Hearing — Oversight of Treasury and Federal Reserve Pandemic Response (House Financial Services, 2020)
Summary
This is a hybrid hearing before the Committee on Financial Services of the House of Representatives, titled Oversight of the Treasury Department's and the Federal Reserve's Pandemic Response, on June 30, 2020. The contents list witnesses Steven T. Mnuchin, Secretary, Department of the Treasury, and Jerome H. Powell, Chair, Board of Governors of the Federal Reserve System. Additional material for the record includes a written statement of the Credit Union National Association and written responses to questions submitted by Chairwoman Waters. One member's remarks call it the first quarterly oversight hearing under the CARES Act.
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- Chrg Chrg 116Hhrg42943 Chrg 116Hhrg42943
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“Hearing — Oversight of Treasury and Federal Reserve Pandemic Response (House Financial Services, 2020).”
Original at www.govinfo.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/chrg-chrg-116hhrg42943-chrg-116hhrg42943/
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OVERSIGHT OF THE TREASURY
DEPARTMENT’S AND THE FEDERAL
RESERVE’S PANDEMIC RESPONSE
HYBRID HEARING
BEFORE THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
JUNE 30, 2020
Printed for the use of the Committee on Financial Services
Serial No. 116–99
(
U.S. GOVERNMENT PUBLISHING OFFICE
42–943 PDF WASHINGTON : 2021
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HOUSE COMMITTEE ON FINANCIAL SERVICES
MAXINE WATERS, California, Chairwoman
CAROLYN B. MALONEY, New York PATRICK MCHENRY, North Carolina,
NYDIA M. VELÁZQUEZ, New York Ranking Member
BRAD SHERMAN, California ANN WAGNER, Missouri
GREGORY W. MEEKS, New York FRANK D. LUCAS, Oklahoma
WM. LACY CLAY, Missouri BILL POSEY, Florida
DAVID SCOTT, Georgia BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri STEVE STIVERS, Ohio
ED PERLMUTTER, Colorado ANDY BARR, Kentucky
JIM A. HIMES, Connecticut SCOTT TIPTON, Colorado
BILL FOSTER, Illinois ROGER WILLIAMS, Texas
JOYCE BEATTY, Ohio FRENCH HILL, Arkansas
DENNY HECK, Washington TOM EMMER, Minnesota
JUAN VARGAS, California LEE M. ZELDIN, New York
JOSH GOTTHEIMER, New Jersey BARRY LOUDERMILK, Georgia
VICENTE GONZALEZ, Texas ALEXANDER X. MOONEY, West Virginia
AL LAWSON, Florida WARREN DAVIDSON, Ohio
MICHAEL SAN NICOLAS, Guam TED BUDD, North Carolina
RASHIDA TLAIB, Michigan DAVID KUSTOFF, Tennessee
KATIE PORTER, California TREY HOLLINGSWORTH, Indiana
CINDY AXNE, Iowa ANTHONY GONZALEZ, Ohio
SEAN CASTEN, Illinois JOHN ROSE, Tennessee
AYANNA PRESSLEY, Massachusetts BRYAN STEIL, Wisconsin
BEN MCADAMS, Utah LANCE GOODEN, Texas
ALEXANDRIA OCASIO-CORTEZ, New York DENVER RIGGLEMAN, Virginia
JENNIFER WEXTON, Virginia WILLIAM TIMMONS, South Carolina
STEPHEN F. LYNCH, Massachusetts VAN TAYLOR, Texas
TULSI GABBARD, Hawaii
ALMA ADAMS, North Carolina
MADELEINE DEAN, Pennsylvania
JESÚS ‘‘CHUY’’ GARCIA, Illinois
SYLVIA GARCIA, Texas
DEAN PHILLIPS, Minnesota
CHARLA OUERTATANI, Staff Director
(II)
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CONTENTS
Page
Hearing held on:
June 30, 2020 .................................................................................................... 1
Appendix:
June 30, 2020 .................................................................................................... 37
WITNESSES
TUESDAY, JUNE 30, 2020
Mnuchin, Hon. Steven T., Secretary, U.S. Department of the Treasury ............ 6
Powell, Hon. Jerome H., Chair, Board of Governors of the Federal Reserve
System ................................................................................................................... 7
APPENDIX
Prepared statements:
Mnuchin, Hon. Steven T. ................................................................................. 38
Powell, Hon. Jerome H. .................................................................................... 41
ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD
Waters, Hon. Maxine:
Written statement of the Credit Union National Association ...................... 52
Written statement of the National Association of Federally-Insured Credit
Unions ............................................................................................................ 60
McHenry, Hon. Patrick:
Written statement of the National Association of Federally-Insured Credit
Unions ............................................................................................................ 60
Mnuchin, Hon. Steven T.:
Written responses to questions for the record submitted by Chairwoman
Waters ............................................................................................................ 63
Written responses to questions for the record submitted by Representa-
tive Heck ........................................................................................................ 75
Written responses to questions for the record submitted by Representa-
tive Himes ..................................................................................................... 76
Written responses to questions for the record submitted by Representa-
tive Gonzalez ................................................................................................. 76
Written responses to questions for the record submitted by Representa-
tive Lawson ................................................................................................... 77
Written responses to questions for the record submitted by Representa-
tive Steil ......................................................................................................... 78
Written responses to questions for the record submitted by Representa-
tive Tlaib ........................................................................................................ 78
Written responses to questions for the record submitted by Representa-
tive Vargas .................................................................................................... 80
Powell, Hon. Jerome H.:
Written responses to questions for the record submitted by Chairwoman
Waters ............................................................................................................ 82
Written responses to questions for the record submitted by Representa-
tive Beatty ..................................................................................................... 109
Written responses to questions for the record submitted by Representa-
tive Heck ........................................................................................................ 113
Written responses to questions for the record submitted by Representa-
tive Kustoff .................................................................................................... 115
(III)
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IV
Page
Powell, Hon. Jerome H.—Continued
Written responses to questions for the record submitted by Representa-
tive Lawson ................................................................................................... 119
Written responses to questions for the record submitted by Representa-
tive Mooney ................................................................................................... 122
Written responses to questions for the record submitted by Representa-
tive Tlaib ........................................................................................................ 124
Written responses to questions for the record submitted by Representa-
tive Vargas .................................................................................................... 129
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OVERSIGHT OF THE TREASURY
DEPARTMENT’S AND THE FEDERAL
RESERVE’S PANDEMIC RESPONSE
Tuesday, June 30, 2020
U.S. HOUSE OF REPRESENTATIVES,
COMMITTEE ON FINANCIAL SERVICES,
Washington, D.C.
The committee met, pursuant to notice, at 12:45 p.m., in CVC-
200, Congressional Auditorium, Hon. Maxine Waters [chairwoman
of the committee] presiding.
Members present: Representatives Waters, Maloney, Velazquez,
Sherman, Meeks, Clay, Scott, Green, Cleaver, Perlmutter, Himes,
Foster, Beatty, Heck, Vargas, Gottheimer, Gonzalez of Texas,
Lawson, San Nicolas, Tlaib, Porter, Axne, Casten, McAdams,
Ocasio-Cortez, Wexton, Gabbard, Adams, Dean, Garcia of Illinois,
Garcia of Texas; McHenry, Wagner, Lucas, Posey, Luetkemeyer,
Huizenga, Stivers, Barr, Tipton, Williams, Hill, Zeldin, Loudermilk,
Mooney, Davidson, Budd, Kustoff, Hollingsworth, Gonzalez of Ohio,
Rose, Steil, Gooden, Riggleman, Timmons, and Taylor.
Chairwoman WATERS. The Financial Services Committee will
come to order. First, I want to thank Secretary Mnuchin and Chair
Powell for your patience while we wrapped up our votes. I appre-
ciate that there may be a vote called during the hearing as well;
however, I plan to continue the hearing if votes are called. I am
told by my staff that both of you have agreed to be here for 2 hours
from the start of the hearing, and I thank you.
Without objection, the Chair is authorized to declare a recess of
the committee at any time.
I want to welcome the Members and our distinguished witnesses
to the first Full Committee hybrid hearing being conducted by the
Committee on Financial Services. As Congress breaks new ground
with these remote hearings, I want to remind Members of a few
matters, including some required by the regulations accompanying
H. Res. 965, which established the framework for remote and hy-
brid committee proceedings.
First, I would ask all Members on the Webex platform to keep
themselves muted when they are not being recognized. This will
minimize disturbances while Members are asking questions of our
witnesses. Members on the Webex platform are responsible for
muting and unmuting themselves. The staff have been instructed
not to mute Members except when they are not not being recog-
nized by the Chair, and there is inadvertent background noise.
Members on the Webex platform are reminded they may only at-
(1)
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2
tend one remote hearing at a time, so if you are participating
today, please remain with us during the hearing. Members should
try to avoid coming in and out of the hearing, particularly during
the question period. If, during the hearing, Members wish to be
recognized, the Chair recommends that Members identify them-
selves by name so as to facilitate the Chair’s recognition.
I would also ask that Members be patient as the Chair proceeds,
given the nature of the online platform the committee is using. In
addition, the Chair informs the Members participating in person
that in enforcing order and decorum in the hearing room, the Chair
has a duty to protect the safety of the Members. The attending
physician provided the following guidance: ‘‘For U.S. House of Rep-
resentatives meetings in a limited enclosed space, such as a com-
mittee hearing room, for greater than 15 minutes, face coverings
are required.’’
Accordingly, the Chair will treat wearing masks as a matter of
order and decorum, and all Members should wear masks. The
Chair has a strong preference for Members to continue to wear a
mask, even while being recognized by the Chair. Members who do
not wish to wear masks may participate virtually through the
Webex platform.
Before proceeding to the hearing, I have one committee business
matter. Without objection, two resolutions, distributed in advance
to all Members’ offices establishing committee task forces for the
remainder of 2020, are approved.
Today’s hearing is entitled, ‘‘Oversight of the Treasury Depart-
ment’s and the Federal Reserve’s Pandemic Response.’’ This hear-
ing is the committee’s first quarterly hearing required by the
Coronavirus Aid, Relief, and Economic Security (CARES) Act for
oversight of the various facilities and programs under the Act.
I would like to inform Members that our witnesses have a hard
stop today at 2:00.
I now recognize myself for 4 minutes to give an opening state-
ment.
Secretary Mnuchin, Chair Powell, welcome back. The pandemic
continues to have a terrible impact. More than 126,000 people have
lost their lives in the United States, and, this past Sunday, there
were 40,000 new cases of COVID-19, the highest number of daily
cases. And the unemployment rate in May was 13.3 percent, nearly
4 times higher than it was last May. All of the job gains of the past
decade have been wiped out.
Communities of color have been affected disproportionately both
by the virus and its economic impact. The Centers for Disease Con-
trol reports that Jewish, Black, and Latinx Americans are 4 to 5
times more likely than Whites to be hospitalized for COVID-19,
and half of all Black adults are not working. During the 2008 fore-
closure crisis, we saw a similarly disproportionate impact on com-
munities of color. This was followed by an unequal recovery where
White households gained the wealth they lost, and Black and
Brown households are still trying to catch up. We cannot endure
another unequal crisis or unequal recovery. Your agencies and Con-
gress must do all that we can to ensure that history does not re-
peat itself.
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I want to thank both of you for your efforts thus far, and for the
ways that you have worked with me and the members of this com-
mittee, including taking my many calls to strengthen the imple-
mentation of the CARES Act.
Secretary Mnuchin, you have used your authority to provide
Community Development Financial Institutions (CDFIs) and Mi-
nority Depository Institutions (MDIs) greater access to the Pay-
check Protection Program (PPP), including by setting aside $10 bil-
lion for them to lend to ensure that more loans go to small, minor-
ity-owned businesses.
Chairman Powell, you have worked with us to reduce the min-
imum loan size at the Main Street Lending Facility from $1 million
to $250,000, and to extend the length of the loans. You have also
expanded eligibility of the Municipal Liquidity Facility to increase
access to a greater number of cities and towns.
The CARES Act has provided important relief to struggling fami-
lies and communities, but as the pandemic has strengthened, so
must our efforts.
I now recognize the ranking member of the committee, the gen-
tleman from North Carolina, Mr. McHenry, for 4 minutes.
