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FORMER FEDERAL RESERVE CHAIRS
ON RESPONDING TO OUR NATION’S
ECONOMIC CRISIS
HEARING
BEFORE THE
SELECT SUBCOMMITTEE ON THE CORONAVIRUS
CRISIS
OF THE
COMMITTEE ON OVERSIGHT AND
REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
JULY 17, 2020
Serial No. 116–103
Printed for the use of the Committee on Oversight and Reform
(
Available on: govinfo.gov,
oversight.house.gov or
docs.house.gov
U.S. GOVERNMENT PUBLISHING OFFICE
41–894 PDF WASHINGTON : 2020
COMMITTEE ON OVERSIGHT AND REFORM
CAROLYN B. MALONEY, New York, Chairwoman
ELEANOR HOLMES NORTON, District of JAMES COMER, Kentucky, Ranking Minority
Columbia Member
WM. LACY CLAY, Missouri JIM JORDAN, Ohio
STEPHEN F. LYNCH, Massachusetts PAUL A. GOSAR, Arizona
JIM COOPER, Tennessee VIRGINIA FOXX, North Carolina
GERALD E. CONNOLLY, Virginia THOMAS MASSIE, Kentucky
RAJA KRISHNAMOORTHI, Illinois JODY B. HICE, Georgia
JAMIE RASKIN, Maryland GLENN GROTHMAN, Wisconsin
HARLEY ROUDA, California GARY PALMER, Alabama
RO KHANNA, California MICHAEL CLOUD, Texas
KWEISI MFUME, Maryland BOB GIBBS, Ohio
DEBBIE WASSERMAN SCHULTZ, Florida CLAY HIGGINS, Louisiana
JOHN P. SARBANES, Maryland RALPH NORMAN, South Carolina
PETER WELCH, Vermont CHIP ROY, Texas
JACKIE SPEIER, California CAROL D. MILLER, West Virginia
ROBIN L. KELLY, Illinois MARK E. GREEN, Tennessee
MARK DESAULNIER, California KELLY ARMSTRONG, North Dakota
BRENDA L. LAWRENCE, Michigan W. GREGORY STEUBE, Florida
STACEY E. PLASKETT, Virgin Islands FRED KELLER, Pennsylvania
JIMMY GOMEZ, California
ALEXANDRIA OCASIO-CORTEZ, New York
AYANNA PRESSLEY, Massachusetts
RASHIDA TLAIB, Michigan
KATIE PORTER, California
DAVID HICKTON, Select Subcommittee Staff Director
RUSS ANELLO, Chief Counsel
SENAM OKPATTAH, Clerk
CONTACT NUMBER: 202-225-5051
CHRISTOPHER HIXON, Minority Staff Director
SELECT SUBCOMMITTEE ON THE CORONAVIRUS CRISIS
JAMES E. CLYBURN, South Carolina, Chairman
MAXINE WATERS, California STEVE SCALISE, Louisiana, Ranking Minority
CAROLYN B. MALONEY, New York Member
NYDIA M. VELÁZQUEZ, New York JIM JORDAN, Ohio
BILL FOSTER, Illinois BLAINE LUETKEMEYER, Missouri
JAMIE RASKIN, Maryland JACKIE WALORSKI, Indiana
ANDY KIM, New Jersey MARK E. GREEN, Tennessee
(II)
C O N T E N T S
Page
Hearing held on July 17, 2020 ............................................................................... 1
WITNESSES
The Honorable Janet Yellen, Distinguished Fellow in Residence, The Brook-
ings Institution Former Chair, Board of Governors of the Federal Reserve
(2014-2018)
Oral Statement ........................................................................................................ 7
The Honorable Ben Bernanke, Distinguished Fellow in Residence, The Brook-
ings Institution, Former Chair, Board of Governors of the Federal Reserve
(2006-2014)
Oral Statement ........................................................................................................ 8
Written opening statements and the written statements of the witnesses are
available on the U.S. House of Representatives Document Repository at:
docs.house.gov.
INDEX OF DOCUMENTS
Documents entered into the record during this hearing and Questions for
the Record (QFR’s) are listed below/available at: docs.house.gov.
* National Academies Report on School Reopenings, article; submitted by
Rep. Scalise.
* American Academy of Pediatrics Guidance, article; submitted by Rep.
Scalise.
* Questions for the Record: to Dr. Yellen; submitted by Rep. Green.
* Questions for the Record: to Dr. Bernanke; submitted by Rep. Green.
(III)
FORMER FEDERAL RESERVE CHAIRS
ON RESPONDING TO OUR NATION’S
ECONOMIC CRISIS
Friday, July 17, 2020
HOUSE OF REPRESENTATIVES
SELECT SUBCOMMITTEE ON THE CORONAVIRUS CRISIS
COMMITTEE ON OVERSIGHT AND REFORM
Washington, D.C.
The subcommittee met, pursuant to notice, at 12:38 p.m., via
WebEx, Hon. James E. Clyburn (chairman of the subcommittee)
presiding.
Present: Representatives Clyburn, Waters, Maloney, Velázquez,
Foster, Raskin, Kim, Scalise, Jordan, Luetkemeyer, Walorski, and
Green.
Chairman CLYBURN. Good afternoon. The committee will come to
order.
Without objection, the chair is authorized to declare a recess of
the committee at any time. I now recognize myself for an opening
statement.
Today, the Select Subcommittee is pleased to welcome our distin-
guished panel, Dr. Ben Bernanke and Dr. Janet Yellen.
Dr. Bernanke was appointed chair of the Federal Reserve by
President George W. Bush in 2006 and oversaw the Federal Re-
serve’s response to the global financial crisis. Before his tenure as
Fed chair, Dr. Bernanke served as chair of President Bush’s Coun-
cil of Economic Advisors.
Dr. Yellen served as vice chair of the Federal Reserve until 2010
to 2014 before being appointed chair in 2014 by President Barack
Obama. Dr. Yellen also previously served in the White House as
chair of the Council of Economic Advisors.
This is the first time that either Dr. Bernanke or Dr. Yellen has
testified before Congress since stepping down from the Federal Re-
serve. These extraordinary times require Congress to seek out ad-
vice for experts with extraordinary experiences.
As Congress works to end this economic crisis and enable the
strong recovery, we are fortunate to benefit from their individual
insights and gain from their unique position as Federal Reserve
chairs than the last economic crisis and recovery. I want to thank
both of them for agreeing to testify today.
Six months into this crisis, the coronavirus pandemic continues
to spiral out of control. Today, over 3 million Americans have test-
ed positive for the virus, including a record-breaking 75,600 con-
(1)
2
firmed yesterday. And more than 140,000 Americans have died, far
more than any other country.
This administration has not only failed to fix the problem, it has
made things worse. The White House pushed states to reopen with-
out a plan to keep everyone safe. As a result, we have new
epicenters in Florida, Arizona, Texas, and here in my home state
of South Carolina. Florida’s per capita infection is now 20 percent
higher than New York’s was at the peak of the outbreak in April.
And now the administration is undermining its own public health
experts in the rush to reopen schools again without a plan.
Our Nation’s unemployment is at a historic high. According to re-
cent estimates, nearly 33 million Americans are collecting unem-
ployment benefits. Just last week, several Federal Reserve officials
expressed alarm that the country’s modest recovery is quote, ‘‘start-
ing to level off.’’
This economic crisis has been especially damaging to commu-
nities of color, who as our witness recently wrote or quoted, ‘‘bury-
ing a greater fear of COVID–19 deaths and also face higher rates
of unemployment than their White counterparts.’’
So, the question for today’s hearing is, what can we do about it?
First, we cannot address our economic woes until we first address
the urgent public health crisis. It is far past time for the White
House to take responsibility for others’ crisis and provide the
much-needed Federal leadership and a clear national strategy to
fight this pandemic.
Second, the Federal Reserve and Treasury must act quickly to
use the authority and funding Congress provided to help America’s
families. This is an unprecedented crisis that requires an unprece-
dented response. While the Fed has taken significant steps to show
up credit markets and protect big businesses, it has done less to
protect workers. In fact, the Fed’s primary mechanism to protect
jobs, the Main Street Lending Program, has struggled to get off the
ground.
The Fed should do more to ensure the Main Street Lending Pro-
gram is accessible for the small businesses who most need it and
deserve this assistance and to protect the workers this program
was designed to help.
Third, the White House must work with Congress to act boldly
and decisively to prevent an economic catastrophe. American fami-
lies and small businesses cannot wait any longer for relief. Con-
gress must pass another economic recovery package that includes
support for low-wage workers and the unemployed, new assistance
to states and localities, and programs that invest in public health.
On May 15, more than two months ago, the House passed the HE-
ROES Act to do exactly that. I urge my colleagues in the Senate
to end the delays and pass this vital legislation.
I would also like to address one final point. After we announced
this hearing, my Republican colleagues suggested we add a witness
who is not a Federal Reserve chair or a former Federal Reserve
chair. Now, I have accepted every other witness my Republican col-
leagues have proposed, and I think it has been five thus far. And
I look forward to hearing from this proposed witness at a future
date.
3
But, today, my goal is to hear from the unique insights from
Chair Bernanke and Chair Yellen on their efforts to help our Na-
tion recover from the 2008 financial crisis as leaders of the Fed.
For example, Dr. Bernanke has stated, and I quote, ‘‘The initial
2009 fiscal program was perhaps not adequately sized given the
size of the problem. We must not make that same mistake again.’’
Our witnesses today serve honorably under Presidents of both
parties. I am hopeful that all my colleagues will participate in this
hearing in a bipartisan manner and help us search for solutions to
benefit the American people.
The chair now recognizes the distinguished ranking member for
his opening statement.
Mr. SCALISE. I thank you, Mr. Chairman. And I want to thank
our witnesses for appearing before the subcommittee as well. They
both have distinguished careers and can offer some important in-
sights on the hearing about responding to our Nation’s economic
crisis, which is today’s topic.
But with due respect, Mr. Chairman, both of today’s witnesses
were selected by the majority. And I know you and I spoke about
this, but I requested as Rule 11 of the House of Representatives ac-
tually requires that the minority get to also have a witness, so that
the Select Committee can hear from a diversity of perspectives.
Whether people are from different parties, if they are both bring-
ing a similar perspective on an issue, that is not the intention of
the House rules, which is why I asked for a witness as well, and
somebody who is widely regarded as an expert on the economy.
He has testified before Congress dozens of times. In fact, he was
a former head of the Congressional Budget Office. He is the person
tasked to inform us, Congress, on understanding budget and eco-
nomic impacts of policy decisions.
So, Mr. Chairman, I know you denied that witness, we talked
about it, but because of that decision, we are also being denied the
diversity of opinion that we should be getting on today’s topic. We
should all request and seek that the House rules, as they require,
welcome that diversity of opinion, which is why both parties are al-
lowed to invite witnesses to provide us with pertinent testimony.
That was denied today to us at this hearing, unfortunately, and it
hinders our ability it get all of the facts.
But with that, Mr. Chairman, pursuant to Clause 2(j)1 of Rule
11, I am requesting that we get what we are allowed under the
rules on that, as a minority date of hearing under this subject.
The Rules require it. They were not followed in the request that
we made. It doesn’t allow the chair to select both a Republican and
Democrat. It allows the chair to select witnesses, but it also allows
the minority to be able to submit a witness. We did that. It was
denied.
So, in lieu of that, the rules require that we are able to have a
minority day of hearing. I just wanted to invoke that, Mr. Chair-
man. I know you and I can, our staffs can work through that. But
as a point of order, I did want to bring that up, Mr. Chairman.
Why don’t we now talk about the state of the economy——
Chairman CLYBURN. Gentleman, I want interrupt you for a mo-
ment.
