[Senate Hearing 117-18]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 117-18


         THE SEMIANNUAL MONETARY POLICY REPORT TO THE CONGRESS

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

                                HEARING

                               BEFORE THE

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

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                                   ON

      OVERSIGHT ON THE MONETARY POLICY REPORT TO CONGRESS PURSU- 
       ANT TO THE FULL EMPLOYMENT AND BALANCED GROWTH ACT OF 1978

                               __________

                           FEBRUARY 23, 2021

                               __________

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


[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]


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

                              __________
                               

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
44-741 PDF                  WASHINGTON : 2021                     
          
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            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                     SHERROD BROWN, Ohio, Chairman

JACK REED, Rhode Island              PATRICK J. TOOMEY, Pennsylvania
ROBERT MENENDEZ, New Jersey          RICHARD C. SHELBY, Alabama
JON TESTER, Montana                  MIKE CRAPO, Idaho
MARK R. WARNER, Virginia             TIM SCOTT, South Carolina
ELIZABETH WARREN, Massachusetts      MIKE ROUNDS, South Dakota
CHRIS VAN HOLLEN, Maryland           THOM TILLIS, North Carolina
CATHERINE CORTEZ MASTO, Nevada       JOHN KENNEDY, Louisiana
TINA SMITH, Minnesota                BILL HAGERTY, Tennessee
KYRSTEN SINEMA, Arizona              CYNTHIA LUMMIS, Wyoming
JON OSSOFF, Georgia                  JERRY MORAN, Kansas
RAPHAEL WARNOCK, Georgia             KEVIN CRAMER, North Dakota
                                     STEVE DAINES, Montana

                     Laura Swanson, Staff Director

                 Brad Grantz, Republican Staff Director

                       Elisha Tuku, Chief Counsel

                         Tanya Otsuka, Counsel

                 Dan Sullivan, Republican Chief Counsel

                 John Crews, Republican Policy Director

                      Cameron Ricker, Chief Clerk

                      Shelvin Simmons, IT Director

                    Charles J. Moffat, Hearing Clerk

                                  (ii)


                            C O N T E N T S

                              ----------                              

                       TUESDAY, FEBRUARY 23, 2021

                                                                   Page

Opening statement of Chairman Brown..............................     1
        Prepared statement.......................................    44

Opening statements, comments, or prepared statements of:
    Senator Toomey...............................................     4

                                WITNESS

Jerome H. Powell, Chairman, Board of Governors of the Federal 
  Reserve System.................................................     5
    Prepared statement...........................................    45
    Responses to written questions of:
        Chairman Brown...........................................    48
        Senator Toomey...........................................    52
        Senator Warren...........................................    56
        Senator Cortez Masto.....................................    66
        Senator Scott............................................    68
        Senator Rounds...........................................    69

              Additional Material Supplied for the Record

Monetary Policy Report to the Congress dated February 19, 2021...    71

                                 (iii)

 
         THE SEMIANNUAL MONETARY POLICY REPORT TO THE CONGRESS

                              ----------                              


                       TUESDAY, FEBRUARY 23, 2021

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 10 a.m., via Webex, Hon. Sherrod 
Brown, Chairman of the Committee, presiding.

          OPENING STATEMENT OF CHAIRMAN SHERROD BROWN

    Chairman Brown. This hearing is in the virtual format, as 
we have done in the past. For those joining remotely, a few 
reminders.
    Once you start speaking, there will be a slight delay 
before you are displayed on the screen. To minimize background 
noise, please click the mute button until it is your turn to 
speak or to ask questions.
    You should all have one box on your screens labeled 
``Clock'' that will show you how much time is remaining. For 
all Senators, the 5-minute clock still applies for your 
questions. At 30 seconds remaining, you will hear a bell ring 
to remind you your time has almost expired. It will ring again 
when your time has expired.
    If there is a technology issue, Cameron and Charlie, who 
are very good at this, will fix it, but we will move to the 
next Senator until any technology issue is resolved.
    To simplify the speaking order process, Senator Toomey and 
I have agreed to go by seniority for this hearing, as we have 
in the past.
    At this Committee's first hearing, we heard from our 
witnesses the challenges and struggles Americans have faced 
over the past year.
    Anyone who has been doing their jobs has heard these 
stories. Frontline workers, like transit workers--whom we heard 
from last week--go to work every day worried they will get the 
virus on the job and bring it home to their families. Mayors 
and county commissioners and community leaders wonder how long 
they can hold on without starting layoffs. Renters see their 
bills pile up, watching their bank balances dwindle lower and 
lower, wondering if this will be the month that an eviction 
notice is posted on their door.
    Today more than 4 million people are out of a job. That 
number keeps climbing. We are still fighting the battle against 
the coronavirus. Nearly 500,000 of our fellow Americans have 
died from COVID-19.
    We know we are facing two crises: a public health crisis 
and an economic crisis. We have to be clear about that. We 
cannot solve one without solving the other.
    We know getting our economy back to full strength requires 
a massive, wartime-level mobilization to get all Americans 
vaccinated.
    We also know that vaccines alone will not put most workers 
and their families back to where they were a year ago.
    We want people back to work, we want kids back in school, 
and we want to see Main Streets thriving and humming with life 
again. That requires real Federal leadership on a level we have 
not seen in this country since World War II.
    As Bill Spriggs alluded to when testifying before this 
Committee, before D-Day, General Eisenhower did not call up 
President Roosevelt and ask, ``Can we afford to storm the 
beaches at Normandy? Do we have the money in our accounts?''
    Most people that I talk to in Ohio and around the country 
are not worried about doing too much in the battle against this 
virus; they are worried about doing too little. They want us to 
do whatever it takes.
    Eighty-five percent of Americans still need a vaccine. Our 
front-line workers still need PPE. Small businesses still need 
assistance to keep their doors open. States and cities and 
towns still need resources and support to open schools safely 
and keep buses running and libraries open and firefighters on 
the job.
    Experts agree the best thing we can do, the best thing we 
can for the country right now, is to get resources out the door 
as quickly as possible to tackle these interconnected problems.
    Former Fed Chair, now our Treasury Secretary, Janet Yellen 
said if we do not do more, we risk a permanent, her word, 
``scarring'' of the economy into the future.
    Economists from across the political spectrum--including 
many who have testified before this Committee--tell us that 
without strong fiscal support, our economy could spiral even 
further out of control and take even longer--years--to recover.
    Our witness today, Federal Reserve Board Chair Jerome 
Powell, has expressed some of those same concerns. Just a few 
weeks ago--after we passed the COVID-19 relief bill in 
December--Chair Powell said that ``support from fiscal policy 
will help households and businesses weather the downturn as 
well as limit lasting damage to the economy that could 
otherwise impede the recovery.''
    Chair Powell has talked to all of us about the risk of 
falling short of a complete recovery, the damage it will do to 
people's lives and to the ``productive capacity of the 
economy.'' Those were his words: ``productive capacity of the 
economy.''
    President Biden understands this moment; he has risen to 
meet it with his bold American Rescue package. It is a plan to 
both rescue the economy and save American lives.
    Workers and their families need to see their Government 
work for them now, and this rescue plan must be the beginning 
of our work to deliver the results that empower people and make 
their lives better. We need to rethink how our economy 
operates. When a hard day's work does not pay the bills for 
tens and tens of millions of workers, and even middle-class 
families do not feel stable, something in the system is broken. 
We know that.
    Workers' wages have been stagnant for decades; CEO pay has 
soared. Corporations get huge tax breaks. Instead of investing 
in their employees and the communities they serve, management 
too often rewards itself and its shareholders through stock 
buybacks and dividends.
    The wealth and income gaps for women and for Black and 
Brown workers are getting worse, not better. Many families 
still had not recovered from the Great Recession when the 
pandemic hit.
    This did not happen by accident. It is the result of 
choices made by corporations and their loyal allies in 
Washington.
    They have spent years rolling back consumer protections in 
our financial system, cutting corporate tax rates, and using 
Wall Street to measure the economy instead of the condition of 
workers.
    And the same people that have been advocating for these 
rollbacks, pushing this stock market-centered view of the 
economy, are the same people who say we should not go big on a 
rescue plan. They say that there is no need for the Government 
to help people, that the market should decide who wins and who 
loses.
    But we all know that the market does not work when the game 
is rigged. Corporations that have been lining their own pockets 
have done so with plenty of Government help and intervention.
    We know that for them short-term profits are more important 
too often than their workers. That is why we have to stop 
letting them run things.
    Look at what has happened in Texas, where a deregulated 
energy grid failed, leaving millions without power in frigid 
winter temperatures. People are literally freezing to death in 
their own homes--in the United States of America.
    Without any rules, energy companies can charge consumers 
sky-high prices. They even use automatic debits, taking 
thousands of dollars directly out of people's bank accounts. We 
know climate change causes severe weather patterns across this 
country. We need more investment in public infrastructure, not 
less. We cannot let corporate greed continue to stand in the 
way.
    Our Nation's central bank plays a critical role in all of 
this.
    The Federal Reserve can ensure that the biggest banks use 
their capital to invest in their workers and lend in their 
communities, instead of ginning up stock prices with buybacks 
and dividends.
    The Fed can make sure the response to economic and 
financial crises does not just help Wall Street, but helps 
everyone.
    It can require that financial institutions take into 
account the serious risks posed by the climate crisis.
    It can help ensure that everyone in this country has a bank 
account and access to their own hard-earned money. It can start 
to undo the systemic racism in the financial system, from black 
codes to Jim Crow to redlining to locking in discriminatory 
practices during the last Administration. It can make workers 
the central focus of our economy.
    Chair Powell, you said just a few weeks ago that the 
``benefits of investing in our Nation's workforce are immense. 
Steady employment provides more than a regular paycheck. It 
also bestows a sense of purpose, improves mental health, 
increases life spans, and benefits workers and their 
families.''
    What that boils down to is the dignity of work. It means 
that hard work should pay off, no matter who you are, no matter 
what kind of work you do, whether you punch a clock or work for 
tips or work on a salary or taking care of aging parents. It 
means we need to start measuring the success of our economy by 
the success of the people who make our economy work.
    Chair Powell, thank you. I look forward to your testimony.
    Senator Toomey.

         OPENING STATEMENT OF SENATOR PATRICK J. TOOMEY

    Senator Toomey. Thank you, Mr. Chairman, and thank you, 
Chairman Powell. Welcome back to the Banking Committee. I look 
forward to your testimony.
    About a year ago, the U.S. economy was entering an 
unprecedented economic contraction as a result of the shutdowns 
that followed the spread of COVID-19. We all remember credit 
markets seizing up. Second quarter GDP last year fell by over 
30 percent. The unemployment rate reached about 15 percent in 
April, the highest it had been since the 1930s. The economy was 
in very desperate straits, to say the least.
    Thankfully, the worries about a long, drawn-out depression 
appear to have been unfounded. In response to the economic 
collapse, Congress and the Fed took very, very bold, 
unprecedented, and decisive action. The Fed quickly lowered 
interest rates, launched a quantitative easing program on an 
unprecedented scale, and helped facilitate market functioning 
through a variety of emergency programs that were funded 
through congressional legislation, and we in Congress passed 
over $4 trillion in relief over five overwhelmingly bipartisan 
bills.
    Fortunately, today we are in nothing like the situation we 
were in last spring. Today the unemployment rate is now 6.3 
percent, about where it was in July of 2014. Eighteen States 
have unemployment rates below 5 percent. The average household 
in America is in a better financial position today than it was 
in before the pandemic. Personal savings rates are up by over 
$1.6 trillion. Consumer credit is down by over $100 billion. 
There is no question there are some subsets of our economy and 
our society that have been hit much harder than others, but in 
the aggregate, the fact is Americans have more disposable 
income now than they had before the crisis. And yet Congress is 
in deliberations to spend another $1.9 trillion with universal 
payments to people who have never had as much income as they 
do, to entities such as State and local governments, which in 
the aggregate have taken in more revenue in 2020 than they did 
ever before.
    We are well past the point where our economy is collapsing. 
And, in fact, our economy is growing very powerfully. The last 
thing we need is a massive multi- trillion-dollar universal 
spending bill. And we should recognize that all of this 
spending comes at a cost. It all gets funded with Government 
debt, which is either monetized, which has its own dangers, or 
it is a burden that gets passed on to future generations that 
have to service that debt.
    In 2020, debt held by the public reached 100 percent of our 
total economic output, and CBO projects that over the next 10 
years, net interest costs will amount to $4.5 trillion, and 
that is without another $1.9 trillion bill.
    There is also a real danger that we have overheating in 
places that lead to unwanted inflation, and I think the data is 
increasingly pointing in that direction. Keep in mind, we have 
$11 trillion in personal savings deposits. The country is in an 
accelerating reopening as the number of COVID cases is 
declining very, very rapidly on a daily basis. The economy is 
poised for very substantial growth in the near term, and yet 
the Fed continues to purchase $120 billion of securities per 
month, maintain short-term interest rates at basically zero, 
and Congress is considering, as I said, another enormous bill.
    On another matter, I want to make the point that I do think 
it is very important for the Fed to continue to focus on the 
mandate it has and not to seek to broaden that mandate. As 
noble as the goals might be, issues such as climate change and 
racial inequality are simply not the purview of our central 
bank. So during this hearing, I look forward to hearing about 
your views, Mr. Chairman, on the economy, on monetary policy, 
and the state of our markets.
    And with that, I yield.
    Chairman Brown. Thank you, Senator Toomey.
    Today we will hear from Federal Reserve Chair Jerome Powell 
the Fed's monetary policy and the state of the U.S. economy. It 
is nearly 1 year since the coronavirus pandemic first wreaked 
havoc in our country. We know the Federal Reserve plays a key 
role in making sure that our economy recovers for all 
Americans.
    Chair Powell, thank you for your service. Thank you for 
being in front of our Committee today and for your testimony. 
Proceed.

