Business Credit Initiative 
(SSBCI), providing $10 billion in Federal funds to support up 
to $100 billion in new loans and initiatives for small 
businesses through State, Territory, Tribal, and local 
Governments. Under the program, potential grantees must submit 
a completed application by February. How is the Treasury 
Department conducting outreach and working with local 
governments to ensure that completed applications are submitted 
on a timely basis?
    Secretary Yellen. Thank you. This is a very important 
program.
    Our staff have contacted each State individually to follow 
up on the application notice, to see if there are questions or 
if help is needed with a set of webinars. We are assisting in 
program design, in helping to develop programs, and with 
respect to Tribal Governments, we have been conducting 
extensive outreach.
    Ms. Velazquez. Thank you.
    And Chair Powell, would you agree with what Secretary 
Yellen is saying regarding raising the debt ceiling?
    Mr. Powell. Yes, I think it is essential that the debt 
ceiling be raised in a timely fashion so we can pay our bills. 
And I think the consequences of a failure to do so would be 
potentially severe.
    Ms. Velazquez. Thank you. Madam Chairwoman, I yield back.
    Chairwoman Waters. Thank you very much. The gentleman from 
West Virginia, Mr. Mooney, is now recognized for 5 minutes.
    Mr. Mooney. Thank you, Madam Chairwoman.
    Secretary Yellen, do you believe that President Biden's 
reconciliation package proposal, the one with the $3.5 trillion 
in total spending, will cost zero and be fully paid for?
    Secretary Yellen. Yes, I do. We have a full program that 
the President has proposed to raise revenue that would cover 
the costs of the program. In the President's budget, of course, 
there are changes under consideration as this goes through 
Congress, but there are a host of revenue raisers, and I do 
believe it will be actually deficit-reducing beyond the first 
10 years of the program.
    Mr. Mooney. Okay, thank you.
    Yesterday, Speaker Pelosi claimed the same thing, that the 
Democrats' reconciliation proposal would cost zero, that it 
would be paid for. And President Biden said the same thing in a 
tweet earlier.
    Call me skeptical, but given the record of the Democrats in 
Congress here on runaway spending, I just don't believe it. And 
I am not the only one. The Washington Post called President 
Biden's claim that the bill would be budget-neutral, 
``misleading,'' and gave it a score of two Pinocchios.
    We are passing bills out of committee, I understand, 
without even Congressional Budget Office (CBO) scores, so we 
don't really know. And we have not done that before. That is a 
change in our policy.
    The truth is that we are spending at an alarming rate in 
this country. Since the COVID-19 pandemic began last year, the 
Federal Government has spent more than $5.3 trillion on relief. 
That is roughly $16,000 for every American.
    Our ballooning debt is not some abstract problem. Out-of-
control spending proposed by President Biden and being 
rubberstamped here in Congress will leave a mess that our 
children and grandchildren will have to clean up and pay for. 
The decisions we make today, 20 or 30 years from now, our 
children and grandchildren will have to pay this money back.
    I would like to move to a different aspect of the package. 
One of the attempted pay-fors in the package that is alarming 
to me is the tax increases that will make our economy less 
competitive. Secretary Yellen, my question is, the proposed 
corporate tax rate in the House reconciliation bill is 26.5 
percent. This actually moves us higher than Communist China's 
corporate tax rate of 25 percent. We are going to have a higher 
tax rate than a country that has been taking our jobs and has 
Communist ideology.
    Can you explain why raising our corporate tax rate above 
China's is a good idea, if you think it is? And do you think 
this would hurt our competitiveness with China and around the 
world?
    Secretary Yellen. Our companies are the most competitive 
and profitable in the world. The effective tax rate that they 
pay is very low, and recent studies suggest that among advanced 
countries, the United States has an effective tax rate that is 
among the lowest of countries around the world.
    We can certainly afford to take the corporate tax rate up 
to 26.5 percent, as in House Ways and Means, without negatively 
impacting a firm's performance. And we propose to do that in 
the context of an international agreement that received the 
support of over 130 countries worldwide to establish global 
minimum tax rates that will apply to other countries' firms.
    Right now, the United States is the only country with a 
global minimum tax rate on its multinational corporations. We 
propose to raise that, but at the same time, other countries 
will raise theirs much more. And that means that the 
competitiveness of American firms will be enhanced, and we will 
be reducing the incentives that exist in our tax law right 
now--
    Mr. Mooney. Thank you.
    Secretary Yellen. --to export jobs and profits.
    Mr. Mooney. Thank you. I don't know how much time I have 
left, but thank you, Secretary Yellen.
    One thing we have learned over the last several years is 
that we need to take the threat from China more seriously here 
in America. Making America less competitive--and despite what 
you said, raising our corporate tax rate makes us less 
competitive than our economic adversaries like China--is too 
high of a cost for all of this spending.
    Running up these massive debts that our children will have 
to pay back for this spending is just not right. So, despite 
what we are hearing and what many are saying, this 
reconciliation package will be expensive in terms of dollars 
and, frankly, to the future of our competitiveness in this 
country, racking up this debt, and I just fear we are going to 
pay for this for years to come.
    Thank you, Madam Chairwoman. I yield back the balance of my 
time.
    Chairwoman Waters. Thank you very much. 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 
our witnesses today.
    Certainly, as I have been listening, a lot of descriptive 
words were used, everything from, ``dysfunctional,'' to 
``meaningless,'' to ``irrational.'' Well, I could think of a 
lot of other words that I could use, but certainly, those words 
are appropriate to describe what Democrats inherited from the 
last Administration. Whether that is the irresponsibility of 
the past Administration, whether it is all the debt that was 
occurred because of the Trump Administration, I think those 
words are appropriate, Madam Chairwoman, just very misdirected 
by my colleagues. In my opinion, you should look at your own 
house and home before throwing stones, and especially when they 
are not appropriate.
    Now, with that said, to our two witnesses who have been 
very responsive, I say, thank you. And let me quickly get to my 
first question on the Federal Reserve.
    Chair Powell, we have had a lot of conversations about 
diversity. I want to thank you for responding and for 
continuing to increase your diversity. But as you know, 
recently, there have been two Federal Reserve Presidents who 
have left, quit, retired, bottom line immediately leaving or 
gone from the Federal Reserve Banks of Dallas and Boston.
    My question is--and you know where I am going with this--I 
would certainly be hopeful that we could increase our numbers 
in diversity beyond Raphael Bostic by asking that we use the 
Beatty Rule, patterned after the Rooney Rule, to do as we did 
with the Alaska Federal Reserve President, and make sure that 
in that interview process, we have an African American or a 
female. Do you have any comment on that?
    Mr. Powell. I do. Thank you, Mrs. Beatty.
    I can absolutely guarantee you that we will work hard in 
both of those processes to find and give a fair shot to diverse 
candidates for those two jobs as we do. And it will be a big 
focus of both of those processes.
    Mrs. Beatty. Thank you.
    Secretary Yellen, you will recall that back in 2016, then-
Treasury Secretary Lew made his historic announcement that 
Harriet Tubman would be the face on the $20 bill. I sent you a 
letter in early July, along with my colleague, Congressman 
Katko, requesting the committee to move forward with the Obama 
Administration's plan to put her on the face of the $20 bill.
    I understand your staff has been in discussion on this 
issue, and I am hoping to get a high-level overview and to ask 
you if there is any comment you can make on that?
    Secretary Yellen. Thank you for that question, 
Representative Beatty.
    We believe it is very important that our notes reflect the 
history and diversity of our country, and I couldn't possibly 
think of a better way to honor Harriet Tubman's legacy and her 
courage in fighting for the freedom of enslaved people and 
women's right to vote than seeing her on the $20 bill.
    Issuing notes, as you know, is a very lengthy process. It 
involves collaboration among a number of different agencies, 
and it is necessary to design new security and counterfeit 
features.
    Mrs. Beatty. Right.
    Secretary Yellen. And unfortunately, that means the lead 
time to redesign new bills and ensure their security is long. 
When Secretary Lew announced--
    Mrs. Beatty. Madam Secretary?
    Secretary Yellen. --announced--
    Mrs. Beatty. Madam Secretary, I am going to go to my rental 
question, because the clock is winding down, and we will follow 
up with your staff.
