Janet Yellen & Jerome Powell Testify on COVID Economic Response Hearing Transcript

Rep. Maxine Waters: (02:44) The committee will come to order without objection. The chair is authorized to declare recess of the committee at any time. As a reminder, I ask all members to keep themselves muted when they're not being recognized. The staff have been instructed not to mute members except where a member is not being recognized. And there is inadvertent background noise. Members are also reminded that they may only participate in one remote proceeding at a time. Rep. Maxine Waters: (03:15) If you are participating here today, please keep your camera on. And if you choose to attend a different remote proceeding, please turn your camera off. Before we began today's hearing, I would like to inform all members that our witnesses today have a hard stop at 2:15 PM Eastern Standard time. Rep. Maxine Waters: (03:41) This committee is entitled: Oversight of the Treasury Departments and Federal Reserves Pandemic Response. I now recognize myself for four minutes to give an opening statement. Rep. Maxine Waters: (03:56) I'd like to welcome Secretary Yellen and Chair Powell. I'm very pleased that with Democrats passage of President Biden's American Rescue Plan, help is now arriving for millions of struggling individuals, families and small businesses all across this country. The Biden plan delivers much needed relief in the form of additional direct payments, expanded child tax credits, emergency rental and homeowner assistance, unemployment assistance, support for small and minority owned businesses as well as funding for other key programs. The American Rescue Plan is exactly what the nation needs in the midst of this ongoing crisis, and will help to put us on the path to a faster and more equitable recovery. Rep. Maxine Waters: (04:49) I'm also very relieved that we now have President Biden's capable leadership in the White House, and that he is putting in place a team to ensure that the pandemic response and the implementation of relief programs is efficient, effective, and a top priority, so that we can beat this deadly virus. Rep. Maxine Waters: (05:09) I would like to take a moment as we prepare to receive testimony from Secretary Yellen for the first time in her role as treasury secretary, to acknowledge the historic nature of her appointment. Starting with Alexander Hamilton in September of 1789, the Department of the Treasury has exclusively been led by men until now. Over 231 years later, Secretary Yellen became the first woman to serve as treasury secretary. She's also the first person to serve as treasury secretary after serving as head of both, the Federal Reserve and the White House Council on Economic Advisors. Secretary Yellen, we applaud you and our committee looks forward to continuing to work closely with you. Rep. Maxine Waters: (06:05) Secretary Yellen. I would also like to thank you for your work negotiating an increase in the special drawing rights of $650 billion at the G7, as I have previously called for. This increase will help vulnerable countries to fight the pandemic and boost the United States and global economies. Rep. Maxine Waters: (06:26) Chair Powell, I would like to thank you for following my recommendation on bank capital requirements and ending the temporary exemptions to the supplemental leverage ratio for big banks. We need to ensure the stability of our financial system during this continuing crisis. And strong capital requirements are the cornerstone of appropriate prudential bank regulation. Rep. Maxine Waters: (06:51) While we're on the right path with the passage of the American Rescue Plan and the Biden administration's strong leadership, we still have a long road ahead of us. Millions of people are still out of work and threats to the economy remain. We must ensure that there is indeed a sustained and equitable recovery from this historic crisis. So I look forward to your testimony. Rep. Maxine Waters: (07:17) And now, recognize the Ranking Member of the committee, the gentleman from North Carolina, Mr. McHenry for four minutes. Rep. Patrick McHenry: (07:26) Well thank you, Madam Chair. And I want to thank Secretary Yellen and Chair Powell for being here today. It's clear we're in a very different place today than we were last March. Our economy is ready to safely reopen, economic projections are increasingly positive. Rep. Patrick McHenry: (07:41) Despite those facts, Democrats still chose to muscle through their partisan spending package. Only 9% of which goes toward defeating the virus. This package was not targeted to help those most in need, does not get Americans safely back to work or kids back in the classroom. The data tells us targeted support is the key to really reaching those groups who need it most. And with the addition of $1.9 trillion, there's been a great deal of debate about what will happen with this amount of liquidity in our financial markets. Rep. Patrick McHenry: (08:15) So here's what we do know. Taxes or increased taxes will impede growth. And as we saw in 2008 and 2009, it's hard to address long-term unemployment. We see our central bank's balance sheet grow to levels unseen in human history. Pre-COVID, we experienced a roaring economy spurred by appropriate regulation, lower taxes and innovative solutions. Rep. Patrick McHenry: (08:39) Instead of building on these gains, my Democrat colleagues are approaching this crisis like they did in 2009, doing it all over again; rehashing old, failed policies that will not build lasting growth and lasting prosperity. This is much different. It's a much different country now and a much different economy now. And we should remain forward-thinking and seek bipartisan solutions to really address the needs of our economy. Rep. Patrick McHenry: (09:08) Now, I am grateful for the opportunity to be with you here today under the guise of CARES oversight hearing, although it's interesting that the CARES funding was rescinded in December. And I think it'd be more productive to discuss this larger COVID package that was just passed. And I believe there is a lot to discuss there. Rep. Patrick McHenry: (09:34) To put that mammoth $1.9 trillion bill into perspective, let's put it this way. The Biden administration is going to spend $3.7 billion on average per day for every day remaining in 2021. That equals $43,000 per second. A lot of that money will flow directly from Treasury to states and cities, which introduces a whole new set of challenges, with respect to preventing waste and fraud. And unlike the bipartisan CARES Act, this bill does not contain any new layers of oversight to address these challenges. Rep. Patrick McHenry: (10:07) Secretary Yellen, at our first CARES quarterly hearing in June of 2020, we had a chance to run through our expectations with respect to transparency with your predecessor. At that hearing, Secretary Mnuchin committed to providing key programmatic data to congressional committees to assist oversight responsibilities and he followed through on that commitment. Secretary Mnuchin also committed to working with the various oversight bodies with jurisdiction under the CARES act, including the Pandemic Response Accountability Committee, the Congressional Oversight