Hybrid Hearing — Oversight of the Treasury Department's and Federal Reserve's Pandemic Response (2021)
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Printed House hearing record, Serial No. 117–50, titled Oversight of the Treasury Department's and Federal Reserve's Pandemic Response, a hybrid hearing before the Committee on Financial Services on September 30, 2021. The witnesses are Jerome H. Powell, Chairman of the Board of Governors of the Federal Reserve System, and Janet L. Yellen, Secretary of the U.S. Department of the Treasury. The committee met at 10:04 a.m. in room 2128 with Maxine Waters presiding as chairwoman. Waters says the hearing will conclude at 12:15 p.m. and that Members who could not ask questions at the March 23rd hearing will have priority to ask questions.
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“Hybrid Hearing — Oversight of the Treasury Department's and Federal Reserve's Pandemic Response (2021).”
Original at www.govinfo.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/chrg-chrg-117hhrg46009-chrg-117hhrg46009/
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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 SEVENTEENTH CONGRESS
FIRST SESSION
SEPTEMBER 30, 2021
Printed for the use of the Committee on Financial Services
Serial No. 117–50
(
U.S. GOVERNMENT PUBLISHING OFFICE
46–009 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 FRANK D. LUCAS, Oklahoma
GREGORY W. MEEKS, New York BILL POSEY, Florida
DAVID SCOTT, Georgia BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri ANN WAGNER, Missouri
ED PERLMUTTER, Colorado ANDY BARR, Kentucky
JIM A. HIMES, Connecticut ROGER WILLIAMS, Texas
BILL FOSTER, Illinois FRENCH HILL, Arkansas
JOYCE BEATTY, Ohio 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
CINDY AXNE, Iowa DAVID KUSTOFF, Tennessee
SEAN CASTEN, Illinois TREY HOLLINGSWORTH, Indiana
AYANNA PRESSLEY, Massachusetts ANTHONY GONZALEZ, Ohio
RITCHIE TORRES, New York JOHN ROSE, Tennessee
STEPHEN F. LYNCH, Massachusetts BRYAN STEIL, Wisconsin
ALMA ADAMS, North Carolina LANCE GOODEN, Texas
RASHIDA TLAIB, Michigan WILLIAM TIMMONS, South Carolina
MADELEINE DEAN, Pennsylvania VAN TAYLOR, Texas
ALEXANDRIA OCASIO-CORTEZ, New York PETE SESSIONS, Texas
JESÚS ‘‘CHUY’’ GARCIA, Illinois
SYLVIA GARCIA, Texas
NIKEMA WILLIAMS, Georgia
JAKE AUCHINCLOSS, Massachusetts
CHARLA OUERTATANI, Staff Director
(II)
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CONTENTS
Page
Hearing held on:
September 30, 2021 .......................................................................................... 1
Appendix:
September 30, 2021 .......................................................................................... 41
WITNESSES
THURSDAY, SEPTEMBER 30, 2021
Powell, Hon. Jerome H., Chairman, Board of Governors of the Federal Re-
serve System ......................................................................................................... 6
Yellen, Hon. Janet L., Secretary, U.S. Department of the Treasury .................. 4
APPENDIX
Prepared statements:
Powell, Hon. Jerome H. .................................................................................... 42
Yellen, Hon. Janet L. ....................................................................................... 47
ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD
Powell, Hon. Jerome H:
Written responses to questions for the record submitted by Chairwoman
Waters ............................................................................................................ 52
Yellen, Hon. Janet L.:
Written responses to questions for the record submitted by Chairwoman
Waters ............................................................................................................ 60
Written responses to questions for the record submitted by Representa-
tive Emmer .................................................................................................... 73
Written responses to questions for the record submitted by Representa-
tive Hill .......................................................................................................... 69
Written responses to questions for the record submitted by Representa-
tive Posey ....................................................................................................... 63
Written responses to questions for the record submitted by Representa-
tive Williams ................................................................................................. 61
(III)
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OVERSIGHT OF THE TREASURY
DEPARTMENT’S AND FEDERAL
RESERVE’S PANDEMIC RESPONSE
Thursday, September 30, 2021
U.S. HOUSE OF REPRESENTATIVES,
COMMITTEE ON FINANCIAL SERVICES,
Washington, D.C.
The committee met, pursuant to notice, at 10:04 a.m., in room
2128, Rayburn House Office Building, Hon. Maxine Waters [chair-
woman of the committee] presiding.
Members present: Representatives Waters, Velazquez, Meeks,
Scott, Green, Cleaver, Himes, Foster, Beatty, Vargas, Gonzalez of
Texas, Lawson, San Nicolas, Axne, Casten, Pressley, Torres, Lynch,
Adams, Tlaib, Dean, Garcia of Illinois, Garcia of Texas, Williams
of Georgia, Auchincloss; McHenry, Lucas, Posey, Luetkemeyer,
Huizenga, Wagner, Barr, Williams of Texas, Hill, Emmer, Zeldin,
Loudermilk, Mooney, Davidson, Budd, Kustoff, Hollingsworth, Gon-
zalez of Ohio, Rose, Steil, Gooden, Timmons, Taylor, and Sessions.
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.
As a reminder, I ask all Members participating remotely to keep
themselves muted when they are not being recognized by the
Chair. 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.
Also, if you are participating remotely today, please keep your
camera on. And if you choose to attend a different remote pro-
ceeding, please turn your camera off.
As a reminder to all Members, we will conclude today’s hearing
at 12:15 p.m. Members who were unable to ask questions at our
March 23rd hearing with Secretary Yellen and Chair Powell will
be given priority to ask their questions today, and we will return
to our normal order of recognition once those Members have asked
their questions.
Today’s hearing is entitled, ‘‘Oversight of the Treasury Depart-
ment’s and Federal Reserve’s Pandemic Response.’’
I now recognize myself for 4 minutes to give an opening state-
ment.
Welcome back, Secretary Yellen and Chair Powell. As this pan-
demic continues, the Biden Administration and Congressional
Democrats continue to work around the clock to get essential relief
(1)
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2
to individuals, families, and small businesses across the country.
Following the catastrophic failure of the Trump Administration to
tackle the pandemic crisis, the Biden Administration and Demo-
crats in Congress swiftly moved to enact the American Rescue
Plan, which provided $1.9 trillion to address the impacts of
COVID-19.
The legislation included billions in funding to support individuals
and families, including renters, homeowners, and people experi-
encing homelessness, as well as small businesses, during this cri-
sis. We are also working together to put President Biden’s Build
Back Better agenda into action by making long-overdue invest-
ments into the nation’s housing programs, childcare, education,
workforce, and other critical aspects of our economy, all while being
completely paid for.
Democrats are also working to address the past failures of the
Trump Administration’s approach to the pandemic. For example,
we are working with Secretary Yellen and the Treasury Depart-
ment to correct administratively-burdensome requirements initi-
ated by Republicans that made it harder for renters and landlords
to obtain relief in the earlier versions of the Emergency Rental As-
sistance Program. My legislation, the Expediting Assistance to
Renters and Landlords Act of 2021, would further speed up relief
and cut down unnecessary barriers that are standing in the way
of aid for renters and landlords.
Of course, the Federal Reserve has also played a part in the re-
sponse to the pandemic through the creation of emergency facilities
that have tackled the crisis. Until they were prematurely shut
down by former Treasury Secretary Mnuchin, these facilities
played a vital role in stabilizing financial markets last year. Mov-
ing forward, our committee is committed to exploring ideas to en-
sure that facilities like these can more directly protect workers and
support small businesses, as well as State and local governments,
the next time there is a crisis.
Amid Democrats’ continuing efforts to ensure that relief reaches
communities across the country and that our economy is strong for
the future, Republicans continue to operate recklessly. Even now,
Republicans are threatening to throw the economy into unneces-
sary turmoil by blocking legislation to suspend the debt ceiling. It
is completely unacceptable for Republicans to hold our nation’s
economy hostage, especially in the middle of this continuing public
health crisis and when fully one-fourth of the increase in the debt
ceiling is attributed to Trump’s tax scam for the rich.
Secretary Yellen, Chair Powell, I expect to hear your thoughts on
these issues and to hear more about what will happen if Repub-
licans force the country to default. I also look forward to discussing
your ongoing work to respond to the pandemic today.
I now recognize the ranking member of the committee, the gen-
tleman from North Carolina, Mr. McHenry, for 5 minutes.
Mr. MCHENRY. Today, the Financial Services Committee is hold-
ing its second statutorily-required quarterly hearing on the Biden
Administration’s pandemic response. Now, the only problem is that
this hearing should have actually occurred in the second quarter.
It is now the third quarter. But then again, that just perfectly en-
capsulates the incompetence and dysfunction of a Democrat-run
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3
Washington, where Democrats run the House, the Senate, and the
White House.
So, let us just review briefly. The incompetence of the Rental As-
sistance Program, which Republicans have highlighted since
March—there is no solution in sight. The so-called, ‘‘Biden agenda’’
appears to be on the rocks. And Democrats are no closer to raising
the debt ceiling ahead of the October 18th deadline than they were
in August when it expired.
And what do all of these problems have in common? They were
foreseeable. They are known things, not just to Democrats, but to
the world. And now, markets are taking notice. Our allies, and our
adversaries are watching closely to see what happens next.
But in the midst of this chaos, we at least have you two individ-
uals in your respective seats. And the two of you instill confidence
in our financial system, especially in a moment like this. And that
credibility of your institutions is deeply connected with each one of
you right now.
Chairman Powell, your decisive action helped prevent the worst
of the economic impacts of COVID. You are thoughtful, deliberate,
and transparent. The antithesis, I would say, of dangerous. And to
think otherwise is, frankly, reckless and unmoored from reality.
And anyone who would say that—well, frankly, I appreciate their
courage to speak their truth. Chairman Powell, our country will be
better off with your continued leadership at the Federal Reserve.
Secretary Yellen, your experience as Fed Chair and steady hand
throughout the financial crisis made you a natural pick for the
Treasury Department, and I am glad you are in your seat. That is
why I am sorry you are in such a bad situation, given this Admin-
istration’s strategy.
Bad strategy and a worse fiscal plan from a Democrat-run Wash-
ington will have consequences, I believe. Consumer prices continue
to rise. Businesses can’t find workers. And the government, be-
cause of overspending, will not be able to pay its bills in a little
more than 2 weeks.
So, what is the plan? All I have heard from Democrats this year
is a plan to spend more money—$2 trillion in March, more than
$5 trillion now. And $5 trillion was a compromise, I want to remind
you that Bernie Sanders and the progressives wanted a $6 trillion
reconciliation package, and President Biden proposed a $6 trillion
budget in June. But Democrats couldn’t agree on that either. So,
here we are.
To be clear, the Biden Administration’s Treasury Department
can’t even keep track of the $46 billion of rental assistance. So,
how are the American people supposed to trust Democrats with an-
other $5.5 trillion?
This isn’t a plan. Frankly, it is a heist. The Democrat-run Wash-
ington tax-and-spend policies will only increase prices more for con-
sumers. And they are using you, Madam Secretary, and your credi-
bility to sell this bad agenda.
Over the last several weeks, you have called on Congress to ad-
dress the debt limit. I couldn’t agree more. Yesterday, the House
passed a debt ceiling bill that is doomed in the Senate. It was polit-
ical theater, and they know it, we know it, and the American peo-
ple, in fact, know it as well.
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4
It is theater designed to distract Americans from the fact that
Democrats have no idea how to govern. They have known this
deadline was coming. They knew it the day they took control of the
Senate. They knew it the day that President Biden was sworn into
office, and they knew it the day that the Treasury Secretary was
confirmed.
The Democrats have been in charge of our country for nearly a
year, and they did nothing to prepare for this moment—well, ex-
cept spend more money and bring the date forward by which we
have to address the debt ceiling.
And I want to be clear: The U.S. Government is run and con-
trolled by Democrats. It is defined by dysfunction, incompetence,
and fiscal irresponsibility. Late in the game, asking Republicans to
bail out your agenda so you can pass more spending is, frankly, ab-
surd. This is no way to run the country.
I yield back.
Chairwoman WATERS. Thank you, Ranking Member McHenry.
I now recognize the gentleman from Texas, Mr. Green, for 1
minute.
Mr. GREEN. Thank you, Madam Chairwoman.
Madam Chairwoman, we must raise the debt ceiling. Raising the
debt ceiling does not authorize new spending. Raising the debt ceil-
ing allows the United States to pay its existing debts. Congress has
raised or suspended the debt ceiling on a bipartisan basis 78 times
since 1960. There are no secret weapons in the Treasury’s arsenal
that will save us from default if this body fails to act responsibly
and swiftly.
Madam Chairwoman, we passed the CARES Act and other pan-
demic relief legislation. Let us come together again and stand be-
hind the debts of our nation with the full faith and credit of the
United States of America. We must raise the debt ceiling.
I yield back.
Chairwoman WATERS. I now want to welcome our distinguished
witnesses today, whom I believe need little introduction to mem-
bers of the committee.