Mr. MCHENRY. Thank you. Thank you all for being before the
committee and behind the salad guards that we have arranged for
you. It’s good to see your smiling faces behind your masks, but I
am grateful that we are able to assemble. This is certainly a large
undertaking for the second-largest committee in Congress, and I do
want to commend the chairwoman for these efforts so that we could
actually have this hybrid hearing. I think it shows that Congress
and our government are still working, even if we have to do so
using technology. Thank you all for your response and your active
response since this crisis began.
I want to say, first of all, I believe that the Fed’s and Treasury’s
decisive actions prevented the worst of the economic catastrophe,
but there is still much work to be done. It is important to remem-
ber this is not a crisis that was caused by irresponsible choices by
any specific industry or corporation. What we have seen is the im-
pact of a voluntary shutdown of our economy in an effort to save
lives. The bipartisan CARES Act directed both the Treasury De-
partment and the Federal Reserve to stand up responsible pro-
grams that would have been unthinkable even months ago, and to
do so quickly, and you have done so rather quickly.
Now that many of these programs are up and running, we must
be forward-thinking to seek solutions to return us to the roaring
economy that we experienced right before the global health crisis.
That means we need to understand the nature of what we have
done and what we need to do going forward. We know the pan-
demic has touched nearly every aspect of our economy and every
family. Facilities discussed today need to be similarly far-reaching
and responsive to economic conditions, not political ones. And I
know there are a number of programs that have been desired by
policymakers to be company-specific or something like that, but
that is not the appropriate response nor commensurate with the
law.
Moreover, Members are going to have a lot of questions about fis-
cal policy, which I think Secretary Mnuchin is best fitted to, and
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monetary policy, which Chairman Powell is best suited to. And I
think the understanding of that is important for us as policy-
makers to experience at the beginning of this hearing rather than
to hear you defer to one another. Our role in Congress is to assess
the effectiveness of existing programs, determine the goals for addi-
tional relief programs, and identify the appropriate entity to pro-
vide that relief. That is our role.
Of course, we need to access the key programmatic data, and so
I want to commend Secretary Mnuchin for coming forward with
this type of oversight material in a massive, unprecedented way,
with the type of low-level data that we requested in Congress, and
to provide that in a transparent way. The thousands of pages of
documents that you and your team have assembled for just this
committee alone is staggering in such a short period of time. I hope
my colleagues will use this data appropriately so that we can as-
sess these programs and make sure they are working.
I do want to commend you, Secretary Mnuchin, for the delivery
of the PPP program so effectively and so quickly. It wasn’t perfect,
of course, but it saved millions of jobs. And Chairman Powell, I
want to commend you. You have made your words good in terms
of action, and that builds confidence in the institution of the Fed-
eral Reserve, that your words actually are as good as action by the
Federal Reserve. So, thank you for following through on your word
and your commitment. I think there is positive news in terms of
the assessment for this initial response, and I want to thank you
for being here at the first quarterly oversight hearing under the
CARES Act.
Madam Chairwoman, on a personal note, I would like to welcome
back our friend and colleague, the ranking member of the Over-
sight Subcommittee, Andy Barr, from his family concerns he has
been attending to. So, thank you, Andy. We welcome you back.
I yield back.
Chairwoman WATERS. Thank you very much. I now recognize the
gentleman from Texas, Mr. Green, who is also the Chair of our
Subcommittee on Oversight and Investigations, for 1 minute.
Mr. GREEN. Thank you, Madam Chairwoman. And I thank every-
one. It is an honor to serve under your leadership, Madam Chair-
woman.
The 2019 Home Mortgage Disclosure Act (HMDA) data were re-
leased last week and demonstrate that unequal access to credit on
the basis of race and ethnicity remains the norm in America today.
This is something that we can do something about, but there is a
problem. Many of the people who have the authority and who are
in positions to make a difference refuse to even acknowledge that
the problem exists. I have the evidence. I have pictures from prior
hearings. The one to my right asks, ‘‘Do you believe that discrimi-
nation in lending exists?’’ One person has his hand up. He is with
the NAACP. He is African American. The four Anglo persons on
this panel refused to raise their hands. These are the problems
that we have to contend with. I yield back the balance of my time.
Chairwoman WATERS. Thank you, Mr. Green. I now recognize
the subcommittee’s ranking member, Mr. Barr, for 1 minute.
Mr. BARR. Madam Chairwoman, before I deliver my opening
statement, I rise to ask a question of personal privilege.
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Chairwoman WATERS. Without objection, certainly.
Mr. BARR. Thank you, Madam Chairwoman. As you know, 2
weeks ago, I lost my wife unexpectedly to a heart condition, and
I want to express my sincere appreciation to you, Madam Chair-
woman, Ranking Member McHenry, and to all of my colleagues on
this committee on both sides of the aisle for the outpouring of pray-
ers and expressions of sympathy for Carol and her greatest legacy,
our two daughters. Your friendship and kindness during this dif-
ficult time for me and my family means so much, and I thank all
of you.
Chairwoman WATERS. Thank you very much, Mr. Barr, and now
you may take 1 minute if you would like—
Mr. BARR. Thank you.
Chairwoman WATERS. —on the subject that is before us today.
Mr. BARR. Thank you. And thank you, Secretary Mnuchin and
Chairman Powell, for appearing before the committee today and for
your continued efforts to ameliorate the effects of the government-
imposed shutdown of the economy arising out of the pandemic.
Congress acted decisively through the passage of the CARES Act
and other legislation to mitigate the damage to the economy, and
keep people employed and businesses strong to ensure that the
economy can emerge on the other side in a position for long-term
growth. Congress directed the Fed and Treasury to play a critical
role in the response, and throughout, you both have been decisive
and aggressive in using the tools at your disposal and been incred-
ibly responsive to congressional concerns. You have made appro-
priate adjustments, each of you personally, and there are elements
of Treasury’s and the Fed’s responses to the pandemic that could
still be improved or adjusted to honor congressional intent. I look
forward to talking to you about those today, including and espe-
cially in commercial real estate. I look forward to discussing that
today. And, again, thank you, both of you, for being here today. I
yield back.
Chairwoman WATERS. Thank you, Mr. Barr. I want to welcome
today’s witnesses. First, we have Steven T. Mnuchin, Secretary of
the Treasury. He has served in this current position since 2017.
Mr. Mnuchin has testified before the committee on previous occa-
sions, and I do not believe he needs any further introduction.
Next, we have Jerome Powell, Chair of the Board of Governors
of the Federal Reserve System. Mr. Powell has served on the Board
of Governors since 2012, and as its Chair since 2017. Mr. Powell
has testified before the committee on previous occasions, and I do
not believe he needs any further introduction.
Each of you will have 5 minutes to summarize your testimony.
When you have 1 minute remaining, a yellow light will appear. At
that time, I would ask you to wrap up your testimony so we can
be respectful of the committee members’ time. And, without objec-
tion, your written statements will be made a part of the record.
Secretary Mnuchin, you are now recognized for 5 minutes to
present your oral testimony.
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STATEMENT OF THE HONORABLE STEVEN T. MNUCHIN,
SECRETARY, U.S. DEPARTMENT OF THE TREASURY
Secretary MNUCHIN. Thank you very much, and, Mr. Barr, let me
express my condolences for your loss.
Chairwoman Waters, Ranking Member McHenry, and members
of the committee, I am pleased to join you today to discuss how the
Treasury Department and the Federal Reserve are working to-
gether to provide liquidity to credit markets, businesses, and
households, as well as State and municipal governments. We re-
main committed to making sure that every American gets back to
work as quickly as possible.
America’s economy continues to recover from the challenges
posed by the COVID-19 pandemic. The jobs report for the month
of May vastly exceeded expectations with a record gain of 21⁄2 mil-
lion jobs after experts had predicted a loss of nearly 8 million jobs.
While the unemployment rate is still historically high, we are see-
ing additional signs that conditions will improve significantly in
the 3rd and 4th quarters of this year.
The ‘‘Blue Chip Report’’ is forecasting that our GDP will grow by
17 percent annualized in the 3rd quarter and by 9 percent in the
4th quarter. The U.S. Chamber of Commerce reported this month
that 79 percent of small businesses are at least partially open, and
half of the remaining businesses are opening very soon. Retail sales
rose in May by 18 percent, more than double the expectation. In-
vestors and businesses have historically high cash positions, the
highest level since 1992, indicating that private capital is ready to
return as communities reopen.
We are in a strong position to recover because the Administra-
tion worked with Congress on a bipartisan basis to pass legislation
and provide liquidity to markets in record time. In particular, the
PPP is keeping tens of millions of employees connected to their
jobs. Economic impact payments are also helping millions of fami-
lies and workers through these challenging months. We are moni-
toring economic conditions closely. Certain industries, such as con-
struction, are recovering quickly, while others, such as retail and
travel, are facing longer impacts and may require additional relief.
We look forward to continued conversations with you to address
these critical economic issues.
Treasury has been hard at work implementing the CARES Act
Program. The PPP: we have approved over 4.8 million small busi-
ness loans for $519 billion. Economic impact payments: we distrib-
uted nearly 160 payments in record time. Programs to support
aviation and other eligible businesses: we have approved and dis-
persed over $27 billion to over 500 airlines and other aviation busi-
nesses, preserving hundreds of thousands of jobs. We are in the
process of documenting loans to business and critical national secu-
rity for approximately $25 billion. The Coronavirus Relief Fund:
from this fund, we have distributed $150 billion across States and
local governments and additional money to tribal governments.
The CARES Act granted Treasury the authority to provide $454
billion to support Federal Reserve Lending Facilities under Section
13.3. Since March 17th, using funds available, I have approved a
number of Federal Reserve programs: the Commercial Paper Pro-
gram; the Primary Dealer Program; the Money Market Mutual
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Program; the TALF; the Primary Market Corporate Credit Facility;
the Secondary Facility; the Main Street Facility; the Municipal Fa-
cility; and the PPP Lending Facility. We have committed approxi-
mately $200 billion to support these. The announcements of these
programs have helped unlock markets and promote much-needed
access to liquidity. We have over $250 billion to create or expand
programs as needed.
While we are beginning to have conversations about supple-
mental relief legislation, we look forward to working with Congress
on a bipartisan basis in July on any other further legislation that
will be necessary. Treasury has already been entrusted with a tre-
mendous amount of funding to inject into the economy. We are
closely monitoring these results and seeing conditions improve. We
would anticipate that any additional relief would be targeted to
certain industries that have been especially hard hit by the pan-
demic, with a focus on jobs and putting all Americans back to work
who have lost their jobs through no fault of their own.
The Treasury Department is implementing the CARES Act with
transparency and accountability. We are providing information to
the government-wide reporting on USAspending and updates to
Congress. We are also cooperating with the congressional oversight
committee, GAO, and others. We are pleased that the Federal Re-
serve has announced plans to boost loan information on its website
regarding its facilities. Chair Powell and I have had very produc-
tive initial meetings with four members of the Oversight Com-
mittee, and we look forward to continuing to work with them.
Thank you very much.
[The prepared statement of Secretary Mnuchin can be found on
page 38 of the appendix.]
Chairwoman WATERS. Thank you. Chair Powell, you are now rec-
ognized for 5 minutes to present your oral testimony.
STATEMENT OF THE HONORABLE JEROME H. POWELL, CHAIR,
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Mr. POWELL. Chairwoman Waters, Ranking Member McHenry,
and members of the committee, thank you for the opportunity to
testify today to discuss the extraordinary challenges our nation is
facing and the steps we are taking to address them.
We meet as the pandemic continues to cause tremendous hard-
ship, taking lives and livelihoods both at home and around the
world. This is a global public health crisis, and we remain grateful
to our healthcare professionals for delivering the most important
response, and to our essential workers who help us meet our daily
needs. These dedicated people put themselves at risk day after day
in service to others and to our country.
Beginning in March, the virus and the forceful measures taken
to control its spread induced a sharp decline in economic activity
and a surge in job losses. As the economy reopens, incoming data
are beginning to reflect a resumption of economic activity. Many
businesses are opening their doors, hiring is picking up, and spend-
ing is increasing. The economy has entered an important new
phase and has done so sooner than expected.