    Just prior to the new Administration coming into office, 
the former Administration rushed the regulations and questions 
for the Rental Assistance Program. Those regulations were so 
unworkable that States like my State--Ohio--and others were 
telling me that they weren't even sure if they would be able to 
distribute rental assistance funds under those guidelines.
    Secretary Yellen, isn't it true that the Secretary under 
the new Administration had to spend weeks going back and 
redoing all of that to make sure that the funds could actually 
be distributed?
    Secretary Yellen. That is correct.
    Ms. Beatty. Thank you. I want that to go on the record. 
Some of my colleagues wanted to drill down and make our 
Secretary answer those questions, so thank you.
    The last--
    Chairwoman Waters. Thank you very much. The gentlelady's 
time has expired.
    The gentleman from Ohio, Mr. Davidson, is now recognized 
for 5 minutes.
    Mr. Davidson. Thank you, Madam Chairwoman, and I thank our 
witnesses and our colleagues. I appreciate this hearing.
    Chairman Powell, you have extensive private-sector 
experience, and, of course, as Chairman of the Federal Reserve, 
you have a role in bank regulation. In your experience, do 
banks or lenders increase lines of credit unconditionally? 
Isn't there some level of underwriting involved? Wouldn't banks 
have problems with their regulators if they did no underwriting 
for a line of credit?
    Mr. Powell. Yes, of course, they are very careful in the 
lending they do.
    Mr. Davidson. I submit that it is perfectly rational for 
Congress to expect something in exchange for an increased line 
of credit. The plan presented is atrocious. It will never 
balance. It doesn't even propose to balance in 15, 20, 30, or 
100 years. There is no plan to quit bankrupting America, Madam 
Secretary.
    Now, thankfully, under the Federal Reserve's leadership and 
Section 13(3) authority, we had some facilities in place to 
prevent real financial calamity. Recently, our Subcommittee on 
National Security, International Development and Monetary 
Policy held a hearing to discuss the Federal Reserve's lending 
facilities under Section 13(3), and how those facilities were 
utilized prior to and since the passage of the CARES Act.
    I fear that some of my colleagues don't even understand how 
some of the products like bonds or margin calls work, as they 
have criticized programs where there is literally no buy side 
in the market. And, of course, the Federal Reserve stepped in 
to create a buy side and support the markets. I have heard 
colleagues say, ``Well, there are only two loans under the 
Municipal Liquidity Facility,'' for example, while there were 
hundreds of loans, and hundreds of billions of dollars of 
credit extended.
    How important are the 13(3) provisions to the financial 
stability of our country?
    Mr. Powell. They are very important but they are reserved 
for real economic emergencies, financial emergencies. And as 
you point out, they function, I think, very well in a crisis as 
backstops, that we put them in place and the private capital 
markets started working. And really, that is success. That is 
what success looks like.
    Mr. Davidson. Do you think 13(3) should ever be used for a 
political goal or as something to fulfill a dual mandate rather 
than an emergency?
    Mr. Powell. Actually, no, I don't. I think the current 
institutional arrangements are very good. I think we need the 
approval of the Treasury Secretary. Realistically, we work with 
Treasury, and we are constrained for very specific 
circumstances, unusual and exigent circumstances. There are a 
number of tests in the law, and I think it is an arrangement 
that works.
    Mr. Davidson. Thank you, Chairman Powell.
    Recently, Federal Reserve Governor Michelle Bowman gave a 
speech in which she discussed the evolution enhancement of bank 
supervision, particularly during the COVID pandemic. And in 
that speech, she stated that the Fed avoided overreacting and 
instead approached supervision in a more measured way that 
allowed banks the flexibility to work with their customers.
    There are a range of topics she has addressed, and others 
have, with bank regulation. I will just share this from her 
paper. She says, ``The goal of this initiative is to ensure our 
supervisory approaches accommodate a much broader range of 
activities while ensuring we don't create an unlevel playing 
field with unfair advantages or unfair disadvantages for some 
types of firms versus others.''
    And for that reason, I am working on a bill that would 
study the evolution of consumer finance and the viability of 
updating our prudential regulatory structure through 
consolidation of bank supervisors. Of course, there is some 
level of coordination the Fed does, but could either of you 
give an opinion on a scenario where the United States 
consolidates banking supervision?
    Mr. Powell. That is something we would have to look at. I 
know it is something that does tend to get looked at over 
intervals and it hasn't happened. I think each institution has 
a different role in our society. I know we have more bank 
regulators than other countries, but we do seem to work pretty 
well together.
    Mr. Davidson. Thanks for that. Secretary Yellen, obviously 
there are a lot of provisions and a large void in the digital 
asset space. In your opinion, what is a digital asset for 
purposes of tax reporting?
    Secretary Yellen. For purposes of tax reporting, I believe 
the IRS will issue detailed regulations which will answer that 
question, for the purposes of tax reporting.
    Mr. Davidson. Thank you. Our law has not really kept up 
with this, and frankly, it has led to regulation by enforcement 
with the SEC and a host of others. But I appreciated when you 
were Chair of the Fed, the faster payments initiative that got 
launched. A lot of this involves payments. But so much in the 
digital asset space isn't a currency or a payment system. There 
are a gazillion use cases, and it would be a shame to see the 
regulatory framework curtail that. And I look forward to seeing 
fintech flourish in the future.
    I yield back.
    Chairwoman Waters. Thank you. The gentleman from Florida, 
Mr. Lawson, is now recognized for 5 minutes.
    Mr. Lawson. Thank you, Madam Chairwoman, and Ranking Member 
McHenry.
    Chairman Powell, Floridians, unfortunately, have seen 
firsthand the impact of climate change and that impact is 
becoming worse as we experience more severe and frequent 
hurricanes and risks of rising sea levels. I am glad to see 
greater attention given to how we can better assess and manage 
climate-related risk.
    It is my understanding that many financial institutions 
conduct scenario analysis to assess credit market liquidity and 
operate risk related to transition risk [inaudible] physical 
risk like hurricanes, flooding, wildfires, and drought.
    Mr. Powell, is scenario analysis a good tool in assessing 
climate-related financial risk? Can you please discuss the 
difference between scenario analysis and stress testing? What 
other tools does the Federal Reserve have to assess climate-
related financial risk?
    Mr. Powell. Thank you. Our role, of course, is to make sure 
that the financial institutions we regulate and supervise 
understand and can manage their risks, including the risks from 
climate change, the financial risks from climate change.
    Scenario analysis is almost certainly going to be one of 
the principal tools for doing exactly that, and it is very 
different from stress tests. Scenario analysis, at this point, 
is about institutions really understanding what these risks 
will be, how they will develop over time, and what are the 
channels through which they will develop, and it is sort of 
early days in understanding how those risks will interact with 
the economy and with the financial system. Scenario analysis is 
meant to help do that, and we at the Fed are working on 
developing a program of scenario analysis. Many of the large 
institutions are doing so. As I mentioned, it's quite different 
from stress tests, which have consequences for distributions 
and that kind of thing.
    I think, overall, we see our job, as I mentioned, as making 
sure that these financial institutions understand the risks and 
can manage them, and that is just a lot of basic supervisory 
tools, understanding what they are doing and have the processes 
in place and the analytical tools in place and the focus, and 
that is what we will be doing.
    Mr. Lawson. Okay. Thank you. Secretary Yellen, I am 
concerned that small businesses, particularly within 
communities of color, will have lasting economic damage coming 
out of this pandemic. The American Rescue Plan extended 
assistance to small businesses by authorizing a $10 billion 
program called the State Small Business Credit Initiative, with 
$2.5 billion of these funds set aside for minority-owned 
businesses.
    In Florida, the problem of economic opportunity is waiting 
for the Treasury to release applications and requirements and 
program guides. When can we expect the guidance will be 
released, and can we share our Treasury plan to ensure that 
assistance goes to small businesses that will be highly 
impacted by the pandemic?
    Secretary Yellen. The State Small Business Credit 
Initiative is an extremely important program, and we are in the 
process of implementing it. We will absolutely make sure that 
it reaches small businesses that have been very severely 
affected by the pandemic, and certainly in underserved areas 
and communities of color.
    I think you know that Congress required that Treasury 
provide funds to States based on the extent of job losses that 
had been suffered, and it sets aside significant funds for 
businesses that are owned by socially- and economically-
disadvantaged individuals.
