Hybrid Hearing with the Federal Reserve Chair Jerome H. Powell, House hearing transcript (September 23, 2020), GovInfo CHRG-116hhrg41958, PDF

Summary

This is the printed (PDF) edition of the transcript of the September 23, 2020 hybrid hearing of the House Select Subcommittee on the Coronavirus Crisis with Federal Reserve Chair Jerome H. Powell. Chairman Clyburn said the Fed's key programs, including the Main Street Lending Program, had barely lent, with 99.7 percent of $1.1 trillion in available lending unspent, and criticized Main Street's $250,000 loan minimum. Representative Velazquez asked why Main Street made no loans until July; Powell answered that Main Street is "many, many, many times more complicated to set up." Representative Jordan asked Powell whether the economy would recover faster if some states were not still largely locked down.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Full text

HYBRID HEARING WITH
THE FEDERAL RESERVE CHAIR
JEROME H. POWELL

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

SEPTEMBER 23, 2020

Serial No. 116–119

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
41–958 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 RAPALLO, Staff Director
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 September 23, 2020 ..................................................................... 1

WITNESS

The Honorable Jerome H. Powell, Chair, Board of Governors of the Federal
Reserve System
Oral Statement ........................................................................................................ 8
Written opening statements and the written statement of the witness are avail-
able on the U.S. House of Representatives Document Repository at:
docs.house.gov.

INDEX OF DOCUMENTS

No documents were entered into the record during this hearing.

(III)
HYBRID HEARING WITH
THE FEDERAL RESERVE CHAIR
JEROME H. POWELL

Wednesday, September 23, 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 10:05 a.m., in room
2154, Rayburn House Office Building, 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 morning. 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, and today I am
pleased to welcome Reverend—Federal Reserve Chair Jerome Pow-
ell. Thank you, Chair Powell, for appearing before us today. Our
goal today—well, that happens to me very often. Our goal today is
to understand the course and scope of the outgoing—ongoing jobs
crisis in America, what the Fed is doing to address it, and what
else needs to be done.
Chairman Powell, you said back in April, and I quote, ‘‘This is
first and foremost a public health crisis.’’ In July, former chairs
Ben Bernanke and Janet Yellen appeared before the select sub-
committee. Quoting from their testimony, ‘‘Nothing is more impor-
tant for restoring economic growth than improving public health.’’
I agree. This health crisis has dragged on for eight months, and we
just passed a tragic milestone of 200,000 Americans killed, far
more than any other country on earth. Yet the Trump administra-
tion still refuses to show leadership and implement a science-based
national strategy to address this ongoing public health emergency.
The President continues to reject the advice of scientific experts on
testing, social distancing, and wearing masks. These failures have
allowed the virus to spread, causing millions of infections, tens of
thousands of preventable deaths, and one of the worst economic cri-
ses in our Nation’s history.
Let’s be clear. Despite the rosy picture this administration tries
to paint, many American families are still struggling, and millions
of small businesses are on the verge of collapse, even as investors
(1)
2

reap record profits and gains in the stock market. Nearly 30 mil-
lion Americans continue to rely on unemployment benefits. While
most high wage jobs have returned, the employment rate for lower
wage workers is still down more than 16 percent since January
2020, and an increasing number of these jobs are lost permanently.
In August, permanent job losses skyrocketed to 3.4 million, half a
million more than the month before and more than two and a half
times what they were in January.
Job losses have dire consequences. In one recent survey, 12 per-
cent of households with children indicated that they did not have
enough food to eat in the last seven days. The numbers are even
worse for minority families, with 16 percent of Hispanic households
with children and 20 percent of Black households with children
without enough food in the previous week. In the richest country
in the world, tens of millions of children don’t have enough to eat.
Congress helped keep an estimated 12 million Americans out of
poverty when we passed the CARES Act back in March. But the
expiration of Federal unemployment benefits and other relief meas-
ures this summer put millions of Americans at risk of hunger,
homelessness, and mounting debt.
We need to provide additional economic assistance for American
workers and families, especially low-income Americans and commu-
nities of color that have been hit hardest. The legislation we enact
must comprehensively address the enormous scope of the problems
we face. Again, quoting you, Chairman Powell, from last week,
‘‘The current economic downturn is the most severe in our life-
times, and more fiscal support is likely to be needed.’’ Again, I
agree. The Federal Reserve has an essential role to play in reviving
the economy, and it must do so in a way that is fair and equitable.
Unfortunately, the Fed’s actions so far have prioritized big busi-
nesses over the small ones that are most at risk, and it has failed
to protect American workers.
Today, the select subcommittee released a staff report ‘‘Exam-
ining the Fed’s Purchases in Wall Street’s Corporate Bond Market.’’
The report finds that, while the Fed helped many large companies
by purchasing bonds, the terms of these purchases fail to include
any protection for these companies’ workers. Without worker pro-
tections, the companies whose bonds have been bought by the Fed
have prioritized the interests of shareholders over workers. Layoffs
have continued, even while dividends have been issued.
While I recognize that, during severe economic crises, Federal
Government assistance for large corporations can be necessary to
support the wider economy, public support must always be under-
taken to achieve maximum public benefit. I believe the terms of the
Fed’s purchase of the corporate bonds could have been improved so
that benefits were more equitably shared by workers as well as in-
vestors.
Of course, assistance for big businesses is never a replacement
for assistance for small businesses and state and local govern-
ments. Small business revenues are down nearly 20 percent since
January, and states and localities face budget shortfalls of $1 tril-
lion. Regrettably, the Fed’s lending programs designed to help
these entities have failed to make an impact because of overly re-
strictive rules and onerous loan terms. The Fed’s key programs, in-
3

cluding the Main Street Lending Program and the Municipality Li-
quidity Facility, have barely loaned any money at all. Of the com-
bined $1.1 trillion in available lending, 99.7 percent remains
unspent.
The Main Street program has been plagued by delays, overly re-
strictive loan terms, a $250,000 loan minimum that is out of reach
for most small businesses, and a lack of employee retention safe-
guards. The municipal program has been plagued by onerous inter-
est rates and a short repayment period, rendering the facility use-
less to most jurisdictions. We must do better across the board. The
Trump administration must finally implement a national plan to
get the coronavirus pandemic under control. Republicans must
agree to a comprehensive recovery package like the Heroes Act that
provides for necessary resources to stop the spread of the virus and
alleviate economic harm. And the Fed must use its tremendous re-
sources and market power not just to bail out wealthy stockholders
but also to protect low income workers and struggling small busi-
nesses that are the backbones of this country’s economy. I urge my
colleagues on both sides of the aisle and throughout the Federal
Government to seek common ground and meaningful solutions to
help the millions of Americans still struggling through this crisis.
We must find solutions based on science and economies and eco-
nomics, not politics or ideology.
Thank you for being here, Mr. Chairman. I now yield to the
ranking member for his opening statement.
Mr. SCALISE. Thank you, Mr. Chairman, for calling today’s hear-
ing.
And, Chairman Powell, thank you for coming before us today,
and thanks for your service to our country. Earlier this year, we
had the chairs of the Federal Reserve, former chairs, Ben Bernanke
and Janet Yellen, come before our committee. I would venture to
say, Chairman Powell, that the challenges you’ve faced during your
tenure far exceed things that we’ve seen from previous Fed chair-
men. And as we work together through this, I just want to thank
you for keeping a steady hand at the Federal Reserve which has
been so important as we start seeing this economic recovery.
China, Mr. Chairman, has long declared a goal of overtaking the
United States, both economically and militarily. At the outset of
this pandemic, China lied about the emergence of the most dan-
gerous virus we’ve seen in over 100 years. China refused to allow
American scientists into their country to help assess the threat, de-
spite the fact that many scientists within China were asking for
our help. I was in some of those meetings at the White House with
Dr. Fauci and others when the Trump administration was trying
to get our best doctors into China to find out what was happening,
and it was the Chinese Communist Party who refused our ability
to find that out.
At the same time China was closing down domestic travel, they
were sending thousands of people a day overseas, including here
into the United States, setting the table for this global pandemic.
In the months of January and February, China hoarded medical
PPE. The Chinese Communist Party actually banned the exports
of surgical gloves, masks, and gowns to the United States so that
4

they could hoard PPE for themselves while they lied to the rest of
the world about COVID–19’s threats and dangers.
China not only covered up an emerging pandemic, they also
spread the pandemic and made sure that the rest of the world was
not prepared to thwart the virus. Still to this day, this House ma-
jority calls China’s role in this pandemic a distraction. The major-
ity has held zero hearings on China’s role. We’ve had celebrities
testify before our committee, but yet, we can’t get the Chinese Am-
bassador, as we’ve called for multiple times, to come and testify be-
fore this committee. We cannot fully understand this pandemic and
the impact it’s had on the American people without understanding
the role of the Chinese Communist Party and the Chinese Govern-
ment in this coverup.
But let’s start with where America was prior to COVID. Prior to
COVID–19, the economy added jobs every single month since the
election of President Trump. Prior to COVID–19, since the Presi-
dent’s election, the economy has added more than 7 million jobs.
This is more than the entire population of the state of Massachu-
setts in 2018. This is 5.1 million more jobs than the Congressional
Budget Office projected in its final forecast before the 2016 elec-
tion.
In 2019, real median household income increased by more than
$4,000 per household, reaching an all-time high of $68,700 of
household income. This represents a 6.8 percent one-year increase
which is the largest one-year increase in median income on record.
As income grew by $4,379 per family in 2019, this represents more
than the entire median income gains during the whole eight years
of the previous administration by more than $1,300 per family.
Poverty also hit a record low in 2019. The official poverty rate
fell to an all-time record low of 10.5 percent, and more than 4 mil-
lion people were lifted out of the poverty between 2018 and 2019
for a 1.3 percentage point decrease. This was the largest reduction
in poverty in more than 50 years. Minority groups led the way in
the alleviation of poverty. Compared to the overall poverty rate re-
duction of 1.3 percent, Black poverty fell by 2 percentage points,
Hispanic poverty felt by 1.8 percentage points, and Asian poverty
fell by 2.8 percentage points. The poverty rate fell to an all-time
record low for every race and ethnic group in 2019. The Black pov-
erty rate fell below 20 percent for the first time in history. Between
the time President Trump took office and February 2020, African
American employment increased by 1.3 million jobs.
Then the virus hit our shores, and President Trump listened to
the experts. In fact, President Trump did take and continues to
take decisive action, carrying out a plan that is saving American
lives, carrying out a plan that is getting us on the verge of mul-
tiple, not one but multiple vaccines for COVID–19. That is a suc-
cessful plan.
Now, if you want to start with the first decisive action, as we fi-
nally found out, despite China’s lies, what was coming in from
China, not just to America but all around the world, the first thing
President Trump did is made a critical, decisive decision: he
banned flights from China. There were critics—we know who many
of them are—using terms like xenophobia and other things, but yet
President Trump was steadfast because he listened to his sci-
5

