Hearing: Oversight of the Treasury Department's and Federal Reserve's Pandemic Response (House Financial Services)
Summary
A hybrid hearing titled Oversight of the Treasury Department's and Federal Reserve's Pandemic Response, before the Committee on Financial Services, U.S. House of Representatives, on December 2, 2020. The committee met via Webex at 10:04 a.m., with Hon. Maxine Waters presiding as chairwoman of the committee. The listed witnesses are Hon. Steven T. Mnuchin, Secretary of the U.S. Department of the Treasury, and Hon. Jerome H. Powell, Chairman of the Board of Governors of the Federal Reserve System, each with a prepared statement in the appendix. Additional material submitted for the record includes written responses to questions from Hon. Maxine Waters and letters from the Credit Union National Association, the National Association of REALTORS and PATH (People Supporting the Homeless).
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“Hearing: Oversight of the Treasury Department's and Federal Reserve's Pandemic Response (House Financial Services).”
Original at www.govinfo.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/chrg-chrg-116hhrg43529-chrg-116hhrg43529/
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OVERSIGHT OF THE TREASURY DEPARTMENT’S
AND FEDERAL RESERVE’S PANDEMIC RESPONSE
HYBRID HEARING
BEFORE THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
DECEMBER 2, 2020
Printed for the use of the Committee on Financial Services
Serial No. 116–115
(
U.S. GOVERNMENT PUBLISHING OFFICE
43–529 PDF WASHINGTON : 2022
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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:
December 2, 2020 ............................................................................................. 1
Appendix:
December 2, 2020 ............................................................................................. 43
WITNESSES
WEDNESDAY, DECEMBER 2, 2020
Mnuchin, Hon. Steven T., Secretary, U.S. Department of the Treasury ............ 5
Powell, Hon. Jerome H., Chair, Board of Governors of the Federal Rreserve
System ................................................................................................................... 6
APPENDIX
Prepared statements:
Mnuchin, Hon. Steven T. ................................................................................. 44
Powell, Hon. Jerome H. .................................................................................... 46
ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD
Waters, Hon. Maxine:
Written responses to questions submitted to Secretary Mnuchin ................ 58
Written responses to questions submitted to Chairman Powell ................... 73
Letter to Hon. Mark Calabria, Director, FHFA ............................................. 85
Letter from the Credit Union National Association (CUNA) ........................ 87
Letter from the National Association of Federally-Insured Credit Unions
(NAFCU) ........................................................................................................ 90
Letter from the National Association of REALTORS to Treasury Sec-
retary Mnuchin and FHFA Director Calabria ............................................ 94
Letter of support from PATH (People Supporting the Homeless) ................ 96
Letter from various midsized nonprofits ........................................................ 97
(III)
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OVERSIGHT OF THE TREASURY
DEPARTMENT’S AND FEDERAL
RESERVE’S PANDEMIC RESPONSE
Wednesday, December 2, 2020
U.S. HOUSE OF REPRESENTATIVES,
COMMITTEE ON FINANCIAL SERVICES,
Washington, D.C.
The committee met, pursuant to notice, at 10:04 a.m., via Webex,
Hon. Maxine Waters [chairwoman of the committee] presiding.
Members present: Representatives Waters, Sherman, Clay,
Green, Perlmutter, Foster, Heck, Gottheimer, Lawson, San Nicolas,
Porter, Axne, Casten, Pressley, Ocasio-Cortez, Wexton, Lynch,
Gabbard, Adams, Dean, Garcia of Illinois, Garcia of Texas, Phillips;
McHenry, Wagner, Lucas, Posey, Huizenga, Stivers, Barr, Hill,
Zeldin, Mooney, Davidson, Budd, Kustoff, Gonzalez of Ohio, Rose,
Steil, Gooden, Riggleman, Timmons, and Taylor.
Chairwoman WATERS. The Financial Services Committee will
come to order.
Without objection, the Chair is authorized to declare a recess of
the committee at any time. I want to remind Members of a few
matters, including some required by the regulations accompanying
House Resolution 965, which established the framework for remote
committee proceedings.
I would ask all Members on the Webex platform to keep them-
selves muted when they are not being recognized by the Chair.
This will minimize disturbances while Members are asking ques-
tions of our witnesses.
Members on the Webex platform are responsible for muting and
unmuting themselves. The staff has been instructed not to mute
Members, except when a Member is not being recognized by the
Chair, and there is inadvertent background noise.
Members on the Webex platform are also reminded that they
may only attend one remote hearing at a time. So, if you are par-
ticipating today, please remain with us during the hearing. Mem-
bers should try to avoid coming in and out of the hearing, particu-
larly during the question period.
If, during the hearing, Members wish to be recognized, the Chair
recommends that Members identify themselves 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 plat-
form the committee is using.
In addition, for Members participating in person, the Attending
Physician provided guidance.
(1)
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2
I now recognize myself for 4 minutes to give an opening state-
ment.
Today, the committee convenes to conduct oversight over the
Treasury Department’s and Federal Reserve’s pandemic response.
This pandemic continues to have a terrible impact across the na-
tion. There have been over 13.4 million coronavirus cases in the
U.S., which is almost double the amount of cases when Secretary
Mnuchin and Chair Powell last testified in September, and over
267,000 people have lost their lives to the virus. Hospitalizations
and deaths are surging as this crisis spirals out of control. Small
businesses are shutting their doors permanently, and millions are
at risk of eviction, foreclosure, and being laid off.
An historic number of Americans resoundingly voted for a new
direction last month by overwhelmingly voting for President-elect
Biden and Vice President-elect Harris. The American people have
made it clear that they want a government that will fight this
virus and will protect their families and small businesses from the
impacts of COVID-19.
Secretary Mnuchin, on a call last month, many committee Demo-
crats and I committed to not going home until we have a deal for
a stimulus package that is desperately needed across the country,
but as negotiations continue, I am appalled that you would know-
ingly make matters worse by permanently ending essential emer-
gency lending programs, leaving States, cities, and small busi-
nesses out to dry as the nation faces a dire and worsening phase
of the pandemic crisis. There is simply no justification or justifiable
reason to take these tools away, with the pandemic crisis worse
than it has been, and the Biden Administration arriving in Janu-
ary.
And, Chairman Powell, I am also concerned that the Federal Re-
serve acceded to Treasury’s request after publicly indicating the
importance of extending these Facilities.
Secretary Mnuchin, I am also very concerned that the Treasury
Department may be taking actions that will undermine housing
markets during the pandemic by reportedly working with the Fed-
eral Housing Finance Agency (FHFA) to rush the Government-
Sponsored Enterprises (GSEs) out of conservatorship before the
end of the Trump Administration.
These actions follow the Trump Administration’s obstruction of
the transition process, delaying important information-sharing
about the pandemic response and national security between the
Biden transition team and the current Administration. So today,
you will be held to account for your misguided actions.
I now recognize the ranking member of the committee, the gen-
tleman from North Carolina, Mr. McHenry, for 4 minutes.
Mr. MCHENRY. Thank you, Madam Chairwoman.
And, look, I know there has been a lot of partisan talk by my col-
leagues on the Democratic side of the aisle attacking the actions of
the Treasury Secretary and even the Federal Reserve. And I know
committee Democrats and a lot of Democrats in Congress said that
they wouldn’t go home until they had a deal, and then they went
home for 10 days. So, there is not a whole lot of believability com-
ing from our fellow politicians here on Capitol Hill right now. It is
quite frustrating.
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3
But, Chairman Powell, Secretary Mnuchin, I want to thank you
for being with us today and for being so available. I also want to
commend you for the quick and decisive work that you both have
done, and I think that is something for which we should commend
you.
But, today, I think there is also a reason for optimism. The
coronavirus vaccines are moving at an unprecedented pace. Last
month, Pfizer announced its vaccine is 95-percent effective, and
they are currently seeking regulatory clearance. Moderna an-
nounced on Monday that its vaccine is 94.1-percent effective, and
they will also seek regulatory clearance. And the British announced
today that they are moving forward as well with their vaccine dis-
tribution.
This is proof that the public-private partnerships, like those in
Operation Warp Speed, can lead to phenomenal successes in record
time. But we know a full economic recovery will occur only when
Americans can go back to work safely, send their kids back to
school confidently, and have easy access to testing and treatments.
And there is still more work to be done.
And so, I do want to go back to our committee jurisdiction, and
the Treasury and the Fed’s decisive actions back in March and
April to prevent the worst of this economic crisis and save millions
of jobs.
Chairman Powell, the Federal Reserve’s emergency lending facili-
ties continue to serve as a strong backstop to our financial markets
and to prevent disorder in the financial markets from impacting
our real economy. Those programs stipulated billions of dollars in
private-sector lending and successfully operated as lender of last
resort.
And they acted as that necessary source of liquidity in those ur-
gent times earlier this year. They ensured the orderly flow of credit
and the functioning of markets of all sizes, including supporting
workers in communities across the country. So, I want to commend
you for that.
But they are emergency facilities only, and they are backstops
designed to support the functioning of private markets, and they
are intended to be a lender of last resort, not to replace private
markets. And from the start, I have said that we need to be for-
ward-thinking and have a plan to wind down these firefighting
measures, when appropriate.
And so, I want to thank both the Fed and the Treasury for hav-
ing a plan to wind those measures down appropriately, in accord-
ance with the Coronavirus Aid, Relief, and Economic Security
(CARES) Act law. And I will ask you specifically about the addi-
tional capacities that you will have with the CARES Act expiring
on December 31st.
Additionally, Secretary Mnuchin, thank you for your quick work
on the Paycheck Protection Program (PPP) that supported millions
of small businesses. I know we still need additional relief for more
small businesses in different segments, and thank you for con-
tinuing to work for a bipartisan agreement here on Capitol Hill,
and to not play the gamesmanship and partisan games that have
bedeviled these talks in the last couple of months. Thank you for
rising above that.
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4
But there is still work to be done, and I look forward to us com-
ing together and having a package that can support small busi-
nesses and do the responsible things necessary to help rebuild our
economy and to protect American citizens. Thanks so much for
being here today, and I look forward to your testimony.
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.
I thank the witnesses for appearing as well. Mr. Mnuchin [in-
audible] indicating that the market has recovered significantly.
This begs the question for my constituents, what market? We know
it isn’t the Federal market [inaudible] The free food market, the
foods, obviously, have one thing in common, and when all the food
is gone, the front lines [inaudible].
The supermarkets, the market prices there have gone up 3.9 per-
cent for the 12 months ending in October. The stock market does
not measure certain things of influence to my constituents. It does
not measure the hunger pains that my constituents suffer, the de-
pression, and the addiction. It doesn’t measure the working-class
uncertainty and coronavirus injury and death.
My concern today is, what is your agency doing to help the grim
reality of this pandemic for consumers? I look forward to hearing
your testimony.
I yield back.
Chairwoman WATERS. Thank you very much.
I now recognize the subcommittee’s ranking member, Mr. Barr,
for 1 minute.
Mr. BARR. Thank you, Madam Chairwoman.
And thank you to our witnesses for being here today.
Congress, the Fed, and Treasury acted boldly in the face of the
economic turmoil brought on by the COVID pandemic, and show-
cased the true reach of the Federal Government’s response.
Through Congress’ fiscal policy authority and the Fed’s emergency
lending facilities, we were able to stabilize markets, keep workers
on the job, and ensure the continued functioning of corporate credit
markets.
As we continue on the path of economic recovery, it is important
that we take stock of the tools used. We must evaluate which were
effective and which were not, which should be redeployed and
which can be wound down, and which programs are legally set to
expire and which programs should be reauthorized. That is the role
of this committee with oversight of the U.S. financial system. I look
forward to hearing from our witnesses on this and other topics to
help inform Congress’ continued response to the pandemic.
Secretary Mnuchin and Chairman Powell, I commend you on
your work to promote economic stability in turbulent times, and I
thank you for your service.
I yield back.
Chairwoman WATERS. Thank you.
I want to welcome today’s witnesses to the committee.
First, I want to welcome the Honorable Steven T. Mnuchin, Sec-
retary of the United States Department of the Treasury. He has
served in his current position since 2017. Mr. Mnuchin has testified
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5
before the committee on previous occasions, so I do not believe he
needs any further introduction.
I also want to welcome our other distinguished witness, the Hon-
orable Jerome Powell, Chairman of the Board of Governors of the
Federal Reserve System. He has served on the Board of Governors
since 2012, and as its Chair since 2018. Chair Powell has pre-
viously testified before the committee, so I believe he also does not
need 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.
STATEMENT OF THE HONORABLE STEVEN T. MNUCHIN,
SECRETARY, U.S. DEPARTMENT OF THE TREASURY
Secretary MNUCHIN. Thank you.
Chairwoman Waters, Ranking Member McHenry, and members
of the committee, I am pleased to join you today to discuss the De-
partment of the Treasury’s unprecedented response to support the
American people throughout the pandemic. We continue to work to
implement the historic CARES Act with speed, efficiency, and
transparency, but our job will not be complete until we get every
American back to work.
When I last testified before you in September, I stated that
America was in the midst of the fastest economic recovery from any
crisis. I am proud to say that while there is still a lot more work
to be done, that statement is true. In the third quarter, GDP grew
by 33 percent annually, beating all expectations and a previous
record of 1950.
Americans are getting back to work. The October Jobs Report
showed the economy gained back 12 million jobs since April, more
than 50 percent of all jobs lost due to the pandemic.