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

    Mr. Powell. Thank you, and good morning, Chairman Brown, 
Ranking Member Toomey, and other Members of the Committee. I am 
pleased to present the Federal Reserve's semiannual Monetary 
Policy Report.
    At the Federal Reserve, we are strongly committed to 
achieving the monetary policy goals that Congress has given us: 
maximum employment and price stability. Since the beginning of 
the pandemic, we have taken forceful actions to provide support 
and stability, to ensure that the recovery will be as strong as 
possible, and to limit lasting damage to households, 
businesses, and communities. Today I will review the current 
economic situation before turning to monetary policy.
    The path of the economy continues to depend significantly 
on the course of the virus and the measures undertaken to 
control its spread. The resurgence in COVID-19 cases, 
hospitalizations, and deaths in recent months is causing great 
hardship for millions of Americans and is weighing on economic 
activity and job creation.
    Following a sharp rebound in economic activity last summer, 
momentum slowed substantially, with the weakness concentrated 
in the sectors most adversely affected by the resurgence of the 
virus. In recent weeks, the number of new cases in 
hospitalizations has been falling, and ongoing vaccinations 
offer hope for a return to more normal conditions later this 
year. However, the economic recovery remains uneven and far 
from complete, and the path ahead is highly uncertain.
    Household spending on services remains low, especially in 
sectors that typically require people to gather closely, 
including leisure and hospitality. In contrast, household 
spending on goods picked up encouragingly in January after 
moderating late last year. The housing sector has more than 
fully recovered from the downturn, while business investment 
and manufacturing production have also picked up. The overall 
recovery in economic activity since last spring is due in part 
to unprecedented fiscal and monetary actions, which have 
provided essential support to many households, businesses, and 
communities.
    As with overall economic activity, the pace of improvement 
in the labor market has slowed. Over the 3 months ending in 
January, employment rose at an average monthly rate of only 
29,000. Continued progress in many industries has been tempered 
by significant losses in industries such as leisure and 
hospitality, where the resurgence in the virus and increased 
social distancing have weighed further on activity. The 
unemployment rate remained elevated at 6.3 percent in January, 
and participation in the labor market is notably below 
prepandemic levels. Although there has been much progress in 
the labor markets since the spring, millions of Americans 
remain out of work. As discussed in the February Monetary 
Policy Report, the economic downturn has not fallen equally on 
all Americans, and those least able to shoulder the burden have 
been hardest hit. In particular, the high level of joblessness 
has been especially severe for lower-wage workers and for 
African Americans, Hispanics, and other minority groups. The 
economic dislocation has upended many lives and created great 
uncertainty about the future.
    The pandemic has also left a significant imprint on 
inflation. Following large declines in the spring, consumer 
prices partially rebounded over the rest of last year. However, 
for some of the sectors that have been most adversely affected 
by the pandemic, prices remain particularly soft. Overall, on a 
12-month basis, inflation remains below our 2-percent longer-
run objective.
    While we should not underestimate the challenges we 
currently face, developments point to an improved outlook for 
later this year. In particular, ongoing progress in 
vaccinations should help speed the return to normal activities. 
In the meantime, we should continue to follow the advice of 
health experts to observe social distancing measures and wear 
masks.
    I will turn now to monetary policy. In the second half of 
the year, the Federal Open Market Committee completed our first 
ever public review of our monetary policy, strategy tools, and 
communication practices. We undertook this review because the 
U.S. economy has changed in ways that matter for monetary 
policy. The review's purpose was to identify improvements to 
our policy framework that could enhance our ability to achieve 
our maximum employment and price stability objectives. The 
review involved extensive outreach to a broad range of people 
and groups, including through a series of Fed Listens events.
    As described in the February Monetary Policy Report, in 
August, the Committee unanimously adopted its revised statement 
on longer-run goals and monetary policy strategy. A revised 
statement shares many features with its predecessor. For 
example, we have not changed our 2-percent longer-run inflation 
goal. However, we did make some key changes. Regarding our 
employment goal, we emphasized that maximum employment is a 
broad and inclusive goal. This change reflects our appreciation 
for the benefits of a strong labor market, particularly for 
low- and moderate-income communities. In addition, we state 
that our policy decisions will be informed by our assessments 
of shortfalls of employment from its maximum level rather than 
by deviations from its maximum level. This change means that we 
will not tighten monetary policy solely in response to a strong 
labor market. Regarding our price stability goal, we state that 
we will seek to achieve inflation that averages 2 percent over 
time. This means that following periods when inflation has been 
running below 2 percent, appropriate monetary policy will 
likely aim to achieve inflation moderately above 2 percent for 
some time. With this change, we aim to keep longer-term 
inflation expectations well anchored at our 2-percent goal. 
Well-anchored inflation expectations enhance our ability to 
meet both our employment and inflation goals, particularly in 
the current low interest rate environment in which our main 
policy tool is likely to be more frequently constrained by the 
lower bound.
    We have implemented our new framework by forcefully 
deploying our policy tools. As noted in our January policy 
statement, we expect that it will be appropriate to maintain 
the current accommodative target range of the federal funds 
rate until labor market conditions have reached levels 
consistent with the Committee's assessment of maximum 
employment, and inflation has risen to 2 percent and is on 
track to moderately exceed 2 percent for some time. In 
addition, we will continue to increase our holdings of Treasury 
securities and agency mortgage-backed securities, at least at 
their current pace, until substantial further progress has been 
made toward our goals. These purchases and the associated 
increase in the Federal Reserve's balance sheet have materially 
eased financial conditions and are providing substantial 
support to the economy. The economy is a long way from our 
employment and inflation goals, and it is likely to take some 
time for substantial further progress to be achieved. We will 
continue to clearly communicate our assessment of progress 
toward our goals well in advance of any change in the pace of 
purchases.
    Since the onset of the pandemic, the Federal Reserve has 
been taking actions to more directly support the flow of credit 
in the economy, deploying our emergency lending powers to an 
unprecedented extent, enabled in large part by financial 
backing and support from Congress and the Treasury. Although 
the CARES Act facilities are no longer open to new activity, 
our other facilities are in place.
    We understand that our actions affect households, 
businesses, and communities across the country. Everything we 
do is in service to our public mission. We are committed to 
using our full range of tools to support the economy and to 
help ensure that the recovery from this difficult period will 
be as robust as possible.
    Thank you. I am happy to take your questions.
    Chairman Brown. Thank you, Chair Powell.
    First, just a yes or no question. Do you agree the most 
important thing we can do for the economy right now is get 
people vaccinated?
    Mr. Powell. I would say that, yes, that is the single best 
policy to return the economy to its potential growth.
    Chairman Brown. Thank you. Researchers in Minneapolis say 
the pandemic is forcing mothers of young children out of the 
workforce. Some 3 million women have been forced out of the 
paid labor market in the past year. Every day families face 
impossible choices between their paychecks and caring for their 
children. The Biden Rescue Plan, as you know, provides the 
funding we need to get Americans vaccinated, as you suggest is 
the right policy. And that will help kids go back to school, to 
help working moms get back to work safely.
    What can the Fed do to make sure women, especially those 
with young children, can return to the workforce so that we do 
not end up with an even bigger lasting gender gap in the labor 
market?
    Mr. Powell. So the tools that can really address specific 
groups, for example, women who have perhaps temporarily dropped 
out of the labor force, those are really fiscal policy tools. 
Obviously, those are not tools that we have, and I today will, 
you know, stay away from fiscal policy and really talk about 
what we can do. And I think the main thing that we can do is 
continue to support the economy, give it the support that it 
needs. We are still 10 million jobs below the level of payroll 
jobs before the crisis. There is still a long way to go to full 
recovery, and we intend to keep our policy supportive of that 
recovery.
    Chairman Brown. Thank you for acknowledging in your opening 
statement and your comments to many of us, and your public 
comments, frankly, about how much we need to do to fight racism 
and increase diversity. Yet we know historically the Fed's 
monetary policy has benefited wealthy savers and homeowners. 
Decades of discrimination in the financial system we talked 
about earlier, from redlining to the subprime mortgage crisis, 
specifically targeted Black, Brown, and other vulnerable 
communities. It is clear the Fed's policy and failure to 
regulate predatory actions in the banking sector have 
contributed to the racial wealth, income, and home ownership 
gaps. You have said that the Fed's tools cannot address the 
underlying causes of racial injustice or income and wealth 
inequality in our economy. I think you give up a little too 
easily when you say that.
    So how can the Fed use its supervision authority to enforce 
antidiscrimination laws and fight racial injustice and income 
inequality?
    Mr. Powell. We do have responsibilities and authorities for 
fair lending, for example, under a number of statutes, and we 
take those responsibilities very seriously and, I think, carry 
them out robustly, and that is an important part of our 
mandate. And so that is something that we could do, and I think 
we do aggressively.
    In addition, through our Consumer and Community Affairs 
Division and through the Federal Reserve Banks, we do not 
spend, you know, public resources, but we try to attract 
private resources around, for example, initiatives that will 
address economic issues of low- and moderate-income communities 
and racial minorities.
    Chairman Brown. I think we could do more, but we will 
discuss that later.
    Chair Powell, in the middle of the pandemic, bank 
regulators have loosened capital requirements at the biggest 
banks. In one of its changes for the capital rules, the Fed 
stated the rule was meant, and I quote, ``to allow banking 
organizations to expand their balance sheets as appropriate, to 
continue to serve as financial intermediaries rather than to 
allow banking organizations to increase capital 
distributions.''
    In other words, the Fed reduced capital standards so banks 
would lend more, not so they would pay dividends. But as you 
know, it is not what is happening. The biggest banks have 
gotten larger. They have gotten more profitable, but they have 
not increased lending. Dividends, however, have remained 
steady.
    My question is: Mr. Chair, will you promise to the 
Committee that you will not extend any exemptions for capital 
requirements for banks and bank holding companies that have 
continued to pay dividends rather than invest in the real 
economy?
    Mr. Powell. So we are talking here really about the 
temporary measures we took with respect to the supplementary 
leverage ratio, and those expire at the end of March. We have 
not decided what to do there yet, and we are actually looking 
into that right now. I am not going to commit to connecting 
that decision to the payment of dividends. As a separate 
matter, as you know, we intervene to require the banks to limit 
their dividend growth to zero and also to limit their share 
buybacks, and the result of what you see now is a banking 
system that has higher capital than it did going into the 
pandemic, and particularly for the largest banks, and one where 
the banks have taken very large reserves against losses and so 
have proven themselves pretty resilient.
    Chairman Brown. Perhaps, but we also understand that they 
have not been supporting the real economy to the degree that we 
hoped they would, and we will continue that conversation. And I 
will send a written question to you on climate that we wanted 
to talk about.
    Chairman Brown. Senator Toomey.
    Senator Toomey. Thank you, Mr. Chairman.
    Just on this topic, let me just say I certainly hope that, 
to the extent that banks have adequate capital for the 
circumstances that they face at any point in time, any capital 
beyond that should absolutely be available to be returned to 
the people who own those banks in the form of dividends or 
stock buybacks, or whatever mechanism is suitable. And anything 
to the contrary is a terrible constraint on our economy and on 
economic freedom.
    I also want to just observe briefly--and I am not asking 
for a comment on this, Chairman Powell, but if I could 
summarize and characterize your opening comments about the 
economy, I think it is fair to say that we have many areas, 
sectors of our economy that are performing extremely well--
housing in the goods sector I think you referred to. And then 
we have very concentrated problems in certain relatively narrow 
sectors like hospitality and travel and entertainment, which 
are extremely depressed because of the circumstances. I think 
that clearly makes a very strong case that if there were to be 
further fiscal policy, it should address where the problem is 
and not where the problem is not.
    But to address monetary policy for a moment or so, I think 
the Fed's current forecast for growth for this year is over 4 
percent. I think the consensus is well over 5 percent, with 
some thinking it could be considerably higher than that. The 
unemployment rate is now at 6.3, which is about where it was in 
2014 when we were not contemplating multi-trillion-dollar 
bills, and I do not think we were buying $120 billion worth of 
securities per month.
    My concern is that the last two recessions were, I think, 
caused by asset bubbles that burst. In 2001 it was the stock 
market. In 2008 it was the mortgage credit market. In both 
cases, in my view, monetary policy contributed a great deal to 
the formation of those bubbles.
    The Dallas Fed President, Robert Kaplan, recently 
acknowledged that there is a link between the record amount of 
liquidity being pushed into the system and these unprecedented 
asset valuations that we are seeing in a whole range of assets, 
be it GameStop or Bitcoin or real estate commodities. Across 
the board we are seeing quite elevated asset prices and signs 
of emerging inflation.
    So I guess my question is: Do you believe that there is a 
link between the liquidity that the Fed has been providing and 
some of these unprecedented asset prices?
    Mr. Powell. So there is certainly a link. I would say, 
though, that if you look at what the market is looking at, what 
markets are looking at, it is a reopening economy with 
vaccinations; it is fiscal stimulus; it is highly accommodative 
monetary policy; it is savings accumulated on people's balance 
sheets. It is the expectations of much higher corporate 
profits, which matters a lot for the equity markets. So there 
are many factors that are contributing to what is happening in 
markets right now. Monetary policy I would certainly agree is 
one of them.
    Senator Toomey. Yeah, I would just suggest that--right, I 
agree all of those things are happening, all of those 
indicators of growth and increasingly indicators of rising 
inflation. As you know, the TIPS 10-year break-even on 
inflation is now over 2 percent, up from six-tenths of 1 
percent.
    My point is that at some point we have got too much 
liquidity going into the system. The economy is recovering 
very, very well. Problems are isolated and should be addressed 
narrowly. And I hope that $120 billion a month of bond buying 
does not become a permanent situation.
    One of the things I am concerned about, I wonder if you 
could comment on the risk that we would have an increase in 
inflation, an increase in bond deals that would correspond to 
that, but without being back at full employment, what would 
that imply--which I think is a very plausible scenario for 
later this year. What does that imply for the bond-buying 
program?
    Mr. Powell. Well, so what we have said about the bond-
buying program is that it will continue at the current pace, at 
least at the current pace, until we make substantial further 
progress toward our goals. And we have also said that as we 
monitor that progress, we will communicate well in advance of 
any actual decisions on purchases. And so what it will take for 
us to begin to moderate the level of purchases, is substantial 
further progress toward our goals, which we have not really 
been making for the last 3 months, but expectations are that 
will pick up as the pandemic subsides.
    Senator Toomey. Well, thank you, Mr. Chairman. I would just 
suggest that there are a lot of warning signs that have not 
been worrisome in the past but now are certainly blinking 
yellow. With that, I will yield.
    Chairman Brown. Thank you.
    Senator Menendez.
    Senator Menendez. Thank you, Mr. Chairman.
    Chairman Powell, at the end of this pandemic, we need to 
ensure that we have a more equal society. Unfortunately, we are 
not on a path to an equal recovery. As of January, the Black 
unemployment rate is 9.2 percent, the Hispanic unemployment 
rate is 8.6 percent, compared to 5.7 percent for White workers.
    According to the New York Fed, over the course of the 
pandemic the black labor force exit rate has increased 
dramatically while the White labor force exit rate has returned 
to prepandemic levels. Doesn't this mean that the Black 
unemployment rate is likely misleadingly low compared to the 
White rate?
    Mr. Powell. Well, as you point out, this pandemic was 
particularly bad for these long-standing disparities that we 
have in our economy. The job losses were heavily concentrated 
in public-facing service sector jobs. Those job losses tend to 
be more skewed toward lower-paid jobs and, in many cases, 
minorities and women, and so that is really where the big 
pockets of unemployment remain. And so you are right, so the 
burden really has fallen more in the low- and moderate-income 
communities than would typically be the case. It is always the 
case to some extent. This particular event, though, is somehow 
very precisely aimed at those people, and we are well aware of 
that.
    Senator Menendez. Well, I appreciate that acknowledgment. 
We know from the Bureau of Labor Statistics over the course of 
2020, the labor force participation rate for Black men and 
women fell nearly twice as much as it did for White men and 
women. So do you agree that minority families are bearing the 
brunt of the damage caused by the pandemic?
    Mr. Powell. Yes, along with others at the lower end of the 
income spectrum, the bottom quartile.
    Senator Menendez. Would you agree then that addressing this 
disproportionate damage needs to be a central priority in 
relief efforts?
    Mr. Powell. I would have thought so.
    Senator Menendez. Yeah, so would I. Now, as part of the 
Federal Reserve's mission to ensure maximum employment, what is 
the Federal Reserve's plan for maximizing employment for low-
income and minority workers?
    Mr. Powell. So when we say that maximum employment is a 
broad and inclusive goal, that means we look not just at the 
headline numbers; we also look at different groups and we try 
to take all of that into account in making our assessments. So 
we will take into account the headline numbers, but also those 
for other groups as we think about reaching maximum employment.
    Senator Menendez. Well, I hope that in your mission that 
the Federal Reserve looks at this because Federal Reserve 
studies show that while high-income jobs mostly recovered to 
prepandemic levels, unemployment among low-wage workers remains 
14 percent below prepandemic levels. And this is in spite of 
the fact that almost half of all low-wage workers are essential 
workers, the people who actually let us stay home when we were 
told to stay home to avoid the spread of the pandemic and to be 
infected; but they were risking their lives in the jobs that 
they did. And so I believe we have the tools to try to make 
this an equitable recovery.
    So would you commit to working with Congress and the 
Treasury to help low-wage workers and minority workers be able 
to recover just as strongly as others?
    Mr. Powell. We will do that. I will say, though, that 
monetary policy as a tool is famously a broad--it is a broadly 
effective tool. It does not enable us to target particular 
groups. It lifts the entire economy. But we are going to be 
mindful, though, of the disparities that exist as we make our 
decisions.
    Senator Menendez. Then, finally, as of February 1st, an 
estimated 13 million adults were not caught up on their rent; 
another 10 million adults were not caught up on their mortgage 
payments. Our country is very clearly in the midst of a housing 
crisis. What would be the effect on the housing market and our 
overall economy if Congress does not provide additional 
resources to help families struggling to pay their rent and 
mortgages?
    Mr. Powell. Well, if it were to get to the point at which 
people were evicted--and you are talking about people's lives 
being disrupted in ways that are sometimes quite hard to 
recover from, both for renters and owners, so it is important. 
I think the single best thing we can do about that, of course, 
is to keep monetary policy accommodative to do what we can to 
speed the recovery so that it will be robust and complete as 
soon as possible.
    Senator Menendez. Well, millions of people losing their 
homes would not only affect rateable bases and their most 
single aspect of wealth, so I hope you will keep your eye on 
that.
    Thank you, Mr. Chairman.
    Mr. Powell. Thank you.
    Chairman Brown. Senator Shelby.
    Senator Shelby. Good morning. Chairman Powell, thank you 
for your service of a number of years and how you, I believe, 
have done an outstanding job as Chairman of the Federal 
Reserve. I would like to associate myself this morning with a 
lot of the questions that have been asked already by Senator 
Toomey--the concern of inflation, the concern of the balance 
sheet, of where is the economy going when we get over this 
COVID, which we all hope and pray will be sooner than later. 
And I would like to add to that, Mr. Chairman, what is your 
view of the world economy tying into ours? Because it is an 
important factor as we go forward, assuming in the next, say, 6 
months that we get a handle around COVID in the country, and 
Europe, for example, does the same thing.
    Mr. Powell. So I will take those one at a time. On 
inflation, let me say a couple of things. First, as the very 
low readings of last March and April drop out of the 12-month 
calculation as we move forward this year, we expect readings on 
inflation to move up. That is called ``base effects.'' That 
will be a temporary effect, and it will not really signal 
anything.
    More importantly, though, with all the factors we have been 
discussing, you could see spending pick up pretty substantially 
in the second half of the year. And that would be a good thing, 
of course, but it could also put upward pressure on prices. And 
I would just say that essentially it does not seem likely that 
would result in very large increases or that they would be 
persistent.
    We have all been living in a world for a quarter of a 
century and more where all of the pressures were 
disinflationary, you know, pushing downward on inflation. We 
have averaged less than 2 percent inflation for more than the 
last 25 years. Inflation dynamics do change over time, but they 
do not change on a dime, and so we do not really see how a 
burst of fiscal support or spending that does not last for many 
years would actually change those inflation dynamics.
    I will also say forecasters need to be humble and have a 
great deal to be humble about, frankly, so if it does turn out 
that unwanted inflation pressures arise and they are 
persistent, then we have the tools to deal with that, and we 
will.
    Shall I continue? So on the balance sheet, you know, we are 
going to continue to--we are at a stage where with 10 million 
people--payroll employment is 10 million below where it was 
before the pandemic. You know, we are a long way from maximum 
employment. We are going to keep--the balance sheet is going to 
continue to provide the support that we think the economy 
needs. Over time, it will--the growth of it will slow, but that 
decision is the one that we talked about earlier, where asset 
purchases will continue until we make significant further 
progress toward our goals.
    You asked about the U.S. economy and the world economy. I 
do think--and many forecasters agree--that once we get this 
pandemic under control, you know, we could be getting through 
this much more quickly than we had feared, and that would be 
terrific. But it is not done yet. That job is not done. That is 
the thing I keep coming back to. We have got to finish the job 
with the pandemic, get it under control so that the U.S. 
economy could really reopen. Other countries around the world 
have the same set of issues, but there is--if people will get 
vaccinated and we can get the disease under control properly, 
the second half of this year and thereafter, the economy could 
be very good, and it could be good elsewhere in the world as 
well.
    Senator Shelby. And the fact that the savings rate has gone 
up tremendously in America, does that bode well in the future 
as far as perhaps economic activity?
    Mr. Powell. So a lot of that just is that people have not 
been able to spend. They have not been able to travel and go to 
restaurants, so it is forced savings in a way. So they will 
spend some of that going forward.
    You are really thinking, I think, about the fact that, you 
know, the U.S. needs more savings so that it will have more 
investment and more productivity. It would be nice if we had a 
higher savings rate, and it would be also nice if we did not 
have a lot of dissavings at the Federal level. A lot of it is 
that budget deficits require a lot of assets, not that we 
need--that is something we need to turn to again, but I think 
this is not the time to be thinking about that. But that time 
will certainly come.
    Senator Shelby. Thank you, sir.
    Mr. Powell. Thank you, Senator.
    Chairman Brown. Thank you, Senator Shelby.
    Senator Tester.
    Senator Tester. Yes, thank you, Mr. Chairman. And I want to 
start by thanking Chairman Powell. I very much appreciate your 
frankness. I very much appreciate your fight to keep the Fed 
independent. I know that has been difficult over the past 
number of years, but you have stepped up. You certainly do not 
want a bunch of politicians to determine monetary policy, so I 
am glad you are at the helm.
    I also think that we are going to have a debate over this 
$1.9 trillion package in front of you on probably every damn 
Committee that I am on and a bunch of others. Some of that is--
well, all of it is necessary, but I do want to talk to you, 
because everybody makes points and I go, ``Yeah, that is a good 
point.'' And it is true. The housing market in a place like 
Montana is hotter than hot. It is, quite frankly, booming, and 
there is another problem that I want to talk to you a little 
bit about with the housing thing. But there are other 
industries and there are folks out there who, quite frankly, do 
not have the job they used to have and may never get that job 
back. And there are business people out there that are up 
against it. Some of those businesses will go broke and never 
reopen. Others will.
    I just kind of want to get your perspective on if you were 
not the head of the Fed but in the U.S. Senate, where would you 
pay most of your attention to? Because I agree, any money we 
spend needs to be focused where it will do the most good. There 
is no doubt about that. Where is your focus? Where would your 
focus be? Would it be on employment? Would it be hospitality 
businesses? Or would it be something more global than that?
    Mr. Powell. That is an interesting question. Maybe the 
grass is always greener, but our work really relates to 
managing the business cycle in a way. But what I always think I 
would focus on is more what we call the ``supply side,'' which 
is really investing in things that will increase the potential 
growth rate of the United States economy over time and make 
that prosperity as broadly spread as possible.
    Let me be more specific. It amounts to investing in people, 
and that means education, it means training. It means all those 
things. And that enables those people to take part fully in our 
great economy, and I really do think in a global economy people 
who are able to use and benefit from technology, there is no 
limit on the amount of those people who can be working in the 
United States because it is such a global economy.
    I also think it is important for businesses as well that 
they have a climate where they can trust, you know, that 
inflation is going to be under control and that business 
conditions are going to be good and that they can invest, and I 
think the Federal Government investing in basic science over 
time has produced a lot of productivity-enhancing things.
    But, more generally, Senator, I think focusing on things 
that will make a longer-run difference to our economy is what I 
would do.
    Senator Tester. OK. I appreciate that.
    Now I want to go to housing because I do not--you know, I 
talk about Montana, but I think this is true all over. We do 
not have enough affordable housing. We do not have enough 
workforce housing. I think that short term and long term, by 
the way, this is going to be a drag on the economy.
    Do you see the Fed playing any role or do you think they 
could have a role in increasing the amount of affordable 
housing that is out there? And if you do think the Fed plays a 
role, what would that role be?
    Mr. Powell. I do not really think we do. When it comes to a 
set of policies like that, that is targeting, you know, the 
fiscal power of the Federal Government to what is seen as a 
worthy cause. It is not really something we can do. We can 
combat housing discrimination and things like that in lending, 
but I do not think we are in a position of being able to 
allocate credit to worthy beneficiaries. That is really fiscal 
policy.
    Senator Tester. Getting back to the pandemic, you have 
implemented a lot of monetary tools during this crisis. In your 
opinion, have they been sufficient? And if they have--yeah, 
that is the first question. Have they been sufficient?
    Mr. Powell. I think they have. I think the difference 
really this time is that fiscal policy has really come to the 
table, and that is making a difference.
    Senator Tester. OK. Moving forward, have you looked at any 
changes to the policies, the monetary policy, the monetary and 
fiscal tools that we use moving forward?
    Mr. Powell. Not yet. I mean, we are looking into that. Of 
course, we will do--right now our focus is on providing the 
economy the support it needs. We will be turning to an 
evaluation of everything that happened in the crisis and 
answering that question.
    Senator Tester. OK. Thank you, Mr. Chairman. Thank you, 
Chairman Powell.
    Mr. Powell. Thank you, Senator.
    Chairman Brown. Thank you, Senator Tester.
    Senator Scott.
    Senator Scott. Thank you, Chairman Brown, and thank you, 
Chair Powell, for being here with us this morning. It is 
certainly an important time for us to engage in a conversation 
about the future of employment in our Nation, and one of the 
core responsibilities of the Fed, of course, has to do with 
unemployment.
    There seems to be so few issues right now, Chairman Powell, 
that actually unite the left and the right. I am always stunned 
in Washington when we find something that unites both sides 
and, frankly, the minimum wage issue is an issue that has 
united both Republicans and Democrats on opposing having the 
$15 minimum wage as a part of the COVID-19 relief package. It 
is good to see my friends on the left coming to the conclusion 
that in the middle of a pandemic that, according to the 
Congressional Budget Office, has already shuttered--the $15 
minimum wage would shutter another 1.4 million jobs. The 
earlier estimate went as high as 3.7 million jobs in the middle 
of a pandemic that has eliminated 10.7 million jobs. This seems 
to be common sense from my perspective, from the perspective of 
Democrats and the Congressional Budget Office.
    My question for you, sir, is: Have the Fed's economists 
conducted research on the potential impacts of raising the 
minimum wage to $15 an hour?
    Mr. Powell. I do not know that we have looked at that 
question particularly. We have great labor economists who have 
done a lot of work on the broad area.
    Senator Scott. Yes, sir. Are their conclusions similar to 
the conclusions of the Congressional Budget Office as it 
relates to the negative impact of raising the minimum wage 
during the pandemic?
    Mr. Powell. Let me say, as I must, that this is a classic 
issue that the Fed never takes a position on, and I am not 
going to take a position on it here today. It is fiscal policy. 
Most of the research still says that there is some tradeoff 
between job loss and those whose wages go up. But, actually, 
you know, the sort of unanimity of that finding of 30 or 40 
years ago is no longer in place. There is a much more nuanced 
understanding of it. But, in any case, it is just an issue 
where we do not play a role or express a view. I can share with 
you the research that we have done. I would be happy to do 
that.
    Senator Scott. That would be----
    Mr. Powell. That our staff has done.
    Senator Scott. That would be very important, especially as 
you think of the Fed's responsibility as it relates to 
providing a sustainable economy that includes keeping 
unemployment as low as possible. The fact that the Fed is not 
taking a position on an increase of the minimum wage that is 
obviously, according to the Congressional Budget Office, going 
to eliminate the minimum of 1.4 million jobs I think is an 
important engagement from the Fed on that issue.
    I will ask you a different question as it relates to the 
COVID relief package of $1.9 trillion. It seems to me that over 
the last fiscal year, we spent right around $6.5 trillion 
addressing the pandemic. My question for you is: As we see 
another $1.9 trillion on top of the $6.5 trillion that we have 
already spent, what is the impact on the issue of rising 
inflation in excess of the Fed's longer-run objective of 2 
percent?
    Mr. Powell. So, of course, as I said at the beginning, I am 
not going to comment today on the proposal that you mentioned, 
the fiscal package that you mentioned, at all. Not our role.
    I will say on inflation there perhaps once was a strong 
connection between budget deficits and inflation. There really 
has not been lately. That does not mean it will not return. 
But, again, my expectation will be that inflation will probably 
be a bit volatile over the next year or so due in significant 
amount to particular things to do with the pandemic. For 
example, we will see a slight increase in inflation in a few 
months because of the base effects that I mentioned. We will 
also see perhaps--we do not know this, but we may see upward 
pressure on prices as the economy fully reopens. A good problem 
to have.
    I do not think that those effects should either be large or 
persistent, and the real reason for that is that we have had 
decades of well-anchored inflation expectations, meaning that 
we have had a very volatile economy for the last 15 years, and 
inflation has just kind of done what it was going to do. It did 
not go up.
    Senator Scott. Thank you very much, sir. I appreciate your 
answer. The fact that you are unwilling and unable to answer 
the questions as it relates to the minimum wage is certainly 
you do not want to get into the politics of the $1.9 trillion 
package. I do not blame you. If I were you, I would not want to 
get into the politics of it at all, frankly, and I certainly 
understand your reticence to do so.
    I will use my few seconds here to simply say that the 
Congressional Budget Office, some Democrats, all Republicans 
all agree that raising the minimum wage is a way to destroy 
jobs and an economy that is looking forward to a fragile 
recovery.
    Thank you, Chair Brown.
    Chairman Brown. Thank you, Senator Scott.
    Senator Warner. Thank you, Mr. Chairman, and thank you for 
holding this hearing. Chair Powell, it is great to see you 
again. Thank you for the good work you are doing.
    I think in response to Senator Tester's questions, when you 
were talking about the kind of investments we ought to be 
making that are long term, thinking about infrastructure, one 
of the areas--and understanding what my friend Senator Scott 
just said in your answer, that you do not want to weigh in on 
the President's most recent plan, I would like you, though, to 
comment whether you believe that broadband investments fall 
into that category of the kind of long-term structural change 
we need. I would argue over the last 11 months we have seen 
that broadband is a necessity. I think it is absolutely COVID-
related. I hope that the current package can be changed to 
actually include a sizable investment in broadband. As good as 
our four packages, bipartisan packages, have been to date, the 
broadband investment has been meager or nonexistent. Experts 
like Tom Wheeler and Blair Levin have said somewhere in the $40 
to $50 billion range, we could get about 97 percent coverage 
along with better affordability.
    So I guess I am asking, would you agree that immediate 
efforts to close the broadband gap not only represent long-term 
investments, but also have some direct relationship to the 
current health care crisis?
    Mr. Powell. So as you and I have discussed on a number of 
occasions, I would agree that broadband is kind of a classic 
21st century infrastructure and one of those things that can 
support growth. But I, of course, cannot go anywhere near--do 
not want to go anywhere near the question of what should be 
included in the package, if that is OK.
    Senator Warner. What about the question, though, you know, 
from a macroeconomic standpoint, broadband and trying to close 
the digital divide if we are going to have a fulsome recovery 
across socioeconomic groups? Could you speak to the question of 
the necessity for broadband to be ubiquitous if we are going to 
have that kind of robust recovery and comments about whether 
broadband is at this point a ``nice to have'' or an ``economic 
necessity,'' whether it is telework, telehealth, or tele-
education?
    Mr. Powell. So, again, as you and I have discussed on a 
number of occasions, I would agree that it is a classic piece 
of infrastructure for the modern economy, for the service 
economy, for the technologically advanced economy, and having 
it broadly available just could mean--as broadly available as 
possible could be a significant benefit economically.
    Senator Warner. If not broadly available, are we going to 
be able to see the kind of broad-based recovery that I think we 
are all looking for?
    Mr. Powell. Well, I think we have longer--we have a bunch 
of issues to deal with that relate to these persistent 
disparities that we see to do with education and training and 
all those things. But that would certainly be one of those 
things.
    Senator Warner. Senator Scott in his previous line of 
questioning raised the inflation issues, and I know we have 
seen about a 41-basis-point increase on some of our 10-year 
benchmarks. It is still relatively small. I tend to agree I 
think we do need to make a sizable investment right now. I am 
not sure--the inflation risks, I agree with you, are not as 
high as they potentially might be.
    Could you just briefly give some of the tools you have got 
available as Federal Reserve Chair if you started to see 
inflation rise at a level that you did not feel comfortable 
with?
    Mr. Powell. Well, those are the classic tools that we have, 
and, again, I really do not expect that we will be in a 
situation where inflation rises to troubling levels. At this 
point the Federal Open Market Committee is seeking inflation 
running moderately above 2 percent for some time. So the real 
question is: As we go through this, are we going to find 
ourselves in a situation where inflation expectations are de-
anchored and inflation is moving up and it is persistent? I 
think we are all very, you know, acquainted with the history of 
how we got into that situation in the 1970s. We did that in the 
1960s. And we have no intention of repeating that.
    So central banks and the Fed learned how to keep--the 
centrality of keeping inflation under control, and we know how 
to do that. That is just by not allowing the economy to just 
ignore constraints over time. But I think this is not a problem 
for this time, as near as I can figure, and if it does turn out 
to be, then we do have the tools we need.
    Senator Warner. We are down to my last 20 seconds, and let 
me just--if you want to make some general comments, I would 
argue that the pandemic was the first major real-world stress 
test we have had on our fiscal system since 2009. How do you 