entists. In fact, Dr. Fauci testified from that very chair you are sit-
ting in, Chairman Powell, just a few weeks ago before this com-
mittee that President Trump’s decision on that and so many other
decisions along the way carrying out his plan was the right deci-
sion and that President Trump’s plan saved American lives.
Of course, the President made other decisions. He banned travel
from Europe once we realized that, while flights were not allowed
in from China, people from other European countries had already
been seeded this disease from China, and then they were coming
into the United States, so the President made another tough deci-
sion, but the right decision, according to all the scientists: he
banned flights from Europe.
Then the President instituted the 15 days to stop the spread plan
which, again, Dr. Fauci from that chair just a few weeks ago, testi-
fied under oath that that was not only the right decision, but that
decision saved American lives as did the subsequent decision the
President made to extend for another 30 days and so many other
decisions that we’ve seen this President make.
We put the strongest economy in American history on a self-in-
duced coma. The pain was real: 40 percent of the job losses oc-
curred among people making less than $40,000 a year. In my home
state of Louisiana, almost 45 percent of the accommodation and
food service work force had lost their jobs, an industry dominated
by low-income workers.
Under President Trump’s leadership, Congress responded in a bi-
partisan way. We passed the CARES Act. We came together to help
those small businesses, to help those families who were struggling,
to help those hospitals who were struggling, and, yes, also to help
those states who were struggling. It put your team to work, Chair-
man Powell, working on carrying out this recovery plan.
While the Main Street lending facility program has perhaps
taken a slightly different path than originally anticipated, the Fed
provided a needed backstop and injected much needed liquidity at
a critical moment. The United States had the smallest economic
contraction of any major Western economy in the first half of this
year during this pandemic, and now America has begun this next
great American recovery. Total nonfarm payroll employment rose
by 1.4 million jobs in August. With the record-breaking job gains
in May and in June and in July and now in August, this economy
has added more than 10 and a half million new jobs just in the last
four months. We can talk about those numbers. We can also talk
about how much more we need to go, but a plan that has created
over 10 million jobs to get that economy back going is the right di-
rection we need to be heading. The unemployment rate ticked down
by 1.8 percentage points to 8.4 in August, beating market expecta-
tions. African-American employment has increased by 1.3 million
jobs from the record that we saw.
So, how do we keep this great American economic recovery on
track? I first want to emphasize a point that Chairman Powell
made in your testimony yesterday, quote: Our economy will recover
fully from this difficult period.
You talked about that yesterday. I’m sure we’re going to talk
about that more today. The Chairman also testified yesterday that,
6

quote, ‘‘the path forward will depend on keeping the virus under
control and on policy actions taken at all government levels.’’
Now, one of those areas in terms of keeping the virus under con-
trol, because, clearly, this has been a critical component of the
President’s plan, is to get a vaccine. As you know, Chairman Pow-
ell, and as members of this committee know, we have three dif-
ferent groups of very well-respected, internationally respected drug
companies that are in final testing, in Phase 3 of FDA testing, for
a vaccine. We don’t know when this will complete. We don’t know
if all three, one, two, maybe all three will get approved by the FDA.
But never in our history have we seen one, let alone three, vaccines
on the brink of actually being approved by the FDA in this quick
of a period of time.
And why is it? It is not by accident. It is because of the Presi-
dent’s plan. It is called Operation Warp Speed that’s brought us to
this point. Some of this is money that we voted on in a bipartisan
way for the CARES Act, that we allowed the FDA, CDC, and other
agencies to have increased ability to go out and encourage the de-
velopment of a vaccine, no corners being cut. Critical, critical point.
No corners have been cut. We’ve heard from many of the top sci-
entists working on this just how detailed this is, just how many
people, thousands, tens of thousands of Americans who have signed
up.
I want to congratulate and thank, by the way, Mr. Chairman, the
250,000-plus Americans who signed up to participate in these
trials. It’s unprecedented that Americans from all walks of life have
stood up and said, ‘‘I’m willing to be a part of these trials so that
we can get a vaccine that will save American lives.’’
I am concerned, Mr. Chairman, that there’s some people that are
trying to undermine the public confidence in this process. You
started to see it just last week, some politicians, for their own per-
sonal benefit, trying to put doubt in the heads of people whether
or not this process is going to yield a safe and effective drug. There
ought to be no doubt. There ought to be nobody trying to use poli-
tics to interfere with this process. The highest integrity, not just in
America but in the world, is taking place at the FDA. The FDA is
the gold standard for the world at testing and approving drugs, and
no one has suggested that that process has been compromised. I
challenge anybody to name one company on this list that would cut
corners or speed up the process that involves putting a drug in
your body just because they’re trying to help some candidate for po-
litical office. That’s a ridiculous and dangerous notion. That kind
of attempt to reduce public confidence would cost American lives.
So, let’s follow the science. Let’s let the FDA run its course. If
a drug or two or three or more get approved - vaccines, therapies
- we ought to celebrate that. We ought to applaud that and encour-
age people to listen to their doctor. Ultimately, that’s a discussion
between them and their doctor about whether or not they should
take this, but let that process move forward without further cor-
ruption.
And, again, I applaud the President for the work he’s done to put
all of these plans in place, to lay out through CDC how schools can
safely reopen. We need to encourage all elements of our economy
to safely reopen. It can be done. Some are choosing to do it, and
7

some at the local level are choosing not to do it. We’ve seen and
we’ve heard testimony about the devastating impact on children,
for example, when a local school system makes the decision not to
safely reopen for in-school learning. It can be done safely. The
guidelines are there all around. Some are choosing to do it, and
some aren’t, but there’s consequences to those children. There’re
consequences when economies are shut down, and we’re seeing
death rates, unfortunately, go up in other areas because people are
losing their jobs, losing their way of life, companies that are col-
lapsing.
We’ve got a bill, Mr. Chairman. I brought this to the majority
leader’s attention. Congressman Chabot from Ohio filed a bill to
take the remaining PPP money. We’ve got $138 billion remaining
in the Paycheck Protection Program sitting idle in a bank account
because the program expired. It was a highly successful program.
It wasn’t a Republican program or a Democrat program. We all
voted on it, and it had unbelievable success, over 50 million jobs
that had been created, and yet there are many of those businesses
that are still struggling today, that want to get back up and run-
ning, that could use a second lifeline, and we have the money to
do it. What Congressman Chabot’s bill does is frees up that $138
billion so that those small businesses who are actually having a de-
cline in their sales—some are increased in their sales, but some are
declined, let those businesses that are still struggling go a second
round with that money that’s sitting idle in a bank account. I
would hope that the majority would bring that bill to the floor.
That’s tremendous bipartisan support. An article in The Hill today
talks about a number of Democrats who are very interested in that
bill, and yet we’re not allowed to get a hearing on that bill on the
House floor. We could come together and get that done. I know
there are bigger issues that are being negotiated, but that negotia-
tion has been going on for weeks. Let’s take a program we already
agree on and at least give a lifeline to those small businesses who
are struggling while we work to get this great economic recovery
back on track.
I look forward to your testimony, Mr. Chairman. And, with that,
I yield back the balance of my time.
Chairman CLYBURN. I thank the ranking member for his state-
ment, and I just wish to say, as we turn to our witness, Mr. Rank-
ing Member, I’ve only heard one politician cast any doubt on the
scientific research being done, as well as a timeline for when this
vaccine may come online, only one that I’ve heard that from.
I would like now to introduce our witness. Today, the select com-
mittee is pleased to welcome the Honorable Jerome H. Powell,
Chair of the Board of Governors of Federal Reserve System.
Thank you, Chairman Powell, for being here today.
Please stand so I may swear you in. Please raise your right hand.
Do you swear or affirm that the testimony you’re about to give is
the truth, the whole truth, and nothing but the truth, so help you
God?
Mr. POWELL. I do.
Chairman CLYBURN. You may be seated.
Let the record show that the witness answered in the affirma-
tive.
8

Without objection, your written statement will be made part of
the record.
Chairman Powell, you are recognized for your opening statement.
STATEMENT OF THE HONORABLE JEROME H. POWELL, CHAIR,
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Mr. POWELL. Thank you. Chairman Clyburn, Ranking Member
Scalise, and other members of the select subcommittee, thank you
for the opportunity to update you on our ongoing measures to ad-
dress the hardship brought by the pandemic.
The Federal Reserve, along with others across government, is
working to alleviate the economic fallout. We remain committed to
using our tools to do what we can for as long as it takes to ensure
that the recovery will be as strong as possible and to limit lasting
damage to the economy.
Economic activity has picked up from its depressed second quar-
ter level when much of the economy was shut down to stem the
spread of the virus. Many economic indicators show marked im-
provement. Household spending looks to have recovered about
three-quarters of its earlier decline, likely owing in part to Federal
stimulus payments and expanded unemployment benefits. The
housing sector has rebounded, and business fixed investment
shows signs of improvement.
In the labor market, roughly half of the 22 million payroll jobs
that were lost in March and April have been regained as people re-
turn to work. Both employment and overall economic activity, how-
ever, remain well below their pre-pandemic levels, and the path
ahead continues to be highly uncertain.
The downturn has not fallen equally on all Americans. Those
least able to bear the burden have been the most affected. The ris-
ing joblessness has been especially severe for lower wage workers,
for women, and for African Americans and Hispanics. This reversal
of economic fortune has upended many lives and created great un-
certainty about the future.
A full recovery is likely to come only when people are confident
that it is safe to reengage in a broad range of activities. The path
forward will depend on keeping the virus under control and on pol-
icy actions taken at all levels of government. Since mid-March, we
have taken forceful action, implementing a policy of near zero
rates, increasing asset holdings, and standing up 13 emergency
lending facilities. We took these measures to support broader finan-
cial conditions and more directly to support the flow of credit to
households, businesses of all sizes, and state and local govern-
ments. Our actions, taken together, have helped unlock more than
a trillion dollars of funding which, in turn, has helped keep organi-
zations from shuttering, putting them in a better position to keep
workers on and to hire them back as the economy continues to re-
cover.
The Main Street Lending Program has been of significant inter-
est to this select subcommittee and to the public. Many of the busi-
nesses affected by the pandemic are smaller firms that rely on
banks for loans rather than the public credit markets. Main Street
is designed to facilitate the flow of credit to small-and medium-
sized businesses. In establishing the facility, we conducted exten-
9

sive outreach, soliciting public comment and holding indepth dis-
cussions with lenders and borrowers of all sizes.
In response to feedback, we’ve continued to make adjustments to
Main Street to provide greater support to small-and medium-sized
businesses and to nonprofit organizations, such as educational in-
stitutions, hospitals, and Social Service organizations. Nearly 600
banks, representing well more than half of the assets in the bank-
ing system, have either completed registration are in the process
of doing so. About 230 loans totaling roughly $2 billion are either
funded or in the pipeline.
Main Street is intended for businesses that were on a sound foot-
ing pre-pandemic and that have good, longer term prospects but
have encountered temporary cash-flow problems due to the pan-
demic and are not able to get credit on reasonable terms as a re-
sult. Main Street loans may not be the right solution for some busi-
nesses, in part because the CARES Act states clearly that these
loans cannot be forgiven. Our credit facilities have improved lend-
ing conditions broadly, including for potential Main Street bor-
rowers. And the evidence suggests that most credit worthy small-
and medium-sized businesses can currently get loans from private
sector financial institutions.
Many of our programs rely on emergency lending powers that re-
quire the support of the Treasury Department and are available
only in unusual circumstances. By serving as a backstop to key
credit markets, our programs have significantly increased the ex-
tension of credit from private lenders. However, the facilities are
only that, a backstop. They are designed to support the functioning
of private markets, not to replace them. Moreover, these are lend-
ing, not spending powers. Many borrowers will benefit from these
programs, as will the overall economy, but for others, a loan that
could be difficult to repay might not be the answer. In these cases,
direct fiscal support may be needed.
Our economy will recover fully from this difficult period. We re-
main committed to using our full range of tools to support the econ-
omy for as long as needed. Thank you.
Chairman CLYBURN. Thank you. Thank you very much, Chair-
man Powell.
Because we are running behind on time, Mr. Ranking Member,
I’d like to go out of order and recognize one of our members for his
questions so that he may go into another meeting.
Mr. SCALISE. Yes. We have no objection to that, Mr. Chairman.
Chairman CLYBURN. I now recognize Mr. Foster for five minutes.
Mr. FOSTER. Well, thank you, Mr. Chair, and hello, Chairman
Powell. I would like to thank the chairman and my colleagues for
letting me ask my questions early here as I have to leave to chair
a hearing on the subcommittee on investigations and oversight in
the Science Committee into political interference into epidemiolog-
ical statistics at the CDC.
So, you know, the—and I’d like to begin, actually, by talking
about the importance of regulatory independence. The coronavirus
response provides us with two crystal clear examples of both the
benefits of regulatory independence and the dangers of political in-
terference. The independence of the Federal Reserve seems largely
to have been respected during this crisis. As a result, you suc-
10