The unemployment rate has decreased to 6.9 percent, a rate not
expected by the blue chip to be achieved until the fourth quarter
of 2021. The historic bipartisan CARES Act provided the economic
relief that is critical to supporting the economy recovering. Addi-
tional economic slowdowns, however, continue to impair and cause
great harm to American business and workers.
Based upon the recent economic data, I continue to believe that
a targeted fiscal package is the most appropriate Federal response.
I strongly encourage Congress to use the $455 billion in unused
funds from the CARES Act to pass an additional bill with bipar-
tisan support. The PPP has unused money of $140 billion that
could be sent out the door immediately to support many small busi-
nesses. The Administration is standing ready to support Congress
in this effort to help American workers and small businesses that
continue to struggle with the impact of COVID-19.
Treasury has been working hard to implement the CARES Act
in a transparent and efficient manner. We have released a signifi-
cant amount of information on Treasury.gov and USAspending.gov.
We continue to cooperate with various oversight bodies, including
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6
the new Special Inspector General (IG), the Treasury IG, the
Treasury IG for Tax Administration, the new Congressional Over-
sight Commission, and the GAO.
We have provided regular updates to Congress, and this is my
ninth appearance before Congress for the CARES Act hearings. We
have also devoted significant resources to responding to inquiries
from numerous congressional committees and individual Members
on both sides.
We appreciate your interest on these issues, and we remain com-
mitted to working with you to accommodate Congress’ legislative
purpose to advance the whole-of-government approach to defeating
COVID-19.
Chairwoman Waters, I do want to just respond to your comment
where you said I had no justification and made matters worse on
my termination of the facilities. I just want to emphasize that this
was not a political decision; I was merely implementing the CARES
Act. I am happy to walk you, your staff, or other members of the
committee through Section 4029, which makes it very clear.
I find it implausible that any member of the committee believed,
in voting for the CARES Act, that you were authorizing me to in-
vest $500 billion in Federal Reserve facilities to make loans and
purchase corporate bonds in perpetuity with no expiration date.
That is exactly what you would have to believe if you disagree with
my interpretation of congressional intent on the issue. And since I
was personally there and negotiated most of these documents, I am
very familiar with them. But if Congress wants to extend this
money for Federal purposes for these facilities, Congress can add
that to new legislation.
I would like to thank the members of the committee for working
with us, and I am pleased to answer any additional questions.
Thank you very much.
[The prepared statement of Secretary Mnuchin can be found on
page 44 of the appendix.]
Chairwoman WATERS. Thank you very much, Secretary Mnuchin.
Chair Powell, you are now recognized 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
update you on our ongoing measures to address the hardship
wrought by the pandemic.
Our public health professionals continue to deliver our most im-
portant response, and we remain grateful for their service. The
Federal Reserve, along with others across the government, is using
its policies to help alleviate the economic burden.
Since the pandemic’s onset, we have taken forceful actions to pro-
vide relief and stability, to ensure that the recovery will be as
strong as possible, and to limit lasting damage to the economy.
Economic activity has continued to recover from its depressed sec-
ond quarter level.
The reopening of the economy led to a rapid rebound in activity,
and GDP rose at an annual rate of 33 percent in the third quarter.
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7
In recent months, however, the pace of improvement has mod-
erated. Household spending on goods, especially durable goods, has
been strong and has moved above its pre-pandemic level. In con-
trast, spending on services remains low, largely because of ongoing
weakness in sectors that typically require people to gather closely,
including travel and hospitality.
The overall rebound in household spending is due, in part, to
Federal stimulus payments and expanded unemployment benefits,
which provided essential support to many families and individuals.
In the labor market, more than half of the 22 million jobs that
were lost in March and April have been regained, as many people
were able to return to work. As with overall economic activity, the
pace of improvement in the labor market has moderated.
Although we welcome this progress, we will not lose sight of the
millions of Americans who remain out of work. The economic down-
turn has not fallen equally on all Americans, and those least able
to shoulder the burden have been the hardest hit. In particular, the
high level of joblessness has been especially severe for lower-wage
workers in the service sector, for women, and for African Ameri-
cans and Hispanics. Economic dislocation has upended many lives
and created great uncertainty about the future.
As we have emphasized throughout the pandemic, the outlook for
the economy is extraordinarily uncertain and will depend, in large
part, on the success of efforts to keep the virus in check. The rise
in new COVID-19 cases, both here and abroad, is concerning and
could prove challenging for the next few months. A full economic
recovery is unlikely until people are confident that it is safe to re-
engage in a broad range of activities.
Recent news on the vaccine front is very positive for the medium-
term. For now, significant challenges and uncertainties remain, in-
cluding timing, production, and distribution and efficacy across dif-
ferent groups. It remains difficult to assess the timing and scope
of the economic implications of these developments with any degree
of confidence.
The Fed’s response has been guided by our mandate to promote
maximum employment and stable prices for the American people,
along with our responsibility to promote the stability of the finan-
cial system. We have been taking broad and forceful actions to
more directly support the flow of credit in the economy.
Our actions, taken together, have unlocked almost $2 trillion of
funding to support businesses, large and small, nonprofits, and
State and local governments since April. This, in turn, has helped
keep organizations from shuttering and has put employers in a bet-
ter position to both keep workers on, and to hire them back as the
economy continues to recover.
These programs serve as a backstop to key credit markets and
have helped restore the flow of credit from private lenders through
normal channels. We have deployed these lending powers to an un-
precedented extent. Our emergency lending powers require the ap-
proval of the Treasury, and are available only in very unusual cir-
cumstances, such as those we find ourselves in today. Many of
these programs have been supported by funding from the CARES
Act, and I have included detailed information about those facilities
in my written testimony.
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The CARES Act assigns sole authority over its funds to the
Treasury Secretary, subject to the statute’s specified limits. The
Secretary has indicated that these limits do not permit the CARES
Act-funded facilities to make new loans or purchases or to purchase
new assets after December 31st of this year.
Accordingly, the Fed will return the unused portion of the funds
allocated to lending programs that are backstopped by the CARES
Act in connection with their termination at the end of the year. As
the Secretary noted in his letter, non-CARES Act funds and the
Exchange Stabilization Fund are available to support emergency
lending facilities if they are needed.
Everything the Fed does is in service to our public mission. We
are committed to using our full range of tools to support the econ-
omy and to help ensure that the recovery from this difficult period
will be as robust as possible on behalf of communities, families,
and businesses across the country. Thank you.
[The prepared statement of Chairman Powell can be found on
page 46 of the appendix.]
Chairwoman WATERS. Thank you very much, Chair Powell.
I now recognize myself for 5 minutes for questions.
Secretary Mnuchin and Chair Powell, just last month the Fed-
eral Open Market Committee (FOMC) met and, according to the
minutes, ‘‘a few participants noted that it was important to extend
the emergency lending facilities beyond year end.’’
A few days later you, Secretary Mnuchin, requested that the Fed
eliminate its CARES Act emergency lending facilities at the end of
the year and return $419 billion so that it could not be used in the
future. Initially, the Fed resisted publicly, but the next day, Chair
Powell, you acquiesced.
Secretary Mnuchin, your own Office of Financial Research (OFR)
warned that we should expect, ‘‘potentially severe losses from bor-
rower defaults and bankruptcies.’’ Moreover, the outlook for States,
cities, airports, and hospitals is not good.
And despite what President Trump suggests, it is not limited to
blue States. For example, the day after New York State’s credit
was downgraded, Mississippi’s credit was downgraded. With the
pandemic worse than at any point since it began, it is foolish and
reckless to take away emergency lending options at this time.
Secretary Mnuchin, you argue that it was congressional intent
for these Fed facilities to be shut down at the end of the year, but
the law does not say that, and even the actions of my Republican
colleagues belie that novel interpretation.
Senator McConnell filed a COVID-19 bill that would change the
law to require the Fed to close all of its facilities after January 19,
2021. So, if the law already required this, this bill wouldn’t be nec-
essary. The CARES Act was passed to stabilize the economy during
the entirety of the pandemic, not until the end of your tenure as
Treasury Secretary.
Secretary Mnuchin, it was reported last week that you intend to
transfer the unused portion of the CARES Act, that $500 billion
appropriation, to Treasury’s General Fund so that the next Sec-
retary can’t have access to the fund. However, Section 4027 of the
CARES Act explicitly states that funds may only be transferred on
January 1, 2026, not before January 1, 2026.
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What you are doing is contrary to what is lawful, and it puts our
entire economy in jeopardy. And, what’s more, it has also been re-
ported that you are working with Director Calabria of the Federal
Housing Finance Agency to sell off the government stakes in the
housing giants, Fannie Mae and Freddie Mac, likely destabilizing
the entire housing market in the next few months.
As I understand it, Secretary Mnuchin, the Obama Administra-
tion showed you every courtesy when your team was taking the
reins. Similarly, the Bush Administration worked closely with
President Obama’s incoming team during the financial crisis, even
before he was sworn in. They did so because they were honoring
the decision of the American electorate.
Tell me, Secretary Mnuchin, and Chair Powell, does the Sec-
retary’s expected successor, Janet Yellen, support what you are
doing? Does she agree that the emergency lending facilities are not
needed even though thousands of people are dying each day, mil-
lions more are being infected each week, tens of thousands of small
businesses are closing permanently, and our cities and States are
struggling? Does Ms. Yellen support Director Calabria’s plans to
fundamentally remake the housing markets, where millions of peo-
ple are struggling to pay their mortgage and rent each month? Sec-
retary Mnuchin?
Secretary MNUCHIN. Again, let me first comment on—and in all
due respect, I believe I am following the law. Section 4029 makes
very clear that on December 31, 2020, the authority provided under
new loans, guarantees, or other investments shall terminate.
Chairwoman WATERS. Thank you very much. I am going to re-
claim my time.
Do you agree? Do you agree, Mr. Powell?
Secretary MNUCHIN. Let me just continue. The transfer of the
funds is not up to me. When funds come back, they go into—
Chairwoman WATERS. Reclaiming my time, I need to have an an-
swer from Mr. Powell. Do you agree with Secretary Mnuchin?
Mr. POWELL. The Secretary has sole authority over the CARES
Act funding under the CARES Act. The Fed is not involved in that.
His reading of the law, thus, is the authoritative one, and we ac-
cept it.
Secretary MNUCHIN. I would also just say, if I was politically-mo-
tivated, I wouldn’t have extended the four facilities in deference to
the Fed’s view that were non-CARES Act facilities. So, had I been
trying to be political, I would have terminated those.
Chairwoman WATERS. My time has expired.
I now recognize the distinguished ranking member, Mr.
McHenry, for 5 minutes for questions.
Mr. MCHENRY. Secretary Mnuchin, let me just give you a mo-
ment to answer. It sounds like you have additional things you want
to explain in your reading of the CARES Act. The CARES Act ex-
pires on December 31st of this year. That is in the law. So, let me
give you the opportunity to give a full answer on your decision with
the Exchange Stabilization Funds.
Secretary MNUCHIN. Thank you very much. There are three sec-
tions I direct people to. First, Section 4029, which is the termi-
nation date of December 31st of 2020 to make new loans, loan
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guarantees, or other investments shall terminate. That is perfectly
clear.
Second, Section 4003, which references deposit of proceeds. So,
when proceeds come in, we allocate proceeds. Whether it is the re-
turn of an airline loan or money from the Fed, we allocate it very
clearly in Section 4003.
Third, as the Chair referenced, Section 4027, which references if
there was money left over, okay. And there are limited uses of
what that money can be, either expenses or follow-on investments
on existing loans. So, if we had to make an advance on an existing
loan to an airline, that is under Section 4027, and any money on
2026 will come back vis-a-vis that.
So, again, Section 4003, Section 4027, Section 4029, and, again,
I personally negotiated this language. And, again, Congress has the
ability to change this if they think the money should be spent oth-
erwise.
Mr. MCHENRY. Secretary Mnuchin, you and I talked regularly
during those negotiations. I was a strong advocate for as large an
Exchange Stabilization Fund dollar amount as possible so that
both the Treasury and the Federal Reserve would have maximum
firepower to put out what we did not fully understand would hap-
pen in the coming weeks or coming months with the nature of the
virus.
So, we, in the midst of this negotiation, had a very, very large
Exchange Stabilization Fund (ESF). Absent the CARES Act’s $454
billion in the Exchange Stabilization Fund, how many dollars are
allocated to the Exchange Stabilization Fund?
Secretary MNUCHIN. Again, we allocated something like $20 bil-
lion from the ESF for the pre-CARES facilities prior to the CARES
Act. As I said, in deference to the Fed, those facilities don’t have
this restriction and still exist. And there is still something like an
additional $50 billion that could be used in the future for emer-
gencies, which would support another $500 billion.
And, again, I want to thank Congress for giving extraordinary
authority to the Secretary of the Treasury for $500 billion. As peo-
ple have noted, many people criticized that authority. And I am
merely following the law and returning that authority back, as
Congress intended.
Mr. MCHENRY. Chairman Powell, these facilities of the Fed
served a very important purpose in the early days. Their utilization
in recent months has not significantly changed in dollar value of
Fed lending facilities, and so the four remaining facilities are still
important as a lender of last resort facility, of course.
I want to thank you for your work to stand up those facilities
and your work in the last 8 months of this year to stand up more
facilities than were stood up in the fullness of the financial crisis
of 2007, 2008, 2009, 2010. You stood up more facilities in 8
months—well, actually, in 3 months, than they did in 4 years. So,
I thank you and the staff of the Federal Reserve for your solid
great work to support our economy and to ensure that this health
crisis, that has become an economic crisis, did not become a finan-
cial crisis. I want to commend you for that.
