tv Federal Reserve Chair Jerome Powell Testifes at Senate Banking Hearing CSPAN February 23, 2021 10:01am-12:25pm EST
to make sure that nuclear weapons are not produced anywhere, any more. after the one test of july 16th, 1945. so we know that they can exist. it is quite possible that the history of the cold war would have been quite different certainly in the first ten years. remember stalin dies in '53 and krushchev and malenkopf during that transition period reach out to the united states -- >> federal jerome powell preparing to testify before the senate banking committee on the semi annual policy report. live coverage of his remarks here on cspan3. >> you should all have one box on your screens labeled clock
which will show you how much time is remaining. for all senators the five-minute clock applies for your questions and 30 seconds remaining you'll hear a bell ring to remind you your time is 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'll move to the next senator until any technology issue is revolved. to simplify the speaking process senator toomey have agreed toor past. 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 transit workers who we heard from last week go to work every day worried they'll get the virus on the job and bring it home to their families. mayors and community 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're 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 war-time 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 sprigs alluded to in testifying before this committee before d-day generalizen hower did not call president roosevelt and asked can we afford to storm the beaches at normdy. most people are not worried about doing too much, they're worried about doing too little. they want to do whatever it takes. 85% of americans still need a vaccine. our frontline workers still need ppe and 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 do 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 treasury secretary janet yellen said if we don't do more, we risk a
permanent, her words, scarring of the economy and to the future. economists from across the political spectrum include 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 expressed some of the same concerns. just a few weeks ago after we passed the covid-19 relief bill in december, chair powell said that, quote, 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 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 this economy. those were his words. productive capacity of this 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 with the results empower people and make their lives better. how our economy works when the hard day work doesn't pay the bills for tens of million of workers and even middle class families don't feel stable. something in the system is broken. we know that. workers' wages have been stagnant for decades and 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 buy backs and dividends. the wealth and income gaps for women and 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 loyal
allies in washington. they spent years rolling back consumer protections in our financial system, cutting corporate tax rates, using wall street to measure the economy instead of the condition of workers. and the same people advocating for these rollbacks and pushing the stock market center view of the economy are the same people who say we should not go big on a rescue plan. no need for the government to help people and the market decides who wins and who loses. we all know the market doesn't work when the game is rigged. corporations have been lining their own pockts and done so with plenty of government help and intervention. we know that for hem short-term profits are more important too often than their workers. that's why we have to stop letting them run things. look what happened in texas. 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 and 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 and we know more investment in public infrastructure. we need more, not less. we can't let corporate greed continue to stand in the way. our central bank plays a huge role in all of this. the federal reserve can ensure they invest in their workers and lend in their communities instead of stock prices with buy backs and dividends. the fed can make sure the response, economic and financial crisis just doesn't help wall street, it helps everyone. require that financial institutions take into account the serious risk posed by 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 undue the systemic racism and the
financial system to jim crow to red lining 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, quote, the benefits of investing in our nation's work force are a myth. steady employment provides more than a regular paycheck, it bestows a sense of purpose and improves mental health, increases life span and benefits workers and their families, unquote from the chair. what that boils down to is the dignity of work. hard work should pay off no matter who you are and what kind of work you do. whether you punch a clock or work on tips or a salary or taking care of aging parents. it means we have to start measuring success of our community by success of the people who make our economy work. chair powell, thank you. i look forward to your testimony. 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 a contraction as a result of the shutdowns that followed the threat of covid-19. we all remember credit markets seizing up and second quarter gdp fell last year by over 30%. unemployment rate reached about 15% 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 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%, about where it was in july of 2014. 18 states have unemployment rates below 5%. 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's 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 that 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 never had as much income as they do to entities that have 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's a burden that gets passed on to future generations that have to service that debt. in 2020 debt held by the public reached 100% of our total economic output. and cbo projects that over the next ten years net interest costs will amount to $4.5 trillion. and that's without another $1.9 trillion bill. there's 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 of personal saving 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. and another matter i want to make the point and i do think it's very important for the fed to continue focused 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. >> thank you, senator toomey. today we'll hear from jerome powell on the state of the u.s. economy. nearly one year since the coronavirus pandemic first wreaked havoc on 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. >> thank you and good morning. chairman brown, ranking member toomey and other members of the committee, i'm pleased to present the federal reserve's semi annual 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 instability to ensure the recovery will be as strong as possible and limit lasting damage to households, businesses and communities. today i will review the current economic situation before returning 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. a resurgeance in covid-19 cases and hospitalizations and deaths in recent months is causing great hardship for millions of americans and 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 sector's 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 encouragely in january. the housing sector has more than fully recovered from the downturn while business investment and manufacturing has also picked up. the overall recovery and economic activity since last spring is due in part to unprecedent 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 three 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 hosphospita. the unemployment rate remained and below prepandemic levels. although 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, has 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, of course, 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% longer run objective. 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 normal activity. in the meantime, we should continue to follow the advice of health experts to observe social distancing measures and wear masks. i'll turn now to monetary policy. in the second half of theyear, completed our first public review of our monetary strategy policy 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. 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% 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 a strong labor market, particularly for low and moderate-income communities. in addition, we state our policy decisions will be informed by our assessment of shortfalls of
employment from its maximum level rather than from deviations of its maximum level. this change means we will not tight monetary policy to a strong market. we will seek to achieve inflation that averages 2% overtime. following times when inflation has been running below 2%, appropriate monetary policy will likely aim to above 2% for some time. with this change, we aim to keep longer-term inflation expectations well anchored at our 2% 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've implemented our new
framework deploying our policy tools. we expect that it will we appropriate to maintain the current accommodative target range of the federal fund's rate until market conditions reach levels consistent with the consistent of maximum employment and inflation has risen to 2% and on track to moderately achieve 2% for some time. in addition, we will continue to increase our holdings of treasuries, securities and agency mortgage-backed securities at least at their current pace until substantial further progress has been made towards our goals. these purchases and the associated increase in the federal reserve's balance sheet have materially eased financial conditions and providing support to the economy. the economy is a long way from our employment and inflation goals and likely to take some time for substantial further progress to be achieved. we will continue to clearly communicate our assessment of progress towards 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 and deploying our emergency lending powers to an unprecedented extent enabled in large part by financial backing and support from congress and the treasury. the c.a.r.e.s. act are no longer open. we understand our actions affect households, businesses and communities across the country. everything we do is in service to our public mission. we're 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'm happy to take your questions. >> 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? >> i would say, yes, that is the single best policy to return the economy to its potential growth. >> thank you. the researchers in minneapolis
say that the pandemic is forcing mothers of young children out of the workforce. some three 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 and 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 don't end up with an even bigger lasting gender gap in the labor market? >> so the tools that can really address specific groups, for example, women who perhaps temporarily dropped out of the labor force. those are really fiscal policy tools. obviously, those are not tools we have. and i, today, stay away from fiscal policy and really talk about what we can do. the main thing we can do is continue to support the economy. give it the support that it
needs. we're still 10 million jobs below the level of payroll jobs before the crisis. there's still a long way to go to full recovery and we intend to keep our policy supportive of that recovery. >> thank you for acknowledging in your opening statement and your comments to many of ous and your public comments, frankly, about how much we need to to to fight racism and increase diversity. we know historically the fed's monetary policy has benefited wealthy homeowners and discrimination in the financial system we talked about earlier from redlining to the sub prime mortgage crisis specifically targeted black, brown and other vulnerable communities. it's clear the fed's policy and failure to regulate predatory actions in the sector have contributed to the racial wealth and home ownership gaps. you said the fed's tools can't address the underlying causes of
racial injustice or income wealth and economy in our country, 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 face racial injustice and income inequality? >> 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 can do. and i think we do it aggressively. in addition through our consumer, community consumer affairs division and through the federal reserve banks, we don't spend, you know, public resources, but we try to attract private resources around, for example, initiatives that will address issues of economic
issues of low and moderate income communities and racial minorities. >> i think we can do more, but we will discuss that later. chair powell, in the middle of the pandemic, bank regulators have loosened capital requirements at one of the biggest banks and one of the biggest changes to 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 unquote. in other words, the fed reduced capital standards so banks would lend more not so they would pay dividends, but not what is happening. the biggest banks have gotten larger and more profitable but they haven't increased lending. dividends, however, remain steady. my question, mr. chair, will you promise to the committee that you will not extend any exemptions for banks and bank holding companies that have continued to pay dividends rather than invest in the real economy?