Commission, three department IGs, and the Government Accountability Office. Rep. Patrick McHenry: (10:43) Now that we have an additional $1.9 trillion to track, I would ask for your commitment along those same lines as Secretary Mnuchin committed. That would be encouraging that you continue the practice of your predecessor to cooperate with our committee, both Democrats and Republicans, to ensure appropriate oversight. Rep. Patrick McHenry: (11:01) And so I want to thank you for the testimony today and look forward to the discussion. Yield back. Rep. Maxine Waters: (11:09) Thank you very much. I now recognize the chairman of the subcommittee on oversight and investigations. The gentleman from Texas, Mr. Green, for one minute. Rep. Al Green: (11:20) Thank you, Madam Chair. I thank you so much for your leadership during these turbulent times. Madam Chair, as the CARES Act funding continues to flow, I'm greatly concerned about the mechanics of how these bonds will reach their intended beneficiaries. There are two recently authorized pandemic response programs that Treasury Department is now rolling out, and in which I have special interest. Rep. Al Green: (11:44) The first is the December COVID package that included $9 billion in emergency capital investment as a program. It's called the ECIP to provide capital investments and grants to strengthen CDFIs and MDIs. I'm looking forward to hearing about the plans for engaging eligible MDIs and CDFIs regarding this new resource. Rep. Al Green: (12:08) The second is assistance to small businesses authorized in the American Rescue Plan through the State Small Business Credit Initiative; also known as the SSBCI. This $10 billion program provides funding. 2.5 billion of which will go to minority owned businesses and can make a real impact in the hardest of businesses. I look forward to hearing from the witnesses, in terms of how these programs would benefit the end users. I yield back. Rep. Maxine Waters: (12:38) Thank you. Am I on? I now recognize the subcommittee's Ranking Member, Mr. Barr for one minute. Rep. Andy Barr: (12:49) Thank you, Madam Chair. Secretary Yellen, congratulations on your confirmation. I look forward to working with you and Chairman Powell, thank you for being here. Rep. Andy Barr: (12:57) Last year in response to the pandemic, Republicans and Democrats worked together on multiple bills that were temporary targeted and tied to COVID. In partnership with the Fed and Treasury, we were able to direct aid where it was needed. Unfortunately, despite last year's bi-partisan cooperation, the majority ran through a partisan $2 trillion deficit spending bill that was a Keynesian wishlist for their pre-COVID priorities. Rep. Andy Barr: (13:22) While stimulative policies may look good in the short term, I worry about the unintended consequences for mid and longterm growth. I fear the toxic cocktail of massive deficit spending when we had $1 trillion of funding still unspent from last year, increasing risk of inflation, higher long-term interest rates and unprecedented accommodative monetary policy that I fear is addicting our economy on easy money, the promise of growth destroying tax increases in an avalanche of regulation, which includes unrelated climate and ESG [inaudible 00:13:57] will stifle longterm prosperity. I hope we can work together to mitigate future damage by enacting pro-growth market oriented solutions to position our economy for the longterm. Thank you and I yield back. Rep. Patrick McHenry: (14:13) Madam Chair. Rep. Maxine Waters: (14:15) Yes, Mr. McHenry. Rep. Patrick McHenry: (14:17) Madam Chair, I ask a point of personal privilege to recognize my staff director of the Republican staff director on the Financial Services Committee, Stephen Cody. Rep. Maxine Waters: (14:29) There's still two minutes recognized. Rep. Patrick McHenry: (14:32) Well, thank you, Madam Chair. And I think Chairwoman Waters and I know from our service here on the Hill, that without competent good staff, this institution couldn't work. And I think on a bipartisan basis, we know that our staff carries out a lot of the things that we try to achieve legislatively, in terms of oversight and working with the administration to help the American people. Rep. Patrick McHenry: (15:00) So Stephen Cody has served our institution quite well. He will be leaving us in mid April to go with an establishment downtown, go into the private sector, and I want to wish him well. I want to thank him for his service to the American people, to our government. Rep. Patrick McHenry: (15:19) He has served in Congress most notably as a staff director of the House Rules Committee, before coming to this fine committee, the House Financial Services Committee to lead the committee Republican staff. He has served the majority and the minority in the House of Representatives. He served in the administration and the Department Offices of Management Budget and various other functions. He is a patriot who served his country and served his country well. Rep. Patrick McHenry: (15:47) I want to thank him for his work, his tenacious spirit, his love for the staff and the people that he gets to work with, love for the institution and our government, and a love for his country. And I want to thank Stephen for his great work for me over the last two and a half years for the good work that we've been able to get done. Rep. Patrick McHenry: (16:07) So with that, I want to say thank you to Mr. Cody for his service and Madam Chair, yield back. Rep. Maxine Waters: (16:13) Thank you very much, Mr. Ranking Member. I would like to associate myself with you and I join with you in recognizing Stephen's contributions to the committee and to the Congress. Stephen, also called Cody by friends and enemies alike, has had a long and distinguished career in the United States Congress and in the executive branch. Rep. Maxine Waters: (16:37) So during his 20 year career, he has served in a variety of positions and institutions. To say he's a tough negotiative is an understatement. He is tenacious. He is fierce and he's stubborn. He also has a talent for frustrating several members of my staff with his demands. He is a fierce advocate for his ranking member and his party, and I do respect that. Rep. Maxine Waters: (17:03) So Stephen, neither I nor my staff are sorry to see you go. But in all seriousness, on behalf of the democratic majority, I thank Stephen for his service to the American people and wish him the best of luck in his future endeavors. Thank you very much. Rep. Patrick McHenry: (17:22) Madam Chair, thank you for that kindness. Thank you for that kindness and the spirit with which you offer it. We both have talented staff and sometimes they go toe to toe on our behalf, but as always for love of our country, but sometimes for the love of the game too. So anyways, thank you, Madam Chair. Rep. Maxine Waters: (17:44) Thank you very much, Mr. Ranking Member. You're so true. Rep. Maxine Waters: (17:48) So I want to now to welcome today's distinguished witnesses to the committee. First, I want to welcome the Honorable Janet Yellen, Secretary of the United States Department of the Treasury, for her first appearance before the committee in her new role. Secretary Yellen has testified a number