ceeded in the major part of your charge: to stabilize the financial
system against external shocks.
Unfortunately, we’ve also seen a tragic example of the dangers
of political interference into jobs best left to experts as tragically
demonstrated by the dangerous and incompetent political inter-
ference by the Trump Administration into the jobs of professional
scientific staff at the CDC, NIH, FDA, and other public health
agencies. Tens of thousands of Americans have died as a result, 4
percent of the world’s population and 25 percent of the deaths, and
no amount of attempts to rewrite history will change that brutal
fact. Many more thousands are at risk if the public loses confidence
in the safety and effectiveness of an approved vaccine due to per-
sistent manipulation or attempts to manipulate the scientific judg-
ment of career professionals.
So, Chairman Powell, you should count your lucky stars that you
have been able to do your job largely behind the firewall of inde-
pendence that Congress has crafted for you and that you can de-
pend on the integrity of the statistics that you need to do your job.
Now, in your testimony, you mentioned doing what you can to
help our economy, an acknowledgment of the limits of the Fed’s
ability to help different segments of the economy survive. And the
intervention to minimize pain on Wall Street has been largely suc-
cessful thanks, in part, to the Federal Reserve’s unprecedented
intervention in the corporate bond market. These interventions
have dramatically lowered the cost of raising capital for large cor-
porations, and these markets are now functioning adequately, al-
though perhaps distorted, due to significantly underpricing risk
compared to what would have happened without Fed intervention.
During the previous financial crisis, we saw risk spreads over
treasuries for most corporate bonds, you know, went out to several
hundred basis points and persisted for about a year while, in this
crisis, the yield spike was much smaller and disappeared promptly
in response to the Fed’s intervention.
At the other end of the market, the PPP program has been sig-
nificantly successful in providing a path for survival for many of
the smallest businesses largely because of the prospect of loan for-
giveness, and there is bipartisan support for extending that pro-
gram. But there has been difficulty in crafting an appropriate pro-
gram for medium-sized businesses. You know, the Fed does have
a facility for small-and medium-sized businesses, the so-called
Main Street lending facility, but uptake has been rather small. In
large part, this is because they’re loan programs, and many busi-
nesses do not need loans. They need money to survive, but handing
out taxpayer money carries many moral hazards.
So, like—so, my open-ended question here is what are the pos-
sible extensions and modifications to that program that you may
have considered but may have discarded that might have made it
more effective in delivering capital to midsize businesses on which
so many jobs depend?
Mr. POWELL. Thank you, Mr. Foster. So, I’ll first say on the cor-
porate credit facilities, the larger companies that have access to the
bond market were—that market was closed down in February and
March, and these are very large companies. Their businesses were
severely affected by the pandemic, and our actions were in no way
11

an attempt to relieve pain on Wall Street. They were solely focused
on opening up those markets so that those companies could finance
themselves and keep their workers working, and I think we’ve had
good success in that. The two facilities we erected together really
have worked to allow companies to finance themselves, not so
much to borrow from us but our backstop. So, I think those are—
we’re pleased at the success we’ve had so far with that.
You asked about Main Street. Main Street is a—this is medium-
sized companies and smaller companies that sort of fall between
the PPP program and the corporate credit facilities, and that’s a
world where lending takes place through banks. Every bank credit
agreement is carefully negotiated and unique in its own way, so
there isn’t the standardization that allows you to intervene quickly
in the bond market. So, it’s very, very difficult, and the only way
for the Fed to reach those companies was through the banking sys-
tem. So, we had to create standardized products that would meet
the needs of as broad as possible a range of companies and do that
in a way that was consistent with section 13–3 and the CARES
Act.
As you’ve seen, we’ve had repeated waves of efforts to broaden
the appeal of that program. We’ve done most of the things that we
can think of, or, basically, all of the things we can think of that
are clear gains, we’ve done. We’re looking to do more, but the up-
take is modest. You’re correct in saying that, but I would say, more
broadly, credit is pretty broadly available in the space of small-and
medium-sized companies. Banks are lending. If the economy per-
forms worse than we expect, then Main Street will be there to take
on a heavier load. But I would say the things that we’ve done have
been—have really been to widen the appeal of that program and
its effectiveness. And I don’t—nothing major that we’re looking at
now—there is nothing major that we see now that we—that would
be consistent with opening it further.
Mr. FOSTER. Well, yes. I’m afraid I’m over time here, but I urge
you to remain creative and to see what you can do to make that
more effective.
I yield back.
Chairman CLYBURN. Thank you very much, Mr. Foster.
The chair now recognizes the ranking member for five minutes.
Mr. SCALISE. Thank you, Mr. Chairman.
I do want to give an update. Just—literally, just a few minutes
ago—I know I showed this chart in my opening, but literally a few
minutes ago, there was an announcement that a fourth company
has just been entered into Phase 3 of FDA testing, and that’s John-
son & Johnson. It was a drug that was showing tremendous
progress during Phase 2, but just less than an hour ago, we got the
word that the FDA has now moved Johnson & Johnson into Phase
3 of testing on a vaccine that they’re seeing tremendous progress
in. This is four different major, internationally respected drug com-
panies in America that are on the verge of a vaccine for COVID–
19 that can be approved by the FDA. Again, I applaud President
Trump for his leadership at putting this plan in place through Op-
eration Warp Speed to remove red tape so the scientists can actu-
ally focus on saving lives, and this is what it’s yielding. Let’s con-
tinue to embrace that revolutionary pace of scientific research.
12

Chairman Powell, I want to ask you about where we are in the
economy. Clearly, as I talked before, we saw historic job creation,
job growth, personal income levels increasing for people in every
demographic group at every income level prior to COVID. Now
we’re working through this pandemic. As the whole world is deal-
ing with it, we’re trying to get through this as well. But between
April and August, how many percentage points have we seen un-
employment fall in America as we’ve started to reopen our econ-
omy?
Mr. POWELL. You know, I think the official number is something
like from 14 and change to 8.4 percent today. But you said it in
your remarks. Two things are true. One, we’ve really made sub-
stantial progress, and that’s great to see and faster than we ex-
pected, frankly, but there’s plenty left to do.
Mr. SCALISE. Clearly. And when you compare, let’s say, to the
2008 great recession, I’ve seen numbers that it took over 10 years
for our economy to recover from that. Is that about what you’ve
seen?
Mr. POWELL. Yes. Of course, that was different. This was a situa-
tion where we shut the economy down, so we had outsized loss of
employment and loss of economic activity, so you would expect that
the first new quarter would be good. As I say, this is—and this has
been a good start to a recovery.
Mr. SCALISE. Right. And, of course, the economy was shut down
in part to make sure our hospitals weren’t overrun but also to slow
the death rate, as we learned about this virus after China lied to
the world, which we still ought to have a hearing on before this
committee—of all things we should be having a hearing on, it’s
China’s role in creating this. But because of the President’s action,
if you look throughout the world, this is a global pandemic. It’s af-
fecting every country. We mourn every loss of life here in America.
We’ve crossed the 200,000 death number. We mourn all of those
deaths. You look around the world. Many countries actually are ex-
periencing a higher death rate than the United States, and so
that’s where we need to keep doing the things we’re doing to bring
that number down as we are. You see these other countries that
are above us. They will benefit, by the way, from the work we’re
doing to develop a vaccine. As we work and we put money in place
to develop a vaccine and the President’s Operation Warp Speed is
getting us to the brink of that, that work will also benefit all of
these other countries around the world. And notice, by the way,
you don’t see on this list China. You don’t see on this list Russia
because they don’t even release their numbers, so the world doesn’t
really know the full impact. But as you can see, we all want to get
to that place where we’ve conquered this disease. Fortunately, be-
cause of science and the leadership of the President, we are on the
brink of a vaccine to actually get around the hump, and that helps
us to safely reopen the economy even more.
I want to ask you about safely reopening schools because first,
I’ll ask in a—I mentioned this in my opening. We’ve done a lot to
help small businesses. The Paycheck Protection Program has been
highly successful. If we were, for example, able to go a second
round for those businesses that are still struggling, let’s say 25 per-
cent or more loss compared to where they were before where they
13

could actually go for a second round of Paycheck Protection Pro-
gram relief, would that be helpful to the economy, in your view?
Mr. POWELL. Yes. I’d say—I would say it this way. The returns
to making people feel safe enough to engage in ever more activities,
from an economic standpoint, those returns will be very high.
Mr. SCALISE. And safely reopening schools. We’ve seen CDC pro-
tocols, American Academy of Pediatrics. There’s a way to do it.
Some are doing it; some aren’t. Is it a benefit to the children, and
is it a benefit also to the economy to safely reopen schools?
Mr. POWELL. Yes, with emphasis on safely. People have to feel
confident, and we have to, you know, observe those——
Mr. SCALISE. Right. People can wear masks. You can put in
plexiglass. Students can be 10 feet from the nearest teacher. There
are all of those standards in place. A lot of that’s laid out by the
President’s plan. If anybody cares to read it, it’s all online. You can
go get it right now. So, hopefully we will continue to encourage peo-
ple to follow those guidelines and safely reopen, continue to encour-
age the great work this President’s done to get us to the brink of
a vaccine so that we can finally safely reopen the economy and get
this country back on track. Thanks for the work you’re doing. I’m
sure we’ll talk more about it.
Mr. Chairman, I yield back.
Chairman CLYBURN. Thank you very much, Mr. Ranking Mem-
ber. The chair now recognizes himself for five minutes of questions.
Chairman Powell, I notice in your opening statement here, you
mentioned the fact that these small businesses, Main Street loans
are—have to be repaid under the law. Now, how did the minimum
loan get to be $250,000? I don’t think that’s in the law.
Mr. POWELL. No. So, we designed this—this program for me-
dium-sized companies, basically, and we had a—if you may recall,
we had a—I think we had it $2 million originally, and then we
moved it to $1 million minimum, and then we moved that to
$250,000. So, actually, the demand in the facility, there really
hasn’t been any under a million dollars. It would be a different fa-
cility, truthfully, if we were going to try to lend money in very
small chunks like that. It would—you know, doing the due dili-
gence on hundreds of thousands of very small loans would be a
really different program. And I would tell you that it’s more—that
part of the market is better suited to the Paycheck Protection Pro-
gram. But it would be—the current facility would not work for
much smaller loans. We’d have to start a new facility that had a
lot less protections for the taxpayer and that kind of thing.
Chairman CLYBURN. So, with 99.7 percent of the money still sit-
ting there, you don’t think you can come up with a program that
would use the money, $1.1 trillion, to try to keep people employed,
try to keep businesses open? It’s still sitting there.
Mr. POWELL. Well, the purpose of these facilities was to reopen
the private capital markets. About a trillion dollars of lending has
taken place just between the corporate credit facilities and the mu-
nicipal facility. All of that was closed down in—effectively in March
and April. We put these facilities in place, and now there are
record amounts of borrowing happening in the corporate facilities—
the corporate facility and in that space, rather, and in the muni—
muni space. We set up a facility, and then the private market
14