>> so, we're talking here really about the temporary measures we took with respect to the supplemental leverage ratio and those expire at the end of march. we have not decided what to do there yet. and we're actually looking into that right now. i'm not going to commit to connecting that decision to the payment of dividends as a separate matter, as you know. we intervened to require the banks to limit their dividend growth to zero and also to limit their share buy backs and the result, 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. >> perhaps. but i also, we also understand that they have not been
supporting the real economy to the degree that we hope 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. 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 buy backs or whatever mechanism is suitable and anything to the contrary is a terrible constraint on our economy and on economic freedom. also want to just observe briefly and i'm 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's fair to say that we have many areas, sectors of our economy that are performing
extremely well. housing and the good 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 this year is over 4%. i think the consensus is well over 5% 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 multitrillion dollar bills and i don't 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. 2001 it was the stock market. 2008 it was the mortgage credit market. in both cases, in my view, monetary policy contributed to a great deal to the formation of those bubbles. the dallas fed president robert kaplan recently acknowledged there is a link between the record amount of liquidity being pushed into the system and the asset valuations we're seeing in a whole range of assets be it gamestop or bitcoin, real estate, commodities. across the board we're seeing quite elevated asset prices and signs of emerging inflation. do you agree a link between the liquidity that the fed has been providing and some of these unprecedented asset prices? >> so, there's certainly a link. i would say, though, that you look at what the market is
looking at, what markets are looking at. it's a reopening economy with vaccination. it's fiscal stimulus and monetary policy and it's savings accumulated on people's balance sheets and the expectations of much higher corporate profits which matter a lot for the equity markets. many factors contributing to, you know, to what's happening in markets right now. monetary policy, i would certainly agree is one of them. >> yeah, i would just suggest that, yes, i agree all of those things are happening and all of those indicators of growth and increasingly indicators of rising inflation, as you know, the tips ten-year break even on inflatn now over 2% up from 0.6. my point is at some point we have too much liquidity going into the system. the economy is recovering very well and problems should be
addressed narrowly and i hope that $120 billion a month of bond buying doesn't become a permanent situation. one of the things i'm concerned about and wonder if you can comment on the risk we would have an increase in inflation and increase in bond yields 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? >> well, so what we 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 towards our goals. we've also said that as we monitor that progress, we'll communicate well in advance of any actual purchases. and, so, that's what it will take for us to begin to moderate the level of purchases. substantial further progress towards our goals. which we haven't been making for
the last three months but expectations are that will pick up as the pandemic subsides. >> 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. >> thank you, 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're not on a path to an equal recovery. as of january, the black unemployment rate is 9.2%. the hispanic unemployment rate is 6.8% compared to 5.7% 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 missing low compared to the white rate? >> well, this, as you point out, this pandemic was particularly bad for the long-standing disparities we have in our economy. the job losses were heavily concentrated in service sector jobs. those tend to be more skewed towards lower paid and in many cases, minorities and women. that's really where the big pockets of unemployment remain. and, so, again, you're right. the burden really has fallen more in the low and moderate income communities, it is always the case to some extent. this particular event, though, is very somehow precisely aimed at those people and we're well aware of that. >> 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 you agree that minority families are bear bearing the b of the damage caused by the pandemic? >> along with those at the bottom end. >> you agree addressing this disproportionate percentage needs to be a pritorty in relief efforts? >> i would have thought so. >> 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? >> so, we look when we say that maximum employment is a broad and inclusive goal, that means we are looking not just at the headline numbers but also look at, you know, different groups
and we try to take all of that into account in making our assessment. we will take into account the headline numbers and also those for other groups as we think about reaching maximum employment. >> well, i hope that in your mission that the federal reserve looks at this because a federal reserve study show while high-income jobs mostly recovered to pre-pandemic levels and minimum to low-wage workers remains 14% below prepandemic levels. this is in spite of the fact that almost half of low-wage workers who let us stay home when we were told stay home to avoid the spread of the pandemic and to be infected, that they were risking their lives in the jobs that they did. and, so, i believe we had the
tools and try to make this an equitable recovery. 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? >> we will do that. i will say, though, monetary policy as a tool is famously a broad, it's a broadly effective tool. it doesn't enable us to target particular groups. it lifts the entire economy. but we're going to be mindful, though, of the disparities that exist as we make our decisions. >> then, finally, as of february 1st an estimated 13 million adults were not caught up on their rent and 13 million not caught up on their mortgage payments. our country is in the midst of a housing crisis. what is the effect on the housing market and our overall economy if congress doesn't provide additional resources to help families struggling to pay their rent and mortgages?
