tv Treasury Secretary Yellen Federal Reserve Chair Powell Testify on the... CSPAN March 24, 2021 10:05am-12:10pm EDT
talking with our viewers and listeners on washington journal. that will do it for this morning's program. we are back tomorrow at 7:00 a.m. eastern and we hope that you are too. next up we will take you lower life to a hearing getting underway with the senate. they are hearing from treasury secretary janet yellen and jerome powell. that is live next on c-span. [captions copyright national cable satellite corp. 2021] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] >> you cannot afford it and on your own. the american rescue plan will deliver on the hope that americans voted for, and put shots in people's arms and money in pockets and kids back at school. it is the investment we need to rescue the economy and begin the work of building a better system for the future. our witnesses, treasury secretary ellen and treasury -- and treasury chair powell have
played a key role. this is secretary yellen's first committee, making the first time a woman has come before this committee as the head of our nation's economic policy. it is about time and welcome. you and your colleagues will have a huge role in making the american rescue plan a success and making sure that renters and homeowners can stay in their homes getting funding to make sure that they can keep small business stores open. i spoke to a republican mayor in western ohio who said that she is going to use a big part of the dollars that we have sent her to work with local businesses so that they can continue to exist, and grow. you were all charged with expanding the economic tax credit to put money in the pockets of workers to help millions of working class and middle class parents keep up with the cost of raising a family and a responsible for getting stimulus checks to the vast majority of americans, more
than 100 million people already have the checks and a little more economic security and peace of mind. the fed can make sure that it uses all of its tools to support a strong economic recovery that reaches all workers and all communities, not just wall street. it means that we cannot go back to the way things were before the pandemic. for too many americans the economy did not work for them and had not worked for a long time. the gap between wages and profits has soared over the past few decades. black and brown workers and women in so many cases have never had their hard work pay off like it should, and the government is set to sentiment -- to benefit the rich as corporations and instead get growing inequality and wealth at the very top and a shrinking middle class that we are too familiar with. the past year in the past third of a century makes it obvious. when we funnel money till wall street and the corporations and the richest people get -- it
never trickles down to the rest of us. we have tried that approach repeatedly and it has failed. the rescue plan is the beginning a new -- the beginning of a new era which means growing an economy where one job is enough to build a class life and seizing every opportunity to lead the world and clean energy manufacturing and clean infrastructure and giving people power over their own money, and the financial security to weather emergency. it means building an economy where hard work pays off from everyone. i look -- forward to hearing from you to see how we will do that together. ranking member to me. sen. toomey: thank you. a year ago our economy was foiled by covid-19. we saw extraordinary turmoil, and that threaten the ability of
households and businesses, states and municipalities to obtain the credit that they needed. that presented the real threat of a depression that could have taken years to recover from. in response congress passed the cares act to provide temporary relief to help the country whether a temporary storm. it was an extraordinary response to an extraordinary situation. thankfully, it proved effective and we are now well on our way to a very strong recovery. the vaccine is being administered at a rate of 2 million doses a day, states are reopening, and gdp is set to reach pre-pandemic levels as soon as this month, far earlier than the cbo or the fed projected. the economy has been in strong recovery modes since last summer when we saw 38% gdp growth and well before our democratic colleagues enacted a $2 trillion spending blowout that has little to do with covid.
congress must not use this pandemic as an excuse to increase the size and role of the federal government. congress made this clear for the cares act emergency lending facilities. they were established to stabilize turbulent credit market so that household businesses and municipalities could access credit. the intent was clear that the facilities were to be temporary to provide liquidity and to cease operations no later by the end of 2020. they were extremely successful in achieving their intended purposes of restoring liquidity in the private capital markets. in the december relief bill, congress ensured that these facilities would be wound down by the year end as congress had intended in the law required. they cannot be replicated in the future without congressional approval. in addition to the swift response, the fed's response was massive and played a crucial role in the ongoing recovery. as is the case with congress,
the fed must fight the urge to continue the response beyond its original purpose. last march the fed lowered interest rates to nearly zero and initiated a record expansion of its balance sheet. this accommodation has remained, and by both official forecasts and market expectations it will continue beyond the point of full recovery which raises at least two concerns. the first concern is that the increase footprint is almost a for -- permanent feature. if this is the case and there is no reduction in the size of the portfolio than the quantitative easing to date would amount to government that and i hope that that is not the case. the second concern is that such an accommodative stance leaves our economy vulnerable to inflation. the fed has signaled that its monetary policy is here for a long time. it summary of market rejections does not see rate hikes until
2024 and the fed has no plans in place to reduce monthly securities purchases. during -- dealing with the increases in commodity prices and fed communications, i worry that the fed might be behind the curve when inflation inevitably picks up. final point any warning. very little of the $2 trillion american rescue plan had anything to do with covid. it seemed more like a dash to reclaim -- to claim a recovery and try to get as much money as possible to try to make the state as center of life. it was a partisan bloated spending bill that had stimulus checks for people with six-figure salaries with no loss of income. extended welfare benefits that minimize personal responsibility. there were reparations as the chairwoman of the agricultural
community said. there were bailouts for mismanaged states and cities despite their having record revenue in 2020 and half $1 trillion in addition that had already been provided by federal-aid. and there was a federal pickup of unemployment insurance that will pay half of unemployed people more money not to work than they make working. in the long run those kinds of policies will reduce productivity, manage economic growth and that means a lower standard of living for all americans. and it will exacerbate societal fractures. fewer people will pay taxes to support an ever-growing government and those who do work will increasingly resent those who choose not to and enjoy the same or higher standard of living. that is unhealthy for the body politic, our economy and society at large. i look forward to the testimony and the question period later. thank you mr. chairman.
>> mr. chairman, if you have a technical problem, would you like to me to kick this over to our witnesses and then get back to you? give me a thumbs up. ok. in that case, until we can resolve this technical difficulty, i will recognize our witnesses. i do not have a proper introduction prepared, but there -- if there were ever two witnesses that do not need a introduction, it is those two folks here, and i think we are leading off with secretary yellen, so if you could begin. sec. yellen: thank you. chairman brown, ranking member to me -- toomey, thank you for inviting me. we are meeting at a hopeful moment for the economy but a
daunting one. while we are seeing signs of recovery, we should be clear eyed about what we are thinking out of. the country is still down nearly 10 million jobs from its pre-pandemic peak. when congress passed cares and consolidated appropriation acts last year, it gave the federal government some elegant tools to address the crisis. but upon taking office i worried that they were not powerful enough. after all, there were and still are very deep pockets of pain the data. one in 10 homeowners with a mortgage are behind on their payments, and almost one in five renters are behind on their rent. there are 22 million people who say that they do not have enough food to eat. one in 10 adults are hungry in america. i look at data like this and i worried that the economy was
going to keep hurting millions of people now and haunt them long after the health emergency was over. we know that when the foundations of someone's life all apart, the roof over their head, or the ability to eat dinner every night, the pain can weigh on them for years. their earnings potential is permanently lowered and i worried about this happening on a mass scale, and that is why i advocated hard for the american rescue plan, and it is why my first and most enthusiastic message today is thank you. with the passage of the rescue plan i am confident that people will reach the other side of this pandemic with the foundations of their lives intact, and i believe that they will be met there by growing economy, and in fact i think we may see a return to full employment makes dear.