of times before the committee in her prior capacity as the Chair of the Federal Reserve, where she served from 2010 to 2014 as vice chair, and 2014 to 2018 as chair. I believe she does not need any further introduction. Rep. Maxine Waters: (18:24) So I want to welcome her, our other distinguished witness, the Honorable Jerome Powell, Chairman of the Board of Governors of the Federal Reserve System. He has served on the Board of Governors since 2012, and as its chair since 2018. Chair Powell has previously testified before the committee. And I believe he also does not need any further introduction. Rep. Maxine Waters: (18:48) So without objection, your witness statements will be made part of the record. Each of you will have five minutes to summarize your testimony. You should be able to see a timer on your screen that will indicate how much time you have left and a chime will go off at the end of your time. I would ask you to be mindful of the timer and quickly wrap up your testimony if you hear the chime. Rep. Maxine Waters: (19:13) So Secretary Yellen, you are now recognized for five minutes to present your oral testimony. Sec. Janet Yellen: (19:28) [crosstalk 00:19:28] a hopeful moment for the economy, but still a daunting one where we're seeing signs of recovery. We should be clear-eyed about the hole we are digging out of. The country is still down nearly 10 million jobs from its pre-pandemic peak. When Congress passed the CARES and consolidated appropriations acts last year, it gave the government some powerful tools to address the crisis. But upon taking office, I worry that they weren't powerful enough. After all, there were instill are some very deep pockets of pain in the data. Sec. Janet Yellen: (20:08) 1 in 10 homeowners with a mortgage are behind on their payments. And almost 1 in 5 renters are behind on their rent. There are 22 million people who say they don't have enough food to eat. 1 in 10 adults are hungry in America. I looked at data like these and I worried that the COVID economy was going to keep hurting millions of people now, and haunt them long after the health emergency was over. Sec. Janet Yellen: (20:37) We note that when the foundations of someone's life fall apart, when they lose the roof over their head, with the ability to eat dinner every night, the pain can weigh on them for years. Their earnings potential is permanently lowered. And I worried about this happening on a mass scale. That's why I advocated very hard for the American Rescue Plan and why it's my first and my most enthusiastic message today. Thank you. Sec. Janet Yellen: (21:08) With the passage of the rescue plan, I'm confident that people will reach the other side of this pandemic with the foundations of their lives in tact and I believe they'll be met there by your growing economy. In fact, I think we may see a return to full employment next year. Of course, the speed and strength of our recovery depends in part on how we implement the legislation. Treasury is tasked with much of that work and there's nothing that I or my team take more seriously. We appreciate your oversight on this matter and I want to briefly tell you about how we've been working. Sec. Janet Yellen: (21:50) Since taking office two months ago. We've been expediting relief to the areas of greatest need. For example, small businesses and especially the smallest small businesses, which are disproportionately owned by women and people of color. The pandemic has hit these businesses hard. The Paycheck Protection Program was an early lifeline, but because of issues with the program's design, the first rounds often didn't reach the smallest sole proprietorships. We're addressing that now. We worked with SBA to tweak how the program was implemented. It's allowing the PPP to reach millions more micro businesses and entrepreneurs, especially in rural and low-income areas. We're also building capacity to support these communities over the longer term. Sec. Janet Yellen: (22:47) Because of the December legislation, Treasury now has $12 billion to inject and to community development financial institutions, and minority depository institutions. In turn, these CDFIs and MDIs can lend that capital out; helping people buy homes and start businesses in places that the financial services sector traditionally hasn't served well. Sec. Janet Yellen: (23:17) Then there are the families I spoke about. The ones struggling to keep a roof over their head and food on the table. The American Rescue Plan provides more than $30 billion to help renters and homeowners at risk of losing their homes. And we're making sure that assistance flows as efficiently as possible. Sec. Janet Yellen: (23:39) For instance, the previous administration put in place rules that required tenants and landlords to provide quite a bit of documentation to get rental assistance, including detailed statements about their income. But some people don't have access to those documents. We're cutting through the red tape for them, while still taking responsible steps to prevent fraud and abuse. Sec. Janet Yellen: (24:06) And of course, we've been sending direct payments to Americans, a lot of Americans. As of last week, we had issued over 90 million payments. And all this is just a fraction of Treasury's work. There is so many more relief programs, including one that will provide 350 billion in aid to state and local governments implementing all of it is more complicated than it sounds. And we're working closely with stakeholders to make sure that these programs are both efficient and effective. Sec. Janet Yellen: (24:41) Behind these many relief programs. These millions of transactions are a staff, very dedicated and very tired Treasury and IRS employees. My final word is to them. Thank you. You're putting on a masterclass in how government should work in the furnace of a crisis. And I'm grateful to be your colleague. With that, I'm happy to answer any questions you have. Rep. Maxine Waters: (25:09) Thank you very much, Secretary Yellen. Chair Powell, you are now recognized for five minutes to present your oral testimony. Chair Jerome Powell: (25:20) Chairwoman Waters, Ranking Member McHenry, and other members of the committee, thank you for the opportunity to discuss the measures that we've taken to address the hardship wrought by the pandemic. I'd like to start by noting the upcoming one year anniversary of the CARES Act. With unanimous approval, Congress provided by far, the fastest and largest response to any post-war economic downturn, offering fiscal support for households, businesses, healthcare providers and state and local governments. This historically important legislation provided critical support in our nations hour of need. Chair Jerome Powell: (25:54) As the virus arrived in force, our immediate challenge was to limit the severity and duration of the fallout to avoid longer run damage. At the Fed, we also acted with unprecedented speed and force, using the full range of policy tools at our disposal. Chair Jerome Powell: (26:10) Today, the situation is much improved. While the economic fallout has been real and widespread, the worst was avoided by swift and vigorous action from Congress and the Federal Reserve, from across government and cities and towns and