Finally, I want to note that I have consistently been an advocate
of the independence of the Federal Reserve for making monetary
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11
policy and supporting our economy. I do think it is important, an
important hallmark, whether it was Chair Yellen in your seat,
Chairman Powell, or your service as Chairman of the Federal Re-
serve, that we honor the independent policymaking and monetary
policy decisions of the Federal Reserve. And I want to thank you
for your leadership.
I yield back.
Chairwoman WATERS. Thank you very much.
The gentleman from Guam, Mr. San Nicholas, who is also the
Vice Chair of the committee, is recognized for 5 minutes.
Mr. SAN NICOLAS. Thank you, Madam Chairwoman.
Chairman Powell and Secretary Mnuchin, thank you so much for
making time to be with us here today. I wanted to open with some
questions regarding the Main Street Lending Program (MSLP), Mr.
Chairman. Are you familiar with how much has been authorized
for the MSLP at this time?
Mr. POWELL. Yes, I am. We made about $5 billion in loans, a lit-
tle better than $5 billion in loans.
Mr. SAN NICOLAS. Okay. So, we have about $5 billion out there
in the MSLP. Now, those programs are administered by partici-
pating banks, correct?
Mr. POWELL. Yes.
Mr. SAN NICOLAS. Are the banks—
Mr. POWELL. Put it this way: We work through the banking sys-
tem. We access borrowers through the banking system. We admin-
ister the overall program, but the banks are facing off against the
actual borrowers.
Mr. SAN NICOLAS. Right. So, these borrowers who are receiving
MSLP funds, are they required to be investment-grade borrowers?
Mr. POWELL. No.
Mr. SAN NICOLAS. And that just brings me full circle, Mr. Chair-
man, because the last time we spoke, I was discussing the Munic-
ipal Liquidity Facility and the Fed’s inability to allow municipali-
ties that are below investment grade to be able to access that li-
quidity.
And it was mentioned in our hearings that the Federal Reserve
does not provide funding to noninvestment grade entities. And yet,
through the MSLP, indirectly, the Federal Reserve, as you have
mentioned, is willing to do so for private sector entities.
Mr. POWELL. As you will recall, with the Territories, there are
no investment grade, overall sovereign investment grade. But we
worked with you and your office to work with one of the below sov-
ereign level facilities. The name of it doesn’t come to mind. And we
also worked with you to be in touch with the Treasury Department
under various loan programs that might be useful.
But, no, the overwhelming majority of municipal borrowers are
investment grade, and we did limit the facility to that.
Mr. SAN NICOLAS. The reason why I am raising this point, Mr.
Chairman, is because I just wanted to highlight the inconsistency
in the policy, because if investment grade is a requirement for the
Federal Reserve to be providing financial support, particularly as
the lender of last resort, and it is not imposing that same require-
ment on private sector entities that are accessing the MSLP, I
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again beg the question, why are we doing so for municipal entities
trying to access the Municipal Liquidity Facility?
I appreciate your staff trying to work with us in looking for
workarounds in this environment, but, it is just so glaring, Mr.
Chairman, that these private companies are not investment grade,
and they are able to access the support. I am glad they are; I want
them to. But we are not allowing municipal entities who are not
investment grade to be able to access the specific facilities that we
set up for our municipal circumstances.
I just wanted to put that in the record, Mr. Chairman. I am hop-
ing that you can go back to the table and reconsider this, given
these issues that we are bringing to light. And at the end of the
day, we need a solution for our municipal entities that are below
investment grade, but are in the same boat as all of these private
sector entities that are able to access capital through the MSLP.
Thank you, Madam Chairwoman, and I yield back.
Chairwoman WATERS. Thank you very much.
The gentlewoman from Missouri, Mrs. Wagner, is recognized for
5 minutes.
Mrs. WAGNER. Thank you, Madam Chairwoman.
And welcome, Secretary Mnuchin and Chairman Powell. First, I
would like to thank you both, both you and your staff for your serv-
ice to our nation and your tireless efforts during this pandemic to
implement the CARES Act and for propping up the Federal Re-
serve’s emergency lending facility.
While economic data continue to trend in a positive direction and
we do know that credible and safe vaccines are just weeks away,
the surge in cases and lockdowns occurring across the country
could result in our economy backsliding again if we do nothing. I
want to reiterate the urgency, the overdue urgency for Congress to
provide immediate targeted relief now, not next year. It should
have been months and months ago. Our nation’s hospitals, small
businesses, schools, many of our hardest-hit industries, and cer-
tainly those who continue to be unemployed, cannot continue to
wait any longer for relief.
Just this week, St. Louis County, which I have the privilege of
representing, reported an average of 660 new cases being added
every day, with a total of 51,324 confirmed coronavirus cases as of
Sunday. Many of my constituents in Missouri’s Second District are
under a mask mandate, and restaurants and bars have been com-
pletely shuttered and are closed down. Capacity limits of gath-
erings are down to 10 people.
Our families and our businesses are asking Congress for addi-
tional relief to combat this health crisis. Hospitals are filling up,
and many businesses are worried that they will not survive. They
are reaching the desperation point. We must stop playing partisan
politics and come to a bipartisan agreement to provide a direct
COVID-related stimulus and support now.
Chairman Powell, according to the data you are seeing, what
parts of our economy are most in need of fiscal stimulus measures
provided by Congress?
Mr. POWELL. Thank you. There are many sectors that could use
some help, and, of course, those decisions are really up to you and
the Administration. But I will just mention quickly, I would start
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with the labor market. I think we ought to remember that, despite
the rapid progress in getting people back to work, which is so wel-
come, there are still 10 million people who are out of work because
of the pandemic. And, that is more than lost their jobs in all of the
global financial crisis 10 years ago, which at the time was the big-
gest recession that we had had in a long, long time.
So, there is a lot of work left to do there. The unemployment in-
surance programs are expiring at year’s end. I think that is an
area where I would certainly look.
Another thing that comes up all the time in our discussions is
smaller businesses. We met with a group of community bankers a
week or so ago, and they were telling us there are just a lot of
smaller businesses in their communities that will struggle to make
it through this winter because, as you say, in Missouri’s Second
District—and it is true all over the country—COVID is moving up,
and with the cold weather, people are staying in, and it is going
to be tough on a lot of small businesses. That is another place
where I would look.
Finally, I do think for State and local governments, and this dif-
fers State to State, revenue is down, and maybe not so much in
some States, but in some States by a lot, and costs are going up.
And I think they deliver critical services. They are living under bal-
anced budget requirements, and so they lay people off, and they
have laid off more than a million people already. So, that is an-
other area where I think it would be profitable to look.
Mrs. WAGNER. Thank you, I appreciate that.
Secretary Mnuchin, I will ask you a similar question. You have
mentioned the need for a targeted fiscal package with $455 billion
in unused funds from the CARES Act that did need to be returned
to Treasury, given the law.
How do you suggest we appropriate this money to support the
most-vulnerable segments of our population?
Secretary MNUCHIN. My single-highest priority would be to acti-
vate the $140 billion in PPP funds that are not spent, that we
could immediately send out to the hardest-hit small businesses
whose revenue is down dramatically.
I also think Congress should consider extending some of the un-
employment insurance programs that expire at the end of the year.
Mrs. WAGNER. I appreciate that. And the Paycheck Protection
Program is estimated to have saved more than 50 million jobs, in-
cluding many jobs across Missouri’s Second Congressional District.
Chairwoman WATERS. The gentlelady’s time has expired.
Mrs. WAGNER. Thank you. I yield back.
Chairwoman WATERS. The gentleman from Illinois, Mr. Casten,
is recognized for 5 minutes.
Mr. CASTEN. Thank you very much. We really appreciate you all
being here today.
I was really pleased that the Federal Reserve’s financial stability
report identified climate change as a risk to financial stability. The
report stated that, ‘‘different sectors of the economy and geographic
regions face different risks that will diverge from historical pat-
terns.’’ It also said that levered financial institutions may be ex-
posed to losses from disasters made more likely by climate change.
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14
Chairman Powell, while there is more to explore about how to in-
corporate these risks into modeling, do you think it is appropriate
for financial institutions to incorporate climate risk into credit risk
assessment?
Mr. POWELL. Let me say this for starters: Climate change is an
important issue. I want to say that society’s broad response to cli-
mate change really has to come from elected Representatives. I
think there is a role for the Fed here, and we are working our way
through understanding what that will be.
But one thing is the public will expect that, in our supervision
and regulation of financial institutions and financial market infra-
structure, that they will be resilient, we will make sure that they
are resilient to climate change risks. And I do think that it does
fall on banking institutions and CCPs and other financial market
infrastructures to evaluate that and incorporate it in their own op-
erations and also, I would think ultimately, in the credit that they
extend.
Mr. CASTEN. I think I will take that as a yes, because I was real-
ly just asking if it was appropriate for financial institutions to in-
corporate. What role the Fed has is, of course, a separate question.
I certainly agree with you, and I asked the question because I
am really concerned with the OCC’s latest rule that would prevent
banks from integrating climate-related risks into their credit as-
sessments, despite the fairly significant financial risk that climate
poses.
The OCC rule specifically says that the risks of lending, ‘‘would
not change based on the sector in which the firm operates,’’ which
is categorically false. I don’t know how you would tell banks that
somehow they need to ignore the dynamics in the sector without
imposing significant systemic risk on the banking sector, not allow-
ing banks to account for the sector of the economy where it sits just
defies logic and market fundamentals.
The report also stated that, within the financial system, in-
creased transparency, through improved measurement and disclo-
sure, would improve the pricing of climate risks. What additional
transparency would be helpful to appropriately assess the overall
risk to the financial system due to climate change?
Mr. POWELL. I am glad you read that box in our Financial Sta-
bility Report. We are really at the beginning of the process of
thinking our way through these things, and so are other market
regulators and central banks and financial institutions around the
world.
The point there was that we are going to need transparency
about how financial institutions are thinking about these risks,
how they are incorporating it in their business model. We don’t ac-
tually regulate transparency. That is really more of a market regu-
lator job, what is a required disclosure.
I think we are all moving in that direction, but in terms of the
interaction between financial regulators and financial institutions,
we are at the beginning of the work.
Mr. CASTEN. Would a standardization of climate-related risk dis-
closures from publicly traded companies be useful for you in order
to continue that work?
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Mr. POWELL. I think that is certainly where we are headed over
time. Again, it is not our responsibility. That would be the market
regulator’s responsibility. But I do think that is where we will be
going.
Mr. CASTEN. Thank you. And I yield back the balance of my
time.
Chairwoman WATERS. Thank you.
The gentleman from Kentucky, Mr. Barr, is recognized for 5 min-
utes.
Mr. BARR. Thank you, Madam Chairwoman.
Chairman Powell, some in the press this morning and some of
my colleagues have seemed to try to make the argument that you
and the Treasury Secretary are in disagreement about the Ex-
change Stabilization Fund, but I don’t detect much of a disagree-
ment.
What I heard the Secretary say is that his decision to not extend
the $430 billion left in the Exchange Stabilization Fund is rooted
in his interpretation of the statute of the CARES Act. And what
I heard you say is that you believe that the Secretary, under the
law, has the authoritative interpretation of that and you accept
that.
Now, obviously, you stated yesterday that you think it is perhaps
premature to be pulling back from emergency lending programs,
but I heard the Treasury Secretary say that it is within Congress’
ability to authorize that, so I don’t see a disagreement here.
But given the modest takeup in some of the emergency lending
programs, particularly Main Street, wouldn’t it be wise for Con-
gress to repurpose at least some of that $430 billion towards what,
admittedly, has been an effective program, the Paycheck Protection
Program?
Mr. POWELL. I hope you won’t mind if I use just a couple of sec-
onds to clarify what is going on.
Mr. BARR. Sure.
Mr. POWELL. As I said earlier, the Secretary has sole authority
over CARES Act funds. He reads the statute and reads it to say
that there is no support for lending after December 31st. We accept
that. We don’t have a role in reading it. That is one thing. Our
thinking is not about the CARES Act money; it is more about sup-
port for the economy.
Mr. BARR. Sure.
Mr. POWELL. We were concerned that the public might misinter-
pret this as the Fed stepping back and thinking that our work is
done, and that is very much not the case. So, we needed to send
a signal to the public to that effect.
And, as the Secretary pointed out in his letter and as we pointed
out in our letter, there is Exchange Stabilization Fund money that
is available to support the reestablishment of these facilities or
other facilities, if they are needed and they meet the legal require-
ments and that kind of thing.
Mr. BARR. Let me just ask this, though: Wouldn’t it be wise for
Congress at this point, before the end of the year, to repurpose
some of those CARES Act funds towards the Paycheck Protection
Program, given the concerns of the small businesses that you ref-
erenced?
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16
Mr. POWELL. I would just say that what I am hearing from
across the aisle and on both sides of the Hill is the desire to do
something to fund these causes, as the Secretary just talked about,
and others. And I think that would certainly be a help for the econ-
omy. As to where that money comes from, that is really up to you.
Mr. BARR. One area where there is, I think, significant bipar-
tisan support is for streamlining the forgiveness process. A recent
survey in Kentucky found that 27 percent of community banks in
Kentucky would not participate in a new round of PPP without
streamlined forgiveness and clear rules of the road.
Many of the businesses in my district who have applied for for-
giveness tell me that the process from the Small Business Adminis-
tration (SBA) is slow and cumbersome. It is a big problem if lend-
ers will not participate in a second round because of inadequate
streamlining of the forgiveness rules.