of course, the speed and strength of our recovery depends in part of how we implement the legislation. the treasury is tasked with much of that work and there is nothing that i your my team take more seriously -- i or my team take more seriously. i want to briefly tell you about how we have been working. since taking office two months ago we have been expediting relief to areas of greatest need. for example, small businesses and especially the smallest small businesses which are disproportionately owned by women and people of color. the pandemic has hits these businesses hard. the paycheck protection program was an early lifeline, but because of issues with its design the first grant did not reach the smallest sole proprietorship's and we are addressing that now. we worked with the sba to tweak
the program as implemented which is allowing the ppp to reach million more micro business as an entrepreneurs, especially in rural and low income areas. we are building capacity to support these communities over the longer term. because of the december legislation, the treasury has 12 alien dollars to inject into -- $12 billion to communicate -- to inject into community institutions. in turn, the cdf i and mdi can land that i out, helping -- land that capital out helping people start is this is in places that the financial services sector has not served well. then there are the families, the ones struggling to keep a roof over their head, and food on the table. the american rescue plan provides $30 billion to help renters and homeowners at risk
of losing their homes, and we are making sure that that assistant flows -- assistance flows as smoothly as possible. the previous administration had rules to provide tenants and landlords with a lot of documentation including documents about their income. some people do not have access to those documents. we are cutting through the red tape wall preventing fraud and abuse. we are sending direct payments to a lot of americans. as of last week we issued over 90 million payments. all of this is just a fraction of the treasury's work. there are so many more relief programs including one that will provide $350 billion in aid to state and local governments, implementing all of this is more
complicated than it sounds and we are working closely with stakeholders to make sure that the programs are both efficient and effective. behind these minis -- many of release programs -- relief programs is a staff of tire treasury and irs employees and my final word is to them. thank you, you are putting on a master class of how government should work in the furnace of a crisis. i am grateful to be your colleague. with that i am happy to answer any questions that you have. sen. brown:, thank you. chairman powell, you are recognized. chair powell: chairman powell, ranking member toomey, thank you for the opportunity to discuss the measures we have taken to address the pandemic. i would like to start by noting the one-year anniversary of the cares act. with unanimous approval congress
provided the fastest and largest response to any postwar economic downturn, offering support for households, businesses, health care providers and state and local governments. this legislation provided critical support in our nation's hour of need. as a virus arrived in force, our immediate challenge was to limit the severity and duration of the fallout to avoid longer run damage. we also acted with unprecedented speed and force using the full range of the policy tools at our disposal. today the situation is much improved. while the economic fallout has been real and widespread the worst was avoided by swift and vigorous action from congress and the federal reserve from across governments and cities and towns and from individuals, communities in the private sector. more people held onto their jobs and more businesses kept their jobs open and more incomes were saved. the recovery is far from complete, so at the fed, we will
provide the economy the supported needs for as long as it takes. as we have emphasized, the path of the economy depends on ache -- depends on the course of the virus. since january the number of new cases and deaths have fallen and ongoing vaccinations offer hope for a return to more normal conditions later this year. in the meantime, continued social distancing and mask wearing will help us reach that goal. indicators of economic activity and employment have turned up, household spending has risen notably so far this year, although spending on services remains low in sectors that typically require in person gatherings. the housing sector has more than fully recovered while business investment and manufacturing production have picked up. as with overall economic activity, conditions and the labor market have improved and employment rose by 379,000 in
february as the leisure and hospitality sector recouped half of its jobs that it lost. the recovery has progressed quickly then generally expected and looks to be strengthening. this is due to the unprecedented fiscal and monetary policy actions that i mentioned to provide essential support to households and communities. however, the sectors most adversely affected by resurgence of the vibe -- of the virus remain weak. the unemployment rate still elevated underestimates the shortfall as labor force participation remains notably below pre-pandemic levels. we welcome this progress that we will not lose sites of -- site of millions of americans who are still hurting including the wage sector and african-americans and other minorities that have been hit. we are guided by our mandate to provide price stability along
with our mandate to provide stability to the financial system. when financial markets came under intense pressure we took broad and forceful action deploying our conventional and emergency lending tools to more directly support the flow of credit. our actions helped unlock $2 trillion in funding to help support businesses large and small, nonprofits, and state and local governments. this has helped organizations from shuttering and put employers in a better position to keep workers on and hire them back. programs served as a backstop to keep credit markets and help restore the flow of credit from private lenders through normal channels. we deployed them to annex -- to an unprecedented extent last year. they require the approval of the treasury and available in only unusual circumstances. many of these programs were supported by funding from the cares act. those facilities provided
essential wrote -- support through a difficult year. they are closed and the fed has returned the large number of equity acquired -- as required by law. our other emergency lending facilities are closing imminently although we continued the paycheck protection lending facilities. everything the fed does is in service of our public commission. we are committed to supporting the economy and making sure that the recovery will be as robust as possible on behalf of communities, families, and businesses. thank you and i look forward to your questions. sen. brown: thank you chair powell and secretary. chair powell, do you think all of this support will help us get to full employment and improve our economic growth? chair powell: i think the fiscal support that congress has the -- has provided since the beginning
has been at the heart of the recovery and deserves much of the credit over the course of the last year. i am loath to comment on particular fiscal bills, as you know, but i would say, generally this situation really called for a strong fiscal response and we had that. sen. brown: how does the american rescue plan help women and people of color, and the workers who have been left behind in our economy? sec. yellen: the rescue plan is very much focused on getting aid in a whole variety of ways to those groups starting with unemployment insurance, rental assistance for people who are in danger of losing their homes, food assistance, assistance to small businesses, especially in low income minority communities.
just into state and local governments -- aid to state and local governments, much of which can be directed towards those groups who have been the most adversely affected by the pandemic. so, there is also child support, an increase in the child tax credit to help families with burdens, household burdens, there is an expansion of the child dependent care credit that will help women who are at home with family responsibilities get back to work, so a broad range of features that are directed at those groups. sen. brown: i'm noticed one of the first things that you mentioned, the work that a number of my colleagues did to help renters keep their bills and -- pay their bills and keep
roofs over their heads and i hope that we will continue working to help get this help out to renters quickly. secretary yellen, do you think getting people vaccinated as fast as possible has -- as the biting administration and american rescue plan is doing, does that help the economic recovery? sec. yellen: absolutely, as chair powell indicated, ultimately the economic recovery depends on success in getting the pandemic under control, and vaccinations are critical to accomplish that. sen. brown: obviously, you agree with secretary yellen on that, but chair powell do you think direct payments to families healthy economic recovery? chair powell: again, i am reluctant -- these matters are for congress, not for elected
representatives. nobody elected us to make those decisions, i would rather stay at a high level i think the fiscal policy has provided a lot of support and it is appropriate. sen. brown:, do you want to expand on that question, direct payments helping economic recovery? sec. yellen: i think direct payments are providing support to families for a wide range of burdens that many have suffered over the last years. there is other supports that is targeted, that i think this is helpful in the spending that will -- that it will produce will speed the recovery. sen. brown:, one last question. do you think banks buying back their stock will help the recovery? sec. yellen: i have been opposed earlier when we were very concerned about the situation
that thanks would face about stock buybacks, but the financial institutions look healthier now, and i believe that they should have some ability to -- abiding by the rules -- to make returns to shareholders. sen. brown:, my last joint question, what is the lessons learned from the impact on the economy that we should use to make the economy and financial system more resilient to the impacts of climate change? do you want to start chairman powell on that? chair powell: on climate change i will quickly say that we have a mandate to supervise financial institutions and look after financial stability, so we do not have a mandate to do an anything in particular regarding climate change we look at it in
an extent to those particular existing mandates, and as you know, we are in the early stages of trying to understand what the implications are for financial stability and on a basis for individual financial institutions, how should they think about the risks and manage them over a longer period of time. sec. yellen: i agree with that. i think it is very important to make sure that financial institutions are resilient to the risks from climate change as well as the risks. i think it is important for regulators to assess those risks both to understand them and to help the institutions themselves understand and manage their risks. sen. brown:, thank you. ranking member toomey is recognize. sec. toomey: if you pick up any