First, I want to welcome the Honorable Janet Yellen, Secretary
of the United States Department of the Treasury, who has served
in that role since her confirmation in January of this year.
Our second distinguished witness today is the Honorable Jerome
Powell, the Chair of the Board of Governors of the Federal Reserve
System, who has served in that role since February of 2018.
You will each have 5 minutes to summarize your testimony. You
should be able to see a timer on the screen in front of you that will
indicate how much time you have left. And, without objection, your
written statements will be made a part of the record.
Secretary Yellen, you are now recognized for 5 minutes to
present your testimony.
STATEMENT OF THE HONORABLE JANET L. YELLEN,
SECRETARY, U.S. DEPARTMENT OF THE TREASURY
Secretary YELLEN. Thank you, Chairwoman Waters, Ranking
Member McHenry, and members of the committee. It is a pleasure
to testify today.
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5
We are in the midst of a fragile, but rapid, recovery from the
pandemic-induced recession. While our economy continues to ex-
pand and recapture a substantial share of the jobs lost during
2020, significant challenges from the Delta variant continue to sup-
press the speed of recovery and present substantial barriers to a
vibrant economy. Still, I remain optimistic about the medium-term
trajectory of our economy, and I expect we will return to full em-
ployment next year.
A rebound like this was never a foregone conclusion. In fact, the
American recovery is stronger than those of other wealthy nations.
One key factor for our overperformance is the policy choices the
Congress has made over the past 18 months. Those choices include
the passage of the CARES Act, the Consolidated Appropriations
Act, and the American Rescue Plan.
Treasury, as you know, was tasked with administering a large
portion of the relief dollars in those bills, and when we last met,
our Department was busy standing up programs to help individual
families, State Governments, and organizations of every size in be-
tween. While we still have much more work to do, we have made
significant progress, and I wanted to give you an update.
Let us start with families. In July, our Department started send-
ing the monthly expanded child tax credit payments to the families
of nearly 60 million children across the country. To date, $46 bil-
lion in payments have been made, and we are already seeing the
impact. Analysis by the Census Bureau found that after the first
payments in July, food insecurity among families with children
dropped 24 percent.
As for State, local, Tribal, and Territorial Governments, COVID-
19 decimated their budgets. There were mass layoffs, and to end
the health and economic emergencies, we knew that communities
would need funding to hire educators to bring kids back to school,
for example, or frontline workers to administer the vaccine. The
American Rescue Plan included $350 billion to that end, and those
dollars are, indeed, helping the machinery of local governments get
up and running. States and localities can rely on relief money that
is available instead of resorting to painful budget cuts.
Congress rightly designed the State and local program with flexi-
bility in mind. I think many of us knew the recovery could run up
against some unforeseen challenges, and we wanted communities
to be able to devote resources where and when they saw fit. I want
to note that this flexibility is paying off now, especially with the
spread of the Delta variant. Harris County, Texas, for instance, has
used this funding to boost its immunization rate, offering $100 to
each person who gets their first vaccine dose.
For the relief dollars not yet out the door, Treasury is doing ev-
erything it can to expedite their delivery. The Emergency Rental
Assistance Program is one example. Prior to the pandemic, there
was essentially no national infrastructure to get money from gov-
ernment coffers to renters and landlords. Building that infrastruc-
ture has been a massive undertaking for States, localities, and
Tribes.
The program is scaling up quickly, with 1.4 million payments
made to help struggling renters keep a roof over their heads. Still,
too much of the money remains bottlenecked at the State and local
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levels. That is why our Treasury team has worked to eliminate
every piece of red tape possible in order to ensure more payments
can get to renters and landlords, but States and localities must also
work to remove barriers that can speed up distribution of rental as-
sistance funds.
I will end my remarks there, except to say this: It is imperative
that Congress address the debt limit. If not, our current estimate
is that Treasury will likely exhaust its extraordinary measures by
October 18th. At that point, we expect Treasury would be left with
very limited resources that would be depleted quickly.
America would default for the first time in history. The full faith
and credit of the United States would be impaired, and our country
would likely face a financial crisis and economic recession as a re-
sult. We must address this issue to honor commitments made by
this and prior Congresses, including those made to address the
health and economic impact of the pandemic. It is necessary to
avert a catastrophic event for our economy.
Representatives, the debt ceiling has been raised or suspended
78 times since 1960, almost always on a bipartisan basis. My hope
is that we can work together to do so again and to build a stronger
American economy for future generations.
Thank you, and I am pleased to take your questions.
[The prepared statement of Secretary Yellen can be found on
page 47 of the appendix.]
Chairwoman WATERS. Thank you, Secretary Yellen.
Chair Powell, you are now recognized for 5 minutes to present
your testimony.
STATEMENT OF THE HONORABLE JEROME H. POWELL, CHAIR-
MAN, BOARD OF GOVERNORS OF THE FEDERAL RESERVE
SYSTEM
Mr. POWELL. Thank you, Chairwoman Waters, Ranking Member
McHenry, and members of the committee, for the opportunity to
discuss the measures we have taken to address the hardship
wrought by the pandemic.
Since we last met, the economy has continued to strengthen.
Real GDP rose at a robust pace in the first half of the year, and
growth is widely expected to continue at a strong pace in the sec-
ond half. The sectors most adversely affected by the pandemic have
improved in recent months, but the rise in COVID-19 cases has
slowed the recovery.
Household spending rose at an especially rapid pace over the
first half of the year, but flattened out in July and August, as
spending softened in COVID-sensitive sectors. Additionally, in
some industries, near-term supply constraints are restraining ac-
tivity.
As with overall economic activity, conditions in the labor market
have continued to improve. Demand for labor is very strong, and
job gains averaged 750,000 per month over the past 3 months. In
August, however, gains slowed markedly, with the slowdown con-
centrated in sectors most sensitive to the pandemic.
The unemployment rate was 5.2 percent in August, and this fig-
ure understates the shortfall in employment, particularly as par-
ticipation in the labor market has not moved up from the low rates
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7
that have prevailed for most of the past year. Factors related to the
pandemic appear to be weighing on employment growth. These fac-
tors should diminish with progress on containing the virus.
The economic downturn has not fallen equally on all Americans,
and those least able to shoulder the burden have been the hardest
hit. In particular, despite progress, joblessness continues to fall dis-
proportionately on lower-wage workers in the service sector and on
African Americans and Hispanics.
Inflation is elevated and will likely remain so in the coming
months before moderating. As the economy continues to reopen, we
are seeing upward pressure on prices, particularly due to supply
bottlenecks in some sectors. These effects have been larger and
longer-lasting than anticipated, but they will abate, and as they do,
inflation is expected to drop back toward our longer-run 2 percent
goal.
The process of reopening the economy is unprecedented. As it
continues, bottlenecks, hiring difficulties, and other constraints
could again prove to be greater and more enduring than antici-
pated, posing upside risks to inflation. If sustained higher inflation
were to become a serious concern, we would certainly respond and
use our tools to ensure levels that are consistent with our goal.
The path of the economy continues to depend on the course of the
virus, and risks to the outlook remain. The Delta variant has led
to a surge in cases, causing significant human suffering and slow-
ing the recovery. Continued progress on vaccinations would support
a return to more normal economic conditions.
The Fed’s policy actions are guided by our dual mandate to pro-
mote maximum employment and stable prices, along with our re-
sponsibility to promote the stability of the financial system. In re-
sponse to the crisis, we took broad and forceful measures to sup-
port the flow of credit and to promote the stability of the financial
system.
Our actions, taken together, helped unlock more than $2 trillion
of funding to support businesses large and small, nonprofits, and
State and local governments between April and December of 2020.
This helped keep organizations from shuttering and put employers
in a better position to keep workers on and to hire them back as
the recovery continues.
These programs have served as a backstop to key credit markets
and helped to restore the flow of credit from private lenders. We
have deployed them to an unprecedented extent. Our emergency
lending tools require the approval of the Treasury, and are avail-
able only in unusual and exigent circumstances, such as those
brought on by this crisis.
Many of these programs were supported by CARES Act funding.
Those facilities provided essential support through a very difficult
year and are now closed. The Fed completed its sales of assets from
the Secondary Market Corporate Credit Facility on August 31st.
We were able to wind down the facility rapidly and efficiently, with
no adverse impact on credit conditions.
We also recently closed the Paycheck Protection Program Liquid-
ity Facility (PPPLF) to new lending and are managing the paydown
of assets in our other CARES Act facilities as they wind down. We
continue to analyze their efficacy and to review the lessons learned.
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The Fed’s actions affect communities, families, and businesses
across the country. Everything we do is in service to our public
mission. We will do all we can to support the economy for as long
as it takes.
Thank you. I look forward to your questions.
[The prepared statement of Chairman Powell can be found on
page 42 of the appendix.]
Chairwoman WATERS. Thank you very much, Chair Powell.
I now recognize myself for 5 minutes for questions.
Secretary Yellen, your Department reports that as of August
21st, $7.7 billion in emergency rental assistance had been allocated
to households, assisting approximately 2 million renters. Although
spending has increased over the past several months, I think we
are all concerned that the pace of delivery of this critical assistance
is not happening quickly enough.
Can you talk about the challenges you have faced after taking
over oversight of ERA1 from the Trump Administration? What do
you believe are the most significant improvements to the program
guidance you have made, and what impact have you seen?
Secretary YELLEN. Yes, thank you for that question.
This is a critically important program that Treasury has been
very focused on, in expediting the delivery of these rental assist-
ance funds to those who need them.
As I mentioned in my opening statement, getting these funds out
has involved creating a national infrastructure where none existed
before, and that has been a very difficult and slow process. Treas-
ury has done everything possible to facilitate getting these pro-
grams up and running around the country, and particularly, we
have tried to give States and localities flexibility to administer the
program in ways that are appropriate for different communities to
reduce the paperwork requirements, while also making sure that
we have accountability and transparency. We have provided tech-
nical assistance and working to provide more technical assistance,
and I do think we are seeing a payoff.
As I mentioned, we have had 1.4 million renters helped by this
assistance, and the pace at which it is flowing out is increasing.
Also, I would note that the Act requires Treasury to begin to reallo-
cate funds on September 30th from those localities that either are
not effective in getting assistance out or have less need for the
funds, and to reallocate them to those that are more effective and
have demonstrated need.
Chairwoman WATERS. Thank you very much. And I want to
thank you and your team for working with me on H.R. 5196, the
Expediting Assistance to Renters and Landlords Act, which would
make it easier for both renters and landlords to apply for assist-
ance and provide for the deeper involvement of Treasury to support
grantees to get the funds out the door.
Are there particular provisions that you think would aid Treas-
ury’s efforts to make the Rental Assistance Program more success-
ful? You have given us quite a bit of information about what you
have been involved with, but is there anything else you would like
to share?
Secretary YELLEN. Chairwoman Waters, we are very supportive
of your efforts to try to put in effect changes that would expedite
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9
the delivery and effectiveness of this program, and we look forward
to continuing to work with you. I think we have offered substantial
technical assistance, and we absolutely want to work with you to
make sure this program is as effective as possible.
Chairwoman WATERS. Thank you very much.
The gentleman from North Carolina, Mr. McHenry, who is the
ranking member of the committee, is now recognized for 5 minutes.
Mr. MCHENRY. Thank you.
Chairman Powell, I know it is the policy of the Federal Reserve
to not comment on fiscal policy, but fiscal policy does impact the
Fed’s economic projection, does it not?
Mr. POWELL. Yes, it does. We make assumptions about fiscal pol-
icy. And then, once it is enacted, we would put that into our mod-
els.
Mr. MCHENRY. Okay. But your public models are a statement
about current law rather than proposed policy, is that largely cor-
rect?
Mr. POWELL. We don’t really publish a forecast as the Federal
Reserve. Individual participants publish their forecasts in the Sum-
mary of Economic Projections, but that would include their per-
sonal assessments of likely fiscal actions.
Mr. MCHENRY. Okay. About these fiscal actions, Secretary
Yellen, I said this in my opening statement, and I will say this to
both of you again. I am grateful, as an American, that you both are
in the seats that you are in right now, because we are in a special
circumstance here in the fall this year. It was a foreseeable, slow-
moving disaster, but here we are.
But the credibility of your relevant agencies and the credibility
of you two individuals is of substance right now and very important
to us as the American Government. So, Secretary Yellen, you said
in July, right before the debt limit was reinstated, the CBO said
Treasury would probably run out of cash sometime in the first
quarter of next year—or fiscal year, most likely in October or No-
vember.
Secretary Yellen, you began exercising Treasury’s authority to
take extraordinary measures to prevent a default back in August.
Is that correct?
Secretary YELLEN. Yes. The debt limit, the suspension expired on
August 1st, and we began using extraordinary measures to remain
under the debt ceiling.
Mr. MCHENRY. But those extraordinary measures are just a
band-aid for a period of time, right?
Secretary YELLEN. As I indicated, we expect them to be ex-
hausted on October 18th.
Mr. MCHENRY. And it would be a disaster if we did not raise the
debt limit?