Secretary Mnuchin, you previously indicated your support for
legislation to streamline PPP forgiveness. Is this still the case, and
what more can we do to ensure participation by community lenders
in a new round of PPP?
Secretary MNUCHIN. I do support that. And we have created
three different forms for forgiveness, using what authorities we
have, and making it as simple as possible for loans that are less
than $50,000.
But I know there is bipartisan support to pass a bill. I believe
it is all loans $150,000 or less. And we fully support that, subject
to audit.
Mr. BARR. Thank you.
Chairman Powell, the statutory language in the CARES Act tem-
porarily suspends accounting rules related to troubled debt restruc-
turing (TDR), and that expires on December 31st. It is important
that Congress extend this important tool to allow lenders to con-
tinue to work with their customers.
What authorities do you have at the Fed to extend TDR relief ad-
ministratively versus what Congress must do to ensure lenders can
continue to accommodate borrowers?
Mr. POWELL. We actually don’t have authority to extend TDR. It
is an accounting rule. We have a lot of authority, though, and we
will use it to make sure that banks continue to work with their
borrowers, to encourage them to do so, I should say.
Mr. BARR. There is some uncertainty among the auditing commu-
nity about whether life insurers would qualify for TDR relief under
CARES. This is a problem, because insurers make up over 13 per-
cent of the commercial real estate lending market, a sector that is
deeply impacted by the pandemic.
Chair Powell, do you agree that life insurers, given their partici-
pation in the commercial real estate lending market, should qualify
for TDR relief?
Mr. POWELL. I would have to check on that, and get back to you.
Thanks.
Mr. BARR. We think that is an important thing to look into.
My time has expired. I yield back.
Chairwoman WATERS. Thank you very much.
The gentleman from New Jersey, Mr. Gottheimer, is recognized
for 5 minutes.
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Mr. GOTTHEIMER. Thank you, Madam Chairwoman.
And thank you, Chairman Powell and Secretary Mnuchin, for
being here today.
The COVID-19 pandemic, as we have been talking about, has
caused ongoing global health and economic crises. While certain as-
pects of our economy are recovering, millions of Americans and
thousands of my constituents are in dire need of help. We can’t go
home from Washington, given what is going on, without risking a
double-dip recession.
As you said earlier this month, Chairman Powell, further support
is likely to be needed to avoid another spread of the virus, and to
help individuals. We are obviously in the lame duck session of Con-
gress. The American people have waited long enough. Our families,
our businesses, and our communities are all suffering, and it would
be unconscionable for any party to walk away from so many who
are hurting right now.
Yesterday, the Problem Solvers Caucus joined a bipartisan group
of Senators in releasing a new $908 billion emergency short-term
stimulus package. It is intended to be a critical downpayment to
get through the next months.
If I can start with you, Secretary Mnuchin, have you had a
chance to review the framework, by chance?
Secretary MNUCHIN. First, let me just say I really appreciate the
work that you have personally done, and the Problem Solvers have
done, in trying to reach bipartisan solutions.
I did review it briefly yesterday after my testimony, and I will
be spending more time on it today. Again, I would urge Congress
to move quickly on the PPP, for which there seems to be enormous
bipartisan support. But, again, thank you personally for your ef-
forts.
Mr. GOTTHEIMER. Thank you, Mr. Secretary. And I appreciate
the work we have done together on this. And obviously, I hope this
will be something that if we can get the support here, the Adminis-
tration might support.
If I could turn to Chairman Powell, would you speak to the ur-
gency for fiscal relief, and what do you believe is at stake this win-
ter for the economy and for families if we don’t get an emergency
package done in the next week?
Mr. POWELL. My view is that it would be very helpful and very
important that there be additional fiscal support for the economy,
really to get us through the winter. We have made a lot of progress
faster than we expected, and now we have a big spike in COVID
cases, and it may weigh on economic activity. People may pull back
from activities they were previously involved in, or not get involved
in new activities. So, I think it would be helpful if we could get
that done, if you could get that done.
Mr. GOTTHEIMER. Thank you so much, Mr. Chairman.
Just to follow up on that, obviously, local governments are strug-
gling now, through no fault of their own. It is putting law enforce-
ment, firefighters, teachers and their [inaudible] on the line. What
do you think the impact will be, if we can’t get extra resources to
our State and local governments, on the economy?
Mr. POWELL. These are really decisions for you, but I would say
that State and local governments provide critical services. You
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18
mentioned them. And State and local governments live with bal-
anced budget requirements, unlike the Federal Government. And
what happens when revenues soften and expenses go up is you see
layoffs. And that was a big part of the story in the slow recovery
from the global financial crisis a decade ago. We now have a little
more than a million in layoffs so far.
State and local governments are some of the very largest employ-
ers in the country, and they provide those critical services. I think
that is a worthy place for you to look, in terms of where support
might be appropriate.
Mr. GOTTHEIMER. Do you see it as sort of, just to follow up on
that point, a ripple effect? In New Jersey, about a third of our busi-
nesses already, small businesses, have already gone out, including
about 28 percent of restaurants. When you add that with the rev-
enue declines for the State and local governments, and all of these
businesses coming out, what do you see on the other side of the
virus? And, again, with the vaccine, but what can be the economic
[inaudible] that all of this brings along after the virus is behind us?
Mr. POWELL. I think, as you suggest, that you have a near-term
and medium-term difference. The near-term does look challenging
through the winter. Small businesses—we are hearing all over that
small businesses are really under pressure. And then, sometime in
the middle of next year, it really does look like that may be the
light at the end of the tunnel—we all hope so—and that the econ-
omy could be very healthy.
The problem is, of course, people who lose their homes now or
businesses that go out of business, these are sometimes small busi-
nesses that might have generations of sort of human capital built
up in their activities. And once they are gone, they can’t just be re-
created. So, you could lose parts of the economy, and that will
mean a slower recovery.
I like to think of it as a bridge over this chasm that was created
by the pandemic. We are trying to get as much of the economy and
as many of the workers across that bridge to the post-pandemic
economy. And I think we have done well at that, but there is still
some work left to do.
Mr. GOTTHEIMER. Thank you so much.
And I yield back.
Chairwoman WATERS. The gentleman’s time has expired.
The gentleman from Ohio, Mr. Gonzalez, is recognized for 5 min-
utes.
Mr. GONZALEZ OF OHIO. Thank you, Madam Chairwoman, for
holding this hearing, and I thank both of our witnesses for all of
your work throughout this pandemic. I sincerely believe that we
will look back a decade, or 2 decades from now, and the work that
you two did together will be looked at in the most favorable light.
And so, I couldn’t be more grateful for your service, so thank you
both for that.
Look, we can see the light at the end of the tunnel with two vac-
cines awaiting approval, and I think the bridge comment is exactly
correct. We are looking to bridge from now until, call it April 1st
or whenever that is. And I was pleased to join a group of bipartisan
and bicameral Members yesterday as my colleague, Mr.
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19
Gottheimer, just mentioned, with the Problem Solvers Caucus to
hopefully provide that bridge, and I hope we will be able to do that.
Chairman Powell, before I move into some questions on that,
going back to the Exchange Stabilization Fund a bit, the main pur-
pose was to provide liquidity to the financial system to stabilize the
financial system. As these programs expire, do you see the same
or similar risks to the liquidity inside the financial system as you
did, say, back in March or April, or do you feel like we are in a
much better place today?
Mr. POWELL. We are clearly in a much better place. To be clear,
the utilization of these facilities, most of them, is very, very low
now. Nonetheless, we see them as serving a backstop function that
a central banker would want, and we would want to leave that
backstopping function in place for some additional period of time
but not forever.
If you look back at what we did in the global financial crisis, we
left them out there until we were well past the difficulty, and then
we unplugged them, put them in the attic, and put them away.
None of them became a permanent feature of the landscape, and
we hope these don’t either. So, that is the way we think about it.
Mr. GONZALEZ OF OHIO. Thank you. That is helpful. And hope-
fully, as we debate the next package, we can consider that.
Secretary Mnuchin, in recent months, we have heard Speaker
Pelosi on multiple occasions state effectively that nothing is better
than something with respect to additional relief. In your esti-
mation, is nothing better than something for my constituents back
home?
Secretary MNUCHIN. No. Something is clearly better than noth-
ing. And, again, I would urge Congress to do something, if it is just
the PPP or more.
Mr. GONZALEZ OF OHIO. And, of course, that is an obvious state-
ment, which I think everybody knows, but for whatever reason, the
Speaker has chosen that path. My understanding is you have con-
tinued dialogue with her. I am not going to ask you to divulge sort
of the specifics of those conversations, but you have been involved
in a lot of deals in your life, certainly as Treasury Secretary.
As you have had these discussions, how would you characterize
them with respect to willingness to actually get a deal done? Be-
cause I think there are a lot of people who like to talk around here,
but when it gets down to it, actually don’t do that much with re-
spect to closing a deal. How would you characterize the discus-
sions?
Secretary MNUCHIN. I would say the good news is when we really
needed to get this done last March, it got done with overwhelming
bipartisan support. Republicans and Democrats came together in
an unprecedented response. When we needed to extend the PPP,
people came together in an unprecedented response.
Unfortunately, since that period of time, things for which, in my
opinion, there should be absolute bipartisan support, and we could
get done, unfortunately, the Speaker has had—a half a loaf is not
good enough and wanted a full loaf. So, again, I would encourage
Congress, particularly over the next few weeks in the lame duck,
let’s try to get something done.
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Mr. GONZALEZ OF OHIO. No. I couldn’t agree more, and I—again,
to state another obvious point, my colleagues on the other side of
the aisle are in the Majority. And in order for this to actually get
done, we are all going to have to come together to do it, but really,
the pressure needs to come from them. And I hope that they will
use the leverage that they have to encourage the Speaker to put
a real bipartisan bill forward, because as Chairman Powell said,
and as you have said, as common sense demands, it is obvious that
we need a bridge here, that there are people struggling. There are
small businesses struggling. There are people who are unemployed
who are struggling. And I can almost guarantee you to the person
that every single one of them would prefer something to nothing.
And I hope that this body will come to common sense and actually
get that done.
And with that, I yield back.
Chairwoman WATERS. Thank you.
And I object to all of the fault being placed on the Speaker’s
back. I would advise the President to get involved and get off the
golf course.
Mrs. Axne, you are now recognized for 5 minutes.
Mrs. AXNE. Thank you, Madam Chairwoman, and I thank both
of our witnesses for being here.
As we all know, we are in dire straits right now. Iowa has now
had increasing unemployment claims for 6 straight weeks. And, of
course, I would like to remind everybody that we need to pay atten-
tion to the level of unemployment, not just the direction. This is
all happening when week after week, we see initial claims higher
than the worst that we saw in the Great Recession. That is 36
weeks in a row where we have seen record unemployment claims
across this country.
Meanwhile, The Century Foundation recently estimated that 12
million people would lose their unemployment benefits the day
after Christmas if we don’t act. That seems very terrible for this
country.
Chairman Powell, what are the economic impacts of removing
that support at a time when this recovery is so fragile?
Mr. POWELL. This is if the unemployment programs run out and
expire at the end of the year. We would be concerned that the un-
employment rate for people in the bottom quartile, for example, is
about 20 percent still, and those are people with relatively low sav-
ings, low wealth. And we would be concerned that they would be
vulnerable to losing their houses or their rental and just be in a
very difficult place. So, we think that is an appropriate place to
look for further help.
Mrs. AXNE. I appreciate that. As we all know, 1 in 8 Americans
are going hungry, more than 3 million businesses have closed, and
we are approaching 100,000 people now hospitalized with COVID.
So I am wondering, for either one of you, does seeing this kind of
need and the discussion that we have had today show the impor-
tance of passing another COVID aid package? And how quickly do
we need to get that done?
Mr. POWELL. I would just urge, as the Secretary has done, that
this is a good time. This would really help the economy through
these winter months and beyond. And, again, we can see the vac-
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21
cines coming, but we have a bit more of the bridge to build, and
I think it would be very important for the economy to receive that
help.
Secretary MNUCHIN. I would agree with that, as I have echoed.
Mrs. AXNE. Thank you.
And, Secretary Mnuchin, I did want to discuss the CDC’s eviction
moratorium that currently expires on December 31st. A study re-
cently showed that 430,000 cases of COVID and more than 10,000
deaths are due to lifting the earlier State and local eviction morato-
rium. Are there plans to extend that to possibly protect 10 million
households from eviction this January?
Secretary MNUCHIN. I think, as you know, that wasn’t our first
choice. Our first choice was really assistance to those people, but
I will discuss that with the President, and extending it.
And, Chairwoman Waters, I have been speaking to the President
every day and updating him on the state of the negotiations. He
would like us to see additional funding.
Mrs. AXNE. Thank you. I hope we can get that done quickly so
that we don’t have a 20-day gap here where millions of people are
going to get evicted. Soc, please get back to us and the chairwoman
on what we can expect from that. Thank you.
I would also like to discuss what you are doing with the $450 bil-
lion of funds for the CARES Act. I know we have had some discus-
sion here. I am going to set aside the question of whether what you
are doing is legal, because I want to get into why you are doing
this. One explanation I have seen is that it’s because you think
Congress should use this for fiscal aid, and I don’t disagree with
that.