4
Mr. SCALISE [continuing]. I will recognize you on that point of
order.
Chairman CLYBURN. Well, thank you very much. I understand
that you have submitted the letter. I have received the letter, and
I will take it under advisement. I will commit to you today that I
will consider your request in accordance with the House rules. In
fact, as I understand it, that one of the witnesses that you have
requested already appeared before this committee just last month.
With that, I would yield back and thank you, and I feel that you
and I will be able to deal with this in an amicable manner.
Mr. SCALISE. Thank you, Mr. Chairman. I am confident we will
be able to work through this as well.
Now, why don’t we talk about the economy. The unemployment
rate in February was 3.5 percent. That is the lowest in over 50
years. The unemployment rate for African Americans and His-
panics was the lowest in recorded history of this country. Hourly
wages were growing at the fastest pace we have seen in over a dec-
ade. America was experiencing the hottest economy we have ever
seen, and every segment of our country was reaping those benefits.
And then a global pandemic hit our shores. China lied and hid
the truth about it. The organization that the world looks to for
medical expertise and guidance in a pandemic, the World Health
Organization, was corruptly complicit in actually regurgitating Chi-
na’s lies. America got hit hard, and it got hit fast like the rest of
the world did in this global pandemic. The worst we have seen in
over 100 years.
Immediately, America came together to fight the invisible enemy
and to prevent our hospitals from being overwhelmed, and we did
so without knowing nearly as much as we do today by this unique
destructive virus. All we could really do was shut down and put the
largest most prosperous economy in human history on pause. The
pause was necessary, but it came at a staggering cost from lowest
unemployment in almost 50 years to now over 40 million jobs lost.
Income inequality was made worse. Forty percent of people mak-
ing less than $40,000 were laid off. Children lost irretrievable
months of in-school learning. Vaccinations plummeted. Progress on
the opioid crisis that we made working together was reversed.
What America must now decide is whether those losses are going
to be short-term costs, or will they be long term irrevocable dam-
age?
I proudly supported the CARES Act. In fact, virtually all Mem-
bers of Congress did. And there are some important structural
building blocks for recovery in that legislation. We already know
about PPP, and we have had hearings on the tremendous success
that did in saving millions of jobs. But we put billions of dollars
in place for PPE to protect our frontline healthcare workers. We
put billions in place for testing for the development of therapies
and ultimately a vaccine.
But let’s be honest about the relief portion of the CARES Act,
what we did was float the U.S. economy with borrowed money to
temporarily compensate for shutting it down. The question before
us today is knowing now what we know about the unintended cost
of the shutdown, should we continue to extend it, or instead focus
5
on the building blocks of long-term sustainable and equitable recov-
ery.
A few key principals in shared goals should guide us in this di-
rection. Federal policy should reward and support America’s work-
ers. Educating our children safely in the classroom is a paramount
responsibility. It is not just a goal, it is something we have to
achieve.
Federal policy should accelerate innovation and research and
manufacturing here in the United States. And only a healthy and
growing economy can support long-term sustainable and equitable
prosperity.
With that, all Americans are concerned about the continued
spread of the virus, and all Americans have a role and a responsi-
bility in helping to slow the spread, as we are all wearing masks
when we are out in public.
But let’s also acknowledge some key developments. The death
rate continues to fall because we are doing better protecting our
most vulnerable population and improving the treatment of COVID
patients. President Trump’s Operation Warp Speed is showing
great promise, including this week’s remarkable announcement of
promising results from vaccine trials. Testing capacity and PPE
production continue to ramp up. Red tape is being cut, and this
progress can give hope to all of us who want to end this pandemic.
America must continue to forge ahead with this can-do attitude
and find practical solutions to the challenges that must be solved,
beginning with safely reopening our schools.
Earlier this week, Vice President Pence brought his task force
down to Louisiana—and I had the honor of spending the day with
him, along with our governor who happens to be a Democrat—talk-
ing with school officials, public health experts, and even Coach
Orgeron about the importance of getting kids back to school and
how to do it safely.
Dr. Birx, by the way, who is the White House coordinator,
coronavirus response coordinator and a respected medical official
was there and talking about how you can safely reopen. Our atti-
tude has to be, how to do it, not whether you can do it, clearly, it
can be done.
Children need to get back to school and continue their education.
For many children, the time lost will never be made up. Children’s
health will improve and schools reopen. Vaccinations will increase.
Child nutrition for our most vulnerable will improve.
The American Academy of Pediatrics, Mr. Chairman, issued an
important report, which among other things, quote, ‘‘strongly advo-
cates that all policy consideration for the coming school year should
start with a goal of having students physically present.’’ The report
goes on to say, quote, ‘‘the importance of in-person learning is well-
documented, and there is already evidence of the negative impacts
on children because of school closures in the spring.’’
I would hope that we would be focused on the damage to stu-
dents of not reopening as we put our efforts behind how to safely
reopen.
Mr. Chairman, I would like to ask unanimous consent that this
report by the American Academy of Pediatrics be entered into the
record.
6
If there is any objection, but I did want to make that request——
Chairman CLYBURN. The gentleman has a right to object, though,
I do not intend to object.
Mr. SCALISE. We will provide you with this report by the Acad-
emy of Pediatrics.
Chairman CLYBURN. OK.
Mr. SCALISE. And I would ask that it be included if there is no
objection.
Chairman CLYBURN. Without objection.
Mr. SCALISE. To conclude, Mr. Chairman, thank you.
School reopening also helps the economy because parents can
more readily get back to work. We should resolve that no business
in America ever again has to compete with a Federal policy that
makes unemployment relief pay better than actually going back to
work.
Small business after small business has told me their biggest ob-
stacle of reopening right now is getting their workers to come back
because the temporary bonus unemployment check in many cases
pays more than the actual salary. This policy needs to stop.
While some in Washington want to continue the shutdown with
the Federal Government continue floating the economy and have
the Federal Reserve just keep printing more money, that is not a
path to prosperity. We have faced big challenges throughout Amer-
ica’s history.
America put a man on a Moon. For goodness sake, we can surely
reopen our schools and safely rebuild our economy. Let’s rise to this
challenge.
I yield back the balance of my time, Mr. Chairman.
Chairman CLYBURN. I thank the ranking member for his opening
statement.
Now, I would like to introduce our witnesses. The Honorable Ben
Bernanke is a distinguished fellow in residence at the Brookings
Institution and served as chair of the Board of Governors of Fed-
eral Reserve from 2006 to 2014.
The Honorable Janet Yellen is also a distinguished fellow in resi-
dence at the Brookings Institution and served as chair of the Board
of Governors of the Federal Reserve from 2014 to 2018.
The witnesses will be unmuted so we can swear them in.
Please raise your right hands.
Do you swear or affirm that the testimony you are about to give
is the truth, the whole truth, and nothing but the truth, so help
you God?
Ms. YELLEN. I do.
Mr. BERNANKE. I do.
Chairman CLYBURN. Let the record show that the witnesses an-
swered in the affirmative.
Thank you. Without objection, your joint written statements will
be made part of the record. With that, Chair Bernanke, you are
now recognized to provide your testimony.
Mr. BERNANKE. Mr. Chairman, could I defer to Dr. Yellen to go
first?
Chairman CLYBURN. Yes.
Mr. BERNANKE. We coordinated our comments.
7
Chairman CLYBURN. Very well. The chair now recognizes Dr.
Yellen.
STATEMENT OF THE HONORABLE JANET YELLEN, DISTIN-
GUISHED FELLOW IN RESIDENCE, THE BROOKINGS INSTI-
TUTION; FORMER CHAIR, BOARD OF GOVERNORS OF THE
FEDERAL RESERVE
Ms. YELLEN. Thank you. Chairman Clyburn, Ranking Member
Scalise, and members of the committee, I appreciate the oppor-
tunity to testify before you today. My remarks will focus on the eco-
nomic impact of the coronavirus and the contribution that fiscal
policy can make in addressing it. Former Chair Bernanke will then
discuss the Federal Reserve’s response.
In many respects, this recession is unique. Although, like all re-
cessions, it is imposing heavy costs. Most downturns result from
developments inside the economy. This recession was triggered by
a public health crisis. The unusual source of the recession is re-
flected in the extraordinarily rapid decline in economic activity ear-
lier this year, and the sharp, but incomplete rebound of recent
months following the first steps toward reopening.
The heaviest blows are falling on lower-paid workers as well as
women and minorities who are overrepresented in the most af-
fected service sectors. They have born a disproportionate share of
the losses of jobs and income.
By far, the most important factor determining the economy’s
path will beat the course of the pandemic itself. To support recov-
ery, and more importantly to save possibly tens of thousands of
lives, controlling the spread of the virus and mitigating its effects
should be the first priority for Members of Congress, local leaders,
and other policymakers. This requires support for testing and con-
tact tracing, medical research, and sufficient hospital capacity. It
also requires working to ensure that businesses, schools, and public
transportation have what they need to reopen safely.
If the pandemic comes under better control, economic recovery
should follow. However, the pace of the recovery could be slow and
uneven. In the face of ongoing uncertainty, households and busi-
nesses may remain cautious for a time, increasing precautionary
saving and reducing spending, hiring, and capital investment. The
longer the recession lasts, the greater the damage it will inflict on
households and business balance sheets. And the depth of the re-
cession may leave scars on the economy, such as the deterioration
of unemployed workers’ skills or the closure of many businesses.
An important goal with fiscal and monetary policies should be to
speed the recovery and minimize the recession’s lasting effects.
The fiscal response to the coronavirus has thus far been quite ef-
fective in our view. Enhanced unemployment insurance and the
Paycheck Protection Program have helped unemployed workers
and their families, together with many businesses, survive the
spring shutdowns. However, a number of programs authorized by
the Congress are coming to an end, and new actions are necessary.
Our recommendations for further fiscal action are as follows:
First, nothing is more important for restoring economic growth
than improving public health. Investments in this area are likely
to pay off many times over.
8
Second, with unemployment still at record levels, enhanced un-
employment insurance should be extended, and complimentary pro-
grams like food stamps adequately funded. Rather than making a
one-time appropriation, we think the Congress would be well-
served by tying supplemental unemployment insurance and other
support programs to the national or state unemployment rate,
thereby creating an automatic stabilizer.
Third, Congress should provide substantial support to state and
local governments. The enormous loss of revenue from the reces-
sion, together with the new responsibilities imposed by the re-
sponse to the pandemic, has put their budgets deeply in the red.
To avoid the recessionary effects of major fiscal cuts by those gov-
ernments, Federal support should be substantial, and conditions on
the aid should not be overly restrictive.
Following our advice would further increase the already record-
level Federal budget deficit. With interest rates extremely low and
likely to remain so for some time, we do not believe the concerns
about the deficit and debt should prevent the Congress from re-
sponding robustly to this emergency.
The top priorities at this time should be protecting our citizens
from the pandemic and pursuing a stronger and equitable economic
recovery. Thanks.
Chairman CLYBURN. Thank you very much, Dr. Yellen. We will
now hear from Dr. Bernanke.
STATEMENT OF THE HONORABLE BEN BERNANKE, DISTIN-
GUISHED FELLOW IN RESIDENCE, THE BROOKINGS INSTI-
TUTION; FORMER CHAIR, BOARD OF GOVERNORS OF THE
FEDERAL RESERVE
Mr. BERNANKE. Thank you, Chairman Clyburn, Ranking Member
Scalise, and members of the committee, thank you for the oppor-
tunity to testify before you today.