think overall that the system has responded? And recognizing, 
Mr. Chairman, that will be my last question. You may want to 
take that one for the record, but if you want to make some 
general comments quickly.
    Mr. Powell. You meant financial system, I think, right?
    Senator Warner. Right, yes.
    Mr. Powell. Well, I think that the large financial 
institutions that are at the heart of our financial system 
proved resilient. They did. And they have been able to keep 
lending, and their capital levels have actually gone up during 
this period. As I mentioned, their liquidity levels are at 
highs. So I think the work that we did over the course of the 
last decade and then some has held up pretty well so far, and I 
expect it will continue to.
    Senator Warner. Thank you, Mr. Chairman. Thank you, 
Chairman Powell.
    Chairman Brown. Thank you, Senator Warner.
    Senator Rounds of South Dakota.
    Senator Rounds. Thank you, Mr. Chairman. Chairman Powell, 
first of all, it is good to see you again, and I appreciate 
your service to our country as well. Thanks for being with us 
today.
    I would first like to ask about the SLR exclusion which is 
set to expire on March 31st. My colleagues have mentioned it 
earlier, but did not really get into the heart of the matter. 
The temporary patch allowed banks to exclude ultra-safe assets, 
U.S. Treasurys and deposits to the Fed from their balance 
sheets. This was important in preserving bank liquidity during 
last spring's flight to cash and was a commonsense move since 
the Fed cannot go bankrupt and the Treasury has never failed to 
meet its obligations.
    We all agree that the economy is still in need of fiscal 
and monetary support. The Chairman himself said that banks 
should be doing more to help their workers and our broader 
society, but they cannot do that when we are tying their hands 
with excessive and challenging capital requirements. It would 
appear Congress is going to create even more bottlenecks in our 
financial plumbing by flooding the economy with about $1.9 
trillion in new money that banks will have to hold capital 
against as soon as the Treasury starts writing the checks.
    My question is: Would you agree that it makes sense to 
seriously consider extending the SLR exclusion given the other 
measures the Fed and Congress are taking to facilitate our 
economy's recovery?
    Mr. Powell. So I do think that the SLR exclusion--I know it 
expires at the end of March, and we actually have not made a 
decision on what to do. It is something we are in the middle of 
thinking about right now, and so I am just going to have to say 
that we will be making a decision and announcing it pretty soon 
here.
    Senator Rounds. The reason for my question is that I think 
last time around and in the past, we have had challenges with 
banks that have come in and said, look, we have got folks that 
want to bring their assets in, they have got to have a place to 
put it, it is liquid, it is what we are going to have. Most 
certainly that has impacted our ability and the reason for the 
SLR in the first place, and it just seems to reason that as you 
talk about it and as you continue to discuss it, I hope that we 
really do keep an open mind and I presume you are keeping an 
open mind on the need for that, as this amount apparently will 
be put into the economy in very short order. And so I simply 
bring it up saying I think there are a lot of us that think 
that that is going to be an important part of the discussion to 
have.
    Let me lead into another question with you, sir. We have 
been monitoring the increase in Treasury yields from about 
nine-tenths of 1 percent at the start of 2021 to approximately 
1.37 percent when the market closed yesterday. I understand 
this reflects a view of an improving economy, but also comes 
with increased borrowing costs, increased inflation, and 
potentially a move by the Fed to increase interest rates down 
the line.
    How do you view the increase in Treasury yields in the 
broader context of our economy at this point?
    Mr. Powell. So, first, we look at a broad range of 
financial conditions, and that is one. It is an important one. 
But, really, we look at the whole range of financial 
conditions, and it is very important to ask why are rates 
moving up. And so if you look at why they are moving up, it is 
to do with expectations of a return to more normal levels, more 
mandate-consistent levels of inflation, higher growth, an 
opening economy. In a way it is a statement of confidence on 
the part of markets that we will have a robust and ultimately 
complete recovery. So those are the reasons that are behind 
that, I would say.
    Senator Rounds. Great. Well, thanks. Look, we follow the 
markets. We follow on a regular basis whether the markets are 
moving up or moving down and so forth, and I think in 
anticipation of what your thoughts were going to be today, I 
think the market was rather volatile.
    I am just curious. When you walk into an opportunity like 
this where you are sharing your thoughts, I know that you want 
to be very careful in terms of the message that you send, and I 
think you do a very good job of being very careful in the way 
that you send the message, but let me just ask. In your 
opinion, when you prepare for this type of a discussion, 
knowing the markets are literally watching everything you say, 
what is the message that you would like to send? Are you 
talking we are going to have stability, it is going to be 
steady as she goes, we do not see changes coming up with regard 
to the availability of capital, we do not see changes that are 
going to impact inflation? What is the message that you really 
want to send as you share with us today and you are expected to 
be in front of our Committees?
    Mr. Powell. So I guess I will say a couple of things. 
First, the starting point is that we are 10 million jobs below 
where we were in February of 2020, 10 million payroll jobs. So 
there is a long way to go, and many of those jobs are 
concentrated in the lower end of the income spectrum, as I 
mentioned.
    Many parts of the economy have recovered, but in the bottom 
quartile, the unemployment rate is probably in excess of 20 
percent, we think. So there is a long way to go. Monetary 
policy is accommodative, and it needs to continue to be 
accommodative. We have put forward guidance out both on our 
asset purchases and our rates. We think that forward guidance 
is appropriate, and you can expect us to move patiently over 
time as we see better data coming in. You know, right now, we 
have had 3 months of 29,000 jobs a month. It is not very much 
progress. We expect that such progress, which we had earlier 
last year--we had very fast progress. We expect that will begin 
to return in coming months and expect us to move carefully and 
patiently and with a lot of advanced warning.
    Senator Rounds. Thank you, Mr. Chairman.
    Thank you, Mr. Chairman. I apologize for going over on my 
time.
    Chairman Brown. Thank you, Senator Rounds.
    Senator Warren of Massachusetts.
    Senator Warren. Thank you, Mr. Chairman.
    So our economy is suffering through a K-shaped recovery 
where the wealthy are doing better and better while working 
people are doing worse and worse. Chair Powell, you have been 
pretty vocal about inequality over the past few years. You have 
noted--I think I have got a quote here from you-- that it has 
been a growing issue in our country and in our economy for four 
decades. You have talked a lot about how inequality undermines 
opportunity and mobility, and you have described it as 
something that holds our economy back.
    So I take it from these comments that you believe that 
inequality weighs our economy down and stunts economic growth. 
Is that a fair statement?
    Mr. Powell. Yes, it is.
    Senator Warren. Good, and I agree with you on this, and the 
Fed's own data spell out the problem. I think you were just 
talking about it. You know, the top 1 percent of families last 
year received 20 percent of all the income in this country, and 
you think that is not good for our economic growth overall. Is 
that fair?
    Mr. Powell. Well, I would say that the stagnation of 
incomes in the lower-income area and also the low mobility that 
we have seen emerge, those to me are the two most important 
things that I focus on when I talk about inequality--stagnation 
of incomes and low mobility.
    Senator Warren. Right, but we are talking here about income 
inequality, how much people earn each year to be able to pay 
the rent and to be able to put food on the table. But 
inequality also shows up in wealth, which is what families 
build over time, money in the bank, home, stock. Wealth 
inequality is even more extreme in our Nation than income 
inequality. While the top 1 percent of families, this tiny 
slice, got 20 percent of all the income earned in the U.S. last 
year, the top 1 percent held 33 percent of the total wealth in 
this Nation. And now this pandemic is making inequality worse.
    Unemployment, as you just noted, is now at about 20 percent 
for the bottom quartile in this country, meaning that there are 
a lot of folks out there who are making choices about keeping 
the heat on or putting food on the table. Meanwhile, the wealth 
of America's 660 billionaires increased by $1.1 trillion over 
this past year.
    Inequality is felt in another way. It is felt in how people 
pay taxes. The 99 percent in America pay on average about 7.2 
percent of their total wealth in taxes in a given year, but the 
top one-tenth of 1 percent pay only about 3.2 percent. That is 
less than half as much.
    Chair Powell, does it increase inequality when the 
wealthiest Americans pay total taxes at less than half the rate 
of nearly all other American family?
    Mr. Powell. You are getting farther and farther from the 
kinds of inequality that we focus on and, frankly, the ones 
that we can do anything about with our tools. We cannot affect 
wealth inequality, certainly in the short term. We can affect 
indirectly income inequality by doing what we can to support 
job creation at the lower end of the market. So I would leave 
to you--those are really fiscal policy issues that I would 
not--I cannot relate those to our mandate. That is all.
    Senator Warren. I appreciate that you are trying to move 
sideways on this, but you have pointed out that inequality is a 
problem in our country, that it holds back mobility, that it 
holds back opportunity, and I am simply pointing out that 
inequality is felt not just in income. It is also felt in 
wealth even more so, and that our tax structure makes that 
inequality worse over time.
    Extreme wealth inequality undermines our economy, as you 
have said. It undermines justice. It undermines our democracy, 
and our Tax Code focuses almost entirely on income and lets 
most of the wealth that the ultra-rich families have 
accumulated just slip right on through, and that just seems to 
me not right.
    You know, it is time for a wealth tax in America, a 2-cent 
tax on fortunes worth more than $50 million. If your fortune is 
over a billion, pay a few more cents. This wealth tax will let 
us address the inequality that you have been very worried about 
as Chair of the Federal Reserve. It is how we have a chance to 
level the playing field and build an economy that works for 
everyone.
    So thank you for being here, Mr. Chairman, and thank you, 
Chairman Brown.
    Chairman Brown. Thank you, Senator Warren.
    Senator Tillis of North Carolina.
    [No response.]
    Chairman Brown. If not, Senator Kennedy of Louisiana.
    Senator Kennedy. Yes, sir. Can you hear me, Mr. Chairman?
    Mr. Powell. I can, Senator. You have two ``Mr. Chairman's'' 
here.
    Senator Kennedy. Yes, sir. Mr. Chairman, the witness, what 
was our fourth quarter GDP growth?
    Mr. Powell. I am reluctant to guess, but it was in the--I 
want to say 4 percent.
    Senator Kennedy. Right. That is what my numbers show, too. 
What are you and your economists estimating that our GDP growth 
will be for 2021?
    Mr. Powell. So we will be updating our forecasting. The 
last forecast the staff did was in January. My guess is that 
the data have been a little more positive, but it will be a 
good number. We would be in the range that you see in the 
public forecast.
    Senator Kennedy. How about 6 percent?
    Mr. Powell. Could be. Could be in that range. In the range 
of 6 to 7 percent.
    Senator Kennedy. OK. At what point in 2021 will the level 
of GDP equal prepandemic levels?
    Mr. Powell. Sometime during the year. It depends on the 
growth rate. Could be second half of the year.
    Senator Kennedy. How about the end of January--or the end 
of February, rather?
    Mr. Powell. I do not know that. Are you asking the 
question--the prepandemic level or the prepandemic trend?
    Senator Kennedy. The prepandemic level. If you froze the 
GDP, the economy, in February a year ago, at what point would 
we be back to where we were February a year ago?
    Mr. Powell. In the first half of the year.
    Senator Kennedy. Yeah, I mean, I see a lot of economists 
saying at the end of February. Do you disagree with that?
    Mr. Powell. I cannot be that specific. I was answering the 
question about the precrisis trend, which is what we are trying 
to get back to.
    Senator Kennedy. Well, here is what I am getting at. You 
have strongly encouraged Congress to pass another coronavirus 
bill, $2 trillion. And I guess tell me, if you could, in just a 
couple of sentences why you think we need to do that if we are 
looking at 6 percent GDP growth this year, and as soon as the 
end of this month, we will be back where we were in February 
2020?
    Mr. Powell. Actually, Senator, I have consistently not 
taken a position on this bill.
    Senator Kennedy. So you do not have an opinion about 
whether we ought to pass President Biden's bill?
    Mr. Powell. As I have said since the December press 
conference, I think, on every public occasion when I have been 
asked about it, I have said that it is not appropriate for the 
Fed to be playing a role in these fiscal discussions about 
particular provisions in particular laws. We did not comment on 
the Tax Cuts and Jobs Act. We did not comment on the CARES Act. 
You know, it is not our role to do that.
    Senator Kennedy. OK. So your opinion is if we do not pass 
the bill, you are cool with that?
    Mr. Powell. Well, that would be expressing an opinion, so 
that is what I am not doing, is expressing an opinion.
    Senator Kennedy. Well, would you be uncool with that?
    Mr. Powell. I think by being either cool or uncool, I would 
have to be expressing an opinion.
    Senator Kennedy. OK. How do you think we ought to pay all 
this money back that we are going to borrow and that we already 
have borrowed?
    Mr. Powell. I think that we will need to get back on a 
sustainable fiscal path, and the way that has worked when it is 
successful is you just get the economy growing faster than the 
debt. I think that we are going to need to do that, and that is 
going to need to happen, but it does not need to happen now. 
Now is the wrong time to be doing that.
    Senator Kennedy. Do you think we ought to go Catwoman on 
the budget and actually look for savings there?
    Mr. Powell. ``Go Catwoman''? I do not know that reference. 
I think in the fullness of time, we will need to right-size our 
budget relative to our--so that the economy is growing faster 
in nominal terms than the debt. We will have to eventually on 
the path we are on.
    Senator Kennedy. Well, do you think that deficits matter?
    Mr. Powell. Certainly in the long run, I do believe they 
do.
    Senator Kennedy. You do not think they matter in the short 
run?
    Mr. Powell. Again, I think we will need to return to----
    Chairman Brown. I am going to call on Hagerty because he 
has waited so long.
    Mr. Powell. We will need to return to this issue, but I 
would not return to it now, and the way to get after this issue 
is to get a situation where the economy is growing faster in 
nominal terms than the debt is.
    Senator Kennedy. What if that becomes the case, but your 
spending is also growing faster than your economy?
    Mr. Powell. Well, no, that is the deficit. I mean, the 
question really is--the deficit is the difference between 
intake and spending, so it depends. It is the net of those two.
    Senator Kennedy. Let me stop you, Mr. Chairman, because I 
am going to have one last question quickly. M2, the money 
supply, is up I think about $4 trillion over the past year, or 
$6 trillion. Four trillion, 6 trillion, what is a few trillion? 
It is up 26 percent, the highest amount since 1943. What does 
that tell you?
    Mr. Powell. Well, when you and I studied economics a 
million years ago, M2 and monetary aggregates generally seemed 
to have a relationship to economic growth. Right now, I would 
say the growth of M2, which is quite substantial, does not 
really have important implications for the economic outlook. M2 
was removed some years ago from the standard list of leading 
indicators, and just that classic relationship between monetary 
aggregates and economic growth and the size of the economy, it 
just no longer holds. We have had big growth of monetary 
aggregates at various times without inflation, so something we 
have to unlearn, I guess.
    Chairman Brown. Thank you, Senator Kennedy.
    Senator Kennedy. Thank you, Mr. Chairman.
    Chairman Brown. Senator Cortez Masto from Nevada.
    Senator Cortez Masto. Mr. Chairman, thank you. Thank you, 
Chairman and Ranking Member. And, Chairman Powell, thank you 
again for being here as usual. I so enjoy listening to you in 
the conversation so far.
    Let me bring up a subject that you and I quite often talk 
about, which is Nevada, and the tourism and service industry as 
we all know has been so hard hit. We have the second highest 
unemployment rate in the Nation. In this type of labor market, 
there is no upward pressure on wages because when people are 
desperate for work, they are willing to take lower-paying jobs. 
But when the unemployment rate is low, employers are more 
willing to both raise wages to find workers as well as invest 
more in in-house training and retraining.
    Can I just ask a question? How does a tight labor market 
encourage employers to invest in in-house training? Do you have 
any thoughts or answers to that at all?
    Mr. Powell. I do. And as we have discussed, in that last 
couple of years when unemployment was routinely below 4 
percent, as low as 3.5 percent, and where labor force 
participation was high, had moved up actually, despite 
expectations that it would not, we saw lots of virtuous effects 
in the labor market. I actually talked about those a couple of 
weeks ago. One of them was--and I did not focus too much on 
it--you saw employers investing more in training. You saw 
employers looking for people at the margins of the labor force. 
You know, employers were going to prisons and getting to know 
people before they came out and giving them jobs as they came 
out. Great things happening from a tight labor market, and I 
just think we saw that, and that is one of the reasons we are 
so eager to get back to that, you know, consistent with also 
maintaining price stability. But we really do think--and others 
saw the same thing we did, which is the broad societal benefits 
of a tight labor market.
    Senator Cortez Masto. And, in particular, wouldn't you 
agree that Congress' investment in workforce and workforce 
development and helping developing those skills for that 
workforce would be important?
    Mr. Powell. I do. Again, I do not want to comment on any--I 
am not entirely sure if what you mentioned is in the current 
proposal, but I would say that the kinds of investment in 
people that enable them to be more effective in the labor force 
and policies that enable people to take part in the labor 
force, those are big things that can increase the productive 
capacity of our economy over time.
    Senator Cortez Masto. Yeah, I agree. And that is why I have 
introduced the Workers Act, the Pathways Act. Many of my 
colleagues are really focused on this investment, particularly 
now when we have an opportunity to have a long-term impact on 
jobs, so thank you for that.
    Let me jump to just the unemployment in the service 
industry now. This is an area that I know we have been really 
hard hit, and we have to do more to turn this economy around in 
our hospitality industry. But let me ask you this: If the 
Congress does not extend and bolster unemployment insurance, 
what is the Federal Reserve's economic forecast for the impact 
on communities like Las Vegas that are dependent on travel and 
hospitality?
    Mr. Powell. So, again, I am not going to comment on--
unemployment insurance is part of the bill, so I am just going 
to stay away from the current fiscal discussions. I really have 
to do that. I mean, the single most important thing for your 
service sector employees is to get the pandemic behind us so 
people can get on airplanes and go to Nevada again and take 
vacations. That is the single most important economic growth 
thing that we have.
    After that, I think there will be--and it is possible that 
that will begin to happen relatively soon, if we can get the 
vaccines out and get people vaccinated and people do the right 
things with social distancing and masks and that kind of thing. 
You could see that happening relatively soon, which would be 
great.
    Senator Cortez Masto. I agree, but you would agree there is 
an investment that still needs to be made? I mean, we are not 
done here at the Federal level with our monetary and fiscal 
policy in addressing the economic crisis we have. It is one 
thing to get the pandemic under control. It is another to 
understand how we turn this economy around as well. Wouldn't 
you agree?
    Mr. Powell. I would agree, and, you know, as I have said, 
we will keep our policy accommodative. We think we have 
significant ground to cover before we get even close to maximum 
employment, and we hope to do everything we can to speed that 
process.
    Senator Cortez Masto [presiding]. Yeah, and let me just say 
one final thing, because, as you just said, it is the pandemic 
that has hit State after State and individual communities after 
individual communities, I hope we do not shift gears here about 
making investments when some States turn around much quicker 
and their economy turns around much quicker than ours, 
particularly in the service industry. No State should be left 
behind, and I hope that we would all agree to that, that we 
need to pull everybody with us as we address this pandemic and 
start to turn the economy around.
    So I know my time is up. I will submit the rest of my 
questions for the record. I also think that Chairman Brown has 
had to get over to Senate Finance to ask a question. He will 
return. So I am going to sit in his chair temporarily, and I am 
going to go ahead and turn the gavel over to Senator Hagerty. 
Thank you.
    Senator Hagerty. Well, thank you, Senator Cortez Masto, and 
I want to say thank you to Chairman Brown and to Ranking Member 
Toomey as well for holding this hearing today as we work toward 
full economic recovery. And as noted, this is an important part 
of Congress' oversight of the Federal Reserve System.
    And, Chairman Powell, I want to thank you for your time and 
your participation today. More generally, I want to thank you 
for your leadership of the Fed as we work our way through this 
crisis. And I want to say this, Mr. Chairman: I am very 
encouraged by the indications from the Monetary Policy Report 
of the progress that we are making as we come out of this 
downturn. We are looking at potentially north of 4 percent 
economic recovery, or as you and Senator Kennedy were just 
discussing, maybe even 6 percent growth for 2021. I find that 
very encouraging. Albeit an uneven recovery, I feel that it is 
very good news that we are on the way.
    That also raises concerns that I have, and I am sure it has 
been discussed many, many times about the amount of liquidity 
that we are going to continue to pump into this economy. We 
have already allocated $4 trillion in coronavirus recovery 
relief, $1 trillion yet to be spent, and now we are talking 
about putting close to an additional $2 trillion into the 
economy. I will not belabor this anymore. It has been discussed 
by my colleagues, but I share their concerns about injecting 
that much liquidity into the economy at a time when we are in 
the process of recovering, particularly noting our tough and 
slow recovery after the 2008 recession, given the amount of 
funding that was injected into the economy then.
    Chairman Powell, I would like to shift gears for a minute. 
Yesterday Treasury Secretary Yellen talked about the digital 
dollar, the digital dollar that is overseen by the Fed. It is 
tied to blockchain technology, something that she said could 
result in faster, safer, and cheaper payments. You and I have 
discussed the importance of the dollar as the world's reserve 
currency on previous occasions. It is a vital asset for us as 
Americans. I would very much appreciate, Chairman Powell, your 
perspective on whether the Fed should develop a digital dollar, 
a digital dollar that will be held directly by households, 
directly by businesses, and not intermediated by commercial 
financial institutions.
    Mr. Powell. Thank you. So we are looking carefully, very 
carefully, at the question of whether we should issue a digital 
dollar, and it is something that central banks around the world 
are looking at and doing so appropriately because the 
technology now enables us to do that, and it also enables 
private sector actors to create their own kind of digital 
quasi-money type of instruments.
    So there are significant both technical and policy 
questions to do with how we would go about doing that. I would 
say that we are committed to solving the technology problems 
and to consulting very broadly with the public and very 
transparently with all interested constituencies as to whether 
we should do this.
    I would also say we are the world's reserve currency, and 
we have a responsibility to get this right. We do not need to 
be the first. We need to get it right, but this is something we 
are investing time and labor in right across the Federal 
Reserve System. You may know that the Federal Reserve Bank of 
Boston has a partnership with MIT looking at one particular 
thing. We are doing research here at the Board. It does hold 
out the prospect of the things that you mentioned, very 
positive. It could help with financial inclusion as well. At 
the same time, you want to avoid creating things that might be 
destabilizing or that might draw funds away from the banking 
system. We have a banking system which intermediates between 
savers and borrowers. We want to be careful about what the 
implications are of what we do, so it is a very high priority 
project for us.
    Senator Hagerty. I share your concerns on the need to be 
careful. I also appreciate the fact that you are going to stay 
at the leading edge of looking at this and making certain that 
America does not fall behind in any respect in terms of 
maintaining our status as the world's leader in reserve 
currency.
    With just a moment of time left, I want to follow up on a 
more technical comment that Senator Rounds made regarding the 
importance of looking hard at the SLR exemptions as we continue 
to move forward this year. I know they are coming to expiration 
at the end of March, but I very much appreciate your taking a 
hard look at that as we move forward, because there is a 
tremendous amount of liquidity coming in.
    And on inflation, you and I have talked before about the 
experience in Japan of disinflation. At the same time, I share 
Senator Toomey's concerns about the asset price bubbles that we 
are seeing already occur here in America, and, again, I 
appreciate your role in taking a very steady hand in monitoring 
inflation and making sure we stay on top of it. Thank you very 
much, Mr. Chairman.
    Mr. Powell. Thank you, Senator.
    Senator Cortez Masto. Thank you.
    Next I am going to call on Senator Van Hollen. I know 
Senator Brown is asking a question at Finance. I am going to 
ask a question at ENR. So I am going to also pass the gavel to 
Senator Van Hollen. Thank you.
    Senator Van Hollen [presiding]. Thank you, Senator Cortez 
Masto, and welcome, Mr. Chairman. Thank you for your service.
    At the outset here, I just want to underscore the 
importance of the Fed continuing to move ahead with the FedNow 
Service. As we have discussed in previous hearings, the United 
States' outdated payment system is inflicting large and 
unnecessary costs on millions of American consumers, leading to 
billions of dollars of unnecessary funds spent. And this does 
not impact people with big bank accounts who are not close to 
overdrawing. It impacts those who are living paycheck to 
paycheck. So I see that the Fed has accelerated its timetable a 
little bit to 2023. If you can move even faster, all the 
better. You will be saving millions of Americans lots of money 
in unnecessary costs.
    I want to focus my questioning on the issue of long-term 
unemployment. In a speech you gave on February 10th, you 
pointed out that the unemployment rate would be close to 10 
percent if you adjust for the Bureau of Labor Statistics, its 
clarifications and people who dropped out of the labor force 
since the pandemic. This includes over 4 million Americans who 
are counted in the unemployment figures, but are long-term 
unemployed, and millions more who have dropped out of the labor 
force during the pandemic, but would like to get back into the 
workforce. And you noted in that speech the concerns and damage 
from persistent long-term unemployment, what it inflicts on 
workers personally and their families and the negative impact 
on productive capacity for our entire economy. And you stressed 
that monetary policy alone cannot do this. It requires a fiscal 
response.
    So here is my question: Beyond the overall impacts that the 
bill before us or other fiscal responses will make in terms of 
increasing overall economic growth, based on your experience, 
would you agree that it is important to very intentionally 
develop policies to help the long-term unemployed, individuals 
who even during good economic times were unable get into the 
workforce?
    Mr. Powell. I do, and this really is a longer-run thing, I 
would say, but it is particularly relevant now. As I also 
mentioned in those remarks, industries are always growing and 
shrinking, and workers are moving from one industry to another. 
That is just a market-based economy working. In this situation, 
you have that accelerated in a big way. So we may find that 
many of the people who are not going back to work, are not back 
at work now, may really struggle to find jobs because 
businesses are being automated. We hear that all the time, that 
computers and automated answers are becoming more and more 
common. So I think those people are really going to need help 
to get back into the labor force and get their lives back. That 
will take, I think, the kind of investments you are talking 
about.
    Senator Van Hollen. No, I appreciate that, and we are 
talking about a focus and an intentional investment beyond the 
investments that we are making for overall economic growth, 
right?
    Mr. Powell. Yes.
    Senator Van Hollen. Yeah. And I also wanted to turn really 
quickly to the importance of using the right kind of economic 
measurements to determine the well-being of American workers 
and families. As you noted in that same speech, unemployment 
among low-wage workers is 17 percent, where it was at the start 
of the pandemic; whereas, among high-wage workers it is only 
down 4 percent. So if you take the average, you are not seeing 
the impact, the disproportionate impact on low-wage workers.
    I often give the example that if Jeff Bezos had moved to 
Baltimore City last year, the per capita income of Baltimore 
City would have gone from $53,000 per person to $175,000 per 
person, even though nobody was better off individually.
    So what should we be doing and what is the Fed going to be 
doing to make sure that as our economy improves, which we all 
want it to do quickly, we do not overlook the continuing pain 
people are feeling because we are looking at averages and not 
looking beneath those averages?
    Mr. Powell. These people who are struggling in that way are 
doing so because they were employed in public-facing jobs in 
the service industries. So, clearly, the number one thing we 
can do to get them back to work is to get the pandemic behind 
us, and that is not something we can work on here at the Fed, 
but that is the top thing.
    Beyond that, I just think it is up to us to continue what 
we can do to support the economy, really, with some patience in 
order so that they will have time to get across. We have talked 
about a bridge. Most Americans will have a bridge in the end, 
but there is a group that will really struggle. I think we need 
to be mindful of them, because, really, they did nothing wrong. 
This was a natural disaster. And, you know, as a country, we 
set out to provide support.
    Senator Van Hollen. I appreciate that. My hope is the Fed 
releases its numbers going forward. In addition to the 
aggregate average numbers, you also continue to provide us with 
the impact on lower-wage individuals. Thank you, Mr. Chairman.
    Senator Tillis.
    And if Senator Tillis is not with us, Senator Lummis.
    And if Senator Lummis is not with us, Mr. Chairman, is 
Senator Tillis--I am told may be joining us soon?
    Senator Moran.
    Senator Moran. Thank you, Mr. Chairman, Mr. Chairman pro 
tem, and, Chairman Powell, thank you for the opportunity to 
visit with you today, and thank you for your work at the Fed.
    I just have a broad question. How do you view your job in 
relationship to an Administration? So a change in 
Administration from one President to the next, what does that 
mean at the Federal Reserve from your perspective? Anything? Or 
a lot?
    Mr. Powell. Well, our job does not change, and at the very 
beginning of the Administration, the personnel do not change. 
Of course, the one way that Administrations really do interact 
importantly with the Fed is with appointments, and so those 
will happen over time.
    The second thing is, you know, it is a different group of 
people. We have ongoing relationships by a longstanding 
practice with various parts of the Treasury Department mainly, 
but also to a much more limited extent with the White House, 
and we make new relationships and continue to have the same 
sorts of discussions that we have. But, ultimately, the answer 
to your question is nothing really changes because of the 
election other than meeting new people.
    Senator Moran. Chairman, thank you, and thank you for your 
answer. During my time on the Senate Banking Committee, I have 
been an advocate for an independent Fed and want the Fed to 
make decisions based upon best policy without significant 
political interference, other than perhaps the Senate Banking 
Committee, anytime that we can take that opportunity.
    Let me ask a specific question. In the most recent Monetary 
Policy Report to Congress, the central bank indicated that, and 
I quote here, ``Commercial real estate prices remain at 
historically high levels despite high vacancy rates and appear 
susceptible to sharp declines, particularly if the pace of 
distressed transactions picks up or, in the longer term, the 
pandemic leads to permanent changes in demand.''
    I have great concern for the commercial property markets 
and would like to hear what your thoughts are. Is this 
something we need to wait out? Is it something that needs more 
attention than we have been able to provide in CARES or COVID 
relief before? And what does it mean to CMBS borrowers with 
this market?
    Mr. Powell. Well, some parts of commercial real estate--
office, hotel, and some maybe retail to some extent--are under 
real pressure because of the pandemic. Those changes may be 
lasting or they may be temporary, or they may be somewhere in 
the middle. So this is something that we are keeping a close 
eye on. There is exposure to the banking system, and as you 
pointed out, there is significant exposure in CMBS to, I think, 
the hotel space in particular. So we watch these things.
    Of course, as I think you also mentioned, the single best 
thing that can happen is to have the economy recover quickly so 
that offices and hotels, you know, can be filled up again.
    Where it relates to offices, are more people going to work 
remotely, and so will the demand for office space feel some 
downward pressure for a while or even for the long run? That is 
very possible. We do not really know that, but if you talk to--
we had a presentation a couple weeks ago from someone who had 
done a survey that suggested that there may be sort of 
sustained lower demand for office space in particular.
    So those are things we watch very carefully. We watch it 
through the banking system and to see whether--most banks are 
OK on that, although some of the smaller banks do have a 
concentration in CRE. So we watch that carefully.
    Senator Moran. Mr. Chairman, thank you very much. I yield 
the balance of my time.
    Senator Van Hollen. Thank you, Senator Moran.
    Senator Smith.
    Senator Smith. Thank you, Mr. Chair. Can you all hear me? I 
know, of course, Senator Tillis was having a hard time with his 
audio.
    Senator Van Hollen. We can hear you.
    Senator Smith. Yes, great. Thank you.
    Chair Powell, it is great to see you today, and I want to 
start by asking you a question around climate risk and 
disclosing climate risk. You and I have discussed before that 
climate change remains one of the most pressing challenges that 
we face. It is an economic issue. It is a health issue. I mean, 
it really cuts across our entire economy. I think in some ways 
it is like a slow-moving pandemic, and, of course, it poses a 
real risk to the banks that the Fed regulates.
    So I know that in December--and I think it was a great 
idea--that the Fed joined the Network of Central Banks and 
Supervisors for Greening the Financial System. I think that is 
a step in the right direction. But my question gets to this: A 
lot of public disclosure on climate risks is mostly voluntary. 
It varies a lot from company to company, which makes it really 
hard to compare risks or interpret what those disclosures mean.
    So could you talk to us about whether or not you think that 
climate risk disclosures should be standardized? Or should we 
continue to allow firms to sort of make their disclosures, if 
they make them at all, in whatever form they choose?
    Mr. Powell. I will. If you would permit me, I would first 
like to say that, of course, the overall response of society to 
climate change, which I agree with you is a very important 
problem, has to come from elected officials in Congress and 
also in executive branch under existing law. So that is really 
where this comes from.
    Senator Smith. I would agree with you.
    Mr. Powell. We have a specific role on climate change, 
which only extends to the scope of our mandate, which is really 
to assure the resilience of the institutions that we regulate 
and supervise.
    But on disclosure--and this is really an SEC issue, but I 
would just say in general financial institutions everywhere, 
particularly the larger and medium-sized ones, are working hard 
on this question. There has been a lot of work done with the 
Task Force on Climate-Related Financial Disclosure, and other 
groups, you know, are struggling with this question of 
different kinds of disclosure that varies by jurisdiction and 
by institution. And I do think that it is appropriate to allow 
some of that difference to persist for now.
    In the long run, clearly we ought to be going to kind of a 
template and more standardized, but it seems to me we can let 
this process--which is very much ongoing now among our own 
financial institutions, we can let it bear fruit for a while. 
But I think in the long run that we have to be going in the 
direction of more standardization.
    Senator Smith. So moving toward a more standardized, 
reliable, comparable kind of standard of disclosure makes sense 
to you?
    Mr. Powell. Yes, it does, over time.
    Senator Smith. Thank you. Thank you. And I just want to 
also just loudly agree with you that this is primarily an 
opportunity where Congress and the executive need to step up 
and take the steps that we need to take from a policy 
perspective. So I agree with you on that.
    I have one other thing I would like to ask you about. There 
has been a lot of conversation today about the unevenness of 
the economic recovery and how that is affecting different 
people differently, and I would like to hit on one point about 
this.
    Last week, I think it was, the Minneapolis Fed came out 
with a report looking at recovery, people recovering their 
employment, and it revealed in Minnesota and in the Minneapolis 
Fed district a dramatic difference in women rejoining the 
workforce or, in this case, not rejoining the workforce, a 
dramatic difference between women and men and even particularly 
a difference between lower-wage women workers and higher-wage 
women workers. This is a huge challenge because in many parts 
of my State, we actually have a workforce shortage. So it is an 
economic challenge as well as, of course, a challenge for 
families that have lost that really significant wage earner.
    So, Chair Powell, could you just talk a little bit about 
this unevenness, the challenges of women returning to the 
workforce as we move through the pandemic, and then how you see 
that affecting our economic recovery?
    Mr. Powell. Sure. So we know that with the closure of 
schools and with home schooling, you know, parents have had to 
stay home, and that burden has fallen significantly more on 
women than on men. So women in effect have had to involuntarily 
withdraw from the workforce. Hopefully, that will be temporary, 
to the extent people want to return to the workforce, but that 
interrupts your career. It may be difficult to get back to 
where you were in the workforce and replace that work life that 
you had and sort of limit your ability to contribute to the 
economy. So it is important. And, again, it is not really our 
policies that can accelerate that, but policies that bring the 
pandemic to an end as soon as possible would help and allow us 
to open the schools up again would certainly help. But you are 
right, though, that there have been disproportionate impacts, 
and that is one of them.