    So, we will make this funding available and provide 
technical assistance, working with communities to make sure 
that it is used as intended.
    Mr. Lawson. Okay. Thank you very much. And with that, I 
yield back.
    Chairwoman Waters. The gentleman yields back. The gentleman 
from North Carolina, Mr. Budd, is now recognized for 5 minutes.
    Mr. Budd. Thank you, Madam Chairwoman, and I thank the 
witnesses.
    The Federal Government's spending, and I am not even 
talking about debt but just the spending here, is expected to 
reach record highs this year, 2021, and Democrats are trying to 
dump trillions of dollars of what I believe is very reckless 
spending into an already-inflationary economy. As a percentage 
of GDP, our public debt has reached 125 percent in the second 
quarter.
    Secretary Yellen, very briefly, do you believe that there 
is a level of debt that is unsustainable in our economy, and if 
so, what is that number? And you can share that with me either 
in dollars or as a percentage of GDP.
    Secretary Yellen. I believe that the debt held by the 
public relative to GDP is around 105 percent, and that is a 
number that is higher than we have had during most of the 
postwar period in the United States. But it is not a number 
that I think is fiscally irresponsible or unsustainable.
    Interestingly--
    Mr. Budd. Madam Secretary, do you have a number that is a 
threshold, that is irresponsible, either in percentage or in 
dollars?
    Secretary Yellen. One way that I would judge that is by 
looking at the interest burden, the real interest burden on the 
debt. That really is the burden, a better measure of the burden 
it places on our economy. And this year, that interest burden 
has actually been negative. Interest rates have been 
exceptionally low. This dates back to before the financial 
crisis in 2008, and most economists believe that there are deep 
structural reasons why low interest rates are likely to 
continue. Even if nominal interest rates move back toward more 
normal levels--
    Mr. Budd. Let me ask--I am sorry to--
    Secretary Yellen. --that interest burden--
    Mr. Budd. --just because I want to be aware of the time 
constraints, thank you, Madam Secretary. If the interest rate 
was zero, what is irresponsible in percentage or dollars?
    Secretary Yellen. I think that if the real interest burden 
stays below--
    Mr. Budd. If it is as is--
    Secretary Yellen. --historical norms--I'm sorry. If 
interest rates are zero?
    Mr. Budd. If it is, let's say, zero. Let's say as is. Pick 
one of those, and let's say what is irresponsible as a 
percentage or total dollars of debt?
    Secretary Yellen. If interest rates are zero and negative 
in real terms, certainly we could have a substantially higher 
burden, although there are always risks pertaining to the path 
of interest rates that need to be taken into account.
    Mr. Budd. I understand. Thank you. Let me shift gears a 
bit. In one of my recent telephone town halls, I asked a poll 
question to those who were able to join me, ``Have you or your 
family noticed a sharp rise in prices for food, gas, or 
electricity?'' And 94 percent of the respondents--and it was a 
good sample size--said yes, inflation is eating away at the 
buying power of every single North Carolinian. Bottom line: 
Inflation is a tax on working Americans.
    Chairman Powell, I know that you have called the inflation 
that we are dealing with transitory, and boy, I sure hope you 
are right. But what would you tell people back in my district, 
especially those on fixed incomes, when they are struggling to 
make ends meet right now? What would you tell them?
    Mr. Powell. I would say that we are dealing with a very 
unusual event that is really part of the broader COVID event, 
that the economy is now reopening, and that we are hitting the 
supply-side bottlenecks. For example, it is hard to manufacture 
cars without semiconductors, which are in short supply, so car 
prices are going up, and lots of prices are being affected by 
supply-side constructions. We expect that those will abate, 
that they will lesson, and over time inflation will come back 
down. Exactly when that will happen is not possible to say, but 
I would say we should be seeing some relief in the coming 
months and over the course of the first half of next year.
    Mr. Budd. I hope you are right. The folks I talk to back in 
North Carolina are doubtful of that, but I do hope you are 
right.
    Chairman Powell, next question. In a July hearing before 
this committee, you were asked about Central Bank Digital 
Currencies (CBDCs) and their impact on stablecoins and other 
cybercurrencies. And you stated, and I think I quote you 
correctly here, ``You wouldn't need stablecoins. You wouldn't 
need cybercurrencies if you had a digital U.S. currency.''
    So, Mr. Chairman, as a matter of policy, is it your 
intention to ban or limit the use of cybercurrencies like we 
are seeing in China?
    Mr. Powell. No, and I immediately realized that I had 
misspoken there. I didn't mean--take the word, 
``cybercurrency,'' out of that sentence, and I would say it's 
fairly widely understood that Central Bank Digital Currencies 
could perform some of the--could make--
    Mr. Budd. But no intention to ban?
    Mr. Powell. No intention to ban, but stablecoins are like 
money market funds, they are like bank deposits, but they are, 
to some extent, outside the regulatory perimeter, and it is 
appropriate that they be regulated--same activity, same 
regulation.
    Mr. Budd. Thank you. I yield back.
    Chairwoman Waters. Thank you. The gentleman from Illinois, 
Mr. Casten, who is also the Vice Chair of our Subcommittee on 
Investor Protection, Entrepreneurship, and Capital Markets, is 
now recognized for 5 minutes.
    Mr. Casten. Thank you, Madam Chairwoman, and thank you so 
much to our witnesses. We are truly fortunate to have you at 
the helm, steering us through some past and future crises.
    I want to talk about those, but before that, I want to just 
talk about manufactured crises, which I would like to avoid. 
Congress, everybody on this call in some fashion has voted to 
approve our spending. Congress, everybody on this call in some 
fashion has voted to decide how much of that spending would be 
paid with tax revenues, and then somewhat uniquely, we give 
ourselves the authority to decide how much of the residual, 
which is paid with debt, we are going to pay for. It is 
political suicide. I am a co-sponsor and supporter of my 
friend, Mr. Foster's, bill, H.R. 3305, the End the Threat of 
Default Act, to take that tool away from Congress, because 
Congress has proven that we cannot be trusted with that 
responsibility.
    Secretary Yellen, without getting into the specifics of Mr. 
Foster's bill, would you support simply eliminating the debt 
ceiling so that we don't have to deal with this in the future 
and can focus on real crises?
    Secretary Yellen. Yes, I would, because I believe when 
Congress legislates expenditures and puts in place tax policy 
that determines taxes, those are the crucial decisions Congress 
is making, and if to finance those spending and tax decisions, 
it is necessary to issue additional debt, I believe it is very 
destructive to put the President and myself, the Treasury 
Secretary, in a situation where we might be unable to pay the 
bills that result from those past decisions.
    Mr. Casten. Thank you. I am glad to hear it, and we will 
hopefully try to get that through Congress.
    Moving on to past crises, Chair Powell, I think all of us, 
in all of our districts, are hearing about labor market 
tightness, and I think a lot of people are explaining that 
labor market tightness to justify preexisting political biases. 
As you know, and we have talked about, we saw unemployment go 
from 3.5 percent to almost 10 percent, and back down to 5.2 
percent, but I am much more concerned that workforce 
participation went from 63 percent to 61 percent and has stayed 
low. Can you just explain for the committee briefly what is 
driving the reduction in workforce participation and what, if 
anything, we can do to get that number back up, to make sure 
that employers have access to folks who are ready and able to 
work?
    Mr. Powell. I would be glad to. The two biggest parts of 
that are caretakers and retirees. So, that makes up a lot of 
the shortfall from where we were with labor force participation 
before the pandemic crisis. And within caretakers, some of that 
is going to be connected to schools not being open or people 
who are afraid to go into an unvaccinated workplace and are 
afraid of COVID, and things like that, and other reasons. That 
is a part of it, and that should abate over time.
    In terms of the retiree piece, it is not clear about that. 
I would say the lore is that people don't come out of 
retirement, except, I would say, all during the last few years 
of the very long expansion that ended with the pandemic, we 
were constantly surprised to the upside on participation, 
including older people staying in the workforce longer. I think 
my prior would be that we will get back a big chunk of the so-
called retirees and that we should be very open-minded about 
how much labor force participation can go up.