In my oral remarks, I will briefly summarize the Federal Re-
serve’s response to the coronavirus crisis. The Federal Reserve has
moved swiftly and forcefully in this crisis. It eased monetary policy
in March by lowering the Federal funds rate nearly to zero and in-
dicating that it plans to keep rates low for several years. And the
Fed may well do more in coming months as reopening proceeds and
as the outlook for inflation, jobs, and growth become somewhat
clearer.
In particular, to maintain downward pressure on longer-term in-
terest rates, the Federal Open Market Committee likely will pro-
vide forward guidance about the economic conditions it would need
to see before it considers raising its target rate, as well as clari-
fying its plans for further securities purchases for quantitative eas-
ing.
The Fed has also been active beyond monetary policy. First, the
Fed has served as a market-maker of last resort by acting to sta-
bilize critical financial markets when capital or other regulatory
constraints have interfered with normal market making in arbi-
trage. In March, uncertainty about the pandemic led hedge funds
and others to scramble to raise cash by selling longer-term securi-
ties. The upsurge of the supply of longer-term securities, including
9
Treasuries, was more than dealers and other market-makers could
handle resulting in substantial volatility.
To stabilize these key markets, the Fed purchased large quan-
tities of Treasuries and mortgage-backed securities. Risks and li-
quidity premiums in these key markets have since returned closer
to normal.
Second, the Fed has served as lender of last resort to the finan-
cial system, the classic function of central banks. Fortunately, the
financial system is in much better shape today than it was during
the financial crisis. The Fed, nevertheless, has taken steps to en-
sure that the financial system, including banks, broker dealers, and
money market funds has sufficient liquidity to operate normally
and to keep extending credit.
Third, the Federal Reserve with the support of Congress and the
Treasury has also served during the current crisis as a lender of
last resort to the nonfinancial sector, backstopping key credit mar-
kets disrupted by the pandemic. Using emergency authorities, the
Fed revived the financial crisis-era facilities to stabilize commercial
paper and asset-backed securities markets. The Fed has also added
new facilities to lend to corporations and state and local govern-
ments, and to buy outstanding corporate bonds.
By establishing these programs, the Fed has given private inves-
tors the confidence to reengage by reassuring them that the gov-
ernment would not allow these critical markets to become dysfunc-
tional.
The Fed also established the Main Street Lending Program to
lend through banks to medium-sized companies. It is too soon, how-
ever, to judge its performance. This program is very different from
anything the Fed has attempted before and poses difficult technical
challenges. Questions remain about how many banks and bor-
rowers will participate. The Fed and Treasury may have to further
ease terms for borrowers and increase incentives for banks for this
program to have the desired effect.
Is there more the Fed could do? As I noted, the Fed likely will
provide more clarity about its monetary policy plans, and it may
need to adjust the terms or borrower eligibility requirements of its
various lending facilities.
Broadly speaking, though, the Fed’s response has been quite
comprehensive. As Chair Powell often notes, the Fed’s authorities
allow it to lend but not to spend. Some households and firms will
need subsidies or grants rather than loans to survive this chal-
lenging period. Spending is, of course, the province of Congress.
Thank you, Mr. Chairman.
Chairman CLYBURN. Thank you very much, Dr. Bernanke. And
thanks to you, again, Dr. Yellen.
We have now come to where each member gets five minutes to
ask questions. So, I am going to begin by yielding myself five min-
utes.
And I would like to begin by asking Dr. Bernanke about the op-
ed piece that he wrote this week. And I am going to quote from
that op-ed piece. It said, a new package is needed in order to sta-
bilize aggregate demand and restore full benefit or full employ-
ment.
10
Now. I would like to ask you, Dr. Bernanke, what do you think
will happen to the economy other the next few months if Congress
fails to pass a new stimulus bill?
Mr. BERNANKE. Well I will focus on the state and local govern-
ment part of this. They are both the first-line providers of critical
financial services, health, education and the like, and are also big
employers. And one thing we learned in the—after the financial cri-
sis was that because of balanced budget requirements at the state
and local level, as states and localities saw big declines in their
revenues, they also had to do serious cuts in their employment and
capital investment leading to a slower economic recovery.
Some recent estimates suggest that the contraction at the state
and local level slowed growth in the U.S. economy after the crisis
by about half a percentage point a year, which is significant.
Now this crisis has had similar effects. On the one hand, state
and localities have had greater expenses to deal with the health
crisis to help companies reopen safely. On the other hand, they see
big revenue hits. One estimate is that the revenue hit for states
alone since February is over $500 billion.
If no action is taken to help the states and localities, you know,
avoid massive contraction, then it will have a negative effect both
on recovery but also on critical services that they provide to their
citizens.
Chairman CLYBURN. Dr. Yellen, Dr. Bernanke has given us some
insight as to what will happen if we do not assist state and local
governments. I wanted to ask you what would happen if we do not
extend support to public health agencies to food stamps and other
public assistance programs? And unemployment insurance, what
will happen if we fail to move in those areas?
Ms. YELLEN. Well, we have tried—we have both emphasized that
money spent on public health yields a very high return. It means
that the economy can get back on its feet more rapidly. We can re-
open and put people back to work, and, of course, we also save lives
in the process.
With respect to unemployment insurance, I am tremendously
concerned that the extended benefits are now scheduled to end on
July 31. I think, frankly, it would be a catastrophe not to extend
unemployment insurance. It has done a great deal to support the
incomes of a large number of individuals, disproportionately low-
wage workers, and minorities 40 percent of whom have lost their
jobs.
It has provided a good deal of support to them. And to the econ-
omy more broadly because we need the spending that those unem-
ployed workers can do. Without it, we would simply see more weak-
ness—as their spending contracts, we would see more weakness
throughout the entire economy.
And those workers, especially the lower-income workers who are
benefiting from the $600, they have a very high propensity to
spend the money that they are given. We have seen higher-income
workers do more saving, but the lower-income workers who are re-
ceiving those unemployment benefits are spending it which benefits
jobs throughout the economy.
There is the issue of work incentives. And if we had a stronger
economy and the unemployment rate were lower and we were clos-
11
er to full employment, I would worry about the disincentives that
having more than 100 percent replacement ratio would involve.
But at this point, I really—there is such a shortage of jobs that
I really don’t think this is. And I think there is evidence in recent
suggesting this is not really stopping the economy from creating
jobs and putting people back to work.
We do suggest that unemployment benefits could be based on the
individual’s pre-unemployment wages with a replacement rate that
would not receive 100 percent. But I don’t know at this point if
states all have the technical ability to put that into effect.
Chairman CLYBURN. Well, thank you very much for that. I see
that I am out of time. I do have one other question, but I’ll let the
ranking member go now, and maybe he will loan me some time
later.
I yield to the ranking member.
Mr. SCALISE. OK. Is that working, Mr. Chairman?
Chairman CLYBURN. Yes, I hear you now.
Mr. SCALISE. OK, thank you. We will let you get that last ques-
tion in.
But I do want to point out that when you look at what we need
to do to get our economy back open, this isn’t a question of rein-
venting the wheel. Clearly, we’re dealing with serious challenges
that we’re all working through. But let’s look to what did work to
get us to that hottest economy in the world before this.
That was a robust tax policy. It was making our country competi-
tive again. It was putting more money in the pockets of families.
Letting families have more control over their own destiny, over
their own money that they worked hard to earn. And that was done
by the Tax Cuts and Jobs Act. We saw unparalleled growth in our
country’s economy, we saw the ability to bring jobs back, and we
can do that again once we get through this.
That’s why it’s so encouraging to see what President Trump is
doing on Operation Warp Speed. It doesn’t get enough credit or at-
tention, but we’re seeing the full focus of the Federal Government.
Agencies like the FDA removing red tape so that they can focus ev-
erything on finding vaccines, therapies and, ultimately, a cure for
COVID–19.
And we saw already the remarkable progress this week. We hear
from drug companies who are in Phase 3 of testing on very effec-
tive vaccines. That’s where our focus should be for long term to get
through this. And, hopefully, that happens soon. And I appreciate
that President Trump and Vice President Pence are focusing so
much time on that.
But then as we look to the health of our country, we also need
to look at opportunities we’re going to have coming out of this. As
we push to get people back to work, how we can create more incen-
tives to strengthen this economy in America and address what we
saw that China did.
We know that China hoarded PPE. As we all complained about
the shortages of PPE at the very beginning of this, it’s because the
bulk of it is made in China, and they were hoarding the PPE while
they were lying to us about this. That’s why we ought to have a
hearing on holding China accountable to see what they did to shut
off the supply of that vital protective equipment for our frontline
12
hospital workers. When we were in the midst of trying to find out
what was really happening, they hoarded it, and we didn’t have
that ability to get it.
We’re now starting to make that here in America. We ought to
have incentives to create more jobs by bringing that back—it’s a
national security item—bring that back into America, create those
jobs here in America. If you look at things like the drugs that were
made in China, we can make that here in America. That would be
something we ought to look at incentivizing.
I hear from small businesses every day who talk about the prob-
lems, the problems created by paying people. In many cases, over
75 percent of workers in America, they have studied, are making
more money on the enhanced benefits than in their normal job.
And it’s a true impediment. It’s a true impediment when you talk
to small businesses across this country, like getting them back to
work.
I do want to ask Dr. Yellen, because you talked about a substan-
tial amount of money to bail out states. Do you have a rough idea
of how much money you are talking about? We have already passed
$150 billion to help the states get through this. Are you talking
about a $500 billion number, $1 trillion number, can you quantify
what you mean when you are talking about this package that
would bail out Sates?
Ms. YELLEN. So, as Chair Bernanke mentioned in his response
to the chair’s question, there is a study by the Center on Budget
and Policy Priorities that suggest that, I believe, it’s through 2022
that the shortfall for Sates alone is put at about $550 billion. And
there’s perhaps not quite as large but also tremendous shortfalls at
the local level. So, I think we aren’t talking about very substantial
cutbacks.
And Chair Bernanke and I are both happy to be serving on state
reopening committees.
Mr. SCALISE. And, if I may, I appreciate that, and I apologize, I
know we’re on limited time. You know, you talk about $550 billion
as a starting point, not even time for local governments. I think we
all are talking about this, but we need to recognize there were
many states that—not many, but there were a few states that had
massive budget shortfalls, multibillion-dollar budget shortfalls
prior to COVID–19.
So, the idea that the Federal taxpayer, which is already
stretched, should bail out those states that had failed policies, you
can look at the tax policies I talked about earlier, many of those
states had budget shortfalls because they were taxing their people
too high and because they were running the good jobs out of their
states.
That’s what they should be focused on, focused on fixing the
problems they had prior to COVID–19 that were causing their
economies to collapse and businesses to flee and good jobs to flee.
Fix that now while we’re in the middle of rebuilding things. That’s
where the focus ought to be so that they can come back stronger,
they can come back in a more healthy position, not just continue
and ask the Federal taxpayer to bail out their state problems.
That’s where the focus ought to be.
13
I do want to ask Dr. Bernanke, you know, I cited the American
Academy of Pediatrics Study that talks about the importance of
bringing kids back to school for many reasons, health reasons, get-
ting nutrition, but also to be able to be learning at the right pace.
Do you agree with the Academy of Pediatrics talking about the
importance to children of getting back in school, not just learning
at home?
Chairman CLYBURN. I’m going to assist the ranking member,
your time has expired. But I am going to let Dr. Bernanke answer
this question, because I am sure you are going to allow me to——
Mr. SCALISE. I will allow you to finish.
Mr. BERNANKE. Thank you. I will be brief.
Chairman CLYBURN. Thank you.
Mr. BERNANKE. My wife is a teacher, I do understand the value
of children of in-person instruction, plus the support that they get.
I understand the importance of working parents. But there is a
concern here, of course, about the health risks. And I think that
local districts are going to have to make tough decisions based on
their local conditions, you know, and based on their evaluation of
the public health situation.