The problem with this, though, is that if Congress wants to re-
appropriate money from the Exchange Stabilization Fund (ESF),
we can do that the same as we can from the General Fund. The
only real difference I can see is that leaving it in the ESF makes
it a heck of a lot easier for a future Treasury Secretary to use this
money quickly to provide for economic support. So, why are you
choosing to make it harder to support the economy in the future?
Secretary MNUCHIN. I just want to clarify, because there is a
bunch of confusion. Whether it sits in the general account, whether
it sits in the ESF, all of this is completely governed by the law.
And as I have said, I extended the pre-CARES Act facilities. If I
was looking to do something that was political, I wouldn’t have ex-
tended those.
My result in not extending the CARES Act is merely an adminis-
tration of my obligation under this law. It doesn’t matter what ac-
count it is in. That has nothing to do with it. The money is admin-
istered pursuant to the law. And if Congress wants to change the
law, that is fine. And the reason why I believe Mitch McConnell
has put some new language in isn’t in my interpretation of the law;
it is because many of you seem to be confused and he wants to clar-
ify it.
Mrs. AXNE. Reclaiming my time, Thank you, Mr. Secretary, but
that is just not accurate. The CARES Act is very clear that existing
investments can remain there, and that is what you have made
happen with the Fed’s facilities, so that answer isn’t acceptable.
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Why are you looking for a way not to help American people right
now? This isn’t your money; it is taxpayer money, and it should be
quickly available to the American people right now when we need
the help. So, I see you undermining the American people on your
way out the door. You need to reverse this decision so that these
programs can keep supporting people.
Chairwoman WATERS. The gentlelady’s time has expired.
Mrs. AXNE. Thank you for your service, and I yield back.
Chairwoman WATERS. Thank you.
The gentleman from Tennessee, Mr. Rose, is recognized for 5
minutes.
Mr. ROSE. Thank you, Chairwoman Waters, and Ranking Mem-
ber McHenry. And I thank you, Secretary Mnuchin and Chair Pow-
ell, for being here today for this third oversight hearing required
by the CARES Act. I want to thank you also for the great work by
both the Department of the Treasury and the Federal Reserve
throughout this pandemic response. Your fast action has allowed
businesses in my district in Tennessee and across the country as
well to keep their doors open, and to keep employees on the pay-
roll.
I also want to underscore the importance and impact of the
CARES Act on stabilizing the economy. We continue to see strong
economic recovery, and I hope we can continue that trend as we
work towards the great American comeback.
Congress has already provided approximately $1 trillion through
bipartisan legislation, including the CARES Act, to stabilize State
and local economies and support communities, including frontline
workers, teachers, students, school employees, and employers and
employees.
In your testimony, you pointed out that $455 billion in unused
funds remain from the CARES Act. Back in Tennessee, folks are
talking about how these funds sit unused while House Democrats
continue to discuss spending an additional $3.4 trillion, and that
is with a ‘‘T,’’ trillion, in the Health and Economic Recovery Omni-
bus Emergency Solutions (HEROES) Act.
In Middle Tennessee, there have been several industries that are
enjoying their best year ever while others have been completely
devastated by the government-imposed shutdowns due to the
coronavirus pandemic. The American private bus and motor coach
industry is one of the latter. The motor coach industry plays a vital
role in our travel, tourism, and music industries, and provides
nearly 600 million passenger trips per year. In the wake of the
pandemic, nearly all of the 3,000 companies in the industry at
some point were completely shut down, 36,000 vehicles were
parked, and most of the over 88,000 employees were laid off.
We have billions of dollars sitting unused, and yet this industry
still needs relief. Congress must act to provide targeted relief.
Secretary Mnuchin, as a proponent yourself of targeted relief,
can you detail what you would do to provide targeted aid to this
devastated industry?
Secretary MNUCHIN. Yes. And let me just say, there is more than
the $450 billion unused. There is actually another $140 billion in
PPP on top of that. But I would support $20 billion in additional
money in payroll support to the airlines, identical to what we have
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23
done before in the CARES Act. I think that would be very mean-
ingful in terms of employment and saving the industry.
Mr. ROSE. And I appreciate that, but unfortunately, that assist-
ance didn’t reach the motor coach industry, and so they have not
enjoyed that same targeted relief that we saw go to the airline in-
dustry.
Do you believe that the aid that you described should be included
in an end-of-year package?
Secretary MNUCHIN. I apologize. I thought you were asking about
the airlines. I would support additional aid to the motor coach in-
dustry as well.
Mr. ROSE. Thank you. Lastly, would you be willing to commit to
having Treasury staff brief my staff and Senator Marsha
Blackburn’s staff before the end of the year on ways that Treasury
might be able to provide targeted assistance to the bus and motor
coach industry using any existing funds?
Secretary MNUCHIN. We would be happy to. I don’t think, unfor-
tunately, we can use existing funds, but we would be more than
happy to go through that with your staff.
Mr. ROSE. Thank you.
Thanks to President Trump’s Operation Warp Speed, and the
great American innovative industries that we have, we are getting
closer and closer to widely distributing a vaccine. In Tennessee, if
the FDA authorizes emergency use, we are expecting to see dis-
tribution beginning in mid-December.
Chair Powell, could you speak to the effect that distributing an
effective vaccine would have on our economy?
Mr. POWELL. Yes. Clearly, in the medium-term, which is to say,
sometime in the middle of next year, we are not well-positioned to
give a precise estimate of when that might be, people will regain
confidence that they can gather in various activities that now seem
too risky because of COVID, and that will have a very positive ef-
fect on economic activity, on spending, and on hiring. So, we do see
very positive things coming.
I just would add, though, as I said in my testimony, the path is
a little bit uncertain because we are still learning, going to be
learning, about the efficacy of the vaccines and also about the
speed of the rollout and who will get them and in what order and
what the effect will be on the public. But, overall, I think we see
a very positive set of developments coming at a somewhat uncer-
tain time but not so long into the future.
Mr. ROSE. Thank you, Chairwoman Waters. I yield back.
Chairwoman WATERS. Thank you.
The gentlewoman from California, Ms. Porter, is recognized for
5 minutes.
Ms. PORTER. Thank you, Madam Chairwoman.
Chair Powell, would you say the economic crisis caused by the
pandemic is over?
Mr. POWELL. I’m sorry. I couldn’t hear exactly what you said. I
apologize.
Ms. PORTER. That’s okay. Would you say the economic crisis
caused by the pandemic is over?
Mr. POWELL. No, I would not.
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Ms. PORTER. Okay. How long do you think it will take before we
know?
Mr. POWELL. I think—well, before we know, I think we will know
a lot in the next 4 to 6 months about vaccines. The real issue,
though, is what are going to be the effects of people whose jobs may
have changed or gone away? It is really the new—the post-pan-
demic economy is going to be different, and we are going to learn
a lot about that in the second half of next year. And I think those
people are going to need help, some of them.
Ms. PORTER. And I think that is, Chair Powell, a very fair an-
swer. We can’t know unless we have a crystal ball exactly how the
recovery from this is going to proceed.
Now, Secretary Mnuchin, who is also here with us today, appar-
ently disagrees with you. In fact, Secretary Mnuchin is so certain
that the economic crisis is over that he wants to ban the Fed from
using any more of the $500 billion that Congress set aside in the
CARES Act to help the economy. Two weeks ago, he wrote to you
to request that you return the remaining $455 billion because our
economy, in his opinion, simply doesn’t need it anymore.
In response, you, Chair Powell, said that the outlook for the
economy is extraordinarily uncertain. The Federal Reserve would
prefer that the full speed of emergency facilities established during
the pandemic continue to serve their important role as a backstop
for our still strained and vulnerable economy.
Needless to say, it is highly concerning that the two people
tasked with stabilizing our economy do not agree on whether the
markets are stable. But it actually doesn’t matter what either of
you two think because Secretary Mnuchin simply doesn’t have the
authority to recall the $455 billion.
I am reading aloud now from Section 4027 of the CARES Act:
‘‘On or after January 1, 2026, any funds that are remaining shall
be transferred to the General Fund,’’ in other words, sent back to
the Treasury.
Secretary Mnuchin, is it currently the year 2026? Yes or no?
Secretary MNUCHIN. First, let me comment. I do believe there is
an economic emergency.
Ms. PORTER. Secretary Mnuchin, reclaiming my time.
Secretary MNUCHIN. You are putting words in my mouth that are
not correct.
Second of all, okay—
Ms. PORTER. Reclaiming my time.
Secretary MNUCHIN. —the answer is that 4027—
Chairwoman WATERS. The time belongs to the gentlelady.
Ms. PORTER. Madam Chairwoman?
Reclaiming my time, Mr. Mnuchin, would you start by answering
my next question, and I will ask you others. Is today the year
2026? Yes or no?
Secretary MNUCHIN. Of course, it is not 2026. It’s ridiculous to
ask me that question and waste our time.
Ms. PORTER. Secretary Mnuchin, I think it is ridiculous that you
are playacting to be a lawyer when you have no legal degree.
Secretary MNUCHIN. Actually, I have plenty of lawyers at the De-
partment of the Treasury who advise me, so—
Ms. PORTER. Mr. Mnuchin—
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Secretary MNUCHIN. —I am more than happy to follow up with
Chairwoman Waters and the ranking member and explain all of
the legal provisions. I am more than happy to make that access.
Ms. PORTER. Secretary Mnuchin, are you, in fact, a lawyer?
Secretary MNUCHIN. I do not have a legal degree. I have lawyers
who report to me.
Ms. PORTER. Thank you.
Chair Powell, are you, in fact, a lawyer?
Mr. POWELL. I am a former lawyer, a recovering lawyer.
Ms. PORTER. You have a legal degree, correct?
Mr. POWELL. Yes, I do.
Ms. PORTER. Okay. Secretary Mnuchin, you are trying to tell
Chairman Powell to send over any remaining funds right now, and
you are claiming, falsely in my opinion, that is what the law says.
And you have gotten into a disagreement with someone who is ac-
tually a lawyer—
Secretary MNUCHIN. Are you a lawyer?
Ms. PORTER. —and, Congress, which actually wrote the law
about what it says. So, let’s go through with what the law actually
says.
Secretary MNUCHIN. Okay. Actually, I wrote the law with Con-
gress, for what it is worth. And, by the way, it is not $450 billion
he is returning. I think it is approximately $175 billion.
Ms. PORTER. Reclaiming my time, there was no question there.
Secretary Mnuchin, the CARES Act already says in exhibit—in
Section 4027, it says that you have to stop making any new invest-
ments, new investments, in Fed lending programs at year’s end. It
doesn’t say that the Fed programs must stop making loans or pur-
chases. You are making a decision that is not aligned with the stat-
ute or congressional intent.
Chairwoman WATERS. The gentlelady’s time has expired.
The gentleman from Wisconsin, Mr. Steil, is recognized for 5
minutes.
Mr. STEIL. Thank you, Madam Chairwoman.
Secretary Mnuchin, thank you for being here. Would you like to
further your comments for just a minute on the last exchange there
as to your rationale? I feel like you got cut off there for a minute.
Secretary MNUCHIN. Thank you very much. And, again, I think
what I will do is follow up with the chairwoman and the ranking
member so we clarify both 4027 and 4029. Again, I have had these
discussions with the Senate. And, again, if there is any misunder-
standing on this, again, this can be changed.
Mr. STEIL. I appreciate it. Thank you very much, and thank you
for being here.
Chairman Powell, the Fed balance sheet currently stands at $7.2
trillion, more than $3 trillion above where we started at the begin-
ning of the year. At the hearing on June 17th, I asked you how the
Fed would manage its balance sheet going forward to mitigate in-
flationary pressures. I think we need to keep this issue in mind in
light of the unusual monetary and fiscal tactics we have been re-
quired to employ this year to maintain the economic growth and
stability that we have had.
When we spoke, you commented that during the last recovery,
going back a ways, the Fed waited until it was, ‘‘well down the
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path of recovery,’’ before deciding what to do. You asserted that the
balance sheet, I think in your words, ‘‘doesn’t present issues at the
current time,’’ suggesting that addressing the balance sheet size
was not a priority.
It is now 6 months later. Our economy has begun to recover. The
unemployment rate has fallen from approximately 10 percent to
closer to 7 percent. Multiple vaccine trials have been successful,
and we are expecting distribution in the not-too-distant future. We
are not out of the woods yet, but there is cause, I think, for opti-
mism about our economic recovery.
Could you comment on the indicators that you are watching
closely as you consider taking steps to begin to restore the Fed’s
balance sheet to its prepandemic levels?
Mr. POWELL. Sure. Our priority remains supporting the economy
until we are really well through this. We are going to keep our
rates low and keep our tools working until we feel like we really
are very clearly past the danger that is presented to the economy
from the pandemic. So, we are not considering pulling back any of
our support for the economy, and we are not going to, until we feel
very confident that it is no longer necessary.
The time will come to start thinking about balance sheet issues,
and we have the model of what we did in the last financial recov-
ery. And I was at the Fed during those years when we were consid-
ering that. That time will come. It is well into the future. I think
we know how to do it, and that is slowly and carefully.
I think we have also seen all of these years of large balance
sheets, and understandably, people were concerned after quan-
titative easing began that there would be inflationary pressures or
market distortionary problems, but we really didn’t see them. So,
we don’t want the balance sheet to be, in the long run, any bigger
than it needs to be, but the main thing for us is to keep the sup-
port that the economy needs until we are confident that it no
longer needs it.
Mr. STEIL. Thank you for your comments. If I can shift gears,
Chairman Powell, as you know, LIBOR is linked to almost $400
trillion in financial contracts, so the implications of the transition
away from the benchmark are quite significant. I am especially
concerned about some of the tough legacy contracts which reference
LIBOR and are unchangeable.