>> well, if those people, if it were to get to the point at which people were evicted and you're talking about people's lives which is hard to recover from. so, it is important. and i think the single best thing we can do about that, of course, is to keep monetary policy to do what we can to speed the recovery so that it will be robust and complete as soon as possible. >> well, llosing, millions of people losing their homes would not only affect the single aspect of wealth. so, i hope you'll keep your eye on that. thank you, mr. chairman. >> thank you. >> senator shelby. >> good morning. chairman powell, thank you for your service of a number of years and how you, i believe,
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. where is the economy going when we get over this covid, which we all hope and pray will be sooner rather than later. as i like to add to that, mr. chairman, what is your view of the world economy tying into ours because it's an important factor as we go forward, assuming in the next say six months that we get a handle around covid in the country and europe, for example, gets, does the same thing. >> so, i'll take those one at a time. on inflation, let me say that we do expect that as the, couple of things. first, as the very low ratings
of last april drop out of the 12-month calculation we expect readings to move up. base effect. that is a temporary effect and won't really signal anything. more importantly, though, with all the factors we've been discussing, you could see spending pick up pretty substantially in the second half of the year. 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's not, it doesn't seem likely that that would result in large increases or they would be persistent. we have all been living in a world for a quarter of century where all the pressures were disinflationary. you know, pushing downward on inflation. we averaged less than 2% inflation for more than the last 25 years. inflation dynamics do change over time, but they don't change on a dime. we don't really think, see how a burst of fiscal support or
spending that doesn't 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. if it does turn out that unwanted inflation pressures arise and they're persistent, we have the tools to deal with that. shall i continue? so on the balance sheet, you know, we're going to continue -- we're at a stage with 10 million people, payroll unemployment is 10 million where it was before the pandemic and we're a long way from maximum employment and the balance sheet will 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 towards our goals. you ask 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's not done yet. the job is not done. that's the thing i keep coming back to. we have 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, the same set of issues. but there is, we can, if people will get vaccinated and we can get the disease under control properly, the second half of this year and the year after, the economy could be very good. and it could be good else where in the world, as well. >> 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? >> a lot of that is just that people have not been able to
spend. they haven't been able to travel and go to restaurants. it forced savings in a way. so, they'll spend some of that going forward. you're really thinking, i think, about the fact that, you know, the u.s. needs more savings so that it will have more investment and productivity. it would be nice if we had a higher savings rate and nice if we didn't have a lot of dissavings a that federal level. a lot of it is that these budget deficits require a lot of assets. not that we need, that's 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. >> thank you, sir. thank you. >> thank you, senator. >> thank you, senator shelby. >> i very much appreciate your, i know that has been difficult
over the past number of years and you stepped up and certainly don't want a bunch of politicians to determine monetary policy and i'm glad you're at the helm. i also think we're going to have a debate over this $1.9 trillion package in front of you on probably every committee that i'm 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 that, i go, yeah, that's a good point. and it's true. housing, the housing market in places like montana is hotter than hot. it is, quite frankly, booming. another problem that i want to talk to you about the housing thing. but other industries and there are folks out there who, quite frankly, don't 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 united states senate, where would you pay most of your attention to? because i agree, the money we spend needs to be focused where it will do the most good. no doubt about that. where is your focusfocus? would it be unemployment or hospitality businesses or something more global than that? >> you know, it's an interesting question. maybe the grass is always greener. our work really relates to managing the business cycle in a way. what i always think i would focus on is more of 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. so, 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's no limit on the amount of those people who could be working in the united states because it's such a global economy. i also think it's 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 business conditions are going to be good and that they can invest in and i think the federal government investing in basic science over time has produced a lot of productiity in enhancing things. more generally, senator, i think focusing on things that will make a longer run difference to our economy is what i would do. >> okay. appreciate that. now, i want to go to housing because i talk about montana,
but i think this is true all over. we don't have enough affordable housing and workforce housing. i think 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? if you do think the fed plays a role, what would that role be? >> i don't 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's not really something we can do. we can combat housing discrimination and things like that and lending, but i don't think we are in a position of being able to allocate credit to worthy beneficiaries. that's really fiscal policy. >> okay. getting back to the pandemic. you've implemented a lot of monetary tools during this crisis.
in your opinion, have they been sufficient? and if they have, you know, that's the first question. have they been sufficient? >> i think they have. i think the difference really this time is that fiscal policy has really come to the table. it's made a big difference. >> moving forward, have you looked at any changes to that, to the policies, the monetary policy and the monetary policy tools that you've used moving forward? >> not yet. i mean, we're looking into that. of course, we'll do -- right now our focus is providing the economy the support it needs and turning to an evaluation of everything that happened in the crisis and answering that question. >> thank you, mr. chairman. thank you, chairman powell. >> thank you, senator. >> thanks, senator tester. senator scott. >> thank you, chairman brown and chair powell for being here with us this morning. certainly an important time for
us to engage in the conversation about the future of employment in our nation and one of the core responsibilities of the fed has to do with unemployment. there seems to be so few issues right now, chairman powell, that actually unites the left and the right. i'm 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 part of the covid-19 relief package. it's 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 1.4 million jobs and the earlier estimate went 1.7 million jobs in the middle of a pandemic that eliminated 10.7 million jobs. this seems to be common sense from my perspective and the perspective of democrats and the
congressional budget office. my question for you, sir, has the fed economists conducted research on the potential impacts of raising minimum wage to $15 an hour? >> i don't know we've looked at that question in particular. we have great labor economists who have done a lot of work on the broad area. >> yes, sir. are there 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? >> let me say as i must that this is a classic issue that fed number takes a position on, and i'm not going to take a position on here today. it's fiscal policy. most of the research still says that there is some trade-off between job loss and those whose wages go up. but actually the sort of
unanimity of that finding is no longer in place. there's a much more nuanced understanding of it. but, in any case, it's just an issue where we don't play a role or express a view. but i can share the research that we've done. i'd be happy to do that. >> 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 isn't 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 important engagement from the fed on that issue. i'll 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 that we've already spent, what is the impact on the issue of rising inflation in excess of the fed's longer run objective of 2%? >> so, of course, as i said at the beginning, i'm 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. thereof really hasn't been lately. that doesn't mean it won't return. but, again, my expectation will be that inflation will probably be a bit volatile over the last year, and it can relate to
things that have to do with the pandemic. for example, we'll see a slight increase in inflation a few months because of the base effects that i mentioned. we'll also see, perhaps, we don't know this, but we may see upward prices. i don't think those effects should either be large or persistent. and the real reason for that is is that we have decades of well-anchored inflation expectations meaning that we've had a very volatile economy for the last 15 years. and inflation didn't go up. >> thank you very much, sir. i appreciate your answer. the fact that you're unwilling and unable to answer the questions related to minimum wage, certainly you don't want to get into the politics of the $1.9 trillion package. i don't blame you. i wouldn't want to get into the politics of it at all. and i certainly understand your reticence to do so. i'll simply say that congressional budget office,
some democrats or republicans all agree that raising the minimum wage is a way to destroy jobs in an economy that is looking forward to a fragile recovery. thank you, chair brown. >> thanks, senator scott. senator warner. >> thank you, mr. chairman. and thank you for holding this hearing. chair powell, it's great to see you again. thank you for the good work you're doing. i think in response to questions and 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 that you don't 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 -- come into long-term structural change we need, i would argue, over the last 11 months we've seen broadband is a necessity. i think it is absolutely covid related. i hope that the current package can be changed actually include a sizeable investment and broadband as good as our four packages, bipartisan packages have been to date. the broadband investment is neither or nonexistent. experts like tom wheeler and blair lemon have said somewhere in the 40 to $50 billion range, we get about 90% coverage along with better affordability. so i guess i'm 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? >> 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 don't want to go anywhere near of what should be included in the package, if that's okay. >> what about the question though, you know, from a macroeconomic standpoint. broadband and trying to close the digital divide if we're going to have a fulsome recovery across all socioeconomic groups. could you speak to the question of the necessity for broadband to be ubiquitous if we're 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's telework, telehealth, teleeducation? >> again, as you and i have discussed on a number of occasions, i would agree that it's 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 -- could be a significant benefit economically. >> if not broadly available, are we going to be able to see the kind of broad-based recovery that i think we're all looking for? >> 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 scott, in his previous line of questioning, raised the inflation issues. and i know we've seen about a 41-basis-point increase on some of our ten-year benchmarks, it's
still relatively small. i tend to agree. i do think we need to make a sizeable investment right now. i'm not sure the inflation risk i agree with you are not as high as potentially might be. can you just briefly give some of the tools you've got available as federal reserve chair if you started to see inflation rise at a level that you didn't feel comfortable with? >> well, those are the classic tools that we have. again, i really do not expect that we'll be in a situation where inflation rises to troubling levels. at this point the committee is seeking inflation running moderately above 2% 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 deanchored and inflation is moving up and it's persistent. i think we're 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 it under control. and that's by not allowing the economy to ignore constraints over time. but i think this is not a problem for this time. and if it does turn out to be, then we do have the tools we need. >> we're down to the last 20 seconds. let me just -- do you want to make some general comments, and i would argue that the pandemic was the first major real world stress test we've had on our fiscal system since 2009. how do you think overall that the system has responded, and recognizing mr. chairman, this is my last question. if you want to make some general comments quickly.