Secretary YELLEN. It would be a catastrophe if Congress failed
to raise the debt ceiling.
Mr. MCHENRY. Here is the deal for Republicans. Democrats con-
trol the House and the Senate and the White House. And since
January 20th, the approach of this Congress is that they do not
need Republican votes to do anything. That has been the approach.
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And now, they want a political cover in the midst of this massive
amount of new spending to have Republicans raise the debt ceiling.
That is really the request.
Here is my question to you, Secretary Yellen. For the seat you
sit in, do you care whether or not the debt limit is raised with Re-
publican votes, or do you just care if it is raised?
Secretary YELLEN. I think it is important that this be done on
a bipartisan basis. I think it should be bipartisan, in recognition
of the fact that both Republican Administrations and Congresses
and Democratic ones have run budget deficits for most of the post-
war period, with only a few years serving as an exception.
And that requires, on a regular basis, raising the debt ceiling.
The need to do so has nothing to do with future spending or tax
plans that haven’t been enacted.
Mr. MCHENRY. Under the circumstances—
Secretary YELLEN. It is necessary to pay our bills.
Mr. MCHENRY. I understand, Secretary Yellen.
Secretary YELLEN. And Republicans and—
Mr. MCHENRY. Secretary Yellen?
Secretary YELLEN. —Democrats need to share that responsibility.
Mr. MCHENRY. Secretary Yellen? As I said to you on the phone
last week, I have been a part of every single debt ceiling increase
for the last decade, every fiscal consequence of Congress. And some
of them have been very bad, but I have tried to make things better.
I have been a part of the solution for the last decade.
And the call that I received from you last week was the first out-
reach I have had from this Administration to do something on a
bipartisan basis, and you called me to raise the debt ceiling. Not
with a plan, not for a fiscal plan, not for my buy-in, but simply for
my vote. And that, to me, speaks volumes.
Now, I am grateful for the outreach from you, but it speaks to
the larger issue for the Administration. And I don’t envy the posi-
tion you are in. I don’t. Because the bad strategy from this White
House and the leadership of this House and Senate is showing that
they don’t want Republican votes.
We did bipartisan bills last Congress, in the midst of COVID, bi-
partisan bills, major bipartisan bills. We can work together in a re-
sponsible manner. But to ask for my vote the week before it comes
up in the House is not in keeping with the realities of the situation.
We have the tools. We have the votes to get this thing done
through Congress. It is just a question of who votes for it.
Secretary YELLEN. I would like to point out that in 2017, when
the White House and both Houses of Congress were controlled by
the Republicans, and a reconciliation bill was in progress that led
to the 2017 tax cuts, the debt ceiling was raised, and it was done
on a bipartisan basis.
[Gavel sounding.]
Mr. MCHENRY. In 2011 and 2013, I voted for a bill that President
Obama signed. So, I am willing to participate in a bipartisan way.
Chairwoman WATERS. The gentleman’s time has expired.
Mr. MCHENRY. It is just a question of who votes for it and the
circumstances of $7 trillion of new spending this year.
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Chairwoman WATERS. The gentleman from New York, Mr.
Meeks, who is also the Chair of the House Committee on Foreign
Affairs, is now recognized for 5 minutes.
Mr. MEEKS. Thank you, Madam Chairwoman.
And I have to just say initially that I am kind of shocked at
Ranking Member McHenry saying that because he wasn’t asked for
a vote, something is going to determine whether or not American
people, Democrats and Republicans, will suffer if we don’t raise
this debt ceiling. And I have been here for 22 years between wheth-
er it is Democratic or Republican Administrations, and each time,
when it came to the credit of the United States and our economy,
it didn’t make a difference to me whether or not the Administration
was Democrat or Republican or whether or not someone called me
to ask me for my vote. I am here to try to do the best thing for
the American people, not play politics.
And when it comes to the credit for the United States and the
economy moving on, it is not about who is the President or who
called and asked me for a vote. It is about doing the right thing
for the American people, Democrats and Republicans. And moving
up this debt to make sure that we don’t default on our debts is es-
sential to that, and it is essential to our responsibility as Members
of Congress, and not to say, ‘‘Oh, nobody called me for a vote.’’ That
is simply not our responsibility.
Madam Secretary, there are consequences if we don’t pass and
increase the debt ceiling, like the increase in the corporate bor-
rowing, for a home or a car, or through one’s credit cards, of which
folks on the other side will say, I don’t have to deal with that, but
then it is going to be—play politics with it.
I was wondering, as we are recovering from this economy, what
setbacks will a default on debt cost American households? Be they
Democratic, Republican, Independent, nonvoters, what would it
cost us?
Secretary YELLEN. I think it would be catastrophic for the econ-
omy and for individual families. Nearly 50 million seniors could
stop receiving Social Security payments or see them delayed. Our
troops would not know when they would get their next paycheck.
We have 30 million families who rely on the monthly child tax
credit, and they would not receive that relief, at least on time.
And as we saw in 2011, when the debt ceiling was raised at the
absolute last minute, and investor and consumer confidence was
shaken in the run-up, we saw a marked increase in interest rates,
and a marked drop in the stock market. And when U.S. interest
rates go up and the credit rating of the United States was down-
graded, that means higher interest payments for everyone who has
a loan. Whether it is a small business, a homeowner with a mort-
gage, a credit card payment, anyone who borrows would see higher
interest costs of their debt.
Mr. MEEKS. We must raise the debt ceiling for the benefit of the
American people. I don’t care what party they are from.
Let me go to Chairman Powell. The Fed is rightly focused on con-
trolling inflation while boosting employment, with the aim of guid-
ing our economy back to its pre-pandemic normal. And at the Euro-
pean Central Forum, you mentioned that it is urgent for the Fed
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to resolve the tension between these two policy goals since taming
prices by raising interest rates would weaken our labor market.
As the Fed considers its monetary policy, how will you manage
the tradeoffs between controlling prices and ensuring full employ-
ment, and how do you plan to resolve the tension between the two
that you spoke on on Wednesday?
Mr. POWELL. That is the very difficult situation we find ourselves
in. Almost all the time, inflation is low when unemployment is
high, and so interest rates work on both problems now.
Right now, we think we are far away from full employment. So,
that gives us incentive to keep accommodative policy strong, to
keep accommodative policy in place. Inflation is well above target,
and we have an expectation that that high inflation will abate be-
cause we think the factors that are causing it are temporary and
tied to the pandemic and the reopening of the economy.
And what we say is, we just have to balance the two. But I would
say our expectation is that inflation will come down, and we won’t
ultimately face that difficult tradeoff of having the two goals in ten-
sion.
Mr. MEEKS. Thank you. Madam Chairwoman, I yield back.
Chairwoman WATERS. Thank you. The gentlewoman from Mis-
souri, Mrs. Wagner, is now recognized for 5 minutes.
Mrs. WAGNER. Thank you, Madam Chairwoman.
And Secretary Yellen, thank you for finally taking the time to
appear before this committee. I know that the ranking member has
formally requested your presence at least twice within the last few
months, with no response.
Last week, Treasury released the latest data on its Emergency
Rental Assistance Program. As you know, $46 billion was made
available to supposedly help COVID-impacted, low-income families
pay off their back rent and to help make mom-and-pop property
owners whole in Missouri’s Second Congressional District and be-
yond.
After more than 9 months and an entire summer of Republicans
pushing Treasury, your own data still shows that more than 83
percent of your funds remain unspent, while millions of renters and
property owners remain stuck in limbo. It certainly doesn’t sound
to me like it has been, in your words, ‘‘an expedited program.’’
Now, I have a series of yes-or-no questions. Because my time is
limited, I would appreciate and will insist upon a simple, ‘‘yes,’’ or
‘‘no.’’
First, Madam Secretary, do you consider Treasury’s Emergency
Rental Assistance Program to be a success? Yes or no?
Secretary YELLEN. Yes.
Mrs. WAGNER. Amazing. Are you aware that in December of
2020, when Congress appropriated the first $25 billion for the
Emergency Rental Assistance Program, funds were to be used by
December of 2021? Yes or no?
Secretary YELLEN. Yes.
Mrs. WAGNER. Do you know why Congress set that initial dead-
line?
Secretary YELLEN. To make sure that funds got to those who are
in need.
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Mrs. WAGNER. Right. To get it out the door to renters and land-
lords, ASAP. Madam Secretary, are you aware that just this past
March, Democrats extended the timeframe for the Emergency
Rental Assistance Program to the years 2022 and, are you ready
for this, 2025, for the two respective programs? Yes or no?
Secretary YELLEN. Yes. There is significant need, and it will con-
tinue, and I think that was appropriate.
Mrs. WAGNER. In 2025, ma’am?
Secretary YELLEN. Yes.
Mrs. WAGNER. Does extending the program’s deadline incentivize
grantees to get funds out? By extending this, does it incentivize
grantees to get funds out the door? Yes or no?
Secretary YELLEN. We are doing everything we can in the States
and localities—
Mrs. WAGNER. Well, it is not fast enough.
Secretary YELLEN. —to get it out the door. As I indicated in my
opening statement, and in a written response to a previous ques-
tion, the infrastructure to do this had to be built, and the pace at
which money is getting out the door is increasing.
Mrs. WAGNER. There was plenty of time for the infrastructure to
be set. Our Fed programs, our Paycheck Protection Program (PPP),
all of those expeditiously got money to people who needed it. This
is a complete and abject failure.
Secretary YELLEN. I’m sorry. This was—
Mrs. WAGNER. Secretary Yellen, I want to read a quote to you
from a Treasury official to journalists on September 24th, ‘‘To sim-
ply take the amount of money that has gone out in the first 5 or
6 months and then compare that to what was allocated for 4 or 5
years is just a meaningless number.’’
Secretary Yellen, is getting money out the door as soon as pos-
sible a meaningless gauge, particularly when we are talking about
a pandemic-related eviction crisis? Yes or no?
Secretary YELLEN. Our objective is to get the money out the door.
Mrs. WAGNER. Well, it hasn’t gotten out the door; 83 percent of
it is still sitting in Treasury coffers.
Secretary YELLEN. I’m sorry, 1.4 million—
Mrs. WAGNER. Ma’am, my constituents in St. Louis and I do not
find it meaningless when we are talking about emergency assist-
ance meant to keep individuals and families in their homes today
during a pandemic, not years and years later, out to 2025.
Moving on, Chairman Powell, with spiking energy prices and bot-
tlenecks in supply chains around the world, there are concerns that
a rise in inflation, may not be as transitory as you originally pre-
dicted. Given our current economic situation, and the fact that
Democrats want to pass trillions and trillions more in spending,
what makes you believe we will not see more sustained higher in-
flation, especially when we have seen significant consumer price in-
creases, et cetera, et cetera?
Mr. POWELL. As I mentioned in my opening remarks, we do
think that inflation will remain elevated until the supply-side bot-
tlenecks are resolved, and we think that it will then move back
down toward our goal.
Mrs. WAGNER. Timeframe?
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14
Mr. POWELL. These are not things that we control. We don’t con-
trol who supplies the semiconductors, for example.
Mrs. WAGNER. Not very transitory, sir. It seems pretty dug in.
Mr. POWELL. I would say that, remember, this is a function of
supply-side bottlenecks over which we have no control. But I would
say that we do expect in the first half of next year to see some re-
lief, depending on the bottleneck in question, and inflation should
move down over the course of that time.
Mrs. WAGNER. This is not a time to be spending trillions and tril-
lions of dollars. I yield back.
Chairwoman WATERS. The gentlewoman from New York, Ms.
Velazquez, who is also the Chair of the House Committee on Small
Business, is now recognized for 5 minutes.
Ms. VELAZQUEZ. Thank you, Madam Chairwoman.
Secretary Yellen, I would like to pick up with what Chairwoman
Waters was asking on the Emergency Rental Assistance Program
(ERAP). Can you please explain the type of resistance the Treasury
Department continues to face from some State and local govern-
ments? How is the Treasury Department trying to expedite this
funding to tenants and landlords who need it the most despite
these challenges?
Secretary YELLEN. In cases where States and other grantees
launched their programs late, they faced an array of complications.
The most significant involved obtaining the necessary authoriza-
tions from a grantee’s governing body, and there were procurement
challenges that arise when grantees have to engage outside part-
ners and contractors.
We have received a lot of feedback indicating that the guidance
that Treasury has released really does give State and local pro-
grams the tools they need to move forward expeditiously. And I
would also note the partnering with HUD to send out technical ex-
perts who can help grantees accelerate their programs and help
them document best practices.
Ms. VELAZQUEZ. Thank you.
Early on, New York was one of the lowest-performing States in
distributing ERAP funding. But significant progress has been
made, and the State now ranks first nationally with more than
$1.2 billion in payments made or obligated.
Unfortunately, more assistance is needed. The Treasury Depart-
ment is required to start reallocating excess first-round funds at
the end of September. Can you tell us how this process will unfold?
Secretary YELLEN. Thank you for that question.