    The United States has low labor force participation 
compared to our advanced economy peers, and this is not 
something that has to be that way. It is not something that is 
good.
    Mr. Casten. Thank you. Certainly, when I talk to folks in 
my district, everybody kind of acknowledges that it is the 
boomers who retired who are creating a lot of their skills gap, 
and that is a harder challenge.
    Going back to you, Secretary Yellen, I think subsequent to 
your first Financial Stability Oversight Council (FSOC) meeting 
when you identified climate change as an emerging threat, 
President Biden issued an emergency order on climate financial 
risk, directing Agencies, including yours, to analyze and 
mitigate risks that climate change poses to the financial 
system. In the little time that we have left, can you give us 
any updates on status, milestones, and deliverables that the 
Treasury Department has in response to that Executive Order?
    Secretary Yellen. Yes. We are in the process of completing 
the report, and we expect to issue it in late October or early 
November, within the 180-day timeframe. And what we will be 
doing is looking at the work of individual regulators to 
incorporate climate change risks into their regulatory and 
supervisory activities and describing some of the challenges 
that they face in carrying that out.
    Mr. Casten. Thank you. I am out of time. I will clear my 
calendar to allow some time to read that week, and I yield back 
to the Chair.
    Chairwoman Waters. Thank you very much. The gentleman from 
Tennessee, Mr. Kustoff, is now recognized for 5 minutes.
    Mr. Kustoff. Thank you, Madam Chairwoman, for calling 
today's hearing, and thank you to the witnesses for appearing.,
    Secretary Yellen, there was an article in The Wall Street 
Journal dated September 15th, and the headline is, ``Yellen, 
IRS push Democrats to require banks to report taxpayer annual 
account flow.'' I want to read the first two paragraphs, just 
briefly.
    ``Treasury Secretary Janet Yellen and IRS Commissioner 
Charles Rettig pressed lawmakers Wednesday to give the Internal 
Revenue Service more information about taxpayer bank accounts 
as the Biden Administration tries to salvage its struggling tax 
compliance proposal.
    ``In letters to lawmakers, the administration officials 
again asked Congress to require banks to report annual inflows 
and outflows from bank accounts with at least $600, or at least 
$600 worth of transactions, a proposal aimed at letting the IRS 
target its audits more effectively. It would generate about 
$460 billion over a decade to cover the cost of Democrats' 
planned expansion of the social safety net and climate change 
policies, according to the administration.''
    Those are the first two paragraphs of the story.
    That is an accurate reflection of what you have done, 
correct?
    Secretary Yellen. Yes. We have proposed both augmenting the 
resources of the IRS so that it can hire qualified auditors, 
and augmenting the information flow so that the IRS gets 
insight into opaque sources of income, and both together, we 
believe, can serve to greatly address the $7 trillion estimated 
tax gap that we will see in this country--
    Mr. Kustoff. And Madam Secretary--
    Secretary Yellen. --over the next decade.
    Mr. Kustoff. --you would tell my constituents that they 
should not have any privacy concerns about what you are trying 
to do?
    Secretary Yellen. They should not, because this is a simple 
matter for banks that already file 1099-INT forms--
    Mr. Kustoff. Madam Secretary--
    Secretary Yellen. --with the IRS--
    Mr. Kustoff. --the IRS--
    Secretary Yellen. [Inaudible.]
    Mr. Kustoff. --information about taxpayers to ProPublica, 
that published their entire tax returns, their entire tax 
information. On the record, you tell my constituents, and all 
of the other Members here, and their constituents, that they 
should have no privacy concerns about banks reporting $600 or 
more in account value to the IRS.
    Secretary Yellen. What we have asked to have reported is 
the aggregate inflows and outflows from these accounts each 
year, on an annual basis, two additional pieces of information, 
not transaction-level data.
    And look, every wage-earner in this country has their wage 
income--
    Mr. Kustoff. At least $600, is that a correct statement?
    Secretary Yellen. We want to make sure that this can--
    Mr. Kustoff. That is different than transactions.
    Secretary Yellen. --by expanding--
    Mr. Kustoff. Those are values of $600.
    Secretary Yellen. There is--
    Mr. Kustoff. The Wall Street Journal is accurate, correct?
    Secretary Yellen. Excuse me?
    Mr. Kustoff. The Wall Street Journal's report is accurate, 
correct?
    Secretary Yellen. We did propose that. I don't believe it 
is an invasion of privacy. And look, the IRS gets a great deal 
of information that it needs in order to make sure that 
taxpayers comply with the Tax Code. It receives individual 
information on wages and salaries that are received, on 
dividends, on transactions, on--
    Mr. Kustoff. How did ProPublica receive this information 
from the IRS about the individual taxpayers?
    Secretary Yellen. Excuse me?
    Mr. Kustoff. How did ProPublica obtain the information from 
the IRS about taxpayer information?
    Secretary Yellen. Independent agencies and law enforcement 
are currently looking into that and attempting to figure out 
how that occurred. That is clearly a crime and an utterly 
unacceptable thing, and it will be prosecuted when it is 
understood, when these agencies--
    Mr. Kustoff. Your proposal purports to give more 
information to the IRS, drilling down to accounts of $600.
    Secretary Yellen. We want to make sure that individuals 
can't game the system by opening multiple accounts in order to 
evade the--
    Mr. Kustoff. And you give the IRS all of this other 
information about individuals.
    Last question, Madam Secretary, do you support the move of 
the United States Secret Service from the Department of 
Homeland Security to the Department of the Treasury?
    Secretary Yellen. I haven't taken a view on that.
    Mr. Kustoff. Thank you. I yield back my time.
    Chairwoman Waters. The gentleman from New York, Mr. Torres, 
is now recognized for 5 minutes.
    Mr. Torres. Thank you, Madam Chairwoman. I am appalled by 
the Republican gamesmanship around the debt limit. I heard a 
Republican colleague on this committee complain about not 
receiving a phone call from the Administration or a complaint 
that we, the Democrats, are too partisan. The Republican 
argument seems to be the following, that since the Democrats 
have been mean to us, we are going to sabotage the full faith 
and credit of the United States to exact revenge against those 
who have slighted us. And that kind of pettiness has me 
wondering, are we in high school or the United States Congress?
    Now, it has to be said that raising the debt limit would 
not authorize new spending. It would simply pay the debts of 
previous Administrations, including the Trump Administration. 
So, the Republicans cannot pass $2 trillion worth of tax cuts 
and then refuse to pay back the debt that made those tax cuts 
possible in the first place. That, to me, is worse than fiscal 
responsibility. That is fiscal hypocrisy. And I support 
Congressman Foster's legislation abolishing the debt limit so 
that we are no longer at the whim of bruised egos slighted by 
unreturned phone calls.
    Suppose for a moment that it is October 18th. The use of 
extraordinary measures is exhausted. What happens on October 
19th?
    Secretary Yellen. We are simply in an impossible situation 
in which it will be impossible for Treasury, on that day or a 
few days thereafter, depending on--we will have very limited 
resources. It will be run down quickly. We won't be able to pay 
all of the government's bills.
    The Treasury has been directed by Congress to pay all of 
the government's bills, to use the tax revenues that are 
available, and without that to issue debt, and the debt ceiling 
will make it impossible for us to do that.
    Mr. Torres. And the damage could be irreparable.
    Secretary Yellen. Yes, and we got a taste of that in 2011, 
when the debt ceiling wasn't raised until the last minute. The 
fact that Congress might not raise the debt limit and call into 
question whether or not what is regarded as the safest asset in 
the world, dollar-denominated U.S. Treasury debt, will actually 
be repaid, is simply a catastrophic event.
    Mr. Torres. I want to follow up on an exchange you had with 
Congressman Budd, who asked you about the debt-to-GDP ratio. 
The U.S. debt-to-GDP ratio is over 100 percent. What is Japan's 
debt-to-GDP ratio?
    Secretary Yellen. Excuse me?
    Mr. Torres. What is Japan's debt-to-GDP ratio?
    Secretary Yellen. It is about 250 percent.
    Mr. Torres. It is the highest in the world.
    Secretary Yellen. Yes, it is.
    Mr. Torres. And Japan is regarded as a successful economy?