from individual communities in the private sector. More people held onto their jobs. More businesses kept their doors open and more incomes were saved. But the recovery is far from complete. So at the Fed, we will continue to provide the economy the support that it needs for as long as it takes. Chair Jerome Powell: (26:44) As we have emphasized throughout the pandemic, the path of the economy continues to depend on the course of the virus. Since January, the number of new cases, hospitalizations and deaths has fallen, and ongoing vaccinations offer hope for a return to more normal conditions later this year. In the meantime, continued social distancing and mask wearing will help us reach that goal as soon as possible. Chair Jerome Powell: (27:05) Indicators of economic activity and employment have turned up recently. Household spending on good has risen notably, so far this year, although spending on services remains low, especially in sectors that typically require in-person gatherings. The housing sector has more than fully recovered from the downturn, while business investment in manufacturing production have also picked up. Chair Jerome Powell: (27:28) As with overall economic activity, conditions in the labor market have recently improved. Employment rose by 379,000 in February, as the leisure and hospitality sector recouped about two thirds of the jobs it lost in December and January. Recovery has progressed more quickly than generally expected and looks to be strengthening. This is due in significant part to the unprecedented fiscal and monetary policy actions I mentioned, which provided essential support to households, businesses and communities. Chair Jerome Powell: (27:58) However, the sectors of the economy most adversely affected by the resurgence of the virus and by greater social distancing, remain weak. And the unemployment rate still elevated at 6.2%, underestimates the shortfall, particularly as the labor market participation remains notably below pre-pandemic levels. We welcome this progress, but will not lose sight of the millions of Americans who are still hurting, including lower wage workers in the services sector, African-Americans, Hispanics and other minority groups that have been especially hard hit. Chair Jerome Powell: (28:32) The Fed's response has been guided by our mandate to promote maximum employment and stable prices for the American people. Along with our responsibilities to promote the stability of the financial system. When financial markets came under intense pressure last year, we took broad and forceful actions, deploying both our conventional and emergency lending tools, to more directly support the flow of credit. Chair Jerome Powell: (28:54) Our actions taken together, helped unlock more than $2 trillion in funding to support businesses, large and small, non-profits and state and local governments between April and December. This support in turn, has helped organizations not shutter their businesses and put employers in both a better position to keep workers on and to hire them back as the recovery continues. Chair Jerome Powell: (29:17) Our programs serve as a backstop to key credit markets and help restore the flow of credit from private lenders through normal channels. We deployed these lending powers to an unprecedented extent last year. Our emergency lending powers require the approval of the Treasury and they are available only in very unusual circumstances. Many of these programs were supported by funding from the CARES Act, those facilities provided essential support through a very difficult year. They are now closed and the Federal Reserve has returned the large majority of the Treasury's CARES Act equity as required by law. Our other emergency lending facilities are following suit imminently, although we recently extended the PPPLF for another quarter to continue to support the PPP. Chair Jerome Powell: (30:03) Everything the fed does is in service to our public mission. We are committed to using our full range of tools to support the economy and to help assure that the recovery from this difficult period will be as robust as possible on behalf of communities, families, and businesses across the country. Thank you. I look forward to your questions. Rep. Maxine Waters: (30:22) Thank you very, very much, chairman Powell. I now recognize myself for five minutes for questions. On March 11th, President Biden signed the American Rescue Plan Act into law, providing an additional 1.9 trillion package that is already helping individuals, families, and small businesses. Rep. Maxine Waters: (30:45) The American Rescue Plan also includes $77 billion in our committee's jurisdiction, including 21.5 billion to pay the back rent and future rent payments, which will not only help renters remain stably housed, but support small landlords who have also been struggling. Congress has now provided the Treasury Department with more than $46 billion in emergency rental assistance to distribute to states, local communities, tribes, and territories, to help struggling families pay their rent and utilities. My state of California is expected to receive somewhere in the amount of $ 4.67 billion. Rep. Maxine Waters: (31:32) However, I am growingly, increasingly concerned with how the program is being implemented by grantees in particular. California just launched a program that greatly limits of the amount of assistance renters can receive, even if they owe more. Rep. Maxine Waters: (31:53) Secretary Yellen, what has been the progress so far in implementing the program? What guidance is Treasury providing to ensure grantees are setting up programs that actually. Rep. Maxine Waters: (32:03) ... to ensure grantees are setting up programs that actually stabilize renters and make landlords hold? Sec. Janet Yellen: (32:06) Thank you for that question, chairwoman Waters. We have distributed the money to state, local and tribal grantees. The act, the consolidated appropriations act that started this program, does specify that grantees can only provide assistance to households where one or more individuals are experiencing unemployment or hardship, that they demonstrate a risk of experiencing homelessness or housing stability, and that the household has income at 80% of the area median or below and that the assistance can be for up to 15 months. We're trying to provide grantees with flexibility to operate, establish their programs and operate them within those parameters, but with a great deal of flexibility to address local needs as they see it. The role of the treasury here is to provide policy guidance so that grantees can establish and follow their own program policies to meet local needs, and we're developing outreach and technical assistance so that our grantees can understand best practice. Of course, we have a role in monitoring to make sure that the payments are reaching intended populations. Rep. Maxine Waters: (33:54) Secretary Yellen, I hate to interrupt you, my time is going to be up shortly, but I am very concerned about the flexibility that the states have. I don't really know what all of that means, but I do know that there's a lot of confusion because some states had moratorium programs, some cities had moratorium programs, the federal