Our objective will be to maximize the number of eligible house-
holds that are served by ensuring that resources of the program
are appropriately aligned with each grantee’s needs and ability to
deliver reassistance. And reallocation will be really critical in
achieving that objective.
Our frameworkwe will identify localities that have excess funds.
We will use clear expenditure benchmarks that increase over time.
We will strive to keep reallocated funds within the same State
when it is possible and afford a venue for voluntary reallocation
among grantees.
Ms. VELAZQUEZ. Thank you.
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Under the American Rescue Plan, Secretary Yellen, Democrats
reauthorized the State Small Business Credit Initiative (SSBCI),
providing $10 billion in Federal funds to support up to $100 billion
in new loans and initiatives for small businesses through State,
Territory, Tribal, and local Governments. Under the program, po-
tential grantees must submit a completed application by February.
How is the Treasury Department conducting outreach and working
with local governments to ensure that completed applications are
submitted on a timely basis?
Secretary YELLEN. Thank you. This is a very important program.
Our staff have contacted each State individually to follow up on
the application notice, to see if there are questions or if help is
needed with a set of webinars. We are assisting in program design,
in helping to develop programs, and with respect to Tribal Govern-
ments, we have been conducting extensive outreach.
Ms. VELAZQUEZ. Thank you.
And Chair Powell, would you agree with what Secretary Yellen
is saying regarding raising the debt ceiling?
Mr. POWELL. Yes, I think it is essential that the debt ceiling be
raised in a timely fashion so we can pay our bills. And I think the
consequences of a failure to do so would be potentially severe.
Ms. VELAZQUEZ. Thank you. Madam Chairwoman, I yield back.
Chairwoman WATERS. Thank you very much. The gentleman
from West Virginia, Mr. Mooney, is now recognized for 5 minutes.
Mr. MOONEY. Thank you, Madam Chairwoman.
Secretary Yellen, do you believe that President Biden’s reconcili-
ation package proposal, the one with the $3.5 trillion in total
spending, will cost zero and be fully paid for?
Secretary YELLEN. Yes, I do. We have a full program that the
President has proposed to raise revenue that would cover the costs
of the program. In the President’s budget, of course, there are
changes under consideration as this goes through Congress, but
there are a host of revenue raisers, and I do believe it will be actu-
ally deficit-reducing beyond the first 10 years of the program.
Mr. MOONEY. Okay, thank you.
Yesterday, Speaker Pelosi claimed the same thing, that the
Democrats’ reconciliation proposal would cost zero, that it would be
paid for. And President Biden said the same thing in a tweet ear-
lier.
Call me skeptical, but given the record of the Democrats in Con-
gress here on runaway spending, I just don’t believe it. And I am
not the only one. The Washington Post called President Biden’s
claim that the bill would be budget-neutral, ‘‘misleading,’’ and gave
it a score of two Pinocchios.
We are passing bills out of committee, I understand, without
even Congressional Budget Office (CBO) scores, so we don’t really
know. And we have not done that before. That is a change in our
policy.
The truth is that we are spending at an alarming rate in this
country. Since the COVID-19 pandemic began last year, the Fed-
eral Government has spent more than $5.3 trillion on relief. That
is roughly $16,000 for every American.
Our ballooning debt is not some abstract problem. Out-of-control
spending proposed by President Biden and being rubberstamped
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16
here in Congress will leave a mess that our children and grand-
children will have to clean up and pay for. The decisions we make
today, 20 or 30 years from now, our children and grandchildren
will have to pay this money back.
I would like to move to a different aspect of the package. One of
the attempted pay-fors in the package that is alarming to me is the
tax increases that will make our economy less competitive. Sec-
retary Yellen, my question is, the proposed corporate tax rate in
the House reconciliation bill is 26.5 percent. This actually moves us
higher than Communist China’s corporate tax rate of 25 percent.
We are going to have a higher tax rate than a country that has
been taking our jobs and has Communist ideology.
Can you explain why raising our corporate tax rate above Chi-
na’s is a good idea, if you think it is? And do you think this would
hurt our competitiveness with China and around the world?
Secretary YELLEN. Our companies are the most competitive and
profitable in the world. The effective tax rate that they pay is very
low, and recent studies suggest that among advanced countries, the
United States has an effective tax rate that is among the lowest
of countries around the world.
We can certainly afford to take the corporate tax rate up to 26.5
percent, as in House Ways and Means, without negatively impact-
ing a firm’s performance. And we propose to do that in the context
of an international agreement that received the support of over 130
countries worldwide to establish global minimum tax rates that
will apply to other countries’ firms.
Right now, the United States is the only country with a global
minimum tax rate on its multinational corporations. We propose to
raise that, but at the same time, other countries will raise theirs
much more. And that means that the competitiveness of American
firms will be enhanced, and we will be reducing the incentives that
exist in our tax law right now—
Mr. MOONEY. Thank you.
Secretary YELLEN. —to export jobs and profits.
Mr. MOONEY. Thank you. I don’t know how much time I have
left, but thank you, Secretary Yellen.
One thing we have learned over the last several years is that we
need to take the threat from China more seriously here in America.
Making America less competitive—and despite what you said, rais-
ing our corporate tax rate makes us less competitive than our eco-
nomic adversaries like China—is too high of a cost for all of this
spending.
Running up these massive debts that our children will have to
pay back for this spending is just not right. So, despite what we
are hearing and what many are saying, this reconciliation package
will be expensive in terms of dollars and, frankly, to the future of
our competitiveness in this country, racking up this debt, and I just
fear we are going to pay for this for years to come.
Thank you, Madam Chairwoman. I yield back the balance of my
time.
Chairwoman WATERS. Thank you very much. The gentlewoman
from Ohio, Mrs. Beatty, who is also the Chair of our Subcommittee
on Diversity and Inclusion, is now recognized for 5 minutes.
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Mrs. BEATTY. Thank you, Madam Chairwoman, and thank you to
our witnesses today.
Certainly, as I have been listening, a lot of descriptive words
were used, everything from, ‘‘dysfunctional,’’ to ‘‘meaningless,’’ to
‘‘irrational.’’ Well, I could think of a lot of other words that I could
use, but certainly, those words are appropriate to describe what
Democrats inherited from the last Administration. Whether that is
the irresponsibility of the past Administration, whether it is all the
debt that was occurred because of the Trump Administration, I
think those words are appropriate, Madam Chairwoman, just very
misdirected by my colleagues. In my opinion, you should look at
your own house and home before throwing stones, and especially
when they are not appropriate.
Now, with that said, to our two witnesses who have been very
responsive, I say, thank you. And let me quickly get to my first
question on the Federal Reserve.
Chair Powell, we have had a lot of conversations about diversity.
I want to thank you for responding and for continuing to increase
your diversity. But as you know, recently, there have been two Fed-
eral Reserve Presidents who have left, quit, retired, bottom line im-
mediately leaving or gone from the Federal Reserve Banks of Dal-
las and Boston.
My question is—and you know where I am going with this—I
would certainly be hopeful that we could increase our numbers in
diversity beyond Raphael Bostic by asking that we use the Beatty
Rule, patterned after the Rooney Rule, to do as we did with the
Alaska Federal Reserve President, and make sure that in that
interview process, we have an African American or a female. Do
you have any comment on that?
Mr. POWELL. I do. Thank you, Mrs. Beatty.
I can absolutely guarantee you that we will work hard in both
of those processes to find and give a fair shot to diverse candidates
for those two jobs as we do. And it will be a big focus of both of
those processes.
Mrs. BEATTY. Thank you.
Secretary Yellen, you will recall that back in 2016, then-Treasury
Secretary Lew made his historic announcement that Harriet Tub-
man would be the face on the $20 bill. I sent you a letter in early
July, along with my colleague, Congressman Katko, requesting the
committee to move forward with the Obama Administration’s plan
to put her on the face of the $20 bill.
I understand your staff has been in discussion on this issue, and
I am hoping to get a high-level overview and to ask you if there
is any comment you can make on that?
Secretary YELLEN. Thank you for that question, Representative
Beatty.
We believe it is very important that our notes reflect the history
and diversity of our country, and I couldn’t possibly think of a bet-
ter way to honor Harriet Tubman’s legacy and her courage in fight-
ing for the freedom of enslaved people and women’s right to vote
than seeing her on the $20 bill.
Issuing notes, as you know, is a very lengthy process. It involves
collaboration among a number of different agencies, and it is nec-
essary to design new security and counterfeit features.
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Mrs. BEATTY. Right.
Secretary YELLEN. And unfortunately, that means the lead time
to redesign new bills and ensure their security is long. When Sec-
retary Lew announced—
Mrs. BEATTY. Madam Secretary?
Secretary YELLEN. —announced—
Mrs. BEATTY. Madam Secretary, I am going to go to my rental
question, because the clock is winding down, and we will follow up
with your staff.
Just prior to the new Administration coming into office, the
former Administration rushed the regulations and questions for the
Rental Assistance Program. Those regulations were so unworkable
that States like my State—Ohio—and others were telling me that
they weren’t even sure if they would be able to distribute rental as-
sistance funds under those guidelines.
Secretary Yellen, isn’t it true that the Secretary under the new
Administration had to spend weeks going back and redoing all of
that to make sure that the funds could actually be distributed?
Secretary YELLEN. That is correct.
Ms. BEATTY. Thank you. I want that to go on the record. Some
of my colleagues wanted to drill down and make our Secretary an-
swer those questions, so thank you.
The last—
Chairwoman WATERS. Thank you very much. The gentlelady’s
time has expired.
The gentleman from Ohio, Mr. Davidson, is now recognized for
5 minutes.
Mr. DAVIDSON. Thank you, Madam Chairwoman, and I thank our
witnesses and our colleagues. I appreciate this hearing.
Chairman Powell, you have extensive private-sector experience,
and, of course, as Chairman of the Federal Reserve, you have a role
in bank regulation. In your experience, do banks or lenders in-
crease lines of credit unconditionally? Isn’t there some level of un-
derwriting involved? Wouldn’t banks have problems with their reg-
ulators if they did no underwriting for a line of credit?
Mr. POWELL. Yes, of course, they are very careful in the lending
they do.
Mr. DAVIDSON. I submit that it is perfectly rational for Congress
to expect something in exchange for an increased line of credit. The
plan presented is atrocious. It will never balance. It doesn’t even
propose to balance in 15, 20, 30, or 100 years. There is no plan to
quit bankrupting America, Madam Secretary.
Now, thankfully, under the Federal Reserve’s leadership and Sec-
tion 13(3) authority, we had some facilities in place to prevent real
financial calamity. Recently, our Subcommittee on National Secu-
rity, International Development and Monetary Policy held a hear-
ing to discuss the Federal Reserve’s lending facilities under Section
13(3), and how those facilities were utilized prior to and since the
passage of the CARES Act.
I fear that some of my colleagues don’t even understand how
some of the products like bonds or margin calls work, as they have
criticized programs where there is literally no buy side in the mar-
ket. And, of course, the Federal Reserve stepped in to create a buy
side and support the markets. I have heard colleagues say, ‘‘Well,
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19
there are only two loans under the Municipal Liquidity Facility,’’
for example, while there were hundreds of loans, and hundreds of
billions of dollars of credit extended.
How important are the 13(3) provisions to the financial stability
of our country?
Mr. POWELL. They are very important but they are reserved for
real economic emergencies, financial emergencies. And as you point
out, they function, I think, very well in a crisis as backstops, that
we put them in place and the private capital markets started work-
ing. And really, that is success. That is what success looks like.
Mr. DAVIDSON. Do you think 13(3) should ever be used for a po-
litical goal or as something to fulfill a dual mandate rather than
an emergency?
Mr. POWELL. Actually, no, I don’t. I think the current institu-
tional arrangements are very good. I think we need the approval
of the Treasury Secretary. Realistically, we work with Treasury,
and we are constrained for very specific circumstances, unusual
and exigent circumstances. There are a number of tests in the law,
and I think it is an arrangement that works.
Mr. DAVIDSON. Thank you, Chairman Powell.
Recently, Federal Reserve Governor Michelle Bowman gave a
speech in which she discussed the evolution enhancement of bank
supervision, particularly during the COVID pandemic. And in that
speech, she stated that the Fed avoided overreacting and instead
approached supervision in a more measured way that allowed
banks the flexibility to work with their customers.
There are a range of topics she has addressed, and others have,
with bank regulation. I will just share this from her paper. She
says, ‘‘The goal of this initiative is to ensure our supervisory ap-
proaches accommodate a much broader range of activities while en-
suring we don’t create an unlevel playing field with unfair advan-
tages or unfair disadvantages for some types of firms versus oth-
ers.’’
And for that reason, I am working on a bill that would study the
evolution of consumer finance and the viability of updating our
prudential regulatory structure through consolidation of bank su-
pervisors. Of course, there is some level of coordination the Fed
does, but could either of you give an opinion on a scenario where
the United States consolidates banking supervision?
Mr. POWELL. That is something we would have to look at. I know
it is something that does tend to get looked at over intervals and
it hasn’t happened. I think each institution has a different role in
our society. I know we have more bank regulators than other coun-
tries, but we do seem to work pretty well together.