    Senator Smith. Well, I know I am out of time, but I want to 
just toss in there that one of the key pieces of infrastructure 
for our economy to work, and especially to work for women, is a 
child care system that is there so that their young children 
have a safe, affordable place to go. This has been a big really 
kind of collapse in the child care system during the pandemic 
and something that I hope to be able to work with, continue to 
work with my colleagues on in Congress.
    Thank you.
    Mr. Powell. Thank you.
    Senator Van Hollen. Thank you, Senator Smith.
    Senator Tillis.
    Senator Tillis. Senator Van Hollen, can you hear me?
    Senator Van Hollen. I can hear you. We can hear you.
    Senator Tillis. I had to reboot my PC. Sorry about that, 
but thank you for your indulgence.
    Chairman Powell, thank you for being here, and thank you 
for the time that we spent on the phone a few weeks back.
    We have 210 million adults, Americans over the age of 18 in 
this country, and now we are at a run rate of about 1.7 million 
vaccinations a day now that we have had the lag in January. 
That is the first and second vaccination. So I think in answer 
to Chairman Brown's question, you said the most important thing 
we can do is accelerate the vaccine. Now we are on pace for 
having well over half of the country for people who want to 
take the vaccine vaccinated by, let us say, June, early July 
timeframe.
    Back when you and Treasurer Mnuchin were before us, when we 
were debating what a follow-up package should look like, we 
ultimately passed one that was over $900 billion. We were 
talking about a bridge. In your opening statement, you also 
talked about an optimistic outlook in the second half if we 
continue to make progress on the vaccine. I am not going to ask 
you questions about the fiscal policy that we are debating in a 
$1.9 trillion package. But I am curious if, at least at a high 
level, you think it would be prudent to make sure that the 
additional money that we expend to continue to provide that 
bridge or build that bridge to recovery, should it be spent on 
things that are truly stimulative? Do you see any stimulative 
value, for example, in money coming from the Federal Government 
that ultimately makes it into bank accounts and not back into 
the economy on a short-term basis?
    Mr. Powell. Again, I do not want to comment on the 
particulars of the bill. Clearly, some kinds of support have 
higher multiplier effects, and the people who get the money 
have different marginal propensities to consume.
    Senator Tillis. I want to follow up on a question that 
Senator Moran asked about CMBSs in particular. With the 
eviction and foreclosure moratoriums ultimately sunsetting and 
with the CMBSs also being linked in many cases to pension plans 
and their potentially being volatile, what specific proactive 
steps should we consider as a matter of policy or can you take 
to avoid what may be some tough waters for that space of 
investments in probably the coming year?
    Mr. Powell. You know, the kind of tools that we have are 
not really appropriate for addressing those kinds of situations 
unless they become extremely broad, and I would not expect 
that. So I think it would come down to whether you want to 
direct specific assistance.
    Senator Tillis. Well, let me go back to one other thing on 
asset bubbles. I am sure you are familiar with President 
Bullard's comments about his belief that he does not see any 
potential risk of bubbles. Do you share that view?
    Mr. Powell. I would not comment on what one of my 
colleagues said. So I guess what I would say is this: We look 
at a really broad range of things when we talk about financial 
stability. We have got how much leverage is there in the 
banking system, households, nonfinancial corporates. We look at 
funding risks, and we look at asset prices. The thing we always 
get asked about is asset prices, but they are only one thing. 
Ultimately, what you want is a situation where movements in 
asset prices do not disrupt the broader financial system. I 
think we have highly capitalized banks, and we have done a lot 
to shore up the parts of the financial system that did not hold 
up during the prior crisis.
    You know, I would not comment on any particular--on 
bubbles. You know, we are not--no one can really identify them. 
For any particular asset, even now, people have different 
perspectives. For example, in the equity market, there are some 
who say there is a bubble. Others say if you look at it this 
way, there is a lot of--I do not have an opinion on that for 
this purpose.
    Senator Tillis. Final question. I cannot see the timer, so 
I do not know if I am out of time. I know I am close, but I 
think Senator Van Hollen mentioned the payment system. What is 
the current status of the implementation relative to the 
original timelines for implementation and pricing?
    Mr. Powell. So we are right on track and feeling like we 
will be up and running in 2023, and that is good. We said it 
would be 2023 or 2024. So now we are thinking 2023. That is 
really good, and I just think it is a project that overall is 
very much on track. I do not have anything for you, any news on 
pricing, but it is on track.
    Senator Tillis. OK. Well, I look forward to reaching out 
and maybe speaking with you all about the implementation and 
some of the issues on pricing, which have been a concern of 
mine. Thank you, Chairman Powell.
    Mr. Powell. Thank you, Senator.
    Chairman Brown [presiding]. Thank you, Senator Tillis. And 
thanks to Senator Van Hollen for, while I was voting, taking 
over the Committee.
    Senator Sinema from Arizona.
    Senator Sinema. Well, thank you, Chairman Brown, and thank 
you to Ranking Member Toomey for holding this hearing. Chairman 
Powell, it is good to see you. Thank you for joining us today.
    Now, I will admit that when I hear from Arizonans, the 
first question or concern they have for me is not usually about 
the federal funds rate. It is not about the Fed's dual mandate 
or the money supply curve, because right now Arizonans are 
concerned about getting the coronavirus under control and 
getting our economy back on track. We want to ramp up vaccine 
production and distribution, support small businesses, deliver 
relief to struggling Arizonans, and reopen our schools safely. 
So my hope is that we will get critical relief [inaudible] to 
think about the future, not just the present crisis. We want a 
strong economic recovery, and that means ensuring the Fed's 
work complements our legislative efforts.
    On December 16th, the Federal Open Market Committee stated 
that it will be ``appropriate to maintain the current 
accommodative target range of the federal funds rate until 
labor market conditions have reached levels consistent with 
maximum employment and inflation has risen to 2 percent and is 
on track to moderately exceed 2 percent for some time.'' So the 
FOMC summary of economic projections from December show that 
most members' projections of the longer-run unemployment rate 
lie between 3.9 and 4.3 percent. So, Chairman, does that mean 
that the FOMC will not view the U.S. as having reached 
conditions that are consistent with maximum employment until 
the unemployment rate is 4.3 percent or less?
    Mr. Powell. Yes, and it means more than that, too. When we 
say maximum employment, we do not just mean the unemployment 
rate. We mean the employment rate, which is the inverse, and we 
mean it as a percentage of the population, employment to 
population, which also takes onboard relatively high levels of 
participation. We look at wages. We look at many things, a 
broad range of indicators on maximum employment.
    Senator Sinema. I see. Now, the statement lists three 
conditions for raising rates: full employment, 2 percent 
inflation, and projections of 2 percent-plus inflation. Are all 
three of these conditions necessary for the FOMC to consider 
raising its target for the federal funds rate?
    Mr. Powell. Yes, they are.
    Senator Sinema. Oh. Well, thank you. That is very helpful, 
and I appreciate you clarifying that for all of us.
    You know, as we work to rebuild the economy and reopen 
safely, we will likely see pent-up demand in the hardest-hit 
sectors--hotels, tourism, and restaurants. And as you know, 
excessive pent-up demand can cause temporary sector-specific 
price inflation. But temporary sector-specific price inflation 
is very different than persistent economywide inflation. So 
taking overly aggressive action on a short-term limited problem 
risks cutting off relief before it reaches Arizona families, 
and that is because such action would increase interest rates 
on student loans, mortgages, and other household debts when 
families can least afford it.
    So what tools would the Fed utilize to ensure that you 
effectively distinguish between temporary sector-specific 
inflation and the real deal?
    Mr. Powell. So as I mentioned earlier, we are very aware of 
the history of inflation and how it was gotten under control 
and how it got out from under control. I would just say looking 
at the current situation, we do expect that inflation will move 
up, in part because of what you mentioned, which is 
enthusiastic spending as the economy reopens, but we do not 
expect that the effects on inflation will be particularly large 
or persistent, particularly from sort of a one-time amount of 
spending due to the current situation. So we will be watching 
that carefully to make sure that is right, but we will be doing 
that patiently. And we would expect that the longer-run 
inflation dynamics that we have seen for more than a quarter 
century, where inflation expectations are grounded and 
inflation does not move up very much or it does not move down 
in bad times, does not move up that much in good times, we 
think those will not go away overnight. We think they will 
persist. They may well evolve, but, again, we would expect 
inflation to perform somewhat in keeping with the history of 
the last few decades.
    Senator Sinema. Thank you, Chairman Powell. Again, I 
appreciate you being here today. Mr. Chairman, let us work 
together to get the economy back on track and ensure that 
everyone benefits from this recovery.
    Thank you, and I yield back.
    Mr. Powell. Thank you.
    Chairman Brown. All right. Thank you, Senator Sinema.
    Senator Lummis from Wyoming is next.
    Senator Lummis. Well, thank you, Mr. Chairman, and, 
Chairman Powell, thanks so much for appearing before the 
Committee today.
    I have two questions. The first one centers on energy. As 
you know, demand has dropped for energy since the pandemic 
started, but economists are projecting greater demand later 
this year and into 2022, even while production declines under 
the current Administration's actions to restrict oil, gas, and 
coal development.
    My question is this: Are inflationary risks weighted to the 
upside or downside if a demand shock occurs and reduced 
production cannot keep up?
    Mr. Powell. The downside for a long time. The situation you 
described, let us say hypothetically that it does push up 
energy prices in the near term. That would move through 
headline inflation, but it would not necessarily--it would 
raise prices. It would not necessarily change the rate of 
underlying inflation.
    Senator Lummis. Would a balanced energy approach, more 
balanced than we are looking at right now, be appropriate until 
the supply demand curve returns to normal?
    Mr. Powell. You know, we do not really take positions on 
energy supply. Those are really issues for our elected 
representatives, notably including you, and I know you are an 
expert in the energy space.
    Senator Lummis. Well, I will switch my questions then to 
innovative payment instruments. FedNow and other instruments 
like stablecoins and central bank digital currencies have the 
potential for much higher monetary velocities. So how will this 
impact the monetary transmission mechanism and collateral 
availability in the markets?
    Mr. Powell. Well, we do not think they will have much of an 
effect on monetary transmission, actually. We have had a 
tremendous amount of payment sector innovation for a long time, 
really, and monetary policy transmission continues to be about 
what it is. We change interest rates, and that works its way 
through the economy, and that supports economic activity or 
restrains it, depending on where interest rates are. So we do 
not actually think there is going to be a tight connection 
between the FedNows and the stablecoins of the world. And I 
would agree with you it is important to have collateral, and, 
you know, what we see in the markets is far from a shortage of 
collateral. There seems to be ample collateral, if you just 
look at the rates that are being paid.
    Senator Lummis. Could higher velocities from innovative 
payment instruments lead to a refocusing of the monetary 
transmission mechanism away from the securities markets and 
toward more of a bank-focused transmission mechanism based on 
demand deposits?
    Mr. Powell. Again, we do not see--the premise is--that 
might be right. We do not actually think, though, that there is 
much reason or evidence to expect, or showing that these 
innovations will have much of an effect on velocity, or on 
transmission for that matter. So we should talk about this 
offline. It is a very interesting question, actually. But we do 
not really see the premise, but I would love to hear more.
    Senator Lummis. I will look forward to those conversations. 
One more question. Do we need a central counterparty for the 
clearing of Treasuries?
    Mr. Powell. Interesting question, and that is a proposal. 
We are doing a lot of thinking these days, along with 
colleagues from other agencies, about the structure of the 
Treasury market, given what happened during the acute phase of 
the pandemic when there was so much selling pressure and there 
was not the capacity to handle it. And one way to do that would 
be to have central clearing. It certainly has benefits, and I 
have been a big fan of central clearing in other parts of the 
economy. It is something that we are looking at. I do not know 
that it will wind up being part of the solution, but it is 
certainly worth looking into. So, again, another very 
interesting analysis and question.
    Senator Lummis. Well, thank you. Senator Sinema, who 
previously spoke, and I have founded a Financial Innovations 
Caucus in the Senate, and these are some of the things that we 
want to explore, plus many other things. So we will look 
forward to addressing some of these questions through the 
Financial Innovations Caucus and through this Committee. So 
thank you so much, Chairman Powell, for being with us today and 
for your insights. I yield back.
    Chairman Brown. Thank you, Senator Lummis.
    Senator Ossoff from Georgia, you are recognized.
    Senator Ossoff. Thank you, Mr. Chairman, and thank you, 
Chairman Powell, for joining us this morning and this 
afternoon, and for the discussion that we had several days ago.
    Chairman Powell, it may not be widely known that the Fed's 
retail payment office, or RPO, is based in Atlanta, and the RPO 
is responsible for most transactions involving Americans' 
checking accounts, ACH transactions, direct debit. This is 
critical financial infrastructure vital to the functioning of 
our economy. Do you have concerns that cybersecurity threats to 
the RPO could pose a systemic risk to the U.S. economy? And 
will you commit to working with my office to review the 
cybersecurity of the Atlanta-based RPO and to improve it if 
necessary?
    Mr. Powell. I would agree with you that those are very 
important issues. I do think that the Atlanta Fed is very 
focused on those issues, but I would be, of course, delighted 
to work with your office in that respect.
    Senator Ossoff. Thank you so much. There is no doubt, 
Chairman Powell, that the COVID-19 pandemic is the most 
significant drag on economic growth and job creation, but could 
you step back please and comment on what you assess to be the 
most significant systemic threats to global or national 
financial stability?
    Mr. Powell. Well, you know, clearly, bringing the pandemic 
to an end in the United States and globally, a real decisive 
end, would take so much risk to the financial system end of the 
economy and to the people we serve off the table. So you really 
cannot overestimate the importance of getting that done 
quickly, and we can do it, but just remember--we have not done 
it yet, but we really can do it as a country. And it has to 
happen all around the world, or we will keep getting echoes of 
this, you know, possibly next winter, but this is where we do 
not want to be. We want to get this done and have it be 
decisive.
    Beyond that, I think the advanced economies have issues 
around growth, around an aging population and low interest 
rates, low inflation, low growth, low productivity worldwide, 
the United States to a lesser extent than many other advanced 
economies. But those are issues that we face that threaten 
different kinds of stability. Those are big, big issues that we 
think about and we have to address to some extent with our 
policies. So I could go on.
    Senator Ossoff. Thank you, Chairman Powell. I appreciate 
that. And recognizing that you are, as a matter of policy, not 
commenting on the specific fiscal measures that Congress is 
considering, can you please guide us through what your thinking 
would be, if Congress were to engage in more ambitious fiscal 
expansion, with more significant or more sustained fiscal 
support for low- or middle-income households, without 
commenting on any specific legislation, how might that change 
the Fed's policy outlook?
    Mr. Powell. So we take fiscal policy into account. It is 
completely--we take it as a given, whatever fiscal policy is. 
And it is one of many, many factors that will affect the path 
of the economy. We are focused entirely on the state of the 
economy and the path to maximum employment and price stability. 
That is our focus. Anything that affects that can affect what 
we see. But we will be looking at the actual data in our 
forecast. We will not be reacting to specific policies, if that 
is what you mean. Again, I would say over the longer term----
    Senator Ossoff. Chairman Powell, you have acknowledged the 
extreme difficulty of economic conditions for low-income and 
low-wealth households in this hearing. Which provides more 
direct economic relief to low-income households who may not own 
stocks or hold mortgages or run businesses: direct fiscal 
relief or monetary expansion whose effects are mediated by 
money markets and the banking system?
    Mr. Powell. Well, I would just say again, without 
commenting on a particular bill, fiscal policy, if we are 
talking about targeting specific groups within society for 
support, that is the work of fiscal policy. Monetary policy is 
really not designed to do that.
    Senator Ossoff. That is right. So if trying to relieve the 
suffering of people who are in economically precarious 
situations in their household, who, again, do not own stocks, 
do not own businesses, do not have mortgages, direct fiscal 
relief will be a more effective means of relieving their 
suffering than the broader macroeconomic intervention of the 
Fed through monetary policy. Is that a correct paraphrasing of 
your statement?
    Mr. Powell. Yes, and that is really been the story of this 
recovery, is fiscal policy has really stepped up and done that. 
We have done what we can, too, but fiscal policy----
    Senator Ossoff. OK. I have just 20 seconds. Chairman, I 
want to return to systemic risk. The provision of massive 
liquidity to the financial system, not just since COVID but 
since the 2007-08 crisis, risks the emergence, as the Ranking 
Member noted, of asset bubbles that could pose a systemic risk 
to the banking system. Do you believe that we have sufficient 
surveillance and risk management capacity right now to identify 
those risks before they threaten financial stability?
    Mr. Powell. I do. We monitor financial markets very 
carefully and so do many others. It is not a question of lack 
of monitoring capacity.
    Senator Ossoff. OK. Thank you so much, Chairman Powell. 
Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Ossoff.
    Senator Daines from Montana is recognized. Or perhaps he is 
not here. Senator Cramer from North Dakota has not spoken yet. 
He had checked in earlier. Is he here?
    Senator Warnock from Georgia is recognized.
    I understand people are voting. Let me ask one question. I 
wanted to ask--hang on a second. I apologize. I wanted to ask 
the Chairman a question about climate, and I had mentioned, I 
will do this question in writing. I would rather obviously do 
it now while we are waiting, and I will not keep you long if 
the other Members do not show up.
    Chairman Brown. We know that low- and moderate-income 
communities and Black and Brown communities suffer the effects 
of climate change disproportionately. When a hurricane hits--
and always have suffered weather disasters, way out of 
proportion to their numbers. When a hurricane hits, when 
wildfires ravage an entire town and regions, entire spring 
planting washes down the Mississippi, local residents need 
Government agencies to be agile and flexible in response.
    What policy changes, Mr. Chair, will the Fed implement to 
promote consumer protection in community development and do 
things like ensuring access to cash or other means of payment 
when these more frequent extreme weather events devastate 
already distressed communities or whole regions? Are you 
coordinating on this with the Federal Reserve Banks, among the 
12 banks?
    Mr. Powell. Yes. So that is a good example, really, of the 
way--to the extent climate change leads to increased episodes 
of severe weather, we need the banking institutions that we 
supervise to be in a position to perform really critical 
functions in the aftermath of this, those of us who see that. 
By the way, the Federal Reserve System itself, our Reserve 
Banks get the cash. They take the actual physical cash and get 
it to those affected areas. It is something they do very well, 
and we need to be resilient and available to do that--able to 
do that, rather. And then we need the banks to be able to 
perform the function that they perform with their ATMs and 
their branches to get that cash out to people who may be in 
pretty dire circumstances in the wake of a natural disaster.
    Chairman Brown. Senator Daines from Montana is recognized 
for 5 minutes.
    Senator Daines. All right. Thanks, Mr. Chairman.
    Chairman Powell, it is good to have you here. I just was 
looking at the T-bill chart and noticing since the 1st of 
February, the 1-month rates have dropped in half, from 0.06 to 
today 0.03; 2 months went from 0.07 to 0.02. We are starting to 
get into that realm here of possibly negative rates, which we 
saw, of course, briefly a year ago March.
    I just want to get your thoughts on that. Is there any 
issues here of shortage collateral? What is driving this as you 
are watching some of these short-term rates approaching zero?
    Mr. Powell. So with T-bills in particular, this would 
really be a Treasury issue, but I would say, you know, it is a 
lot of demand for short term--there is a lot of liquidity and 
people want to store it to some extent in T-bills, and there is 
demand and, therefore, that drives down the rates that people 
are being paid--or are receiving for buying those assets.
    From our standpoint, our policy rate is the federal funds 
rate. And to the extent there were to be downward pressure on 
that because of, for example, the Treasury general account 
shrinking in size, then we have tools that we can use to keep 
that rate in our intended policy range, and we will do that. 
And that should also limit the extent to which other money 
market instruments like T-bills would go even lower or perhaps 
negative.
    Senator Daines. So do you have a concern? Many of us were 
surprised when we saw negative rates here a year ago. These 
rates are getting awfully low in the short term. Is that a 
concern of yours then or not?
    Mr. Powell. Well, again, our principal concern is that the 
federal funds rate be in its intended range, the range intended 
by the Federal Open Market Committee. We do see that there is 
the possibility that other money market rates could move down. 
And I think to the extent we are able to keep the federal funds 
rate in its range, that should ameliorate some of that downward 
pressure. And that would be appropriate.
    Senator Daines. To follow up on that same point, Mr. 
Chairman, the last couple of weeks, we have seen a lot of 
volatility, for example, in the Texas gas markets that to a 
degree spread out to other markets. If there were several of 
these other kind of special circumstances all happening at the 
same time, might this lead to a shortage of collateral from T-
bills, as seemed to be in the case that we saw here last March?
    Mr. Powell. It is possible. I do not really see that 
happening, but it is true that there is tremendous demand. And, 
again, the issue of supplying the demand across the curve is 
really one for the issuer, which is Treasury.
    Senator Daines. Is there any merit or might it be a good 
idea to waive the supplementary leverage ratio for, say, a year 
until some of these special circumstances we are seeing 
regarding the recovery from the pandemic in the past and when 
perhaps we will have less possible need for some of the dealer 
intermediation in the repo market and some of the other short-
term markets?
    Mr. Powell. As you I am sure know, the temporary relief 
that we granted regarding the SLR expires at the end of March.
    Senator Daines. Right.
    Mr. Powell. And we are right in the middle of thinking 
about what to do about that. I do not have any news for you on 
that today, but we do expect to make a decision on what to do 
about that exemption, that change we made to SLR back last 
year.
    Senator Daines. Let me shift gears in looking at some of 
the prospects of these asset bubbles here. We are seeing signs 
of speculation across various portions of the economy. Stocks, 
of course, are trading at very high prices to earnings ratios; 
ag commodities moving up, economically sensitive materials, 
such as copper, nickel, they are soaring; Bitcoin is up 80 
percent this year alone.
    Mr. Chairman, how do we know when, I guess to quote--I 
think it was Mr. Greenspan talked about ``irrational 
exuberance'' has unduly escalated asset values, which then 
might become subject to unexpected and perhaps prolonged 
contractions?
    Mr. Powell. So as we look at those things that you cited, 
what many of them have in common is that they are related to 
expectations of and greater confidence in a stronger recovery. 
So that is the metals. It is not so much Bitcoin, but it is the 
metals that you mentioned and inflation expectations and other 
securities. Prices are really related to--you know, because of 
all the factors that are out there right now, an expectation 
that the recovery is going to be stronger, sooner, and more 
complete. And so that is OK. We saw commodity prices moved up a 
lot in 2008 and 2009, and people were worried about inflation. 
The Inflation never came. So it is a healthy sign, I think, 
there.
    Honestly, we are focused on making sure that we are 
providing the support that the economy needs to get back to 
maximum employment and stable prices. We have still got 10 
million people, fewer working now, according to the payroll 
statistics. And it is much worse than that among the workers in 
the lower quartile. So that is really our focus. Our focus in 
financial stability generally has been to have a banking system 
and financial sector that is highly resilient to shocks and----
    Chairman Brown. I am going to change the order of this.
    Senator Daines. All right, Mr. Chairman, I am over my time 
at the moment. So thank you. I yield back.
    Chairman Brown. Thank you, Senator Daines.
    Senator Warnock from Georgia is recognized for 5 minutes. 
Senator Warnock.
    Senator Warnock. Thank you so very much, Chairman Brown, 
and I look forward to working with you and also with Ranking 
Member Toomey and other Members of this Committee. I am 
grateful to Chairman Powell. Thank you so much for taking the 
time to talk to me 2 weeks ago. I look forward to working with 
you as we work on a recovery that embraces our whole country. 
And I especially look forward to working with you and Atlanta 
Fed President Raphael Bostic to help Georgians over the next 2 
years.
    Some have suggested that our COVID-19 challenges with 
unemployment, with homelessness, and poverty will be solved if 
we simply lift all local restrictions and open up the economy. 
But since the beginning of this crisis, I have heard you stress 
time and time again, and something along this order even today 
as you offered your testimony, that the path of the economy, 
you said on one occasion, continues to depend significantly on 
the course of the virus.
    Would you mind elaborating on why this is the case? Will 
the economy fully recover if people do not feel safe and 
comfortable that the virus is contained?
    Mr. Powell. I would answer your question in the negative. 
It would not. We know that actually at the beginning of the 
pandemic, if you look at the plummeting levels of travel and 
going to restaurants through OpenTable, all that data, it shows 
that people stopped doing those things because of the 
coronavirus before there were governmental restrictions at the 
State and local level to do it, to do those things. So it 
really is to a significant extent just people wanting to avoid 
catching the coronavirus.
    It is also, you know, the restrictions that are in place in 
some cases on the part of governments. It is not a role for us 
to express views on whether they should be lifted or not. That 
is really something for State and local governments. But, you 
know, clearly, if you look at the 10 million people who are out 
of work, a great number of them are in those sectors of the 
economy that have been so badly affected by COVID. And those 
are the ones where they gather closely and where people are 
still--not every person, but many people are still reluctant to 
go to indoor restaurants, for example. And you see sporting 
events, they are not having crowds. The people who worked in 
those areas, those are the ones who were affected, and it is 
going to be hard for them to go back to work until people are 
confident, as you say.
    Senator Warnock. So we want the economy to fully recover, 
but we have got to get the virus under control, and those 
things work together, which is why I am glad to see $20 billion 
in the vaccine rollout funds and the COVID-19 stimulus package. 
And I am going to do everything I can to make sure that we get 
those funds approved and out the door so that we can reopen and 
do so safely and permanently.
    You are tasked primarily with looking at the whole economy 
and with the big picture in guiding our country forward. And 
one of the things that you have to look at as you do that is 
systemic risks. You and the other Governors over at the Fed 
Board have to ask, well, what risks are systemic? And in that 
regard, I am curious how broad is your definition of systemic 
risk? My definition of systemic risk includes a cycle of 
poverty. It includes things like disparities in wages that mean 
women make less than men, people of color make less than their 
White sisters and brothers. It includes food insecurity, 
housing insecurity, lack of access to health care. These things 
feed a cycle that limits opportunity, limits upward mobility, 
and people's ability to reach their full potential, which then 
has implications for the whole economy.
    How do you factor these kinds of things in as you take 
stock of whether the economy is working or not and for whom is 
the economy working?
    Mr. Powell. So you have heard us increasingly in recent 
years talking about these longer-run disparities and why do we 
feel that we can do that? It is because they weigh on the 
economy in the sense that if not everyone has the opportunity 
to participate in the economy and contribute as much as that 
person can contribute, given his or her talents and abilities 
and willingness to work and all those different things, then 
the economy is going to be less than it can be. And in our 
country, of course--and every country faces challenges. We are 
not alone in this, but we do face persistent, very persistent 
differentials that are hard to account for and that weigh on 
the economy. And those are along racial lines, along gender 
lines and other lines. And I just think it is--I would say it 
is widely understood now that we need to do everything we can 
to bring people into the economy and let them contribute and 
let them share in the broader prosperity.
    Senator Warnock. Thank you, Chairman Powell. It is clear 
that the bottom line is that poverty, systemic inequality, 
wealth inequality are risks to the entire economy and have 
implications for all of us; that these issues cannot be siloed, 
which is why we have got to take this into consideration as we 
push forward COVID relief, and then pivot to address 
longstanding issues of wealth inequality in our country.
    Thank you so very much.
    Chairman Brown. Thank you, Senator Warnock.
    For Senators who wish to submit questions for the record, 
these questions are due 1 week from today, Tuesday, March 2nd.
    Chair Powell, based on the change we made to our Committee 
rules bipartisanly, you have 45 days to respond to any 
questions.
    I appreciated the dose of reality we heard from Chair 
Powell today: 10 million fewer jobs. We are only creating 
29,000 new jobs a month. That is unacceptable. As you said, Mr. 
Chairman, when it comes to our recovery, the job is not done. 
Talk to any mother or essential worker or mayor. Talk to the 
people who own barber shops and diners and drycleaners. 
Everything is not fine.
    Much of what we heard from my Republican colleagues today 
sounds pretty out of touch with the reality that the great 
majority of American families are living in. It is the same 
message we heard all last summer, last fall, the stock market 
is up, everything is fine. We heard it again today.
    Certainly the wealthiest sliver of Americans are doing just 
fine, just like they were before the pandemic, but our job is 
not to work for them; it is to work for everyone, as you and I 
have discussed, Chair Powell. The Fed has multiple tools to 
increase employment, fight wealth inequality, create an economy 
that Senator Warnock just spoke about, that works for the vast 
majority of people who get their income from a paycheck, not an 
investment portfolio. You, Mr. Chair, have a responsibility to 
use all of those tools toward that goal. I continue and look 
forward to continuing to work with you to do all of that.
    With that, the hearing is adjourned. Thank you so much.
    [Whereupon, at 12:22 p.m., the hearing was adjourned.]
    [Prepared statements, responses to written questions, and 
additional material supplied for the record follow:]
              PREPARED STATEMENT OF CHAIRMAN SHERROD BROWN
    At this Committee's first hearing, we heard from our witnesses the 
challenges and struggles Americans have faced over the past year.
    Anyone who has been doing their jobs has heard these stories. Front 
line workers--like our transit workers--go to work every day worried 
they'll get the virus on the job, and bring it home to their families. 
Mayors and county commissioners and community leaders wonder how long 
they can hold on without starting layoffs. Renters see the bills pile 
up, watching their bank balance dwindle lower and lower, and wondering 
if this will be the month an eviction notice comes.
    Today more than 4 million people are out of a job--and the trend 
continues upward. Last week jobless claims rose again. We are still 
fighting the battle against the coronavirus--nearly 500,000 of our 
fellow Americans have died from COVID-19.
    We all know that we are facing two crises--a public health crisis, 
and an economic crisis. We have to be clear about that--we can't solve 
one without solving the other.
    We know getting our economy back to full strength requires a 
massive, wartime level mobilization to get all Americans vaccinated.
    We also know that vaccines alone will not put most workers and 
their families back to where they were a year ago.
    We want people back to work and we want kids back in school and we 
want to see main streets thriving and humming with life again. That 
requires real Federal leadership on a level we have not seen in this 
country since World War II.
    As Bill Spriggs alluded to when testifying before this Committee, 
before D-Day, General Eisenhower didn't call up the president or the 
Treasury Secretary and ask, can we afford to storm the beaches at 
Normandy? Do we have the money in our accounts?
    Most people that I talk to in Ohio and around the country aren't 
worried about doing too much in the battle against coronavirus; they're 
worried about doing too little. They want us to do whatever it takes.
    85 percent of Americans still need a vaccine.
    Our front line workers still need PPE. Small businesses still need 
assistance to keep their doors open. States and cities and towns still 
need resources and support to open schools safely and keep buses 
running and libraries open and firefighters on the job.
    And the experts agree that the best thing we can do for the country 
right now is to get resources out the door as quickly as possible, to 
tackle all of these interconnected problems.
    Former Fed Chair, now our Treasury Secretary, Janet Yellen said 
that if we don't do more, we risk a permanent ``scarring'' of the 
economy into the future.
    Economists from across the political spectrum--including many who 
have testified before this Committee--tell us that without strong 
fiscal support, our economy could spiral even further out of control 
and take years to recover.
    Our witness today, Federal Reserve Board Chair Jerome Powell, has 
expressed some of those same concerns. Just a few weeks ago--after we 
passed the COVID-19 relief bill in December--he said that ``support 
from fiscal policy will help households and businesses weather the 
downturn as well as limit lasting damage to the economy that could 
otherwise impede the recovery.''
    Chair Powell has talked to all of us about the risk of falling 
short of a complete recovery, and the damage it will do to peoples' 
lives and to the ``productive capacity of the economy''--his words.
    President Biden understands this moment, and he's risen to meet it 
with his bold American Rescue package. It's a plan to both rescue the 
economy and to save American lives.
    Workers and their families need to see their Government work for 
them, now.
    And this rescue plan must be the beginning of our work to deliver 
results that empower people and make their lives better, not the end. 
We need to rethink how our economy operates. When a hard day's work 
doesn't pay the bills for tens of millions of workers, and even middle 
class families don't feel stable, something in that system is broken.
    Workers' wages have been stagnant for decades, while CEO pay has 
soared. Corporations get huge tax breaks, and instead of investing in 
their employees and communities they serve, management reward 
themselves and shareholders through stock buybacks and dividends.
    The wealth and income gaps for women, and for Black and brown 
workers, are getting worse, not better. Many families still had not 
recovered from the Great Recession when the pandemic hit.
    This didn't happen by accident. It's the result of choices made by 
corporations and their allies in Washington.
    They've spent years rolling back consumer protections in our 
financial system, cutting corporate tax rates, and using Wall Street to 
measure the economy instead of workers.
    And the same people that have been advocating for these roll backs, 
pushing this stock market-centered view of the economy, are the same 
people who say we shouldn't go big on a rescue plan. They say that 
there's no need for the Government to help people--the market should 
decide who wins and who loses.
    But we all know that the market doesn't work when the game is 
rigged. And the corporations that have been lining their own pockets 
have done so with plenty of Government help and intervention.
    We know that for them, short-term profits are more important than 
their workers. That's why we have to stop letting them run things.
    Just look at what's happening in Texas, where a deregulated energy 
grid failed, leaving millions without power in frigid winter 
temperatures. People are literally freezing to death in their own 
homes--in the United States of America.
    And without any rules, energy companies can charge consumers sky 
high prices. They even use automatic debits, taking thousands of 
dollars directly out of people's bank accounts. We know climate change 
is causing severe weather across our country. We need more investment 
in public infrastructure, not less, and we can't let corporate greed 
continue to stand in the way.
    Our Nation's central bank plays a critical role in all of this.
    The Federal Reserve can ensure that the biggest banks use their 
capital to invest in their workers and lend in their communities, 
instead of ginning up their stock prices with buybacks and dividends.
    The Fed can make sure the response to economic and financial crises 
doesn't just help Wall Street, it helps everyone else.
    It can require that financial institutions take into account the 
serious risks posed by the climate crisis.
    It can help ensure that everyone in this country has a bank account 
and access to their own hard earned money. And it can start to undo the 
systemic racism in the financial system, and make workers the central 
focus of our economy.
    Chair Powell, you said just a few weeks ago that, quote, the 
``benefits of investing in our Nation's workforce are immense. Steady 
employment provides more than a regular paycheck. It also bestows a 
sense of purpose, improves mental health, increases lifespans, and 
benefits workers and their families.''
    What that boils down to is the Dignity of Work. It means that hard 
work should pay off, no matter who you are or what kind of work you do. 
It means that we need to start measuring the success of our economy by 
the success of the people who make our economy work.
    Chair Powell, thank you and I look forward to your testimony.
                                 ______
                                 