newspaper, a prominent story has been occurring across the state, and that is the story of mayors and township commissioners and county commissioners meeting to try and figure out what in the world they are going to do with this mountain of cash that got dropped on them after having collected all the revenue they expected last year, and in some cases it is 50% of their budget. my question, i will start with chairman powell, and what i would like to do is follow up on a conversation that we had last week. i want to understand how the recent fed projections fit together because in some ways there are some apparent outliers or it appears that way to me. what i am referring to is the recent revision, the economic forecast revision has a very significant upward revision in gdp growth, 6.5% is the real gdp
number for this year, not inconsistent where a lot of private economists are, but that is a 2.3% increase. the unemployment rate that you project is only a decline of .5%, and the inflation rates over the course of the full year, you guys are projecting that it will come in lower than it has been for the last three months. so, on average for the remainder of the year you are projecting inflation to decline. so, i think most economic models that would have that big of an upward revision in growth what have a stronger reduction in unemployment, and a higher likelihood of inflation. i concern is that your model systemically were to understate the progress we are likely to make on employment and risk of inflation and it could lead to policy that goes too far for too long. can you walk us through why you have a relatively small
improvement in the unemployment rate and a declining inflation despite gdp growth? chair powell: let me start by saying that what we published in the economic projections are individual projections that are totaled up and tabulated, it is not something that we vote on. i will address the medians, which is what we published. the reason that unemployment does not go down further given the level of growth is really just that we see participation expanding on -- it is a different margin as people come back into the labor market and that pulls the unemployment rate up even if it is a highly desirable outcome. this was the biggest drop in participation since world war ii and there are a bunch of other things that go into it and a good amount of uncertainty around that. sen. toomey: my concern is that because private sector economists are aware of the decline in the workforce
anticipation and seemed to come to different conclusions, but i understand this is an art, not a science. i'm going to run out of time and i will direct my next question to secretary yellen. on the topic of imf sdr's, i want to thank secretary kennedy for his leadership on this issue. i am concerned about the issuance of a 500 or $600 billion of sdr's in the name of helping poor countries sponsor covid. sdr allocations are not meant to be a source of foreign aid, that is the realm of congress to decide whether or not to extend foreign aid, and as you yourself as pointed out, this is an efficient way to deliver the aid since the money goes to g20 quant -- countries that have no need for this. i am wondering why it is that you seem to have changed your position on the desirability of using sdr's for this purpose,
and is this a final decision that has already been made, or is it influx? sec. yellen: well, before committing to it, we were certainly -- we will certainly consult with cross -- with congress. the crisis has increased the need for global reserves and that is the imf's assessment. the global economy suffered a very severe collapse in 2020. it in contracted -- it contracted by 3.5%. the emerging-market faced considerable external financing needs, and then this allocation will help countries meet the need for reserves without forcing them to tighten fiscal policy, which could lead to further global divergence. now, this is a joint effort of
the global community, and there is a -- there is broad support for an sdr allocation. it is true that rich countries will get sdr, that is how it works, it is tied to the country's quota in the imf, but many countries have indicated a willingness and desire to recycle the sdr's they receive in the form of a low income grant to low income countries. and that will magnify the impact of the sdr allocation in terms of providing resources to low income countries. sen. toomey: i see i am out of time, thanks you mr. chairman. sen. reed: it thank you very much. welcome madam secretary, good to
see you. we are all interested in getting everyone back to work, but you have indicated recently that it could be a full year before we reach full employment. in that interim, would you support and hands unemployment benefits? i think the american rescue plan has done a great deal to help the unemployed, but that effort i think should continue. your views please? sec. yellen: i think while unemployment remains high, and it is important to provide a supplementary relief in the arp. and, that begins to expire i believe in the fall, when i believe the economy will be getting back on its feet. people who have raised concerns about whether or not this additional aid will the terror -- deter people from going back to work, that is not an issue
when unemployment is as high as it is now, and studies that have been done suggest that people receiving this have been accepting jobs, and it has not deterred work. i think it is appropriate as the economy recovers, and i hope it will by the fall that that should be phased out. sen. reed: i have noticed coming from rhode island, and past recoveries, some areas come back faster for many different reasons, and some are slower. in the last major recession or the -- rhode island and nevada lag behind. it would -- would it be appropriate for states to qualify for extended benefits if they are over a certain level of unemployment even at the other states have broken through? sec. yellen: i think the experience that we have had suggests that the time may have come to modernize our
unemployment system, and to look for ways to tie the generosity of unemployment benefits to local conditions or to put in place automatic stabilizers that tie local conditions into national unemployment rates, so that is an adjustment that we -- that would seem sensible to me. sen. reed: you responded to a letter that senator collins and i sent you with regards to the coronavirus economic relief for transportation services. it actually helps with the motor coach, schoolbus, and passenger vessel companies around the country. and, could you give us an idea of when you will be issuing the guidance for the distribution of these resources?
these companies are really hurting. sec. yellen: i know they are hurting, they are mainly small businesses. it is a highly complex grant program and, unfortunately our need to get -- to better understand eligibility, and how to get money out to, and then form those who are eligible for it. we have been working very hard on this and we have done a lot over the last couple of months, but, we are working very hard to build an online application portal, and to write up the standard agreement, so i hope that soon we will be able to get it out. it turns out that there are a large number of companies that are eligible. the expected demand to be very large relative to the $2 billion
in funding just available. we will have to short -- sort through how to allocate it. sen. reed: chairman powell i have a few seconds left, but i spoke about this previously, bottlenecks in the world economy and today we have a classic example, the suez canal is tied up. how are you reflecting those bottlenecks in your outcome if at all or your projections? chair powell: we have a little pot -- literal bottleneck in the suez canal today. we are monitoring all of that and our staff is trying to model that as well. we have some slowdown in production. what has happened is covid changed demand in -- and supply in some cases we are seeing with chips that go into cars now, and we are seeing it in various places in the economy. the sense of it is that there
will be slower growth and some modest upward pressure on prices in those goods, but that should be something that is temporary. sen. reed: thank you mr. chairman. sen. brown: senator shelby from alabama is recognize. sen. shelby: secretary yellen in 2017, when you were chair of the federal reserve, you noted that it was concerning to you that the u.s. debt to gdp ratio was about 70 pot -- 75% of the time. today the congressional budget office projects debt to reach 102% of gdp at the end of 2021. is the nation's growing debt something to be concerned about, and if not, why not? it seems like we are layering more and more debt because of
the crisis and so forth. sec. yellen: of course, our finances need to be on a sustainable -- need to be sustainable and long-running. that is a very critical responsibility. my views on the amount of fiscal stakes that the united states has, i will stay -- say have changed somewhat since 2017 when i said that. and, it is partly because the interest rate environment has been so very low. and, most economists and observers believe that interest rates have been trending down in developed countries now for several decades. and that the trend predates the financial crisis and is likely to continue and what it means is that whereas in 2007 one we had
a 35% debt to gdp ratio, now it is close to close -- closer to 100%. in fact, interest payments on that debt relative to gdp have not gone up at all. and so, i think that is a more meaningful metric of the burden of the debt on society and on the federal finances, and so i do believe that we have more fiscal space. it certainly does not mean that anything goes. i believe in responding to a crisis with a needed surge of spending that is temporary that was fully appropriate not to pay forward under the circumstances, but the longer run, we do have two raise revenue to support permanent spending that we wants to do.
sen. shelby: what long-term issues could, honest dealing with substantial long-term debt to the economy? in other words, it cannot be a benefit to the economy except temporarily. what are some of the systemic things that could happen because of too much debt? sec. yellen: if a country has too much debt it might drive up interest rates, and in the process of doing that, it can crowd out other forms of productive investment in the economy capital investment housing, or other interest sensitive sectors. and that may be a good thing or bad thing, it depends on what the expenditure is for. if it were say for infrastructure spending, or for investments in people that had a very high payoff, we might
decide that that was worthwhile. but it does have the potential to crowd out private spending. sen. shelby: chairman powell i have a question for you if i could, the 10-year treasury yield jumped above 1.7% last week, which was its highest level in more than a year. i think it has dropped a little since then, but the yield curve between the two year and 10 year notes were 160 basis points, the steepest since 2015. what do you attribute to this uptick in recent weeks and what about the yield curve. can you get into that with just a minute? chair powell: it seems that rates have responded to news
about vaccination and growth. higher growth is higher inflation and lower cases of covid and there has been underlying sense of improved economic outlook that has to be a part of why rates would move back up from the extraordinary low levels they were at. back up towards measures, and that would be an orderly process, i would be concerned if it were not. where conditions were to the point where they threaten our economy. sen. shelby: we are all concerned about stability and inflation. if inflation does arise precipitously and becomes an issue, we hope not, but it could. what tools could the federal reserve utilize or have left to maintain a more stable price.