government has a moratorium program, and so I think that's confusing to our renters. In addition to that, for the state of California to say that they're going to pay 80% of the rental assistance rather than 100%, bothers me somewhat and I don't know what other states are doing. And I know that the federal government does guidance, so I'd like to know if you can think about any role that we can play to straighten out confusion and to help stabilize this rental assistance? Sec. Janet Yellen: (34:50) Congresswoman, we did distribute frequently asked questions revised from the previous administrations, to try to provide additional guidance, but if you have concerns, my staff will be glad to work with you and your office to see if it's possible to address them. Rep. Maxine Waters: (35:15) Thank you very much, I appreciate that because there is confusion out there and I'm worried about what is happening with this confusion and whether or not our landlords are going to abandon us and not go for another moratorium. And so it's a lot of questions, I will be back to you, and thank you so very much. With that, I now recognize Mr. McHenry for five minutes. Rep. Patrick McHenry: (35:42) Thank you, madam chair. And look, chair, chairman Powell, and secretary Yellen, I've previously asked about the question of the independence of the FED and trying to get the secretary of the treasury to opine about that. Dr. Yellen, I would suggest that maybe I need to skip that question with you, I think you have very practical understanding and knowledge here at play, and you'll treat your successor as you wish to have been treated, since he is now sitting in your chair. Sec. Janet Yellen: (36:24) [inaudible 00:36:24]. Rep. Patrick McHenry: (36:26) Yes. Well, look, it's nice to have two folks that understand this in these respective seats. But chairman Powell, I want to begin with you and talk about inflation. There continues to be a great deal of speculation that we should be worried about inflationary pressures, particularly after the passage of the most recent $1.9 trillion spending bill, a so-called stimulus or COVID stimulus bill. And then we see recent press reports of additional $3 trillion of spending contemplated by this administration. Does the FED share that there are inflationary pressures and concerns with this rate of spending, what's the view now? Chair Jerome Powell: (37:16) Thanks. So let me start by saying that we're strongly committed to our price stability mandate, which is along with our maximum employment mandate, those are the two mandates that you've essentially given us. We construe that as inflation that is 2% over time, inflation that average's 2% over time. We do expect that inflation will move up over the course of this year, first because of what we call base effects, the very low readings of March and April of last year drop out of the 12 month calculation and mechanically it rises, but that goes away quite quickly. Possibly after that we'll see a situation in which as the economy reopens and vaccination continues, there could be a surge in spending and there could be some bottlenecks in the economy, we see some of that now. We might see some upward pressure on prices. Chair Jerome Powell: (38:12) Our best view is that the effect on inflation will be neither particularly large, nor persistent. And part of that just is that we've been living in a world of strong dis-inflationary pressures, around the world really, for a quarter of a century, and we don't think that a one- time surge in spending leading to temporary price increases would disrupt that. However, we have the tools to deal with that. We remain strongly committed to inflation expectations anchored at 2%, and we'll use our tools as appropriate to achieve that. As far as further fiscal policy is concerned, it's not up to us to comment, as we've discussed on some occasions, we don't comment on fiscal policy, we try not to particularly on specific bills and things like that. So I'll leave that to others. Rep. Patrick McHenry: (39:00) Well, secretary Yellen, about fiscal policy. We have, as chairman Waters highlighted, the rental assistance, the $25 billion of rental assistance to individuals and families that were in arrears because of the lockdowns and we've tried to support them with some rental assistance. What guard rails has the Department of Treasury put in place to ensure that the funds are actually prioritized for individuals and families who are in rental arrears? Sec. Janet Yellen: (39:33) Well, it is treasury's job to establish guard rails, and we've done that by issuing a set of frequently answered questions that are essentially guidance about how the money needs to be used. It clarifies that grantees have flexibility, but also that there are requirements of the statute and that we will follow up to make sure that the payments are going to eligible households and that the guidelines of the program are being followed. Rep. Patrick McHenry: (40:23) Thank you, secretary Yellen. Final question I have is about oversight. Secretary Yellen, your predecessor agreed to very onerous and rigid and strong oversight for the cares act. And this current $1.9 trillion has rescinded all those things sadly, except this quarterly hearing. And so what I'd like to hear is your voluntary commitment to work with Congress, the GAO, the special inspector generals and the Congressional Oversight Commission, as well as this committee. Sec. Janet Yellen: (40:55) Well you [inaudible 00:41:00] I think oversight is very important and I pledge to work with this committee and the oversight groups. Rep. Patrick McHenry: (41:06) Thank you, secretary Yellen, and congratulations on your new chair. Sec. Janet Yellen: (41:12) Thank you. Rep. Maxine Waters: (41:14) I now recognize Ms. Maloney for five minutes. Carolyn B. Maloney: (41:18) Okay. Thank you so much chair Waters for having this and welcome chairman Powell and secretary Yellen. And as the first female secretary of the treasury in the history and the first to head the FED, we are so proud of you, of your many accomplishments, secretary Yellen, and this women's history month, you are certainly inspiring many young women with more confidence and aspirations with your leadership, so thank you. As you know, at the end of last year we were able to reach a bipartisan compromise on my corporate transparency act, which will crack down on anonymous shell companies, the vehicle of choice for criminal activity, money laundering, and terrorism financing. I want to thank ranking member McHenry for his willingness to compromise and chairwoman Waters for your steadfast support of this bill over many, many years. Carolyn B. Maloney: (42:14) The bill requires companies to disclose their true beneficial owners to FinCEN, which is an arm of treasury. And FinCEN will collect this information in a database, which is intended to be state of art with privacy and security protection. Law enforcement calls it the most important tool that's been given to them to track illegal activity, illegal money activity in 30 years. And the implementation of this is going to be a massive undertaking and will require an enormous amount of resources and manpower at treasury. I worked on this bill as a top priority for 12 years