Mr. DAVIDSON. Thanks for that. Secretary Yellen, obviously there
are a lot of provisions and a large void in the digital asset space.
In your opinion, what is a digital asset for purposes of tax report-
ing?
Secretary YELLEN. For purposes of tax reporting, I believe the
IRS will issue detailed regulations which will answer that question,
for the purposes of tax reporting.
Mr. DAVIDSON. Thank you. Our law has not really kept up with
this, and frankly, it has led to regulation by enforcement with the
SEC and a host of others. But I appreciated when you were Chair
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20
of the Fed, the faster payments initiative that got launched. A lot
of this involves payments. But so much in the digital asset space
isn’t a currency or a payment system. There are a gazillion use
cases, and it would be a shame to see the regulatory framework
curtail that. And I look forward to seeing fintech flourish in the fu-
ture.
I yield back.
Chairwoman WATERS. Thank you. The gentleman from Florida,
Mr. Lawson, is now recognized for 5 minutes.
Mr. LAWSON. Thank you, Madam Chairwoman, and Ranking
Member McHenry.
Chairman Powell, Floridians, unfortunately, have seen firsthand
the impact of climate change and that impact is becoming worse as
we experience more severe and frequent hurricanes and risks of
rising sea levels. I am glad to see greater attention given to how
we can better assess and manage climate-related risk.
It is my understanding that many financial institutions conduct
scenario analysis to assess credit market liquidity and operate risk
related to transition risk [inaudible] physical risk like hurricanes,
flooding, wildfires, and drought.
Mr. Powell, is scenario analysis a good tool in assessing climate-
related financial risk? Can you please discuss the difference be-
tween scenario analysis and stress testing? What other tools does
the Federal Reserve have to assess climate-related financial risk?
Mr. POWELL. Thank you. Our role, of course, is to make sure that
the financial institutions we regulate and supervise understand
and can manage their risks, including the risks from climate
change, the financial risks from climate change.
Scenario analysis is almost certainly going to be one of the prin-
cipal tools for doing exactly that, and it is very different from stress
tests. Scenario analysis, at this point, is about institutions really
understanding what these risks will be, how they will develop over
time, and what are the channels through which they will develop,
and it is sort of early days in understanding how those risks will
interact with the economy and with the financial system. Scenario
analysis is meant to help do that, and we at the Fed are working
on developing a program of scenario analysis. Many of the large in-
stitutions are doing so. As I mentioned, it’s quite different from
stress tests, which have consequences for distributions and that
kind of thing.
I think, overall, we see our job, as I mentioned, as making sure
that these financial institutions understand the risks and can man-
age them, and that is just a lot of basic supervisory tools, under-
standing what they are doing and have the processes in place and
the analytical tools in place and the focus, and that is what we will
be doing.
Mr. LAWSON. Okay. Thank you. Secretary Yellen, I am concerned
that small businesses, particularly within communities of color,
will have lasting economic damage coming out of this pandemic.
The American Rescue Plan extended assistance to small businesses
by authorizing a $10 billion program called the State Small Busi-
ness Credit Initiative, with $2.5 billion of these funds set aside for
minority-owned businesses.
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In Florida, the problem of economic opportunity is waiting for the
Treasury to release applications and requirements and program
guides. When can we expect the guidance will be released, and can
we share our Treasury plan to ensure that assistance goes to small
businesses that will be highly impacted by the pandemic?
Secretary YELLEN. The State Small Business Credit Initiative is
an extremely important program, and we are in the process of im-
plementing it. We will absolutely make sure that it reaches small
businesses that have been very severely affected by the pandemic,
and certainly in underserved areas and communities of color.
I think you know that Congress required that Treasury provide
funds to States based on the extent of job losses that had been suf-
fered, and it sets aside significant funds for businesses that are
owned by socially- and economically-disadvantaged individuals.
So, we will make this funding available and provide technical as-
sistance, working with communities to make sure that it is used as
intended.
Mr. LAWSON. Okay. Thank you very much. And with that, I yield
back.
Chairwoman WATERS. The gentleman yields back. The gen-
tleman from North Carolina, Mr. Budd, is now recognized for 5
minutes.
Mr. BUDD. Thank you, Madam Chairwoman, and I thank the
witnesses.
The Federal Government’s spending, and I am not even talking
about debt but just the spending here, is expected to reach record
highs this year, 2021, and Democrats are trying to dump trillions
of dollars of what I believe is very reckless spending into an al-
ready-inflationary economy. As a percentage of GDP, our public
debt has reached 125 percent in the second quarter.
Secretary Yellen, very briefly, do you believe that there is a level
of debt that is unsustainable in our economy, and if so, what is
that number? And you can share that with me either in dollars or
as a percentage of GDP.
Secretary YELLEN. I believe that the debt held by the public rel-
ative to GDP is around 105 percent, and that is a number that is
higher than we have had during most of the postwar period in the
United States. But it is not a number that I think is fiscally irre-
sponsible or unsustainable.
Interestingly—
Mr. BUDD. Madam Secretary, do you have a number that is a
threshold, that is irresponsible, either in percentage or in dollars?
Secretary YELLEN. One way that I would judge that is by looking
at the interest burden, the real interest burden on the debt. That
really is the burden, a better measure of the burden it places on
our economy. And this year, that interest burden has actually been
negative. Interest rates have been exceptionally low. This dates
back to before the financial crisis in 2008, and most economists be-
lieve that there are deep structural reasons why low interest rates
are likely to continue. Even if nominal interest rates move back to-
ward more normal levels—
Mr. BUDD. Let me ask—I am sorry to—
Secretary YELLEN. —that interest burden—
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Mr. BUDD. —just because I want to be aware of the time con-
straints, thank you, Madam Secretary. If the interest rate was
zero, what is irresponsible in percentage or dollars?
Secretary YELLEN. I think that if the real interest burden stays
below—
Mr. BUDD. If it is as is—
Secretary YELLEN. —historical norms—I’m sorry. If interest rates
are zero?
Mr. BUDD. If it is, let’s say, zero. Let’s say as is. Pick one of
those, and let’s say what is irresponsible as a percentage or total
dollars of debt?
Secretary YELLEN. If interest rates are zero and negative in real
terms, certainly we could have a substantially higher burden, al-
though there are always risks pertaining to the path of interest
rates that need to be taken into account.
Mr. BUDD. I understand. Thank you. Let me shift gears a bit. In
one of my recent telephone town halls, I asked a poll question to
those who were able to join me, ‘‘Have you or your family noticed
a sharp rise in prices for food, gas, or electricity?’’ And 94 percent
of the respondents—and it was a good sample size—said yes, infla-
tion is eating away at the buying power of every single North Caro-
linian. Bottom line: Inflation is a tax on working Americans.
Chairman Powell, I know that you have called the inflation that
we are dealing with transitory, and boy, I sure hope you are right.
But what would you tell people back in my district, especially those
on fixed incomes, when they are struggling to make ends meet
right now? What would you tell them?
Mr. POWELL. I would say that we are dealing with a very un-
usual event that is really part of the broader COVID event, that
the economy is now reopening, and that we are hitting the supply-
side bottlenecks. For example, it is hard to manufacture cars with-
out semiconductors, which are in short supply, so car prices are
going up, and lots of prices are being affected by supply-side con-
structions. We expect that those will abate, that they will lesson,
and over time inflation will come back down. Exactly when that
will happen is not possible to say, but I would say we should be
seeing some relief in the coming months and over the course of the
first half of next year.
Mr. BUDD. I hope you are right. The folks I talk to back in North
Carolina are doubtful of that, but I do hope you are right.
Chairman Powell, next question. In a July hearing before this
committee, you were asked about Central Bank Digital Currencies
(CBDCs) and their impact on stablecoins and other
cybercurrencies. And you stated, and I think I quote you correctly
here, ‘‘You wouldn’t need stablecoins. You wouldn’t need
cybercurrencies if you had a digital U.S. currency.’’
So, Mr. Chairman, as a matter of policy, is it your intention to
ban or limit the use of cybercurrencies like we are seeing in China?
Mr. POWELL. No, and I immediately realized that I had
misspoken there. I didn’t mean—take the word, ‘‘cybercurrency,’’
out of that sentence, and I would say it’s fairly widely understood
that Central Bank Digital Currencies could perform some of the—
could make—
Mr. BUDD. But no intention to ban?
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Mr. POWELL. No intention to ban, but stablecoins are like money
market funds, they are like bank deposits, but they are, to some
extent, outside the regulatory perimeter, and it is appropriate that
they be regulated—same activity, same regulation.
Mr. BUDD. Thank you. I yield back.
Chairwoman WATERS. Thank you. The gentleman from Illinois,
Mr. Casten, who is also the Vice Chair of our Subcommittee on In-
vestor Protection, Entrepreneurship, and Capital Markets, is now
recognized for 5 minutes.
Mr. CASTEN. Thank you, Madam Chairwoman, and thank you so
much to our witnesses. We are truly fortunate to have you at the
helm, steering us through some past and future crises.
I want to talk about those, but before that, I want to just talk
about manufactured crises, which I would like to avoid. Congress,
everybody on this call in some fashion has voted to approve our
spending. Congress, everybody on this call in some fashion has
voted to decide how much of that spending would be paid with tax
revenues, and then somewhat uniquely, we give ourselves the au-
thority to decide how much of the residual, which is paid with debt,
we are going to pay for. It is political suicide. I am a co-sponsor
and supporter of my friend, Mr. Foster’s, bill, H.R. 3305, the End
the Threat of Default Act, to take that tool away from Congress,
because Congress has proven that we cannot be trusted with that
responsibility.
Secretary Yellen, without getting into the specifics of Mr. Foster’s
bill, would you support simply eliminating the debt ceiling so that
we don’t have to deal with this in the future and can focus on real
crises?
Secretary YELLEN. Yes, I would, because I believe when Congress
legislates expenditures and puts in place tax policy that determines
taxes, those are the crucial decisions Congress is making, and if to
finance those spending and tax decisions, it is necessary to issue
additional debt, I believe it is very destructive to put the President
and myself, the Treasury Secretary, in a situation where we might
be unable to pay the bills that result from those past decisions.
Mr. CASTEN. Thank you. I am glad to hear it, and we will hope-
fully try to get that through Congress.
Moving on to past crises, Chair Powell, I think all of us, in all
of our districts, are hearing about labor market tightness, and I
think a lot of people are explaining that labor market tightness to
justify preexisting political biases. As you know, and we have
talked about, we saw unemployment go from 3.5 percent to almost
10 percent, and back down to 5.2 percent, but I am much more con-
cerned that workforce participation went from 63 percent to 61 per-
cent and has stayed low. Can you just explain for the committee
briefly what is driving the reduction in workforce participation and
what, if anything, we can do to get that number back up, to make
sure that employers have access to folks who are ready and able
to work?
Mr. POWELL. I would be glad to. The two biggest parts of that
are caretakers and retirees. So, that makes up a lot of the shortfall
from where we were with labor force participation before the pan-
demic crisis. And within caretakers, some of that is going to be con-
nected to schools not being open or people who are afraid to go into
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24
an unvaccinated workplace and are afraid of COVID, and things
like that, and other reasons. That is a part of it, and that should
abate over time.
In terms of the retiree piece, it is not clear about that. I would
say the lore is that people don’t come out of retirement, except, I
would say, all during the last few years of the very long expansion
that ended with the pandemic, we were constantly surprised to the
upside on participation, including older people staying in the work-
force longer. I think my prior would be that we will get back a big
chunk of the so-called retirees and that we should be very open-
minded about how much labor force participation can go up.
The United States has low labor force participation compared to
our advanced economy peers, and this is not something that has to
be that way. It is not something that is good.
Mr. CASTEN. Thank you. Certainly, when I talk to folks in my
district, everybody kind of acknowledges that it is the boomers who
retired who are creating a lot of their skills gap, and that is a hard-
er challenge.
Going back to you, Secretary Yellen, I think subsequent to your
first Financial Stability Oversight Council (FSOC) meeting when
you identified climate change as an emerging threat, President
Biden issued an emergency order on climate financial risk, direct-
ing Agencies, including yours, to analyze and mitigate risks that
climate change poses to the financial system. In the little time that
we have left, can you give us any updates on status, milestones,
and deliverables that the Treasury Department has in response to
that Executive Order?
Secretary YELLEN. Yes. We are in the process of completing the
report, and we expect to issue it in late October or early November,
within the 180-day timeframe. And what we will be doing is look-
ing at the work of individual regulators to incorporate climate
change risks into their regulatory and supervisory activities and
describing some of the challenges that they face in carrying that
out.
Mr. CASTEN. Thank you. I am out of time. I will clear my cal-
endar to allow some time to read that week, and I yield back to
the Chair.
Chairwoman WATERS. Thank you very much. The gentleman
from Tennessee, Mr. Kustoff, is now recognized for 5 minutes.