I am not a doctor. I can’t make that judgment. But local districts
are going to have to use the advice they get from professionals to
make those choices.
Mr. SCALISE. And Dr. Birx Tuesday talked about some of those
steps you can take to do it safely as the Academy of Pediatrics did
too. No tradeoff between safety, but the importance of getting kids
back in school in a safe way can be done. We have to do it.
With that, Mr. Chairman, I yield back. Thank you.
Chairman CLYBURN. Thank you very much, Mr. Ranking Mem-
ber, before going to Chair Waters, I would like to present a ques-
tion because of what you raised, Mr. Ranking Member, is some-
thing I think we ought to take a look at.
We have heard from several of my colleagues recently that the
next package ought to be capped at $1 trillion. The CARES pack-
age itself is far in excess of that. The HEROES Act is around $3
trillion, of which nearly $1 trillion is devoted to state and local gov-
ernments.
I would like to suggest, what do you think about capping the
next package at $1 trillion? Should that be? And if so, why or why
not?
Dr. YELLEN.
Ms. YELLEN. I would be concerned about capping it when we
know that the needs of the state and local governments come, alone
come close to that, and a substantial amount will also be needed
for unemployment insurance and for public health needs.
So, I don’t know what the right number is. We need support,
also, that comes from all of that spending for economic activities
so that unemployment doesn’t rise. So, per aggregate demand and
total spending in the economy, at this point, we do need fiscal sup-
port as well.
So, I would be concerned with the cap at the magnitude you
mentioned,
Chairman CLYBURN. Dr. Bernanke, what’s your attitude about
that?
14
Mr. BERNANKE. Well, I think that what—the reason for a cap
would be the concern about the deficit, which I understand. But
right now, as we talk about in our testimony, real interest rates
are negative, the interest burden is very low, there’s a big appetite
for debt. It’s an opportunity to take advantage of our ability to bor-
row, to do something to help our economy recover. In the longer
term, we’re going to have to worry about sustainability. But right
now, I think the priority ought to be doing what needs to be done.
As Mario Draghi once said, whatever it takes, is probably what
we need to be thinking now.
I can’t hear you, Mr. Chairman.
Chairman CLYBURN. I yield to Chair Waters for five minutes of
questions.
Ms. WATERS. Thank you very much, Mr. Chairman. For this
hearing. This is very important, and I am so pleased that you
brought the past chairs of the Fed to talk with us today. Because
not only are they responsible for our monetary policy, they have
shown us how effective they can be with being the lender of last
resort.
So, both of our past chairs have wonderful reputations and back-
grounds for the way that they have managed the Fed when they
were in charge, and I appreciate their observations, their advice to
all of us as we fight through this pandemic that’s confronting us
all.
The first thing I would like to have past Chair Yellen explain
why Powell said that with the interest rates being low that we
should be very generous in the way that we deal with this pan-
demic and the resources that we allocate to it? If there was ever
a time to put, you know, substantial support into this economy,
now is the time. What is it about the interest rates that everybody
should understand that made Powell say that?
Ms. YELLEN. Well, when interest rates are low, the cost to the
Federal Government in terms of interest burden on the debt is ex-
tremely low. And I can give you as an example, because interest
rates were low even before the pandemic hit, and now they’ve gone
lower.
But between 2007 and just before the pandemic, the ratio of Fed-
eral debt to GDP had doubled from 40 to 80 percent. And yet the
interest burden of that debt because interest rates fell during that
period and stayed low, it was no additional cost relative to the size
of the economy, and that’s true and will only be more true now.
So, I agree with Chair Bernanke that one day in the future, we
will have to get deficits after this is over and the economy is recov-
ered, we’ll have to deal with deficits and get them under control.
But now is a time when I think it’s not necessary to worry about
it.
And I guess the final thing I’d add is that in an economy with
unemployed resources, we don’t have to worry about the spending
diverting activity away from other things.
Ms. WATERS. Thank you so very much. We have heard the con-
nection between what the experts, the health experts are advising
us and how that helps to improve the economy if, in fact, we wear
masks, if we are social distancing, if we have the PPE that we
need, all of that.
15
So, we have been advised that a surge certainly has taken place
and we can see the results of that. And every time that happens,
it sets us back somewhat from being able to deal with the economy.
Is that correct?
Ms. YELLEN. Regardless of what the rules are, we have seen that
people are afraid to engage in activities that risk their health and
pull back from it. And the worst the outbreak gets, the more true
that is. So, whatever helps public health enables us to get people
back to work.
Ms. WATERS. So, because of that, we need leadership. And now
that we are talking about the schools, I believe that we made a
mistake with some of our governors in some of our states opening
up certain businesses too soon. We’re seeing the results of that.
So, I don’t know where all of this confidence is coming from
about opening up these schools, get these children back in. I think
Mr. Bernanke is correct when he said the localities in our school
districts have to be careful, they have to make sure that they can
provide the safety, otherwise, we will continue to have surges, and
children will get sick, some may even die. And this does not help
the economy, does it?
Ms. YELLEN. No, it doesn’t. We do have to be careful. I mean, the
American Academy of Pediatrics Report and the National Academy
Report point that out. And it’s also expensive for the schools to
make the modifications they need to be able to open safely.
And I think Congress needs to think about funding the expenses
that are involved. Of course, it’s an important goal to reopen the
schools. And I can’t imagine who would disagree with the priority
that should be attached to that.
Ms. WATERS. The last second or so I have here, minority commu-
nities, Black communities, Latinx communities are suffering. We
suffered from a lack of testing. We suffered from our hospitals not
having all of the PPE. We suffered for, you know, not even being
eligible for unemployment. We suffered because we still need food
stamps, et cetera.
I heard something about perhaps looking at grants and better
workers to infuse, you know, capital and resources into minority
communities.
What are you suggesting we do for minority communities that
would help us be able to deal with this pandemic and not cause us
to die from it—or some have indicated we are dying and getting
sick.
Ms. YELLEN. Well, with respect to access to capital, it seems to
me that businesses and minority communities really face tremen-
dous barriers. And I believe it’s important for Congress to do spe-
cial things in order to provide funds for these on particularly busi-
nesses and minority areas.
Ms. WATERS. Do you think grants would be helpful instead of
looking for ways by which to keep your business open and then
take back the money? Could we use some grants?
Ms. YELLEN. I think grants are important for many businesses.
Many businesses really didn’t benefit in low-income areas from
PPP. They don’t have strong relationships with banks, but they do
with CDFIs.
16
And I would say, I don’t know if it’s really feasible, but I would
love to see the Fed and Treasury explore a 13(3), maybe something
within the mainstream facility through CDFIs that would be ori-
ented toward these low-and moderate-income neighborhoods and
businesses.
Ms. WATERS. Now, I want to talk about
[inaudible] for yield Mr. Bernanke and Congress to sign up with
all of these other economies the—that was so unusual to see so
many of you to sign on to something that was urging us to, you
know, to be very, very generous with this stimulus,
[inaudible] to have $3 trillion stimulus
[inaudible]. Why did you all sign that document?
Chairman CLYBURN. The gentlelady’s time has expired.
Ms. WATERS. Can the gentlelady respond to that, Mr. Chairman?
Chairman CLYBURN. OK.
Ms. YELLEN. We urge that because we feel it’s important both for
equity and for the recovery of the economy.
Ms. WATERS. Thank you Mr. Chairman.
Chairman CLYBURN. Thank you, Dr. Yellen. The chair now yields
five minutes to Congressman Jordan.
Mr. JORDAN. Thank you, Mr. Chairman.
Dr. Bernanke, what’s more important, reopening schools or pro-
testing?
Mr. BERNANKE. Opening schools safely is very important, and
people protest for the causes they feel are important as part of the
American way, as you know.
Mr. JORDAN. Well, I agree with that, but I wish you would tell
Democrat leaders that because they obviously think protesting is
more important than opening our schools.
You hear Democrats at the Federal level, you hear Democrat
mayors, Democrat governors all talking about how they can’t re-
open schools, while Mayor de Blasio can go out and stand with a
bunch of protestors and paint on Fifth Avenue in front of Trump
Towers, Mayor Garcetti can go out and kneel down to protestors
without a mask, bow down to the mob without a mask, and that’s
fine, but, oh, he can’t open schools.
Do you know how many school districts there are in the country,
Dr. Bernanke?
Mr. BERNANKE. No, sir.
Mr. JORDAN. Thirteen thousand school districts, 56 million kids
that deserve to get back in school—as you said earlier, your wife’s
a teacher; my wife’s a teacher—get back in school and get their
education. But Democrats seem to say: No, no, no, they can’t do
that.
In fact, Democrats think there is lots of things they think are—
that protesting is more important. Democrats think protesting is
more important than going to church. Democrats think protesting
is more important than going to school, more important than going
to a loved one’s funeral, more important than going to work, we
have seen from so many Democrats.
And I think what’s interesting is we have now seen, in Portland,
over the last six weeks, some of the—I mean, we’ve seen the city
burn for the last six weeks, and I have yet to see any condemnation
come from Democrat leaders.
17
Six weeks of this happening. The protests, over the last several
weeks, 12 police officers shot, 130 injured, 60 Secret Service people
injured just in the District of Columbia.
What’s more important, Dr. Bernanke? What’s more important to
economic growth: Reopening schools, or protesting?
Mr. BERNANKE. Well, I have not been involved in any of the com-
mentaries that you’re referring to. I think——
Mr. JORDAN. I understand.
Mr. BERNANKE [continuing]. Opening schools——
Mr. JORDAN. I’m asking what’s more important to economic
growth? You’re an expert in economic growth——
Mr. BERNANKE. Economic growth, opening schools is more impor-
tant. Protesting is important for democracy and people who have
different views about what they think needs to be protested about.
Mr. JORDAN. Do you know what the Brookings Institute—Institu-
tion, a place you know something about—do you know what they
estimated just when schools are just down for a few months—do
you know what they estimated the cost to the economy would be?
Mr. BERNANKE. I’m sure it’s very large because of the effects on
working parents.
Mr. JORDAN. Exactly, $2.5 trillion, $2.5 trillion, just the cost of
the protests, the damage, the rioting, the looting, the destruction
of property, just in one city, Minneapolis, $500 million.
And, as we know, this is happening in cities all across the coun-
try, and, yet, somehow protest is allowed to continue. That’s fine.
And I’m all for protests. I want everybody, under the First Amend-
ment, to be recognized and be allowed. That’s the hallmark of our
country. But somehow Democrats say, no, no, no.
In fact, Governor Newsom just closed down churches again in
California, but says nothing about the protests that continue to
take place. So, this is what I find troubling.
And now this push not to let kids go back to school. You’re famil-
iar with the fact that the American Academy of Pediatricians has
said that kids should be back in school, that we should reopen
schools.
Mr. BERNANKE. I believe, if I saw that study right, that there
are—you know, it has to be done safely.
Mr. JORDAN. Of course. That they have——
Mr. BERNANKE. Yes.
Mr. JORDAN. Of course safely, but that’s not what we hear from
Democrats. We just hear we can’t open schools. We’re all for doing
it safely.
Do you know how many kids under 17 have died of coronavirus
in the state of California, Dr. Bernanke?
Mr. BERNANKE. Probably very few. Congressman, I have no ex-
pertise on this. I’m not pretending to give you any kind of advice
on whether to open schools or not. That’s not my area of knowl-
edge.
Mr. JORDAN. Well, I’m just saying the place you work, the Brook-
ings Institution, did a study a few years ago that said what a cost
is to our economy, $2.5 trillion, and why we hear from so many
Democrats that we can’t do it—I think we can. I think we can do
it safely. I think it needs to happen. That’s all we’re saying. How
18
about this: What’s more important: Opening schools, or defunding
the police?