chair powell: the most fundamental and well understood tools are for the purpose of guiding inflation, and that is our tools that create accommodative or less accommodative monetary policy, so that his interest rates and asset purchases. let me just say that we do not expect the kind of inflation that you talked about, but we have those tools and if we were to face inflation that threatened to deanchor inflation above 2% then we would have the tools and we would guide inflation back to 2%. sen. brown: wrap it up if you can. sen. shelby: last question, what do you think the growth rate will be in the next nine months? chair powell: i do not have a personal forecast that i would disclose, but i would point to the media and -- the median of participants for this year was
6.5%, and that is very much as senator toomey mentioned as being in line. it will be a strong year in the most likely case. there are risks to the upside and downside, but it should be a very strong year. sen. brown: senator tester is recognized for five minutes. sen. tester: i would like to thank secretary yellen and chairman powell. thank you for your continued service and secretary yellen, it is good to see you back in the game. i am going to start with chairman powell. following the passage of the american rescue plan, the federal reserve upgraded the -- the projections. they said that last week gdp will rebound and unemployment rates will decrease more quickly. but as you highlighted already, we still have a ways to go. but the past year i have shared your concerns of under shooting
the economic recovery, and there are many small businesses and families in montana and across the country that are struggling because of the pandemic and economic crisis. how concerned are you about inflation once the economy gets on the plus side? chair powell: we take the 2% inflation target very seriously. it is half of our mandate. we are strongly committed to inflation at 2% over time meaning that inflation expectations need to be anchored at 2% and inflation has to average 2% so it is absolutely fundamental that we achieve that. in the near term we expect as many forecasters do that there will be upward pressure on prices and there will be a technical and base effect with low readings from april and march last year dropping out of a 12 year comp -- calculation. do not expect that that pressure will produce substantially higher prices or the effects will be persistent.
we expect them to be temporary. if it turns out that we see substantially higher inflation that would risk persistent inflation, materially above our goal, then we would use our tools to bring inflation back down to 2%. sen. tester: you anticipate that there could be some upward pressure, but long-term you do not see it as being an issue? chair powell: long-term, we think that the dynamics that we have seen for around the world for a quarter of essentially -- century are essentially intact, and we have a world with very low inflation. the u.s. has had low inflation for some time and we know that those dynamics have not gone away overnight and will not. sen. tester: secretary yellen icu are working from home. there are a bunch of decisions that you have to make about how this money is going to go out and what it can be used for and that kind of flexibility that
you can -- flexibility that it could be used for. different localities face different challenges, but the fact is that there is a concerted effort to make sure that we get some money to municipalities without the states giving out any money, and not only municipalities that are large, but of all sizes. the question is, are you permitted -- committed to making sure that the funds get to the smallest of towns who have not received assistance without the states giving out any money off of the top, or adding additional restrictions that were not included in the legislation or treasury statements? sec. yellen: we are committed to following the instructions that congress gave us, and i would agree that that was congress's intention where we have about 60 days to write the guidance on
the use of those state and local funds. we are consulting broadly. congress intended for there to be a lot of flexibility in how states and localities can use the funds, and we will certainly try to make sure that they are distributed as congress intended, and with the flip -- and that the flexibility is there, and we also want to make sure that we have requirements to make sure that the money is used responsibly and in accordance with congress's direction. sen. tester: i appreciate that. you said 60 days, can you give me a ballpark pig -- figure, will it take full sake -- the full 60 days or you intend to get it out sooner? sec. yellen: we are working as hard as we possibly can. there are a host of issues about how to interpret the
requirements of the statute. i do not want to premise -- promise that it will take less than 60 days but we will try and get this done as soon as we possibly can. sen. tester: i appreciate that and your hard work. i get questions all the time about the flexibility in how the money can be used. by the way, the municipalities are very thankful for these dollars. they have been running on shoestring budgets forever and this is the first time they will be able to make real improvements in their counties. plus, being able to pay for police officers and fire departments and make sure that the garbage gets picked up. thank you and i appreciate both of you and we look forward to visiting down the line. thank you. sen. brown: senator crapo from iowa -- idaho is recognized. sen. crapo: thank you, secretary yellen i want to talk to you about a guidance issue that we need to focus on in the american recovery act.
there is a restriction on the use of funds under the state fiscal recovery fund that was included that would prohibit states from using funds to " either directly or indirectly offset a reduction in the next -- the net tax revenue in such state or territory resulting in a change of law, regulation or administrative interpretation during a recovery. that reduces any tax that provides a reduction in a rate, credit, or otherwise or delays the imposition of any tax or tax increase." as you know, this has raised many questions and concerns. 11 of my republican colleagues and i introduced the state flicks -- flexible act to remove this troubling restriction from the law. 21 state attorneys general asked for a clarification on this issue in a lawsuit was filed by the ohio attorney general. this is an issue that needs immediate clarity and i am aware
that you responded to the attorneys general, saying that you will provide guidance before the states muscle a certification under 602 d1, but that does not tell us how soon this guidance is coming out. it seems like the states are hamstrung and cannot do anything until you give them the guidance. can you give us clarity for how soon this will come out? sec. yellen: well, we have a 60 day period to complete the work to get money to distribute to the state and local governments, and there are a host of cliffs that we have to work through to connect with the issues that you just mentioned, and we simply are going to have to try to craft guidance in that period of time. we are working on it 24/7 to get it out as rapidly as we possibly
can. sen. crapo: we appreciate that and i will encourage you to do everything that you can in developing this guidance to answer those thorny questions in a way that gives maximum flexibility to the states and local communities. again, in the letter that you wrote you seems to be moving in that direction and you stated that nothing in the act prevented the states from enacting a broad variety of tax cuts. it just cannot use the revenue from the act as an offset from the tax cuts. sec. yellen: that is correct. sen. crapo: i appreciate that perspective. as i am sure that you are aware, that leaves the question as to what is offsetting? how do you intend to approach the question of what is direct or indirectly offsetting a tax cut? sec. yellen: when i said that we had thorny questions to work through, you have just indicated
why we do. we will have to define what it means to use money from this act as an offset for tax cuts, and giving the fungibility of money, it is a hard question to answer. that is what we are required to do and we will do our best to offer guidance on it. sen. crapo: you just hit the nail on the head when you reference the fungibility of money, and so, i want to encourage you to be very restrictive in terms of the application ofand give the maxiy to states and local communities as they administer these funds. i want to ask you an example question. i realize you may not be able to answer this anymore specifically then you have been able to give specifics.
what if a state decides that, as with the federal act waiver federal taxation on a certain amount of unemployment compensation, the state would also like to wave a portion of its tax on the same compensation dollars. would that be something the state would have to pay for if it did that? sec. yellen: this is a question we will have to consider and work through whether informing changes that states make for example with respect to unemployment insurance whether or not that would qualify as a tax cut or be exempt and we are examining that question carefully. >> thank you. i want to encourage you to give the states the maximum flexibility you can.