started working again. With Main Street, it’s not so simple because
you don’t have those kind of externalities. We’ve worked hard to
reach borrowers. Again, as I said in my opening statement, we’re
looking for borrowers who were in good shape before the crisis and
had good longer term prospects, but because of the pandemic,
they’ve lost—had a real effect, and now they can’t get loans else-
where. So, that’s a relatively modest group in size, and we’ve done
everything we can to reach out to them. And, you know, we are—
we do—are experiencing a steady flow of borrowers, and we expect
that to continue and to pick up if the economy weakens.
Chairman CLYBURN. Well, Mr. Chairman, I—in view of this
issue, I’m going to call your attention to the report that we just
published this morning. We find that, in the dual mandate that the
Fed has, one of them is maximum employment. Yet the Fed bought
corporate bonds issued by companies, we found this in our report,
that laid off more than 1 million workers since March. That doesn’t
sound like maximum employment to me. And of these companies,
383 paid dividends to their shareholders during the pandemic. Laid
off over a million people, paid dividends to 383—I mean, 383 com-
panies paid dividends while laying off people. That doesn’t sound
like maximum employment.
Mr. POWELL. It doesn’t sound good, but let me explain it a little
bit. So, the secondary market corporate credit facility, what we did
was we bought very, very small amounts of bonds across 800 dif-
ferent issuers, and those are out—already outstanding bonds.
We’re not making loans to those companies. They’re not—they’re
not getting a loan from us at all. We’re buying from another buyer.
And the reason we bought from 800 was we didn’t want to be de-
ciding which company to buy from and which not. So, that’s what
we did. We didn’t ask these companies whether we could buy their
bonds or not. I think if we’d said we, you know, ‘‘We want to buy
your bonds because we want to make you part of an index,’’ they
would probably have said no, and, ‘‘We want you to do—we want
you to do certain things.’’ They would have opted out. We had no
basis to ask them to do anything. We didn’t ask their permission.
That was the point of this. It wasn’t to allocate credit. And these
are—these are tiny amounts in the grand scheme of things. None
of those companies sees themselves as having gotten a loan from
the Fed. Again, there are 800 of them, and we’re buying very,
very—we’re down to buying, I think, $20 million worth of bonds
now daily, and we’re barely present in that market at all. So, I
think it’s—you know, the real thing is the primary market facility,
which is where we were going to make loans to those companies,
we’ve made zero loans. And the reason is that when we set the fa-
cility up, borrowers and lenders started lending again because we
were an effective backstop, so—and these were big American com-
panies that were under tremendous strain, and they could have
laid off hundreds of thousands of people and didn’t because of this
facility. So, I would say it’s been a success.
Chairman CLYBURN. Well, as I—my time has expired, but I
would like to say that 227 of these companies over the last three
years have been accused of illegal conduct, 227 of them.
With that, I yield five minutes to Mr. Jordan.
Mr. JORDAN. Thank you, Mr. Chairman.
15

Chairman Powell, yesterday, you said our economy will recover
fully from this difficult period. Would it recover faster if some
states weren’t still largely locked down?
Mr. POWELL. You know, the decision about when to lock down
and how to open up is one that’s given to others other than the
Fed, so I wouldn’t have a view on that.
Mr. JORDAN. But just simple terms. I mean, you think about it.
We’ve got California, New York, New Jersey, Pennsylvania, Michi-
gan still largely locked down. That’s—that’s, like, one-fourth of our
population. I’m—frankly, I’m amazed at the American comeback,
the recovery that’s happening in spite of the fact that you’ve got
these states, some of our biggest states in population, still largely
locked down. I think it’s a simple question. If they were opening
faster, would our economy be recovering faster?
Mr. POWELL. So, you know, the question is of opening —is about
reopening— in a way that is sustainable.
Mr. JORDAN. Yes.
Mr. POWELL. And it’s just not a matter of reopening. You’ve got
to do it in a way that’s sustainable. If you look at some of the Euro-
pean countries right now that were doing so well a few months ago,
now they’ve got a big outbreak. So, I think it’s a very difficult judg-
ment, how fast to reopen given how urban your population is be-
cause that—there seems to be a lot of spread in urban areas. So,
again, we have a lot of responsibilities. You’ve given us a precious
grant of independence if we stay out of politics and stick to our
knitting. And I wouldn’t prejudge state and local governments in
their decisions here.
Mr. JORDAN. But are you somewhat amazed, as I am, that the
economic recovery is as strong as it is in spite of the fact that these
states are still largely locked down? I think that’s amazing when
the unemployment numbers have come down like they have in
spite the fact that you’ve got five—these are, like, 5 of the top 10,
11 states in population in the country still largely locked down.
Mr. POWELL. Yes. I don’t know that there—they may be locked
down in the sense people are working from home, but I’m not sure
their GDP is lower systematically. I’d have to look at that. If you
think about a place like New York, you know, a lot of what’s hap-
pening in New York is the financial markets, and people are work-
ing from home. Their output, such as it is, will be high even though
they’re still somewhat locked down.
Mr. JORDAN. Was the economy pretty good prior to COVID?
Mr. POWELL. I would say yes. A lot to like about a tight labor
market. A lot to like about 3 and a half percent unemployment.
Mr. JORDAN. It was great, wasn’t it?
Mr. POWELL. You know, there are always problems in an econ-
omy, but this was as good an economy as we’ve seen in a very long
time.
Mr. JORDAN. Wages were up?
Mr. POWELL. Wages started moving up, particularly for people at
the low end of the wage spectrum, in the last couple of years. As
the—as unemployment got down and the labor market got tight,
you saw the benefits going. As I said, there’s a lot to like about a
tight labor market.
Mr. JORDAN. The poverty rate was down?
16

Mr. POWELL. Yes.
Mr. JORDAN. Economic—was the economy better than—better for
everyone in our population?
Mr. POWELL. I would—I don’t know about everyone, but I would
say that the benefits—and I said this recently in a set of public re-
marks. The benefits began to be more widely shared. As unemploy-
ment got lower and lower, what you see is businesses are hiring
people who haven’t been successful in the labor market and pulling
them in, and they’re getting training, so there’s a lot to like about
that.
Mr. JORDAN. The economy was good—it was better for African
Americans, Hispanic Americans. It was better for all Americans,
wasn’t it, low-earning Americans, high-earning Americans? Wages
up, unemployment down. It was better for everyone, wasn’t it?
Mr. POWELL. In a lot of measures, yes.
Mr. JORDAN. Unemployment was low prior to COVID?
Mr. POWELL. Yes.
Mr. JORDAN. Low—lowest in 50 years?
Mr. POWELL. Lowest sustained period of—since the 1960’s, yes.
Mr. JORDAN. Here is what—here is what Secretary Mnuchin said
just two weeks ago when he testified in front of this same com-
mittee: I believe there’s no question that the reason we have unem-
ployment high right now is that certain states are not opening up.
Do you agree with Secretary Mnuchin’s statement?
Mr. POWELL. I cannot validate that, no. I’d have to go back and
look. I’m not sure that’s right.
Mr. JORDAN. You don’t think the Secretary is right, that if states
would open up, unemployment numbers will come down?
Mr. POWELL. This is a—you’re asking me a data question, which
is, are—basically, does the unemployment rate correlate with the
level of lockdown in particular states, and I’ve learned in my al-
most nine years at the Fed to talk to the economists before I could
answer that.
Mr. JORDAN. But it would seem common sense, Chairman Powell,
that if your state is largely locked down and not letting restaurants
open and not letting things happen, not letting people go back to
work, saying some businesses are essential, some aren’t, it would
seem just common sense if you begin to open up, unemployment is
also going to come down. I think that’s all the Secretary is saying.
I’m just asking if you agree with Treasury Secretary Mnuchin.
Mr. POWELL. Yes, again, I’d want to look at the data. I mean,
there’s common sense in what you’re saying, but, again, I think of
New York, in particular, people are working from home, but they’re
not unemployed. So, it wouldn’t change things. I mean—you
could—look at it this way: You could reopen all the restaurants in
the United States right away, and you’d have technically unem-
ployment go down. Would that be a smart thing to do? That would
be a question for others.
Mr. JORDAN. OK.
I yield back.
Thank you.
Chairman CLYBURN. I suspect, Mr. Chairman, we would see a
flourish in the economy with undertakers and cemeteries.
With that, I’ll yield five minutes to Ms. Waters.
17

Ms. WATERS. Thank you very much, Mr. Chairman and Mem-
bers, of course. I came here today to continue discussion with Mr.
Powell or the Feds. And I’m always pleased to see them, and we
work well together. But, you know, Mr. Scalise always starts out
by talking about how great the President has been in handling this
pandemic, this COVID–19.
He’s constantly using the time to talk about China and China’s
responsibility in all of this. One of the things I’d like to find out
from Mr. Scalise—I don’t want to do it today—is whether or not he
would advise the President and his daughter to give up the trade-
marks that they have with China and the business relationships
they have with China in the interest of punishing China.
Mr. SCALISE. Will the gentlelady yield?
Ms. WATERS. No, I will not yield.
Mr. SCALISE. I’d be happy to talk about that.
Mr. JORDAN. You asked him a question.
Ms. WATERS. In addition to that, I would like to ask Chairman
Powell, did you hear that the CDC had basically issued an advisory
that said that the virus could be airborne for six feet or more and
infections, and then they took it back within 24 hours? Did you
hear that?
Mr. POWELL. I’m actually having a hard time hearing you, but
I don’t think I did, no.
Ms. WATERS. What I want to know is, did you hear about the
CDC having issued a new advisory that the virus was airborne and
it could infect those six feet away because of the emissions, you
know, from an infected person? Did you hear about that?
Mr. POWELL. Yes. Yes, I did. Sorry.
Ms. WATERS. OK. You have said that this is a health problem
that we have, and while everybody is trying to dump on you about
the economy and what you’re doing or not doing, did you indicate
ever in your speeches or in your talks that, to the degree that we’re
able to handle the health problem, that certainly would help us
with strengthening our economy. Is that true?
Mr. POWELL. Pretty much every set of remarks I give I say that
the path of the economy’s going to depend on our ability to retain
control, to get control of the virus and keep control, and that we
have the power to help that by following the advice of the experts,
by wearing masks and keeping distances and that kind of thing. In
fact, those things help us reopen the economy faster.
Ms. WATERS. Did you also hear recently that there are some
states, some of which were mentioned here this morning, where the
virus is spreading, it is not subsiding? Did you know that there are
some states that are in that situation?
Mr. POWELL. Yes, ma’am.
Ms. WATERS. And did you know that the President of the United
States of America did not begin even talking about or letting the
public know that we were confronted with the virus until after
maybe a couple of months that he knew? Did you hear something
like that?
Mr. POWELL. I would have no comment on that, Madam Chair.
Ms. WATERS. Thank you. Well, let me just say that, when we
have members who are talking about how good the President has
been, how, you know, the President has been a leader, and we
18

know that we can identify several things that the President has or
has not done that has caused extended problems with this virus,
I think that we should pay attention to the experts and do every-
thing that we can do to help the economy by getting a handle on
the infections and the virus that is taking place.
I am absolutely disturbed about the fact that someone is pushing
to talk about opening up our schools when we have 40,000 students
that have been infected. So, having said all of that, and an answer
to Mr. Clyburn about the $250,000, it was once $1 million. Because
of me and my committee, working with Ms. Velázquez, you agree
to reduce it from $1 million to $250,000.
Is that right?
Mr. POWELL. We did reduce it to $250,000, yes, ma’am.
Ms. WATERS. OK. And in a hearing just yesterday or so, when
you were asked about this, along with Mr. Mnuchin, Mr. Mnuchin
said, well, perhaps it could be reduced to $100,000 as the criteria
for small businesses being able to make loans in the Main Street
program.
Is that right?
Mr. POWELL. Yes. The Secretary did say that.
Ms. WATERS. And what you have said is that you are basically
involved in monetary policy, not fiscal policy, but what has hap-
pened with COVID, you have kind of been involved in ways that
you would normally not be involved, and you’ll take another look
at this, even though you tried to explain here today about the Main
Street program and how it works now.
I have to tell you, while I agree with you on a lot of things, I’m
really concerned about Main Street also. I’m concerned that, when
we think about Main Street, we really don’t think about the size
businesses that you have incorporated in Main Street. Some of us
see those as big businesses, to tell you the truth.
Would you tell us what that amount is that covers the Main
Street program?
Mr. POWELL. It’s less than 15,000 employees or 5 billion in rev-
enue. That’s the top end. We don’t actually set a bottom end, I
don’t believe, in terms of size, but it was designed to go between
the PPP facility, broadly, between the PPP facility and the cor-
porate credit facilities for the big companies.
Ms. WATERS. My time is expired, but I’d certainly like to con-
tinue to ask you to see what you can do to help us with our small
businesses and the amount of money that is left that you have.
Thank you.
I yield back.
Chairman CLYBURN. The chair now recognizes for five minutes,
Mr. Luetkemeyer.
Mr. LUETKEMEYER. Thank you, Mr. Chairman.
Chairman Powell, welcome. Always good to see you.
Last week, we had a hearing with regards to some of the state
and local needs. And we had a gentleman who—Mr. Holtz-Eakin,
who you probably know, who was former CBO director. We asked
him the question about how many dollars he thought we needed to
have in our budget to make whole the state and local folks. He said
that revenues are coming in on the state and local side at record
revenues in 16 different states over last year with regards to sales
19