>> you meant financial system? >> yes. >> well, i think the large financial institutions that are at the heart of our financial system proved resilient, they did. and they've been able to keep blending, 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. >> thank you, mr. chairman. thank you, chairman powell. >> thank you, senator warner. senator rounds of south dakota. >> thank you, mr. chairman. chairman powell, first of all, it's good to see you again. and i appreciate your service to our country as well. thanks for being with us today. i'd 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. treasuries and deposits of the fed from their balance sheets. this was important in preserving bank liquidity during last spring's to cash and the fed can't 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 can't do that when we're tieing 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 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? >> so, i do think that the slr exclusion -- i know it expires at the end of march, and we actually haven't made a decision on what to do. it's something we're in the middle of thinking about right now. so i'm just going to have to say that we'll be making a decision and announcing that pretty soon here. >> i think -- the reason for my question is that i think last time around in the past we've had challenges with banks that have come in and said, look, we've got folks that want to bring their assets in, they've got to have a place to put it. it is liquid. it's what we're going to have. most certainly that has impacted the ability and the reason for the slr in the first place. 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 as saying i think there's a lot of us that think that that's going to be an important part of the discussion to have. but let me lead into another question with you, sir. we've been monitoring the increase in treasury yields from about 9/10 of 1% at the start of 2021 for approximately 1.37% when the market closed yesterday. i understand that 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? >> so, first we look at a broad range of financial institutions and that's an important one, but
really we look at the whole range of financial conditions. and it's very important to ask why are rates moving up. if you look at why they're moving up, it's to do with expectations of a return to more normal levels, more mandate consistent levels of inflation, higher growth, and opening economy. in a way it's 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 move, i would say. >> great. well, thanks. look, we follow the markets. we follow on a regular basis whether the markets are moving up, they're moving down and so forth. i think in anticipation of what your thoughts were going to be, i think the market was rather volatile. i'm just curious, when you walk into an opportunity like this one where you're sharing your thoughts. and 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's the message that you'd like to send? are you talking we're going to have stability, it's going to be steady as she goes, we don't see changes coming up with regard to the availability of capital, we don't see changes that are going to impact --? what's the message that you really want to send as you share with us today and you're expected to be in front of our committees? >> so i guess i'll say a couple things. first, the starting point is that we're 10 million jobs below where we were in february of 2020, 10 million payroll jobs. so there's 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
core tile, there's a long way to go. and monetary policy is accommodated and needs to continue to be accommodated. we've put forward guidance both on our asset purchases and our rates. we think that that forward guidance is appropriate. and we're going to -- you can expect us to move patiently over time as we see better data coming in. right now we've had three months of 29,000 jobs a month. it's not very much progress. we expect that such progress, which we had earlier last year, we had very fast progress. we expect that that'll begin to return in coming months, and expect us to move carefully and patiently and with a lot of advanced warning. >> thank you, mr. chairman. thank you, mr. chairman. i apologize for going over on my time. >> thank you, senator. senator warren of massachusetts. >> 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've been pretty vocal about inequality over the past few years. you've noted -- i think i've got a quote here from from you, that it's been a growing up in our country and in our economy for four decades. you've talked a lot about how inequality underminds opportunity and mobility. and you've described it as something that holds our economy back. i take it that you believe inequality weighs our economy down and stunts economic growth. is that a fair statement? >> yes, it is. >> 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. the top 1% of fans last year received 20% of all the income in this country. and you think that's not good
for our economic growth overall. is that fair? >> well, i would say that the stagnation of incomes in the lower income area and also the low mobility that we've 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. >> right. but we're talking about here income equality, 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% of families, this tiny slice got 20% of all the income earned in the u.s. last year, the top 1% held 33% 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% for the bottom quartile in this country. people are making choices about keeping the heat on or putting food on the table. the 660 billionaires increased by $1.1 trillion over this past year. inequality is felt in how people pay taxes. the 99% in america pay on average about 7.2% of their total wealth in taxes in a given year. but the top one-tenth of 1% pay only about 3.2%. that's 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 families? >> these are -- you're 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 can't effect wealth inequality. we can affect by doing what we can to support job creation at the lower end of the market. so i leave to you, those are really fiscal policy issues. >> i appreciate that you're trying to move sideways on this. but you pointed out that inequality is a problem in our country, that it holds back mobility, that it holds back opportunity. and i'm simply pointing out, that inequality is felt not just in income, it's 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 had accumulated just slip right on through. that just seems to me not right. you know, it's time for a wealth tax in america. a 2 cent tax on fortunes worth more than $50 million. if fortunes 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's 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. >> thank you, senator warren.
senator of north carolina. if not, senator kennedy of louisiana. >> yes, sir. can you hear me, mr. chairman? >> i can, senator. you have two mr. chairmans here. >> mr. chairman, what was our fourth quarter gdp growth? >> i'm reluctant to guess, but it was in the i want to say 4%. >> right. that's what my numbers showed, too. what are you and your economists estimating that our gdp growth will be for 2021? >> so, we'll be updating our forecasting, the last forecasting we did -- the last
forecast the staff did was in january. my guess is that the data have been more positive. but it'll be a good number. we'd be in the range that you see in the public forecast. >> how about 6%? >> could be in that range. >> at what point in 2021 will gdp, the level of gdp equal prepandemic levels? >> sometime during the year. it depends on the growth rate. could be the second half of the year. >> how about the end of january? or the end of february, rather. >> i don't know that. the prepandemic level or the prepandemic trend? >> 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? >> in the first half of the year. >> i see a lot of economists saying at the end of february.