Mr. BERNANKE. I think it’s—you know, we can’t defund the po-
lice. We need police, but there are concerns about police community
relations and police behavior.
Mr. JORDAN. Well, you need to have a talk with the L.A. Teach-
ers Union, because the L.A. Teachers Union said that they’re not
going to open their school. They won’t open their school until they
get an increase in taxes, until they get a bailout for their district,
until they get Medicare for all, and until the police are defunded.
Then they’ll think about opening the schools to help the students
get the education that will allow them to achieve the American
Dream—something you’ve done.
I notice, in your—your wife’s a teacher. You went to MIT. You
went to Harvard. Ms. Yellen went to Yale. She went to Brown. You
know how important education is to accomplishing the American
Dream. Tell that to the L.A. Teachers Union, who says, unless the
police are defunded, they don’t want to come back and teach kids
in school this fall.
Mr. BERNANKE. I absolutely agree that education is extremely
important for everyone.
Mr. JORDAN. Yes. We need Democrat leaders to step forward and
say the same darn thing, and say it’s just as important as going
out, as Mayor Garcetti did, and kneeling down in front of the—in
front of the cancel-culture rioters. Education is just as important,
and we need our schools open.
Chairman, I yield back.
Chairman CLYBURN. Well, thank you so much. I will say to the
gentleman, as one of those Democratic leaders who was also a pub-
lic school teacher—I started my professional career teaching in
public schools, but I’ll also say I’m sitting in Congress today be-
cause of a successful protest.
With that, I yield five minutes to Mrs. Maloney.
Mrs. MALONEY. OK. Thank you, Mr. Chairman.
I had the pleasure of hearing testimony from both of our wit-
nesses today for many years on the Financial Services Committee,
along with Ms. Waters, and I have to say that it’s great to hear
from you both again.
First, I’d like to ask both of you—we’re in the middle of the worst
economic crisis of our lifetime by far. In April, a staggering 20 mil-
lion people lost their jobs, which was a record for a state. It’s the
highest it’s been since the Great Depression. The unemployment
rate rose to 14.7 percent.
But, in the last two months, the unemployment rate has actually
decreased, and now it’s down to 11.1 percent. That surprised me,
because we’re still seeing millions of people file for unemployment
insurance every week.
So, I want to ask both of you: Where do you see the unemploy-
ment rate going? Is it going to get worse before it gets better, or
is it going to continue going down in the months ahead?
And let’s start with you, Dr. Bernanke.
Mr. BERNANKE. It’s very hard to forecast, but I suspect that—
we’ve seen some signs lately of some slowing in activity because of
the increased concern about the virus.
19
So, I don’t think we’ll see as rapid a decline as we’ve seen re-
cently. CBO had its numbers around 10.5; the Fed, its numbers
around 9 to 10 at the end of the year. Those seem like reasonable
ballpark estimates.
So, maybe a little bit lower than where we are now, but not
where we’d like to be.
Mrs. MALONEY. OK. Dr. Yellen?
Ms. YELLEN. Yes. I agree. A lot of the workers who lost their jobs
were on temporary layoff, and they maintained—and this is good
that they did—their attachment with their previous firms. As soon
as lockdowns ended and reopening started, a reasonable number of
those workers were able to go right back to work.
But, as Chair Bernanke just said, with the resurgence of the
virus, progress is slowing and could even reverse. Even if things
had continued on a good track, I think it will take a number of
years—2, 3 years to get unemployment down to levels anywhere
close to where we were before the pandemic.
Mrs. MALONEY. Thank you. As you both know, in the CARES
Act, we provided people who have lost their jobs with an extra $600
a week in unemployment insurance. Businesses were shutting
down and laying people off through no fault of their own, and, if
everyone who was laid off because of the coronavirus stopped
spending at the same time, we’d see a massive contraction in the
economy and possibly even a depression.
From both an economic and a moral perspective, we had to make
sure that people who are unemployed could keep spending on the
necessities of food and clothing and so forth, and the extra $600 a
week has been critically important for the millions of Americans
who are unemployed, and it has prevented a depression by boosting
the aggregate demand.
This extra $600 a week is set to expire at the end of this month,
in just 14 days, which means that, in 14 days, we could be headed
over an economic cliff. But, now, you’re both economists; you know
the importance of an aggregate demand.
So, I want to ask both of you: Do you believe allowing the extra
$600 a week in unemployment insurance—do you believe we
should let—do you think, if we have it expire, would it harm the
economy?
Let’s start with you, Dr. Bernanke.
Mr. BERNANKE. Well, we gave three priorities for Congress on fis-
cal policy, and one of them was continuation of the pandemic UI,
which I do think is very important on both humanitarian and also
economic basis.
I think you can modify the structure to satisfy some of your Re-
publican colleagues in terms of avoiding the more than÷0 percent
replacement in some cases, or, alternatively, giving perhaps a spe-
cial EITC for people who take jobs if there is a differential.
So, there are some structural things you could do, but I agree
with the basic thrust that it’s very important to continue the sup-
port for the unemployed, which there is an enormous number, of
course, as you know.
Mrs. MALONEY. And Dr. Yellen?
Ms. YELLEN. Yes, I completely agree with that, both on humani-
tarian grounds, and the spending is absolutely needed for more
20
pain not to be extended throughout the economy and for unemploy-
ment to continue moving down.
Similarly, for state and local governments, which we also
prioritize, if there isn’t substantial support there, we’re going to see
massive layoffs in state and local governments, and, again, the loss
in spending, the loss in jobs will harm workers throughout the
economy.
Mrs. MALONEY. And now for the flip side of the question: Do you
believe that, from a purely macroeconomic standpoint, extending
the extra $600 a week will boost the economy? What is your anal-
ysis of how a straight extension of the enhanced unemployment in-
surance would affect the economy? Would it support aggregate de-
mand?
Dr. Yellen, and then Dr. Bernanke, and I yield back.
Ms. YELLEN. Yes. Yes, it does. I believe it supports aggregate de-
mand and spending in the economy that we need to create jobs.
Mrs. MALONEY. Dr. Bernanke?
Mr. BERNANKE. We’ve advocated that the extra unemployment
insurance be tied in some way to the national unemployment rate
so that it goes up when unemployment goes up, and down and
when it goes down, and that would make it more responsive to
changing conditions.
Mrs. MALONEY. Thank you, and I yield back.
Chairman CLYBURN. Thank you, gentlelady.
The chair now yields five minutes to Mr. Luetkemeyer.
Mr. LUETKEMEYER. Thank you, Mr. Chairman, and thank our
witnesses for being here today. I appreciated your testimony. I
serve on the Financial Services Committee as well and have en-
joyed the conversation and your testimony over the years
[inaudible] at all of so many financial——
In a March op-ed in the Financial Times, both of you said that—
I quote—to avoid permanent damage from the virus-induced down-
turn, it is important to ensure that credit is available for otherwise
sound borrowers who face a temporary period of low income or rev-
enues, unquote—end quote.
I think that my personal opinion is I think this is critical—this
is a critical concept for Congress that we must understand. Cur-
rently, with the stimulus of the CARES Act and the forbearance
banks have been given to customers, we have not seen broad delin-
quencies and charge-offs yet.
However, as this forbearance ends and as depository institutions
and, more importantly, examiners of those institutions get back to
business as usual, I am fearful that we will see a broad markdown
of assets on balance sheets, and even entire business lines of finan-
cial institutions similar to what we did in 2008 and 2009.
I repeatedly called for financial regulators to provide additional
forbearance to financial institutions and allow them the needed re-
serve, accounting, and capital relief necessary to allow them to
work with their customers.
I’ve got legislation that I believe accomplishes this goal, and so
my questions to you are: Do you think that additional forbearance
for financial institutions is necessary to allow them the needed
time to work with their customers, and, if our economy continues
to be shut down, are you concerned that the classification of non-
21
performing loans will drastically impact reserve accounts at deposi-
tory institutions and, in turn, decrease access to credit, particularly
in low-and moderate-income communities.
I’d like an answer from both of you, please.
Mr. Bernanke, do you want to start first?
Mr. BERNANKE. Sure. I think forbearance is a bit risky. We saw
it in savings and loan crisis, you know, that we need to make sure
that banks are properly valuing their assets. But the Fed has been
trying to work with the banks. They’ve changed the accounting
standard, the CECL accounting standard, to make it—they don’t
have to assess the depth of the recession quite the same way.
They changed the supplementary leverage ratio. They’re working
with—they’re telling the banks to work with the borrowers, as you
described.
I think we don’t want to—you know, it’s really good news that
the banking system is in such strong condition, but I think it’s im-
portant to continue to evaluate them, for example, through the
stress tests, and, if it becomes necessary for some banks to raise
new capital, that was the thing that stopped the crisis in 2009. If
it becomes necessary to do that, I hope the Fed and the other bank
regulators will enforce that.
Mr. LUETKEMEYER. Dr. Yellen?
Ms. YELLEN. Yes. I agree with my former colleague, my current
colleague. I think it’s important for the Fed and the Fed has en-
couraged banks to lend and change regulations in ways that make
it easier for banks to lend.
But it’s also very important in my view, as Ben said, that they
have the capital that’s necessary to meet the lending needs of the
economy, and we’ve seen from the analysis in the recent stress
tests, the pandemic analysis, that about a quarter of the major
banks that are subject to that stress test are likely to see capital
fall below minimum levels.
If we have the W shape and, you know, a second wave of the
virus or if the recovery is very prolonged, and it——
Mr. LUETKEMEYER. Thank you.
Ms. YELLEN [continuing]. May prove necessary for the Fed to ask
them to raise capital.
Mr. LUETKEMEYER. Well, you kind of made my case there with
your last comment, and I appreciate that, but I’m concerned. Both
of you are looking at it from a big bank perspective. There are
lots—most of the banks in this country are less than $50 billion in
assets. You’re looking at credit unions that are small in size.
Those are the ones, I think, that we need to be trying to shore
up and give the ability to give forbearance to the customers, be-
cause they’re the ones that supply the small business loans in this
country, and you and I, Dr. Yellen, had this conversation in com-
mittee many times.
Without that forbearance—and we saw the lack of it in 2008 in
2009 and what it did and how devastating it was to the businesses,
our local communities, jobs, and the banks and credit unions them-
selves.
So, I would appreciate a response to that.
Ms. YELLEN. Well, many banks, including community banks,
have built some significant capital buffers in the aftermath of the
22
financial crisis, and it’s appropriate for them at a time like this to
be able to bring those buffers down to support the credit needs of
their communities, but——
Mr. LUETKEMEYER. I appreciate that.
Ms. YELLEN [continuing]. I would agree with Ben on
forbearances. You know, we need to know what’s happening in
those banks.
Mr. LUETKEMEYER. OK. I have one quick question for you. And
you guys have both indicated your—how you would like to see the
$600 or any other sort of unemployment insurance extended.
What do you think is an incentive to get people back to work?
You’re trying to take care of people unemployed. I’m trying to get
them back to work. What do you see as an incentive? What would
you support, or what kind of idea would you have to get people
back to work?
Continuing the $600 would be a detriment for people going back
to work.
Mr. BERNANKE. I’m sympathetic to that, sir. You could lower the
$600 so that the replacement ratio is not above 100 percent, is the
concern, and you can provide additional incentives to work. For ex-
ample, you could have an enhanced unemployment tax credit for
people who are at work, for example.
So, I mean, there are ways to improve that—you know, that ratio
so that people have the appropriate incentive to go to work without
taking away the necessary support of the unemployed.