While this bounce-back in economic activity is welcome, it also
presents new challenges, notably the need to keep the virus in
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8
check. While recent economic data offers some positive signs, we
are keeping in mind that more than 20 million Americans have lost
their jobs and that the pain has not been evenly spread. The rise
in joblessness has been especially severe for lower-wage workers,
for women, and for African Americans and Hispanics. This reversal
of economic fortune has caused a level of pain that is hard to cap-
ture in words as lives are upended amid great uncertainty about
the future. The path forward for the economy remains extraor-
dinarily uncertain and will depend, in large part, on our success in
containing the virus. A full recovery is unlikely to occur until peo-
ple are confident that it is safe to engage in a broad range of activi-
ties. The path forward will also depend on policy actions taken at
all levels of government to provide relief and support the recovery
for as long as needed.
The Federal Reserve is strongly committed to using our tools to
do whatever we can for as long as it takes to provide some relief
and stability to ensure that the recovery will be as strong as pos-
sible and to limit lasting damage to the economy. After lowering
the Federal funds rate to essentially zero, our actions so far fall
into four categories: stabilizing Treasury and agency MBS markets;
money market, and liquidity and funding measures; direct efforts
to support the flow of credit in the economy; and targeted regu-
latory measures to support those efforts.
So far, we have created 11 Facilities under Section 13.3 of the
Federal Reserve Act to support liquidity, funding, and the flow of
credit to households and businesses and State and local govern-
ments. Without access to credit, families could be forced to cut back
on necessities or even lose their homes. Businesses could be forced
to downsize or close, resulting in further losses of jobs and incomes
and worsening the downturn.
Our emergency lending facilities have all been undertaken with
the approval of the Treasury Secretary, and many are supported by
funding from the CARES Act. Their status and effects are dis-
cussed in greater length in my written statement, which I have
provided to the committee. The Fed will continue to use these pow-
ers forcefully, proactively, and aggressively until we are confident
that the nation is solidly on the road to recovery. When the time
comes, after the crisis has passed, we will put these emergency
tools back in the toolbox.
I would stress that these are lending powers, not spending pow-
ers. I will also note that we design our facilities to work for broad
ranges of businesses and municipalities. We do not target par-
ticular firms or industries. Elected officials have the power to tax
and spend and to make decisions about where to direct such tar-
geted relief. The CARES Act and other legislation provides direct
help to people, businesses, and communities. This direct support is
making a critical difference, not just in helping families and busi-
nesses in a time of need, but also in limiting long-lasting damage
to our economy.
Public faith in our operations depends on transparency. At the
Fed, we are committed to that transparency, particularly in deploy-
ing our emergency powers. Thank you. I look forward to answering
questions.
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[The prepared statement of Chairman Powell can be found on
page 41 of the appendix.]
Chairwoman WATERS. Thank you very much, Chairman Powell.
I now recognize myself for 5 minutes for questions.
As I mentioned in my opening, the pandemic is strengthening,
and so, too, must our response. Two weeks ago, Chair Powell, when
I asked you about the need for more congressional action to protect
our communities, you said, ‘‘There are something like 25 million
people who are still dislodged from their job, in full or in part, due
to the pandemic. I would think it would be a concern if Congress
were to pull back from the support that it’s providing too quickly.’’
Unfortunately, tomorrow, this is exactly what will happen if the
Senate does not pass the Health and Economic Recovery Omnibus
Emergency Solutions (HEROES) Act. Tomorrow, the PPP program
stops taking new loan applications. The PPP should be extended
immediately so that the remaining $135 billion in funding can sup-
port small businesses. Also happening tomorrow, millions of fami-
lies will be unable to pay their rent and mortgages. In June, one-
third of renters couldn’t pay rent, 4.2 million homeowners are cur-
rently in forbearance because they are unable to pay their mort-
gages, and evictions have already started in many States where
local eviction moratoria have expired. While the moratoria should
be extended, it is not conscionable to simply delay an eviction and
foreclosure crisis. Congress and the Administration must provide
assistance to struggling low-income families to cover their rent and
utility payments.
So, Chairman Powell, millions of families are at risk of being
stripped of their homes. Do you think Congress should provide fi-
nancial assistance to ensure that people can stay in their homes?
Mr. POWELL. Thank you, Madam Chairwoman. I try to keep my
fiscal comments at a very high level, and actually that comment
you referred to, was referring to the unemployment insurance that
expires at the end of July. And I think for the specifics of what you
need to be doing, we have the Treasury Secretary here, and I
would defer to the Treasury Secretary on fiscal matters here.
Chairwoman WATERS. Okay. So, you put it off on Mr. Mnuchin.
While you have made some changes to broaden the Municipal Li-
quidity Facility, many jurisdictions, like the Territories, are still
locked out. When we last spoke, you mentioned that it was dif-
ficult, but perhaps there was a way that Guam may be eligible. Did
you find a way to take a serious look at that and determine wheth-
er or not something could happen?
Mr. POWELL. Yes, we are taking a serious look at that. The Terri-
tories themselves are not investment grade-rated, and they were
not before the pandemic set in, and that is the minimum standard
for access to the Municipal Liquidity Facility. Of course, businesses
in the Territories would be eligible for the Main Street Facility.
Some of the revenue-based facilities that Guam has are investment
grade-rated, but below the minimum, and we are actually review-
ing our credit standards in the Municipal Liquidity Facility at the
moment to determine if there is a way to adjust the Facility in a
way that would make eligible some creditworthy issuers without
violating the spirit or the letter of Section 13.3.
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Chairwoman WATERS. Thank you. Secretary Mnuchin, with crit-
ical unemployment support expiring next month, and today mark-
ing the last day that Treasury and the Small Business Administra-
tion’s (SBA’s) claim that new PPP loans can be approved, does the
Administration support extending these programs as proposed in
the HEROES Act?
Secretary MNUCHIN. We do support additional legislation, and we
look forward to working with the House and the Senate on that.
As it relates to the PPP, I have already had conversations with the
Small Business Committee in the Senate about repurposing that
$135 billion, and I think that should be done, and I look forward
to working with both the House and the Senate so that we can pass
legislation by the end of July.
Chairwoman WATERS. Thank you very much. The ranking mem-
ber of the committee, the gentleman from North Carolina, Mr.
McHenry, is now recognized for 5 minutes.
Mr. MCHENRY. Thank you. Thank you for your testimony. Sec-
retary Mnuchin, I think there is wide agreement that your engage-
ment in the PPP program made things largely better, right? The
Treasury expertise in making sure that SBA could deliver on this
really seminal program of the CARES Act is proven out because
you have 41⁄2 million small businesses that have benefited from it.
The average loan size is quite modest in the context for our econ-
omy, but the effect is pretty widescale. So, what would you say re-
garding the additional funds that are purposed for PPP? What
should be our focus as policymakers on repurposing that $134 bil-
lion? How can we best do that? Is that the 7(a) Program? Is that
an expiry loan program? How do you see this fitting in, given the
actions of Main Street and other Facilities you stood up through
this Act?
Secretary MNUCHIN. Thank you, and I appreciate your com-
ments. I think at the time when we passed the last CARES Act,
the economy was in very difficult shape, and we needed to get
money quickly. And I have said before, programs that took 3 or 4
months were not the focus. I think that there appears to be bipar-
tisan support in the Senate to repurpose the $130 billion for PPP,
and extending it to businesses that are most hard hit, that have
a requirement that their revenues have dropped significantly,
things like restaurants and hotels and others where it is critical to
get people back to work.
Mr. MCHENRY. Okay. That seems like a reasonable step in the
right direction. Chairman Powell, the reputation you have garnered
this year, in particular, is that your actions have been predictable,
and that you signal what you are going to do and you follow
through on it, transparent in that you lay out the metrics for ac-
tion. You, therefore, follow those metrics. Incredible. One example
is that at announcement, you said that you were going to support
corporate bonds, and by saying you are going to support corporate
bonds, the market acted as if the Fed already had the program up
and running, to the point where once you were up and running,
people asked why you followed through on that program.
Now, I think that is important to note. That transparency, that
guidance, that communication has been effective in this opening
stage in setting up these responses. So along those lines, the Fed
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11
took, what I would call, strong medicine in terms of action on the
stress test to restrict dividends and buybacks, and in restraints on
these large financial institutions. I would call that quite strong
medicine. I think what we want to understand are the metrics that
the Fed is going to use in order to make these judgments and as-
sessments in this next phase over the next couple of months for
these large financials?
Mr. POWELL. I think you have to start with two major facts here.
One is that the banking system is very strong, and has been a
source of strength. The banks have been taking on a wave of depos-
its. They have been engaging in forbearance. They have been mak-
ing loans. So, they are a source of strength in this situation, unlike
the last crisis, where they were a source of weakness. It is also a
fact that things are highly uncertain, and so to preserve that
strength, what we have done is we have stopped all share repur-
chases and we have stopped increases in dividends, so we are pre-
serving the level of capital in the system.
To address the uncertainty, looking forward, we did run these
three sensitivity analyses, and they were really to assess the over-
all strength of the system in the face of these downside cases. We
found that the majority of firms were still adequately capitalized,
sufficiently capitalized, in all of those scenarios. Notwithstanding
that, for the first time in the history of these tests, we said that
we are going to ask the banks to resubmit their capital plans. We
are going to distribute scenarios, and we are going to look at the
results again as we learn more about the path of the crisis. And
in terms of the precise metrics we are going to be looking at, we
will be providing more clarity about that, going forward.
Mr. MCHENRY. But based off of that uncertainty, you are assert-
ing as a regulator that you will actively review this to ensure that
we don’t have a financial crisis as a result of this health crisis?
Mr. POWELL. Yes, we are going to keep monitoring this. We are
learning so much every quarter, and the path of the economy is
highly uncertain. In our system, dividends are declared every quar-
ter. We have already stopped the overwhelming majority of dis-
tribution, so we think that is the right place to be.
Mr. MCHENRY. Thank you. Thanks for your leadership and effec-
tiveness, and thank you as well, Secretary Mnuchin, for your effec-
tiveness in leadership. I yield back.
Chairwoman WATERS. Thank you. I now recognize the gentle-
woman from New York, Mrs. Maloney, for 5 minutes.
Mrs. MALONEY. Thank you, and welcome. Secretary Mnuchin, I
would like to ask you about a very troubling oversight issue. As
you know, I am the Chair now of the House Oversight and Reform
Committee, and I take these matters very seriously, and I hope
that you do, too.
In the CARES Act, we created the Pandemic Response Account-
ability Committee, or PRAC, which is a committee of independent
inspectors general that is charged with overseeing all of the money
spent in the CARES Act, and identifying waste, fraud, and abuse.
Last month, the General Counsel’s office in Treasury issued a legal
opinion that questions PRAC’s authority to oversee trillions of dol-
lars of CARES Act spending. To put it bluntly, this legal analysis
is so bad that it borders on bad faith.
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The opinion claims, with no evidence, that Congress did not in-
tend for the PRAC to have oversight authority over anything in the
first half of the CARES Act, including the PPP program and any
of the Fed’s Lending Facilities or the $150 billion in funding for
State and local governments. So I would say, Secretary Mnuchin,
that this interpretation is wrong, that it is just plain wrong.
Senator Gary Peters and I proposed and authored this section of
the law, the PRAC Act, and I was heavily involved in negotiating
those provisions in the CARES Act, and I am telling you that Con-
gress’ intent was for the PRAC to oversee all of the spending in the
CARES Act, not just one-half of the CARES Act, but all of it. That
was our intent, and that was what the bill said explicitly. The in-
terpretation from your general counsel’s office is already causing
problems because it is hindering the PRAC’s ability to monitor how
the States are spending their CARES Act money.
So now, Secretary Mnuchin, I would say that we have worked
very productively together and in good faith negotiations on the
Beneficial Ownership Bill and other bills before Congress, so I hope
that you will take my concerns about this erroneous legal opinion
seriously, and this is what I would like to ask today: I would like
you to commit to interpreting this section of the CARES Act as
Congress intended, with the PRAC’s oversight authorities applying
to all of the CARES Act spending. I think this is a small step, but
a very important one, that you can take to show that you are seri-
ous about the oversight of the trillions of dollars in the CARES Act.
Secretary MNUCHIN. Thank you. I appreciate your comments,
and I assure you we are very much committed to working with the
Oversight Committee on transparency. Now, as it relates to this,
I can assure you it was not bad faith. I am happy to have our office
follow up with you. It has to do with a technical issue of recipients
reporting. As it relates to the issue of monitoring State spending,
I am more than happy to put the PRAC in touch with our Inspector
General, who has primary oversight, and to make sure that what-
ever information specifically the PRAC wants on the States, that
we accommodate.