Mr. KUSTOFF. Thank you, Madam Chairwoman, for calling to-
day’s hearing, and thank you to the witnesses for appearing.,
Secretary Yellen, there was an article in The Wall Street Journal
dated September 15th, and the headline is, ‘‘Yellen, IRS push
Democrats to require banks to report taxpayer annual account
flow.’’ I want to read the first two paragraphs, just briefly.
‘‘Treasury Secretary Janet Yellen and IRS Commissioner Charles
Rettig pressed lawmakers Wednesday to give the Internal Revenue
Service more information about taxpayer bank accounts as the
Biden Administration tries to salvage its struggling tax compliance
proposal.
‘‘In letters to lawmakers, the administration officials again asked
Congress to require banks to report annual inflows and outflows
from bank accounts with at least $600, or at least $600 worth of
transactions, a proposal aimed at letting the IRS target its audits
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25
more effectively. It would generate about $460 billion over a decade
to cover the cost of Democrats’ planned expansion of the social safe-
ty net and climate change policies, according to the administra-
tion.’’
Those are the first two paragraphs of the story.
That is an accurate reflection of what you have done, correct?
Secretary YELLEN. Yes. We have proposed both augmenting the
resources of the IRS so that it can hire qualified auditors, and aug-
menting the information flow so that the IRS gets insight into
opaque sources of income, and both together, we believe, can serve
to greatly address the $7 trillion estimated tax gap that we will see
in this country—
Mr. KUSTOFF. And Madam Secretary—
Secretary YELLEN. —over the next decade.
Mr. KUSTOFF. —you would tell my constituents that they should
not have any privacy concerns about what you are trying to do?
Secretary YELLEN. They should not, because this is a simple mat-
ter for banks that already file 1099-INT forms—
Mr. KUSTOFF. Madam Secretary—
Secretary YELLEN. —with the IRS—
Mr. KUSTOFF. —the IRS—
Secretary YELLEN. [Inaudible.]
Mr. KUSTOFF. —information about taxpayers to ProPublica, that
published their entire tax returns, their entire tax information. On
the record, you tell my constituents, and all of the other Members
here, and their constituents, that they should have no privacy con-
cerns about banks reporting $600 or more in account value to the
IRS.
Secretary YELLEN. What we have asked to have reported is the
aggregate inflows and outflows from these accounts each year, on
an annual basis, two additional pieces of information, not trans-
action-level data.
And look, every wage-earner in this country has their wage in-
come—
Mr. KUSTOFF. At least $600, is that a correct statement?
Secretary YELLEN. We want to make sure that this can—
Mr. KUSTOFF. That is different than transactions.
Secretary YELLEN. —by expanding—
Mr. KUSTOFF. Those are values of $600.
Secretary YELLEN. There is—
Mr. KUSTOFF. The Wall Street Journal is accurate, correct?
Secretary YELLEN. Excuse me?
Mr. KUSTOFF. The Wall Street Journal’s report is accurate, cor-
rect?
Secretary YELLEN. We did propose that. I don’t believe it is an
invasion of privacy. And look, the IRS gets a great deal of informa-
tion that it needs in order to make sure that taxpayers comply with
the Tax Code. It receives individual information on wages and sala-
ries that are received, on dividends, on transactions, on—
Mr. KUSTOFF. How did ProPublica receive this information from
the IRS about the individual taxpayers?
Secretary YELLEN. Excuse me?
Mr. KUSTOFF. How did ProPublica obtain the information from
the IRS about taxpayer information?
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Secretary YELLEN. Independent agencies and law enforcement
are currently looking into that and attempting to figure out how
that occurred. That is clearly a crime and an utterly unacceptable
thing, and it will be prosecuted when it is understood, when these
agencies—
Mr. KUSTOFF. Your proposal purports to give more information
to the IRS, drilling down to accounts of $600.
Secretary YELLEN. We want to make sure that individuals can’t
game the system by opening multiple accounts in order to evade
the—
Mr. KUSTOFF. And you give the IRS all of this other information
about individuals.
Last question, Madam Secretary, do you support the move of the
United States Secret Service from the Department of Homeland Se-
curity to the Department of the Treasury?
Secretary YELLEN. I haven’t taken a view on that.
Mr. KUSTOFF. Thank you. I yield back my time.
Chairwoman WATERS. The gentleman from New York, Mr.
Torres, is now recognized for 5 minutes.
Mr. TORRES. Thank you, Madam Chairwoman. I am appalled by
the Republican gamesmanship around the debt limit. I heard a Re-
publican colleague on this committee complain about not receiving
a phone call from the Administration or a complaint that we, the
Democrats, are too partisan. The Republican argument seems to be
the following, that since the Democrats have been mean to us, we
are going to sabotage the full faith and credit of the United States
to exact revenge against those who have slighted us. And that kind
of pettiness has me wondering, are we in high school or the United
States Congress?
Now, it has to be said that raising the debt limit would not au-
thorize new spending. It would simply pay the debts of previous
Administrations, including the Trump Administration. So, the Re-
publicans cannot pass $2 trillion worth of tax cuts and then refuse
to pay back the debt that made those tax cuts possible in the first
place. That, to me, is worse than fiscal responsibility. That is fiscal
hypocrisy. And I support Congressman Foster’s legislation abol-
ishing the debt limit so that we are no longer at the whim of
bruised egos slighted by unreturned phone calls.
Suppose for a moment that it is October 18th. The use of extraor-
dinary measures is exhausted. What happens on October 19th?
Secretary YELLEN. We are simply in an impossible situation in
which it will be impossible for Treasury, on that day or a few days
thereafter, depending on—we will have very limited resources. It
will be run down quickly. We won’t be able to pay all of the govern-
ment’s bills.
The Treasury has been directed by Congress to pay all of the
government’s bills, to use the tax revenues that are available, and
without that to issue debt, and the debt ceiling will make it impos-
sible for us to do that.
Mr. TORRES. And the damage could be irreparable.
Secretary YELLEN. Yes, and we got a taste of that in 2011, when
the debt ceiling wasn’t raised until the last minute. The fact that
Congress might not raise the debt limit and call into question
whether or not what is regarded as the safest asset in the world,
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27
dollar-denominated U.S. Treasury debt, will actually be repaid, is
simply a catastrophic event.
Mr. TORRES. I want to follow up on an exchange you had with
Congressman Budd, who asked you about the debt-to-GDP ratio.
The U.S. debt-to-GDP ratio is over 100 percent. What is Japan’s
debt-to-GDP ratio?
Secretary YELLEN. Excuse me?
Mr. TORRES. What is Japan’s debt-to-GDP ratio?
Secretary YELLEN. It is about 250 percent.
Mr. TORRES. It is the highest in the world.
Secretary YELLEN. Yes, it is.
Mr. TORRES. And Japan is regarded as a successful economy?
Secretary YELLEN. It is, and Japan also has low interest rates
and is not—
Mr. TORRES. And I agree with your premise that the cost of serv-
icing debt is a more reliable measure of debt sustainability than
the debt-to-GDP ratio, and if we were to breach the debt limit, as
Republicans would have us do, it would actually raise the cost of
borrowing. It would raise interest rate payments—
Secretary YELLEN. Yes, it would.
Mr. TORRES. —which would make our debt burden less sustain-
able, not more.
Secretary YELLEN. That is absolutely correct. It would be re-
garded as riskier. We might suffer, again, a credit downgrade, and
coming out of that we could expect to see higher interest rates on
Treasury debt and on the debt that private individuals have—mort-
gage debt, credit card debt, auto loans, and everything else.
Mr. TORRES. I want to quickly ask you about a Title IV loan
under the CARES Act. During the Trump Administration, the larg-
est recipient of Title IV was a trucking company previously known
as YRC Worldwide, and presently known as Yellow Corporation. Do
you think a nearly-bankrupt trucking company, whose conduct is
the subject of a DOJ lawsuit for overcharging, should have received
a national security loan from the Trump Administration?
Secretary YELLEN. I am afraid I don’t know the details of that,
but I would be glad to have our staff get back to you on that.
Mr. TORRES. And I want to be clear that this loan is the subject
of scrutiny from the bipartisan Congressional Oversight Commis-
sion and the House Select Subcommittee on the Coronavirus Crisis.
You said at the end of September that the funding for Emergency
Rental Assistance might be reallocated. Up to how much funding
might be reallocated?
Secretary YELLEN. I can’t give you a dollar estimate, but the ob-
jective would be to shift it to areas where there is need and proven
success in getting it out.
Mr. TORRES. And if the use of extraordinary measures is ex-
hausted on October 18th, what does the Federal Reserve do on Oc-
tober 19th? What actions do you take in response? And that will
be my final question.
Mr. POWELL. I guess I would just say that no one should assume
that we can really do much to—if there were to be a default on our
obligations. No one should assume that the Fed, or anyone else,
can fully shield the American people from the consequences of that.
Mr. TORRES. My time has expired.
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Chairwoman WATERS. The gentleman from Indiana, Mr. Hol-
lingsworth, is now recognized for 5 minutes.
Mr. HOLLINGSWORTH. Good morning. I am going to ask most of
my questions to Secretary Yellen. First and foremost, I want to as-
sociate myself with the comments that Mr. Kustoff made.
I love serving on this committee. I have a great time working on
the policies that emanate from this committee. But it’s rare that
something this committee does leads to questions in the grocery
store, questions at convenience stores, and questions around my
district. But I have to tell you, the proposal that has been put forth
about expanding the amount of information that the IRS is going
to get on private bank accounts has been something I have been
asked about at parks, at grocery stores, and at convenience stores
around my district. This has people deeply afraid about the emer-
gence of an apparatus that may be used against them.
I want to better understand, with specificity, what is being pro-
posed, because what I saw in the proposal, as circulated by Treas-
ury, was extremely generic and somewhat incongruent with what
I heard today. You said to Mr. Kustoff that the only things that
will be reported to the IRS under your proposal is the gross inflow
and the gross outflow from that particular account in a given year.
Is that accurate or inaccurate in what you have requested?
Secretary YELLEN. The proposal put forward by the Administra-
tion requested a bit more information than that. But what is under
consideration now, in reconciliation, would be limited to those two
pieces of information. And what you should tell people who ask you
about this in the park is that right now, much of the audit time
of the IRS is devoted to taxpayers who have relatively low incomes.
And we know that the tax gap is something that comes from
opaque sources of income and from high-income individuals.
Mr. HOLLINGSWORTH. Well, I need to tell my—
Secretary YELLEN. The audit rates on individuals earning less
than $400,000 would not increase. This would—
Mr. HOLLINGSWORTH. Wait a minute. Wait a minute. Wait a
minute.
Secretary YELLEN. —redirect audits—
Mr. HOLLINGSWORTH. They are not worried about the audit
rates—
Secretary YELLEN. —to those—
Mr. HOLLINGSWORTH. Reclaiming my time, they are not worried
about the audit rates. They are worried about yielding their pri-
vacy, yielding their transaction history—
Secretary YELLEN. There is no—
Mr. HOLLINGSWORTH. —to a Federal Government—
Secretary YELLEN. —transaction history—
Mr. HOLLINGSWORTH. —reclaiming my time, to a Federal Gov-
ernment that has shown itself, time and time again, by mobilizing
that information against individuals, against organizations, and
against businesses, to be incapable of protecting that data from
breaches—
Secretary YELLEN. There is no—
Mr. HOLLINGSWORTH. —by nation states.
Secretary YELLEN. There is no—
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Mr. HOLLINGSWORTH. Excuse me. Reclaiming my time, this is
deeply concerning to them. So forgive me if I won’t go back to them
and say, ‘‘Don’t worry. Despite all evidence to the contrary about
their past history, the Federal Government really means it this
time when they say they are going to respect your privacy, that
they intend to build firewalls around this enormous database of
personal information. And by the way—which you brought up—we
are doing it for a really good purpose. We are doing it for a really
good purpose.’’ Forgive them if they don’t believe that the govern-
ment is showing up on their doorstep to ask about the inflows and
outflows from their personal accounts, at a very de minimis level,
and that is going to be used for only their good purpose.
Secretary YELLEN. There is no transaction-level data being re-
ported to the IRS.
Mr. HOLLINGSWORTH. Can you clarify what you mean by, ‘‘a bit
more data,’’ than, when I asked, ‘‘Is it just these two things?’’, and
you said, ‘‘It is a bit more.’’ What does, ‘‘a bit more’’ mean?
Secretary YELLEN. The proposal by the Administration that was
originally put forward requested some additional information, par-
ticularly about businesses and partnerships.
Mr. HOLLINGSWORTH. Yes. I wonder—
Secretary YELLEN. But there is no transaction-level data for indi-
viduals being considered by this Congress, and—
Mr. HOLLINGSWORTH. I want to point out—
Secretary YELLEN. —why is it okay that we have businesses re-
port wage and salary income, or companies report dividends, or—
Mr. HOLLINGSWORTH. Reclaiming my time, I think there is some
real concern about growing the amount of data the Federal Govern-
ment has proven itself incapable of handling correctly, or, at some
point, ethically, to the IRS.