Mr. LUETKEMEYER. I know that the President is supportive of a
payroll tax cut, which to me would be an incentive for people not
only to stay employed; it’s a 100 percent pay raise, but also people
to go back to work. So appreciate your comments. Thank you.
Great to see both of you again.
I yield back, Mr. Chairman.
Mr. BERNANKE. Thank you.
Chairman CLYBURN. Thank you.
The chair now yields to Ms. Velázquez for five minutes.
Ms. VELÁZQUEZ. Thank you, Mr. Chairman.
I would like to relay testimony from a restaurant owner in my
district who testified before the House Small Business Committee
this week and stated that PPP, which did provide a lifeline for her,
is an eight-week solution to an 18-month problem.
So, Mr. Chairman, I really thank you for holding this important
hearing.
Dr. Bernanke, three out of four small businesses have been expe-
riencing a decrease in revenue since March, and an estimated 7.5
million small businesses are at risk of permanent closure as a re-
sult of this crisis.
So, Dr. Bernanke, you were Federal chair—Fed chair during the
Great Recession when access to capital nearly froze for small busi-
nesses. Congress made changes to the SBA’s traditional loan pro-
grams, including increasing the guarantees and reducing fees.
As Congress weighs long-term recovery proposals for small busi-
nesses, would you recommend similar changes to SBA loan pro-
grams to provide access to affordable capital for small businesses?
Mr. BERNANKE. Yes. I think the PPP program was very helpful
in getting capital out to small businesses. SBA could be modified.
23
My colleague, Dr. Yellen, talked about the Fed and the Treasury
lending to CDFIs that could be particularly relevant to minority
communities, for example. So, I think there are ways to support
small business.
Many—many people—many small businesses are run by—on the
income of the individual who owns them, so, you know, using fam-
ily resources and credit cards and the like, and so supporting the
unemployed or supporting people broadly, it would also be—would
be helpful.
And I think there is an issue. At some point in the future, we’re
going to have to—this economy may change in very important
ways. We have to allow that at some point to begin to happen, but
I think, for now, I would be inclined to want to continue to provide
support to small businesses that are being hit by the virus.
Ms. VELÁZQUEZ. Thank you.
Dr. Yellen, in your testimony, you mentioned that, because the
recession is unprecedented in so many ways, forecasting the recov-
ery is difficult.
PPP was enacted to keep employees on payroll, but small firms
have other fixed costs. Should Congress consider the bold step of
extending the eviction moratorium for individuals past July 27 and
expanding it to include small businesses?
Ms. YELLEN. I think, with respect to small business expenses, an
approach that looked promising to me that is in the HEROES Act
is an employee retention tax credit. One exists now, but the HE-
ROES Act expands it.
And, for small businesses, it provides a tax credit for expenses
other than wage expenses, and that struck me as a promising ap-
proach in terms of supporting smaller businesses.
Ms. VELÁZQUEZ. Well, I’m concerned about those small busi-
nesses that lack liquidity, but lack the cash that they need in order
to be able to pay rent, realestate costs, to remain in those busi-
nesses. So, a tax credit in that respect really doesn’t help them.
Ms. YELLEN. Well, it’s a refundable tax credit, so they would be
eligible to receive the credit even if they don’t have profits.
Ms. VELÁZQUEZ. Thank you.
Dr. Bernanke, consumer spending is at the heart of the U.S.
economy, and millions of small businesses operating in retail, hotel,
and leisure are struggling, as your testimony indicates. Why is it
so critical to extend enhanced unemployment insurance now to sup-
port individuals and small businesses, and in what amount would
you recommend?
Mr. BERNANKE. Well, as I mentioned, unemployment insurance
has a humanitarian aspect. We want people to be able to pay their
bills and to be stay in their homes. I think, also, I would add that
we need to worry about health insurance, which is another thing
that happens when you lose your job.
The other purpose of the unemployment insurance is to increase
aggregate demand. People will go out and spend, and that will help
the economy generally. But there is a very powerful sectoral effect,
and there are some sectors, like restaurants, that are going to—it’s
going to be a while before they can operate normally because of the
effects of social distancing and so on, and it’s very hard to get
around that problem.
24
Ms. VELÁZQUEZ. And, also, it is important that the public health
crisis, if it’s not adequately addressed, we will continue to face an
economic uncertainty.
Consumers, if they don’t feel safe, they don’t want to go into any
restaurant or hotel or any of those small businesses.
Mr. BERNANKE. That’s correct.
Ms. VELÁZQUEZ. Thank you. I yield back.
Chairman CLYBURN. I thank the gentlelady for yielding back.
The chair now recognizes, for five minutes, Mrs. Walorski.
Mrs. WALORSKI. Thank you, Mr. Chairman. Thanks for our wit-
nesses as well. I’m grateful to have this conversation about the
economy, but I just wanted to convey my disappointment with the
minority not being able to have anybody on this panel today.
If there is ever a time in this country when Americans are lit-
erally desperate for bipartisan cooperation, it’s now. I mean, it’s
July 2020. So, I’m just disappointed that we’re having a one-sided
conversation, the most important conversation we’ve probably had
on this committee, about the recovery in this country, and I just
think that—I’m so disappointed, and I think the American people
are as well.
But, to get to the point today, the pandemic is unlike any crisis
in our lifetime. Our country has experienced a devastating loss of
life. Emergency actions, like stay-at-home orders, were necessary to
slow the spread and flatten the curve, but the picture that’s emerg-
ing on a broader toll of Americans’ health that we can’t ignore:
We’ve heard plenty of anecdotal evidence that loneliness and isola-
tion are especially hard on those battling depression or substance
abuse disorders, as well as victims of domestic violence.
We know, as Americans, many Americans are delaying or skip-
ping doctor visits for fear of contracting coronavirus. It’s staggering
to think of the ripple effect that this is going to have for years to
come as we brace not only for COVID–19 death toll, but for spikes
in deaths from suicide, overdose, heart conditions, cancer, and any
number of other diseases that are diagnosed too late. This is an all-
encompassing tragedy.
Right now, millions of Americans are ready to return to work.
Businesses are ready to reopen their doors. This is a positive step,
I think, for Americans’ mental and financial health. In order to
safely reopen our economy, we all need to ensure access to the
things like PPE, testing, and childcare. Commonsense tells us
every reopening plan should include those.
That’s why it’s been discouraging for me to see the Democrats
playing politics with recovery plans, and the one that we’re talking
about today, the HEROES Act, for example, was not a serious bill
that included all sorts of blank-check giveaways, such as restoring
unlimited deductions for state and local taxes, or SALT, as we all
refer to it.
The nonpartisan Joint Committee on Taxation has founded
over—has found over half the benefits of this policy would go to
those with annual incomes of $1 million or more. Only one percent
of the benefits would go to those making less than $100,000 a year.
Tax experts on both sides, left and right, agree that restoring an
unlimited SALT deduction is bad policy that would do nothing to
help our Nation’s economic recovery. Irresponsible bill would also
25
extend the $600 we’re talking about per week and temporary sup-
plemental unemployment benefits from the CARES Act through
January 2021.
I supported the CARES Act and the unemployment supplement
back in March. Much of the economy was going to be shut down
for an undetermined amount of time. This benefit helped pay—I
think we all understand. It helped pay rent, put food on the table.
It had brought peace of mind as people found themselves unem-
ployed or furloughed by no fault of their own.
But I’ve heard from small business owners all over my district
who are trying to open responsibly, and what they’re finding is that
the supplement has distorted the job market. It’s easy to see why,
in my home state of Indiana, workers receiving the $600 per week
are getting about three times as much as they otherwise would on
unemployment. In many cases, a worker can stay on unemploy-
ment and make more money than if they return to work.
The nonpartisan Congressional Budget Office said that extending
the $600-per-week supplement through January 2021, as the HE-
ROES Act proposes, would weaken the incentives to work, decreas-
ing the economic output, and decreasing unemployment. In short,
it would kill our economy.
Ways and Means have proposed a backdoor bonus that would
make work pay by allowing workers to keep up to two weeks of the
additional benefit after accepting a job, essentially amounting to a
$1,200 reentry hiring bonus.
Chairman Bernanke, the University of Chicago estimates that
over two-thirds of unemployment insurance recipients nationwide
are receiving more money on unemployment than they would if
they returned to work. What impacts of paying such a large group
of people at so much more than their normal incomes happens, and
then do you see our plan as incentivizing rehiring a good thing as
a way to incentivize work?
Mr. BERNANKE. Well, I think, during the lockdowns, it didn’t
make a lot of difference, because people weren’t going out to work
anyway.
Mrs. WALORSKI. Right. Yes. Right.
Mr. BERNANKE. I think—I’ve said now a couple of times——
Mrs. WALORSKI. Right.
Mr. BERNANKE [continuing]. That it makes a lot of sense to
rethink the structure of UI, and maybe even put rewards on the
work side, like EITC or something—the thing about the back-to-
work bonus is that it rewards people who are unemployed and cut-
ting back, and they might earn more than somebody who was there
the whole time, so that’s a question.
But I see no major contradiction between maintaining adequate
UI support for those who can’t find work, but also restructuring so
that people have the appropriate incentives to go back to work. I
think those things can be done.
Mrs. WALORSKI. Well, I appreciate it. And, in my case, you know,
we’re going to have companies shutting down that can’t rehire, be-
cause it’s so big, the difference between unemployment with that
$600 a week. If it went to January 2021, my district and my state
would be in trouble as with the rest of the country. There would
be no jobs to go back to by that point.
26
But I yield back, Mr. Chairman.
Chairman CLYBURN. I thank the gentlelady for yielding back.
The chair now recognizes Mr. Raskin for five minutes.
Mr. RASKIN. Thank you very much, Mr. Chairman.
As we meet today, we have 3.6 million coronavirus cases in
America, the most in the world, just eight days after we hit 3 mil-
lion. Yesterday posted a single-day record of 77,000 new cases in
a single day, and three of our states—Florida, Arizona, and
Texas—are now facing record increases and maxed out hospital in-
tensive care capacity, and what do our colleagues do? Well, they
blame Democrat governors and Democrat mayors and the Chinese
Communist Party and the World Health Organization; anybody but
the President of the United States of America.
What a fraud this is. What disinformation. What a pathetic and
transparent effort to distract America from what’s really going on.
It’s true that China covered up the virus at the beginning.
But, Mr. Chairman, as I have shown several times before with
submissions to the record, Donald Trump covered up for China 37
different times, praising President Xi for his very good leadership,
their excellent collaboration in the crisis, and their beautiful, beau-
tiful friendship.
So, our colleagues really must have an empty cupboard of ex-
cuses that they have to go back to blaming President Trump’s very
good friend, the head of the Chinese Communist Party.
And, while praising China, in January, February, March, and
April, President Trump destroyed our opportunity to wage an effec-
tive national response to the coronavirus crisis, instead burying
America in his course of magical thinking, assuring the public the
virus would magically disappear one day and selling to the public
with his various pronouncements his belief in different quack mir-
acle cures, like injecting people with disinfectant and drinking
hydroxychloroquine.
Mr. Chairman, I’m sorry that we have spent any time on these
distractions, but they keep pumping out propaganda, and we need
to answer it.
I’d like to ask Chairman Bernanke this: The Federal Reserve is
using its section 13(3) powers under the Federal Reserve Act to al-
locate part of the $454 billion of existing assistance for states and
municipalities.
Can you describe how much money the Fed has allocated to the
program for states and localities, and do you think—is it your as-
sessment that the Fed should be putting more money into the
states and localities?
Mr. BERNANKE. Well, the Fed has not gone anywhere close to
using its existing capacity. Its only made one or two loans so far.