    Secretary Yellen. It is, and Japan also has low interest 
rates and is not--
    Mr. Torres. And I agree with your premise that the cost of 
servicing debt is a more reliable measure of debt 
sustainability than the debt-to-GDP ratio, and if we were to 
breach the debt limit, as Republicans would have us do, it 
would actually raise the cost of borrowing. It would raise 
interest rate payments--
    Secretary Yellen. Yes, it would.
    Mr. Torres. --which would make our debt burden less 
sustainable, not more.
    Secretary Yellen. That is absolutely correct. It would be 
regarded as riskier. We might suffer, again, a credit 
downgrade, and coming out of that we could expect to see higher 
interest rates on Treasury debt and on the debt that private 
individuals have--mortgage debt, credit card debt, auto loans, 
and everything else.
    Mr. Torres. I want to quickly ask you about a Title IV loan 
under the CARES Act. During the Trump Administration, the 
largest recipient of Title IV was a trucking company previously 
known as YRC Worldwide, and presently known as Yellow 
Corporation. Do you think a nearly-bankrupt trucking company, 
whose conduct is the subject of a DOJ lawsuit for overcharging, 
should have received a national security loan from the Trump 
Administration?
    Secretary Yellen. I am afraid I don't know the details of 
that, but I would be glad to have our staff get back to you on 
that.
    Mr. Torres. And I want to be clear that this loan is the 
subject of scrutiny from the bipartisan Congressional Oversight 
Commission and the House Select Subcommittee on the Coronavirus 
Crisis.
    You said at the end of September that the funding for 
Emergency Rental Assistance might be reallocated. Up to how 
much funding might be reallocated?
    Secretary Yellen. I can't give you a dollar estimate, but 
the objective would be to shift it to areas where there is need 
and proven success in getting it out.
    Mr. Torres. And if the use of extraordinary measures is 
exhausted on October 18th, what does the Federal Reserve do on 
October 19th? What actions do you take in response? And that 
will be my final question.
    Mr. Powell. I guess I would just say that no one should 
assume that we can really do much to--if there were to be a 
default on our obligations. No one should assume that the Fed, 
or anyone else, can fully shield the American people from the 
consequences of that.
    Mr. Torres. My time has expired.
    Chairwoman Waters. The gentleman from Indiana, Mr. 
Hollingsworth, is now recognized for 5 minutes.
    Mr. Hollingsworth. Good morning. I am going to ask most of 
my questions to Secretary Yellen. First and foremost, I want to 
associate myself with the comments that Mr. Kustoff made.
    I love serving on this committee. I have a great time 
working on the policies that emanate from this committee. But 
it's rare that something this committee does leads to questions 
in the grocery store, questions at convenience stores, and 
questions around my district. But I have to tell you, the 
proposal that has been put forth about expanding the amount of 
information that the IRS is going to get on private bank 
accounts has been something I have been asked about at parks, 
at grocery stores, and at convenience stores around my 
district. This has people deeply afraid about the emergence of 
an apparatus that may be used against them.
    I want to better understand, with specificity, what is 
being proposed, because what I saw in the proposal, as 
circulated by Treasury, was extremely generic and somewhat 
incongruent with what I heard today. You said to Mr. Kustoff 
that the only things that will be reported to the IRS under 
your proposal is the gross inflow and the gross outflow from 
that particular account in a given year. Is that accurate or 
inaccurate in what you have requested?
    Secretary Yellen. The proposal put forward by the 
Administration requested a bit more information than that. But 
what is under consideration now, in reconciliation, would be 
limited to those two pieces of information. And what you should 
tell people who ask you about this in the park is that right 
now, much of the audit time of the IRS is devoted to taxpayers 
who have relatively low incomes. And we know that the tax gap 
is something that comes from opaque sources of income and from 
high-income individuals.
    Mr. Hollingsworth. Well, I need to tell my--
    Secretary Yellen. The audit rates on individuals earning 
less than $400,000 would not increase. This would--
    Mr. Hollingsworth. Wait a minute. Wait a minute. Wait a 
minute.
    Secretary Yellen. --redirect audits--
    Mr. Hollingsworth. They are not worried about the audit 
rates--
    Secretary Yellen. --to those--
    Mr. Hollingsworth. Reclaiming my time, they are not worried 
about the audit rates. They are worried about yielding their 
privacy, yielding their transaction history--
    Secretary Yellen. There is no--
    Mr. Hollingsworth. --to a Federal Government--
    Secretary Yellen. --transaction history--
    Mr. Hollingsworth. --reclaiming my time, to a Federal 
Government that has shown itself, time and time again, by 
mobilizing that information against individuals, against 
organizations, and against businesses, to be incapable of 
protecting that data from breaches--
    Secretary Yellen. There is no--
    Mr. Hollingsworth. --by nation states.
    Secretary Yellen. There is no--
    Mr. Hollingsworth. Excuse me. Reclaiming my time, this is 
deeply concerning to them. So forgive me if I won't go back to 
them and say, ``Don't worry. Despite all evidence to the 
contrary about their past history, the Federal Government 
really means it this time when they say they are going to 
respect your privacy, that they intend to build firewalls 
around this enormous database of personal information. And by 
the way--which you brought up--we are doing it for a really 
good purpose. We are doing it for a really good purpose.'' 
Forgive them if they don't believe that the government is 
showing up on their doorstep to ask about the inflows and 
outflows from their personal accounts, at a very de minimis 
level, and that is going to be used for only their good 
purpose.
    Secretary Yellen. There is no transaction-level data being 
reported to the IRS.
    Mr. Hollingsworth. Can you clarify what you mean by, ``a 
bit more data,'' than, when I asked, ``Is it just these two 
things?'', and you said, ``It is a bit more.'' What does, ``a 
bit more'' mean?
    Secretary Yellen. The proposal by the Administration that 
was originally put forward requested some additional 
information, particularly about businesses and partnerships.
    Mr. Hollingsworth. Yes. I wonder--
    Secretary Yellen. But there is no transaction-level data 
for individuals being considered by this Congress, and--
    Mr. Hollingsworth. I want to point out--
    Secretary Yellen. --why is it okay that we have businesses 
report wage and salary income, or companies report dividends, 
or--
    Mr. Hollingsworth. Reclaiming my time, I think there is 
some real concern about growing the amount of data the Federal 
Government has proven itself incapable of handling correctly, 
or, at some point, ethically, to the IRS.
    I heard testimony 2 years ago about how China was able to 
apprehend many of the protesters in Hong Kong. The way that 
they did that was by mining financial data, not by virtue of 
great law enforcement work and investigatory work, but instead 
by mining financial data about who was scanning their credit 
card in order to buy subway tickets to those particular 
locations.
    This worries Americans who are rightly concerned about a 
Federal Government that does not have their best interest at 
heart, but is telling them that for the greater good, they need 
to yield more privacy, more of their privacy, more of the 
things that they do in their personal accounts, because we 
might be able to close the tax gap for other people who are 
cheating.
    With that, I will yield back.
    Chairwoman Waters. The gentleman's time has expired. The 
gentlewoman from Iowa, Mrs. Axne, who is also the Vice Chair of 
our Subcommittee on Housing, Community Development, and 
Insurance, is now recognized for 5 minutes.
    Mrs. Axne. Thank you, Madam Chairwoman, and thank you, 
Secretary Yellen and Chair Powell, for being here. It is great 
to see you.
    Listen, we have heard a lot about inflation, of course, but 
I want to dig a little bit into this. Chair Powell, you 
recently mentioned that price increases are relatively 
concentrated in particular areas, and yes, I think most folks 
can understand things like airlines and hotels, et cetera, 
industries that took a hit during COVID because people weren't 
really traveling, this could be an issue there.
    However, I want to get into some others areas where we have 
seen price increases. One of the biggest areas is in cars, both 
new and used, and I wanted to touch base about this.
    Secretary Yellen, one of the key causes of the shortages 
and the prices, the increase in our cars is because of 
shortages of semiconductors and production issues. Is that 
correct?
    Secretary Yellen. Yes, that is correct. There have been 
significant semiconductor shortages, particularly affecting 
cars.
    Mrs. Axne. Thank you. And I hear regularly from businesses 
in my district about supply chain issues coming off of the 
pandemic that are unfortunately holding back our companies. One 
recently told me that their sales are down $120 million, really 
because they are producing to supply chain.