                 PREPARED STATEMENT OF JEROME H. POWELL
       Chairman, Board of Governors of the Federal Reserve System
                           February 23, 2021
    Chairman Brown, Ranking Member Toomey, and other Members of the 
Committee, I am pleased to present the Federal Reserve's semiannual 
Monetary Policy Report.
    At the Federal Reserve, we are strongly committed to achieving the 
monetary policy goals that Congress has given us: maximum employment 
and price stability. Since the beginning of the pandemic, we have taken 
forceful actions to provide support and stability, to ensure that the 
recovery will be as strong as possible, and to limit lasting damage to 
households, businesses, and communities. Today I will review the 
current economic situation before turning to monetary policy.
Current Economic Situation and Outlook
    The path of the economy continues to depend significantly on the 
course of the virus and the measures undertaken to control its spread. 
The resurgence in COVID-19 cases, hospitalizations, and deaths in 
recent months is causing great hardship for millions of Americans and 
is weighing on economic activity and job creation. Following a sharp 
rebound in economic activity last summer, momentum slowed 
substantially, with the weakness concentrated in the sectors most 
adversely affected by the resurgence of the virus. In recent weeks, the 
number of new cases and hospitalizations has been falling, and ongoing 
vaccinations offer hope for a return to more normal conditions later 
this year. However, the economic recovery remains uneven and far from 
complete, and the path ahead is highly uncertain.
    Household spending on services remains low, especially in sectors 
that typically require people to gather closely, including leisure and 
hospitality. In contrast, household spending on goods picked up 
encouragingly in January after moderating late last year. The housing 
sector has more than fully recovered from the downturn, while business 
investment and manufacturing production have also picked up. The 
overall recovery in economic activity since last spring is due in part 
to unprecedented fiscal and monetary actions, which have provided 
essential support to many households, businesses, and communities.
    As with overall economic activity, the pace of improvement in the 
labor market has slowed. Over the 3 months ending in January, 
employment rose at an average monthly rate of only 29,000. Continued 
progress in many industries has been tempered by significant losses in 
industries such as leisure and hospitality, where the resurgence in the 
virus and increased social distancing have weighed further on activity. 
The unemployment rate remained elevated at 6.3 percent in January, and 
participation in the labor market is notably below prepandemic levels. 
Although there has been much progress in the labor market since the 
spring, millions of Americans remain out of work. As discussed in the 
February Monetary Policy Report, the economic downturn has not fallen 
equally on all Americans, and those least able to shoulder the burden 
have been the hardest hit. In particular, the high level of joblessness 
has been especially severe for lower-wage workers and for African 
Americans, Hispanics, and other minority groups. The economic 
dislocation has upended many lives and created great uncertainty about 
the future.
    The pandemic has also left a significant imprint on inflation. 
Following large declines in the spring, consumer prices partially 
rebounded over the rest of last year. However, for some of the sectors 
that have been most adversely affected by the pandemic, prices remain 
particularly soft. Overall, on a 12-month basis, inflation remains 
below our 2 percent longer-run objective.
    While we should not underestimate the challenges we currently face, 
developments point to an improved outlook for later this year. In 
particular, ongoing progress in vaccinations should help speed the 
return to normal activities. In the meantime, we should continue to 
follow the advice of health experts to observe social-distancing 
measures and wear masks.
Monetary Policy
    I will now turn to monetary policy. In the second half of last 
year, the Federal Open Market Committee completed our first-ever public 
review of our monetary policy strategy, tools, and communication 
practices. We undertook this review because the U.S. economy has 
changed in ways that matter for monetary policy. The review's purpose 
was to identify improvements to our policy framework that could enhance 
our ability to achieve our maximum-employment and price-stability 
objectives. The review involved extensive outreach to a broad range of 
people and groups through a series of Fed Listens events.
    As described in the February Monetary Policy Report, in August, the 
Committee unanimously adopted its revised Statement on Longer-Run Goals 
and Monetary Policy Strategy. Our revised statement shares many 
features with its predecessor. For example, we have not changed our 2 
percent longer-run inflation goal. However, we did make some key 
changes. Regarding our employment goal, we emphasize that maximum 
employment is a broad and inclusive goal. This change reflects our 
appreciation for the benefits of a strong labor market, particularly 
for low- and moderate-income communities. In addition, we state that 
our policy decisions will be informed by our ``assessments of 
shortfalls of employment from its maximum level'' rather than by 
``deviations from its maximum level.'' \1\ This change means that we 
will not tighten monetary policy solely in response to a strong labor 
market. Regarding our pricestability goal, we state that we will seek 
to achieve inflation that averages 2 percent over time. This means 
that, following periods when inflation has been running below 2 
percent, appropriate monetary policy will likely aim to achieve 
inflation moderately above 2 percent for some time. With this change, 
we aim to keep longer-term inflation expectations well anchored at our 
2 percent goal. Well-anchored inflation expectations enhance our 
ability to meet both our employment and inflation goals, particularly 
in the current low interest rate environment in which our main policy 
tool is likely to be more frequently constrained by the lower bound.
---------------------------------------------------------------------------
     \1\ Italics have been added for emphasis.
---------------------------------------------------------------------------
    We have implemented our new framework by forcefully deploying our 
policy tools. As noted in our January policy statement, we expect that 
it will be appropriate to maintain the current accommodative target 
range of the federal funds rate until labor market conditions have 
reached levels consistent with the Committee's assessments of maximum 
employment and inflation has risen to 2 percent and is on track to 
moderately exceed 2 percent for some time. In addition, we will 
continue to increase our holdings of Treasury securities and agency 
mortgage-backed securities at least at their current pace until 
substantial further progress has been made toward our goals. These 
purchases, and the associated increase in the Federal Reserve's balance 
sheet, have materially eased financial conditions and are providing 
substantial support to the economy. The economy is a long way from our 
employment and inflation goals, and it is likely to take some time for 
substantial further progress to be achieved. We will continue to 
clearly communicate our assessment of progress toward our goals well in 
advance of any change in the pace of purchases.
    Since the onset of the pandemic, the Federal Reserve has been 
taking actions to support more directly the flow of credit in the 
economy, deploying our emergency lending powers to an unprecedented 
extent, enabled in large part by financial backing and support from 
Congress and the Treasury. Although the CARES Act (Coronavirus Aid, 
Relief, and Economic Security Act) facilities are no longer open to new 
activity, our other facilities remain in place.
    We understand that our actions affect households, businesses, and 
communities across the country. Everything we do is in service to our 
public mission. We are committed to using our full range of tools to 
support the economy and to help ensure that the recovery from this 
difficult period will be as robust as possible.
    Thank you, I am happy to take your questions.
        RESPONSES TO WRITTEN QUESTIONS OF CHAIRMAN BROWN
                     FROM JEROME H. POWELL