Mrs. MALONEY. That is not what I am asking. What I am asking
is, will you commit to interpreting the PRAC’s oversight authorities
as applying to all of the CARES Act spending? That was our intent.
I wrote that section of the law. That was what Congress wanted.
There is no problem with the interpretation. It is very clear and
explicit. Will you commit to allowing the oversight that was in the
bill?
Secretary MNUCHIN. I appreciate that you wrote that portion. I
would also say I appreciate I had very direct discussions with peo-
ple in the Senate about various different oversight. That is why we
agreed to a new oversight committee with full transparency. We
agreed to provide information that was not required under Section
13.3 so we have full transparency. And, again, I am happy to follow
up with you on the specific concerns as to which different entities
should receive what information. I think it is important that there
is not bureaucratic overlap. But, again, let me emphasize, if the
PRAC needs certain information, we will try to do what we can to
accommodate it.
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Mrs. MALONEY. I am very disappointed with that answer, and I
guess we will have to pursue a legislative solution. It was very
clear that the intent of Congress was that PRAC would have over-
sight of all of the CARES spending. I yield back. I am out of time.
Chairwoman WATERS. Thank you.
The gentlewoman from Missouri, Mrs. Wagner, is now recognized
for 5 minutes.
Mrs. WAGNER. Thank you, Madam Chairwoman, and thank you
for joining us today, Secretary Mnuchin and Chairman Powell. I
want to commend you both at the outset here for your leadership
during this unprecedented time. Both the United States Depart-
ment of the Treasury and the Federal Reserve System have shown
their ability to both effectively and rapidly respond to the economic
crisis caused by COVID-19 by providing trillions of dollars to sta-
bilize our economy.
Chairman Powell and Secretary Mnuchin, lender registration for
the Main Street Lending Program went live on June 15th, I be-
lieve. Do either of you know how many lenders have registered so
far, and do you know the average size of the lenders participating?
If not, when do you think this information might be made avail-
able? I will toss it to either of you?
Mr. POWELL. Sure. In the range of 300 banks, and it may be
higher than that—that number is a few days old—have entered the
registration process. It takes a few days, so I can’t tell you exactly
how many, but that is how many will come out of the pipeline.
Mrs. WAGNER. Average size of lenders?
Mr. POWELL. I don’t know. The size ranges from the large to the
very small, and the very small are particularly well-represented,
but it does range across the full spectrum.
Mrs. WAGNER. And you will be providing this information to us
on a regular basis?
Mr. POWELL. We are working with the borrowers to figure out
the right way to connect lenders and borrowers and borrowers and
lenders so they can get in touch with each other. So we are work-
ing with the lenders to put something together that will make that
happen in the most efficient way.
Mrs. WAGNER. Thank you. Chairman Powell, in your efforts to
create broad-based programs, do you think that the Main Street
Facility will need to expand any further to meet the needs of our
businesses?
Mr. POWELL. Let me say, as you have seen, the Secretary and I
work very closely on this, and we have been very willing to learn
from experience and learn from what we are hearing from different
parts of the economy, so we—
Mrs. WAGNER. You certainly did with the PPP program, so I
would hope that you would approach this the same way.
Mr. POWELL. We will. As you know, we are in the relatively early
stages of opening up a non-profit Main Street Facility, and I think
will be watching as the regular Main Street fully comes online, and
continuing to look to see whether there are ways we can improve
it.
Mrs. WAGNER. Thank you. Chairman Powell, last week’s release
of the Federal Reserve’s Comprehensive Capital Analysis and Re-
view (CCAR) outcome and, more importantly, the results of their
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COVID-19 sensitivity analysis, underscores the resilience, I think,
of the banking system. While we can all agree that the level of un-
certainty in the economy continues to be high given the progression
of the COVID-19 pandemic, I believe the Federal Reserve subjected
CCAR filers to extraordinary assumptions regarding unemploy-
ment and GDP contraction. Despite these assumptions, the 33 larg-
est banks remained above minimum Tier 1 capital requirements.
Given that, I am wondering why the Federal Reserve has indicated
that firms will need to resubmit capital plans, and, in addition,
there will be an off-cycle supervisory stress test in the ‘‘latter part
of the year.’’ The Federal Reserve has already- ncluded firms’ cap-
ital planning management processes and, I think, approaches and
assumptions, passed the toughest test. So, could you explain that,
please?
Mr. POWELL. Sure. What the 33 institutions all passed was the
regular-way, severely-adverse scenario that we wrote before the
pandemic arrived. That is what controlled the outcome at this time.
Also, though, remember, the pandemic arrived right in the middle
of the stress test period, so we quickly devised, without going
through our usual very thorough vetting process, three alternative
sensitivity analyses, one of which was a V-shaped recovery, one of
which was U-shaped, and one of which was a serious double dip,
and these are very serious downside side cases. We didn’t use them
to evaluate individual institutions, but, rather, to evaluate the
broad range of institutions, and we didn’t—
Mrs. WAGNER. I am running out of time. Why lock up additional
capital now? This has the potential to have, I think, a chilling ef-
fect on the economy at exactly the point where banks need to pro-
vide credit and liquidity to households and businesses to facilitate
economic recovery and support and financial intermediation in the
capital markets. So, I will leave you with that.
Mr. POWELL. No, we didn’t do that. We are not looking to raise
capital standards during a crisis. That is not what is going on here.
Mrs. WAGNER. Thank you for that clarification, and I yield back.
Chairwoman WATERS. Thank you. The gentlewoman from New
York, Ms. Velazquez, is now recognized for 5 minutes.
Ms. VELAZQUEZ. Thank you, Madam Chairwoman, and Ranking
Member McHenry. Mr. Secretary, at any time, have you been
blocked by President Trump or anyone else at the White House
from providing access to information requested by Congress or an
oversight body?
Secretary MNUCHIN. No.
Ms. VELAZQUEZ. Have you ever prevented anyone within the
Treasury Department, or the Administration, more broadly, from
providing access to information requested by Congress or an over-
sight body?
Secretary MNUCHIN. If you are referring to an oversight body,
not that I am aware of, no.
Ms. VELAZQUEZ. Okay. So, tonight, the PPP program expires, and
you are advocating for extending that authorization. You are telling
us that you are already discussing this with the Senate, but there
is a role for the House.
Secretary MNUCHIN. Of course.
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Ms. VELAZQUEZ. Yes, and I will remind you that nothing will
move unless we have those conversations. As Chair of the House
Small Business Committee, I cannot in good sense make a deter-
mination as to where the program should go or what tweaks or
what reforms the program needs unless we have access to the data.
When are you going to provide the data to our committee?
Secretary MNUCHIN. I believe we said by the end of this week,
and we have reached out to your committee to make sure we estab-
lish secure—
Ms. VELAZQUEZ. No, we got a letter, but no date has been—
Secretary MNUCHIN. It is supposed to be delivered by the end of
this week. Let me just say, I am more than happy to speak to you
if you would like to set up a time to speak.
Ms. VELAZQUEZ. Sir, we have been contacting your office every
week asking for you to appear before the Small Business Com-
mittee with the administrator. I spoke to her last week. She in-
tends to come before the committee. You are saying here that we
need to take care of those most hard-hit businesses in this next re-
purpose of the $135 billion that is left, but we need to know if the
program worked as intended by Congress. We know that 4 million
businesses accessed the program, but what about the millions of
minority- and women-owned businesses that were not able to ac-
cess the program? You said that maybe a restaurant might need
to get a second loan. I just heard Senator Marco Rubio—well, no
one should get a second loan unless we know that most businesses
who are struggling get a chance to get a loan.
Chairman Powell, as Chair of the House Small Business Com-
mittee, I am particularly concerned about the state of our nation’s
small businesses as the pandemic poses an acute risk to their sur-
vival. How would the failure of small businesses, especially those
that are women- or minority-owned, adversely affect the commu-
nities they serve, particularly those of color? What impact could
these failures have on future labor market conditions?
Mr. POWELL. Of course, the effects could be very significant.
Small businesses generate most of the jobs and most of the growth
in the economy, so that could be very important, particularly in mi-
nority communities.
Ms. VELAZQUEZ. Chairman Powell, earlier this month, the
Organisation for Economic Co-Operation and Development (OECD)
said the pandemic has triggered the most severe recession in a cen-
tury and warned that the global economy could contract by 7.6 per-
cent this year should a second outbreak hit. Do you agree with this
assessment?
Mr. POWELL. That particular number—there is a range of assess-
ments, but I would say that is in the range. And, yes, I can’t think
of a more—
Ms. VELAZQUEZ. And what impact do you see a second outbreak
having on both the U.S. and the global economy?
Mr. POWELL. I certainly wouldn’t forecast that, and, just hypo-
thetically, a second outbreak could force governments and force
people to withdraw again from economic activity. And I think the
worst part of it would be to undermine public confidence, which is
what we need to get back to lots of kinds of economic activity that
involves crowds.
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Ms. VELAZQUEZ. Thank you. I yield back.
Chairwoman WATERS. Thank you. Mr. Lucas, you are now recog-
nized for 5 minutes.
Mr. LUCAS. Thank you, Madam Chairwoman. Chairman Powell
and Secretary Mnuchin, thank you for attending this hearing
today. And I want to begin by commending Chairman Powell on fi-
nalizing the Inter-Affiliate Margin Rule. This may be the last time
we discuss this, sir. While these rules may seem abstract and dif-
ficult to understand, they have a real impact on agriculture and oil
and gas producers back home that use financial derivatives, man-
age risk, and plan for the future, which can be, as we have seen
in past months, to put it mildly, unpredictable.
That said, as both of you know, commercial paper finances a
wide array of economic activity and provides liquidity for compa-
nies to meet their operational needs. With the commercial paper
market under significant strain due to COVID-19, in mid-March,
the Federal Reserve established the Commercial Paper Funding
Facility to encourage investors to lend in the commercial paper
market, which ultimately supports businesses and jobs across the
country. Chairman Powell, could you describe the current indica-
tors of how the commercial paper market responded to the creation
of the facility, and has there been a discussion to expand the facil-
ity to address liquidity issues faced by Tier 2 issuers?
Mr. POWELL. The Commercial Paper Facility has substantially
healed. As you point out, it really closed there in the beginning
part of March, as so many markets did, and when we announced
the facility, the highest-graded borrowers were able to start bor-
rowing. So largely, but not completely, that market has returned
to fairly normal function, and we are watching it carefully. I would
say we are not currently assessing whether to broaden that facility,
but should the situation deteriorate, we would have that as an op-
tion.
Mr. LUCAS. Thank you. Secretary Mnuchin, there have been re-
ports that China is restricting global agricultural imports due to
COVID-19. How are we working to resolve this with China, and do
you anticipate this impacting the terms of the Phase 1 trade agree-
ment to purchase $200 billion in U.S. goods and services, particu-
larly the commitment to purchase $40 billion in U.S. farm prod-
ucts?
Secretary MNUCHIN. Let me just first emphasize that we have
very serious concerns about the lack of transparency from China as
it relates to COVID. Having said that, we have every expectation
that they will support and live up to the Phase 1 agreement, and
they are well on their way for those commitments.
Mr. LUCAS. One last question. Native American tribes have been
hit particularly hard by COVID-19. Tribal employment is often con-
centrated in the arts, recreation, and accommodation industries.
How has the Federal Reserve and Treasury been looking specifi-
cally at the economic challenges faced by tribes?
Mr. POWELL. As to Main Street, of course, the tribal businesses
are eligible for participating in Main Street, and that is where a
lot of the economic activity is there. The tribes themselves are not
really general obligation issuers, so they are not particular can-
didates for the Municipal Facility.
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Mr. LUCAS. Thank you. And with that, Madam Chairwoman, I
yield back the balance of my time.
Chairwoman WATERS. Thank you. Mr. Sherman, you are now
recognized for 5 minutes.
Mr. SHERMAN. Thank you. Secretary Mnuchin, I am a very nice
guy, so I won’t mention the press reports that say that over $1 bil-
lion in stimulus payments have gone to people who are deceased.
But I will urge you to adhere quickly to the agreement that you
have made with the Senate Small Business Committee to very
quickly release the names and data of all PPP borrowers that have
borrowed over $150,000.