tax revenue, but not coming in too well, obviously, with income tax
revenue. And to make them whole, you would take about 200 to
$250 billion.
So, my question to you is, does that seem reasonable? Is that in
the ballpark of what you would anticipate to make the state and
local folks whole from the losses that we’ve incurred over the last
several months due to COVID?
Mr. POWELL. So, I asked for views on that. I just happened to
a couple of days ago, and there’s actually a wide range of esti-
mates. But that’s certainly within the range of estimates. You can
get to a higher estimate. Of course, expenses have gone up too.
Mr. LUETKEMEYER. But my point is, if we’re in the range of $200
billion to $250 billion and we know that from the leadership on the
other side, they’re looking at trying to do a trillion to $2 trillion of
additional money for state and locals, that doesn’t seem to be
matching up with where we need to go, and seems to be the lever-
age point that the other side wants to use to try and hold up
changes to the PPP program and other things that are necessary
to keep our economy going and address the needs of those who are
left out of this.
But I mean, that’s a fair statement?
Mr. POWELL. Yes. I have a strong desire to not play a role in
your discussions over how much.
Mr. LUETKEMEYER. You’re a smart man, Mr. Powell.
Thank you very much.
You know, one of the things that’s been talked about here is your
different facilities and congratulate you on your quick response. I
know the Fed usually—and don’t take this the wrong way, but in
my opinion of them, it’s like trying to turn a ship around in the
middle of the ocean. It takes a long time to get anywhere with the
Fed. But you guys were very responsible, like a speed boat in the
middle of a lake with regards to how you set these facilities up and
did a fantastic job. Thank you so much.
But it seems to me like there’s a misunderstanding of how
these—how the economy works with regards to helping out bigger
businesses. I’ll give you, for instance. I’ve got Boeing right in my
district and another big plant just outside my district. I know it’s
one of—in this report, this is one of the companies that’s mentioned
here, but if you don’t help a company out like that to make them
stay whole, stay in business, you’re going to lose all the jobs that
are there, not just the ones that they laid off. And you’ll also lose
the small businesses that make parts for all these planes.
I’ll give you an example. I got one plane that is made in my dis-
trict; 1,800 small businesses provide parts for that. And all the em-
ployees of those small businesses would be affected. This is big
business, and once it gets back on its feet, it will probably hire
back a lot of those folks just like a restaurant that lays off two peo-
ple and once it gets back going full speed again will hire those two
people back.
Is that a fair statement of how this situation works?
Mr. POWELL. Very much so. Same with the auto companies. A lot
of big American companies have thousands of suppliers, as you
know.
20

Mr. LUETKEMEYER. So, it’s important that we salvage these big
businesses to make sure that we keep those services and things
going, as well as provide—maintain those jobs that we can be re-
tained down the road, pick up the rest, and also help the small
businesses that help to feed into these businesses.
Is that——
Mr. POWELL. Yes.
Mr. LUETKEMEYER. With regards to regulatory stuff. You know,
I can’t let a hearing go by without talking about CECL, so I’m sure
you expected that. You’ve probably got something in your notes. If
not, you’ve got it off the top of your head. But to me this is, you
know, CECL is some of the regulatory stuff, as well as forbearance,
that has got to be playing in, I think, in your role here in this pan-
demic to make sure that we continue to address the credit needs
of the folks across the board, and make sure that the capital and
reserves are not mismanaged and mishandled.
Your agency, the Federal Reserve, comptrollers, FDIC, were all
part of an interim rule that was made with regards to CECL, and
I think we need to continue to push this down the road, and we
proved that it’s pro-cyclical. Treasury came out with a report last
week, which is kind of ambivalent about all of this, which is unfor-
tunate, but do you see that we need to continue to waive and post-
pone the implementation of CECL till this pandemic has passed so
we can see what’s going on?
Mr. POWELL. I think what we’ve done is pretty effective. If we
came to that view, we wouldn’t hesitate to act, but I guess we gave
companies up to five years to insulate themselves from the capital
effects of it.
Mr. LUETKEMEYER. So, the interim rule is two-year delay, three-
year implements. I mean, you guys see that there’s a problem there
with regards to forbearance. Again, to me, we don’t want a repeat
of 1908 and 1909 when the regulars came in and were forcing be-
cause of their rules and regulations to force banks to foreclose and
push out some of our customers. So, to me, I realize that there’s
some rules that’ll be put in place, but if you have a law in place
that both the banks and the regulars can point to that as guidance
to be able to help them through this period to make sure that for-
bearance is given to make sure we don’t close down industries and
businesses.
Would you agree with that?
Mr. POWELL. Yes. I think we came in with a strong banking sys-
tem and that gives us the ability to make targeted temporary ad-
justments to regulation. We’ve done plenty of that, and I think
that’s just a byproduct of all the work everyone did in strength-
ening the system over the last——
Mr. LUETKEMEYER. I had a long discussion the other day with
former Chairman William Isaac, and he made the comment that,
back in the 1970’s, he was part of a group that actually went to
try and help the REITs survive that period. And there was a five-
year forbearance period that was granted to the REITs to try and
salvage them. It would seem to be a good way to address our needs
today to make sure that we don’t push businesses out of being able
to do business.
Agree?
21

Mr. POWELL. Thank you.
Mr. LUETKEMEYER. Thank you.
Chairman CLYBURN. The gentleman’s time has expired.
The chair now recognizes Ms. Velázquez for five minutes.
Ms. VELÁZQUEZ. Thank you, Mr. Chairman, and thank you,
Chairman Powell.
The Main Street Lending Program as the Fed role would ensure
credit falls to small and midsize businesses with the purchase of
up to $600 billion in loans. The program did not make any loans
until July. Why did it take the Fed four months to set up the Main
Street Lending Program when it was able to set up credit facility
for big businesses in just a few weeks?
Mr. POWELL. Main Street is many, many, many times more com-
plicated to set up because, in the case of the companies that have
market access, there’s quite a bit of standardization in the bond
market, and it was straightforward to set up that facility, and we
did so very, very quickly. The difference is that Main Street deals
with medium-sized companies who get their funding in the banking
system and every bank credit agreement for every company is basi-
cally individually negotiated. There’s nowhere near the degree of
standardization. So, it was a much more complicated problem to
solve, and, you know, it took us a lot of outreach, and we took in
public comments. It was quite a bit of work to get to where we are.
Ms. VELÁZQUEZ. OK. I hear you. You said yesterday the program
as set up tends to help larger sized businesses proven by nearly
one-third of loans being over $10 million.
Can you understand why many of us believe the Fed is failing
Main Street?
Mr. POWELL. So, the—if I heard you correctly, most of the banks
that are active in lending are smaller banks, and the loans are fair-
ly small. I don’t know what the average loan is, but there’s lots of
business between $1 million and $10 million, which is not a big
loan for a company that has the kind of employees that one of
these companies would have.
Ms. VELÁZQUEZ. So, Congress already authorized a specific lend-
ing facility to help small businesses in the CARES Act. The Fed
chose instead to set up the Main Street Lending Program.
Does the Fed have sufficient legal authority to provide liquidity
to small businesses who still need credit assistance to followup on
the points raised by Chairwoman Waters?
Mr. POWELL. I think there was a particular Main Street facility
that was outlined in the CARES Act, but that was expressly not
binding on us. It said: Nothing in this facility shall be seen to dic-
tate to the Fed and the Treasury in designing your own Main
Street facility. So, we designed the one that we have, which is de-
signed to be as broadly applicable as we could possibly make it.
Ms. VELÁZQUEZ. So, the CARES Act told you to set up a facility
for truly small businesses that needed the assistance, but you de-
cided to create your own facility despite having the authority,
which is the issues that we’re raising here.
So, last week, the Fed updated its guidance telling participants
that loans made in compliance with Main Street program require-
ments won’t be faulted by examiners. Why was this change made,
22

and how will it help encourage greater participation in the pro-
gram?
Mr. POWELL. We want to work with our banks to make sure that
they understand that we won’t run in and criticize these loans. So,
Main Street is supposed to be for loans that wouldn’t otherwise be
made. In other words, if the loan was already going to get made,
then we didn’t really need Main Street for that. So, they’re riskier
to some degree, and there’s more risk in them, and we want to en-
courage the banks by telling them that we understand that and
that we will not run in and criticize these things unnecessarily if
you make a loan that is consistent with Main Street.
Ms. VELÁZQUEZ. So, Mr. Chairman, will you commit today to tak-
ing a hard look at how to fix the program and even set up a new
facility from scratch, as you mentioned yesterday, to help small
firms on Main Street as we intended, as Congress intended?
Mr. POWELL. I would say this: it would be very hard to create
a facility that reaches very small businesses. The reason is this—
and that’s why I think you were wise in the CARES Act to create
the PPP for smaller companies. To extend credit to hundreds of
thousands of very small businesses, these are largely personal
loans, you know. Business founders are borrowing on their credit
cards or their bank line with a personal guarantee.
Ms. VELÁZQUEZ. I hear you, but, Mr. Chairman, you stated yes-
terday—or I don’t recall when—that the coronavirus is a great in-
creaser of inequality, yet you decided not to collect voluntary demo-
graphic data on borrowers in the Main Street program.
Would you commit to including a voluntary demographic ques-
tionnaire with loan applications going forward? How do we know
that the smaller businesses are being helped by the Fed?
Mr. POWELL. We did not collect that data, and we don’t have any
plans to do so. It’s not a requirement in the law. We’re really im-
plementing the law that you passed.
Ms. VELÁZQUEZ. I yield.
Chairman CLYBURN. The time has expired.
The chair now recognizes Mrs. Walorski for five minutes.
Mrs. WALORSKI. Thank you, Mr. Chair.
Thank you, Chairman Powell. I appreciate you being here.
The part of northern Indiana that I represent is home to major
manufacturers of RVs, boats, and cargo trailers. In fact, 85 percent
of the RVs you see on the road come from my area. Our commu-
nity’s also known among—also the hardest hit during an economic
downturn. In fact, Elkhart County in my district had the Nation’s
highest unemployment rate during the great recession. However,
the coronavirus has turned that on its head. Suddenly RVs and
boats are in hot demand, so the local economy in my area has been
doing incredible, all things considered, but I’ve still had plenty of
small business and nonprofits in my district reach out to me, even
in the last week saying they still need help.
Recovery is neither instantaneous nor even. That’s why it’s sad
that Democrats, led by Speaker Pelosi, have chosen politics over
our economic recovery. Let’s not forget that the HEROES Act they
point to is nothing more than a wish list messaging bill that had
no chance of becoming law. It wasn’t the product of serious negotia-
tions or committee hearings. Instead, it’s chock full of giveaways to
23