I heard testimony 2 years ago about how China was able to ap-
prehend many of the protesters in Hong Kong. The way that they
did that was by mining financial data, not by virtue of great law
enforcement work and investigatory work, but instead by mining fi-
nancial data about who was scanning their credit card in order to
buy subway tickets to those particular locations.
This worries Americans who are rightly concerned about a Fed-
eral Government that does not have their best interest at heart,
but is telling them that for the greater good, they need to yield
more privacy, more of their privacy, more of the things that they
do in their personal accounts, because we might be able to close the
tax gap for other people who are cheating.
With that, I will yield back.
Chairwoman WATERS. The gentleman’s time has expired. The
gentlewoman from Iowa, Mrs. Axne, who is also the Vice Chair of
our Subcommittee on Housing, Community Development, and In-
surance, is now recognized for 5 minutes.
Mrs. AXNE. Thank you, Madam Chairwoman, and thank you,
Secretary Yellen and Chair Powell, for being here. It is great to see
you.
Listen, we have heard a lot about inflation, of course, but I want
to dig a little bit into this. Chair Powell, you recently mentioned
that price increases are relatively concentrated in particular areas,
and yes, I think most folks can understand things like airlines and
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hotels, et cetera, industries that took a hit during COVID because
people weren’t really traveling, this could be an issue there.
However, I want to get into some others areas where we have
seen price increases. One of the biggest areas is in cars, both new
and used, and I wanted to touch base about this.
Secretary Yellen, one of the key causes of the shortages and the
prices, the increase in our cars is because of shortages of semi-
conductors and production issues. Is that correct?
Secretary YELLEN. Yes, that is correct. There have been signifi-
cant semiconductor shortages, particularly affecting cars.
Mrs. AXNE. Thank you. And I hear regularly from businesses in
my district about supply chain issues coming off of the pandemic
that are unfortunately holding back our companies. One recently
told me that their sales are down $120 million, really because they
are producing to supply chain.
Chair Powell, we see that elsewhere too, with ships waiting off-
shore on both coasts, difficulties moving goods back and forth, et
cetera. Is that correct?
Mr. POWELL. Yes, it is very correct. It is hard to say how long
that will take, but it will resolve itself in time.
Mrs. AXNE. And that shows us also that the price of shipping
goods from China to the U.S. has gone up, and I think that has
gone up 400 percent from pre-pandemic. So, that is going to, of
course, add to the cost of anything we can buy from China.
While we have you two here, I guess what I am wondering is,
what are the solutions? Chair Powell, if we have issues with our
ports or with the supply chain of semiconductors or other compo-
nents, does it make much sense for the economy to pull back on
investments in the bottlenecks, or would we do better to expand
that capacity?
Mr. POWELL. I think that is really a question for fiscal policy. I
will say these are tangled supply chains right now, and it is a com-
bination of a bunch of factors, which should abate over time. But
obviously, investment in supply chains would make them more effi-
cient over time.
Mrs. AXNE. Thank you. I want to point out here that most of the
things we produce do require workers, and I spoke to you, Chair
Powell, about this in February.
But Secretary Yellen, you, of course, have studied labor markets
throughout your career. When we have constraints on our supply
chain, does it make sense to limit the numbers of people able to
work or should we instead invest in policies like childcare that help
get people into the workforce?
Secretary YELLEN. Absolutely. I think over the longer term, we
have had a problem with declining labor force participation of
prime-age workers, and we are proposing paid leave, childcare sup-
port, and early childhood education, supports that would help ex-
pand labor force participation. In the short run, of course, dealing
with the pandemic to make sure schools can operate on a normal
schedule, and get people back to work, will help as well.
Mrs. AXNE. And there are other countries around the world that
obviously have some of these pieces put in place, like better
childcare, and early childhood education. In your studies with
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them, do you see economic growth coming as a result of putting
these practices in place?
Secretary YELLEN. Yes. It has been an important source of
growth in the United States and elsewhere. Once upon a time, the
United States, just with respect to women’s labor force participa-
tion, had about the highest in the world, and that has changed
radically in recent decades as we have failed to expand and provide
the level of support for females. Especially for women’s labor force
participation, we have been falling behind other developed coun-
tries.
Mrs. AXNE. Absolutely, and thank you. So what I am hearing is,
it sounds like Democrats, what we are proposing, is absolutely a
solution to some of these inflation concerns, and that doing nothing
will actually exacerbate issues and make it worse.
I, for one, am not in the business of telling people what they
can’t buy. What I am hoping is that we can find solutions like
childcare, like paid family leave, like lowering the cost of prescrip-
tion drugs to keep money in people’s pockets, so that we can stop
artificially limiting the capacity of America’s economy and get peo-
ple back to work to help create more products and move products
around our country. So, things like childcare, paid leave, and other
policies will actually help expand the workforce.
Thank you so much.
Chairwoman WATERS. The gentlelady’s time has expired. The
gentleman from Tennessee, Mr. Rose, is now recognized for 5 min-
utes.
Mr. ROSE. Thank you, Chairwoman Waters and Ranking Mem-
ber McHenry, and I want to thank Chairman Powell and Secretary
Yellen for being here today.
I am just going to dive right in. I do want to follow up on a cou-
ple of things that have been talked about quite a bit this morning,
the debt limit first of all. I feel like there is a lot of misinformation
that circulates about this.
To be clear, if we suspend the debt limit, that is to allow for the
enlargement of the debt, yes, some of that for programs that have
been in place historically, but much of that would likely facilitate
new spending. And I learned a long time ago, from my dad, not to
sign blank checks. And it seems to me that if we suspend the debt
limit, that is kind of like signing a blank check, and frankly, I am
not willing to participate in signing that blank check. If we had as-
surances that that increase would go simply to cover the current
built-in costs of operating the government, then that might be a
different discussion, but that is not the one we are having.
Secretary Yellen, I want to follow up just for a second about the
IRS reporting for bank account information, and I wonder, in the
Administration’s proposal, is there any allowance in that proposal
to defray the costs that banks and financial institutions would
incur from the added reporting expenses of providing this addi-
tional information to the IRS?
Secretary YELLEN. I don’t believe it was in the Administration’s
proposal, but if appropriate, we would be glad to work with Con-
gress on that to defray any expense.
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Mr. ROSE. I certainly know that the existing reporting require-
ments that banks face are onerous and expensive, and, of course,
ultimately their customers end up bearing that cost.
I want to shift gears now. In May, the Treasury Department pub-
lished an interim final rule to implement the Coronavirus State
and Local Fiscal Recovery Funds. Although the guidance was
much-needed, I continue to hear from city and county mayors
across my district, many of whom are here in town today, asking
for additional clarification and flexibility. I wrote a letter to you in
July, requesting this additional flexibility in the final rule.
Secretary Yellen, can you tell us when we can expect this up-
dated guidance and if there will be increased flexibility included?
Secretary YELLEN. We have tried to provide a great deal of flexi-
bility in the guidance we have provided. There is an interim final
rule that is in place, and States and localities can rely on it. It was
out for comment. We have received a very large number of com-
ments that we are working through carefully, and we will work to
produce a final rule. But the interim rule—
Mr. ROSE. Any foreshadowing of when that rule might be avail-
able?
Secretary YELLEN. Later this year. But the interim final rule is
quite permissive in terms of flexibility and—
Mr. ROSE. We look forward to seeing that.
Secretary YELLEN. —States and localities—
Mr. ROSE. Reclaiming my time.
Secretary YELLEN. —to rely on it.
Mr. ROSE. Earlier this month, the committee reported the chair-
woman’s partisan bill that will have the effect of slowing down, in
my opinion, the distribution of Emergency Rental Assistance funds,
punish landlords, and expose taxpayers to fraud. Part of her bill
would replace having grantees determine if a household was, in
fact, an eligible, low-income household, as Congress intended with
the self-attestation that requires grantees to accept any attestation
of the households as true.
Secretary Yellen, are you concerned that requiring grantees to
accept all self-attestations of applicants who want to get free rental
assistance money will increase the likelihood of fraud?
Secretary YELLEN. We are working carefully with Chairwoman
Waters and want to make sure that we get money out in the most
effective and rapid way possible while maintaining adequate con-
trols to prevent fraud and abuse.
Mr. ROSE. Secretary Yellen, we have had several hearings re-
garding the Emergency Rental Assistance Program that is dis-
bursed through Treasury, and yet, you have not appeared at a sin-
gle one. And for that matter, you failed to appear at the House
Small Business Committee hearing as well. I am going to yield the
remainder of my time to my good friend, Mr. Luetkemeyer, the
ranking member of the House Small Business Committee.
Mr. LUETKEMEYER. Thank you, Mr. Rose. Secretary Yellen, I am
the ranking member of the House Small Business Committee, as
Mr. Rose indicated, and last December Congress passed a bipar-
tisan bill that required you to testify in front of the Small Business
Committee on the Paycheck Protection Program. That deadline
passed 157 days ago, and you are still not there. You have willfully
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refused to come before the committee, and willfully refused to obey
the law.
So, my question is very simple: Why can you, a Cabinet member
of the Biden Administration, pick and choose which laws you
choose to follow?
Secretary YELLEN. I have—
Mr. LUETKEMEYER. Please close your binder, and respond off the
cuff. Why can you pick and choose which laws that you respond to?
Secretary YELLEN. I have testified 11 times before Congress dur-
ing the past—
Mr. LUETKEMEYER. And never in front of the Small Business
Committee, Madam Secretary.
Chairwoman WATERS. Please allow the—
Secretary YELLEN. —months. I have agreed to do so. We have not
been able to find an appropriate date that works. I have offered to
have my—
Mr. LUETKEMEYER. I can show you a list of your—
Secretary YELLEN. —deputies—
Chairwoman WATERS. The gentleman’s time has expired.
Mr. LUETKEMEYER. I yield back.
Chairwoman WATERS. The gentleman from Massachusetts, Mr.
Lynch, who is also the Chair of our Task Force on Financial Tech-
nology, is now recognized for 5 minutes.
Mr. LYNCH. First of all, as someone who for the past 20 years
has worked with both Republican and Democratic Administrations
to allow our government to meet our obligations to our senior citi-
zens and Social Security, pay our troops, and pay our bills, I view
this latest threat to default on our debt as a direct attack on the
American people and on our government itself. Never has it been
a good time to destroy the full faith and credit of the United States,
and I fully support Mr. Foster’s bill, H.R. 3305, which would
change the whole dynamic of raising the debt limit.
I would like to ask you about the rollout of the CARES Act, and
Madam Secretary, I know that was a joint program between Treas-
ury and the Small Business Administration (SBA). As Chairwoman
Waters pointed out, I Chair the Task Force on FinTech, and while
there were very few connections between most of the fintech firms
and the SBA prior to the pandemic, once we gave them about $330
billion in the second phase of the PPP program, the fintechs en-
gaged. They were able to put out, I think 15 percent of the funding
through fintech lenders to people who needed it.
Unfortunately, however, about 75 percent of the fraud that we
detected was from that 15 percent that went out through fintech
lenders. And these were even some of our best—Kabbage, which
previously had never handled an SBA loan. They were one of the
companies that had difficulties.
I am just wondering if there were any lessons learned from that
rollout? I know we were rushed. We were pushing to get, especially
the first phase, the banks took care of their favorite customers. I
understand that. And those were known entities. And then we, in
Congress, encouraged a further reach-out for the SBA for people
who were not met and were not addressed in the initial phase.
But are there any—we had the rushed aspect of it. There was
also, I am not sure what the Application Programming Interface
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(API) is between the SBA and these fintech lenders. I know the re-
lationships are new. But did we learn any lessons from that inter-
action in getting money out to people who need it through the
fintech companies and lenders that we used?
Secretary YELLEN. Certainly, there are oversight and review
processes that are taking place. I can get back to you. I don’t have
details on what we found about fintech lenders, and I guess the
SBA is probably doing much of that review of the Paycheck Protec-
tion Program.
But in every aspect of developing programs that have been as-
signed to Treasury, we have worked, right from the outset, with
our Office of Inspector General and others to make sure that we
have appropriate reporting and fraud control in place to minimize
fraud in the programs and make sure that we have controls in
place.
Mr. LYNCH. Okay. Chairman Powell, any thoughts on that, or
would you rather take a pass?
Mr. POWELL. I will follow up, and also see if we have anything
on that for you. Of course, the PPP was administered by the SBA.
We did the liquidity facility.
Mr. LYNCH. Okay.
Mr. POWELL. On that part, I would be happy to check and get
back to you.
Mr. LYNCH. That would be great. And Madam Secretary, would
you again talk about what happens upon default and what that
means for the American people?
Secretary YELLEN. It is a catastrophe. We are likely to end up
with a financial crisis, surely a recession, and millions of individ-
uals who are counting on checks from the government, not receiv-
ing those in a timely fashion, and long-lasting consequences of
higher interest rates for everybody who borrows.
Mr. LYNCH. Thank you very much. I yield back, Madam Chair-
woman.
Chairwoman WATERS. Thank you. The gentleman from Wis-
consin, Mr. Steil, is recognized for 5 minutes.