    Chair Powell, we see that elsewhere too, with ships waiting 
offshore on both coasts, difficulties moving goods back and 
forth, et cetera. Is that correct?
    Mr. Powell. Yes, it is very correct. It is hard to say how 
long that will take, but it will resolve itself in time.
    Mrs. Axne. And that shows us also that the price of 
shipping goods from China to the U.S. has gone up, and I think 
that has gone up 400 percent from pre-pandemic. So, that is 
going to, of course, add to the cost of anything we can buy 
from China.
    While we have you two here, I guess what I am wondering is, 
what are the solutions? Chair Powell, if we have issues with 
our ports or with the supply chain of semiconductors or other 
components, does it make much sense for the economy to pull 
back on investments in the bottlenecks, or would we do better 
to expand that capacity?
    Mr. Powell. I think that is really a question for fiscal 
policy. I will say these are tangled supply chains right now, 
and it is a combination of a bunch of factors, which should 
abate over time. But obviously, investment in supply chains 
would make them more efficient over time.
    Mrs. Axne. Thank you. I want to point out here that most of 
the things we produce do require workers, and I spoke to you, 
Chair Powell, about this in February.
    But Secretary Yellen, you, of course, have studied labor 
markets throughout your career. When we have constraints on our 
supply chain, does it make sense to limit the numbers of people 
able to work or should we instead invest in policies like 
childcare that help get people into the workforce?
    Secretary Yellen. Absolutely. I think over the longer term, 
we have had a problem with declining labor force participation 
of prime-age workers, and we are proposing paid leave, 
childcare support, and early childhood education, supports that 
would help expand labor force participation. In the short run, 
of course, dealing with the pandemic to make sure schools can 
operate on a normal schedule, and get people back to work, will 
help as well.
    Mrs. Axne. And there are other countries around the world 
that obviously have some of these pieces put in place, like 
better childcare, and early childhood education. In your 
studies with them, do you see economic growth coming as a 
result of putting these practices in place?
    Secretary Yellen. Yes. It has been an important source of 
growth in the United States and elsewhere. Once upon a time, 
the United States, just with respect to women's labor force 
participation, had about the highest in the world, and that has 
changed radically in recent decades as we have failed to expand 
and provide the level of support for females. Especially for 
women's labor force participation, we have been falling behind 
other developed countries.
    Mrs. Axne. Absolutely, and thank you. So what I am hearing 
is, it sounds like Democrats, what we are proposing, is 
absolutely a solution to some of these inflation concerns, and 
that doing nothing will actually exacerbate issues and make it 
worse.
    I, for one, am not in the business of telling people what 
they can't buy. What I am hoping is that we can find solutions 
like childcare, like paid family leave, like lowering the cost 
of prescription drugs to keep money in people's pockets, so 
that we can stop artificially limiting the capacity of 
America's economy and get people back to work to help create 
more products and move products around our country. So, things 
like childcare, paid leave, and other policies will actually 
help expand the workforce.
    Thank you so much.
    Chairwoman Waters. The gentlelady's time has expired. The 
gentleman from Tennessee, Mr. Rose, is now recognized for 5 
minutes.
    Mr. Rose. Thank you, Chairwoman Waters and Ranking Member 
McHenry, and I want to thank Chairman Powell and Secretary 
Yellen for being here today.
    I am just going to dive right in. I do want to follow up on 
a couple of things that have been talked about quite a bit this 
morning, the debt limit first of all. I feel like there is a 
lot of misinformation that circulates about this.
    To be clear, if we suspend the debt limit, that is to allow 
for the enlargement of the debt, yes, some of that for programs 
that have been in place historically, but much of that would 
likely facilitate new spending. And I learned a long time ago, 
from my dad, not to sign blank checks. And it seems to me that 
if we suspend the debt limit, that is kind of like signing a 
blank check, and frankly, I am not willing to participate in 
signing that blank check. If we had assurances that that 
increase would go simply to cover the current built-in costs of 
operating the government, then that might be a different 
discussion, but that is not the one we are having.
    Secretary Yellen, I want to follow up just for a second 
about the IRS reporting for bank account information, and I 
wonder, in the Administration's proposal, is there any 
allowance in that proposal to defray the costs that banks and 
financial institutions would incur from the added reporting 
expenses of providing this additional information to the IRS?
    Secretary Yellen. I don't believe it was in the 
Administration's proposal, but if appropriate, we would be glad 
to work with Congress on that to defray any expense.
    Mr. Rose. I certainly know that the existing reporting 
requirements that banks face are onerous and expensive, and, of 
course, ultimately their customers end up bearing that cost.
    I want to shift gears now. In May, the Treasury Department 
published an interim final rule to implement the Coronavirus 
State and Local Fiscal Recovery Funds. Although the guidance 
was much-needed, I continue to hear from city and county mayors 
across my district, many of whom are here in town today, asking 
for additional clarification and flexibility. I wrote a letter 
to you in July, requesting this additional flexibility in the 
final rule.
    Secretary Yellen, can you tell us when we can expect this 
updated guidance and if there will be increased flexibility 
included?
    Secretary Yellen. We have tried to provide a great deal of 
flexibility in the guidance we have provided. There is an 
interim final rule that is in place, and States and localities 
can rely on it. It was out for comment. We have received a very 
large number of comments that we are working through carefully, 
and we will work to produce a final rule. But the interim 
rule--
    Mr. Rose. Any foreshadowing of when that rule might be 
available?
    Secretary Yellen. Later this year. But the interim final 
rule is quite permissive in terms of flexibility and--
    Mr. Rose. We look forward to seeing that.
    Secretary Yellen. --States and localities--
    Mr. Rose. Reclaiming my time.
    Secretary Yellen. --to rely on it.
    Mr. Rose. Earlier this month, the committee reported the 
chairwoman's partisan bill that will have the effect of slowing 
down, in my opinion, the distribution of Emergency Rental 
Assistance funds, punish landlords, and expose taxpayers to 
fraud. Part of her bill would replace having grantees determine 
if a household was, in fact, an eligible, low-income household, 
as Congress intended with the self-attestation that requires 
grantees to accept any attestation of the households as true.
    Secretary Yellen, are you concerned that requiring grantees 
to accept all self-attestations of applicants who want to get 
free rental assistance money will increase the likelihood of 
fraud?
    Secretary Yellen. We are working carefully with Chairwoman 
Waters and want to make sure that we get money out in the most 
effective and rapid way possible while maintaining adequate 
controls to prevent fraud and abuse.
    Mr. Rose. Secretary Yellen, we have had several hearings 
regarding the Emergency Rental Assistance Program that is 
disbursed through Treasury, and yet, you have not appeared at a 
single one. And for that matter, you failed to appear at the 
House Small Business Committee hearing as well. I am going to 
yield the remainder of my time to my good friend, Mr. 
Luetkemeyer, the ranking member of the House Small Business 
Committee.
    Mr. Luetkemeyer. Thank you, Mr. Rose. Secretary Yellen, I 
am the ranking member of the House Small Business Committee, as 
Mr. Rose indicated, and last December Congress passed a 
bipartisan bill that required you to testify in front of the 
Small Business Committee on the Paycheck Protection Program. 
That deadline passed 157 days ago, and you are still not there. 
You have willfully refused to come before the committee, and 
willfully refused to obey the law.
    So, my question is very simple: Why can you, a Cabinet 
member of the Biden Administration, pick and choose which laws 
you choose to follow?
    Secretary Yellen. I have--
    Mr. Luetkemeyer. Please close your binder, and respond off 
the cuff. Why can you pick and choose which laws that you 
respond to?
    Secretary Yellen. I have testified 11 times before Congress 
during the past--
    Mr. Luetkemeyer. And never in front of the Small Business 
Committee, Madam Secretary.
    Chairwoman Waters. Please allow the--
    Secretary Yellen. --months. I have agreed to do so. We have 
not been able to find an appropriate date that works. I have 
offered to have my--
    Mr. Luetkemeyer. I can show you a list of your--
    Secretary Yellen. --deputies--
    Chairwoman Waters. The gentleman's time has expired.
    Mr. Luetkemeyer. I yield back.
    Chairwoman Waters. The gentleman from Massachusetts, Mr. 
Lynch, who is also the Chair of our Task Force on Financial 
Technology, is now recognized for 5 minutes.