special interests and the rich which have nothing to do with re-
building our economy.
The HEROES Act had more mentions of the word ‘‘cannabis’’
than the words ‘‘job’’ or ‘‘hire.’’ It gave more money to state and
local governments that haven’t even fully spent CARES Act money,
and it restored the unlimited deduction for state and local taxes,
or SALT. Over half the benefits of the SALT deduction go to those
with annual incomes of $1 million or more, while only 1 percent of
the benefits go to those making under $100,000 a year.
The nonpartisan Joint Committee on Taxation found that restor-
ing the unlimited SALT deductions for just two years would cost
almost $137 billion. Meanwhile, the Paycheck Protection Program,
which has been a vital lifeline in my district and my state for small
businesses to keep the lights on and save jobs, expired last month.
And Speaker Pelosi refuses to allow a vote to keep helping Main
Street survive.
Chairman Powell, which would you think would be better for our
economic recovery, and I think you’ve already answered this, giving
$137 billion to the rich by restoring the SALT deduction for two
years or using that money to fund more PPP loans?
Mr. POWELL. Again, I don’t want to get into your fiscal debates
with one another, but I do think small businesses would benefit
from more PPP support, and I think there’s probably very wide
agreement on that.
Mrs. WALORSKI. We definitely have benefited in my district and
my state. Chairman Powell, I think it’s an understatement—I don’t
think it’s an understatement to say that PPP was one of the most
critical lifelines for small business and not-for-profits in my dis-
trict. They wouldn’t have survived otherwise, but two weeks ago,
Democrats in the Senate blocked a coronavirus relief package that
would have started—restarted PPP and added new provisions like
allowing for those hardest hit to apply for a second round.
Over here in the House, Republicans have filed a discharge peti-
tion to stop the political games and bring a commonsense bill to the
House floor that would restart PPP, allow a second loan for those
hardest hit, and simplify the forgiveness process.
Chairman Powell, can you talk about what you’ve seen from the
macro level on PPP? And I know you’ve just talked about the need
for a second stimulus. Should a bill that I just described, which re-
starts PPP, allows for a second loan, and simplifies forgiveness be
a part of that?
Mr. POWELL. I guess I’d start by saying that the good economic
data we’ve seen since really May is, to a significant extent, reflects
what you did in the CARES Act. Also just the general reopening
of the economy, but those checks, the unemployment insurance, all
of that really helped to keep people in their homes, keep them
spending, and, you know, it’s a tribute to the fast and forceful re-
sponse that all of you made.
I think we helped as well, but I think the power of fiscal policy
is unequaled by really anything else. You know, I’ve said on a num-
ber of occasions, I think it’s likely that we’ll need more fiscal sup-
port. And the reason I say that is we’ve still got, in the payroll
numbers, we’ve still got 11 million people who haven’t gone back
to work. If you look at broader measures of unemployment, it’s ac-
24

tually more like 16 million who are working part time or have left
the labor force and things like that.
So, there’s a long way to go. We’ve come a long way pretty quick-
ly, and that’s great, but there’s a long way to go. So, I just would
say we need to stay with it, all of us. The recovery will go faster
if there’s support coming both from Congress and from the Fed.
Mrs. WALORSKI. Yes, and I want to thank you for your efforts.
I also want to thank the guidance and the amount of wisdom that
President Trump has had in continuing to appeal for restoring and
recovering of our local businesses. I’ve had two calls in the last cou-
ple of days since I’ve been out here. One from a woman on the west
side of South Bend that’s a social worker running a behavioral
modification agency and one from a restaurant, 100-year-old res-
taurant in North Manchester. And those calls were so disturbing
because what they’re asking for is that second round of stimulus.
And we were hoping that we could have got that in this week while
we’re here. We’re still hoping we can get it in.
I would just plead with Speaker Pelosi and hoping that she lis-
tens to these comments today that we’ve got to restore and we’ve
got to let these businesses in our districts rebound. Lives are still
at stake. You know, we are still looking at saving American lives
and saving American livelihoods at the same time, and there is a
balance, but we need her help to actually get us there.
So, I yield back, Mr. Chairman. Thank you.
Chairman CLYBURN. Thank you for yielding back.
The chair now recognizes Mr. Kim for five minutes.
Mr. KIM. Thank you, Mr. Chairman.
And, Chairman Powell, a pleasure to have you before our Select
Subcommittee here.
I wanted to just start by raising something that a former—your
predecessor, former Chairman Bernanke had mentioned. He had
said in the op-ed earlier this year that after the 2008, 2009 reces-
sion, an $800 billion Federal program authorized by Congress was
already offset by states through cuts in spending and layoffs. He
said, quote, ‘‘Together with the subsequent turn to austerity at the
Federal level, state and local budget cuts, meaningfully slowed the
recovery.’’
He actually told me in a previous hearing before this committee
that, in estimate, he saw that the cost at the state and local level
led to perhaps about a half a percentage point off the growth rate
at a time that the economy was trying to recover. I feel like I’ve
heard some similar statements coming from you before, but I just
wanted to confirm.
Do you agree with former Chairman Bernanke, his assessment,
that cuts to the state and local funding negatively impacted the
economic recovery after the 2008, 2009 recovery recession?
Mr. POWELL. Yes. So, I think there’s been a great deal of re-
search on that question, and it does generally support that view.
Mr. KIM. And, last week, you said that the current economic
downturn is, I think, quote, ‘‘the most severe in our lifetime,’’ that
it’s something that’s worse than what we experienced a decade ago.
What I thought about Bernanke’s point is, you know, just how
he’s trying to frame it here. So, I guess I wanted to just ask you,
would our national economy right now be in a stronger position to
25

recover from this pandemic and crisis if we could avoid state and
local job cuts and slashes in the way that we saw in 2008, 2009?
Mr. POWELL. Well, again, I don’t want to give advice to Congress
on what I’ll do, but, yes, and Chairman Bernanke also said, you
may remember, that if we play our cards right, if we provide the
right amount of support, in a few years, this doesn’t really need to
leave a permanent mark on the economy. And I would also say that
your first effort, the CARES Act, was much bigger, of course, than
the 2008 response, but, yes. Overall, I would agree that there’s
going to be a need for further support, and I do believe that we’ll
get further support. Not sure when or in what quantities or what
nature, but——
Mr. KIM. I appreciate that. And, look, I want to respect your po-
sition here, and I’m trying not to drag you into the middle of the
discussions and the debates that we’re having here in Congress,
but just try to understand the frame by which we should be ap-
proaching this. I find that oftentimes we are talking about this as
if it’s solely about the support and the help that our states and our
local governments need. Certainly, we need to be focused on that.
You, yourself, had raised the point that one in seven workers in
our country is employed by a state or local government, about 13
million workers. That is a huge part of our work force.
That is certainly something here in New Jersey we experience
with full force, but another point that I’ve been just trying to high-
light based off what Bernanke said and your comments today is
that this is about our country as a whole, our economy as a whole.
It’s not just about helping certain states or certain cities, both red
and blue, both Republican and Democrat, but it’s about our na-
tional economy as a whole. So, I just wanted to linger there on this
front because I often hear that the criticisms make it sound like
it’s trying to—that they’re raising concerns about money mis-
management at the state level or bailouts of preexisting debt, argu-
ments like that.
So, Chairman Powell, I want to just dig into that a little bit.
Have you seen any evidence from before, whether 2008, 2009, or
the CARES Act or other situations where funding for state and
local governments during times of crisis created incentives for mis-
management?
Mr. POWELL. You know, that’s not something—that’s really not
something I’ve looked at.
Mr. KIM. Well, I think that that’s something that we’ve been try-
ing to press for and trying to understand.
So, I understand where you’re coming from on this, but, as I said
for me, I’m trying to figure out if there’s a way we can square the
circle here and get through this. I don’t know if you would com-
ment on whether or not there’s a way to be able to provide funding
for state and local governments that might be able to ensure that
that money is in a fiscally responsible way.
Mr. POWELL. So, that’s very much in your hands to do. I hon-
estly—we don’t really bring anything to that. The idea of what
form to provide, what strings to put on it is really squarely on your
plate.
Mr. KIM. Well, I asked that question to your predecessor. He said
that, quote, that the money could be structured in a way that could
26

eliminate that incentive. He specified that there could be things
done by block grants or by formulas that don’t relate to existing tax
burdens, things like that.
Is that something that you think we should be looking in to?
Mr. POWELL. It certainly sounds like a reasonable thing to look
in to, but as the current Fed Chair, it’s really not up to me to, you
know, get into these questions and try to design the legislation, you
know. I think those things are very much in your bailiwick.
Mr. KIM. No. I appreciate that, and I agree completely, but your
approach in helping us understand the national struggle that we
might face if we don’t move at the state and local level is helpful.
So, with that, Mr. Chairman, I turn back to you.
Chairman CLYBURN. Thank you very much.
The chair now recognizes Mr. Green for five minutes.
Mr. GREEN. Thank you, Chairman and ranking member, and
thank you, Chairman Powell, for testifying today.
I graduated in the top of my medical school class but barely
passed econometrics at West Point. So, I deeply respect you and
your colleagues. I want to digress a second and discuss school clo-
sures, which I and many other physicians, educators, and
behaviorists believe have drastically harmed our children.
We should follow the science, and as a physician, I know the
science is definitive. The CDC has stressed the importance of kids
returning to school saying, and, I quote, ‘‘The harms attributed to
closed schools on the social, emotional, and behavioral health, eco-
nomic well-being and academic achievement of children, in both the
short and long term, are well-known in significant,’’ end quote.
There’s already extensive research on the summer slide, accord-
ing to the Northwest Evaluation Association. In the summer fol-
lowing third grade, students lose nearly 20 percent of their school
year gains in reading and 27 percent in math. By the summer after
their seventh grade, students lose an average of 39 percent of their
school year gains in reading and 50 percent of their school year
gains in math, perhaps explaining my difficulty in econometrics.
Imagine the detriment a yearlong slide will have on our children.
We can’t allow this to happen.
School closures also endanger the emotional and mental health
of children, a recent published—article published in the Journal of
Child and Adolescent Psychiatry found that post-traumatic stress
scores were four times higher in parents and children in quar-
antine than those not in quarantine. The CDC has added that sui-
cides are through the roof. And in one of the scientific journals that
I read as an emergency physician, just last month, the shutdowns
showed an enormous increase in drug overdose and addiction at all
ages, yet Democrats continue to call for more school closures. They
seem willing to put children and parents through all of this, de-
spite the facts that of the 587,948 children diagnosed with COVID,
only 103 have died. And nearly all of them have significant medical
comorbidities.
Now compare that to over 6,000 suicides a year in children, 4,000
who die a year in automobile crashes, but the left is clearly not
stopping children from riding in cars. There’s no question we know
which comorbidities put people at higher risk for COVID. We can
27

protect at-risk children with virtual learning while letting the rest
go back to in-person school.
We hear the left rambling about science and numbers. Well,
they’re clearly ignoring them to keep schools closed, and the con-
sequences are significant. Chairman Powell, I just—I would like to
ask you, and I’ve kind of shared a little bit of the medical side of
this, what are the economic impacts on these school closures?
Mr. POWELL. Well, let me say again that these decisions get
made, a lot of them, at the local level. And I’d imagine you would
agree that that’s appropriate. You want these decisions, this is peo-
ples’ lives, it’s their kids, and to the extent they get made as close
as possible to them, that makes a lot of sense to me any way.
Mr. GREEN. No, I’m asking you to elaborate for us on the eco-
nomic impact. What’s the impact to the economy on these school
closures? I just shared that there’s an increase in suicide; there’s
an increase in opioids. Only 103 have died out of 580,000 that have
been diagnosed. I can share those numbers. I’m a physician. I’m
asking you the economic impact of all these closures.
Mr. POWELL. I just want to make it clear that I do not have a
judgment on the pace of school closures whatsoever. I’m not—I
don’t have one, and I wouldn’t say if I did. But, you know, just as
a straightforward matter, if the kids are home, then some of the
parents are going to stay out of the work force, and lots of people
have tried to quantify that. I don’t have an estimate of it.
But parents who have to stay home to take care of their kids will
be there. As to whether that’s a good thing or a bad thing, hon-
estly, it has to do with the safety of kids and teachers, too, as well.
The teachers are probably much more at risk than the young kids
are, I imagine, but nonetheless these are decisions that are really
not for the Fed and——
Mr. GREEN. I understand the decision on whether or not to open
a school, you know. I was trying to get—you implied a little bit
there. As parents are staying home, that’s a decrease in economic
output, and, therefore, it has a downstream affect in our economy.
So, there is an economic impact, as well as the behavioral impact
that the CDC has highlighted. The increase in suicides, overdoses,
all that stuff in light of 103 deaths out of 587,000 that have been
diagnosed.
Mr. Chairman, looks like I’m out of time, so I yield.
Chairman CLYBURN. Thank you very much. The gentleman
yields back.
The chair now recognizes Mr. Raskin for five minutes.
Mr. RASKIN. Thank you very much, Mr. Chairman. Listening to
our colleagues wax eloquent about how great the economy was be-
fore millions of people were thrown out of work and before we saw
spreading hunger and before, you know, a record number of Ameri-
cans are unemployed, is like listening to Herbert Hoover talk about
how great the economy was before the Depression.
I’m also a little surprised that they’ve decided to go back to
China as a way to distract people from the President’s epic failures
in managing this crisis. We know that there were 37 different occa-
sions in January, February, March, and April when President
Trump praised the performance of his great friends in the auto-
cratic Chinese Communist Party.
28