the last thing we should do is put them in a predicament where they could lose the funding that was authorized by congress to help them just because they want to manage their fiscal policy in a way that might include some reduction of tax revenue. sen. menendez: the paycheck protection program has delivered over $718 billion in critical relief to small businesses. it is set to expire exactly one week from today. secretary elma -- yellen and chairman powell, are we at a place where congress can and ppp relief to small businesses? sec. yellen: of course, the economy is not at a place where small businesses are able to thrive. i'm not sure how much money remains in the program, but there is some and i would be
supportive of an extension. chairman powell: i would defer to the secretary on that question. >> in february, two out of every 10 small businesses said they would likely not survive 2021 without additional assistance. fortunately, the american rescue plan included $7.2 billion for ppp loans. if congress doesn't reauthorize the program in the next seven days, that money will never reach struggling small businesses. i think it would be reckless and cruel to let the program expire when there are still $50 billion of ebp funding remaining and businesses waiting for relief. i am glad to hear that you agree it should be extended. the center on budget and policy priority announced the there were 13.5 million adults behind
on rent and 10.3 million behind on mortgage payments. the brunt of that pain is being felt and minority communities. latino, asian, renters report being behind. one of my major priorities is how -- housing counseling. chairman powell, you said there -- when there is a real crisis don't stop until the job is done. would you say that current mortgage and rental payment delinquency rates to curly among minority families indicates that the job is done? chairman powell: i would say the
level of distress was very high and has recently been coming down a bit, but it is still quite material. that crisis is not over. >> is providing housing support for rental and mortgage relief what you meant when you said congress has come with quite a strong fiscal policy? would this be part of that fiscal policy? chairman powell: i meant that as a general statement. the physical response overall has been remarkable. >> but fiscal response that leaves millions out of their homes whether it be as renters or homeowners is not going to be a fiscal response that will provide us long-lasting benefits is that fair to say? chairman powell: i would say it is. 6 >> with 402 economists, the board of governor employs more
-- in the largest university department although only a small percentage are minorities. things are better at the treasury. secretary yellen, you previously stated that economists are of one gender or race, they are likely to miss things that matter. chairman powell, do you agree with that statement? chairman powell: i very strongly agree with it. we clearly benefit from diverse perspectives. >> considering the current makeup, or either of you concerned they might be missing things that matter? sec. yellen: yes. i am very focused on pursuing diversity and hiring to make sure we do have diversity in the
economics team at treasury and throughout treasury it is a very high priority. chairman powell: this is something very high-priority that we have worked hard at and we are not at all since fight with where we are. we have done a lot of outreach to historically black colleges and universities as well as hispanic serving institutions. i have done a class with minority students last week. we have a systematic program to encourage more minority kids to study economics and if they do that, to think about the fed and that sort of thing. there is a lot of work to be done there. it is a challenge we are focused on. >> i would be happy to work with both of you in providing individuals who presently could meet the challenge.
sen. rounds: thank you. and thank you to both of our panelists for your service to our country. secretary yellen, i want to begin with you. as i'm sure you are aware, the irs is facing a severe backlog when it comes to processing tax returns. these problems like the 2.4 million backlog and untouched tax returns and a staffing issues at the irs were laid out in a recent oversight hearing. the text processing issues at the irs are troubling enough but what i thought was more disturbing is that there was no plan on the part of the irs for how to fix the problem. my question is, what can be done to get the irs to work through the backlog and return a more
normal state of operations? the reason why i bring it up today is we are thinking about the 2019 tax returns, since they have not been processed, it's going to make it more difficult for the 2020 tax returns to be filed and you're going to have some taxpayers that may end up in that position of having a death spiral of penalties imposed on them because they can't get responses back from the irs. have you had a discussion about what the steps should be to fix the issue? sec. yellen: i have met with the irs commissioner and discussed a
range of questions including the irs ability to distribute economic impact payments and the child tax credits on a periodic basis. i have not had a detailed discussion with the irs commissioner about the issue that you raised. in general, the irs needs more funding to be able to work appropriately to put in place the technology it needs to collect taxes. we know there is a huge tax gap. it is estimated at $7.5 trillion over the last decade and more generally, the irs needs more funding to be able to appropriately manage the burdens it has including providing
support to taxpayers. a shortage of personnel makes it frustrating to try to call to get advice over the telephone. >> it's not my point to be argumentative with you, i just want to point out that there are $1.9 trillion have been allocated some of it for pandemic relief and the irs suffered through because during the pandemic, they had a difficult time for their folks be -- to be able to work and that has been understandable. it is not unreasonable for us to ask for a plan to try to take care of that backlog. i would simply ask for your commitment that you would go back and expect them to respond to you then to us with a plant that is appropriate to get the backlog resolved as quickly as possible. sec. yellen: i am certainly
willing to do that and to work with your office and let you know what the plan is. >> thank you. i will just share with you as we have begun to highlight, you have a lot of challenges ahead of you. one of the biggest tasks is the implementation of the illicit hatch act. i partnered with senator warner on this and we were able to get it into the national defense authorization act. it has been signed into law. even everything on your to do list, can you lay out a rough game plan for how you would envision implementing the illicit cash act? sec. yellen: we have been very focused on implementing the provisions of the ndaa. it is a very high-priority
project for us and we are already very hard at work in hiring people in order to be able to complete that work in a timely way. >> thank you. i had a question for the chairman, but i will put it in as a question for the record. i see that my time has expired. sen. sherrod: senator warren is recognized for five minutes. sen. warren: after the 2008 financial crisis, congress passed the dodd frank act to put more cops on the beat and prevent wall street from wrecking our economy again. one of the protections was to automatically create a special designation for the two big to fail banks. at the time those with assets $50 billion or more. they received stronger oversight for the federal reserve.
chairman powell, why did congress think it was a good idea to put stronger oversight in banks above a certain size? chairman powell: i think it was a wise decision. particularly for the largest institutions, it was clear that we needed to raise expectations across a broad range of players particularly capital liquidity risk management. sen. warren: it isn't just banks that pose to the economy. in 2008, to investment companies failed triggering 2008 crash. when congress passed dodd frank, they created the financial stability oversight council and gave it the power to designate non-bank firms as too big to fail or to designate them as systemically important, which means they get the same stronger oversight as the too big to fail
banks. is that correct? chairman powell: yes. sen. warren: let's look at an example of how that's working today. blackrock is the world's largest asset management firm overseeing nearly $9 trillion in assets. that is more than double where it was 10 years ago. it also holds a stake in just about every company listed on the s&p 500. to put that in perspective, blackrock manages more assets than the entire gdp of japan or germany or great britain or any other nation in the world except the united states and china. it is not just size. blackrock runs a technology platform that currently houses at least 10% of all the stocks and bonds around the world. secretary yellen, hypothetically, if a $9 trillion investment company failed, with
that likely have a significant impact on our economy? sec. yellen: senator warren, i believe it is important to look carefully at the risk posed by asset management including blackrock and other firms. they begin to do that i believe in 2016 and 2017. the risk focused on were ones having to do with open and mutual funds that can experience mass withdrawal and be forced to sell off assets that could create fire sales. it is actually a risk that we saw materialize last spring in march and i think that with respect to asset management, rather than focus on designation of companies, i think it is important to focus on an
activity like that and to consider what the appropriate restrictions are. it is not obvious to me that designation is the correct tool to address -- sen. warren: designation is what gives the fed its increased oversight power is that correct? sec. yellen: yes. sen. warren: is blackrock currently -- so it receives that oversight? sec. yellen: it isn't designated. sen. warren: it not receiving increased oversight from the fed. are you currently looking at designation for companies like blackrock, $9 trillion companies like this? sec. yellen: like i said they have looked at this issue. sen. warren: i understand we have done it in the past.