I will still say that it’s been worthwhile, because the announce-
ment of the program reduced quite a bit the risk aversion and un-
certainty in that market, and the market is functioning better on
a private basis. So I—you know, you might consider changing the
terms or lengthening the terms, but I do think that a lot of the
benefit has been felt in terms of reassuring participants that the
Fed is there as a backstop.
Mr. RASKIN. Thank you.
27
Chairman Yellen, you said something very interesting, and I just
want to make sure I got it right. You said: Get the pandemic under
control, and economic recovery will follow.
During the course of this crisis, some people have seemed to pose
the imperative of public health and the imperative of economic re-
covery as opposites; you can favor one or the other. But you seem
to be saying we need to focus on getting the pandemic under con-
trol to advance public health in order for the economy to come
back, and I want to make sure that I got you right on that.
Ms. YELLEN. By and large, there is not much of a tradeoff, and
that everything that we can do and all the resources that are need-
ed to get the pandemic under control will speed economic recovery,
and that’s why, in our testimony, we say that there is a very high
payoff on the public health side. It will benefit our economy.
Mr. RASKIN. Well, Chairman Yellen, President Trump pushed a
number of gullible Republican governors and mayors to opening ev-
erything up way too quickly, and, at the same time, he was not
wearing a mask and sending all kinds of terrible mixed messages
about the public health protocols.
Now, those very states are having to reverse course and go back
to try to institute the public health protocols they didn’t do in the
first place, and the reopenings have been slowed.
Don’t you think it’s better to take the public health problem seri-
ously so we can really reopen the economy?
Ms. YELLEN. Well, I think that’s what we have seen throughout
Europe and much of the world where they had extreme lockdowns,
but then got things under control and were able to open up in a
way that they had enough testing, contact tracing, masks, and
other steps that remained under control, and it’s very expensive to
have to shut down again to the economy, too.
Mr. RASKIN. Thank you, Mr. Chairman. I yield back.
Chairman CLYBURN. I thank Mr. Raskin.
The chair now yields five minutes to Dr. Green.
Mr. GREEN. Thank you, Mr. Chairman and Ranking Member,
and thank you to our witnesses.
America’s businesses are facing unprecedented challenges due to
this pandemic. Government-mandated shutdowns have caused nu-
merous employees to lose their jobs and many businesses to shud-
der.
For the sake of our witnesses, I want to let them know a little
bit about me. After I left the Army, I started a healthcare company,
and I too understand being an entrepreneur. It is not easy. It in-
volves a lot of risks and sleepless nights. I’ll never forget waking
up in the middle of the night to check the lockbox on that night’s
proceeds many, many nights.
During my time as CEO of that company, our team took the com-
pany from 180,000 in revenue to 212 million in annual revenue in
just eight years. I’m very proud of what we accomplished, but,
through all the difficulties and growing pains that we faced, I can’t
imagine the challenges facing small businesses today.
With the witnesses understanding a little bit about who I am, I
want to look at some economic performance during this pandemic.
I know Chairman Clyburn gave a grave picture of how the economy
is crashing. I’d like to point out it’s really those blue states that
28
are continuing to crash economically, and I can hear the retort
now: Well, look at the increases in cases in Tennessee, Florida, and
Texas. I can’t talk about those states, but I can tell you that, in
Tennessee, yes, our cases are going up, but our deaths remain pro-
portionately low, and we’re monitoring our ICU beds here in Ten-
nessee.
Ventilators are at 32 percent utilization. That means 68 percent
are just sitting there waiting. Recall the objective was to flatten the
curve; not stop every single infection. So, protect the at-risk popu-
lations, use social distancing, and open up.
We’ve done just that in Tennessee. Economically, our Tennessee
recovery is setting records. Just announced, after an April unem-
ployment of 15.5 percent; May, 11 percent, our June unemployment
is down to nine percent in Tennessee, with retail sales booming.
Restaurants and retail businesses are at the top of the country for
recovery. And our governor just announced last night that our eco-
nomic growth in Tennessee is only 0.2 percent below what we pre-
dicted it would be without COVID and before it ever happened.
We have the lowest debt in our Nation per capita. We have a
fully funded pension plan. We are using our ample rainy-day fund,
money we set aside years, to distribute additional dollars to busi-
nesses and medical providers.
It just goes to show it matters who governs. Conservative policies
that advance freedom—we need the prosperity, even in a crisis.
And, in Tennessee, we appreciate that the Trump administration
has taken bold action to provide economic relief.
The President slashed streamlined regulations, pushed for a pay-
roll tax holiday to ease hiring penalties, worked with Congress to
enact the Paycheck Protection Program and billions in additional
low-interest loans for small businesses.
If the government is going to force businesses to close, then it
has an obligation to provide relief. The President has also declared
war on this virus, expediting emergency supplies on a massive
scale and ramping up efforts to create a vaccine at, using his
words, warp speed.
America is a resilient Nation. We’ll bounce back stronger than
ever. It’s critical that Congress works with the President, and not
just sits there and bashes the President, and help America recover.
It’s equally important we get our economy blasting on all cyl-
inders. As I and many of my colleagues have pointed out, the cost
of shutdowns are nearly equally as great.
As former Fed chairs, I’m grateful that you guys are here to
share your perspectives on the economic challenges our Nation is
facing. And, real quick, my first question is to Chairman Bernanke:
How much debt is enough? I mean, we’re at 22 trillion before this
thing happened. It looks like we’re upwards of 10 more trillion. I
mean, what is too much?
Mr. BERNANKE. Well, just first going back to the first part of
your comment, there is a lot of evidence that people’s behavior does
depend on the illness in the local area. So, I don’t know about your
state. We’ll have to see how that works out, but there is that issue,
and it makes a lot of sense.
29
I’d also mention that lockdowns are not the only way to address
the problem. There is other tools, like masks and tests and tracing
and so on, and I’m hopeful that that will be used.
On debt, you know, like I said, given how low interest rates are
around the world—and that’s not just a monetary policy thing; this
is a global trend that goes on, that’s now going on for 30 years, of
interest rates coming down and down. The burden of the debt is
not as high as the dollar amount would make you think, and this
is a critical situation——
Mr. GREEN. How much is too much? I mean, I just am looking
at what’s the number? Is it a debt administration——
Mr. BERNANKE. It’s not a number; it’s a trajectory. The problem
is, when it keeps growing and growing and the interest keeps
compounding and getting bigger and bigger, you get to a point
where either the burden of the interest is so high, you have to raise
taxes or cut spending, or, alternatively, you run into an inflation
situation. That’s the kind of outcome you want to avoid. We’re not
that close to it now given the level of our debt burden.
Mr. GREEN. The money we’re printing isn’t going to cause infla-
tion?
Mr. BERNANKE. No. People said it would after 2008. They were
wrong, then, too.
Chairman CLYBURN. The gentleman’s time has expired.
The chair now recognizes, for five minutes, Mr. Foster.
Mr. FOSTER. Thank you. And, you know, I too would like to stay
on that same point.
One of the factors that prevented an adequate fiscal response to
the Great Recession was the very politically successful narrative
that we were somehow spending ourselves into hyperinflation and
defacing the dollar.
Dr. Bernanke probably shares with me the fond memories of
former Senator from Illinois, Republican Mark Kirk, traveling to
China in 2009 to warn officials that they should not buy U.S.
Treasury securities or other U.S. debt because U.S. spending was,
quote, driving us to a default, and that the Federal Reserve bank
was, quote, creating hyperinflation, which is a mantra that we’ve
heard from Republicans again and again and again, and are appar-
ently hearing once more.
So, first, did the Republicans’ prediction of hyperinflation mate-
rialize, why or why not, and what were the actual interest rates
compared to hyperinflation?
Either one of you—I guess start with Dr. Bernanke.
Mr. BERNANKE. Well, as you know, inflation was very low, and,
in fact, the Fed has had a great deal of difficulty getting inflation
up to the two percent level, and interest rates, which include an
inflation premium, have been quite low as well, pretty much in the
two percent range until recently, and now under one percent.
Mr. FOSTER. Thank you. And are you aware of a worse prediction
in macroeconomics?
Mr. BERNANKE. There are a lot of bad predictions in macro-
economics——
Mr. FOSTER. All right.
Mr. BERNANKE [continuing]. Respond to that one.
30
Mr. FOSTER. All right well, for the record, it would be amusing
to see a list of
[inaudible] appears on the
[inaudible] prediction.
Now, going into this crisis—the question is: How much debt is
too much? Going into this crisis, the net worth of Americans was
about $120 trillion.
Chairman CLYBURN. Will the gentleman yield for a moment?
Mr. FOSTER. Yes.
Chairman CLYBURN. We need some people to mute, because
we’re getting a lot of feedback. Please, if you’re not speaking, mute
yourselves.
Mr. Foster?
Mr. FOSTER. All right. Can I resume here?
So, going into this crisis, the net worth of Americans was roughly
$120 trillion, and the market value of property directly owned by
the U.S. Government, though it’s hard to estimate, but it’s been es-
timated in the range of 200 to $300 trillion.
So, in contrast, going into this crisis, our government had a pub-
licly held debt of roughly $20 trillion, and—which will probably be
around 25, perhaps $30 trillion when the coronavirus crisis has
been dealt with.
So, my question is: Are there any credible circumstances under
which our government would be unable to pay its debts as a result
of a fiscally sufficient response to the coronavirus crisis?
Dr. Yellen?
Ms. YELLEN. So, I think it’s hard to imagine. If something—some
shock were to happen that drastically caused interest rates to
rise—and I really can’t imagine what that would be—then the Fed-
eral Government would face strains because of a higher interest
burden on the debt, and would have to deal with it.
Now, you know, eventually some steps do have to be taken in my
view to deal with deficits to get them back under control when this
is over so that the debt-to-GDP ratio stabilizes rather than con-
tinuing to rise.
Mr. FOSTER. I agree. But I think—I guess you concur that there
is no short-term emergency that we’re facing?
Ms. YELLEN. No, none.
Mr. FOSTER. Thank you.
You know, in terms of—as we contemplate the next COVID relief
package, we can allocate Federal spending in many ways, you
know, direct payments to individuals; rental assistance; payroll and
unemployment support; grants or subsidies to businesses, large
and small; you know, subsidized or guaranteed loans to businesses,
or relief to state and local governments.
So, just putting aside all equity issues, which of these provides
the biggest macroeconomic bang for the buck, and where should we
look for objective and competent advice on this?
Mr. BERNANKE. Our recommendations were, first, public health—
that has a very high return—both the medical side and also the
safe opening side.
The second is unemployment insurance, both because of humani-
tarian reasons, and also because people unemployed spend a great
deal of their income. And the third would be state and local.
31
Those, I think, are the priorities. There is other things you might
want to look at, like supporting small business. I think the PPP
program did a lot of good, but those are the three, I think, that,
in our judgment, are the most important priorities.
Mr. FOSTER. Yes. So, has anyone tried to actually quantify this?
I mean, you know, specifically is there modelling that’s done by the
CBO and the Fed? I mean, incorporate the different multipliers for
this different kind of spending, or not? We just—are we sort of on
our own in Congress here?
Mr. BERNANKE. I would imagine the CBO has got estimates. I
don’t have them to hand.
Ms. YELLEN. There is a huge——
Mr. FOSTER. All things occur in variable. Yes.
Ms. YELLEN [continuing]. Huge amount of work on this. I don’t
know the CBO estimates, but what different marginal propensities
to spend out of income that goes to different groups in the econ-
omy, there is a vast amount of work on that.
And, as been said, unemployment compensation to low-wage
workers, virtually all of that is spent, and it would be similar for
state and local government spending that are among our top prior-
ities. Very high impact on spending in the economy.