do you disagree with that? >> um, i can't be that specific. i was answering the question about the precrisis trend, which is what we're trying to effect. >> here's what i'm 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're looking at 6% gdp growth this year, and as soon as the end of this month we'll be back where we were in february 2020. >> actually, senator, i have consistently not taken a position on this bill. >> so you don't have an opinion about whether we ought to pass president biden's bill? >> as i've said since the december press conference, i
think on every public occasion when i've been asked about it, i've said that it's not appropriate for the if ed to be playing a role in these fiscal discussions about particular provisions and particular laws. we didn't exent on the tax cuts and jobs act. we didn't comment on the c.a.r.e.s. act. it's not our role. >> so your opinion is if we don't pass the bill, you're cool with that? >> that would be expressing an opinion. so that's what i'm not doing is expressing an opinion. >> well, would you be uncool with that? [ laughter ] >> i think by being either cool or uncool, i would have to be expressing an opinion. >> okay. how do you think we ought to pay all this money back that we're going to borrow and that we already have borrowed? >> i think that we will need to get back on a sustainable fiscal
path. and the way it has worked when it's successful is you just get the economy growing faster than the debt. i think that we're going to need to do that, and that's going to need to happen. but it doesn't need to happen now. now is the wrong time to be doing that. >> do you think we ought to go catwoman on the budget and actually look for savings there? >> go catwoman? [ laughter ] i don't know that reference. i think in the fullness of time, we will need to right-size our budget relative so that the economy is growing faster in nominal terms than the debt will have to eventually on the path we're on. >> do you think the deficits -- >> certainly in the long run i do believe they do. >> you don't think they matter in the short run? >> again, i think we will need to return to -- >> i can call on -- >> we'll need to return to this
issue, but i wouldn't 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. >> yeah. what if -- if that becomes the case but your spending's also growing faster than your economy? >> well, that is the deficit. the question really is -- the deficit is the difference between intake and spending. it's the net of those two. >> let me stop you, mr. chairman, because i'm 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. 4 trillion, 6 trillion, what's a few trillion? it's up 26%, the highest amount since 1943. what does that tell you? >> well, when you and i studied economics a million years ago, m2 and monetary aggregates
generally seem to have a relationship to economic growth. right now i would say the growth of m2, which is quite substantial, doesn't really have important implications for the economic outlook. m2 was removed some years ago from the standard list of leading indicators. that classic relationship between monetary aggregates and economic growth and the size of the economy, it just no longer holds. we've had big growths of monetary aggregates without inflation. something we have to unlearn, i guess. >> thank you, mr. chairman. senator from nevada. >> thank you, chair. and chairman powell, thank you again for being here, as usual. i so enjoyed 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 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 rages to find workers as well as invest in more in-house training and re-training. 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? >> i do. and as we've discussed, in that last couple of years when unemployment was routinely below 4%, as low as 3.5%, and where labor force participation was high, had moved up actually despite expectations that it wouldn't, we saw lots of virtuous effects. one of them was, i didn't focus too much on, you saw employers
investing more in training. you saw employers looking for people at the margins of the labor force. employers were going to prisons and, you know, 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. that's one of the reasons we're so eager to get back to that, 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. >> and in particular, wouldn't you agree that congress' investment in workforce development and helping developing the skills for the workforce would be important? >> i do. again, i don't want to comment on any -- i'm not entirely sure what you mentioned is in the current proposal, but i would say that the kinds of investment
in the people that enable them to be more effective in the workforce and policies that enable them to take part in the workforce, those are big things that can increase the things in our economy over time. >> that's why i've introduced the workers act, the pathways act. many of my colleagues are really focused on this investment, particularly now when we've had an opportunity to have a long-term impact on jobs. so, thank you for that. let me jump to just the unemployment and service industry now. this is an area that i know we really are hit. and we have to do more to turn this economy around and our hospitality industry. but let me ask you this. if congress does not extend and bolster unemployment insurance, what is the federal reserve's economic impact on economies like las vegas that are dependent on travel and
hospitality? >> so, again, i'm not going to comment. uninsurance employment is part of the bill. i'm going to stay away from the current fiscal discussions. the single most important thing is to get the pandemic behind us so that people can get on airplanes and take vacations again. after that, i think there will be -- and it's possible that that'll 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. >> i agree. but -- there's an investment that still needs to be made. we are not done here at the federal level with our monetary fiscal policy and addressing the economic crisis we have. it's one thing to get the pandemic under control. it's another to understand how we turn this economy around as
well. wouldn't you agree? >> i would agree. as i've said, we will keep our policy accommodated. we think we have significant ground to cover before we even get close to maximum employment. and we hope we can do everything we can to speed up that process. >> because you've 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 does, particularly in the service industry. no state should be left behind. i hope 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. i know my time is up. i will submit the rest of my questions for the record. i also suggest that chairman
brown has had to get over to senate finance to ask 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 haggerty. >> thank you, senator cortes. and i want to say a 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 would, our way through this crisis. and i want to say this, mr. chairman. i'm very encouraged by the indications from the monetary policy report prog-wes that we're making as we come out of this downturn. we're looking at north of 4%
recovery or even 6% growth for 202 #. i find that very encouraging, albeit an uneven recovery. i feel that it's very good news that we're on the way. that also raises concerns that i have, and i'm sure it's been discussed many, many times about the amount of liquidity that we're 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're talking about putting close to an additional $2 trillion into the economy. i won't belabor this anymore. it's been discussed by my colleagues. but i share their concerns about injecting that much liquidity into the economy at a time when we're 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'd like to shift gears for a minute.
yesterday treasury secretary yellen talked about the digital dollar. a digital dollar that's overseen by the fed, tied to blockchain technology, something she said could result in faster, cheaper payments. -- discussed for the world reserve currency. i would very much appreciate, chairman powell, your perspective on whether the fed should develop the digital dollar, a digital dollar that will be held directly by businesses and not mediated by commercial institutions. >> thank you. so, we are looking carefully, very carefully at the question of whether we should issue a digital dollar. it's something that 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're committed to solving the technology problems and to consulting very broadly with 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 don't need to be the first. we need to get it right. and so -- but this is something we're investing time and labor. and right across the federal reserve system, you may know that the federal reserve bank of boston has a partnership with mit. we're 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 intermedates between savers and borrowers. a very high-priority project for us. >> i share your concerns on the need to be careful. i also appreciate the fact that you're 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. i want to follow up on a more technical comment that senator round made regarding the importance of looking hard at the slr exemptions as we continue to move forward this year. i know they're coming to expiration at the end of march. but i very much appreciate your taking a hard look at that because there's a tremendous amount of liquidity coming in.
and on inflation you and i talked about the experience in japan about this inflation. at the same time, i share senator toomey's concerns about the asset price bubbles that we're 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. >> thank you, senator. >> thank you. next i'm going to call on senator van holland. i'm going to ask a question -- i am going to also pass the gavel to senator van holland. >> thank you, senator cortes. and welcome, mr. chairman. thank you for your service. at the outset, i want to underscore the importance of the fed continuing to move ahead with the ted now service as we've 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 doesn't impact people with big bank accounts who are not close to overdrawing. it impacts those who are living paycheck to paycheck. i see that the fed has accelerated its timetable a little bit to 2023. if you can move even faster, all the better. you'll be saving millions of americans lots of money in unnecessary costs. i want to focus my questioning on the issue of long-term unemployment. and in a speech you gave on february 10th, you pointed out that the unemployment rate would be close to 10% if you adjust for the bureau of labor statistics misclassifications
and people who dropped out of the labor force since the pandemic. this includes over 4 million americans who 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 of persistent 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 can't do this. it requires a fiscal response. so here's 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's important to very intentionally develop policies to help the long-term unemployed, individuals who even during good economic times were unable to get into the workforce? >> i do. and this really is a longer-run thing. but it's 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's just a market-based economy working. in this situation, you have that accelerated in a big way. and so many of the people, we may find that many of the people who are not going back to work 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. and that will take i think the kind of investments you're talking about. >> i appreciate that. and we're talking about a focus and an intentional investment beyond the investments that we're making for overall economic growth, right? >> yes. >> and i also wanted to turn really quickly to the importance of using the right kind of economic measurements to determine the wellbeing of american workers and families. as you noted in that same speech, unemployment among low-wage workers is 17% where it was at the start of the pandemic. whereas among high-wage workers, it's only down 4%. so if you take the average,
you're 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've 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 don't overlook the continuing pain people are feeling because we are looking at averages and not looking beneath those averages? >> these people who are struggling in that way are doing so because they were employed in the 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. that's not something we can work on here at the fed, but that's the top thing. beyond that, i just think it's up to us to continue what we can do to support the economy really with some patience in order to -- so that they'll have time to get across. we've talked about a bridge, most americans will have a bridge. but there's a group that will really struggle. and i think we need to be mindful of them because really they did nothing wrong. this was a natural disaster. as a country we set out to provide support. >> i appreciate that. and our 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 loomis? and if senator loomis is not with us, then, mr. chairman, is senator tillis i'm told maybe joining us soon? senator moran. >> thank you, 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. just 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 for the federal reserve from your perspective? anything or a lot? >> well, our job doesn't change. and at the very beginning of the administration, the personnel don't 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. but, the second thing is it's 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. and ultimately the answer to your question is nothing really changes because of the election other than meeting new people. >> chairman, thank you. and thank you for your answer. during my time in the senate
banking committee, i've been an advocate for an independent fed and want the if ed to make decisions based upon best policy without significant political interference other than perhaps the senate banking committee any time that we can take that opportunity. let me ask a specific question. 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 sharp declines. if the pace of distressed transactions picks up or if 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 this something that needs more attention than we've been able to provide in c.a.r.e.s. or covid relief before?