and implementing and getting it up and running, as a top priority of mine. It's incredibly important, I believe, to our national security, we have to get it right. And so my question to you is, will you commit to making beneficial ownership one of your top priorities as treasury secretary? We have two years to implement it and I think it will make all of us safer, I think it's extremely important. Sec. Janet Yellen: (43:24) I completely agree with you, it's a very important piece of legislation and it is one of our highest priorities to implement this promptly and to get it right. We have a hiring plan, we recognize that significant resources will be required and we're trying to obtain them. We have plans for how to collect the required database, and we're actively working to implement this very important piece of legislation. Carolyn B. Maloney: (44:09) Thank you. I want to build on chairlady Waters question, I'm not going to repeat all the things that were in the important recovery act, but my question to you secretary Yellen and chairman Powell, what steps can we take to ensure we don't lose a generation of workers, which never return to the work force, or that they face these depressed wages moving forward? We know that over 11 million and a half women lost their jobs compared to nine million men, black and Latino women suffered the highest rate of all, and that the women's labor force participation is down 2% and the families are suffering. We have many aspects of it, she mentioned from rent to food to help in so many ways. But I'm concerned about this labor force that's been hurt, what can we do to help them get back into the labor force? And my question is to you secretary Yellen first, chairman Powell. Sec. Janet Yellen: (45:12) So first of all, in the short term the American rescue plan contains substantial support for minorities, and particularly for women who have been forced to drop out of the labor market. There's an important increase in the child tax credit that's going to result in, along with other provisions, a 50% reduction in the child poverty rate. There's money to open and support school openings promptly. There is an enhanced child and dependent care credit with a successful vaccination program, to get women back into the labor force. And longer term, when we've gotten to the other side of this pandemic, we hope to address in the jobs package, over the longer term, some of the factors that have resulted in low wages and labor force participation for women. Carolyn B. Maloney: (46:26) Thank you. My time is expired. Rep. Maxine Waters: (46:30) Mrs. Wagner, a gentlelady from Missouri, is recognized for five minutes. Ann Wagner: (46:36) Thank you, madam chairwoman, and thank you chairman Powell and secretary Yellen, for joining us today. Secretary Yellen, and I'd asked you, please respectfully, if you would keep your answers brief. As the country begins to safely reopen and our economy recovers, is examining changes to tax policy the correct direction? Sec. Janet Yellen: (47:01) We expect to examine changes to tax policy, along with programs that will address some of the long standing problems that have held down our productivity and labor supply in the United States. We'll address infrastructure, risks from climate change, education, training. Ann Wagner: (47:26) Let me ask you ma'am, secretary, what impact would this action have on jobs and workers wages? Sec. Janet Yellen: (47:35) I think a package that consists of investments in people, investments in infrastructure, will help to create good jobs in the American economy and changes to this tax structure will help to pay for those programs. Ann Wagner: (47:55) Well, secretary Yellen, what tends to be the impact, I guess I'd ask, on the American consumer, the consumer, my constituents, when corporate taxes are raised, do the costs usually tend to be passed down to them? Sec. Janet Yellen: (48:13) The impact of changes in corporate taxes have been studied by economists for a long time and the impact of them on prices and on consumers are very unclear from existing studies. We do need to ... Ann Wagner: (48:33) Go ahead, please. Sec. Janet Yellen: (48:34) We do need to raise revenues in a fair way, to support the spending that this economy needs to be competitive and productive and- Ann Wagner: (48:45) Let me just say this, secretary Yellen, if I could. I think we know, we know that raising the corporate tax rate, results in higher costs for small businesses, schools and American households. Then why, as this country begins to reopen and recover economically, would the Biden administration be proposing tax policy which would, in the end, hurt the American family and millions of struggling small businesses? Sec. Janet Yellen: (49:18) The Biden administration is not going to propose policies that hurt small businesses or Americans. The Biden administration is going to propose investments this economy has long needed to be competitive and productive and support for- Ann Wagner: (49:37) With all due respect ma'am, I would say this, certainly raising taxes on business and industry is going to affect consumers and households and American families in a very adverse way. Is this being proposed, these tax increases, to offset the costs of the recently enacted partisan stimulus package, ma'am? Sec. Janet Yellen: (50:00) No, the stimulus package, the American rescue plan was not funded with any increases in taxes, but a longer term plan that addresses critical [crosstalk 00:50:16] this economy probably would be accompanied by some revenue raises. Ann Wagner: (50:23) Yes, I'd say so, and I'd say that the plan as it exist right now, hasn't been paid for. For example, let me just say this, last month lumber prices hit an all time high, doubling in price from just three months ago. Gasoline prices jumped 6.4% over the previous month, while electricity and natural gas prices rose 3.9%, not to mention housing prices and other manufacturing supply chain goods. Are these steady increases a sign that once the economy fully reopens, we're likely to see parts of the economy where demand is intense, at least for a period of time, leading to some additional, I think, price pressures? Let me ask you this chairman Powell, in my limited time, could you describe in detail the wide range of policy tools the FED has at it's disposal to address what is obvious inflationary pressures that we're seeing already? Chair Jerome Powell: (51:21) Well, our most basic tools are here to try to achieve price stability, and those principally are interest rates and moving interest rates up and down. As I mentioned a few minutes ago though, our best expectation is that there'll be modest, upward pressure on prices this year, but that they won't be particularly large or persistent into the future, but we do have those tools and will use them. Ann Wagner: (51:44) Thank you. My time is expired. I shall yield back. Rep. Maxine Waters: (51:48) Thank you. The gentleman from California, Mr. Sherman, is recognized for five minutes. Brad Sherman: (51:54) Thank you. Addressing the comments of Ms. Wagner, most of the studies I've seen and obviously the secretary of treasury has seen far more, indicates that increases in corporate income taxes are not passed through