you are the head of f sock now. the question i'm asking is whether or not it is considering and looking at designation for these large financial institutions? sec. yellen: i think it's appropriate to designate institutions whose failure would proposal of risk. sen. warren: that's why i started my question with does potentially a $9 trillion investment company pose some risk to the american economy if it should fail? sec. yellen: one needs to analyze what the risk is. sen. warren: if you are not actually doing the investigation? sec. yellen: it has undertaken such work in the past and as i said, when it looks it asset managers, it issued a report outlining what it saw as the
most significant risk. sen. warren: are you continuing that investigation now? sec. yellen: i am just beginning a work program with fsoc . sen. warren: i understand that when the stock market is going up, it is easy to ignore risks that can be building up in the system. that was the regulators that led up to the 2008 crash and that is how taxpayers ended up on the hook for a $700 billion bailout. when the party is going strong, it is the job of the regulators to take away the punch bowl. my view on this is that congress gave you the tools to monitor these companies and it is important to use them. mr. chairman, thank you for allowing me to go a few minutes over with another brief question. secretary yellen, i am grateful to you and president biden for
your leadership in enacting the american rescue plan. a critical part of this bill is the $350 billion assistance for state and local governments. some of our hardest hit communities in massachusetts are smaller communities under 50,000 in population. i want to ask you about how they get help from this bill? in jail -- general communities with populations under $50,000 received some direct federal funding as a result of the american rescue plan but they don't receive enough -- as much direct help is bigger cities is that correct? sec. yellen: i believe there is a formula that determines how much they receive and it is paid to them through states. sen. warren: that's where i want to go because direct funding is not the only money coming into
state and local government. in addition, state governments also receive a separate plot of money that was flexibly designed to hit our hardest hit communities and specifically the statute says that state funding can be used to respond to public health emergency help for the coronavirus disease or its economic impacts including assistance to household small businesses and nonprofits or aid to impacted communities. is that correct? sec. yellen: yes. sen. warren: in massachusetts, there will be for $.5 billion going to the state government. just to be clear, this statutory language provides our governor with the flexibility to use state funding to provide extra help to address negative economic impacts in smaller communities that did not qualify for larger pots of direct
funding. is that right? sec. yellen: that is my understanding, but we will put out guidance and work through all of the legalities. i believe that what you have said is correct. i want to be very careful about the legalities, but i believe what you said is correct. sen. sherrod: the senator's time is expired. sen. tillis: during her confirmation process, you said that a global minimum tax could stop the destructive race to the bottom on corporate taxation and discourage profit shifting. you went on to say that it is necessary for u.s. companies to be competitive and that's why
the negotiations are so important. i'm trying to understand how this is different from federalism and the states trying to be competitive? we had the highest corporate tax rate of any state that had a corporate tax rate, now we have one of the lower ones. we were also in the fourth quartile for corporate job creation. now we are in the top quartile. why would any country like vietnam or thailand or any developing nation buy into the idea that they should have a minimum corporate tax rate? what we expect -- why wouldn't we expect a flow into those jurisdictions that would have a lower corporate tax rate at the expense of the united states? sec. yellen: we believe that the
oecd negotiations can be productive and creating -- in which there is a minimum corporate tax rate. it is a way of stopping destructive race to the bottom in terms of countries competing for business based on their corporate tax rates. this is something we are committed to working to try to accomplish internationally. sen. tillis: do you agree that the lowering of the corporate tax rate in the united states didn't have a material impact on economic expansion in the united states? sec. yellen: i don't think it had a very substantial impact on investment stint -- spending. we are still studying that. i think it is necessary for u.s.
firms to be competitive. president biden has suggested raising the corporate tax rate back to 28%. at this point, we collect only a tiny amount of revenue through the corporate tax less than 1% of gdp and i believe it is appropriate to raise the tax rate. we need to worry about the competitiveness of american firms and doing that sen. tillis: i have one other question. in your opinion, the increase of the corporate tax rate up to 28% will not cause any significant competitive disadvantage for the united states for corporate expansion? sec. yellen: i think it would be important to make sure that it is done in the context of a global agreement. sen. tillis: last month, you
gave public support for the imf proposal -- new allocation of growing rights. just yesterday, the imf announced they are seeking $650 billion. there was a house proposal looking at $3 trillion. proponents say this has no budgetary impact. i don't think that tells the whole story. isn't it the case that the u.s. treasury has to borrow the dollars a gives out to the imf when the exchanges made? sec. yellen: yes, it does if we provide the dollars. that is true. we also earn interest to the extent that we hold sdr above our allocation. sen. tillis: people either issue keynotes or t-bones correct? to finance increase in the
obligation. >> i believe the cbo score is not having a cost. >> they say it has no budgetary cost. has the u.s. misrepresenting the situation with respect to log -- larger term taxpayer obligations? sec. yellen: i don't think so because there will be interest that are earned that offset the payment of interest to issue t-bills. it's not only the u.s. that will provide hard currency. there are other countries that will also take part in that. sen. tillis: my time is expired. chair powell, i had a question
on asset bubbles and your insight but i will submit it for the record. thank you both for being here. sen. bennet: holland -- sen. bennet: holland senator van hollen: i want to thank you both for your testimony. secretary yellen, i think the actions you took are in our national interest and i look forward to you moving forward on that. i want to ask you a question about long-term unemployment. i was heartened by your testimony this morning that you anticipate that because of the passage of the american rescue plan and other measures that have been taken, we may get back to full employment by the summer
of next year. i remain very concerned about the long-term unemployment. even before the pandemic hit, we had more than a million americans were long-term unemployed meaning they were looking for work for more than six months and couldn't find anything. that number is currently 4 million. i do expect that with the natural improvement of the economy, that number will come down. i also think that if we don't take deliberate measures to help bring the long-term unemployed back into the economy, we will be leaving them behind. i did have a conversation with chairman powell at the last hearing and he agreed that deliberate targeted measures were necessary beyond the natural lift in the economy that we hope we will see as a result of measures taken. do you agree with that assessment? sec. yellen: i am worried about
the long-term unemployed and think we should be focusing importantly on what we need to do to make sure they are not permanently scarred. senator van hollen: with regard to fiscal policies and other policies that we take to improve the economy, that in order to address the needs of the long-term unemployed, we are going to have to be more deliberative and have policies targeted to accomplish that? sec. yellen: i'm not sure exactly what you have in mind, but policies that focus on training in a workforce development may be appropriate as the economy recovers. senator van hollen: other
senators and i have imposed different forms of long-term unemployment elimination bills. they do include a workforce training component. they also include some level of subsidized employment for one or two years combined with those wraparound services in order to make sure we address this chronic problem. as you have said before, the longer someone is out of work, the harder it becomes for them to find work and when they do get it, they may be stuck with lower wages for the rest of their -- we hope to deal with this in the next piece of legislation on infrastructure improvement and other challenges. let me ask you about the irs. we have seen chronic underfunding of the irs since
2011. it is -- as a result, it is hard for american to get their phone calls returned, it's harder for the irs to process things like payment. retina, a lot of people are still waiting for the refunds from last year's tax season. in addition to that, the estimate is that as a result of the lack of enforcement ability, $570 billion in taxes that were owed last year did not get paid. 70% of that coming from the top 1% of americans. for all of these reasons, do you agree that we need to better resource the irs to improve customer service and to make sure that tax chiefs don't get away with not paying their fair share? sec. yellen: i absolutely agree.
the tax gap is huge. i think it would have a fairer tax system and collects more -- collect more tax if we were able to appropriately source the irs. >> we were able to provide $1 billion as part of the american rescue plan. with my other hat, i chair the subcommittee on financial services and general government appropriations and we are going to be asking for your help as we look at this issue. thank you. sen. sherrod: sen. cassidy: -- kennedy: i want to start unusually for me with a statement as opposed to a question. i have been very supportive of
you and the federal reserve and its independence. that was my position with the trump administration and it will be my position with the biden administration. in fact, i have said publicly and privately that the single most important thing that was done to save the world economy from melting down during the shutdown last march was your decision to implement a foreign currency swap line. when americans were looking for dollars. there is an effort going on worldwide to blur the line between government and politics on the one hand and central banks and their independence on the other. i see every day central banks getting more and more involved in fiscal policy and lobbying
legislators with respect to the adoption of fiscal policy. i have noticed that the bank of england has announced in its qe program that it is going to stop purchasing corporate bonds from companies that it thinks have too big of a carbon footprint. i have noticed recently that the reserve bank of new zealand has decided it is going to start in its policymaking its monetary policy taking account of housing prices. this is where i'm headed. the fed needs to maintain its independence in america. your credibility depends on political independence. i give you turkey if you don't believe me. the fed -- the people are unelected.
my concluding point, some people are going to be on you like you stole christmas to get involved in social policy and the guise of economic policy. you need to resist that. thank you, senator. chairman powell: i do think that fed independence is an institutional arrangement that has served the public well over time and i am strongly committed to continuing it. i also would agree that getting off of our home base and straying from our mandate is something that will put independence at risk over the long-term. we have this precious independence. because we have a limited mandate and we stick to it.