Mr. STEIL. Thank you very much, Madam Chairwoman. Chair-
man Powell, Secretary Yellen, thank you for being with us here
today.
Out of the gate, Secretary Yellen, I would just like to note that
the proposal for bank account reporting, that you do not believe to
be an invasion of privacy, I would just like to be on the record that
I believe that this would be an invasion of privacy, and I remain
concerned with it.
I would like to jump over to debt-to-GDP. In a previous question,
you noted that crossing the threshold of 100 percent of debt-to-GDP
in the United States, now roughly 105 percent, was not fiscally ir-
responsible. Is that correct?
Secretary YELLEN. That is right.
Mr. STEIL. In a comment to Mr. Torres, he was examining—
Secretary YELLEN. I believe we are in a place where we can cer-
tainly bear the burden of the debt, now and in the future.
Mr. STEIL. And you believe that because we are currently in a
low inflationary environment with low interest rates. Is that accu-
rate?
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Secretary YELLEN. That is right. But I am assuming that interest
rates, as the economy recovers, will move up to a more normal level
in line with the forecasts of many professional forecasters.
Mr. STEIL. And in the event that the inflationary rate increased
beyond that current forecast by the experts that you are speaking
with, that would increase the burden on the debt. Would that then
become fiscally irresponsible to have a debt-to-GDP ratio over 100
percent?
Secretary YELLEN. It depends on what happens to real interest
rates in the economy. If they were to rise significantly that, of
course, poses a risk that we need to take into account.
Mr. STEIL. I think we should absolutely take it into account. I am
very concerned with the spending proposals from the Biden Admin-
istration and the impact that would have in the event that we
enter a more inflationary period where interest rates increase.
Secretary YELLEN. I want to make clear that the proposals from
the Biden Administration are neutral with respect to the debt path,
that the projections that we have shown display essentially a level
debt path over the next 10 years, and beyond 15 years, substan-
tially reduce the outstanding debt-to-GDP ratio.
Mr. STEIL. I remain very concerned about the debt path that the
Biden Administration is taking us on, and a whole array of spend-
ing proposals that we are seeing.
Let me shift gears slightly over to you, Chairman Powell, if I can,
and build on this topic as it relates to inflation. It is something I
have spoken with you many times about, in particular in this com-
mittee, in July and December of last year. And in those times, you
have suggested, and I think you have continued to state that the
Fed is not ready to take action to head off inflation. Yet, we are
continuing to see prices increase. We saw consumer prices increase
5.4 percent year over year, more recently, and regardless of what
the White House press team says, I think people are really seeing
the impact of higher prices day in and day out.
Now, I know that you have said you believe many of these to be
transitory, that you think they will come down. But here is my con-
cern, is that individual, the public expectations are beginning to
change as people truly see the price increases when they go to fill
up their car with gas, when they go to a grocery store, or when
they go back-to-school shopping. In a recent poll, we saw that 87
percent of Americans said they are concerned about inflation. A
New York Fed report reported that consumers expect to see higher
inflation over the medium term.
So, could you provide a little color as to how you think the Fed
is going to respond to consumers expecting to see inflation?
Mr. POWELL. Essentially, what would need to happen for infla-
tion to remain high, year upon year upon year, is we would have
to have a new inflation regime in which people began to enter their
psychology and they began to think that it was coming and expect
that it was coming.
Mr. STEIL. But with all due respect, don’t we see that evidence
in the Fed report which shows that people are expecting inflation?
Mr. POWELL. We don’t measure these things precisely, but we do
measure them a lot, and there are many, many different measures,
and broadly speaking, those measures are at levels that are con-
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sistent with our 2 percent inflation goal—not for the near term, but
for the medium and longer term.
But nonetheless, that is the right issue. We monitor that very
carefully, and to the extent we were to see expectations broadly
drifting up and the regime changing, we would certainly use our
tools to make sure that inflation is consistent with our goal.
Mr. STEIL. I appreciate you tracking this, because I believe as
Americans are looking at the runaway spending here in Wash-
ington, D.C., without a long-term plan to pay for it, that these ex-
pectations of inflation will continue to increase, and as the expecta-
tion plays out, as you noted, I think we will see real inflation in
the future having a significant impact on the debt burden that the
debt-to-GDP ratio holds.
Recognizing the time, I yield back. Thank you for being here.
Chairwoman WATERS. Thank you. The gentlewoman from North
Carolina, Ms. Adams, is now recognized for 5 minutes.
Ms. ADAMS. Thank you, Madam Chairwoman. Secretary Yellen,
Chairman Powell, thank you both for being here.
I would like to follow up on a question that Senator Brown posed
to both of you on, I think, Tuesday. He raised an excellent point
that no Black woman has ever served on the Fed’s Board of Gov-
ernors, and you both indicated that you want diverse viewpoints
represented at the highest levels of our economic policymaking bod-
ies.
And last year, we had our own Office of Minority and Women In-
clusion (OMWI) Directors testify before us about their efforts to di-
versify your entities. But I would like to hear directly from you
both, what are you doing in your respective organizations to en-
courage the appointment and hiring of Black and Brown women at
all levels of seniority, and have you considered recruiting on the
campuses of Historically Black Colleges and Universities (HBCUs)
and other Minority-Serving Institutions (MSIs)?
Secretary YELLEN. I can start off and say that we have a very
active program at all levels of the Treasury Department, including
political appointments at recruiting diverse workforce and leader-
ship, and I think if you look at the appointments that we have
made or proposed, that we have made good on that commitment
and continue to give it the highest priority.
With respect to the Federal Reserve, I and others will provide
advice on nominations to the President. It will be up to him to
nominate individuals to serve on the Fed Board, and we certainly
will ensure that he has a diverse slate of candidates to consider in
making these appointments.
Ms. ADAMS. Thank you. Mr. Powell?
Mr. POWELL. We work very hard to recruit diverse talent, diverse
people to the board, and we work very hard to keep and make sure
that the people that we do succeed in recruiting have good opportu-
nities, or are included in opportunities to learn, and have as many
opportunities as they can have so that they can have a career at
the Fed. It is a very high-profile focus for us.
Ms. ADAMS. Thank you. Secretary Yellen, it is always a pleasure
to have you before us. In case you don’t know, like you, I was a
professor for over 40 years, and I tell folks all the time that I might
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37
not be in the classroom anymore but I still enjoy educating here
in the Congress.
And so, if you don’t mind, I would appreciate it if you would take
us back to the classroom and help educate us a bit. Do you believe
economic recovery is strong enough to handle the withdrawal of
current pandemic relief efforts?
Secretary YELLEN. I think the relief efforts have been very im-
portant in stimulating a strong recovery. And I mentioned in my
opening remarks that the United States is outperforming most
other developed countries in the strength of our recovery, due to
those efforts the Congress has made.
And there will be fiscal drag next year, namely, we had a good
deal of impetus, your stimulus this year, and it will diminish sub-
stantially next year. Nevertheless, most forecasters in the Adminis-
tration believe that the recovery will continue and that private
spending will be sufficient to have us pass the baton to it and keep
the economy growing.
We are in the middle, as you know, of reconciliation, and the pro-
grams under consideration there are really spread out over 10
years, and provide some modest stimulus in each of those years,
but at a much lower level than the American Rescue Plan, or ori-
ented towards structural issues in the U.S. economy.
Ms. ADAMS. Thank you. We know our mission here is to ensure
that the economy continues to recover for all Americans. So if Con-
gress fails to raise our statutory debt limit by mid-October, what
would the effect be to the economy?
Secretary YELLEN. It would be devastating to the economy. We
will be unable to pay our bills for the first time in American his-
tory. It could provoke a financial crisis and a recession, and it will
harm every American.
Ms. ADAMS. Thank you. It is irresponsible, I believe, that my col-
leagues in both the House and the Senate would risk our recovery
from this pandemic for political points. So, I am glad to hear that
you agree, and I look forward to this body protecting all Americans
by doing the right thing and raising this debt ceiling.
Madam Chairwoman, I yield back.
Chairwoman WATERS. Thank you very much. The gentleman
from South Carolina, Mr. Timmons, is now recognized for 5 min-
utes.
Mr. TIMMONS. Thank you, Madam Chairwoman. And Secretary
Yellen, and Chair Powell, thank you for being here with us today.
Just yesterday, Speaker Pelosi gave oxygen to the idea that
President Biden has the ability to mint a trillion-dollar commemo-
rative coin made of platinum, deposit it in the Federal Reserve,
and then use that to pay our bills. A number of other members
have adamantly promoted this proposal to include Congressman
Nadler, and just Tuesday, my colleagues across the aisle tweeted
#mintthecoin.
Chair Powell, please tell me you think this idea is as ridiculous
as it sounds?
Mr. POWELL. Really, that is not a question for me.
Mr. TIMMONS. I had a feeling you would say that. I just wanted
to start there.
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38
Madam Secretary, please tell me that this is not a legitimate pol-
icy proposal and that this is not something that we are consid-
ering?
Secretary YELLEN. I believe that the only way to handle the debt
ceiling is for Congress to raise it and show the world, the financial
markets and the public, that we are a country that will pay our
bills when we incur them, and—
Mr. TIMMONS. I really appreciate that—
Secretary YELLEN. —a platinum coin—
Mr. TIMMONS. —more than you can possibly know. Thank you so
much. That cuts some of the next few things I was going to say
short. We are not going to mint a trillion-dollar coin. These are not
serious policy proposals.
Speaking of serious policy proposals, I want to talk about what
Congressman Kustoff and Congressman Hollingsworth touched on,
the idea of—well, I guess it has changed, because the Biden Ad-
ministration proposed that it was originally all transaction his-
tories of any account with more than $600 in or out of it. You testi-
fied not 15 minutes ago that it is now, in reconciliation, not being
considered. It is just the account balance? So, it changed?
Secretary YELLEN. I never said that the Administration ever pro-
posed collecting detailed transaction data from individuals. That is
never anything that the Biden Administration contemplated.
Mr. TIMMONS. You just said it has changed since the original pro-
posal to what is now being considered. How did it change?
Secretary YELLEN. A few additional pieces of information were
contemplated for businesses and—
Mr. TIMMONS. Those are no longer being contemplated. So, it is
getting better. It is moving in the right direction. Because I have
had a number of banks and credit unions reach out to me. It is re-
markable. Generally, they do not agree, but they are in agreement
that this is a terrible proposal.
I know that we are trying to figure out how to pay for $5 trillion
of spending, but this is not—just as, ‘‘mint the coin,’’ is not a seri-
ous policy proposal, this is not a serious policy proposal.
Secretary YELLEN. This is a very serious policy proposal. We
have a $7 trillion estimated tax gap that we have a great deal of
avoidance by individuals and businesses, typically very high-net-
worth, high-income individuals and businesses, that have opaque
sources of income, that are not paying the taxes that are due.
Mr. TIMMONS. Respectfully, what does that have to do with—
Secretary YELLEN. And compliance—
Mr. TIMMONS. —$600 accounts? That is every single account of,
what, is it 99 percent of Americans?
Secretary YELLEN. Well, listen. Banks already report interest
amounting to over $10 to the IRS on every account in the country,
and this proposal involves 2 additional pieces of information that
are not at the level of individual transactions. And this will help
low-income individuals who now are disproportionately subject to
audits by the IRS.
Mr. TIMMONS. We had a—
Secretary YELLEN. What this will do is let the IRS focus its com-
pliance efforts—
Mr. TIMMONS. Reclaiming my time, Madam Secretary.
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39
Secretary YELLEN. —on those individuals—
Mr. TIMMONS. We had a hearing—
Secretary YELLEN. —who are avoiding paying the taxes—
Mr. TIMMONS. Reclaiming my time.
Secretary YELLEN. —that are due.
Mr. TIMMONS. Madam Secretary, please. We had a hearing just
yesterday, in this very room, about the underbanked and the
unbanked, and one of the biggest concerns is about privacy. So, for
us to make it far more challenging for people to trust the very sys-
tem that we are hoping that people use—the banking system, the
backbone of our economy—we are moving in the wrong direction
here. And I appreciate that we have changed the expectation from
the original proposal to now what is being considered in reconcili-
ation, but the American people don’t want this. They don’t think
it is reasonable, and I will go ahead and—this is what is going to
happen. It is going to get pulled out because there is no support
from the American public, and it is just not going to happen.
With that, I yield back. Thank you.
Chairwoman WATERS. Thank you very much. I would like to
thank Secretary Yellen and Chair Powell for their testimony today.
The Chair notes that some Members may have additional ques-
tions for these witnesses, which they may wish to submit in writ-
ing. Without objection, the hearing record will remain open for 5
legislative days for Members to submit written questions to these
witnesses and to place their responses in the record. Also, without
objection, Members will have 5 legislative days to submit extra-
neous materials to the Chair for inclusion in the record.
This hearing is now adjourned, and I thank our witnesses so very
much for being here. We had a hard stop now, right at 12:15, so
we are on time. Thank you very much.
[Whereupon, at 12:15 p.m., the hearing was adjourned.]
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APPENDIX
September 30, 2021
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