and what does it mean to cmbs borrowers with this market? >> well, some parts of commercial real estate, office, hotel, and maybe retail to some extent, are under real pressure because of the pandemic. and those changes may be lasting or they may be temporary or somewhere in the middle. this is something we're 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 or
are more people going to work remotely, so will the demand for office space foo el some downward pressure for a while or for the long run? we don't 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. we watch it through the banking system. and to see whether most banks are okay on that. although some of the smaller banks do have a concentration in that. so we watch that very carefully. >> mr. chairman, thank you very much. i yield the balance of my time. >> thank you, senator moran. senator smith? >> thank you, mr. chair. can you all hear me? i know poor senator tillis was having a hard time with his
audio. >> we can hear you. >> great. thank you. chair powell, it's great to see you today. 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. it really cuts across our entire economy. i think in some ways it's 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, i think it was a great idea that the fed join -- the network of central banks and supervisors the financial system. i think that's a step in the right direction. but my question gets to this. a lot of public exposure on climate risks varies a lot from company to company, which makes
it really hard to compare risks or interpret what those disclosures mean. could you talk to us about whether or not you in i that climate risk disclosures should be standardized? or should we allow firms to make their disclosures if they make them at all in whatever form they choose? >> if you permit me, i'd first like to say that of course the overall response of society to climate change, which i agree with you, is very important and has to come from elected officials in congress and also in the executive branch under existing law. so that's really where this comes from. >> i would agree with you. >> we have a specific role on climate change, which only extends together 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's been a lot of work done with the task force on climate-related financial disclosure and other groups are struggling with this question of different kinds of disclosure that varies by jurisdiction and by institution. i do think it's appropriate to allow some of that difference to persist for now. in the long run, clearly we ought to be going to 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, we have to be going in that direction of more standardization. >> so moving towards a more standardized reliable comparable kind of standard of disclosure makes sense to you? >> yes, it does, over time. >> thank you. and i just want to also just loudly agree with you that this
is primarily an opportunity where congress and the executives need to step up and take the steps we need to take from a policy perspective. so i agree with you on that. let me just, there's been a lot of conversation today about the unevenness of the economic recovery and how that is affecting different people differently. and i'd like to hit on one point about this. last week i think it was the minneapolis fed came out with report looking at recovery, people's recovering there, employment. and 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. dramatic difference between women and men, and particularly 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's an economic challenge as well as 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 and how you see that affecting our economic recovery? >> sure. so, we know that with the closure of schools and with homeschooling, you know, parents have had to stay home. that burden has fallen significantly more on women than on men. and so women, in effect, have had to involuntarily withdraw from the workforce. and that will -- hopefully that'll 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's important. and, again, it's 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're right. there have been disproportionate impacts and that's one of them. >> and i know i'm 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 childcare 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 childcare system during the pandemic and something that i hope to be able to work with, continue to work with -- >> i think an answer to chairman brown's question. you said the most important thing we can do is accelerate the vaccine.
now we're on pace for having well over half of the country for people who want to take the vaccine, vaccinated by, let's say june, early july time frame. 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'm not going to ask you questions about the fiscal policy that we're debating and the $1.9 trillion package. but i am curious if at least at a high level, do 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 in money coming from the federal government that ultimately make it's into bank accounts and not back into the economy on a short-term basis? >> i don't want to comment on the particulars of the bill. clearly some kinds of support have higher multiplier effects. people who get the money have different marginal propensities to consume. >> the question 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 the probably coming year? >> we don't have, 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 wouldn't expect that. so i think it would come down to whether you want to direct specific assistance. >> let me get back to one other thing on asset bubbles. i'm sure you're familiar with president bowl yard's comments about his belief that he doesn't see any potential risk of bubbles. do you share that view? >> i wouldn't comment on what one of my colleagues said. i guess what i would say is this. we look at a really broad range of thing. how much leverage is there in the banking system, households, nonfinancial corporates. we look at funding risk and asset prices.
they're only one thing. ultimately what you want is a situation whereaset prices where movements in asset prices do not disrupt the broader system. and i think we have highly capitalized banks and we've done a lot to shore up the parts of the financial system that didn't hold up during the prior crisis. you know, i wouldn't comment on any particular troubles. we're not -- no one could really identify them. you know, for any particular asset even now, you know, people have different perspectives, for example, in the equity market. there are some who say there's a bubble. others say if you look at it this way. we don't -- i don't have an opinion on that for this purpose. >> final question. i can't see the timer so i don't know if i'm out of time. i know i'm close, but i think senator van hollen mentioned the payment system. what's the current status of the implementation relative to the original timelines for
implementation? >> we're right on track and feel like we'll be up and running in 2023. we said it would be 2023 or '24 and now it's '23. that's really good, and i just think it's a project that overall is very much on track. i don't have anything for you on any -- any news on price, but it's on track. >> okay. 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. >> thank you senator. >> thanks to senator van hollen. senator sinema. >> thank you. thank you chairman powell. good to see you and thanks for joining us today. when i hear from arizonans the first question or concern they have for me isn't usually about the federal funds rate. it's not about the 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 school safely so our hope is we'll get critical relief -- [ no audio ] to think about the future. we want a strong economic recovery. on december 16th the federal open market committee stated that it will be, quote, appropriate to maintain the current accommodative target range of the federal funds until labor market conditions have reached levels consistent with maximum employment and inflation has risen to 2% and is on track to moderately exceed 2% 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%.
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% or less? >> yes. it means more than that, too. when we see maximum employment we don't just mean the unemployment rate, we mean the employment rate which is the inverse and we mean it as a percentage of population. employment of the population which also takes on board relatively high levels of participation. we look at wages. we look at many things, a broad range of indicators on maximum employment. >> i see. now the statement lists three conditions for raising rates, full employment, 2% inflation and projections of 2% plus inflation. are all three of these conditions necessary for the fomc to consider raising its target for the federal funds rate? >> yes, they are. >> oh, thank you. that's very helpful, and i appreciate you clarifying that for all of us.