we should have -- there should be very few examples of independent agencies -- sen. kennedy: and you are one of them and i apologize for cutting you off but i want to stay within my time. secretary yellen, the biden administration's plan and it is your plan to require the imf to issue $1 trillion of these sdr's is going to cost the american taxpayer $180 billion. you say you want to help poor countries but we both know that only 10% of that money's going to go to poor countries. if they cash in their sdr's, is
going to help china, it's going to help russia, it's going to help venezuela, and besides that under your plan, you are intentionally splitting the plan into two trucks. of $500 billion each. i don't understand why it is sufficient to charge the american taxpayer $180 billion all of which we have to borrow and you say you're doing it to help and only 10 -- 10% is going to poor countries and even more is going to russia and china. chairman powell: i'm sorry, it's not going to cost the taxpayer $180 billion. sen. kennedy: sure it is, you have to borrow the money. it's not sitting in a bank account. they are going to redeem those sdr's not just the poor countries but china. sec. yellen: there are many countries that can provide hard
currencies in return for sdr's including the united states. if the united states does agree to provide sdr's, it will have to issue treasury bills for debt to do it. it will also earn interest on any amounts that it converts on behalf of other countries. it will be essentially a wash. there is no money to be paid back. the interest that we earn on any sdr holdings offsets the cost of issuing treasuries. it is essentially a wash. it is not costly. sen. kennedy: i disagree with you.
no disrespect, but i think you're wrong. i think we are going to have to aro the $180 billion of this. sec. yellen: i don't know where you got a number like that from. sen. kennedy: when china comes to redeem its sdr's and says we want dollars, where we going to get the money? were going to borrow it. i've gone over, i'm sorry. this is an important issue. i will call you, madam secretary. sec. yellen: i would be glad to talk about offline. sen. cortez masto: thank you and welcome back to the committee. let me start by impressing my appreciation to the staff at your agency who are charged with implementing the laws that we have passed. the staff of the irs, fed and
reserve have worked hard. on behalf of nevada and the american people, i appreciate your staff. let me start chairman powell. around the hospitality industries that have been so hard-hit. can you talk to me about what you are seeing with respect to those economies and the recovery? i think you said that about two thirds of the tours of hospital jobs -- hospitality jobs are back. can you talk to me about what you are seeing as a result of the relief passed here in congress and the impact it is having on hospitality tourism? chairman powell: it is just two thirds of the jobs that were last during the winter coat with spike came back. hospitality industry is still down several million jobs.
i'm sure you are seeing that home. we are beginning to see airline travel, people going to restaurants and hotels and all of those things are just beginning to pick up. all of that is motivated by declining covid cases and increasing vaccinations. if we can just stick to social distancing and mask wearing effective but that commercial and again, it would enable us to get this done and get the economy reopened and all of the small businesses that are earning so much can get the relief that they need. it's right there. if we could follow through on this in the coming months. sen. cortez masto: d.c. regional variations in jobs returning? chairman powell: unemployment generally is very much concentrated in states like yours and others that have high tourism and travel and entertainment components. those are the ones that are suffering.
between individual states within that group, i couldn't say much sitting here today about how much variation there is. sen. cortez masto: thank you for your work and always speaking out about addressing the concerns that we see with the hospitality and travel industries that have been so hard-hit because of this pandemic. secretary yellen, as part of the american rescue plan, we also included 10 billion dollars assistance for homeowners. what is your timeline for getting frequently asked questions and guidelines out to communities wanting to help homeowners? there still a lot of homeowners in need and help and that's why we included $10 billion in assistance. can you talk about that as well? sec. yellen: we are committed to getting this money into the hands of -- at risk -- homeowners at risk of falling
behind on their payments as soon as possible. we are working hard on it. we are conducting outreach to state housing agencies to make sure these funds are quickly and effectively distributed to communities at need. we are working hard at that. i can't give you a definite date when we will get the faq out. sen. cortez masto: the same question, we have talked about this the hospitality and leisure industries that have been so hard-hit. the money we fought for particularly in the last package was to focus on those in the industry not only the business is directly involved but those indirectly involved. i am looking to you to help us make sure that the guidelines get out as quickly as possible where they are needed to make sure we get this money to the
communities. sec. yellen: the money that was designated for restaurants and associated industry, that is being managed by the sba and treasury but we stand to work with them to be helpful. sen. cortez masto: i cannot stress enough the money that we fought for the $350 billion to our states. sec. yellen: absolutely. sen. cortez masto: this is lifesaving and democrats who fought for this and will continue to fight for this. everybody is struggling. whether they are republicans or democrats, states are struggling and it is in a bipartisan way.
sec. yellen: the help is going to get out very rapidly. we have a maximum of 60 days. we will work very hard to get that money into this state and local governments to support their communities. sen. cortez masto: thank you both so much for what you're doing. sen. sherrod: senator cramer is recognized for five minutes. >> thank you mr. chairman and madam secretary and chairman powell for being here. i want to align myself with the comments of senator kennedy. it is critical and i applaud
you. the banking industries are starting to roll back last year's regulatory measures that responded to pandemic stresses. we made some temporary relief. we are hearing now that community banks are under leverage racial stress because of the influx of deposits which they are holding largely in very low risk assets. somewhat because of their strong commitment to ppp lending. as the banks continue to work with their communities, what factors will you consider in deciding how to address leverage ratio pressures and how much leeway will the banks get to adapt to these ad hoc conditions? maybe start with you, mr. chairman. chairman powell: on the community bank leverage ratio, that is something we will look at and communicate ahead of time. we are well aware of the stresses. sen. cramer: very good.
secretary yellen, i'm one to ask you another question. you have made addressing climate change one of the central points of your time at the treasury. it has been reported that president biden's climates are john kerry has encouraged banks and other institutions to form a net zero banking allowance. -- alliance. he has also worked -- at the expense of more traditional energy products and possibly forcing institutions to put political and social considerations ahead of business practices. that would be a violation of their new sherry responsibility to their shareholders. in light of the week unemployment numbers, do you think it's a good idea for private businesses to be forced by government officials or even encouraged by want to make decisions about where they should or should not put their money jeopardizing jobs and
other sectors of the economy that the legal -- represent legal commerce and industries and businesses? sec. yellen: i think the world faces a profound crisis in connection with climate. it is appropriate for governments, the private sector as well, to focus on how we can mitigate the risks to encourage financial institutions, lenders were generally, to think about control adverse and tax investments that they may make. and perhaps more importantly, to understand that eventually, we are committing to going to net zero emissions by 2050. that can affect the returns that
they receive on investment. i don't think that is inappropriate. there are no requirements by government that i'm aware of to force anyone to lend for any particular project or not to lend to businesses that are involved in carbon emitting activities. sen. cramer: a lot of these bigger banks are responding to the pressure and to market forces as well. that said, i might bring up a scenario in say a cold place like north dakota or anywhere in the midwest. women get to times where like a polar vortex as some people like to call it, we just call it winter. or for that matter, you get a peek hot summer stretch when the
baseload of electricity people used to rely on to keep their companies rely on for the gas that used to be the feedstock for manufacture becomes fuel for generating electricity, that could have a negative impact on the companies and manufacturers, the server farms who suddenly find themselves low in backup. i hope we can take a pick entir- sec. yellen: we need to take account of those impact. sen. cramer: thanks to both of you for being here and for your service. we just call it winter. [laughter]
sen. sherrod: senator smith is recognized. supposed myth -- set smith definitely got the joke about it being winter. i think i'm going to start with secretary yellen. it's great to be with both of you. again secretary for a great display of stress under pressure as you are getting talked over a minute ago. i appreciated that very much. wanted to hone in on the issue of women in the workplace. the challenges that women are fake -- facing in the workplace, covid has made it so much worse. women dropping out of the workforce at the same rates as men but men are returning to the workforce and women are not. in minnesota, it is an 11% decline in women's produce patient. there are two basic issues that women face. one is lack of access to
affordable childcare and the other is lack of access to paid family leave. this is happening in the united states in different ways than in europe as i understand it. as part of the american rescue plan, as you know i worked with senator warren and others to make a significant investment in shoring up our childcare system. i was wondering if you could talk a bit about this. how does this ability of women dissipate in the workforce connect to our competitiveness and what role does childcare play in making sure that women can participate in the workforce and support their families? sec. yellen: women have contributed enormously in the united states and in countries around the world. their labor force participation has boosted growth and has boosted household incomes. we saw a surge in women's labor
force participation in the 1970's and 1980's. it has leveled off and even declined somewhat. there are a number of reasons for it, but we look at the fact that in many european countries and underdeveloped countries, we have -- where participation of women is higher than the united states which stands out is paid leave and affordable childcare as to things that distinguish the united states from those countries. they are really critical to enabling women to successfully participate. i think it is exciting that the american rescue plan really addresses these issues providing additional meaningful support on both fronts. >> thank you.