On Monday, the Fed, the FDIC, and the OCC issued a statement
recognizing some of these developments and reiterating, among
other things, that banks should transition away from the U.S. dol-
lar LIBOR as soon as practical. Are you concerned that some finan-
cial market participants may continue to reference LIBOR in con-
tracts even after the relevant phase-out dates?
Mr. POWELL. As you know, we have provided guidance to market
participants that we would strongly discourage the use of LIBOR
for new contracts after the end of 2021. And then, there is a pro-
posal which will go out for comment, but the idea would be that
LIBOR would cease to be published, would cease to exist, except in
the tail in the remaining outstanding contracts at June 30, 2023.
It is very important that people understand that LIBOR should
not be assumed to continue to be published after that. That does
mean there will be a so-called hard tail, and we do think that will
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take legislation, and we have been working with Congress and also
at the New York State level on that. So, we think that is important
but not urgent from a time standpoint, but something that we will
need to get done.
Mr. STEIL. Thank you very much. Thank you both for being here.
I yield back.
Chairwoman WATERS. Thank you.
The gentlewoman from Massachusetts, Ms. Pressley, is recog-
nized for 5 minutes.
Ms. PRESSLEY. Thank you, Madam Chairwoman.
Chairman Powell, you have consistently publicly called for great-
er fiscal aid. You testified that, ‘‘the risk of overdoing it is less than
the risk of underdoing it.’’ I agree with you here, Chairman Powell.
This is not a question of either/or. We absolutely need further stim-
ulus, but Congress has also provided the Fed with over $450 billion
to support lending to cities, States, and small businesses.
Now, in fact, in your March 23rd press release announcing these
emergency lending facilities, you state 3 times that the Fed, ‘‘is
committed to using its full range of tools and authorities.’’ Yet, in
less than 24 hours, you gave up any resistance to Secretary
Mnuchin’s arbitrary demand to shutter these facilities by the end
of the year, including the municipal liquidity in Main Street lend-
ing facilities.
So, I want to just build on my colleague, Representative Axne’s,
line and justfurther sort of enumerate and unpack the sobering
landscape likely before us. So, yes or no, please, with the ongoing
pandemic, do you expect the number of cities and States facing his-
toric budget shortfalls to continue to rise? Chairman Powell, yes or
no?
Mr. POWELL. I don’t really have a strong expectation on that, but
that may be right.
Ms. PRESSLEY. I will take that as a yes.
Do you expect further State and municipal credit downgrades,
making it more difficult for State and local governments to borrow?
There have been 337 downgrades so far. Do you expect that to hap-
pen? It is a yes or a no.
Mr. POWELL. I think it is probable.
Ms. PRESSLEY. Okay. I will take that as a yes.
Are we facing an unprecedented wave of small business closures?
Yes or no?
Mr. POWELL. I think that is uncertain. Unprecedented wave? I
don’t know that we know that.
Ms. PRESSLEY. Okay. Is the rescue of small businesses essential
to any long-term economic recovery? Yes or no?
Mr. POWELL. Yes. It is important.
Ms. PRESSLEY. And would failure to provide relief to cities,
States, and small businesses further widen existing inequalities,
including, but not limited tox, the racial and gender wealth gaps?
Yes or no?
Mr. POWELL. Look, I think it is—
Ms. PRESSLEY. Yes or no?
Mr. POWELL. I think it—I’m sorry. Yes-or-no questions for these
questions—I am just going to answer you, which is that I think it
is important that these groups—
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Ms. PRESSLEY. Reclaiming my time.
Mr. POWELL. —get additional fiscal support. Thank you.
Ms. PRESSLEY. Please don’t—I don’t want you to filibuster here,
okay, because these issues are of great import. And part of your job
is forecasting, so I am leaning in on your expertise. So, again, yes
or no, will this exacerbate racial and gender wealth gaps, failing
to provide relief to cities and States and small businesses?
Mr. POWELL. I think there is a risk of that. I think there is a
risk of that, yes.
Ms. PRESSLEY. Chairman Powell, the Federal Reserve lends at a
ratio of 10 to 1, so if Congress set aside $400 billion to cover any
potential losses, you can lend up to how much to these facilities?
What is that amount?
Mr. POWELL. Whatever 10 times the amount of equity that has
been pledged, so it would have been several multiple trillion, $4
trillion or so. Of course, that borrowing happened. It just didn’t
happen in the facility.
Ms. PRESSLEY. Over $4 trillion. So, you have a responsibility to
support maximum employment. Yet in the midst of a global pan-
demic, you have been complicit in eliminating over $4 trillion in po-
tential relief to cities, States, and small businesses. And then add-
ing insult to injury, the Secretary wants to move this money to
Treasury’s General Fund, conveniently out of reach of the incoming
Administration and in direct violation of the CARES Act.
I know there has been this sort of, Jedi mind trick going on here,
but we know what our intentions are. We can read. And the funds
are supposed to be available for up to 5 years, so I am not even
sure why we have been going back and forth on that.
But I did also just want to ask about—let me for a moment turn
to Secretary Mnuchin, just building on the line from my colleague,
Congresswoman Porter, here. What does it state in Section 4027,
subsection C, paragraph 2 of the CARES Act? I just want to make
sure we are all operating with the same information.
Secretary MNUCHIN. Section 4027 allows, to the extent we have
made, for example, an existing loan to an airline. If we need to ad-
vance additional money to that airline in a protective capacity, or
if we have expenses, that is what 4027 applies to. And, again, it
says very clearly that there are certain funds that can be used
until 2026, and will continue to be available in Section 4027. Sec-
tions 4027 and 4029 work together. Section 4029 has the December
31st—
Ms. PRESSLEY. I will just reclaim my time. I am reclaiming my
time because, I don’t know, we must be reading a different text. So,
Mr. Secretary, Section 4027, subsection 2, paragraph 2—
Chairwoman WATERS. The gentlelady’s time has expired. Thank
you.
Ms. PRESSLEY. Thank you.
Chairwoman WATERS. The gentleman from Texas, Mr. Gooden, is
recognized for 5 minutes.
Mr. GOODEN. Thank you, Madam Chairwoman.
Secretary Mnuchin, thank you for your prior support for credit
risk transfer (CRT) as a means of reforming Freddie Mac and
Fannie Mae, as expressed in Treasury and the Administration’s
housing reform plan. Does that support still exist? And do Treasury
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and the Administration still support CRT for the GSEs, and more
importantly, the de-risking of Fannie Mae and Freddie Mac that
protects taxpayers?
Secretary MNUCHIN. Yes.
Mr. GOODEN. Would you like to elaborate on that?
Secretary MNUCHIN. I think credit risk transfer is a very effec-
tive mechanism of supporting the institutions. I also think that
capital accumulation is something that is very important, and ulti-
mately capital raising, so that taxpayers are not at risk.
Mr. GOODEN. Thank you. As you know, I, and many of my col-
leagues in both Chambers of Congress and a variety of stake-
holders who have filed comments, have urged FHFA to ensure a ro-
bust, risk-based CRT market in the new capital framework for the
GSEs. And while I support the capitalization of the Enterprises, I
have real concerns about the impact of FHFA’s capital rule on the
CRT market.
The Financial Stability Oversight Council (FSOC) and Treasury
provided a brief 4-page review of FHFA’s 400-plus page proposed
capital rule with little to no analysis of the impact on the markets
for CRT or mortgage-backed securities.
Do you think FHFA’s capital rule provides adequate capital relief
for CRT? And has Treasury, FSOC, or the Office of Financial Re-
search examined the effects this rule could have on the CRT mar-
ket or access to mortgage credit?
Secretary MNUCHIN. We have done some work on that, and we
would be happy to follow up with you on it.
Mr. GOODEN. Thank you. I would appreciate that.
Mr. Powell, you were filibustered earlier. Did you have any fur-
ther comments? The floor is yours. I will give it to you. I have 3
minutes.
Mr. POWELL. Thank you. I just would say that, for example, the
municipal facility—the level of municipal borrowing is set to exceed
the all-time annual record this year, and that is because of the
backstop of this facility. You don’t measure the success of the facil-
ity by the amount of lending it does. It succeeded in restoring bor-
rowing in the markets at very low levels for municipalities and
other State and local government entities across the credit spec-
trum: small; medium; and large. So, I would just say that I think
it has been quite a success.
Mr. GOODEN. Thank you. I appreciate it.
Madam Chairwoman, I yield back.
Ms. DEAN. [presiding]. The gentlewoman from New York, Ms.
Ocasio-Cortez, is recognized for 5 minutes.
Ms. OCASIO-CORTEZ. Thank you both so much for coming to offer
your testimony today and your expertise.
Secretary Mnuchin, not to belabor the point, but I did want to
dive back in here to Sections 4027 and 4029 that you are ref-
erencing. I do think it is important that we discuss this because
you are bringing it up as the main rationale as to why you are kind
of bringing these funds back into the Exchange Stabilization Fund.
So, first and quickly, Section 4027 of CARES explicitly states
that unused funds are to be returned to the Exchange Stabilization
Fund on January 1, 2026, correct?
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Secretary MNUCHIN. That is correct, and that will occur on Janu-
ary 1, 2026.
Ms. OCASIO-CORTEZ. And that is with respect to the unused
funds. Now, Section 4029—
Secretary MNUCHIN. No, it is not the unused; it is the unused
funds in the ESF at that time, that is correct.
Ms. OCASIO-CORTEZ. Yes. Thank you.
Section 4029 refers to rescinding authority to making new loans,
right? So, the law explicitly does contemplate—it has that Section
A, B, and C—and it does explicitly contemplate that remaining
funding as of January 1, 2021, which is in just a matter of weeks,
to be available for restructuring, modification, amendment, and ad-
ministrative costs. Is that right?
Secretary MNUCHIN. That is correct.
Ms. OCASIO-CORTEZ. I was wondering if I could give you the op-
portunity to discuss, instead of choosing to return those funds—and
you are choosing to return those funds, right?
Secretary MNUCHIN. No, I am not choosing to return those funds.
Whether the funds are returned or the funds aren’t returned, 4029
governs both direct and indirect. So, again, I could have allocated
all $500 billion on day one to the Federal Reserve. I allocated $200
billion. It really is irrelevant. Section 4029 governs the same provi-
sion, whether money is sitting in any of the accounts. That was the
purpose of 4029. If you don’t read it that way for 4029, then it
shouldn’t have existed. There was no purpose to have the Decem-
ber 31, 2020, date. And, again, I personally negotiated these docu-
ments.
Ms. OCASIO-CORTEZ. I understand. And I am trying to seek some
clarification because we are in such a desperate position. Given the
unfortunate gridlock, I think if—that we are all kind of in—we are
all aligned in interest in trying to figure out where we can explore
maximum flexibility as offered by the statute, and so I am just cu-
rious.
Instead of choosing to kind of return—or rather, instead of re-
turning these funds, instead of reading the interpretation as re-
turning these funds to ESF, could you use, could we use this modi-
fication statute to recapitalize loans?
Secretary MNUCHIN. Recapitalize existing loans?
Ms. OCASIO-CORTEZ. Yes.
Secretary MNUCHIN. Again, in my example, we have made airline
loans.
Ms. OCASIO-CORTEZ. Yes.
Secretary MNUCHIN. So, people are focusing on the Section 13(3),
these facilities. This governs both the direct loans and the indirect
loans. In the case of an airline loan that we have already made,
and we need to make protective advances after December 31, 2020,
the statute allows us to do that. And, again, it doesn’t matter
whether I had allocated $500 billion. I just want to put this in per-
spective. Of the $190 billion I allocated, that would have done $2
trillion of lending, I believe we have done about $25 billion in total.
So, this is irrelevant in the broader scheme of things.
Ms. OCASIO-CORTEZ. And to kind of turn to your airline example,
are there other examples of advances that could be provided ahead
of the sunset date?
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Secretary MNUCHIN. Again, on any of the existing underlying
loans. So if there is a Main Street loan that has already been
made, and that Main Street loan needs a protective advance after
December 31, 2020, that can be done. The difference between Sec-
tions 4027 and 4029 has to do with existing loans versus new
loans. So, again, it is very clear. Section 4029 says that making
new loans, loan guarantees, or other investments shall terminate.
Ms. OCASIO-CORTEZ. Thank you very much.
Ms. DEAN. The gentleman from South Carolina, Mr. Timmons, is
now recognized for 5 minutes.
Mr. TIMMONS. Thank you, Madam Chairwoman.
I want to first align myself with the comments from my col-
leagues on both sides of the aisle. We need to help small businesses
across this country. It is critical. It is past time. Businesses in my
district in the State of South Carolina are struggling. We have
tourism-related businesses that are set back. We have businesses—
bars, restaurants, yoga studios—that are struggling, and that is in
South Carolina, where we are mostly reopened.
Here in D.C., they just went to 25-percent capacity for res-
taurants. The hotel I am staying in has permanently closed their
restaurant and their rooftop bar until the restrictions are lifted.
We need to help the businesses that are being put out of work
by the government. Government closures are helpful in certain cit-
ies, but in others, we need to safely reopen. And any business that
is being closed because of the government must get relief. It is a
taking, and it is wrong.
So, first, we need to get additional PPP loans. We need to help
the businesses that are struggling the most, but we have to be sur-
gical about it. We don’t need to paint with a broad brush.