Take for example, January 22, Twitter, one of the many great
things about our trade deal with China is it will bring both the
USA and China closer together in so many other ways. Terrific
working with President Xi, a man who truly loves his country. Jan-
uary 24, China’s been working very hard to contain the
coronavirus. The U.S. greatly appreciates their efforts and trans-
parency. It will all work out well. In particular, on behalf of the
American people, I want to thank President Xi.
I wish I had 20 minutes to read through all of his tweet state-
ments praising his friends in the Chinese Communist Party. Feb-
ruary 10, at a campaign rally in Manchester, New Hampshire, I
spoke to President Xi, and they’re working very, very hard there,
and I think it’s all going to work out fine.
February 13, I think they’ve handled it professionally. They’re
extremely capable, and I think President Xi is extremely capable,
and I hope it’s going to be all resolved, and so on. So, either Presi-
dent Trump is an easy mark who got played and exploited by
China or he’s been collaborating in all of the sins that our col-
leagues are talking about.
Chairman Powell, from the beginning of the pandemic, people
have tried to portray this as a tradeoff between national public
health efforts and national economic efforts. Now that we’re eight
months into the nightmare of COVID–19, which has cost more than
200,000 of our people their lives, what can you tell us about your
assessment of this framing that there’s a tradeoff between public
health policy and economic policy?
Mr. POWELL. I don’t really think there is a tradeoff. I think that
we all want to reopen the economy as fast and as sustainably as
possible, and I think the thing that we can all do to help that hap-
pen is to do what the experts tell us to do, which is to wear masks
and keep social distances, and don’t do those things that will, you
know, support the further spread of the disease.
Again, the two things go together. They’re complementary;
they’re not in contradiction.
Mr. RASKIN. OK. And the President and his advisers have em-
braced a policy of herd immunity, which the President sometimes
calls herd mentality, which really means a policy of mass human
sacrifice that has already cost us 200,000 lives and perhaps hun-
dreds of thousands more on the way if they get their way of just
saying let the disease wash over the population.
Is there any economic reason to compel us to adopt a policy of
herd immunity as opposed to trying to go out and defeat the dis-
ease?
Mr. POWELL. So, I never comment on the President’s comments
or policies as just as a general rule.
Mr. RASKIN. OK. I want to go to the question of dividends be-
cause there are 383 companies that paid dividends to their share-
holders during the pandemic who also were the beneficiary of the
Fed’s lending program. For example, the food service company
Cisco laid off about a third of its work force a month before paying
a dividend to its shareholders, and yet they were a beneficiary in
your program.
Caterpillar announced a $500 million distribution to share-
holders on April 8, two weeks after saying that they would be fur-
29

loughing workers. So, why is it that they are continuing to fire
workers, give dividends, and they are the beneficiary of the Fed’s
stimulus money?
Mr. POWELL. So, I guess I would say they really are not bene-
ficiaries of the program. That refers to the fact that we bought
small amounts of outstanding bonds, already outstanding bonds,
from about—from in the market, bonds of about 800 different com-
panies. And we didn’t make a new loan. They got no credit because
of it, and, you know, so they didn’t—they’re not actually bene-
ficiaries.
We haven’t made a single loan to a corporation as part of the pri-
mary corporate credit facility.
Mr. RASKIN. OK. So, I guess I’m a little puzzled by that because,
at least it was my understanding, that all of these companies are
partaking of the Fed’s 13(3) authority. Is that not right?
Mr. POWELL. What we’re doing is we’re buying—we wanted to
buy in the secondary market to support the overall market function
for these big companies that have bond market access, right. So,
we didn’t want to pick winners and losers, so we’re buying very
small amounts. We created an index of 800 companies, and we’re
buying very small amounts of their already outstanding bonds. We
didn’t ask their permission.
When 800 companies are having small amounts of their bonds
purchased, no one’s really benefiting. Really the market—what it
did was it supported market function, which enabled a broad group
of companies to go out and finance themselves, and that did hap-
pen. It happened so successfully that we actually didn’t have to
make any direct loans to these companies.
Mr. RASKIN. OK. And finally——
I yield back, Mr. Chairman.
Thank you.
Chairman CLYBURN. Thank you.
The chair now recognizes Mrs. Maloney for five minutes.
Mrs. MALONEY. Good morning, Chairman Powell. It’s very good
to see you again.
Mr. POWELL. Good morning.
Mrs. MALONEY. I want to ask you about economic recovery and
specifically who benefited from the economic recovery. It’s clear to
me that large corporations have benefited from the Fed’s rescue
programs much more than small-and medium-sized businesses ever
since the Fed promised to essentially back stop the corporate bond
market.
Large corporations have been able to borrow record amounts of
money at rock-bottom rates in order to stay in business, but small-
and medium-sized businesses, on the other hand, had to wait for
months for the Fed to set up the rescue facility for them. And when
the Main Street Lending Program finally went online, it was woe-
fully insufficient.
So, this has, unfortunately, led to the perception that the Fed
will do whatever it takes to support large corporations but will only
do the bear minimum to support smaller and medium-sized busi-
nesses. In previous testimony, you have stressed the logistical hur-
dles to providing meaningful relief to medium-and small-sized busi-
30

nesses, logistical hurdles that the Fed hadn’t considered before the
pandemic.
So, my question is, in the future in order to avoid a situation
where large corporations get substantial, immediate relief but then
smaller and medium-sized businesses are forced to wait for months
for inadequate relief, do you think the Fed should build out a ro-
bust infrastructure ahead of time to ensure that it can deliver ade-
quate relief in a timely matter to smaller and medium-sized busi-
nesses?
Mr. POWELL. So, I do think that the question of how to apply the
lessons that we’re learning from Main Street is a really good one,
and it’s one that we’ll be revisiting, I’m sure, over time. I guess I
would say, though, that this is the first time in our lifetime and
I certainly hope the last time that we faced such a crisis of credit
availability for nonfinancial companies that the Fed had to use
13(3) to create facilities to lend to them.
So, it’s highly unusual, and, nonetheless, we will learn a lot, and
there may be other ways we can improve upon this. So, I would say
that. I guess I would also say that, you know, the surveys do show
that most small-and medium-sized companies do have access to
credit, and that’s not to say they all do. And certainly credit terms
have tightened.
I think the smaller the company, the tighter the credit terms
right now. So—and I would, of course, not fully agree with your
characterizations of Main Street. I think we are reaching a growing
group of companies. We have ongoing interest in the program, and
it’s there as a back stop. It can get a lot larger if the need does
grow.
Mrs. MALONEY. Do you think Congress needs to act in this area
in any way? Do you think Congress should——
Mr. POWELL. I do think, particularly for smaller companies. It’s
really not practical for the Fed to try to create a facility that would
deal with millions or hundreds of thousands of very small loans be-
cause a loan is something where you need documentation under the
law to avoid insolvent companies and have evidence that the com-
pany can repay it.
I think something like the PPP program could continue to do a
lot of good in the small-and medium-sized company space because
it’s going to take longer than we had hoped for some companies to
be able to get back online.
Mrs. MALONEY. Thank you. And I also want to ask you about—
and I’m sure you recall in March there was a tremendous turmoil
in the markets and especially in the Treasury market. This was
very scary for our country because the Treasury market is probably
the most important market in the world, and at the time the Fed
took dramatic action to shore up the Treasury market. It provided
unlimited amounts of cash in the form of short-term loans on
Treasuries and also directly purchased trillions of dollars in Treas-
uries through another round of quantitative easing. These actions
were successful, and I applaud the Fed for taking them, but now
that we’ve had time to study what went wrong, there seems to be
a broad consensus that highly leveraged hedge funds were at the
center of the problem, and this was the conclusion of the bank for
international settlements. The Office of Financial Research, former
31

Fed Chairs Yellen and Bernanke, even Governor Quarles has high-
lighted the central role that leverage hedge funds played in the
Treasury market dysfunction.
So, in light of the broad consensus, do you think there needs to
be additional reforms to hedge funds to ensure that it doesn’t hap-
pen again? Do you think Congress should consider leverage limita-
tions on hedge funds, or should we just stick to the current struc-
ture and let the Fed rescue the Treasury market whenever there’s
trouble?
Mr. POWELL. So, actually, I think that there are a number of im-
portant causes. The one you mentioned regarding hedge funds is
part of it, but it’s far from the whole story. There are lots of other
factors. More broadly, though, what we’re doing is we’re going back
now as we did after the financial crisis, the global financial crisis
10 years ago, and we’re looking at where were the stress points?
How did all of the work we did for the last 10 years, how did it
hold up? What happened that was new? And we’re going to be
doing a lot of work on that. We are doing a lot of work on that,
and a big—a central part of it will be the Treasury market and
what changes do we need to make in and around the Treasury
market so that we don’t have this happen again
Mrs. MALONEY. My time is expired.
Chairman CLYBURN. Thank you very much.
All time has expired for questions. We will now yield for closing
statement to the ranking member.
Mr. SCALISE. Well, I thank the chairman, Chairman Clyburn, for
hosting the hearing.
And, Chairman Powell, again, thank you for the work you’re
doing during an incredibly difficult time. The Federal Reserve has
stepped up like so many other Federal agencies to manage what is
an unprecedented time in America’s history, a time that we mourn
the deaths we’ve experienced in America. We are managing
through finally getting our economy back open, seeing economic
growth, helping families get back on their feet, which is an ongoing
process, while we also follow the science and get to a cure to get
multiple vaccines, hopefully in the stage of approval from the FDA,
which could happen in a matter of weeks to see this revolutionary
work that’s being done with a partnership between the FDA, CDC,
working with the best scientists, not just in America but in the
world, to get us to vaccines by some of the most respected compa-
nies in the world. Most of them headquartered here in America,
something we ought to be proud of, something this President has
led the effort on.
I know there’s a lot of talk about China. There ought to be a lot
of talk about China because China lied to us, and not just to Amer-
ica but to the whole world. If China would have been candid with
just the United States, let alone the other countries around the
world, we all could have seen dramatic reduction in deaths. You
know, when you look at the deaths all around the world, obviously,
we are concerned about all the deaths. We want to do everything
we can to stop deaths here in America, doing the things we can do.
Do you know if just five states who many of us on this committee
worked to uncover, we still haven’t gotten the answers we want, we
still haven’t gotten the transparency we want, but five states broke
32