Chairman Powell, back on March 12th, I sent you a letter urging
that you prohibit stock buybacks by banks. You have done so.
Thank you very much. About 2 weeks ago, you went on the record
to say, ‘‘I would think that it would be of concern if Congress were
to pull back their support,’’ having just said that there are 25 mil-
lion people who have been dislodged from their jobs. I thank you
for that advocacy, and I hope Congress listens. We need to do more
to stimulate this economy under these circumstances.
Secretary Mnuchin mentioned the support that he’s providing to
local and State Governments, but that is all in the form of loans,
and, of course, almost all State and local governments can’t run a
deficit. So with their revenues down by hundreds of billions of dol-
lars, I hope we pass the HEROES Act and actually provide aid to
State and local governments. And one issue, Chairman Powell, for
the Main Street Lending Program that is particularly relevant to
commercial real estate is that if they get a loan from you, they vio-
late the loan covenants that they have in their existing mortgage,
and I look forward to working with you on that. One possible solu-
tion is the bill that I submitted, and we have had hearings on in
this committee, the Business Borrowers Protection Act. Certainly,
getting a loan on a program that we have authorized because of the
COVID crisis should not trigger the violation and make a pre-exist-
ing mortgage immediately due and payable.
I spent this morning at the White House with a few of our col-
leagues getting briefed on Russian involvement in Afghanistan,
and it appears to me, Secretary Mnuchin, that they have been bold.
They have killed our soldiers, because when they do something else
that we catch them on, we don’t sanction them very much. The de-
bate now is whether they took the obscene step of putting a bounty
on the head of individual soldiers, or whether they have limited
their involvement in Afghanistan to just aiding the Taliban, but
not correlating that aid to how many dead Americans this or that
operation created. And, of course, the response from the Adminis-
tration to this seems to be, well, let them into the G-8 and other-
wise help them. That kind of lax response will lead to more de-
ceased American soldiers.
Under the Chemical Weapons Act, which Congress passed a cou-
ple of years ago, your Department was supposed to sanction Russia
for their violation of the Chemical Weapons Act when they used
poison to try to assassinate a Russian dissident in Britain, but you
opted for the weakest sanctions allowed by the Act. What it does,
is it prohibits certain loans from Americans to the Russian govern-
ment, but it doesn’t apply to ruble transactions. It doesn’t apply to
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18
loans to state-owned enterprises, and it apparently doesn’t apply to
purchases in the secondary market.
Given the fact that our under-sanctioning of Russia has led, at
least, to their aiding the Taliban in a general sense and, according
to press reports, has led to the specific putting of a bounty on our
soldiers, could you revisit your decision on this existing law and
impose these bans on ruble transactions, state-owned enterprises,
and secondary markets?
Secretary MNUCHIN. You covered a lot—
Mr. SHERMAN. It must be a tough question. You took off your
mask.
Secretary MNUCHIN. Let me just comment, we believe we fol-
lowed the law and selected amongst a series of items at the time,
but I am happy to go back—I recall the situation—and look at it
again.
Mr. SHERMAN. There are credible reports that they put bounties
on our troops. Please, look at it again.
Secretary MNUCHIN. Again, on that, I just want to be clear. For
the record, I am not commenting on classified information, nor do
I think it is appropriate in this setting to talk about alleged infor-
mation that is in the press.
Chairwoman WATERS. Mr. Posey, you are now recognized for 5
minutes.
Mr. POSEY. Thank you, Madam Chairwoman and Mr. Ranking
Member, for holding this hearing today to review the Treasury and
the Federal Reserve’s pandemic responses.
Mr. Secretary, I want to commend your efforts and those of the
President’s team, but most especially you, in working with Con-
gress to put relief in place during these extraordinary times. The
stimulus checks and the Paycheck Protection Program have been
tremendously successful in bringing much-needed relief to hard-hit
American families. It has been huge. Nothing like it before. It is
great, the very best there is.
Secretary MNUCHIN. Thank you.
Mr. POSEY. I also want to commend Chairman Powell for his
leadership in keeping the financial markets stable and liquid in the
face of the downturn in the general economic conditions. We await
full implementation of the Main Street Lending Program, and I am
looking forward to hearing more about that.
My first question is, our nation’s hoteliers have been facing one
of the most severe downturns in demand of any sector of our econ-
omy. Revenues have plummeted as much as 80 percent during the
shutdown, and extreme curtailment of travel, as you know.
I am wondering—and I would like a response from both of you—
if you have the authority you need under Section 13(3) of the Fed-
eral Reserve Act, and more broadly, the CARES Act, to address the
liquidity and cash flow crisis that the hotel sector will be going
through?
Mr. POWELL. I will go first. We are not looking for additional au-
thority under 13(3). Our authority is, of course, to lend to solvent
institutions and in programs of broad applicability, and any com-
pany in any sector that meets those tests can borrow at one of our
facilities.
Mr. POSEY. Okay.
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19
Secretary MNUCHIN. The only thing I would just add to that is
that we do appreciate, and certain comments have been made by
this committee and others as it relates to loans that are in
securitizations, and particularly hotels and other real estate that
was properly levered beforehand. It does not lend itself as well to
the 13(3) facilities, and we continue to look at that.
Mr. POSEY. Okay. Mr. Chairman, some of our businesses, includ-
ing, again, the hoteliers, are warning that their inability to make
payments is threatening the servicing of commercial-backed securi-
ties, and I just wonder if you can bring us up to date on the status
of the commercial mortgage-backed securities (CMBS) market?
Secretary MNUCHIN. As I just mentioned, one of the problems of
the CMBS market is there are very strict contractual obligations,
and that is why one of the things I do think we need to look at
in the next CARES Act is additional funding for these industries
that are the hardest hit, so they can continue to rehire people, so
that as occupancy increases, they have employees that they can
maintain.
Mr. POSEY. Great. Thank you. I recently wrote to both of you ex-
pressing my concern for businesses that are asset-based and I be-
lieve they will face hurdles to assessing Main Street Lending facili-
ties because of the nature of their business challenges, their ability
to meet lending criteria, based on the earnings before interest,
taxes, and amortization, the so-called EBITA. For example, an air-
craft developer in my district, especially an R&D organization, falls
into this category, and I wonder if you could tell me what the possi-
bilities are of providing access to Main Street Lending facilities for
businesses like that? And you can go first, Mr. Secretary.
Secretary MNUCHIN. We have discussed looking at asset-based fi-
nancing, and that is something we continue to discuss with the
Federal Reserve.
Mr. POSEY. Okay. Mr. Powell?
Mr. POWELL. Yes, that is where we are.
Mr. POSEY. Thank you, Madam Chairwoman. I yield back.
Chairwoman WATERS. Thank you. Mr. Clay, you are now recog-
nized for 5 minutes.
Mr. CLAY. Thank you so much, Madam Chairwoman, and I
thank both witnesses for your participation today.
Mr. Secretary, I am somewhat troubled by recent reports that
some banks have taken stimulus payments from individuals and
families, where the garnishment orders are negative account bal-
ances, to offset unrelated debts owed to them. I find it troubling
that banks would serve as debt collectors at a time like this when
families need resources most.
When will Treasury issue guidelines articulating your expecta-
tion that financial institutions refrain from taking stimulus funds
away from their customers during a time like this?
Secretary MNUCHIN. Let me first say I agree with you, and that
I think it would be awfully unfortunate if banks are doing that. We
have had inquiries about the issue of garnishment, and we agree,
from a policy standpoint, that there should have been no garnish-
ment. Unfortunately, that is something we need to address in the
next CARES Act if we do additional direct payments, because there
are certain State laws that were not overridden in the existing
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20
CARES Act. But my understanding is that is a State issue and not
a Federal issue. But we agree from a policy—
Mr. CLAY. But think about the cruelty of the policy. Wouldn’t you
want to—
Secretary MNUCHIN. As I said, I agree with you on the policy.
Mr. CLAY. Couldn’t you all issue a blanket—
Secretary MNUCHIN. We have asked our legal department, and
unfortunately we can’t, and that is one of the things we would
want to fix in the next CARES Act. So, we agree with you from the
policy standpoint.
Mr. CLAY. Thank you. Chairman Powell, for many nonprofits and
small businesses, earnings before interest, taxes, depreciation and
amortization is not a widely used metric. Have you considered ap-
plying other metrics of debt, future growth, or financial health to
the Main Street Lending Program so that nonprofits and small
businesses are fully able to participate?
Mr. POWELL. Yes. As a matter of fact we have, particularly for
nonprofits, of course, earnings before interest taxes doesn’t make
any sense. So, you don’t need to take taxes out. They are non-
profits. They don’t pay tax. We are looking at a range of—and we
actually put this out for comment, and we got a lot of very thought-
ful comments from the nonprofit community, looking at cash flow
and also financial resources, more broadly.
In terms of companies, EBITA is just basically pre-tax cash flow.
It is a very widely used metric. But there are other metrics, and
as the Secretary mentioned, one of them, probably the next one in
line, is something along the lines of asset-based, and that is some-
thing that we are looking at with the Treasury.
Mr. CLAY. Under the Main Street Lending Program, you reduced
the minimum loan threshold from $1 million to $250,000, and then
by expanding the program to nonprofits with more than 50 employ-
ees. However, many small businesses may not need $250,000.
Mr. Chairman, has the Fed considered eliminating the minimum
loan threshold altogether?
Mr. POWELL. We have not considered eliminating it yet, of
course, and we are just now getting rolling with loans, as you
know. So we can, once we get up and running, look at lowering it
again, but you get into a very different kind of lending when you
are down lower. These are really personal loans rather than busi-
ness loans. They are generally guaranteed by the business oper-
ator, and we could look at that. But that would be something we
would look at once we get up and running.
Mr. CLAY. Yes, but it is kind of concerning that you have that
threshold at $250,000 when, say, a small business in St. Louis
needs $100,000 to survive through this pandemic until they get
back on their feet. Any consideration given to accommodate that?
Mr. POWELL. Yes. No, we can see ourselves possibly lowering the
threshold again, but just logistically, for us to be making very, very
small loans would be difficult, and those people may be better dealt
with through fiscal policy. But I can see us down the road looking
at a lower threshold.
Mr. CLAY. I see. Thank you both for your responses, and Madam
Chairwoman, I yield back.
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21
Chairwoman WATERS. Thank you. Mr. Scott, you are recognized
for 5 minutes.
Mr. SCOTT. Thank you, Madam Chairwoman. Chairman Powell,
we all know that job losses have disproportionately impacted
women, African Americans, and other minorities, but at the same
time, our capital markets have improved significantly since the epi-
demic. Why is that? Is there something you are doing more so to
help the capital markets than helping job losses corrected?
Mr. POWELL. No. In fact, the objective of everything we are
doing, every single thing we are doing is to take the 25 million peo-
ple whose working lives have been disrupted and create a situation
in which they have the best chance to go back to their old job or
to get a new job. That includes all the facilities that we are doing.
That is the overriding goal of what we are doing, and every one of
them helps in that direction.
Mr. SCOTT. Yes, I know that is your goal, but what I am trying
to get at is, is it correctable? Are there some things you can do to
fix this imbalance between staggering lowering unemployment and
soaring rise in our financial capital markets?
Mr. POWELL. What we have been trying to do is to create accom-
modative financial conditions and supportive financial conditions so
that when the economy reopens—remember, we sort of deliberately
closed it down—that expansion can be vigorous and strong, and it
is just beginning now. Our support for that is part of what is driv-
ing the job growth that you saw in May, which was surprising to
the upside.
Mr. SCOTT. Yes. Also, while we have both of you all here, I want
to pick up on what Chairwoman Waters was saying. We have a
great opportunity here to do both of these things, with our housing
and homeowner tranche that we are putting forward. This goes
right into the belly of our economic wheelhouse jobs, keeping people
secure, because it is coming. When 25 or 30 million people lose
their jobs, how are they going to pay their house note? How are
they going to pay the rent? How are they going to pay utilities?
And more than that, how are the banks and the financial institu-
tions going to get their mortgage payments so that they can make
payments for the securitization of those mortgages that keeps our
financial system healthy?
So, I want to ask you to make sure that you all start talking
about these things that we are putting forward. You my not agree
with us on everything, but this is one that is very important.
Let me go to one other area, to you, Secretary Mnuchin. None of
the lending facilities established have targeted the needs of our ag-
riculture industry. Now, why do I mention that? Food. It is coming.