to consumers, but that the incidence of that tax is borne by those who invest capital, and which is disproportionately the top 1%. In contrast, sales taxes are passed through to consumers. I want to use most of my five minutes just to bring to the attention of our two [inaudible 00:52:30] witnesses, some matters that I hope will merit their personal attention in the days to come. Madam secretary, your predecessor [inaudible 00:52:39] to me from a foreign policy standpoint, that the Treasury Department would put a reasonable amount of lawyer hours into doing a tax treaty with Armenia and I hope that that policy will continue now that the government is ready to proceed, having had some discord in the past. Madam secretary, you have delayed till May 17th, the April 15th deadline, and for form 1040. It's very important that you do the same for the first of the four form 1040-ES, the estimated tax payments that is usually prepared at the same time and is so important to gig workers. Madam secretary, two days ago the IRS issued a report indicating that one fifth of the earnings of the top 1% are going untaxed. I hope very much that you'll work with Congress to replace and restore the 15,000 enforcement officers that the IRS has lost in the past decade. I used to head the second largest tax agency in our country, and it's clear that putting more effort into tax collection, particularly from the top 1%, will collect many more times the cost in additional revenue. And will, I think, add to our social cohesion because wage earners are paying their taxes. Brad Sherman: (54:16) Madam secretary, I hope you'll focus on a letter from the state of California, of May, 19th, desperately needed guidance on the recovery act, especially showing that a decision by California to conform to federal law. So federal law recently is very generous to the PPP small businesses, if California conforms to that law, that that isn't regarded as a tax decrease violative of the provisions of the recovery act that say that a state should not be using those funds to cut taxes. Chairman Powell, we've talked a lot about wire fraud, your staff has told me they don't plan to solve the problem, I hope you'll get personally involved in making sure our new wire transfer system does solve a problem. And chairman Powell, I want to commend you for your statement yesterday, that the FED will not proceed with creating a new central bank digital currency, without the support of Congress. Brad Sherman: (55:21) And I don't think you'll have that support unless the know your customer provisions are applicable to this new system, and it doesn't become useful to the tax evaders, terrorists, drug dealers, et cetera. Madam secretary, believe it or not I do have a question, chairman Powell, when he was last before us last month, testified before this committee that federal legislation is necessary to fix the legacy LIBOR contracts, so that they can continue to function after the LIBOR index is no longer published by our friends in London. Secretary Yellen, would you agree with chairman Powell, that Congress will need to act to provide for a smooth transition for these two trillion dollars in contracts? Sec. Janet Yellen: (56:11) Yes. I would agree. There is certain legacy contracts, where the transition could be difficult without legislation. And so these are contracts that don't provide for a workable fallback rate, and so I think Congress does need to provide legislation for the LIBOR transition. Brad Sherman: (56:42) Thank you. And in my remaining time, can you address the issue of states that are conforming their income tax laws to federal income tax law, is that going to be regarded as a violation of the recovery act? Sec. Janet Yellen: (57:00) We're working to provide guidelines on what will and won't, and it's premature for me until we've completed that to offer you an answer on the specifics. Brad Sherman: (57:15) Please, it's critical- Sec. Janet Yellen: (57:15) We'll do it quickly. Rep. Maxine Waters: (57:17) Thank you very much. The gentleman's time has expired. Mr. Lucas, you're recognized for five minutes. Frank D. Lucas: (57:24) Thank you, Madam chair for holding this hearing, and thank you, chairman Powell and secretary Yellen for appearing before the committee. And of course, secretary Yellen, congratulations, I join my colleagues on your confirmation as the first woman to serve as secretary of the treasury. I look forward to the day, hopefully not very far off, when on all positions of responsibility, all opportunities in society will advance to the point where we can no longer use the phrase first woman again. That day will come, hopefully soon. This past Friday, the FED announced the temporary exclusion of treasuries and reserves from the supplemental leverage ratio will expire at the end of the month. The announcement also stated that the FED will seek public comment on potential SLR modifications. Chairman Powell, could you comment if the exclusion of treasuries and reserves from over the past year, helped improve US treasury market conditions and bank's ability to provide credit? Punch your button, Mr. Chairman. Chair Jerome Powell: (58:34) Sorry. I double clicked there, just out of habit and re muted myself. Okay. So as you know, the treasury market was experiencing significant dysfunction during the height of the crisis, and we did a number of things, particularly we bought a lot of US treasuries to restore function. We also did this exclusion and so did many other large countries like us, did something like that. If you look back, we threw the kitchen sink at it, and it's hard to say exactly what effect it had. We did the exclusion relatively late, and by then there had been quite a lot of market function recovered. So it's difficult, I'd love to give you a straight answer, it's difficult to say just how helpful it was, and in any case, now that that danger is long past. Frank D. Lucas: (59:22) So secondly, to the possible extent that you could elaborate on the timeline of potential SLR modifications that may come in the near future, Mr. Chairman? Chair Jerome Powell: (59:30) Yes. We expect to put something out for comment, and I can't tell you exactly when that will be, but relatively soon. And we're going to run a very transparent public process and comment and consider, I mean, really the point is that because of the substantial increase in reserves and treasuries, the leverage ratio is rapidly becoming the binding constraint from a capital standpoint. And that wasn't our intention at the FED from the beginning, we like risk-based capital to be binding because it forces banks to manage their risks more carefully. Frank D. Lucas: (01:00:02) As everyone on this hearing knows, I've always made it a very strong point that the third congressional district of Oklahoma is a commodity driven economy, it's ag and it's energy. There's concern in my district that the financial regulators may be moving towards regulation and supervision with environmental policy objectives, potentially discouraging banks from doing business with entire sectors of the economy. Chairman Powell, could you respond to that concern by my constituents? Chair Jerome Powell: (01:00:33) Sure. It's been a long held policy of the FED that we