with President Trump’s guidelines, went against the CDC guidance
from the scientists, and sent nursing homes patients who were
COVID positive in hospitals back to the nursing homes. More than
25,000 seniors died who shouldn’t have. If just those five governors
would have followed the President’s guidelines from his medical ex-
perts, we would not even be on this list of the top ten deaths. So,
we need to keep working to get those answers. But the fact that
we haven’t had one hearing on this committee on China, the coun-
try not only who started this virus but the country who lied to the
rest of the world, to increase the number of deaths that occurred
in every country. We need to have that hearing to get those an-
swers, to get the facts out because we know a lot more about this
disease today. The Secretary of HHS, Secretary Azar, has talked
about, if you walked into a hospital back in March, if you had some
of those preexisting conditions that we now know about that put
you at a higher propensity of dying from COVID, if you walked into
that same hospital today, your chances of walking out of that hos-
pital alive would be dramatically higher because of medicine.
Doctors know a lot more today than they knew just a few months
ago. They know how better to treat patients. We all know from the
data who’s most at risk to save more people, to get that data out
there, but we also know, as Dr. Green and others have pointed out,
that closing down schools when they can safely reopen is hurting
kids. It’s going to kill kids.
Deaths are up amongst young people, not from COVID but from
non-COVID related things. There are so many studies that are
showing the harm that’s being done to kids for those school sys-
tems that won’t safely reopen. The protocols are there for how to
safely reopen. The money is there. We passed in the CARES Act
$150 billion to states. Not one single state has spent all that
money, and that money can be used to safely reopen schools.
The time for excuses is over. The can-do spirit that’s got us on
the verge of a vaccine by multiple companies, and now today, lit-
erally, as we were holding this hearing, a fourth company’s been
added to this, Johnson & Johnson, but we’re on the brink.
This is a—you’re talking about revolutionary moonshot items
that are being performed by medicine because the can-do spirit of
America. We know we can do this. We know we can get our econ-
omy back up and running to the greatest economy we had maybe
in the history of our country before COVID. We can get back there.
Every income group was doing well, but, as Chairman Powell
pointed out, the lowest income level groups were doing the best
prior to COVID because they were becoming part of the middle
class again, something we all ought to applaud, something we all
ought to achieve, and work to get back to. We can work to get back
to that. We are. We have work to do. We ought to pass that bill
that’s sitting out there floundering before we leave, the bill by Con-
gressman Chabot to take that PPP money, 138 billion sitting idly
that can be turned on today to help those small businesses who are
dying on the vine, who we don’t want to go away. We don’t want
those jobs to go away. We can get that done. We ought to get that
done. That bill ought to be on the suspension calendar. It would
pass overwhelmingly if the majority would just bring it up.
33

So, I appreciate that you’ve talked about what you’re doing, what
others are doing to get this economy back going. We’ve obviously
talked about what the President is doing following the science to
confront this virus, to get us to the brink of a vaccine that hope-
fully everyone who wants to take it will feel comfortable taking be-
cause the FDA’s the gold standard. And it only happens if they ap-
prove it. If they approve it, we all ought to celebrate that achieve-
ment because it would be historic for the world that quickly to get
a vaccine approved.
So, with that, Mr. Chairman, I know we’re going to have other
hearings, and hopefully we’ll bring up some of these other issues
as we move forward, but I appreciate you holding this one. And,
again, Mr. Powell, thank you for the work you’re doing.
I yield back.
Chairman CLYBURN. I thank the ranking member for his closing
statement and for yielding back.
In closing, let me thank you, again, Mr. Chairman, for your testi-
mony here today. As I shared with you in a previous conversation,
you are among the public servants for whom I have a great deal
of admiration and respect, and I appreciate your being here today
to help us try to determine how best to get beyond this pandemic,
how to improve our economy, and help the millions of Americans
struggling to find jobs, pay rent, mortgages, and put food on the
table.
As you know, Mr. Chairman, this select subcommittee is modeled
on the Truman committee during World War II. As many of my col-
leagues know, Harry Truman is one of my political heroes. I be-
came acquainted with him as an elementary school student back
when he ran for President. I just admired, a gentleman from Louis-
ville, Missouri, being limited in education but had a great deal of
what it took to make this country what it is today. I’m one of those
few Democrats who’s not referred to—I don’t call myself a New
Dealer; I’m a fair dealer.
Harry Truman’s fair deal is what started me into politics, and
Truman said this about that committee that this subcommittee is
modeled after. Harry Truman said that he sought to prevent poli-
cies that, and I’m quoting him here, that make the big men bigger
and let the little men go out of business or starve to death. That
is what Harry Truman said back in 1941 when we were trying to
recover from World War II. And this committee was modeled after
that, and according to our research, that committee, Harry Tru-
man’s committee, cost the government about a million dollars, but
according to our research, it returned over $16 billion to the Fed-
eral coffers. But beyond that, the research has said that his work
saved the lives of millions of children, untold numbers of children
whose lives were saved by that committee.
And I would say to my friend, the ranking member, he talked
about those four companies that are on the verge, hopefully on the
verge of coming up with a safe—I want to emphasize safe—vaccine.
The fact of the matter is that those companies are really the recipi-
ents of a significant Federal investment. And I hope that they will
get us to saving lives.
34

However, I caution, according to my readings, neither one of
these four companies included children among the testing that
they’re doing. No children.
So, we know that this virus affects children and adults dif-
ferently, yet all of the protocol has been on adults. We have no idea
what it would do to children, and we have no idea what will hap-
pen when children are brought back into the classrooms and what
it will do to teachers if we believe that children may be asymp-
tomatic in many instances.
So, let me remind my friend, the ranking member, that the Cen-
ters for Disease Control and Prevention has made clear that in-per-
son learning presents the highest risk for spreading the virus com-
pared to remote or hybrid school. Now I don’t know what’s going
on in Louisiana, but I do know that school closings in my home
state where the legislature is Republican controlled—the governor
is a Republican, so this is not about Democrats versus Republican.
No Democrat closed any school in South Carolina. The schools are
closed. He and I banter a lot about Clemson and LSU. I don’t know
what you’re all doing down at LSU, but Clemson is closed.
Mr. SCALISE. Would the gentleman yield?
Chairman CLYBURN. I’ll be glad to yield.
Mr. SCALISE. And this is just a good, candid conversation. I know
we had a hearing—the Vice President came down to LSU’s campus.
We had the head of the LSU system and the head of the Southern
University system. I think it’s the only historically Black college
and university system. There are a lot of HBCU colleges, but
Southern, I think, is the only full system, and both of them have
opened for in school. They offer hybrid, and I know a lot of systems,
each school system is different.
We have a Democratic governor. We actually work very well to-
gether. I think he’s done a good job of allowing school systems to
open and give them the tools they need. Most have, not all. I think
New Orleans starts this week in school, so some have delayed
opening. And they’ve had good success. Obviously, they put proto-
cols in place for, if one student tests positive, how to handle that
in that classroom, but overall it’s been going on for probably over
a month now. I know our kids go to school in the city of New Orle-
ans, and they’ve been in school for a few weeks now, and it’s work-
ing very well. But each school system is obviously handled dif-
ferently, but the tools are there, and I know we’ve put a lot of that,
the work you and I did, all of us did in this committee and our full
House colleagues, the cooperation we did in the CARES Act has
been part of that.
So, I appreciate that, and we’re going to continue to follow that
progress. Maybe we can have a hearing on the Operation Warp
Speed status of these four drugs and what else we can do to spur
that kind of progress.
I’ll yield back.
Chairman CLYBURN. And I thank the gentleman. You made my
point very well. You’re doing it. You opened in Louisiana to a fuller
extent than South Carolina. Louisiana has a Democratic governor.
South Carolina has a Republican governor. So, this isn’t about
Democrats versus Republicans. It is about who has the science
working for them. We had this administration to ask us to reopen
35

schools. A lot of schools reopened, but according to my information,
21,000, 21,000 children and teachers contracted the virus: 21,000.
And a lot of these schools have been forced to close. The University
of North Carolina stayed open for a week and closed, sent the kids
home. They made it very clear that some of them who did not—
this wasn’t the University of North Carolina, another school. All
the students lost their tuition, couldn’t get it back.
So, we have a responsibility here to really do what is necessary
for the country. So, I would hope that, as we go forward with these
hearings—and I think on the 2nd, we’ll have a hearing, Mr. Azar
will be here. You invoked his name today, and I would hope you
will ask questions of Mr. Azar as to why the President was so laud-
atory of China. That may have been the chilling effect for many of
us in dealing with that issue.
Mr. SCALISE. And would the gentleman yield on that?
Chairman CLYBURN. I’ll be glad to yield.
Mr. SCALISE. Clearly, we learned a lot more about China. We
were trying to find out information about China in those early
weeks. Clearly, once we found out, you’ve seen this President very
aggressive against the Chinese Communist Party; in fact, talking
about why we need to bring manufacturing back from China. The
masks, the PPE that we couldn’t get because—even a company like
3M, an American company, they were making PPE in China, and
the Chinese Communist Party banned them from exporting that
back into the United States. So, it showed that we need to bring
that manufacturing back to America. I think we would probably
agree on that. That’s something the President, our President
Trump, has been very aggressive about against the Chinese Com-
munist Party because we’ve learned this. Again, they were lying to
the world. It wasn’t just America they were lying to. So, if some-
body’s telling you one thing and, at one point, you’re trying to get
information, but for the time being, they’re telling you something.
If you find out later it’s a lie, clearly, your attitude toward them
will be very different, which we are seeing.
I yield back.
Chairman CLYBURN. I thank the gentleman. I would hope that
we would hear the President apologizing to the American people for
having misled us as to what China was doing. He is the one that
said China was doing a great job. We listened to him. And I believe
that maybe it’s time for him to be public in apologizing to the
American people for having misled us.
So, I want to say, Mr. Chairman, at the end of my statement
here, that the Truman statement I mentioned earlier, it really
grabs me. I’ve studied Truman all of my life, and I think there’s
so much that’s kind of interesting. At the end of his Presidency, he
was a pretty unpopular fellow. But the more historians look back
on him, the more they elevate him in the history books. And I be-
lieve it won’t be long before he’ll be in the top three or four when
people get a chance to compare how his committee dealt with this
crisis, calling on the research from World War I. And if you recall,
World War I ended in, what, 1917. The Spanish Flu hit in 1918.
It too was a double whammy on our economy like we have today.
So, I’m a little bit worried about whether or not we are heeding
to the history here, whether we aren’t repeating this big man
36

versus little man thing here, when we have such a high level,
250,000, may have been good to get down to. I think we ought to
look at what not to go down to 100,000 or maybe even 50,000 and
have—it says to me—for us to be in this thing for as long as we’ve
been in it and $1.1 trillion sitting there—99.7 percent of it has not
been used—it says to me that we just don’t want to make the kind
of policies that are necessary for little businesses—flower shops, lit-
tle restaurants need to be reopened, and they need to receive this
money. I can name you—take you to restaurants where, if they had
$100,000 of that money, they could reopen safely. They could create
the outdoors that’s necessary for them to carry on their businesses.
With $100,000, I can assure you restaurants that would have out-
door patios, that they could keep open and go back into business,
but they can’t do it without that kind of assistance.
So, I want to thank you, Mr. Chairman. I do mean it when I say
that you are among those that I admire and respect, and I hope
that we can work together going forward to get this economy mov-
ing. We cannot do it unless we protect our children, unless we pro-
tect the health of our teachers, unless we do better by small busi-
nesses.
Without objection, all members will have five legislative days
within which to submit additional written questions for the witness
to the chair which will be forwarded to the witness for their—his
response.
I ask our witness to please respond as promptly as you are able
to.
With that, this meeting is adjourned.
[Whereupon, at 12:16 p.m., the subcommittee was adjourned.]
Æ

File and source

File: CHRG-116hhrg41958.pdf
Size: 222,547 bytes
SHA-256: 6dcbf62abe38d51477c553d0c7d0aba0b8277dab46be0d349fa1660ca4d1f95f
Our copy: CHRG-116hhrg41958.pdf
Original: www.govinfo.gov