I don’t know why people can’t see this crisis. Food shortages are
coming. It is almost like the farmers have been the forgotten ones.
Are they qualifiable as small businesses? Many of them don’t know.
They are sort of out there, just dribbling along the misty flats.
What are you all doing to help lift up and make sure that we
give our farmers, our rural communities the kind of help that they
need? Because all of the food chain is going down, and you hear
about the closures, the food processors are going down. Farmers
are coming. These are small. Most of them, they are very impor-
tant. Why can’t they be qualified as small businesses? Where are
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22
they? They are getting lost in the shuffle. And if we get a food
shortage, we are in—
Chairwoman WATERS. Thank you. Mr. Luetkemeyer, you are now
recognized for 5 minutes. I would encourage all of the Members to
keep their mask on, please.
Mr. LUETKEMEYER. Thank you, Madam Chairwoman, and thank
you, Secretary Mnuchin and Chairman Powell, for being here
today, and for your great leadership during this time. As we have
gone through this, you guys have been very responsive, and you
have been very cooperative. I can tell you from discussions that we
have had in different settings, you have implemented lots of sug-
gestions that we have come up with as a group, as a Congress, and
for that, we are grateful. Leaders make tough decisions in tough
times, and you have both exhibited the ability to make those tough
decisions, so thank you very much.
Both of you, in the past, have expressed your support for housing
finance reform and GSE credit risk transfer (CRT). In prior testi-
mony, you have committed to reviewing your prospective policies to
determine whether capital relief is appropriate for U.S. banking or-
ganizations that engage in CRT with sound counterparties. FHFA
recently re-proposed a capital framework for Fannie Mae and
Freddie Mac, which adopts much of the U.S. banking framework,
but in doing so, seems to have taken a confused and more punitive
approach to certain types of CRT.
I am encouraged by the questions posed in the proposal that
would seem to indicate that there remains room for revision before
the rule is final. I ask each of you gentlemen whether you still
agree that it is appropriate that the Enterprises should receive
meaningful capital credit for sound CRT transactions that they
conduct with sound counterparties and avoid the accumulation of
credit risks on the balance sheets of two institutions that remain
taxpayer-backed.
Secretary MNUCHIN. Yes. I agree that they should receive relief,
that we should encourage them to do credit risk transfers with
creditworthy counterparties, and I can also tell you that the Finan-
cial Stability Oversight Council (FSOC) is beginning to review
these issues as well.
Mr. LUETKEMEYER. Chairman Powell, do you want to comment
on that as well?
Mr. POWELL. No, I do agree, and we are actually in the middle
of doing a careful review of the whole capital proposal as well.
Mr. LUETKEMEYER. Okay. Thank you. As you know, it is hard for
me to let a hearing go without talking about Current Expected
Credit Losses (CECL), so we are going to try it one more time.
In March of this year, the Federal Reserve and the FDIC and the
OCC issued an interim rule to delay for 2 years estimated impact
on regulatory capital at CECL, followed by a 3-year phase-in. In
addition, the CARES Act included an optional delay in CECL im-
plementation until the end of 2020 or the end of the pandemic,
which 25 percent of applicable entities actually opted for.
The Department of the Treasury is also conducting a study about
the impact of Current Expected Credit Losses (CECL)—we were di-
rected to do that—and most recently, my colleagues and I sent a
bipartisan letter to the Financial Stability Oversight Council
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23
(FSOC), urging for a delay on CECL implementation for all entities
until 2022, set every entity, both banks and non-banks, which were
not included in the CARES Act, on the same footing, and Treasury
can conduct the study with the input of a real-life scenario that we
have ongoing today.
Given the actions by Congress and the prudential regulators,
should we delay CECL, as I and my colleagues have called for, and
should the Treasury examine the real-life scenario we have gone
through when conducting their study?
Mr. Mnuchin?
Secretary MNUCHIN. I think that should be seriously considered,
and yes, we are working on the study.
Mr. LUETKEMEYER. The President issued an Executive Order
with regards to each agency, going through and looking at all of
the rules and regulations that were either waived, declined,
changed, whatever. If they don’t work now, why should we continue
them down the road when we get out of this mess? And so, I as-
sume everybody is doing that.
And this particular accounting principle would seem to fall in
that area of, we need to be looking at this as something down the
road that we need to get rid of in its entirety.
Chairman Powell, would you like to comment on this as well?
Mr. POWELL. No, I would agree.
Mr. LUETKEMEYER. Okay. Thank you. I appreciate that, because
I think there is a time and a place for rules and regulations. There
is a time and a place that if they are nonfunctioning, we need to
get rid of them and start over.
With the Nationally Recognized Statistical Rating Organizations
(NRSROs) and the Federal Reserve emergency facilities, I know
you have heard a lot about this issue from members on both sides
of the aisle, Chairman Powell, especially. The Fed took modest
steps to include smaller NRSROs in the most recent FAQs, but
only if those ratings are accompanied by one of the three incum-
bent NRSROs. I remain concerned that the Fed’s unilateral and
haphazard chairing of these NRSROs is going to have serious im-
plications for small to mid-sized businesses. Have you examined
the impact delineating between the large and smalls is having in
the marketplace?
Mr. POWELL. As you mentioned, we started out getting these fa-
cilities set up very quickly, and we just went with the big three.
After that, I think more than a month ago, we broadened it out to
another group after taking a look. And we are balancing the need
to move quickly and to move with institutions that we know well,
or that are well-known, and that we included more and more, and
that is a process that we are still looking at.
Mr. LUETKEMEYER. Okay. Thank you very much. I yield back,
Madam Chairwoman.
Chairwoman WATERS. Thank you. Mr. Huizenga, you are now
recognized for 5 minutes.
Mr. HUIZENGA. A point of inquiry, Madam Chairwoman. Should
that be on the other side of the aisle? Oh, I am sorry. Okay.
Thank you. I appreciate that. Mr. Chairman and Mr. Secretary,
the word, ‘‘unprecedented’’ has been banned in my house by my col-
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24
lege graduate—well, he graduated remotely—because he was look-
ing around and was a little tired of that word being used.
He has a history. His grandfather, my dad, was born in 1921, on
a kitchen table in the hired hand’s home. My mother was born in
1931 in Flint, Michigan—yes, that Flint, Michigan—and had to
move to Oklahoma, to the Dust Bowl, in the middle of the Depres-
sion, to try to survive, when they lost their house and my grand-
father lost his job.
We know that there is history behind this. So, I am not sure if
this is, ‘‘unprecedented.’’ It certainly may be unprecedented in a
way, in the modern era, where we have seen the government come
in and sort of shut this down.
But what we do know, from looking at history, is that we need
to get the economy moving again. Now the question is how, wheth-
er it is getting kids back to school, as some have suggested, be-
cause if you can’t get kids into school, that is not going to then free
up those parents to be available to work.
Anecdotally, in my area, I know that manufacturers and service
companies are having a very difficult time getting enough workers
to come in to complete a full contingent of line workers, for exam-
ple, or to get a full shift filled. And there are various reasons. Some
have debated about the $600 additional per-week kicker as being
a bit of a disincentive.
But nonetheless, we know that we have to address those folks
who really, truly are not able to get a job, and how do we distin-
guish them from those who are just deciding not to take that job?
One of the things that I have proposed is something called the
Patriot Bonus. The Patriot Bonus would be a 50 percent tax credit
to any company that would give a per-hour bump to their employ-
ees, or a weekly bonus to their employees, or even a one-time bonus
to their employees, to incentivize them to come off of that unem-
ployment insurance system and get back engaged in the workforce,
and I think it is critical that we do that.
I do want to say, also, thank you for your work on the Paycheck
Protection Program. I have talked to Cheryl, who owns a very pop-
ular bagel and coffee shop in my hometown, who knows that she
survived because of it. And Don, who owns a bowling alley in my
district, who was able to keep his folks on the payroll. Those types
of things are critical and were very, very important.
As we are shifting to the Main Street program, I do want to draw
attention, and Chairman Powell and I had this conversation a cou-
ple of weeks ago. I brought up La Colombe. La Colombe is a Phila-
delphia-based company that has a manufacturing production facil-
ity in my district. It is a 26-year-old, fast-growing company. You
may have gotten their coffee in the can. They produce a number
of great products. But for the last 6 years, they have been really
focused on their growth, and that also means they have had to bor-
row a tremendous amount of money, and that led to an accumula-
tion of debt. Under some of the rules as they are currently written,
La Colombe would not qualify to participate in the Main Street
Lending Program, and I believe that the way that the leverage
ratio requirements in the program are currently drafted really sort
of, frankly, punishes companies like La Colombe and others who
would otherwise be viewed as really, frankly, success stories.
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So if it is the way the rules are currently written, it is designed
to prevent funds from going to companies that have this debt, but
sometimes those companies might be some of those that need it the
most.
I am hoping that you will commit, Mr. Secretary, to working with
me on that, to address that issue.
Secretary MNUCHIN. Yes. I am not familiar with the company but
we are happy to follow up with you and see if it can work.
Mr. HUIZENGA. Great. And then in the remaining time, I talked
to Jeff this morning. Jeff is 52. I talked to Jim and Eliza. He is
64, she is slightly younger, but she won’t tell me exactly how old.
But what I do want them to know is, I want them to hear from
you, what do you want to tell them, and the rest of Joe and Jane
401k who have their small investments in the markets, that are
there, frankly, to help them as they approach retirement? What as-
surances can we give them about the economy?
Secretary MNUCHIN. I want to tell them and all the other people
that we are going to work with Congress to make sure we can do
whatever we can do to get everybody back to work who lost their
job due to COVID. And I am also extremely optimistic about the
research that is being done on vaccines and virals and us combat-
ting this terrible disease.
Mr. HUIZENGA. Thank you.
Mr. POWELL. I would just say—
Chairwoman WATERS. Mr. Meeks, you are recognized for 5 min-
utes.
Mr. MEEKS. Thank you, Madam Chairwoman. Mr. Powell, you
and others at the Fed have written and spoken about the impor-
tance of maintaining the economy, full employment, as a way to
pull a greater share of the minority workforce up, which is often
the first to be laid off and the last to be hired. And while this is
helpful, this is incredibly frustrating, as it is an admission that ev-
eryone else gets a head start in the economy, and communities of
color only get out of the starting block after everyone else has been
running the race for months, years, or decades.
Let me ask you first, Mr. Powell, would you agree that structural
discrimination exists in the United States in the economy today
and impedes the economic success of communities of color and is
a key to understanding why Black wealth is just 10 percent that
of White communities?
Mr. POWELL. Yes, I do agree.
Mr. MEEKS. Mr. Mnuchin, would you agree also?
Secretary MNUCHIN. I agree we need to do everything we can to
create a level playing field, yes.
Mr. MEEKS. I also believe that our approach to addressing the
legacy of economic racism and discrimination must include equity
investments. Communities that have been financially excluded for
decades, or hundreds of years, that were disproportionately im-
pacted by the financial crisis, and now by the COVID pandemic,
cannot borrow their way out of poverty and economic—I believe
that sizable equity investments over the coming decade into com-
munities of color will be essential to substantially lift them out of
poverty and build resilience.
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I am working on a proposal for creating a national investment
fund, pulling together capital from both the private sector and the
government, to invest in these communities over the next decade
or more.
Secretary Mnuchin, do you agree that massive amounts of equity
investments will be required to lift these communities, and that
debt alone cannot solve the problem?
Secretary MNUCHIN. I definitely think investments in these com-
munities is important, and we look forward to working with you on
your specific ideas.
Mr. MEEKS. Great. And Mr. Powell, can we count on the funds
and you working with us?
Mr. POWELL. We would be delighted to.
Mr. MEEKS. Given that, Secretary Mnuchin, the Treasury De-
partment has the capacity and the authority to invest Tier 1 cap-
ital into Minority Depository Institutions (MDIs), but has never
done so. Similarly, the Treasury Department could use existing au-
thority to mobilize deposits from trust funds into MDIs, either di-
rectly or through custodial accounts, but it does not do so. And
since we agree that we need to have investments, would you agree
that MDIs play a critical role, as we found doing PPP, in providing
minority communities access to capital, and I will ask you then,
will the Treasury use its existing authority and capital to provide
direct support to MDIs?
Secretary MNUCHIN. I will have to review those authorities and
get back to you. If that is something we have, it sounds very inter-
esting. I am not familiar with those specific authorities so let me
look into it.