To that end, my first question is to both of you. There is no deny-
ing that the Federal Government has spent an exorbitant amount
of money this year to combat both the health and economic toil of
the virus. As our national debt climbs towards $30 trillion, it could
very well hit $30 trillion next year between the next COVID relief
package and deficit spending for next year, but we as policymakers
are looking to provide targeted relief for our constituents.
How do we get the best bang for our buck? In other words, what
type of economic relief or stimulus will be the most effective in pre-
serving and creating jobs? And, secondly, how would you rec-
ommend policymakers address our mounting debt over the next few
years?
Secretary MNUCHIN. I would say for small businesses, the sim-
plest and most effective thing that can be done is to authorize me
to use the $140 billion sitting in the accounts of the General Fund
for additional PPP loans. We spent a lot of time on 4027 and 4029.
I, unfortunately, don’t have the legal authority to spend this
money, and I would like the legal authority. That would be the
simplest thing to do.
Mr. TIMMONS. My next question is, is that enough? What about
the businesses that have had 97-percent revenue loss, whether it
is an event venue or a minor league baseball team or any other
business that has been totally shut down? They are not looking at
this as, we need more PPP loans. They are looking at it from the
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perspective that the government has literally ended all revenue.
What do we do for those businesses?
Secretary MNUCHIN. The good news about PPP loans is, if you
use the money correctly, they go and immediately become grants
and they are forgiven. And I do agree, we should pass legislation
to simplify the grant forms. And I agree with you, stages, res-
taurants, entertainment business, and $140 billion isn’t enough. I
would allocate $300 billion to this immediately.
Mr. TIMMONS. I couldn’t agree with you more, and I appreciate
that sentiment, and I urge everyone involved that we pass this im-
mediately. It needs to be done before Christmas. And I don’t think
it is productive talking about whether the President is playing golf
or not. Everyone is at fault. Politics are what is to blame, and we
need to rise above the politics and we need to get this done.
Secretary Mnuchin, yesterday, before the Senate Banking Com-
mittee, you indicated that Fannie and Freddie should not be re-
leased from conservatorship without appropriate capital. Can you
expound on that a bit? Does that mean that they should have at
least the required amount of capital under the FHFA’s new capital
rule? And would that be the minimum capital level or the min-
imum capital level plus the buffer specified in the 2020 rule?
Secretary MNUCHIN. Let me just be clear. Despite the fact that
the Director and I are having conversations, we have made no deci-
sions at Treasury whatsoever yet. We are contemplating, but there
could be a scenario where at some point, between basically the zero
capital they have and the full capital requirement, there would be
a consent order, and they would be released subject to a consent
order. But as I said yesterday, there has to be significant capital
for them, in my opinion, to be released.
Mr. TIMMONS. Thank you.
I want to really thank both of you for all of the work you have
done in the last year. It has been truly remarkable. And I am opti-
mistic that we are going to get on the other side of this pandemic
soon and get our economy back up and running.
And with that, I yield back. Thank you.
Ms. DEAN. The gentleman yields back.
The gentlewoman from Virginia, Ms. Wexton, is recognized for 5
minutes.
Ms. WEXTON. Thank you, Madam Chairwoman. And thank you
very much, Secretary Mnuchin and Chairman Powell, for joining us
here today and for all of your work during this pandemic.
Secretary Mnuchin, one of the facilities that you are allowing to
expire at the end of the year is the Main Street Lending Program
which, as we have discussed, has had a number of issues and I
would submit has been really kind of a disappointment. It was de-
signed to support up to $600 billion in lending to small businesses
and medium-sized businesses, but in 8 months, it has only sup-
ported about $5 billion of loans to about 420 companies.
Do those numbers sound right to you, Secretary Mnuchin?
Secretary MNUCHIN. They do. And I would acknowledge that I
am disappointed as well that there wasn’t more take-up. It was
something the Fed and Treasury worked very hard on, but it was
very difficult to design a program that could really be used.
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Ms. WEXTON. One of the loans that [inaudible] was to Wellshire
Financial Services, which is a company that is in car title lending.
And I assume you are familiar with this loan because it has been
reported in the media lately. Are you familiar with this loan that
was made?
Secretary MNUCHIN. I am really not familiar with the loan. I
have seen certain things in the media, but I don’t have access to
the underlying loan documents and the underlying loan files that
the Fed has.
Ms. WEXTON. So, you didn’t have a role in making this loan be-
cause it was only between the lender and the borrower, right?
Secretary MNUCHIN. I had no role other than setting the policies
with the Fed Chair for the facilities.
Ms. WEXTON. Okay.
Secretary MNUCHIN. And I assume the loan complies, but I don’t
know.
Ms. WEXTON. One of the policies, though, was that those loans
would not be available to finance or lending institutions, correct?
Secretary MNUCHIN. I believe that is correct, but I am not famil-
iar with the details of the loan, as I said.
Ms. WEXTON. I will tell you a little bit about it, because they
were able to exploit a loophole in the law by organizing in Texas
as a consumer credit access company rather than a lender, and
they did that in Texas to avoid their usury laws there. And now,
they have a $25-million loan from the U.S. Government, taxpayer-
funded, at 3 percent, which they are lending out to people at 350
percent.
Assuming that is correct, would you agree that this violates the
spirit and the intent of the law and the regulations?
Secretary MNUCHIN. I would, and I would expect that loan will
be reviewed and audited.
Ms. WEXTON. Okay. So you agree that it is not a good look, espe-
cially given that it has come to light that the owner of the company
is a major donor to the President?
Secretary MNUCHIN. Again, as I have said, I don’t know the spe-
cifics of the loan, but I agree, based upon what you are saying, that
was not the spirit and the intent of the use of the loans.
Ms. WEXTON. Can I get a commitment from you here today that
you will review that loan and consider clawing back the money?
Secretary MNUCHIN. You will have to get that from the Fed, be-
cause they administer the program. I don’t administer it. I don’t
have that ability. But I am sure Chair Powell will respond to that.
Ms. WEXTON. Chairman Powell, can we get a commitment from
you to consider clawing back the money, and to review this loan
to Wellshire Financial Services?
Mr. POWELL. It is really inappropriate for me to try to comment
on individual loans. Like the Secretary, I am not involved in the
process. I will say this. People make representations. We set out
clear rules, they have to be obeyed, and we will always look. And
if they are not obeyed or if incorrect representations are made,
then the consequences will follow. And we will look at all of the
loans in that light.
Ms. WEXTON. Very good. Thank you.
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Secretary Mnuchin, a lot of discussion has been taking place in
this hearing today about whether these programs have to expire at
the end of the calendar year, or whether you are allowing them to
expire. And I understand that you are saying your reading and
your interpretation is that they must expire, and you don’t have
any discretion in that. I can’t help but suspect that had the results
of the election for President been different, your interpretation
would be different. But I would inquire, have you had an oppor-
tunity to speak to incoming Treasury Secretary Yellen?
Secretary MNUCHIN. I have.
Ms. WEXTON. Okay. Very good. And have you discussed with her
your intention to end these facilities?
Secretary MNUCHIN. I have discussed it with her. We are cooper-
ating with the transition. I had a very good working relationship
with her when she was the Fed Chair. And I have advised her that
my reading of this and my interpretation was nonpolitical and was
following the law. So, yes, I did advise her of that.
Ms. WEXTON. And was she disappointed or did she disagree with
your interpretation of the law?
Secretary MNUCHIN. She didn’t reflect an interpretation one way
or another.
Ms. WEXTON. Thank you very much.
I will yield back.
Ms. DEAN. The gentlewoman yields back.
The gentleman from Texas, Mr. Taylor, is recognized for 5 min-
utes.
Mr. TAYLOR. Thank you, Madam Chairwoman. I appreciate that.
I appreciate this hearing, and I appreciate you gentlemen’s hard
work during an unprecedented 2020, one that we really didn’t see
coming.
I want to talk about the policy decisions that are being made in
this building versus broad help, which is what we did in the spring,
versus targeted help, which I think is something that we are talk-
ing more about. Heretofore, I have heard some reluctance to go to
targeted specific help, and I will use airlines as an example. That
is something we made a decision on in the spring, that we were
going to give targeted, specific help to the airline industry, because
there is a need there.
[Audio malfunction.]
Mr. TAYLOR. Madam Chairwoman, can we get that—
Chairwoman WATERS. If you would suspend for a moment until
we get the audio straightened out.
I think you can resume now.
Mr. TAYLOR. Okay. Thank you.
And so as we think about—something I have been very con-
cerned about is the hospitality space, largely because the unem-
ployment numbers are so enormous. We are talking in the range
of 10 million people who are currently unemployed as a result of
COVID, and approximately half are just in one specific sector, in
the hospitality space. So it is my concern or belief that we need to
be targeted in this building.
And I will point out that the Problem Solver package that came
out yesterday, the PPP reload, was designed specifically. It is a
much smaller number by saying you have to have a 35-percent
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drop in revenue, so that created a limiter of kinds to say, hey, if
you are doing well, you are not going to be able to get a PPP re-
load. And I have businesses in my district that do telemedicine,
and their sales are up 100, 200, or 300 percent because telemedi-
cine is a big thing. They are doing better. They don’t need a PPP
loan. They still have business problems, but it is not a PPP reload
that they need.
Chairman Powell, would you concur that it is time to begin to
think more about specific, targeted help rather than broad help
into sectors that are in harm’s way?
Mr. POWELL. I think the timing and the scope and the compo-
nents of this are really up to you. I would say I do see a number
of areas, and I mentioned them earlier, including small businesses,
that do need help, and I think that would be probably very helpful
for the economy were that to happen.
Mr. TAYLOR. And I will point out it is probably better for the tax-
payer rather than just handing out tons of money everywhere, to
be specific.
Secretary Mnuchin, would you like to speak to the need of tar-
geted assistance versus broad assistance?
Secretary MNUCHIN. Yes. I agree completely. And as you have
rightly said, if we are going to do more PPP loans, we should have
a provision that companies’ revenues are down. That is pretty
straightforward.
Mr. TAYLOR. Okay. I certainly appreciate your guidance and in-
sight, and I will continue to advocate on that front.
And I have to admit I have been somewhat entertained by the
discussion about Section 4029, which I have had to pull up and
read just to make sure I was thinking about it correctly, and I will
just read 4029(b). ‘‘On December 31, 2020, the authority to provide
under this subtitle to make new loans, loan guarantees, or other
investments shall terminate.’’ That seems very clear in terms of—
that is 4029(b).
So, the ability for you to make new loans, Mr. Secretary, new
loans, loan guarantees, or other investments terminates. That is
what the law says. I think that is what you are saying.
Secretary MNUCHIN. It is. And as I have said, if anybody on this
committee doesn’t think that is what it said, and they think that
doesn’t apply, then they would have given me unlimited authority
to use this money forever.
Mr. TAYLOR. Sure.
Secretary MNUCHIN. And I don’t know why 4029 would have
been inserted. So, I haven’t had anybody rightfully explain if 4029
doesn’t—what was the purpose of it?
Mr. TAYLOR. Sure. And 429B, again, it could have said December
31, 2021, in which case it would go on for another year, but it is
clearly the end of this year that is the termination of your author-
ity under the law.
And I just want to say that I am a believer in equal protection
under the law, and I commend you for following the law and read-
ing the law and not trying to twist it into something that it was
never meant to be. The law seems very clear to me, Mr. Secretary,
and I certainly applaud your efforts to comply with it despite a lot
of bizarre efforts to try to twist it into something that it is not.
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Secretary MNUCHIN. Thank you.
Mr. TAYLOR. Thank you.
Secretary MNUCHIN. I wish we spent as much time talking about
PPP loans as we have as Sections 4027 and 4029. And I would also
just say, when we passed this law, we thought it was highly un-
likely that we would need to be using these at this period of time.
Mr. TAYLOR. Thank you, Mr. Secretary.
Madam Chairwoman, I yield back.
Chairwoman WATERS. Thank you.
The gentleman from Massachusetts, Mr. Lynch, is recognized for
5 minutes.
Mr. LYNCH. Thank you, Madam Chairwoman.
I want to thank Chairman Powell and Secretary Mnuchin for at-
tending this hearing and for helping the committee with its work.
So, let’s talk about January 1st, because we have much pan-
demic-related support that is going away right now unless action
is taken. We also had last week, I think, 827,000 new unemploy-
ment claims. Again, going back to the rental assistance that is pan-
demic-related, that is scheduled to expire December 31st as well.
Chairman Powell, we are going to be in a bad place, I think, on
January 1st. And even if there were a last-ditch effort to—by Con-
gress to put something in place, what we saw in the CARES Act
was there was a considerable lag time before we could actually get
the help out to the American people, whether that was small busi-
nesses or people waiting for stimulus checks or supplemental un-
employment benefits, working with the States.
Is there a power that you have, independent of Congress, in
terms of appropriations? Let’s take renters’ assistance for right
now, the forbearance that we might allow renters who don’t have
the ability to pay their rent. Of course, we would have to protect
the small landlords, the landlords who are out there who are get-
ting pressure from banks and mortgage companies to render pay-
ment to them, and then ultimately to the bondholders as well, that
underwrote those mortgages and are expecting payments.
Do you have independent power that might provide relief in the
short term until Congress can get its act together and come to
agreement on a larger package similar to what we did in the
CARES Act?