Q.1. The Supervisory Climate Committee (SCC) will look at two 
of the Fed's core functions through the lens of climate risk: 
promoting the stability of the financial system; and promoting 
the safety and soundness of financial institutions and 
evaluating their impact on the financial system. As we have 
seen recently in Texas, and over the last couple of years with 
catastrophic wildfires in California or historic spring 
flooding in the Plains Sates, both in the wake of years of 
persistent droughts, climate change exacerbated extreme weather 
events can dramatically affect Americans' jobs and businesses. 
How will the Fed take into account climate change as part of 
its mandate to ensure maximum employment?

A.1. As you note, earlier this year we announced the formation 
of our Supervision Climate Committee (SCC), which brings 
together senior staff from the Federal Reserve Board (Board) 
and the Reserve Banks as we work to better understand potential 
climate-related financial risks to supervised institutions. The 
formation of the SCC is part of the Federal Reserve's ongoing 
work to help ensure the resilience of supervised firms to 
climate-related risks.
    To best pursue our mandated monetary policy goals of 
maximum employment and price stability, the Federal Reserve 
must, and does, assess any factor that can materially affect 
the dynamics of the job market and inflation. While climate 
change is not a current consideration for monetary policy, we 
recognize that climate change, and the policies governments 
implement in response, could alter the behavior of employment 
and inflation over time. Researchers throughout the Federal 
Reserve System are actively examining the longer-run 
implications of climate change for the economy, financial 
institutions, and financial stability, and if we find important 
changes in these areas, we will take account of them in our 
analysis.

Q.2. I applaud your efforts to establish the SCC, but I am 
concerned that waiting for the SCC to make reports on its 
agenda before acting to consider climate risk in the Feds other 
core functions may be too late. What is your timeline to 
incorporate climate change as a national and global factor to 
be considered in carrying out all Federal Reserve functions?

A.2. Congress has assigned the Federal Reserve narrow but 
important mandates around monetary policy, financial stability, 
and supervision of financial firms, and our current work is 
directed at enabling us to consider the potential effects of 
climate change in relation to the achievement of those 
statutory mandates. For example, our most recent Financial 
Stability Report and Supervision and Regulation Report discuss 
at a high level how climate change may create or change risks 
to the financial system or to individual supervised 
institutions. \1\
---------------------------------------------------------------------------
     \1\ See https://www.federalreserve.gov/publications/2020-november-
financial-stability-report-purpose.htm and https://
www.federalreserve.gov/publications/2020-november-supervision-and-
regulation-report.htm.
---------------------------------------------------------------------------
    In addition, we have been participating in climate-related 
projects in a number of multilateral groups, including the 
Financial Stability Board and the Basel Committee on Banking 
Supervision, and the Federal Reserve recently became a member 
of the Network for Greening the Financial System. We are taking 
a careful, thoughtful, and transparent approach to this work, 
and we will engage with Congress and the public along the way.

Q.3. In your testimony, you reiterated the Federal Open Market 
Committee's position that maximum employment is a broad and 
inclusive goal. Even before the pandemic, many workers in the 
United States were facing pervasive underemployment, including 
workers who are working part time but want to work full time. 
Nearly 6 million Americans are working part time for economic 
reasons, meaning they would normally be working full-time but 
are forced to work fewer hours than they would like. \2\ To 
what extent does the Federal Reserve take into account the 
number of part-time underemployed workers in its assessment of 
the health of the economy and conduct of monetary policy? How 
does the number of workers who work part-time for economic 
reasons contribute to the racial and gender wealth and income 
gaps?
---------------------------------------------------------------------------
     \2\ ``Labor Market Weaker Than Headline Numbers Suggest Center on 
Budget and Policy Priorities'' (cbpp.org); ``Unemployment Rates During 
the COVID-19 Pandemic: In Brief'', Congressional Research Service, 
February 15, 2021, available at: https://crsreports.congress.gov/
product/pdf/R/R46554.
---------------------------------------------------------------------------
    The Federal Open Market Committee's (FOMC) goal of maximum 
employment tries to capture the labor market experiences of all 
Americans and to account for a broad range of labor market 
outcomes (as opposed to simply counting how many people have 
jobs). Underemployment is one of the outcomes that we are 
concerned with. It can come in many forms, ranging from 
discouraged workers who no longer seek work, to those who are 
actively looking for work but have not found a job (the usual 
definition of unemployment), to those who are working part 
time, but would prefer a full-time job. Workers in this third 
category are said to be working part time for economic reasons. 
The number of people working part time for economic reasons is 
quite cyclical and surged to over 10 million during the initial 
stage of the pandemic. Since then, the number of those working 
part time for economic reasons has shrunk to about 6 million, 
which is still nearly 2 million above the level that prevailed 
prior to the onset of the pandemic. Those working part time for 
economic reasons tend to be disproportionately women, Blacks, 
or Hispanics, which means that an increase in the size of this 
group can contribute to greater income inequality. We consider 
this dimension of underemployment, along with others, in 
putting together our overall assessment of the health of the 
labor market and in determining how close we are to meeting our 
maximum employment goal.
    Aside from the overall unemployment rate, what labor market 
indicators and statistics do you look at in determining full 
employment? Do you agree that the Federal Reserve's 
responsibility to ensure maximum employment means full-time 
employment for every worker?

A.3. To gauge the performance of the labor market we look at a 
wide range of aggregate measures as well as more granular and 
disaggregated statistics. Importantly, though, we do not think 
there is one single measure that captures the overall 
performance of the labor market. Among the data at the 
aggregate level, we examine the standard unemployment rate 
along with broader measures of underemployment that capture 
discouraged workers and those working part time who would 
prefer to work full time if they could find a full-time job. We 
also look at labor force participation and the reasons why 
people are not in the labor force. In addition, we monitor job 
openings and job-finding rates, as well as layoffs and 
unemployment insurance claims. Many of these same measures are 
available for less aggregated groups of the population; in 
particular, these statistics can be broken down by gender, race 
or ethnic identity, education level, and across rural and urban 
areas.
    Unlike price stability, the FOMC does not have a numerical 
target for its maximum employment goal. This reflects the 
complexity of the labor market, which in turn implies that one 
summary statistic will not be able to capture every important 
element of the state of the labor market. In addition, changes 
over time in various features of the labor market may result in 
changes to the level of employment that is consistent with our 
maximum employment goal. For example, the labor market has been 
importantly affected in recent decades as the population has 
aged and average educational attainment has increased. In 
addition, technological shifts have changed the supply and 
demand for different types of workers. More recently, the 
pandemic could leave a lasting imprint on labor market 
performance in coming years, and we will have to use the 
indicators described above to assess when we reach full 
employment in the context of price stability.
    Finally, even at maximum employment there will still be 
some amount of unemployment, both voluntary (as workers search 
for jobs that best match their skills), and involuntary 
(because in a dynamic economy, business downsizing or business 
closures will result in temporary periods of unemployment for 
some workers). We are committed to using our full range of 
tools to support the economy and to help ensure that the 
economy's return to maximum employment is as robust as 
possible.

Q.4. During the June 16, 2020, Monetary Policy Report hearing, 
I asked you if you would commit to a study about how the 
Federal Reserve's policies have contributed to systemic racism 
in this country. What progress, if any, have you made on this 
request since then?

A.4. Discrimination has no place in our society. Moreover, it 
is a weight on the economy that restricts opportunity for those 
who want to contribute and share in the prosperity of a robust 
economy. The Federal Reserve devotes considerable time and 
attention to analyzing disparities in income, wealth, 
employment, and other economic outcomes for demographic groups 
and geographic areas. Understanding these disparities, and 
their implications for the functioning of the economy, is a key 
input to effective policymaking. The importance the Federal 
Reserve places on identifying, reporting, analyzing, and 
engaging with the public on these important issues is evident 
in the body of work that is posted on our public website. \3\
---------------------------------------------------------------------------
     \3\ https://www.federalreserve.gov/newsevents/economic-
disparities-work.htm
---------------------------------------------------------------------------
    In addition to consideration of economic disparities in our 
monetary policy, research, and outreach efforts, the Federal 
Reserve also has supervisory authority for consumer protection 
and fair lending laws. We have a rigorous fair lending 
supervision program and evaluate fair lending risk at every 
consumer compliance examination, reviewing banks' practices to 
ensure that financial institutions under our jurisdiction fully 
comply with applicable Federal consumer protection laws and 
regulations. Further, with the increased presence of FinTech 
and artificial intelligence (AI) in underwriting and lending, 
we have been studying the benefits and challenges of the 
advancement of these technologies, including the potential 
risks of amplifying bias and inequitable outcomes. It is 
important that we understand how complex data interactions may 
skew the outcomes of algorithms in ways that undermine fairness 
and transparency. We also regularly discuss these issues with 
the other agencies and plan to issue an interagency request for 
information on risk management of AI in financial services to 
help obtain more insight into the application of various 
technologies in lending and other financial services 
activities.

Q.5. Historically, the Federal Reserve has a poor track record 
when it comes to a diverse workforce--one that reflects the 
population of the United States. What steps have you taken to 
diversify the workplace at the Fed? Are there specific 
mechanisms that you have in place to support people of color 
who work at the Fed?

A.5. The Board is dedicated to developing and sustaining a 
diverse and inclusive workforce. In support of its commitment, 
the Board has in place strategic objectives to attract, hire, 
develop, promote, and retain a highly skilled and diverse 
workforce. We continue to strengthen a diverse, equitable and 
inclusive culture and workplace through our policies and 
practices. We strive to learn from our experiences and adhere 
to best practices.
    Through these and other intentional and coordinated actions 
we ensure our continued commitment:

    Frequent engagements and activities for the entire 
        Board staff and for smaller groups that encourage and 
        enable employees' sharing of experiences addressing 
        diversity, equity, and inclusion.

    Promotion and support for Employee Resource Groups. 
        \4\ These groups hold educational events and 
        activities, and help identify and drive talent 
        acquisition, on-boarding, career development and 
        culture change initiatives.
---------------------------------------------------------------------------
     \4\ The Federal Reserve--Diversity (https://
www.federalreserve.gov/careers-diversity.htm).

    Professional development programs, including 
        mentoring, rotation assignments, coaching, and 
---------------------------------------------------------------------------
        leadership training.

    Ongoing focus on succession and workforce planning 
        to address future workforce needs and strengthen the 
        diversity of the managerial pipeline and progression to 
        leadership positions.

    Intensive recruiting to ensure diverse candidates 
        for job vacancies. This includes outreach to diverse 
        professional networks, usage of diversity job boards, 
        and attendance at job fairs at Hispanic-Serving 
        Institutions (HSIs) and Historically Black Colleges and 
        Universities (HBCUs).

    Required training for hiring managers focused on 
        hiring without bias.

Q.6. The lack of diversity among economists at the Federal 
Reserve is even starker. Only 1 percent of economists at the 
Federal Reserve are Black. \5\ Why are there so few Black 
economists at the Fed, particularly as compared to the 
percentage of Black economists in the field as a whole? What 
concrete actions are you taking to address this disparity?
---------------------------------------------------------------------------
     \5\  https://www.nytimes.com/2021/02/02/business/economy/federal-
reserve-diversity.html

A.6. We are fully committed to strengthening diversity across 
all areas of our workforce. This is a high priority for me and 
our staff, and we have a tremendous amount of work going on at 
the Board.
    We engage in extensive outreach to recruit diverse 
candidates, and despite challenges related to the pandemic, our 
engagement has continued during the past year as well. This 
includes participating in minority recruitment events at HBCUs, 
HSIs, and Hispanic professional conferences and career fairs.
    More specifically, we have taken a number of targeted 
actions to increase diversity among our economist positions, 
and to strengthen the pipeline of economists from under-
represented groups. Some of these actions include our 
collaboration with the American Economic Association (AEA) to 
address the state of diversity and importance of diversity and 
inclusion in the field of economics and in the workplace. We 
have an ongoing teaching and mentoring partnership with Howard 
University's Department of Economics, and Howard University 
will host the AEA Summer Program over the next five years with 
Board staff teaching a research methods course each year. 
Nearly three dozen Board staff have volunteered as instructors, 
teaching assistants, and research mentors for the financial 
literacy course offered at the Board and virtually through 
Howard's Department of Economics.
    In addition, since 2018, the Board has hosted ``Exploring 
Careers in Economics'', an event that welcomed more than 200 
students to the Board and many more virtually to discuss career 
opportunities and diversity in economics. And last, we are 
supporting research on and awareness of the factors that are 
holding back diversity and inclusion in economics. In November, 
we are hosting a conference on Diversity and Inclusion in 
Economics, Finance, and Central Banking, along with three other 
central banks. We look forward to a dynamic program and 
rigorous discussion on what has been done and what more can be 
done to increase diversity and inclusion in the economics 
profession.
    We welcome your suggestions for how we can expand on our 
outreach efforts to increase diversity in our workforce, 
including among leadership roles.
                                ------                                


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

Q.1. Climate Change--In the past several months, the Federal 
Reserve has taken steps that appear to be part of a broader 
effort to use financial regulators to address environmental 
policy like climate change.
    Mindful of the Fed's limited statutory authority, can you 
explain what the Fed is doing in this area?