Let me just say also, the CDFIs did a terrific job as well.
Mr. MEEKS. I agree. I should have added the CDFIs. We concur
on that.
But I look forward to working with you to make sure that we are
investing. We have public money as well as private money to invest
in those MDIs so that they have the capital and the wherewithal
to move forward. That is the way to govern.
Mr. Powell, has the Fed made a requirement of all asset man-
agers and broker-dealers with which they contract to partner with
minority firms in fulfilling contracts and transactions?
Mr. POWELL. Yes. We do have obligations, for example, with the
companies we have contracted with during the pandemic. They
have to address diversity and inclusion issues at their company,
and they have to also reach out to minority suppliers as well.
Mr. MEEKS. And the Treasury? Secretary Mnuchin?
Secretary MNUCHIN. Yes.
Mr. MEEKS. Okay. So, I am hearing from both of you that you
will commit to incorporating this as standard to the Federal Re-
serve and the Treasury policies across all capital market programs
that involve partnership with private sector asset managers,
broker-dealers going forward, with minority broker-dealers and
asset managers. Is that correct?
Mr. POWELL. That is really part of our rulebook now, actually.
Mr. MEEKS. Mr. Mnuchin?
Secretary MNUCHIN. Yes. That is something we will work on as
well.
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27
Mr. MEEKS. Thank you. I am out of time, so I yield back.
Chairwoman WATERS. Mr. Stivers, you are now recognized for 5
minutes.
Mr. STIVERS. Thank you, Madam Chairwoman. And thanks for
being here, Mr. Secretary and Mr. Chairman. I really appreciate it.
Secretary Mnuchin, I am hearing from some lenders that are
being accused of failing to pay agents who assisted businesses in
preparation of their Paycheck Protection Program loan submis-
sions. And before participating in PPP, I heard comments from
banks that they were worried they might be exposed to legal liabil-
ity without sufficient safeguards in what is essentially a govern-
ment grant program. But they largely participated anyway, be-
cause obviously, they felt like they had a duty to their customers
and the country during a time of need.
Now I am told that many banks are being targeted by litigation.
It takes advantage of the lack of clarity about how agent fees are
supposed to be processed and how they work. For example, banks
don’t have precise answers on where the fees were supposed to
come from, is an agreement between a bank and an agent required
before any work on the application is completed or processed? Is
this an issue you are aware of, and does Treasury have a plan to
offer any additional FAQs to clarify the issue of agent fees and
when they are due and how that works?
Secretary MNUCHIN. I have recently become aware of this issue
as well. What our guidance did say is that banks could pay agent
fees out of the fees that they received. That was intended to be
based upon a contractual relationship between the agent and the
bank. And to the extent there is any confusion on that, we will look
at clarifying that.
Mr. STIVERS. It would be great if you could do a clarifying FAQ,
because I think it will prevent some litigation, or at least allow for
that litigation to move expeditiously and less costly through the
process.
Secretary MNUCHIN. We will review that. Thank you.
Mr. STIVERS. Thank you, Mr. Secretary.
Chairman Powell, Treasury and the International Association of
Insurance Supervisors (IAIS)have stated publicly that proposals to
retroactively amend business interruption insurance policies to
cover COVID-19 claims would endanger financial stability. Specifi-
cally, IAIS stated that they cautioned against initiatives seeking to
require insurers to retroactively cover COVID-19-related losses
such as business insurance, and that those things were excluded in
the insurance contracts. Such initiatives could ultimately threaten
policyholder protection and financial stability.
Do you share the concern requiring payoffs of uncovered policies
and that they could result in insurer insolvencies and destabilize
our financial system?
Mr. POWELL. Actually, that is an issue that is really kind of out-
side the periphery of our authority, except as you point out, to the
extent to which it relates to financial stability. We are monitoring
it, but so far, we haven’t taken a position on it.
Mr. STIVERS. Please, continue to monitor it. If it results in any
kind of destabilization of the financial system, that is your role. I
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get it. And I am not asking you to exceed your role, but please pay
attention to it.
Chairman Powell, could you kind of give us an overview of the
current state of municipal finance markets and the effectiveness of
the Fed’s efforts to stabilize those markets?
Mr. POWELL. I would be glad to. The municipal markets, like so
many other markets, really just about shut down in the middle of
March, and we announced the municipal liquidity facility, and real-
ly that announcement has had an enormous effect on the func-
tioning of that market. So, you see a lot of healing in that market.
You see plenty of issuance of issuers of different credit ratings and
also different kinds of issuers, revenue issuers. It hasn’t returned
to where it was in February of 2020, but there has been a lot of
progress.
As an example, the State of Illinois did most of its financing in
the private markets without our support and then came to our fa-
cility for its last piece of financing. So, I am very pleased that the
announcement effect was very strong and effective, and is helping
a lot of borrowers now.
Mr. STIVERS. Finally, I just want to say thank you, Secretary
Mnuchin, and thank you, Chairman Powell, for your incredible
leadership and availability through this crisis. This hasn’t been
easy. Clearly, mistakes will happen when we are in uncharted
waters. But you both have been bold in your leadership. You have
made a difference. You have helped businesses survive. You helped
the economy survive. Thank you for your incredible leadership, and
we wouldn’t be doing as well without it. There is more work to be
done. I appreciate everything you have done and hope you will con-
tinue to focus on small businesses and medium-sized businesses
around Main Street, because they are still struggling. Thank you
so much.
Chairwoman WATERS. Mr. Green, you are now recognized for 5
minutes.
Mr. GREEN. Thank you, Madam Chairwoman. I thank the wit-
nesses for appearing as well, and I would like to lay a proper predi-
cate for my questions.
According to the latest Home Mortgage Disclosure Act (HMDA)
data, in 2019 the vast majority of home purchase loans went to
White borrowers, at approximately 10 times that of loans that went
to Black and Asian Americans and Pacific Islanders (AAPI) bor-
rowers. Here are the numbers: the share that went to White bor-
rowers, 60.3 percent; to Hispanic borrowers, 9.2 percent; to AAPI
borrowers, 5.7 percent; and to Black borrowers, 7 percent—60.3
percent to White borrowers, 7 percent to Black borrowers.
And even when lending discrimination does not result in outright
denials of credit, it drives up borrowing costs for minority home
buyers. Loans to Black and Hispanic borrowers continue to be
higher-priced for both conventional and nonconventional loans in
2019. Home purchase loans were higher-priced for the following
share of borrowers: to Black borrowers, 20.3 percent; to Hispanic
borrowers, 23 percent; and to White borrowers, 8.3 percent.
Consistently we see empirical evidence indicating that there is
invidious discrimination in lending, especially as it relates to peo-
ple of color. So here are my questions, dear friends. Adjusting for
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education, credit score, assets, and other relevant factors, do you
believe that invidious discrimination in lending exists against bor-
rowers of color?
I have been collecting these pictures. I keep them in my office.
These are pictures of people who denied the existence of invidious
discrimination as it relates to people of color.
So my question to you is, do you believe that this invidious dis-
crimination exists in lending as it relates to people of color? If you
do believe so, would you kindly extend a hand into the air?
[Hands raised.]
Mr. GREEN. Okay. Would you kindly hold them up? I’d just like
to get a good picture of you, Mr. Secretary. Thank you very much.
Next question. Do you believe that this invidious discrimination
against borrowers of color can be addressed with legislation? Can
we craft legislation to help end this invidious discrimination? If you
think so, would you kindly raise a hand? Legislation. Can we craft
legislation?
[Mr. Powell raises his hand.]
Chair Powell seems to think so. Mr. Mnuchin?
Secretary MNUCHIN. Can I respond to the answer?
Mr. GREEN. You can respond, but if you will be so kind as to let
me know where you are going first. Sometimes, when people finish,
I don’t know what they said. This wouldn’t apply to you, of course.
Secretary MNUCHIN. I think we have legislation, so I think we
need to do a better job. So I will say we can look at legislation, but
I think it is more than just legislation.
Mr. GREEN. Okay. I agree with you that it is more than legisla-
tion, but would you agree that legislation can be a part of the rem-
edy? If you would kindly extend a hand.
[Secretary Mnuchin raises his hand.]
Mr. GREEN. Thank you. Now, I am in agreement with you. We
have a couple of pieces of legislation. H.R. 149, the Housing Fair-
ness Act, helps to deal with discrimination in housing as it relates
to people of color and others as well. And then, H.R. 166, the Fair
Lending for All Act, would put an end to this race-based lending
and discrimination. That is two pieces of legislation, and hopefully,
they will move in Congress.
But here is my final question. I believe that it is time for us to
reconcile in this country. We have survived COVID but didn’t rec-
oncile. We survived the invidious discrimination that exists now,
segregation, but we haven’t reconciled. If we had a Department of
Reconciliation with a Secretary of Reconciliation, would you work
with a Secretary of Reconciliation, your departments, the agencies
that you represent, would you work with such a person to help us
reconcile in this country? If so, raise your hand.
Okay.
Secretary MNUCHIN. Not knowing what that is, I guess—if there
is a department then—
Mr. GREEN. I can tell you, it would be a department designed to
eliminate invidious discrimination and racism. That is what it
would be all about, at the Cabinet level, hopefully.
Thank you both. And thank you, Madam Chairwoman. I yield
back.
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Chairwoman WATERS. Thank you. Mr. Barr, you now are recog-
nized for 5 minutes.
Mr. BARR. Thank you, Madam Chairwoman, and to Secretary
Mnuchin and Chairman Powell, I want to thank you both for the
very decisive and aggressive actions that you have both taken from
the outset of this pandemic. I think both the Fed and the Treasury,
through the emergency lending, and with the tools that we have
given you through the Exchange Stabilization Fund, really made a
difference in making a bad situation a lot less bad, given the cir-
cumstances. So, thank you for your actions.
And as an example of the agility that you have shown, Secretary,
let me thank you, in particular, for responding favorably to a letter
that Representative Hill and I sent to you about streamlining and
making less bureaucratic the loan forgiveness application under
the PPP program. That was tremendously helpful for both bor-
rowers and lenders, cutting that red tape. The EZ form is very wel-
come, and I appreciate the fact that you were responsive to that.
Let me ask you a follow-up question about commercial real es-
tate. We have had a couple of questions from Mr. Sherman, and
Mr. Posey. This is a problem we have not addressed yet. And I am
hearing from many commercial property owners and borrowers in
my district, and across the country, especially hoteliers, where oc-
cupancy rates remain very, very low. Shopping center owners—re-
tail clearly has not recovered. And other businesses have been sig-
nificantly disrupted by the pandemic.
I think we are going to see, without intervention, a wave of fore-
closures and defaults. And Secretary, you did identify the problem
with the inflexibility of these servicing agreements. But I think you
mentioned that we might need additional legislation to allow
hoteliers to hire back workers. That is really not the issue. The
issue is debt. They can’t service their debt because they don’t have
revenue.
So my question is, both of you all recently received a letter from
me, Congressman Taylor, Congressman Heck, and Congressman
Lawson, plus over 100 of our colleagues, urging the Fed and Treas-
ury to establish a facility to assist commercial real estate bor-
rowers, especially those with CMBS loans. Secretary, you testified
that you have $250 billion remaining in the Exchange Stabilization
Fund (ESF).
To both of you, does the Fed currently have the authority to es-
tablish such a facility, and do you feel that market conditions in
commercial real estate warrant action by the Fed and Treasury?
Secretary MNUCHIN. Let me just appreciate and thank you for
your letter. This is a large challenge, so working with the Fed, we
have not yet figured out a way to set up a facility. It is not out
of a lack of interest or a lack of desire. There are structural prob-
lems.
And let me just add, in many of these cases, these companies
don’t need more debt. They need support. So one of the things we
will want to look at in the next CARES Act, as I said, is additional
support for these hardest-hit industries. As the Chair has said,
there is a difference between lending and spending.
Mr. BARR. Right. Chairman Powell?
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Mr. POWELL. I just would echo, and I have your letter right here,
that I have been very focused on this. And you said it in your com-
ments, and it is in the letter, that more debt may not be the an-
swer here. Debt doesn’t solve every problem you have. People can’t
currently service debt. You have hese inflexible arrangements.
So, there is a serious problem here that needs to get fixed, and
we are racking our brains to see how it could be something we
could do by lending. But that is really what we can do, is create
more debt.