    Mr. Lynch. First of all, as someone who for the past 20 
years has worked with both Republican and Democratic 
Administrations to allow our government to meet our obligations 
to our senior citizens and Social Security, pay our troops, and 
pay our bills, I view this latest threat to default on our debt 
as a direct attack on the American people and on our government 
itself. Never has it been a good time to destroy the full faith 
and credit of the United States, and I fully support Mr. 
Foster's bill, H.R. 3305, which would change the whole dynamic 
of raising the debt limit.
    I would like to ask you about the rollout of the CARES Act, 
and Madam Secretary, I know that was a joint program between 
Treasury and the Small Business Administration (SBA). As 
Chairwoman Waters pointed out, I Chair the Task Force on 
FinTech, and while there were very few connections between most 
of the fintech firms and the SBA prior to the pandemic, once we 
gave them about $330 billion in the second phase of the PPP 
program, the fintechs engaged. They were able to put out, I 
think 15 percent of the funding through fintech lenders to 
people who needed it.
    Unfortunately, however, about 75 percent of the fraud that 
we detected was from that 15 percent that went out through 
fintech lenders. And these were even some of our best--Kabbage, 
which previously had never handled an SBA loan. They were one 
of the companies that had difficulties.
    I am just wondering if there were any lessons learned from 
that rollout? I know we were rushed. We were pushing to get, 
especially the first phase, the banks took care of their 
favorite customers. I understand that. And those were known 
entities. And then we, in Congress, encouraged a further reach-
out for the SBA for people who were not met and were not 
addressed in the initial phase.
    But are there any--we had the rushed aspect of it. There 
was also, I am not sure what the Application Programming 
Interface (API) is between the SBA and these fintech lenders. I 
know the relationships are new. But did we learn any lessons 
from that interaction in getting money out to people who need 
it through the fintech companies and lenders that we used?
    Secretary Yellen. Certainly, there are oversight and review 
processes that are taking place. I can get back to you. I don't 
have details on what we found about fintech lenders, and I 
guess the SBA is probably doing much of that review of the 
Paycheck Protection Program.
    But in every aspect of developing programs that have been 
assigned to Treasury, we have worked, right from the outset, 
with our Office of Inspector General and others to make sure 
that we have appropriate reporting and fraud control in place 
to minimize fraud in the programs and make sure that we have 
controls in place.
    Mr. Lynch. Okay. Chairman Powell, any thoughts on that, or 
would you rather take a pass?
    Mr. Powell. I will follow up, and also see if we have 
anything on that for you. Of course, the PPP was administered 
by the SBA. We did the liquidity facility.
    Mr. Lynch. Okay.
    Mr. Powell. On that part, I would be happy to check and get 
back to you.
    Mr. Lynch. That would be great. And Madam Secretary, would 
you again talk about what happens upon default and what that 
means for the American people?
    Secretary Yellen. It is a catastrophe. We are likely to end 
up with a financial crisis, surely a recession, and millions of 
individuals who are counting on checks from the government, not 
receiving those in a timely fashion, and long-lasting 
consequences of higher interest rates for everybody who 
borrows.
    Mr. Lynch. Thank you very much. I yield back, Madam 
Chairwoman.
    Chairwoman Waters. Thank you. The gentleman from Wisconsin, 
Mr. Steil, is recognized for 5 minutes.
    Mr. Steil. Thank you very much, Madam Chairwoman. Chairman 
Powell, Secretary Yellen, thank you for being with us here 
today.
    Out of the gate, Secretary Yellen, I would just like to 
note that the proposal for bank account reporting, that you do 
not believe to be an invasion of privacy, I would just like to 
be on the record that I believe that this would be an invasion 
of privacy, and I remain concerned with it.
    I would like to jump over to debt-to-GDP. In a previous 
question, you noted that crossing the threshold of 100 percent 
of debt-to-GDP in the United States, now roughly 105 percent, 
was not fiscally irresponsible. Is that correct?
    Secretary Yellen. That is right.
    Mr. Steil. In a comment to Mr. Torres, he was examining--
    Secretary Yellen. I believe we are in a place where we can 
certainly bear the burden of the debt, now and in the future.
    Mr. Steil. And you believe that because we are currently in 
a low inflationary environment with low interest rates. Is that 
accurate?
    Secretary Yellen. That is right. But I am assuming that 
interest rates, as the economy recovers, will move up to a more 
normal level in line with the forecasts of many professional 
forecasters.
    Mr. Steil. And in the event that the inflationary rate 
increased beyond that current forecast by the experts that you 
are speaking with, that would increase the burden on the debt. 
Would that then become fiscally irresponsible to have a debt-
to-GDP ratio over 100 percent?
    Secretary Yellen. It depends on what happens to real 
interest rates in the economy. If they were to rise 
significantly that, of course, poses a risk that we need to 
take into account.
    Mr. Steil. I think we should absolutely take it into 
account. I am very concerned with the spending proposals from 
the Biden Administration and the impact that would have in the 
event that we enter a more inflationary period where interest 
rates increase.
    Secretary Yellen. I want to make clear that the proposals 
from the Biden Administration are neutral with respect to the 
debt path, that the projections that we have shown display 
essentially a level debt path over the next 10 years, and 
beyond 15 years, substantially reduce the outstanding debt-to-
GDP ratio.
    Mr. Steil. I remain very concerned about the debt path that 
the Biden Administration is taking us on, and a whole array of 
spending proposals that we are seeing.
    Let me shift gears slightly over to you, Chairman Powell, 
if I can, and build on this topic as it relates to inflation. 
It is something I have spoken with you many times about, in 
particular in this committee, in July and December of last 
year. And in those times, you have suggested, and I think you 
have continued to state that the Fed is not ready to take 
action to head off inflation. Yet, we are continuing to see 
prices increase. We saw consumer prices increase 5.4 percent 
year over year, more recently, and regardless of what the White 
House press team says, I think people are really seeing the 
impact of higher prices day in and day out.
    Now, I know that you have said you believe many of these to 
be transitory, that you think they will come down. But here is 
my concern, is that individual, the public expectations are 
beginning to change as people truly see the price increases 
when they go to fill up their car with gas, when they go to a 
grocery store, or when they go back-to-school shopping. In a 
recent poll, we saw that 87 percent of Americans said they are 
concerned about inflation. A New York Fed report reported that 
consumers expect to see higher inflation over the medium term.
    So, could you provide a little color as to how you think 
the Fed is going to respond to consumers expecting to see 
inflation?
    Mr. Powell. Essentially, what would need to happen for 
inflation to remain high, year upon year upon year, is we would 
have to have a new inflation regime in which people began to 
enter their psychology and they began to think that it was 
coming and expect that it was coming.
    Mr. Steil. But with all due respect, don't we see that 
evidence in the Fed report which shows that people are 
expecting inflation?
    Mr. Powell. We don't measure these things precisely, but we 
do measure them a lot, and there are many, many different 
measures, and broadly speaking, those measures are at levels 
that are consistent with our 2 percent inflation goal--not for 
the near term, but for the medium and longer term.
    But nonetheless, that is the right issue. We monitor that 
very carefully, and to the extent we were to see expectations 
broadly drifting up and the regime changing, we would certainly 
use our tools to make sure that inflation is consistent with 
our goal.
    Mr. Steil. I appreciate you tracking this, because I 
believe as Americans are looking at the runaway spending here 
in Washington, D.C., without a long-term plan to pay for it, 
that these expectations of inflation will continue to increase, 
and as the expectation plays out, as you noted, I think we will 
see real inflation in the future having a significant impact on 
the debt burden that the debt-to-GDP ratio holds.
    Recognizing the time, I yield back. Thank you for being 
here.
    Chairwoman Waters. Thank you. The gentlewoman from North 
Carolina, Ms. Adams, is now recognized for 5 minutes.
    Ms. Adams. Thank you, Madam Chairwoman. Secretary Yellen, 
Chairman Powell, thank you both for being here.
    I would like to follow up on a question that Senator Brown 
posed to both of you on, I think, Tuesday. He raised an 
excellent point that no Black woman has ever served on the 
Fed's Board of Governors, and you both indicated that you want 
diverse viewpoints represented at the highest levels of our 
economic policymaking bodies.