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 economy-wide inflation, so taking overly aggressive action on a short-term limited problem risks cutting off relief governor reaches arizona families and that's 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? >> so we -- as i mentioned earlier, we're very aware of the history of inflation and how it was gotten under control and how it got out from under control and i would just say looking at the current situation we do
expect inflation will move up in part because of what you mentioned which is enthusiastic spending as the economy reopens but we don't expect that the effects on inflation will be particularly large or persistent so particularly from a sort of one-time amount of spending due to the current situation, so we'll be watching that carefully to make sure that that's right but we'll be doing that patiently, and we would expect that -- that, you know, the longer run inflation dynamics that we've seen for more than a quarter century where inflation expectations are grounded and inflation doesn't move up very much, or it doesn't move down in bad times and doesn't move up that much in god times, we think that won't go away overnight, we think they will persist. they may well evolve but, again, we'll expect inflation to perform somewhat in keeping with the history of the last few decades. >> thank you, chairman powell. again, i appreciate you being here today. mr. chairman, let's work together to get the economy back
on track and ensure that everyone benefits from this recovery. thank you and i yield back. >> thank you. >> thank you, senator sinema. the senator from wyoming is next. >> 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 reduces production cannot keep up.
>> the downside for a long time. the situation you described, let's say hypothetically that it does push up energy prices in the near term. that would -- that would move through head lioaning inflation but it would raise prices. it wouldn't necessarily change the rate of underlying inflation. >> would a balanced energy approach, more balanced than we're looking at right now, be appropriate until the supply owe -- the supply/demand curve returns to normal? >> i am -- i don't -- we don't really take positions on energy supplies. those are really issues for our elected representatives, knowsbly including you. i know you're an expert in the energy space. >> well, i'll switch my questions then to innovative payment instrumpts the fed now and other instruments like stable coins and central bank
digital currencies have the potential for much higher monetary velocities, so how will this impact the monetary prints missionary mechanism and collateral availability in the markets? >> well, we don't think that -- we don't think they will have much of an effect on monetary transmission actually. we have had, you know, 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 don't actually think there isn't going to be a tight connection between, you know, the fed now as in the stable coins of the world, and i would agree with you that it's important to have collateral and, you know, what we see in the markets is -- is far from a
shortage of collateral. there seems to be ample collateral if you look at the relatiates are being paid. >> could higher velocities from innovative payment instruments lead to a refocusing of the monetary transmission mechanism away from the securities markets and towards more of a bank-focused transmission mechanism based on demand deposits? >> again, we don't -- we don't see the promises that might be right. we don't actually think though that there's much reason or evidence to expect the showing that -- that these innovations will have much of an effect on velocity or on transmission for that matter so we should talk about this online. it's a very interesting question actually. we don't see the promise, but i would love to hear more. >> i'll look forward to those conversations. one more question.
do we need a central counterparty for the clearing of treasuries? >> interesting question, and that's -- that's a proposal. we're 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 wasn't the capacity to handle that. one way to do that would be to have central clearing t.certainly has benefits and i've been a big fan of central clearing in other parts of the economy. it's something that we're looking at. i don't know that it will wind up being part of the solution but it's certainly worth looking into. again, another very interesting analysis in question. >> 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. >> thank you. senator ossoff from georgia, you're recognized. >> thank you, mr. chairman, and thank you, chairman powell, for joining us this morning and this afternoon and for the discussion we've had several days ago. chairman powell, it may not be widely known that the payment office or rpo is based in atlanta and the rpo is based for more transactions involving most americans' checking accounts, ach transactions and correct debit. this is all vital to the functioning of our concerns. do you have concerns that cyber security 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 cyber security of the atlanta-based rpo and improve it if necessary?
>> i would agree with you that those are very important issues. i do think the atlanta fed is very focused on those issues but would be, of course, delighted to work with your office in that respect. >> 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. >> well, you know, clearly bringing the pandemic to an end in the united states and globally, a real decisive end would -- would take so much risk to the financial system into the economy and to the people that we serve off the table so you really can't overestimate the importance of getting that done quickly, and we can deal -- remember, we haven't done it yet but we can really do it as a country and it has to happen all the way around the world or
we'll keep getting exo of this possibly next winter, but this is where we don't want to be. this is where we get it done and we'll be decisive. beyond, that you know, i think the advances economies have issues around -- around growth, around an aging the population and low interest rates -- low inflation, low growth, low productivity and the united states do a lesser extent than many other drastic 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. >> thank you, chairman powell, i appreciate that, and recognizing that as a matter of policy you're not commenting on the specific fiscal measures that congress is considering. can you please guide us through what you're thinking 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? >> well, we take -- so we take fiscal policy into account. it's completely -- we take it as a given, whatever fiscal policy is. it's one of many, many factors that -- 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's our focus. anything that affects that can affect our -- you know, what we see. we'll looking at the actual data in our forecast. we won't be reacting to specific policies, if that's what you need. again, i would say over -- over the longer term -- >> chairman, you've acknowledged the extreme difficulty of economic individuals for low income and low-income households in this hearing. which provides more direct economic relief to low-income
households who may not own stocks or hold mortgages, direct fiscal relief or monetary expansion whose effects are mediated by money markets and the banking system? >> well, i would just say, again, without commenting on a particular bill, fiscal policy, iffy with ear talking about targeting specific groups within society for support, that is the work of fiscal policy. monetary policy is -- is really not designed to do that. >> that's right, so if trying to release the suffering of people who are in economically precarious situations in their household who, again, don't own stocks, don't own businesses, don't have mortgages, direct fiscal relief will be a more effective means of relieving the suffering than the broader macro economic management of the fed due to economic policy. is that a correct paraphrasing? >> that's real been the story of this recovery.
fiscal policy has stepped up and done that. we've done what we can, too, but fiscal policy -- >> just 20 seconds left, chairman. i want to return to systemic risk. the provision of liquidity into the financial system but not since covid but since the '07-'08 crisis rises the risk of asset bubbles that poses a systemic risk to the banking system. do you believe we have enough surveillance to identify those risks before they threaten financial stability? >> i do. we monitor financial markets very carefully and so do many others. it's not a question of lack of monitoring capacity. >> okay. thank you so much, chairman powell. thank you, mr. chairman. >> thank you, senator ossoff. senator danes from montana is recognized. or perhaps not here.
senator kramer from north dakota has not spoken yet. is he here? senator warnock from georgia is recognized. i understand people are voting. yeah. let moo ask one question. i wanted to ask -- hang on a second, i apologize. i want to ask the chairman a question about climate and we had -- i mentioned i will do this question in writing. i would rather obviously do it now while we're waiting and i won't keep you long if the other members don't show up? 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 whether a disaster is way out of proportion to numbers. when hurricanes hit and when
wildfires ravage entire regions. what policy changes, mr. chair, will the federalisment to promote consumer protection and 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? >> yes, so that's 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 supervised to be in a position to perform really critical functions in the aftermath of this. 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 affect areas, and it's something they do very well. we need to be resilient and available to do that and able to do that, rather, and then they 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. >> senator danes from montana is recognized for five minutes. >> all right. thanks, mr. chairman. chairman powell, it's good to have you here. i just was look at the t-bill chart and noticing since the first of february the one-month rates that have dropped in half from .06 to today .03, two months from .07 to .02. we're starting to get around here and negative rates which we saw, of course, briefly a year ago march.