Mr. BARR. I would encourage you to consider, in some cases, that
the covenants against additional indebtedness may be too restric-
tive, that these owners could take on additional debt to get them
through this period of time. But I look forward to working with
you, whatever the answer is.
Quickly, on Main Street, Chairman Powell, I have heard from a
number of lenders and business owners who have indicated that
the terms of Main Street may discourage borrowers from applying
and lenders from participating. Some lenders had welcomed the
changes made recently by the Fed, but many are still far from en-
thusiastic about participating.
What has been the response thus far from the lender community,
and how is the Fed going to encourage lender participation, given
the hesitations?
Mr. POWELL. We have had a lot of interest. We do webinars. We
do outreach. And as I mentioned earlier, we have had something
like 300, a little more than 300 now, I think, turn up. What the
banks tell us is, though, is that it is sort of a mixed thing. They
are not getting a ton of interest from borrowers, and many of them
say that they expect that will change—over the course of the next
few months, they do expect the demand from borrowers will in-
crease. And I will just echo that we continue to be open to playing
with the formula and making adjustments going forward.
Mr. BARR. My time has expired, but the reason why Main Street
doesn’t work for commercial real estate is that EBITDA limitation,
as you know. But thank you. I yield back.
Chairwoman WATERS. Thank you very much. Mr. Powell, the
issue of rules that we have talked about is on my radar. We will
continue to talk about this issue and pay attention to what you are
saying to us about it.
With that, Mr. Cleaver, you are recognized for 5 minutes.
Mr. CLEAVER. Thank you very much, Madam Chairwoman. Sec-
retary Mnuchin, thank you for being here. Chairman Powell, thank
you for being here again.
I know that you have been asked by a number of Members before
me about the issue with Black and Brown business owners being
left out of that pot that was clearly intended to help during these
down times. And so I am frustrated, like a lot of people, not only
in Congress, but a lot of people around the country.
What is your philosophy, Mr. Secretary—well, maybe not your
philosophy, but what do you have to say as to why weren’t rural
and minority businesses more equally supported in the emergency
program? And what do you think happened?
Secretary MNUCHIN. Let me just first say that we need to all do
a better job at making sure that we have sources of funds for those
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businesses and to support those businesses. In the PPP, we have
worked with lots of different people to make sure the CDFIs and
the MDIs get there. But across-the-board, we can always be doing
a better job.
Mr. CLEAVER. Thank you. I guess I am where I am now because
I am here dealing with these minority businesses right now, and
if I say we all agree we need to do a better job, do you have any
ideas on specifically, what we can do better?
Secretary MNUCHIN. We would be happy to work with you on
that. We have been working with Robert Smith and a bunch of ex-
ternal people to try to figure out how we can use the CDFIs, how
we can make sure MDIs have more access to capital. And I think
there is a lot of good ideas out there that we need to continue to
explore before we have one solution. I think there are multiple so-
lutions.
Mr. CLEAVER. Okay.
Mr. POWELL. Mr. Cleaver, I will just add that we are doing a
great deal of outreach with MDIs and CDFIs to get them access to
the programs that we are doing, including the PPP. And in fact,
we have a meeting with the National Bankers Association tomor-
row, on July 1st. So, we are doing a lot of outreach, and we think
it is having an effect.
Mr. CLEAVER. Thank you. Actually, after you appeared before our
committee, I did have an approximately 40-minute meeting with
Esther George here, at the Kansas City Fed office. And I said I ap-
preciated her going into detail about the issues that we were rais-
ing as best as she could.
So, thank you for doing that. I appreciate that. I just was hoping
that the Secretary would understand the pressure that these busi-
nesses are under, which means that as representatives of theirs,
we are also in a tremendously pressurized situation. I was hoping
that I could go back and say, ‘‘This is what we are going to do
henceforth.’’
But I appreciate where we are. You can’t respond to any classi-
fied intelligence, so I won’t ask those questions. But I am, never-
theless, going to send you a letter, and I don’t even expect a re-
sponse. I am doing this for my own personal historic concern, and
that is, I am sure that the next generation and the generation after
that will be asking us, ‘‘Grandpa, what did you do?’’ ‘‘Grandma,
what were you doing during those times when things were going
off the rails?’’
So, thank you both for appearing, and I yield back, Madam
Chairwoman.
Chairwoman WATERS. Thank you very much. Mr. Tipton, you are
recognized for 5 minutes.
Mr. TIPTON. Thank you, Madam Chairwoman. I appreciate, Mr.
Secretary, and Chairman Powell, you both taking the time to be
here.
And I do appreciate all of the efforts that you have made to stim-
ulate the economy and to help our folks at home. I did want to
bring up an issue that we have heard back in our district. As you
know, under the CARES Act, the government did provide for com-
munities of 500,000 or more people to be able to apply directly to
Treasury for assistance. In Colorado, that translated into 59 of the
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64 counties in Colorado were unable to be able to receive direct as-
sistance. In full recognition, obviously, the traditional dollars went
in over and above the direct assistance that was able to be applied
for.
And I guess, Mr. Secretary, I would like to be able to see from
you, has there been any oversight to be able to do what I believe
was the congressional intent, to be able to get those dollars back
into small communities, like those that I represent, and have we
had any sort of examination of how those dollars are being spent
by the States?
Secretary MNUCHIN. Let me just say, we agree with you. We
thought the purpose was that we sent money to cities above
500,000. The reason why we didn’t do it to less was purely admin-
istrative. We have put out guidance saying that the States should
distribute money down. We have also had discussions with the In-
spector General to review this. So, we appreciate your comments.
Mr. TIPTON. Thank you, and I appreciate the recognition that the
small communities happen to—when we look at small businesses—
that was my real life—we create 7 out of 10 jobs, and a lot of that
does happen to be in rural America. And I appreciate your atten-
tion to that as we are looking forward to any other package that
may come forward.
One of the biggest aspects, I think, that you have both spoken
to is the ability to be able to get the economy going and to make
sure that we are going to be able to create jobs once again. But pro-
viding access to credit is going to be ultimately critical to being
able to do that. We have some that are tempted to wipe that credit
slate clean during the pandemic. But I believe it is important that
we do have an accurate and a full credit profile to be able to have
risk mitigation that will help ultimately reignite lending in the
country quickly.
Secretary Mnuchin, would you speak maybe to the importance of
being able to maintain unaltered and complete credit profiles so
that lenders can evaluate the creditworthiness of borrowers?
Secretary MNUCHIN. Yes. I believe that is very important.
Mr. TIPTON. One of the bigger issues that we are hearing on PPP
is that lenders across the country, big and small, readily answered
the call to be able to make those loans out to our small businesses
during the crisis. And since there was essentially no guidance
when lenders began providing PPP loans, what can agencies do,
Mr. Secretary, to the extent to hold them harmless in terms of pro-
visions to the entirety of the PPP process and adequately pro-
tecting the lenders who are trying to do the right thing?
Secretary MNUCHIN. The lenders were merely intended to be an
intermediary. They were the fastest way that we could get money
to the businesses. Most of the certifications were certifications that
the borrowers had to make and that they would be liable for. There
were a few things that the lenders had to do, which was check the
payroll and payroll documents. But yes, it was supposed to be pre-
dominantly a pass-through mechanism.
Mr. TIPTON. Okay. Thank you. And there is an interim final rule
on lender fees out of the SBA, indicating that if they conduct loan
review and determined that the borrower was ineligible for a PPP
loan, the lender is not eligible for the processing fee. The SBA was
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34
also able to draw a claw-back feature of the fee, within one year,
if they determined that a borrower is ineligible for the PPP loan.
Considering that those lenders, as we noted, did act in good faith
through the PPP process and have dedicated significant amounts
of resources to be able to help the economy, why did the agencies
decide to take this approach?
Secretary MNUCHIN. Let me just say I hope that is a very small
number of loans that that turns out to be. But the thought of the
taxpayers paying fees to loans that weren’t made seems to be un-
fair, and I would just say, in general, I think the fees were very
attractive to the lenders. So, if there were a small number of loans
that they made where that was the case, I think they were still
well-compensated.
Mr. TIPTON. Thank you, Mr. Secretary, and I yield back, Madam
Chairwoman.
Chairwoman WATERS. Thank you. Mr. Perlmutter, you are recog-
nized for 5 minutes.
Mr. PERLMUTTER. Thank you, Madam Chairwoman. Gentlemen,
thank you for your testimony today. And thank you for your leader-
ship in the first 3 months of this emergency.
The pandemic dealt a real blow to the economy, and you helped
cushion the blow. But we are not out of this thing, by any stretch
of the imagination. Around Colorado, we see California, Utah, Ari-
zona, and Texas with rising case numbers, rising hospital patients,
rising death counts. And we also know that at the end of July, the
Pandemic Unemployment Insurance payments cease, as it is cur-
rently written. We know that a number of the moratoria on evic-
tions and foreclosures begin to cease. And the 8 weeks provided
under the PPP, certainly for those initial takers of the loans, start
to run out.
So, I see a brick wall at the end of July. And Mr. Secretary, you
played a key role in helping to fashion the fiscal pieces of this, the
CARES Act. We call what we have done as this next iteration the
HEROES Act, so that law enforcement, teachers, transportation
workers, and medical staff don’t get laid off, in addition to the ones
who have already been laid off by local governments, by State Gov-
ernments, and by school districts.
I asked Mr. Powell a question when he was in front of our com-
mittee a couple of weeks ago, on State and local government assist-
ance to backfill the tax revenue.I will say, though, from a stand-
point, State and local governments employ something like 13 mil-
lion people. States have to balance their budgets. And revenues go
down and expenses go up, and what States do is they cut costs.
And we have seen State and local governments lay off 1.5 million
people already. State and local governments provide essential serv-
ices, as we all know, so you know they are a great and a big em-
ployer, and I would say it is certainly worth considering.
If we don’t do something, it will hold back the economic recovery
if they continue to lay people off and if they continue to cut essen-
tial services. And, in fact, that is kind of what happened after the
global financial crisis.
Mr. Secretary, as you again are sort of in the middle, between
the House and the Senate and the White House, where are you on
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assisting State and local and school districts to help backfill the
lost revenue that we have seen hit them already?
Secretary MNUCHIN. Let me just first say, within the context of
the last CARES bill, we tried to issue guidance that was as flexible
as possible, particularly for firefighters, first responders, and po-
licemen, so that States could use that money, and have a safe har-
bor, and didn’t need to let any of those people go, which, as you
said, this would be the worst time, when we need to support all of
those people.
I am committed to working with both the Democrats and the Re-
publicans, in the House and the Senate. In July, as you said, we
have a lot of important features that all come to an end, and I com-
mit to continuing to have these conversations, and I take great
pride in the fact that we had enormous bipartisan support in the
previous bills, and I look forward to working with everyone.
Mr. PERLMUTTER. And I would just ask you, because what we
have seen—as a Democrat, we passed this. The Senate has been
sitting on it, even as time is ticking. And in Colorado, for instance,
we are looking at probably a $2.5 to $3 billion drop in tax revenues
this year, and will see it again next year, and probably the year
after that.
And so, I would just ask you to really push on that one, or there
are going to be a lot of people laid off at just the worst time, in
very essential services.
And so, gentlemen, you have done a heck of a job. You get patted
on the back now, but we are still in this emergency, and now we
have to focus on going forward, which is this next iteration, or
there is going to be a lot of trouble come the end of the summer.
With that, I yield back.
Chairwoman WATERS. Thank you very much. I would like to
thank our witnesses for their testimony today.
The Chair notes that some Members may have additional ques-
tions for this panel, which they may wish to submit in writing.
Without objection, the hearing record will remain open for 5 legis-
lative days for Members to submit written questions to these wit-
nesses and to place their responses in the record. Also, without ob-
jection, Members will have 5 legislative days to submit extraneous
materials to the Chair for inclusion in the record.
This hearing is now adjourned.
[Whereupon, at 2:45 p.m., the hearing was adjourned.]
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APPENDIX
June 30, 2020
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File and source
- File
- chrg_chrg-116hhrg42943_chrg-116hhrg42943.pdf
- Size
- 7,055,808 bytes
- SHA-256
- d5d15920d1a511f53cb7ef9f92f6e89c4b686f2d582aefc3a44888bd1638dc72
- Original
- www.govinfo.gov