what we do the american rescue plant not only with providing and shoring up our childcare system but also the child tax credit which is going to have the impact of lifting, reducing child poverty by half. it shows us the policy leverage that we have to make our economy work for women. ultimately, that contributes to our economic competitiveness. >> it helps children also in the long run. sen. smith: absolutely. it addresses that opportunity gap rather than an achievement gap because it is really a lack of opportunity that our children have if they are living in poverty. this brings me to another thing secretary yellen i want to talk to you about something you and i have also talked about, the data shows us that people experiencing homelessness have been disproportionately impacted by covid.
you and i have spoken about what we can do to get the recovery checks, the stimulus checks to people who are experiencing homelessness. there are particular challenges to getting checks to them. recently, your staff provided my office with a briefing on what the treasury is doing to connect with local -- local shelters and providers and continuums of care to get checks to people. i was really heartened by hearing what you are doing and i want to make sure that these community-based efforts continue. we have just a couple of seconds, but i wonder if you could talk about that for a minute then commit to providing some sort of guidance or publishing best practices because there are great examples of what works around the country. sec. yellen: publishing best practices, trying to figure out what they are is a very important role treasury can play
in this and in other programs that we are charged with implementing. one of the most difficult issues is getting impact payments that will also apply to the child tax credit getting these payments to homeless individuals and as you say, we are working very hard and happy to work with you to try to do everything we can on that front. we are working with the irs on this as well. sen. moran: thank you very much, chairman powell thank you for joining us and secretary yellen, a pleasure to be with you again. thank you both for your public service. my question will be directed to you, madam secretary.
the american rescue plan included $350 billion for state and local physical recovery fund. to be used for emergency funding to distribute to states, counties, local units of government. and of the department is currently developing guidance in this regard. i would be interested in knowing the time of that guidance, but i want to highlight for you a circumstance that kansas and many other states are experiencing. no relief can be taken without looking at its broader consequences. i will take us back to what the chairman was talking about winter. a few weeks ago, we had this tremendous cold snap that invaded the country. north to south from canada to texas. that cold snap created huge
increases in utility bills for consumers and even for businesses. it is estimated in kansas, someplace near $100 million in utility increases because of three days of temperatures below zero and the cost of natural gas. in other words, the purchase price that utility companies were encountering to purchase enough gas to keep homes warm, to keep businesses operating was so high that the utility bills now reflect that $100 million increase that was experienced over a few days. a few examples for you. there is a kansas municipality, some of our communities generate their own electricity and sell it to the citizens. one of the cities in kansas with a relation of less than 300 people had a february gas bill 3/5 of the total amount of their annual city budget. another city just over 1000
people with household incomes less than $30,000 had a february energy bill over $9 million. a school which typically schoola $10,000 a month gas bill in february, it was $400,000. a small greenhouse in rule kansas received a bill of just under $100,000, crippling that business. my question to you is, i would love to have a commitment that you would work with me and others -- i think there are other senators who have had experienced the same circumstance and i would like to see our local government have the flexibility under the belief that you cannot take the financial condition of covid in just a vacuum. all of the things that pile on when businesses are already so fragile or utility bills --
individuals are struggling to pay bills, we can't take that interest isolation. i would just ask two things, i want to make sure you are aware of the circumstance that tremendous damage to consumers in kansas and elsewhere, i would ask you also see if the flexibility makes sense to you on a commitment that you would work with me -- that you have an understanding of the circumstance and an id of the timeframe in which the guidance might be in place so that relief can be used. sec. yellen: first, let me say i appreciate your describing to me the problems that your state and other states because of the cold weather and the impact on utilities -- >> [indiscernible] sec. yellen: i promise we will work with you when our staff
will be in contact with yours to discuss the needs that your state has. to deal with this problem. there is a good deal of flexibility within the law on how the funds can be used. over the next 60 days, the statute provides 60 days for payments to get out. we need, within those 60 days, to clarify what the funds can be used for and can't be used for. i am glad to confer with you about whether or not this is within the realm of what the statute has in mind. why don't we have our staff's talk off-line this? sen. brown: thank you for your answer. -- thank you for that today and
your response. i appreciate your willingness to cooperate in your understanding of the tremendous burden that individuals are having. sen. brown: senator daines, have you voted? sen. daines: yes. sen. brown: i apologize to the chair, we are going to -- there are two or three more people -- i am going to vote and we will recess after your question until about 12:30. if secretary yellen and chair powell can stay a little longer, senator daines will go for five minutes now. we will recess after your five minutes and come back at about 12:30. thank you all. sen. daines: let me start by saying -- express my utter shock at the provision that was buried within the recent $1.9 trillion package that prohibits states from directly or indirectly
cutting taxes. this provision was snuck into the bill at the end of a more than 24 hour period of continuous voting. process aside, this astonishing level of meddling by congress in state fiscal appears should be troubling to anyone. republican or democrat who believes in federalism. i was pleased to see euro spots last night to the letter -- your response to the letter, my own attorney general in montana confirming that states can in fact still cut taxes. to quote from your response, "nothing of the act prevents states from acting a broad variety of tax cuts. that is, the act does not deny states to cut taxes in any
manner, it simply provides that funding received under the act may not be used to offset a reduction in net tax revenue resulting from certain changes in state law." senator -- mentioned earlier a specific hypothetical scenario involving unemployment insurance trust funds and stated the treasury is working through these issues and has 60 days to issue guidance. thank you. sec. yellen: that is a direct quote. exactly right. sen. daines: our legislature meets every two years. they are meeting now and are slated to adjourn on or about may 1. they really need this guidance as quickly as possible. we are in the final throes of the biennial session. secretary yellen, would you commit to issuing guidance well in advance of the 60 day statutory deadline?
sec. yellen: i can't commit to that. there are a host of complex questions that have to be resolved and we need to confer with state and local governments , members of congress and work out legal issues around that. we are working as rapidly as we possibly can to get this guidance out, but i do not want to make a commitment that we can get it out sooner. we will get it out as soon as we possibly can. we want this money to be in the hands of state and local governments, we will do the best we can. sen. daines: i appreciate it. with what is at stake right now, legislatures meeting on a periodic basis. shifting to chairman powell,
some have proposed the federal reserve change its policy -- withholding retail fet accounts on behalf of banks. over $10 billion in deposits -- post offices would open accounts for retail and commercial customers but the deposit is held at the fed and these accounts will be held at no cost to consumer and retail customers. my question, is the federal reserve equipped to service individual retail and commercial accounts? chair powell: no, and we are not permitted under current law. that has never been our role, nor the role of any other central bank. it would be a dramatic change in our role in the economy, and when i think should require careful thought. sen. daines: thank you for that answer. in 2019, the fed and fdic took
steps mandated by congress to tailor banks -- bank's prudential red river -- prudential regulation. banks and lending institutions have been a critical source of relief to maintain strong capital and liquidity reserves. it is crucial we recognize the bank's size and business model are relevant to consider when looking at how much risk it poses. do you agree that the tailoring of regulation, including capital and liquidity requirements -- footprint of a particular banking institution is still appropriate? in that there has not been demonstrated impact to the u.s. economy because of tailoring? chair powell: yes, you would agree. -- yes, i would agree. sen. daines: thank you, i am out
of time. do we need to recess the committee? sen. brown: we are going to be in recess until 12:30. if secretary yellen and chairman powell could remain on the call, feel free to turn off your video until we come back. and so we will recess until 12:30. chair powell: you need us to keep sitting here? or, can we come back? >> you can come back. chair powell: just making sure. >> we are joined next by the chair and ranking member of the rules committee, representative jim mcgovern from massachusetts and also from oklahoma, tom whole. thanks for joining us. >> thank you. the 1973 war powers act,
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