Mr. FOSTER. Thank you. And I’m out of time and yield back.
Chairman CLYBURN. Thank you, Mr. Foster.
The chair now recognizes Mr. Kim for five minutes.
Mr. KIM. Thank you, Mr. Chairman, and thank you all for gath-
ering here and talking about this.
I wanted to just start by responding to a comment made earlier
in this hearing. Another member of this committee pressing this
point about schools, cited the American Academy of Pediatrics
about next steps with our kids.
I was interested in learning more about this, so I just quickly re-
searched this, and I found an important clarifying comment made
by the Academy regarding this statement being misunderstood and
misrepresented, and I wanted to read part of it.
Candice Jones from the AAP said, ‘‘The original guidance was al-
ways written as being a strong advocate for the goal of kids phys-
ically being present in school with a lot of things to consider and
that’s where things got misrepresented and misunderstood.’’
Then in fact, she actually goes on to say, ‘‘We have to consider
COVID activities in the community.’’ ‘‘This should not be politically
motivated,’’ and we have to think about what’s best for our kids,
teachers, and families.
In fact, the American Academy of Pediatrics joined with the
American Federation of Teachers, National Education Association,
and others to issue a joint statement saying: Science should drive
decisionmaking on safely reopening schools. Public health agencies
must make recommendations based on evidence, not politics. We
should leave it to health experts to tell us when the time is best
to open up school buildings, and listen to educators and adminis-
trators to shape how we do this.
For instance, schools in areas of high levels of COVID, commu-
nity spread should not be compelled to reopen against the judg-
ment of local experts. A one-size-fits-all approach is not appropriate
for return-to-school decisions.
32
Withholding funding from schools that do not open in person full
time would be a misguided approach.
These are incredibly important things to consider here. I’m a fa-
ther of a young boy that’s supposed to start school soon. I would
love to have him get a great education and be able to enjoy his year
in kindergarten.
I want everything for him, and I don’t want anyone to accuse me
or anyone else of not wanting my kid or our kids to have the edu-
cation that they deserve. But my education—my public school edu-
cation that I got in my district also taught me to respect science
and expertise and to make sure families and education profes-
sionals are part of that discussion.
Going back to the topic of our hearing here, I wanted to just go
to Chair Bernanke. I thank you for what you’ve been saying, the
work that you’ve been doing with regards to state and local govern-
ments and need to be able to fund that.
I was actually just on a Small Business Committee hearing this
morning where Treasury Secretary Mnuchin—I asked him about
this issue, and he wouldn’t commit to me that he would support
this type of aid in the next funding package because we should not,
quote/unquote, ‘‘bail out states with mismanaged budgets,’’ is how
we talked about it there.
So, I want to ask, you know, your stipulation on this. Does your
experience on a state reopening commission give you any concern
that additional funding for state governments in the midst of this
pandemic will create incentives for mismanagement?
Mr. BERNANKE. No. I think the money can be structured in ways
that eliminates that incentive. It can be done in terms of block
grants, you know, for education, for example, or for healthcare. It
can be done by formulas that don’t relate to the existing tax bur-
den, things like population, unemployment rate, et cetera.
So, I think there is ways to provide the money that will not be—
provide an incentive for mismanagement. You can make sure—you
could require that the money not be used to increase pension funds
or cut taxes, for example.
So, I don’t think that’s really an issue. And the most important
issue is that the states and localities are both big employers and
also the front line in terms of critical services to the pandemic.
Mr. KIM. Yes. I appreciate that. And, look, in addition to the
issue about mismanagement, though, you addressed, I also want to
address the use of that term ‘‘bailout’’ here, because it keeps com-
ing up again. It came up in this hearing as well.
In my state of New Jersey, we only get back around 75 cents to
81 cents for every dollar we put into the Federal Government.
Other states get back a dollar, over a dollar, sometimes over two
dollars for every dollar that they put in. So, I just don’t appreciate
this notion that Federal taxpayers are bailing out states like mine.
For years, residents of my state have been helping other states,
doing more than our fair share. Now we need help, and we’re just
asking for what is fair here in the middle of a pandemic.
But, even beyond that point, Chair Bernanke, you talk about sort
of the strong sense and the challenges that we face at the state
level could have dire circumstances on the national economy.
33
So, it’s—I want to just hear a little bit more from you about that,
about, if we don’t help states, what is that going to do when it
comes to our responsibility to our national economy?
Mr. BERNANKE. I think we made this mistake in the recovery
from the 2007–2009 recession after the global financial crisis. We
had an $800 billion Federal program, fiscal program, but the states
were forced to contract, lay off people. And an estimate I saw re-
cently was, as I mentioned before, is that cut about a half a per-
centage point off the growth rate as the economy was trying to re-
cover from that serious recession.
So, it will have implications for spending and jobs, for the econ-
omy as a whole, as well as for people, you know, within New Jer-
sey.
Mr. KIM. Great. Thank you so much.
Mr. Chairman, back to you.
Chairman CLYBURN. Thank you so much.
We have now reached the end of our period of questions.
The chair would like to recognize the ranking member for a clos-
ing statement if he would like to make one.
Mr. SCALISE. OK. Thank you again, Mr. Chairman, and good to
see both Drs. Bernanke and Yellen, and we really have been talk-
ing a lot about what we need to do to reopen the economy safely—
always the key term there. And there are really good examples out
there. It would have been good to hear even more opinions on how
it’s being done, because, when you go all around the communities—
and I get to go to a lot of different places to see what people are
doing smartly—you can learn from what other people are doing as
you work to reopen.
I know, again, I talked about the meeting that I had with the
Vice President on Tuesday. What Vice President Pence did is
brought his whole team down. You had Dr. Birx there. You had all
these medical experts, Seema Verma from CMS.
You had the head of the LSU system and the head of the South-
ern University system. I think it’s the only Historically Black Col-
lege and University system, not just school. And they were both
talking about what they are doing to safely reopen. It can be done.
They both confirmed that. Dr. Birx confirmed that it can safely be
done. You don’t do it if it can’t safely be done. It can safely be done.
So, then our challenge—our challenge as policymakers, as lead-
ers, is to go figure out how to do it, not to allow anybody the copout
of saying, ‘‘Well, it’s hard, and we’re just not sure, so we won’t do
it.’’ Go talk to the people who are doing it safely, because there is
a serious cost—a serious cost.
You know, when you go back to the Academy of Pediatrics, they
talk about, sure, you’ve got to follow guidelines. It’s not about
whether or not to follow guidelines. You’ve got to follow the CDC
guidelines and your state and local guidelines, but you can do it,
and there is a cost of not doing it. They talk in this report about
the damage to kids.
There is a cost to kids; not just in learning. There are a lot of
other things, too. A lot of kids get their basic nutrition from school.
A lot of kids with disabilities get their basic needs met in school.
That’s not being done if you’re closing schools.
34
You know, for some of these school systems to say they’re not
going to reopen or a teacher’s union to say they’re not going to
come back to work unless police are defunded or something ludi-
crous, think about the kids.
You know Mr. Jordan talked about the over 50 million kids that
are going to be losing out, and they’re losing out if they don’t get
their schools reopened.
So, you know, Coach Orgeron talked about this with Vice Presi-
dent Pence. And sports, some people think are trivial. Sports are
key to uniting communities. It’s something in the psyche of people
that they want to see their sports come back. But he talked about
the human aspect of it, and this applies to the over 50 million kids
that would be denied that opportunity to go back.
He said: A year ago today, Joe Burrow was projected to be a
sixth-round draft pick, but, because he had that opportunity, be-
cause he worked hard and he got to be around a system where he
could prove himself, in the course of those next eight months, he
became the number-one draft pick, maybe one of the most storied
careers of a quarterback in college football history, winning the
Heisman Trophy. All of that would have been denied.
And think about the other 50 million-plus kids in America that
will be denied opportunity if we don’t do the hard work of figuring
out how to do it. Not whether or not to do it, but actually doing
it.
It’s something that we’ve got to challenge ourself to do. Like I
said, we put a man on the moon. We can absolutely do it. The doc-
tors say you can do it—Dr. Birx, the American Academy of Pediat-
rics. Let’s go get it done.
Mr. Chairman, I yield back.
Chairman CLYBURN. I thank the ranking member for his state-
ment, and I just want to reiterate that, at the beginning of the
hearing, you asked to enter certain documents into the record. I did
not object.
Of course I want to point out that, last week, when President
Trump started pushing to fully reopen schools without regard to
public health guidance, the American Academy of Pediatrics issued
a clarification. You just heard it from Mr. Kim about—so his state-
ment will go into the record. But I want to emphasize that state-
ment said that science should drive decisionmaking on safely re-
opening schools.
Now, I noticed, my friend, that you talked about Dr. Birx being
there with the Vice President and Southern University and LSU
being there. The fact of the matter is I would love for some elemen-
tary school teachers to have been there, for some kindergarten
teachers to have been there, for some superintendents from those
public-school districts around Louisiana to have been there.
They are the ones who are on the front lines. They are the ones
who are committed to taking care of these little children all day,
every day; not Dr. Birx, not the Vice President, not the President
or the athletic directors at LSU, or Southern University.
I’m a proud graduate of an HBCU. We just closed down our pro-
gram, all, for the whole fall. And I love going to homecoming, and
I love watching my team play.
35
But that’s not what this is about. This is about educating our
children in a safe, healthy environment, and we need to go with
the experts when it comes to that.
I went down to LSU when Clemson played LSU. I’m a big fan
of Joe Burrow’s. I hope he has a successful career, but he’s not
going to have a successful career if he can’t stay healthy. And he
is not insulated from this virus just because he got the Heisman
Trophy. We’ve got to do what’s necessary to keep him healthy.
So, today, in closing, I want to thank Chair Bernanke and Chair
Yellen for being here today. We appreciate your distinguished
records of government service and your expertise that you have
shared with us this afternoon.
I hope that Congress will use this to chart a path through to the
other side of this terrible pandemic. This hearing has made clear
that the Federal Government’s economic recovery efforts so far are
not sufficient, and, without further action, we face even greater
economic turmoil. This turmoil will have a disproportionate impact
on communities of color.
Today’s hearing has also made clear that there are steps our
Government must take now to put us on the road to economic re-
covery. First, as our witnesses explained in their written testi-
mony—and I quote—‘‘nothing is more important for restoring eco-
nomic growth than improving public health,’’ end of quote.
We cannot hope for an economy to recover until we successfully
control this pandemic.
Second, Congress must take bold action now and pass a sub-
stantive economic recovery package, like the HEROES Act, that in-
cludes substantial support to state and local governments.
As the witnesses testified today—and I’m quoting again—‘‘these
governments will have to lay off workers and limit essential serv-
ices until they get Federal help,’’ end of quote.
Chair Bernanke and Chair Yellen eloquently explained why the
economy cannot afford for Congress to do anything less than imme-
diately pass a comprehensive and robust recovery measure.
Finally, the Fed should adjust the terms of eligibility toward
lending facilities to ensure that all borrowers have access to credit
and explore additional facilities to support lending to households
and small businesses that have been harmed by this crisis.
Drs. Bernanke and Yellen steered the Nation out of the 2008 fi-
nancial crisis. Congress and the administration should heed their
advice and act now if we hope to get on the path to economic recov-
ery, in a manner that is effective, efficient, and equitable.
Without objection, all members will have five legislative days
within which to submit additional written questions for the wit-
nesses, to the chair, which will be forwarded to the witnesses for
their response. I ask our witnesses to please respond as promptly
as you are able to.
This meeting—this hearing is adjourned.
[Whereupon, at 2:34 p.m., the subcommittee was adjourned.]
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