A.1. Climate change is an important issue, and Congress has 
entrusted the job of addressing the problem of climate change 
itself to Federal agencies other than the Federal Reserve. As 
you note, Congress has given the Federal Reserve narrow but 
important mandates around monetary policy, financial stability, 
and supervision of financial firms, and we consider the 
potential effects of climate change to the extent such effects 
have an impact on the achievement of our statutory mandates.
    Analysis of climate-related risk to the financial system is 
a relatively new and evolving field. At the Federal Reserve, 
our work is still developing and involves investment in 
research and data to better understand how climate change may 
affect financial institutions, infrastructure, and markets. We 
also have been participating in climate-related projects in a 
number of multilateral groups, including the Financial 
Stability Board and the Basel Committee on Banking Supervision, 
and the Federal Reserve recently became a member of the Network 
for Greening the Financial System. We are taking a careful, 
thoughtful, and transparent approach to this work, and we will 
engage with Congress and the public along the way.

Q.2. Do you believe the Fed's financial stability 
responsibilities authorize you to pursue regulatory policies 
with the explicit goal or practical effect of reducing carbon 
emissions?

A.2. It has long been the policy of the Federal Reserve to not 
dictate to banks what lawful industries they can and cannot 
serve, as those business decisions should be made solely by 
each institution. Moreover, as I wrote in response to your 
first question, Congress has entrusted the job of addressing 
the problem of climate change itself to Federal agencies other 
than the Federal Reserve. Climate-related risks--like any other 
risk--can have implications for financial stability, and we 
consider those risks to the extent they have an impact on the 
achievement of our statutory mandates.

Q.3. Continued Accommodative Monetary Policy--Given that the 
economy has largely recovered and is on pace to reach 
prepandemic levels this summer, what is the rationale for 
continuing to inject $120 billion a month of liquidity via 
asset purchases?

A.3. In December 2020, the Federal Open Market Committee (FOMC) 
put in place outcome-based guidance on asset purchases. We 
reaffirmed that guidance at our January and March meetings. The 
guidance states that we will continue to increase our holdings 
of Treasury securities by at least $80 billion per month and of 
agency mortgage-backed securities (MBS) by at least $40 billion 
per month until substantial further progress has been made 
toward the FOMC's maximum employment and price stability goals. 
This guidance reinforces our strong commitment to using our 
full range of tools to achieve these mandates.
    The increase in our balance sheet since last March has 
materially eased financial conditions and is providing 
substantial support to the economy. We see the current stance 
of monetary policy--including our policy regarding asset 
purchases--as appropriate to continue to move the economy 
toward our statutory goals. As always, the FOMC will closely 
monitor economic developments and continue to assess how our 
ongoing policy actions can best support achievement of maximum 
employment and price stability.

Q.4. Has the Fed's forward guidance created a structural speed 
limit to ceasing asset purchases? What is the shortest 
plausible timeframe in which the Fed could completely stop 
expanding the Fed's asset holdings?

A.4. As noted in the previous response, the guidance on asset 
purchases states that the FOMC will continue to increase our 
holdings of Treasury securities and agency MBS at least at the 
current pace until substantial further progress has been made 
toward the FOMC's maximum employment and price stability goals. 
This guidance embodies the point that the accommodation the 
FOMC intends to provide through its securities holdings depends 
on the progress made toward our goals. If substantial further 
progress toward our objectives occurs relatively quickly, the 
length of time over which our asset purchases would continue at 
the current pace would be shorter, and our securities holdings 
would rise by less. Conversely, if this progress happens more 
slowly, then our asset purchases would continue for longer, and 
we would correspondingly increase our securities holdings by a 
greater amount--thereby providing greater support to the 
economy.
    It is important that the FOMC be transparent about our 
policy actions. The FOMC intends to clearly communicate its 
assessment of actual and expected progress toward its goals 
well in advance of the time when we would judge it appropriate 
to make a change in the pace of purchases.

Q.5. School Reopening--Has the Fed conducted any research on 
the long-term damage being done to the labor force by the 
school closures? If so, please provide.

A.5. Most K-12 schools were closed to in-person education at 
the start of the pandemic, and many schools remained closed to 
in-person education last fall and winter. \1\ Staff research 
done within the Federal Reserve System suggests that the 
closure of in-person education had substantial effects on 
parents' labor force participation--especially mothers' 
participation--although the longer-term consequences are 
uncertain.
---------------------------------------------------------------------------
     \1\ Using information on virtual learning in public school 
districts compiled by Education Week, Board staff estimated that 
roughly two-thirds of public school students started the Fall 2020 
school year with full or partial virtual learning.
---------------------------------------------------------------------------
    For example, analysis by Board staff finds that since March 
2020, the number of parents who report being out of the labor 
force due to caregiving reasons has been elevated relative to 
previous years, especially in the fall of 2020 and thereafter. 
Figure 1 (below) shows the change in the fraction of parents 
aged 25 to 54 years with children 6 to 17 years of age who 
responded to the Current Population Survey (CPS) that they are 
not in the labor force due to caregiving reasons, for the 
indicated month relative to the same month in the previous 
year. \2\ In particular, since September 2020 the fraction of 
mothers out of the labor force for caregiving reasons has been 
2 percentage points or more higher than it was in the same 
months of the previous year, while the fraction of fathers out 
of the labor force for caregiving reasons has been elevated by 
about half a percentage point. Furthermore, over this period, 
the increase relative to previous years has been especially 
large for Black and Hispanic mothers (respectively, a 5 
percentage point and 3 percentage point average increase 
relative to the previous year, compared to a 1\1/2\ percentage 
point average increase for White mothers). \3\
---------------------------------------------------------------------------
     \2\ These estimates are based on calculations from publicly 
available CPS microdata, and are similar to those described in the box 
titled ``Disparities in Job Loss During the Pandemic'' in the February 
2021 Monetary Policy Report. Similarly, other research across the 
Federal Reserve System has noted that employment and labor force 
participation have declined relatively more for parents, especially 
mothers. For example, see: ``Parents in a Pandemic Labor Market'', 
Federal Reserve Bank of San Francisco, Working Paper 2021-04, https://
www.frbsf.org/economic-research/publications/working-papers/2021/04/ 
and ``Did COVID-19 Disproportionately Affect Mothers' Labor Market 
Activity?'' Federal Reserve Bank of Chicago, Chicago Fed Letter No. 
450, https://www.chicagofed.org/publications/chicago-fed-letter/2021/
450.
     \3\ In addition to the CPS, a number of real-time household 
surveys during the pandemic have specifically asked respondents whether 
their employment decisions have been affected by child care 
responsibilities (for example, Household Pulse Survey, conducted by the 
Census Bureau, and the COVID Impact Survey, conducted by the National 
Opinion Research Center at the University of Chicago for the Data 
Foundation). However, these surveys' limited histories make it 
difficult to infer whether the responses reflect child care 
difficulties during the pandemic as opposed to what would be typical 
during normal times.
---------------------------------------------------------------------------
    Looking ahead, it is difficult to predict the long-term 
consequences of this extended disruption to parental labor 
supply (and at present there has been little research that 
attempts to quantify these effects). The eventual magnitude of 
the effect on the labor force will depend on a number of 
difficult-to-predict factors, including how quickly in-person 
education reopens for all students; the prevalence of job 
opportunities after children return to school; and the extent 
to which remaining pandemic-related health concerns might 
affect parents' ability to safely reenter the labor force, 
along with their interest in doing so.


                                ------                                


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

Q.1. Bank Capital Requirements--In response to questioning, you 
indicated that the Federal Reserve was ``in the middle of 
thinking about'' a decision on extending interim final rules 
that provided institutions with relief from the supplementary 
leverage ratio by allowing the exclusion of U.S. Treasuries and 
Central Bank deposits. These rules are currently scheduled to 
expire on March 31, 2021.
    At what point did the Federal Reserve begin deliberations 
regarding a possible extension of these policies? Please 
provide, at a minimum, the month in which you began considering 
a potential extension or modification of temporary SLR relief 
at either the holding company or the depository institution 
level.

A.1. The Federal Reserve Board (Board) sought comment on the 
interim final rules issued in April 2020 \1\ and May 2020 \2\ 
to modify temporarily the supplementary leverage ratio (SLR), 
including specific questions for public feedback on whether the 
modifications from the interim final rules should be shorter or 
longer to achieve their intended purpose. The Board received 
and considered several comments from the public on this issue.
---------------------------------------------------------------------------
     \1\ 85 FR 20578 (April 14, 2020).
     \2\ 85 FR 32980 (June 1, 2020).

Q.2. Have any alternatives to extending the date of the SLR 
relief been discussed? If so, please describe them and provide 
---------------------------------------------------------------------------
any reasons why they were not chosen.

A.2. The Board announced recently that the temporary exclusions 
to the SLR requirement announced in April and May of 2020 would 
expire as scheduled on March 31, 2021. In that announcement, 
the Board also stated that it plans soon to seek public comment 
on potential measures to adjust the SLR.

Q.3. How many banks opted-in for the SLR relief at either the 
holding company or depository institution level?

A.3. The prior approval requirements related to the May 2020 
interim final rule issued by the Board, the Office of the 
Comptroller of the Currency (OCC), and the Federal Deposit 
Insurance Corporation (FDIC) only applied to depository 
institutions that opted into the relief. \3\ There are no 
similar prior approval requirements that apply to holding 
companies subject to the SLR. Holding companies are subject to 
other pandemic-related restrictions on their capital 
distributions. \4\ The only State member bank that opted into 
the SLR relief was Goldman Sachs Bank USA. The OCC and FDIC 
would be in the best position to provide information about any 
State nonmember bank or national bank that opted into the SLR 
relief.
---------------------------------------------------------------------------
     \3\ 12 CFR 217.303(g).
     \4\ https://www.federalreserve.gov/newsevents/pressreleases/
bcreg20201218b.htm
---------------------------------------------------------------------------
    For each institution that did opt-in, please provide the 
following for each quarter starting in 2019 Q1:

  1.  The institution's total leverage exposure

  2.  The institution's total amount of U.S. Treasuries

  3.  The institution's total amount of Central Bank Deposits

  4.  The institution's total amount of capital distributions

  5.  The institution's supplementary leverage ratio



Q.4. Can you commit to not finalizing any additional proposals 
that would reduce capital requirements for the Globally 
Systemically Important Banks (GSIBs) during the remainder of 
your term?
---------------------------------------------------------------------------
     \5\ The data included in Table 1 are based on public filings by 
Goldman Sachs Bank USA in its FFIEC 041 (Call Report) regulatory report 
submissions.

A.4. Consistent with previous statements, I believe the current 
levels of capital and of overall loss absorbency in the banking 
system are generally appropriate. Strengthened by a decade of 
improvements in capital, liquidity, and risk management, banks 
have continued to be a source of strength during the past year. 
Consistent with their systemic importance, globally 
systemically important banks (GSIBs) are subject to the most 
stringent standards, including additional capital requirements 
---------------------------------------------------------------------------
such as the GSIB surcharge.

Q.5. Monetary Policy--The pandemic has disproportionately 
affected marginalized Americans working low-income jobs.
    Please describe how the Fed will use its monetary policy 
tools to ensure a broad-based recovery.

A.5. The dual mandate assigned to the Federal Reserve monetary 
policy is to achieve maximum employment and price stability. 
The highly accommodative monetary policy stance that the 
Federal Open Market Committee (FOMC) has put in place since the 
outbreak of the pandemic and the guidance that it is currently 
providing on its interest rate and balance sheet policies are 
designed to provide support to economic activity in order to 
achieve these goals. Improvement in the labor market should 
contribute to diminishing economic inequalities, as the 
recovery would benefit many in low- and moderate-income (LMI) 
communities. Accordingly, pursuing our congressional mandate 
assists in promoting a broad-based recovery.
    In our revised Statement on Longer-Run Goals and Monetary 
Policy Strategy, issued in August 2020 and reaffirmed in 
January 2021, the FOMC indicated that ``maximum employment'' is 
a broad and inclusive goal. Among other things, this means that 
we will be monitoring a broad range of indicators in assessing 
our progress toward maximum employment. We will remain highly 
attentive to disparities in the labor market of various kinds--
rather than focus solely on the ``headline'' aggregate data. 
Our revised statement also indicates that our policy decisions 
will be informed by the FOMC's assessments of the shortfalls of 
employment from its maximum level. This implies that we will 
not tighten monetary policy solely in response to a strong 
labor market. Our adoption of this position reflects the 
widespread acceptance that a robust job market potentially can 
be sustained without causing an outbreak in inflation, together 
with our recognition of the considerable benefits brought by 
strong labor markets, particularly for LMI communities.

Q.6. How will the Fed react in the event that inflation starts 
to trend higher, but millions of Americans remain left with 
limited opportunities to be employed at an adequate, livable 
wage?

A.6. In pursuing its dual mandate, the FOMC seeks to achieve 
maximum employment and inflation at the rate of 2 percent over 
the longer run. Our experience is that the goals of maximum 
employment and price stability are generally complementary--so 
that pursuing maximum employment is typically consistent with 
achieving our price stability goal of a longer-run inflation 
rate of 2 percent.
    When occasions arise on which the FOMC's judgment is that 
the objectives are not complementary, the FOMC takes both 
employment shortfalls and inflation deviations into account in 
its decisions, as well as the potentially different time 
horizons over which employment and inflation are projected to 
return to levels judged consistent with the Federal Reserve's 
mandate.
    With regard to the present situation, the FOMC has 
indicated that, as inflation has been running persistently 
below our longer-run 2 percent goal, we will aim to achieve 
inflation moderately above 2 percent for some time, so that 
inflation averages 2 percent over time and longer-term 
inflation expectations remain well anchored at 2 percent. The 
FOMC expects to maintain an accommodative stance of monetary 
policy until these outcomes are achieved. More specifically, we 
have indicated that we would not expect to raise the target 
range for the federal funds rate from its effective lower bound 
until we see labor market conditions that are consistent with 
our assessment of maximum employment, inflation has risen to 2 
percent--and durably so, not on a transitory basis--and 
inflation is on track to run moderately above 2 percent for 
some time.

Q.7. What data or metrics will the Fed use to ensure that the 
recovery reaches low-wage, marginalized workers? How will these 
data and metrics guide your decision-making?

A.7. We will look at a large variety of indicators to assess 
the economy's progress toward our broad and inclusive goal of 
maximum employment. For example, in addition to aggregate data 
on the labor market, we will also be looking at labor market 
measures by race and ethnicity, education, and income. We 
recognize that in the recovery from the Great Recession, many 
groups only started to experience the benefits of the recovery 
after the aggregate unemployment rate had reached relatively 
low levels. In particular, it was not until 2015 and later that 
the labor force participation rate began to recover (with much 
of that recovery concentrated among individuals with less than 
a college degree); wage gains for low-income workers started to 
match and then exceed wage gains for other workers; and the 
unemployment rate for African Americans moved below 9 percent.

Q.8. Are there steps that Congress, the White House, or the Fed 
can take to get a more detailed and representative assessment 
of the economic conditions that working-class Americans face on 
a daily basis?

A.8. Collecting high-quality data that can describe the full 
distribution of economic experiences--not simply the average 
experience--is key. Two surveys conducted by the Federal 
Reserve help us do that. The Survey of Household and Economic 
Decision-Making asks individuals about important economic 
events and decisions in their lives. It is the source of the 
often-cited statistic on the share of households that do not 
have enough liquid savings to cover an unexpected $400 expense. 
The Survey of Consumer Finances (SCF) provides household-level, 
high-quality data on wealth, income, and consumption and is the 
basis of much of the recent research on increases in wealth and 
income inequality in the United States. We have combined data 
from the SCF with data from the Financial Accounts of the 
United States, which are published by the Federal Reserve 
Board, to produce the Distributional Financial Accounts (DFAs), 
which provide quarterly updates on the wealth of low- and 
middle-income households, along with that for high-income 
households. The DFAs also provide quarterly data on household 
wealth by age, education, and race or ethnicity. In addition, 
research by our economists uses microdata on households and 
individuals from the Census and other sources to describe and 
interpret the economic experiences of different groups of 
Americans. We continue to look for ways to improve and better 
use the data we collect ourselves or obtain from outside 
sources, and to sharpen our analyses of these data to create a 
detailed, accurate, and timely description of the economic 
experiences of all Americans.

Q.9. According to the Congressional Budget Office, the U.S. 
economy was operating above its maximum sustainable level prior 
to the pandemic, despite inflation remaining below the Federal 
Reserve's target level. What would your estimate be for the 
output gap in January 2020? How far from potential output do 
you believe the economy was at that point?

A.9. Real-time estimates of potential output, like those for 
the natural rate of unemployment, are highly uncertain. Indeed, 
this uncertainty was one of the reasons our revised Statement 
on Longer-Run Goals and Monetary Policy Strategy says that our 
policy decision will be informed by our ``assessments of the 
shortfalls of employment from its maximum level'' rather than 
by ``deviations from its maximum level'' as in our previous 
statement.
    Regardless, I think it is fair to say that the economy was 
in a good place in January 2020. The economic expansion was 
well into its 11th year, the longest on record. The overall 
unemployment rate had declined to 3.5 percent, the lowest level 
in a half-century. The unemployment rate for African Americans, 
at 6 percent, had also reached historical lows. Prime-age labor 
force participation was the highest in over a decade, and job 
openings were plentiful. And while overall wage growth was 
moderate, wages were rising more rapidly for earners on the 
lower end of the scale. These encouraging statistics were 
reaffirmed and given voice by those we met and conferred with, 
including the community, labor, and business leaders; retirees; 
students; and others we met with during the 14 ``Fed Listens'' 
events we conducted in 2019.
    Importantly, however, the strength in the labor market in 
2019 and early 2020 did not result in unwanted upward pressures 
on inflation: In January 2020, the 12-month change in PCE 
inflation was 1.9 percent, a little below the FOMC's 2 percent 
objective. Indeed, there was every reason to expect that, had 
it not been for the onset of the pandemic, the labor market 
could have strengthened even further without causing a 
worrisome increase in inflation.
    Of course, the situation is very different today. Despite 
the improvement in economic activity in recent quarters 
following the deep contraction caused by the pandemic, the 
economic recovery remains uneven and far from complete, and the 
path ahead is highly uncertain. And while the future path of 
the economy continues to depend significantly on the course of 
the virus and the measures undertaken to control its spread, we 
at the Federal Reserve are committed to using our full range of 
tools to support the economy and to help ensure that the 
recovery from this difficult period will be as robust as 
possible.

Q.10. Economist Larry Summers recently claimed that if 
President Biden's $1.9 trillion American Rescue Plan spending 
package was approved, we would have ``an economy that is 
literally on fire.'' \6\ Are you concerned that enactment of 
this package would cause dangerous overheating? Would the 
Federal Reserve likely raise interest rates if the package is 
passed at its current level?
---------------------------------------------------------------------------
     \6\ Bloomberg, ``Biden Urges Fast Virus Relief as Minimum-Wage 
Hike Hopes Fade'', Justin Sink, February 5, 2021, https://
www.bloomberg.com/news/articles/2021-02-05/biden-s-go-big-push-on-
stimulus-gets-help-from-weak-jobs-senate.

A.10. With COVID-19 vaccinations becoming more widespread and 
good prospects for people's lives and activities to start 
returning to normal before long, I am hopeful that we can 
achieve a strong economic recovery this year. The additional 
fiscal support from the recently enacted American Rescue Plan 
(ARP) will contribute to the strength of that recovery. 
Professor Summers and some other respected economists have 
questioned whether the amount of additional fiscal support 
provided in the ARP might overheat the economy and generate a 
problematic rise in inflation. While I agree that very strong 
growth this year could create some upward pressure on inflation 
for a time, I do not believe that sustained higher inflation 
will become a longer-lived problem.
    The economy is still a long way from a full recovery, with 
payrolls some 9\1/2\ million below their prepandemic level. So 
even with the very strong economic growth that we all hope for, 
it will take some time to return to maximum employment. And, of 
course, the path ahead is still highly uncertain with 
considerable downside risks--including those related to 
emerging new variants of the virus. Moreover, the previous 
expansion demonstrated that a strong labor market can be 
sustained without inducing an unwanted increase in inflation.
    Rapid growth with a reopening economy could well lead to 
prices moving up this year, as firms see a large increase in 
demand and as some production bottlenecks emerge. But I would 
anticipate that any such higher inflation would be temporary. 
Inflation has averaged less than 2 percent for a quarter of a 
century, and low inflation has been the norm globally as well 
as in the U.S. That inflation performance has become ingrained 
in consumer inflation expectations and psychology. We are far 
from the situation of the 1970s, when higher inflation could 
boost expectations of future inflation and become built into 
wage and price setting. Inflation dynamics do evolve over time, 
but they have not tended to change rapidly.
    To be sure, no one has perfect foresight about how the 
economy will evolve. If, contrary to expectations, inflation 
were to persistently rise to unwelcome levels, we have the 
tools to address such a situation and will use them as needed.

Q.11. Climate Finance--Following the May 19, 2020, hearing of 
the Committee on Banking, Housing, and Urban Affairs, I 
submitted questions for the record, including several on 
climate-related financial risks, to which you responded in 
August 2020. \7\ In your response, you wrote ``Economic 
research to understand the specific transmission channels 
between climate-related risks and the financial system is 
essential to understanding the impact of those risks on the 
Federal Reserve's mission,'' and though the ``research 
remain[ed] at an early stage,'' efforts were ``active and 
ongoing.'' \8\
---------------------------------------------------------------------------
     \7\ Letter from Federal Reserve System Board of Governors Chair 
Jerome Powell to Senator Elizabeth Warren, August 27, 2020.
     \8\ Id.
---------------------------------------------------------------------------
    Please describe the efforts the Fed has taken to better 
inform decisions regarding the incorporation of climate-related 
risks into the Board's mission since your August 2020 letter 
and since the Fed joined the Network for Greening the Financial 
System in December 2020. \9\
---------------------------------------------------------------------------
     \9\ Board of Governors of the Federal Reserve System, ``Federal 
Reserve Board Announces It Has Formally Joined the Network of Central 
Banks and Supervisors for Greening the Financial System, or NGFS, as a 
Member'', press release, December 15, 2020, https://
www.federalreserve.gov/newsevents/pressreleases/bcreg20201215a.htm.