    And last year, we had our own Office of Minority and Women 
Inclusion (OMWI) Directors testify before us about their 
efforts to diversify your entities. But I would like to hear 
directly from you both, what are you doing in your respective 
organizations to encourage the appointment and hiring of Black 
and Brown women at all levels of seniority, and have you 
considered recruiting on the campuses of Historically Black 
Colleges and Universities (HBCUs) and other Minority-Serving 
Institutions (MSIs)?
    Secretary Yellen. I can start off and say that we have a 
very active program at all levels of the Treasury Department, 
including political appointments at recruiting diverse 
workforce and leadership, and I think if you look at the 
appointments that we have made or proposed, that we have made 
good on that commitment and continue to give it the highest 
priority.
    With respect to the Federal Reserve, I and others will 
provide advice on nominations to the President. It will be up 
to him to nominate individuals to serve on the Fed Board, and 
we certainly will ensure that he has a diverse slate of 
candidates to consider in making these appointments.
    Ms. Adams. Thank you. Mr. Powell?
    Mr. Powell. We work very hard to recruit diverse talent, 
diverse people to the board, and we work very hard to keep and 
make sure that the people that we do succeed in recruiting have 
good opportunities, or are included in opportunities to learn, 
and have as many opportunities as they can have so that they 
can have a career at the Fed. It is a very high-profile focus 
for us.
    Ms. Adams. Thank you. Secretary Yellen, it is always a 
pleasure to have you before us. In case you don't know, like 
you, I was a professor for over 40 years, and I tell folks all 
the time that I might not be in the classroom anymore but I 
still enjoy educating here in the Congress.
    And so, if you don't mind, I would appreciate it if you 
would take us back to the classroom and help educate us a bit. 
Do you believe economic recovery is strong enough to handle the 
withdrawal of current pandemic relief efforts?
    Secretary Yellen. I think the relief efforts have been very 
important in stimulating a strong recovery. And I mentioned in 
my opening remarks that the United States is outperforming most 
other developed countries in the strength of our recovery, due 
to those efforts the Congress has made.
    And there will be fiscal drag next year, namely, we had a 
good deal of impetus, your stimulus this year, and it will 
diminish substantially next year. Nevertheless, most 
forecasters in the Administration believe that the recovery 
will continue and that private spending will be sufficient to 
have us pass the baton to it and keep the economy growing.
    We are in the middle, as you know, of reconciliation, and 
the programs under consideration there are really spread out 
over 10 years, and provide some modest stimulus in each of 
those years, but at a much lower level than the American Rescue 
Plan, or oriented towards structural issues in the U.S. 
economy.
    Ms. Adams. Thank you. We know our mission here is to ensure 
that the economy continues to recover for all Americans. So if 
Congress fails to raise our statutory debt limit by mid-
October, what would the effect be to the economy?
    Secretary Yellen. It would be devastating to the economy. 
We will be unable to pay our bills for the first time in 
American history. It could provoke a financial crisis and a 
recession, and it will harm every American.
    Ms. Adams. Thank you. It is irresponsible, I believe, that 
my colleagues in both the House and the Senate would risk our 
recovery from this pandemic for political points. So, I am glad 
to hear that you agree, and I look forward to this body 
protecting all Americans by doing the right thing and raising 
this debt ceiling.
    Madam Chairwoman, I yield back.
    Chairwoman Waters. Thank you very much. The gentleman from 
South Carolina, Mr. Timmons, is now recognized for 5 minutes.
    Mr. Timmons. Thank you, Madam Chairwoman. And Secretary 
Yellen, and Chair Powell, thank you for being here with us 
today.
    Just yesterday, Speaker Pelosi gave oxygen to the idea that 
President Biden has the ability to mint a trillion-dollar 
commemorative coin made of platinum, deposit it in the Federal 
Reserve, and then use that to pay our bills. A number of other 
members have adamantly promoted this proposal to include 
Congressman Nadler, and just Tuesday, my colleagues across the 
aisle tweeted #mintthecoin.
    Chair Powell, please tell me you think this idea is as 
ridiculous as it sounds?
    Mr. Powell. Really, that is not a question for me.
    Mr. Timmons. I had a feeling you would say that. I just 
wanted to start there.
    Madam Secretary, please tell me that this is not a 
legitimate policy proposal and that this is not something that 
we are considering?
    Secretary Yellen. I believe that the only way to handle the 
debt ceiling is for Congress to raise it and show the world, 
the financial markets and the public, that we are a country 
that will pay our bills when we incur them, and--
    Mr. Timmons. I really appreciate that--
    Secretary Yellen. --a platinum coin--
    Mr. Timmons. --more than you can possibly know. Thank you 
so much. That cuts some of the next few things I was going to 
say short. We are not going to mint a trillion-dollar coin. 
These are not serious policy proposals.
    Speaking of serious policy proposals, I want to talk about 
what Congressman Kustoff and Congressman Hollingsworth touched 
on, the idea of--well, I guess it has changed, because the 
Biden Administration proposed that it was originally all 
transaction histories of any account with more than $600 in or 
out of it. You testified not 15 minutes ago that it is now, in 
reconciliation, not being considered. It is just the account 
balance? So, it changed?
    Secretary Yellen. I never said that the Administration ever 
proposed collecting detailed transaction data from individuals. 
That is never anything that the Biden Administration 
contemplated.
    Mr. Timmons. You just said it has changed since the 
original proposal to what is now being considered. How did it 
change?
    Secretary Yellen. A few additional pieces of information 
were contemplated for businesses and--
    Mr. Timmons. Those are no longer being contemplated. So, it 
is getting better. It is moving in the right direction. Because 
I have had a number of banks and credit unions reach out to me. 
It is remarkable. Generally, they do not agree, but they are in 
agreement that this is a terrible proposal.
    I know that we are trying to figure out how to pay for $5 
trillion of spending, but this is not--just as, ``mint the 
coin,'' is not a serious policy proposal, this is not a serious 
policy proposal.
    Secretary Yellen. This is a very serious policy proposal. 
We have a $7 trillion estimated tax gap that we have a great 
deal of avoidance by individuals and businesses, typically very 
high-net-worth, high-income individuals and businesses, that 
have opaque sources of income, that are not paying the taxes 
that are due.
    Mr. Timmons. Respectfully, what does that have to do with--
    Secretary Yellen. And compliance--
    Mr. Timmons. --$600 accounts? That is every single account 
of, what, is it 99 percent of Americans?
    Secretary Yellen. Well, listen. Banks already report 
interest amounting to over $10 to the IRS on every account in 
the country, and this proposal involves 2 additional pieces of 
information that are not at the level of individual 
transactions. And this will help low-income individuals who now 
are disproportionately subject to audits by the IRS.
    Mr. Timmons. We had a--
    Secretary Yellen. What this will do is let the IRS focus 
its compliance efforts--
    Mr. Timmons. Reclaiming my time, Madam Secretary.
    Secretary Yellen. --on those individuals--
    Mr. Timmons. We had a hearing--
    Secretary Yellen. --who are avoiding paying the taxes--
    Mr. Timmons. Reclaiming my time.
    Secretary Yellen. --that are due.
    Mr. Timmons. Madam Secretary, please. We had a hearing just 
yesterday, in this very room, about the underbanked and the 
unbanked, and one of the biggest concerns is about privacy. So, 
for us to make it far more challenging for people to trust the 
very system that we are hoping that people use--the banking 
system, the backbone of our economy--we are moving in the wrong 
direction here. And I appreciate that we have changed the 
expectation from the original proposal to now what is being 
considered in reconciliation, but the American people don't 
want this. They don't think it is reasonable, and I will go 
ahead and--this is what is going to happen. It is going to get 
pulled out because there is no support from the American 
public, and it is just not going to happen.
    With that, I yield back. Thank you.
    Chairwoman Waters. Thank you very much. I would like to 
thank Secretary Yellen and Chair Powell for their testimony 
today.
    The Chair notes that some Members may have additional 
questions for these witnesses, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    This hearing is now adjourned, and I thank our witnesses so 
very much for being here. We had a hard stop now, right at 
12:15, so we are on time. Thank you very much.
    [Whereupon, at 12:15 p.m., the hearing was adjourned.]

                            A P P E N D I X

                          September 30, 2021

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