just want to get your thoughts on that. is there any issues here of shortage of collateral? what's driving this as you're watching some of these short-term rates approaching zero. >> so with t-bills in particular this would real be a treasury issue, but i would say, you know, it's a lot of demand for short-term -- there's a lot of liquidity and people want to store it to extent and there's demand and, therefore, that drives down the rates that people are -- are being paid or receiving for buying those assets, you know. the from our standpoint we control our policy rate is the federal funds rate, and to the extent there needs to be downward pressure on that because of, for example, the treasury general account shrinking in size, then we have tools in which -- tools that we can use to, you know, to keep that rate in the policy in our intended policy range and we will do that, and that should --
that should also, you know, lime the extent to which other money market instruments like t-bills would -- would go even lower or perhaps negative. >> so do you have a concern -- many of us were surprised that we saw negative rates here a year ago. is it -- rates are getting awfully low and the short term and is that a concern of yourself or not? >> again, our principle concern is that the federal fund rates be within the intend range. >> yeah. >> we also -- you know, we do see that there's the possibility that -- that other money market rates could move down and i think to the extent that we're able to keep the federal funds rate in its range that should ameliorate some of the downward pressure. >> kind of following from that same point, mr. chairman. the last couple of weeks we have seen a lot of volatility in the
texas gas markets that have to a degree spread out to several other markets. if there were special circumstances all happening at the same time, might this lead to a shortage the collateral from the t-bills as seem to be the case that we saw here last march? >> it's possible. i don't really see that happening, but it's true there's tremendous demand and, again, the issue of supplying the demand across the curve is real one for the issuer which is treasury. >> is there any merit or might it be a good idea to wave the supplementary leverage ratio for say a year until some of these special circumstances that we're seeing regarding the recan discovery from the pandemic in the past and when perhaps we'll have less possible need for some of the dealer intermediation in the repo market and some of the other short-term markets?
>> as i'm sure you know, the temporary relief that we'll be granting the slr will be at the end of march and we're right in the middle of thinking about what to do about that. i haven't gotten any news for you on that day. we do expect to make a decision on what to do about that exemption, that change that we made to the slr back last year. >> we'll shift gears in looking at some of the prospects in the asset bubbles. you will see signs of speculation across various portions of the economy. stocks, of course, trading at very high prices to earnings ratios. ag commodities moving up. economically sensitive materials such as copper, nickel. soaring. bitcoin is up 80% this year alone. mr. chairman, how do you know when i guess to quote -- i think it was mr. greenspan who talked about irrational exuberance has unduly escalated asset values which then might become subject
to unexpected and perhaps prolonged contractions. >> yeah, so, as we look at those -- 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's the metals. it's not so much bitcoin but it's 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 and an expectation that the recovery is going to be stronger sooner and more complete, and so that's okay. you know, we saw, you know, commodity prize moved up a lot in 2008 and '09, and people were worried about inflation. the inflation never came, so it's a healthy sign i think there. you know, we're focused -- honestly, we're focused on making sure that we're providing the support that the economy
needs to get back to maximum employment and stable prices. we've still got so million people, fewer working now according to the payroll statistics, and it's much worse than that in among the workers, and that's really our focus. our focus in the financial stability generally has been to have, you know, a banking system and financial sector that is highly resilient to shocks and -- >> i'm going to change the order of this. all right. mr. chairman, i'm over my time at the moment, so thank you. i yield back. >> thank you, senator danes. senator warnock from georgia is recognized for five minutes. >> 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'm grateful to chairman powell. thank you so much for taking the time to talk with me two weeks ago.
i look forward to working with you as we work on a recovery for that -- that embraces our whole country, and i especially look forward to working with you and the atlanta fed president raphael bostic to help georgians over the next two years. some have suggested that our covid-19 chat earnings with unemployment, with homelessness and poverty will be solved if we simply lift up -- lift all local restrictions and open up the economy, but since the beginning of this crisis i've heard you stress time and time again and 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 don't feel safe and comfortable that the requires is contained. >> i would answer your question in the negative. it would not. you know, actually at the beginning of the pandemic you look at the plummet etting level of travel and going to restaurants and open table and all that data, it shows that people stopped doing those things because of the coronavirus because 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's also, you know, the restrictions that are in place in some cases on the part of governments. we don't -- it's not a role for
us to express views on whether they should be lifted or not. that's really for something for state and local governments, but, you know, clearly if you look at the so 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 that they gather closely and where people are still -- not every person, but many people are still reluctant to go to indoors restaurants, for example, and you see sporting events. they are not having crowds. so it's -- those are -- the people who worked in those areas, those are the ones who are affected and -- and it's going to be hard for them to go back to work until people are confident, as you say. >> so we -- we want the economy to fully recover, but we've got to get the virus under control and those things work together which is why i'm glad to see $20 billion in the vaccine rollout funds and the covid-19 stimulus
package and i'm going to do everything i can to make sure we get those funds approved and out of door so that we can reopen and do so safely and permanently. you're also tasked -- well, you're tasked primarily with looking at the whole economy, and with the big picture of 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 the fed board have to ask, well, what risks are systemic, and in that regard i'm curious how broad is your definition of systemic risk? my definition of systemic risks 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 had 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? it is. >> so you've heard us increasingly in recent years talking about these longer run disparities and, you know, why do we feel that we can do that? it's because they weigh on the economy in the sense that if not everyone has the -- the ability -- the opportunity to participate in the economy and contribute as much has that person can contribute given his or her talents and ability and willingness to work and all of those different things, then economies are going to be less
than it can be, and in our country, of course, in every country faces challenges, you know, we're not alone in this, but we do face persistent, very persistent differentials that are hard to account for and that weigh on the economy. those are along racial lines and gender lines and in other lines and i -- i just think it's it's widely understood now that we need to do everything that we can to bring people into the economy and -- and let them contribute and -- and let them share in the broader prosperity. >> thank you, chairman powell. it's -- it's clear that the bottom line is that poverty, systemic inequality and wealth inequality are risks to the entire economy hand have implications for all of us, that these issues cannot be siloed which is why we'll take this
into consideration as we push forward covid relief and pivot to address long-standing issues of wealth inequality to our country. thank you so very much. >> thank you, senator warnock. for senators who wish to submit questions for the record, these questions are due one week from today, tuesday march 2nd. chair powell based on a change we made to our committee rules bipartisanly you have 45 days to respond to any questions. i appreciated the doze of reality that we heard from chair powell today. 10 million fewer jobs. we're only creating 29,000 new jobs a month. that's 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 a mayor, talk to people who own barber shops and diners and dry cleaners, 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 families are living in. it's 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 americans are doing fine, just like they were before the pandemic, but our job isn't to work for them but it's to work for everything as you and i have discussed, chair powell. the fed has multiple tools to fight wealth inequality and create an economy that senator warnock sboek that works for the vast majority of people who get their income from a paycheck, not an investment portfolio. you have all the ability to use all the tools and i look forward to working with you to do that and with that the hearing is ajune. >> thank you. today at 2:30 p.m. eastern, we'll hear from technology companies, including solar, winds and microsoft as they testify on foreign hacking and cyber attacks during a senate intelligence committee hearing.
live coverage right here on c-span 3 again starting at 2 pock eastern today. cia director nominee william burns testifies wednesday morning at a confirmation hearing before the senate select intelligence committee. watch live beginning at sock eastern on c-span 3, an line at c-span.org or listen on the free c-span radio app. >> joining us this morning is the mayor of dayton, ohio, mayor nan whealy, and she's also the vice president of the u.s. conference mayors here to talk about covid-19 pandemic and the impact it's having on city budgets. mayor whealy, the congress is debating over on the house side $1.9 trillion in economic relief around at the same time yesterday, we reached the milestone of 500,000 deaths in this country. what has been the economic -- the human and economic toll on