A.11. Climate change is an important issue, and Congress has 
entrusted the job of addressing the problem of climate change 
itself to Federal agencies other than the Federal Reserve. 
Congress has given the Federal Reserve narrow but important 
mandates around monetary policy, financial stability, and 
supervision of financial firms, and we consider the potential 
effects of climate change to the extent such effects have an 
impact on the achievement of our statutory mandates.
    Since August 2020, we have released a Financial Stability 
Report and a Supervision and Regulation Report (both published 
in November 2020) that include high-level discussion and 
analysis on how climate change may create or change risks to 
financial institutions or the financial system. \10\
---------------------------------------------------------------------------
     \10\ See https://www.federalreserve.gov/publications/2020-
november-financial-stability-report-purpose.htm and https://
www.federalreserve.gov/publications/2020-november-supervision-and-
regulation-report.htm.
---------------------------------------------------------------------------
    As you note, on December 15, 2020, the Board announced that 
we have formally joined the Network for Greening the Financial 
System (NGFS). We had been attending NGFS meetings as a guest 
and participating in NGFS activities for more than a year prior 
to officially joining. Through this forum, we look forward to 
deepening our discussions with more than 80 central banks and 
supervisory authorities from around the world, sharing research 
and identifying best practices to ensure the financial system 
is resilient to climate-related risks.
    In January 2021, we announced the formation of our 
Supervision Climate Committee (SCC), which brings together 
senior staff from the Board and Reserve Banks to facilitate the 
better understanding of potential climate-related risks to our 
supervised institutions. Additionally, in March, we announced 
the formation of our Financial Stability Climate Committee 
(FSCC), a Federal Reserve Systemwide committee composed of 
Board and System staff that works to facilitate the better 
understanding of climate-related risks to our financial system. 
Our goal is to incorporate climate risk into our forward-
looking monitoring of financial stability through the FSCC.
    We also continue to participate in climate-related projects 
in a number of multilateral groups, including the Financial 
Stability Board (FSB) and the Basel Committee on Banking 
Supervision (BCBS). With respect to the FSB, a report on the 
financial stability implications of climate change was released 
in November 2020. \11\ Federal Reserve staff is also cochairing 
the BCBS's Task Force on Climate-Related Financial Risks.
---------------------------------------------------------------------------
     \11\ www.fsb.org/2020/11/the-implications-of-climate-change-for-
financial-stability/
---------------------------------------------------------------------------
    We are taking a careful, thoughtful, and transparent 
approach to this work, and we will engage with Congress and the 
public along the way.

Q.12. Please describe in detail additional steps that the Fed 
plans to take to address climate-related risks throughout the 
financial system?

A.12. As noted above, we have established the SCC, which brings 
together senior staff from across the Federal Reserve System to 
facilitate the better understanding of potential climate-
related risks to our supervised institutions. In this area, we 
are investing in analysis to better understand the transmission 
channels through which climate change impacts the banking 
sector and are engaging with supervised institutions to 
strengthen our understanding of how they are currently 
assessing climate risks. We have also established the FSCC, 
which will undertake work to facilitate the better 
understanding of climate-related risks to our financial system. 
We are in the early stages of identifying and assessing these 
risks and how to incorporate them into our financial stability 
framework.
    More broadly, we remain focused on investing in research 
and data to better understand how climate change may affect 
financial institutions, infrastructure, and markets. Robust 
data and rigorous analyses are essential to informing all our 
actions.

Q.13. In your correspondence, you also mentioned that ``the 
Federal Reserve has considerable expertise in understanding the 
impact of severe weather events, ranging from economic 
forecasting, to financial stability monitoring, to prudential 
supervision, to continuity of operations.'' \12\ News reports 
regarding recent extreme weather events, however, state that 
``As climate change worsens, severe conditions that go beyond 
historical norms are becoming ever more common.'' \13\
---------------------------------------------------------------------------
     \12\ Letter from Federal Reserve System Board of Governors Chair 
Jerome Powell to Senator Elizabeth Warren, August 27, 2020.
     \13\ Associated Press, ``U.S. Needs To Brace Itself for More 
Deadly Storms, Experts Say'', Matthew Daly and Ellen Knickmeyer, 
February 18, 2021, https://apnews.com/article/us-deadly-winter-storms-
2021-df7d37d12ef13633bb5666e1151bcf9e.
---------------------------------------------------------------------------
    How has or how will the Fed work to incorporate research on 
climate change's impact on extreme weather events and other 
significant climate impacts on the economy into its work? [Sic] 
ensure that financial institutions are equipped to manage and 
address climate-related risks?

A.13. For the Federal Reserve's near-term analysis, we already 
take into account information on the severity of weather 
events. When a severe weather event occurs, we closely monitor 
the effects on local economies, assess the implications for 
broader measures of economic production and employment, and 
adjust our economic forecasts accordingly.
    For example, our staff regularly uses daily measures of 
temperatures and snowfall from National Oceanic and Atmospheric 
Administration weather stations to better understand how severe 
weather may be affecting measured and real economic activity in 
specific areas.
    More generally, to best pursue our mandated monetary policy 
goals of maximum employment and price stability, the Federal 
Reserve must, and does, assess any factor that can materially 
affect the dynamics of the job market and inflation. While 
climate change is not a current consideration for monetary 
policy, we recognize that climate change, and the policies 
governments implement in response, could alter the behavior of 
employment and inflation over time. Researchers throughout the 
Federal Reserve System are actively examining the longer-run 
implications of climate change for the economy, financial 
institutions, and financial stability, and if we find important 
changes in these areas, we will take account of them in our 
analysis.

Q.14. How will you ensure that financial institutions are 
equipped to manage and address climate-related risks?

A.14. As noted above, we recently announced the formation of 
the SCC, which will bring together senior staff from the 
Federal Reserve Board and the Reserve Banks to facilitate the 
better understanding of potential climate-related risks to our 
supervised institutions. Our approach has been to invest in 
research and data to understand how climate change and the 
financial system interact.
    We also welcome and benefit from engagement with 
international colleagues from other central banks, supervisory 
authorities, and standard-setting bodies. For example, we are 
engaged in climate-related work through the FSB, the Basel 
Committee's Task Force on Climate-Related Financial Risks, and 
the NGFS.

Q.15. Increased calls for financial regulators to tackle the 
issue of the climate crisis are coming from current Federal 
Reserve Bank leaders, top officials at the Treasury Department, 
and current and former members of the Federal Reserve Board of 
Governors. \14\
---------------------------------------------------------------------------
     \14\ New York Times, ``As Winter Sweeps the South, Fed Officials 
Focus on Climate Change'', Jeanna Smialek, February 18, 2021, https://
www.nytimes.com/2021/02/18/business/economy/federal-reserve-climate-
change-banks.html.
---------------------------------------------------------------------------
    Last year, former Federal Reserve Board Governor and former 
Deputy Treasury Secretary Sarah Bloom Raskin stated, ``when it 
comes to curbing the effects that climate risk will have on the 
economy, particularly the heightened chance that such risks 
will bring about economic catastrophe, leadership must exist 
and concerted action must be taken.'' \15\ Do you believe that 
the Fed during your tenure has shown the leadership and 
concerted action on climate risk to the economy, as described 
by former Deputy Treasury Secretary Raskin?
---------------------------------------------------------------------------
     \15\ Ceres, ``Addressing Climate as a Systemic Risk: A Call to 
Action for U.S. Financial Regulators'', June 2020, https://
www.ceres.org/sites/default/files/reports/2020-06/
Financial%20Regulators%20FULL%20FINAL.pdf.

A.15. Within the bounds of the Federal Reserve's statutory 
mandate, we have undertaken important new initiatives and 
increased our overall program of work on climate-related topics 
in recent years. This work, which is ongoing, includes the 
---------------------------------------------------------------------------
following:

    Establishment of the SCC;

    Establishment of the FSCC;

    Cochairing the Basel Committee's Task Force on 
        Climate-Related Financial Risks;

    Joining the NGFS as a member;

    Participating in the ongoing FSB work to assess the 
        implications of climate change for financial stability;

    Incorporating analysis and discussion of climate-
        related risks into our Financial Stability Report and 
        Supervision and Regulation Report;

    Extensive ongoing economic research, including 
        published papers on climate-related topics in areas 
        such as asset pricing, consumer spending and savings 
        behavior, industrial production, credit availability, 
        and fiscal outcomes;

    Organizing and hosting multiple conferences on 
        climate-related economic research and policy analysis; 
        and \16\
---------------------------------------------------------------------------
     \16\ For example, see ``Economic Risks of Climate Change: 
Implications for Financial Regulators'', Federal Reserve Bank of San 
Francisco, last modified on December 4, 2020; Federal Reserve Bank of 
New York, ``Reducing Climate Risk for Low-Income Communities'', press 
release, November 19, 2020; ``Virtual Seminar on Climate Economics'', 
Federal Reserve Bank of Richmond; ``Climate Change Economics'', Federal 
Reserve Bank of Richmond, last modified on November 20, 2020; and 
Galina B. Hale, Oscar Jorda, and Glenn D. Rudebusch, ``The Economics of 
Climate Change: A First Fed Conference'' (December 2019).

    Collaborating and sharing information across the 
        Federal Reserve System through our System Climate 
---------------------------------------------------------------------------
        Network and other forums.

Q.16. Earlier this year, current Treasury Secretary and your 
predecessor as Federal Reserve Chair Janet Yellen stated, 
``Both the impact of climate change itself and policies to 
address it could have major impacts, creating stranded assets, 
generating large changes in asset prices, credit risks and so 
forth that could affect the financial system. These are very 
real risks.'' \17\ Do you believe that the Fed during your 
tenure has sufficiently or adequately worked to address the 
impacts of climate change and policies to address it on our 
economy, as described by Secretary Yellen?
---------------------------------------------------------------------------
     \17\ POLITICO, ``Yellen Vows To Set Up Treasury Team To Focus on 
Climate, in Victory for Advocates'', Zachary Warmbrodt, January 19, 
2021, https://www.politico.com/news/2021/01/19/yellen-treasury-
department-climate-change-460408.

A.16. To appropriately address the impacts of climate change on 
our economy and financial system, we must first understand the 
risks. The Federal Reserve has made and continues to make 
strides in better understanding climate-related economic and 
financial risks. Researchers throughout the Federal Reserve 
System are examining the implications of climate change for the 
economy, financial institutions, and financial stability. The 
Federal Reserve is investing in data and empirical work to 
analyze the transmission of climate-related risks to the 
economy and developing methodologies to measure these risks. 
Our staff is also engaging with colleagues from other 
regulatory agencies, central banks, and standard-setting 
bodies. Please see the answer to 15 above for a more detailed 
---------------------------------------------------------------------------
list of activities.

Q.17. Last month, President and CEO of the Federal Reserve Bank 
of San Francisco stated that ``[i]t is a fact that severe 
weather events are increasing,'' that ``[w]e have to understand 
what the risks are, and think about how those risks can be 
mitigated,'' and that ``[o]ur responsibility is to look 
forward, and ask not just what is happening today, but what are 
the risks.'' \18\ Do you believe that the Fed during your 
tenure has worked to understand the risks of climate change and 
how those risks can be mitigated, as described by Dr. Daly?
---------------------------------------------------------------------------
     \18\ New York Times, ``As Winter Sweeps the South, Fed Officials 
Focus on Climate Change'', Jeanna Smialek, February 18, 2021, https://
www.nytimes.com/2021/02/18/business/economy/federal-reserve-climate-
change-banks.html.

A.17. As noted in the answers to the previous questions, the 
Federal Reserve has made and continues to make strides in 
better understanding climate-related economic and financial 
---------------------------------------------------------------------------
risks.

Q.18. Last month, Federal Reserve Board Governor Lael Brainard 
stated, ``Climate change and the transition to a low-carbon 
economy create both risks and opportunities for the financial 
sector. Financial institutions that do not put in place 
frameworks to measure, monitor, and manage climate-related 
risks could face outsized losses on climate-sensitive assets 
caused by environmental shifts, by a disorderly transition to a 
low-carbon economy, or by a combination of both.'' \19\ Do you 
believe that the Fed during your tenure has sufficiently or 
adequately worked to describe the frameworks to measure, 
monitor, and manage climate-related risks on our economy, as 
described by Governor Brainard?
---------------------------------------------------------------------------
     \19\ Board of Governors of the Federal Reserve System, ``The Role 
of Financial Institutions in Tackling the Challenges of Climate 
Change'', Lael Brainard, February 18, 2021, https://
www.federalreserve.gov/newsevents/speech/brainard20210218a.htm.

A.18. We continue to prioritize our work to better understand 
and measure climate-related financial risks, including through 
analysis of transmission channels of climate change risk to the 
banking sector, measurement methodologies, and data gaps and 
challenges. In pursuing this work, we are actively cooperating 
on an ongoing basis with other agencies and authorities, 
including through the BCBS's Task Force on Climate-Related 
---------------------------------------------------------------------------
Financial Risks, the FSB, and the NGFS.

Q.19. Main Street Lending Program--What share of loans under 
the Main Street Lending Program have been made to nonprofit 
organizations? Does the Federal Reserve have up-to-date data on 
the financial condition of nonprofit organizations that 
received loans under the Program?

A.19. The total principal amount of the loan participations 
purchased under the Main Street Lending Program (Main Street) 
as of the time of its closure on January 8, 2021, was $16.586 
billion. Of that amount, the total principal amount of the loan 
participations purchased by the Nonprofit Organization New Loan 
Facility or the Nonprofit Organization Expanded Loan Facility, 
the Main Street facilities that made loans to nonprofit 
organizations, was $40 million.
    Main Street relied on eligible lenders (including, for 
example, banks, savings associations, and credit unions) to 
underwrite the loans whose participations were purchased by the 
Main Street special purpose vehicle. Under Main Street's terms, 
a for-profit business or nonprofit organization that received a 
loan must provide quarterly and annual financial data, which is 
used to assess borrowers' credit risk on an ongoing basis.
    For more details, see the full transaction-specific 
disclosures on the Board's public website. \20\
---------------------------------------------------------------------------
     \20\ http://www.federalreserve.gov/reports-to-congress-COVID-
19.htm
---------------------------------------------------------------------------
                                ------                                


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

Q.1. In the last few months, the Federal Reserve has joined the 
Network for Greening the Financial System, started discussing 
climate risk in their financial stability reports, and formed a 
Supervision Climate Committee. What is the specific mandate and 
scope of work for the Supervision Climate Committee?

A.1. Climate change is an important issue, and Congress has 
entrusted the job of addressing the problem of climate change 
itself to Federal agencies other than the Federal Reserve. 
Congress has given the Federal Reserve narrow but important 
mandates around financial stability and supervision of 
financial firms, and we consider the potential effects of 
climate change to the extent such effects have an impact on the 
achievement of our statutory mandates.
    The Supervision Climate Committee (SCC) brings together 
senior staff from the Federal Reserve Board (Board) and the 
Reserve Banks to facilitate the better understanding of 
potential climate-related risks to our supervised institutions. 
The SCC's work is in the early stages. The SCC is focused on 
engaging with a wide variety of stakeholders, including large 
banks, to strengthen its understanding of how banks incorporate 
physical and transition risks into their risk management 
frameworks; working to identify best practices for measuring 
and potentially addressing climate-related risks at banks; and 
investing in analysis to better understand the transmission 
channels through which climate change impacts individual banks 
and the banking sector.

Q.2. On page 30 of the Monetary Policy Report, the report notes 
that prior to the pandemic business debt levels were already 
high. Now, business leverage stands near historical highs.
    Can you expand on the indicators the Federal Reserve 
considers to measure stress on businesses, business leverage, 
insolvency risk, commercial real estate vacancies and sales?
    What indicators should local elected leaders, business 
owners, and the Government consider?

A.2. The Board produces the quarterly Z.1 statistical release, 
``Financial Accounts of the United States'', which includes 
data on transactions and levels of financial assets and 
liabilities, by sector and financial instrument. It also 
includes balance sheets, including net worth, for nonprofit 
organizations, nonfinancial corporate businesses, and 
nonfinancial noncorporate businesses.
    The Board's Financial Stability Report (FSR) has regularly 
included a snapshot of key statistics from the Z.1 release for 
the level of business credit. The FSR has focused on the ratio 
of nonfinancial business credit to GDP as a key measure of 
business leverage and has also reported statistics on gross 
leverage of public nonfinancial businesses--the ratio of firms' 
book value of total debt to the book value of total assets. The 
latest report is available on the Board's public website. \1\
---------------------------------------------------------------------------
     \1\ https://www.federalreserve.gov/publications/financial-
stability-report.htm
---------------------------------------------------------------------------
    A key measure of insolvency risk for businesses is the 
interest coverage ratio, the ratio of earnings before interest 
and taxes to interest payments. \2\
---------------------------------------------------------------------------
     \2\ See Figures 2-6 for the November 2020 FSR.
---------------------------------------------------------------------------
    Additional indicators that Board staff consider when 
measuring stress on businesses, business leverage, and 
insolvency risk include net leverage and aggregate debt growth 
of nonfinancial businesses, the share of nonfinancial business 
debt with low interest coverage ratios, outstanding amounts of 
BBB- and high yield nonfinancial corporate bonds, and 
downgrades and expected defaults of nonfinancial businesses.
    For commercial real estate vacancies and sales, we consider 
vacancy rates, growth rates of price indexes by property type, 
and changes in lending standards.
                                ------                                


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

Q.1. Chair Powell, you are familiar with my concerns around 
protecting the U.S. system of insurance regulation that has 
worked so well for policyholders and the market for over 150 
years in terms of access and affordability. The insurance 
market we have here at home is the largest and most diverse in 
the world and supports products and services in the retirement 
and health space that do not exist in other jurisdictions 
around the world.
    Protecting this system should be an apolitical objective. 
Despite the change in Administration and new leadership at the 
Treasury Department, I expect that the Federal Reserve will 
continue its work in ongoing negotiations at the International 
Association of Insurance Supervisors on the development of an 
Insurance Capital Standard (ICS) that does not compromise the 
U.S. insurance market.
    Will the Federal Reserve continue fighting to ensure that 
U.S. insurance capital standards are recognized as outcome-
comparable to the ICS?

A.1. Yes. The Federal Reserve Board (Board) advocates for the 
U.S. approach to insurance regulation at the International 
Association of Insurance Supervisors (IAIS). To assess group 
capital, U.S. regulators have proposed aggregating existing 
legal entity capital requirements. The Board proposed such an 
approach, termed the Building Block Approach, for depository 
institution holding companies significantly engaged in 
insurance activities. The National Association of Insurance 
Commissioners (NAIC) and States have proposed a similar 
approach, the Group Capital Calculation. The Federal Reserve 
will continue to advocate for these approaches to be deemed 
outcome comparable to the Insurance Capital Standard.

Q.2. Has the Federal Reserve communicated and coordinated with 
the Biden administration's Treasury Department on this 
important work?

A.2. We have communicated and coordinated with the Treasury 
Department on this issue since the change in Administration. We 
work closely together with U.S. Treasury's Federal Insurance 
Office, as well as with the State insurance regulators and the 
NAIC, as part of our participation at the IAIS.

Q.3. I have been closely monitoring the Federal Reserve's 
consideration of how to modernize the regulatory and 
supervisory framework for the Community Reinvestment Act (CRA). 
Now that the comment period has closed on the Federal Reserve's 
CRA ANPR, I would like to request an update the process and 
planned next steps.
    In issuing the CRA ANPR, the Federal Reserve said that it 
aims to build consensus and ultimately issue a modernized CRA 
rule on an interagency basis. Is the Federal Reserve 
coordinating with the other banking regulators to develop a 
unified rule? When can the public expect to see a proposed 
rule? Historically, CRA has been very geographically focused. 
How can the Federal Reserve update CRA in a way that makes 
sense for both digital banks and traditional, branch-focused 
banks?

A.3. Community Reinvestment Act (CRA) modernization is a high 
priority for the Board. Our goal is to strengthen 
implementation of the law's core purpose of meeting the credit 
needs of low- and moderate-income (LMI) communities. We have 
taken several significant steps to achieve our goal of getting 
CRA modernization right and providing a foundation for the 
Federal banking agencies to develop a common approach, 
including issuing an Advanced Notice of Proposed Rulemaking 
(ANPR) and holding more than 50 listening session across the 
country to gather additional input.
    With the benefit of input from the public and now with the 
Board's ANPR comment period complete, we believe there is an 
opportunity for a harmonized rule among the agencies. The Board 
remains committed to working toward a consistent approach 
across the agencies, and we look forward to arriving at a 
common approach that meets the law's intended purpose, to 
ensure that banks are meeting the credit needs of LMI 
communities. We have also sought input on how to reduce 
inequities in credit access and to strengthen banking services 
and investment in LMI communities.
    We believe that putting forward a proposal that reflects 
extensive stakeholder feedback and provides a long comment 
period builds a foundation for the agencies to ultimately 
develop a consistent approach that has broad support.
    The Board's ANPR seeks input on ways to strengthen the CRA 
while increasing clarity, consistency, and transparency. In 
addition, we would like to see a set of rules that tailors CRA 
evaluations to reflect differences in bank sizes and business 
models; uses metrics that account for changes in business 
conditions across economic cycles; and considers the credit 
needs and opportunities of local communities, accounting for 
factors such as the unique needs of small banks and rural 
areas. The ANPR specifically proposes policy approaches that 
recognize how banking is evolving to ensure that CRA 
modernization of assessment areas take into account how banks 
serve their customers through mobile and internet banking, 
while still maintaining a focus on branches, given their 
importance to individuals and communities.
                                ------                                


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

Q.1. In 2019, the Fed, OCC, and FDIC took steps mandated by 
Congress to tailor banks' prudential regulations.
    Now we're almost a year into the COVID-19 crisis and banks 
have been a critical component of the recovery of the U.S. 
economy. Furthermore, they have been stress tested twice in 
recent months. In addition, as we discussed at our recent 
hearing, their dividends and buybacks have been restricted. 
Despite the severe economic challenges of the pandemic banks 
have passed these rigorous tests while maintaining strong 
capital and liquidity reserves. There is also more liquidity in 
our financial system than ever before.
    Do you agree that tailoring of capital and liquidity 
requirements to the systemic footprint of particular banking 
institutions is still appropriate? Are you aware of any 
negative impact to the U.S. economy because of regulatory 
tailoring?

A.1. The Federal Reserve Board's (Board) tailoring rule \1\ 
better aligns regulatory requirements with the risk profile of 
an institution and implements aspects of the Economic Growth, 
Regulatory Relief, and Consumer Protection Act. By creating a 
more risk-sensitive regulatory framework, the tailoring rule 
ensures that prudential standards, including those for capital 
and liquidity, are appropriately stringent for large banking 
organizations.
---------------------------------------------------------------------------
     \1\ See 84 FR 59032.
---------------------------------------------------------------------------
    Tailoring financial regulation to risk is good public 
policy and a long-standing aspect of the Board's regulatory 
framework. The Federal Reserve conducts periodic reviews of its 
rules to update them, reduce unnecessary costs, address 
unintended consequences, and streamline regulatory 
requirements, consistent with the statutory provisions 
underlying such rules. These efforts include considering the 
costs and benefits of regulations as well as exploring 
alternative approaches that would achieve the intended result 
with greater simplicity, transparency, and efficiency.
    The Federal Reserve continues to closely monitor evolving 
risks and the potential impact of those risks on the broader 
financial system and assess the capital and liquidity adequacy 
of large banking organizations subject to the regulatory 
tailoring framework. Because large U.S. banking organizations 
are subject to robust stress testing and enhanced supervision 
of their capital planning processes, they currently have 
significant capital buffers over their existing requirements. 
U.S. banking organizations more generally remain well 
positioned to continue to lend to borrowers during the current 
economic conditions. In addition to encouraging banking 
organizations to use their capital buffers to support lending 
to households and businesses, the Federal Reserve is 
encouraging banking organizations to work constructively with 
borrowers in the context of the COVID-19 pandemic. We will 
continue to evaluate whether adjustments to the capital and 
liquidity frameworks are warranted as the situation progresses.
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