Mr. POWELL. Sir, we do have broad powers, but we don’t have
those kind of powers. Those are really powers that fall to the legis-
lature. Nobody elected us. You created us under statute. You gave
us very specific powers, and they don’t involve—
Mr. LYNCH. I understand that. But I was here in 2008, and the
folks on your side of the table were doing their darnedest to rescue
Wall Street. And now, it is Main Street that is—and so, I am just
asking for the same consideration and the same sense of urgency
when it is regular workers or just average families who are strug-
gling to pay their rent. I would just like to see that level of urgency
and seriousness that I saw back in 2008 when we were trying to
rescue the big banks. I have to be honest, I think that I see a little
bit of laissez-faire with respect to average families. I don’t see that
sense of urgency.
And, Mr. Secretary, with all due respect, you seem way too eager
to give away or give back or render back the resources that were
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available. I didn’t see a long and hard discussion about how we can
get this money out to the people who need it. Rather, it was, well,
this is what the law says, so I am going to do it. And I didn’t see
any extraordinary effort on the part of Treasury to find a way,
going to court, asking for an interpretation to say, do I have the
ability to continue this, these payments and this relief to the Amer-
ican people or am I prohibited from doing so, rather than huddling
with the lawyers who work for you. And I have lawyers who work
for me as well. I didn’t see an extraordinary effort on your part to
try to find a way to make sure that the incoming Administration
has some resources to deal with this problem.
Secretary MNUCHIN. I just want to be clear. I spent the last 4
months trying to work with Congress to get additional legislation
passed. I have been on probably a hundred calls.
Mr. LYNCH. We all have.
Secretary MNUCHIN. What people need is a fiscal response. These
programs were not used. So, let me just be clear: People need—and,
again, people need more PPP money. They need grants. They need
airline support. They need unemployment insurance. These facili-
ties were not being used. And I have worked every day to try to
get Congress to pass more legislation. So, I don’t appreciate that
comment that I haven’t worked hard.
Mr. LYNCH. Well, sir, I would just say that what I saw when
Wall Street was on the hook was creativity to the nth degree in
ways of repurposing money to make sure they got what they need-
ed. And I would just—
Chairwoman WATERS. The gentleman’s time has expired.
Mr. LYNCH. I yield back.
Chairwoman WATERS. The gentleman from New York, Mr.
Zeldin, is recognized for 5 minutes.
Mr. ZELDIN. Thank you, Madam Chairwoman.
Secretary Mnuchin, feel free to use some of my time here to com-
plete your thought. I will yield to you.
Secretary MNUCHIN. Thank you. I was just saying if I had any
legal authority or I could get the President to sign an Executive
Order tomorrow to send out the $140 billion to small businesses
that need PPP loans, I would do that.
And, again, for all of the conversations we have had on these fa-
cilities, which were barely being used, most of which did support
big corporations, I might add, and not Main Street, enough money
to Main Street, Main Street needs more money, grants, PPP.
Thank you.
Mr. ZELDIN. Thank you, Secretary Mnuchin and Chairman Pow-
ell, for being here today. And thank you to Chairwoman Waters
and Ranking Member McHenry for holding this hearing.
Secretary Mnuchin and Chairman Powell, I want to start off by
saying thank you to both of you for your leadership during this
pandemic, especially as it pertains to standing up and fine-tuning
these needed liquidity facilities.
First off, I would share that, with regard to the Paycheck Protec-
tion Program, I have heard from business owners in my district,
from local mayors and others about how the Paycheck Protection
Program has not only saved small businesses and small business
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38
jobs but saved the entirety of Main Streets in the First Congres-
sional District of New York.
With regards to the facilities, the original Municipal Liquidity
Facility term sheet excluded my home County of Suffolk where my
constituents live, but the Federal Reserve and Treasury listened to
the concerns that I and others raised about lowering the population
thresholds for eligible issuers. This provided greater access to a
much-needed backstop financing tool for many State and local gov-
ernments and entities, like the MTA.
I want to say thank you for your attention to this critical market
and the commitment to remaining vigilant of any problems as they
arise, because we need all levels of government to work together.
This is not a time to be Republicans first or Democrats first. This
is a time to be Americans first.
Secretary Mnuchin, late one night, got on the phone with my
local Democrat county executive to talk to us about the Municipal
Liquidity Facility and getting eligibility for Suffolk County, and
you listened to our concerns.
The Municipal Liquidity Facility is set to expire at the end of
this month, and all unused CARES Act funds at the liquidity facili-
ties, to my understanding, will be returned to the Treasury Depart-
ment, but I want to make sure Congress, Treasury, and the Fed-
eral Reserve are working together and remaining vigilant into 2021
as well. To ensure adequate municipal debt liquidity, the Municipal
Liquidity Facility should remain in operation into 2021, until we
know for sure we are out of the woods.
The onus is not just on the Federal Reserve and Treasury. Con-
gress needs to step up to the plate and get a COVID-19 relief bill
across the finish line.
Secretary Mnuchin, I know how hard you have been working
over the course of what has been many months, which is why I am
glad that you had an opportunity here to help clear the record as
to the allegations and the charges that were just being made in
your direction. You have been working extremely hard, and I want
to thank you for your efforts in negotiating the next bill.
Congress provided support for State and some local governments
in the CARES Act, but limited the support for local governments
with more than 500,000 in population.
Chairman Powell, in a Senate Banking Committee hearing in
May, you talked about the negative effects on the overall economy
that come about when State and local governments face serious fis-
cal constraints, citing evidence from the 2008 financial crisis. It is
clear that fiscal solvency at all levels of government is important
for economic recovery.
Can you elaborate on the importance of the health of all levels
of government for the health and growth of the overall U.S. econ-
omy?
Mr. POWELL. State and local governments, as you suggest, pro-
vide critical services—fire, police, sanitation, all of those things
that people depend on for public safety—and live under balanced
budget requirements in essentially all of the States. So, what hap-
pens when costs go up and revenues go down is that they lay peo-
ple off. They have laid off more than a million people so far. And
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39
that was a big problem in the years after the global financial crisis.
We hope it doesn’t become a big problem here.
But these are critical government services, and, as I have said,
it is up to Congress and the Administration, but I think that is an
important area to look at for further support.
Mr. ZELDIN. Again, I thank you both for all of your efforts since
we were first hit by this pandemic.
And again, thank you, Chairwoman Waters, and Ranking Mem-
ber McHenry, for holding this hearing. I yield back.
Chairwoman WATERS. Thank you.
The gentlewoman from Hawaii, Ms. Gabbard, is recognized for 5
minutes.
Ms. GABBARD. Thank you very much, Madam Chairwoman.
Thank you both for making the time to come and have this dis-
cussion today.
Secretary Mnuchin, you made a comment about how you wish
there were more questions about the PPP program. I wanted to ask
you to talk a little bit about that today, given a comment you just
made and also the news that has come out about how some of the
largest businesses that qualified under PPP took the majority of
the money.
So, as we look to a new stimulus package, whether it is this year
or it comes out early next year, what improvements would you rec-
ommend that the PPP program take on to ensure that the majority
of those dollars are actually going to the small businesses within
our communities, who are barely keeping their heads above water,
trying to survive?
Secretary MNUCHIN. Thank you. When we created the original
program, the entire economy was shut down. But now that that is
not the case, I agree with you, it should be much more targeted.
I think it should be focused on the smaller businesses. I think it
should be focused on a revenue decline.
Chairwoman Waters and I worked on a set-aside to make sure
there was money available for underserved areas. I think that is
something that should be done again. We have signed up many
more Community Development Financial Institutions (CDFIs) since
then that are ready to go.
I also very much support a program of investing $10 billion to
$12 billion in CDFIs so that they can do $100 billion of lending.
I think there is big bipartisan support. I have spoken to Chair-
woman Waters, Senators Warner and Crapo, and others. So, I
think there are a lot of things that could be done very, very quickly
that would have a big impact.
Ms. GABBARD. There is no question that the need is there and
the frustration, especially as these reports come out about where
the money has gone, and a lot of folks have been left stranded.
I want to pivot for a second in a different direction that hasn’t
been covered today in the area of sanctions. I served on the House
Foreign Affairs Committee for my first 6 years in Congress. And
both in Congress as well as in the Executive Branch, sanctions are
often one of the first go-to actions to take within the realm of for-
eign policy, for a variety of reasons.
I recently pulled the list of U.S. sanctions that we have on coun-
tries and industries and individuals around the world, and it is a
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40
very exhaustive list, as I am sure you are aware, with some sanc-
tions even going back decades.
Can you speak to the Department of the Treasury’s process and
whether or not you work with other Federal agencies and depart-
ments, like the Department of State, Department of Defense and
others, to assess the effectiveness of these economic sanctions once
they have been levied? And if you do that, how often, really with
the intent of saying, okay, these sanctions have been put in place,
are they achieving the intended objective and, if not, what are they
doing and what unintended negative consequences are there?
Secretary MNUCHIN. First, let me just say I really appreciate you
bringing up this subject, and I would be more than happy to follow
up with you offline. I spend an enormous amount of my time—real-
ly, before the pandemic, I was spending 50 percent of my time on
the sanctions. I think they are very, very effective foreign policy
tools.
We coordinate 100 percent with the State Department, the Na-
tional Security Council, and the intelligence agencies on anything
we do. We have a robust interagency process. I am going to encour-
age Chair Yellen to spend time on this. I also want to thank the
committee and Congress. You have given us a lot of funding over
the last 4 years. We have increased the number of people we have
in these areas.
And these are very effective tools, combined with our strong mili-
tary. But in many cases, they are very, very powerful tools and
don’t put our military in harm’s way.
Ms. GABBARD. Before my time runs out, if you can speak briefly,
and if not, I would like to follow up with you, I would love to know
what specific mechanisms and measures of effectiveness you and
these other Departments use in order to make sure that they are
achieving an intended objective as well as what measures of impact
do you use to say, hey, these sanctions against this country were
intended for this purpose, but it is actually stopping this country
from getting medicine and food and basic supplies, creating a nega-
tive humanitarian effect.
Secretary MNUCHIN. That is a very thoughtful question, I might
just add. In the best-case scenario, we see a specific action as a re-
sult of the sanction and we remove the sanctions, but we also work
very hard on humanitarian issues and issuing licenses for them.
Chairwoman WATERS. The gentlelady’s time is up.
The gentleman from Ohio, Mr. Davidson, is recognized for 5 min-
utes.
Mr. DAVIDSON. Thank you.
Madam Chairwoman, thank you for the recognition. Chairman
Powell and Secretary Mnuchin, thank you for the time you have
given us today. I really appreciate the way you have handled our
questions and the way you have pointed out what the law that
Congress passed actually says and, frankly, for faithfully following
that law.
We do need fiscal policy, not just monetary policy, and, frankly,
we need Congress. From the way it sounds, some of my colleagues
would just strike Article I from the Constitution and have the Ex-
ecutive Branch do everything.
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41
I am glad that this body stays relevant, and I am hopeful that
we can do some of the good things that did happen.
Let me highlight a couple of things that my constituents in the
Eighth District of Ohio share with me. One, Chairman Powell, the
Federal Reserve had a very robust and very swift and decisive re-
sponse in the last half of March and in the early days of April.
Those first 2, 3 weeks, there was a true liquidity crisis that was
hitting our markets and truly global, because the demand for dol-
lars wasn’t just here in our markets; the demand was global.
You saw OPEC countries dump oil into the market, sucking cash,
U.S. dollars into their countries, as a way for them to get liquidity.
But you saw holders of all sorts of assets, including municipal
bonds, generally considered very safe and liquid, disappear. There
was no buy side.
So, the Federal Reserve’s response in providing liquidity there, to
me, fits right in line with the whole purpose of the broad authority
under Section 13(3). But, nevertheless, we saw under 13(3) some
distortions that have carried over as we have seen the size of the
Fed’s balance sheet grow, and some of the questions on that, I
think are relevant. How big does it grow? Well, big enough to make
sure we provide economic stability—that was the clear intent of the
CARES Act—but not so big that it causes true economic distor-
tions.
And where the inflation is showing up isn’t in consumer prices.
A lot of people fear and, frankly, know that it is in marketable se-
curities on Wall Street. And while that benefits retirement savings,
it accentuates the wealth gap.
Secretary Mnuchin, thanks for calling attention to the Payroll
Protection Plan. That was tremendous for Ohio’s Eighth District.
In our district, we had about 9,000 loans made, and 80 percent of
them were for $150,000 or less. So, they were small loans, over-
whelmingly made by smaller lenders.
And what was the effect of that? We had over 100,000 people in
Ohio’s Eighth District stay on payroll. The loan did go to the busi-
nesses, of course, but for the purpose of keeping payroll happening.
And the benefit was that so many of these individuals and their
families kept benefits, health insurance, and other things that
come with employment. So, it has been a tremendous source of sta-
bility.
So, I congratulate my colleagues on the success of the Payroll
Protection Plan, but, frankly, on Treasury and the SBA and others,
all of the banks that made this functional.
The concern I have is the slow-walking of forgiveness on the back
end. So, I hope you can give some attention to that. And, as time
dwindles swiftly, I want to get to one topic that is emerging. We
have seen the rise of digital assets and, frankly, to the extent that
some people have proposed a central bank digital currency as a re-
sponse to our monetary situation right now.
And I think it is important that we do that very thoughtfully
[audio malfunction].
Chairwoman WATERS. I think there are some technical difficul-
ties here.
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42
We are past our hard stop, and I apologize for that. We are 5
minutes past. And so, I would like to thank our distinguished wit-
nesses 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.
With that, this hearing is adjourned. Thank you very much.
[Whereupon, at 12:21 p.m., the hearing was adjourned.]
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APPENDIX
December 2, 2020
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