don't tell banks what legal businesses they can lend to, or order them to lend to, that's not what we do. With the climate change, you're getting at the climate change work that we're doing, we're at a very early stage of understanding the risks to regulated financial institutions from climate change. It is a risk that we think the public has every right to expect that we will assure that the banks do manage over time. So again, in early stages of that, I'd be happy to talk to you offline about that too. Frank D. Lucas: (01:01:12) Absolutely. And on that vein, secretary Yellen, could you provide your thoughts on that concern? Punch that button secretary. We all have too many buttons. Sec. Janet Yellen: (01:01:29) You want me to weigh in on the issue of lending and climate change? Frank D. Lucas: (01:01:37) Yes. That there will potentially be efforts by the financial regulators to move towards regulation, supervision, environmental policy objectives. My folks are concerned that that will lead to discouraging banks from doing businesses in certain areas, in certain sectors, and consequently, potentially have a dramatic effect on their business models or their ability to function. Sec. Janet Yellen: (01:01:58) Well, climate changes is a top priority for the Biden administration, but we agree that financial regulators should be assessing the risks to financial institutions through stress testing and other techniques, and that investors need disclosure of risks. But I have no plan to regulate what lending or investments can be done. Frank D. Lucas: (01:02:31) Thank you very much. And I can assure you, I and my colleagues will watch that all very closely. With that, I yield back, chairwoman. Rep. Maxine Waters: (01:02:38) Thank you. The chair now recognizes the gentleman from New York, Mr. Meeks, chair of the Foreign Affairs Committee, for five minutes. Mr. Meeks? If Mr. Meeks is not available, we'll move on to Mr. Scott, for five minutes. David Scott: (01:03:07) Thank you very much, chairlady. Chairman Powell, miss Yellen,, welcome. Chairman Powell, first to you, thanks to the rescue plan, we now have an opportunity to expand the child tax credit. The IRS split put forth the, get my payment website, and I believe it could be used in conjunction with the average Joe, the FDIC and the private sector to bring more Americans into our banking system, using what is known as BankOn certified save account, but only if it is able to be moved. David Scott: (01:04:03) And is able to be moved at this moment when we capture it, because currently the IRS Get My Payment tool is only open for the status checks, but consumers are unable to add or change delivery information and as they were able to do so with the delivery of the first stimulus checks. So Chairman Powell, explain that. Don't you agree that this is an opportunity to increase financial inclusion, the reuse of certified bank on safe accounts Get My Payment? Chair Jerome Powell: (01:04:50) Sir, I would agree with you that greater inclusiveness in the financial system is a goal of the highest priority for us and really for all financial regulators and for the country. I'm not familiar with a particular practice you're referring to, but I'll be happy to look into that and come back to you. David Scott: (01:05:07) Okay, please do. And then there's another one with the Treasury Department called Get My Payment. All of these things are good, but I appreciate you looking into them as quickly as you can, so that they're there. We need to use them now because so many of our people can not get the money quickly because they don't have the kind of high standing within our financial system. So when you put these things in like bank on and Get My Payment, we need to use them right now. So I appreciate your looking into that. Now, Secretary Yellen, let me move to you. The American Rescue Plan also included the $350 billion in assistance to state and local government to make up for the lost revenue and to ease the economic impact of the COVID-19 pandemic. So could you tell me when can local governments expect treasury to release guidance on the American Rescue Plan? Sec. Janet Yellen: (01:06:28) Well, we have to issue guidance quite quickly, I think within 60 days, and to distribute the funds and we're working very hard to sweat through the issues that we need to, in order to provide clarity about the purpose of the funds and how they can be used. David Scott: (01:07:00) All right, Madam Chair Lady, I am concerned. We have the treasury secretary here. We have the chairman of the Federal Reserve here, and we passed this bill and we put certain things in here to increase the delivery. And everybody cannot get this payment through electronic accounts. Most of the people that you and I have been very concerned about getting inclusion are not getting these funds as quickly. So I just want to encourage you. And I know you're agree, but I want to take a moment here. We passed it. It's there. Please. Please. Treasury, Secretary, please. The Federal Reserve, all of us need to hurry up. We put these things in place so we can reach those who have been excluded very quickly. They need the money as quickly as everyone else. Thank you, Chair Lady. Chairman Waters: (01:08:17) Well, thank you very much, Mr. Scott. I now recognize the gentleman from Florida, Mr. Posey for five minutes. Rep. Bill Posey: (01:08:25) Thank you, Chairman Waters, for calling this hearing today. We continue to live in a period of uncertainty, but there is some good news on the horizon for our economy, as it appears poised to recover rapidly as the vaccine is given to more and more people. Rep. Bill Posey: (01:08:41) Chair Powell told us at the semi-annual appearance a few weeks ago that the economy could grow by as much as 6% during this year alone. At the same time, other factors could cloud the horizon, such as our unprecedented level of deficit spending, increases in nominal treasury and corporate bond yields, and mysterious enthusiasm for raising taxes, and the headlong pursuit of climate change mitigation measures that threatens affordable energy and our recently acquired energy independence. Rep. Bill Posey: (01:09:18) Secretary Yellen, you recently said that the Treasury Department could facilitate bank stress tests for climate change, but you wouldn't expect the results would be used for capital requirements or other regulation. If these climate stress tests have no regulatory purpose, what would the purpose of such stress tests be? Sec. Janet Yellen: (01:09:41) So the purpose of, we should call it, scenario analysis rather than stress test is for financial institutions and for the regulators to better understand the risks that climate change pose to the health and resilience of core financial institutions. And it will help those institutions better manage and understand the risks. Rep. Bill Posey: (01:10:14) Are we doing any studies of the risk from a solar interaction with our planet? I mean, a couple of years ago we missed a solar eruption that would have knocked out a lot of satellites and kind of put us in a dark age. Are we checking on natural phenomenon like that as well? Sec. Janet Yellen: (01:10:33) Well [crosstalk 01:10:34]. Go ahead. Chair Jerome Powell: (01:10:37) Thanks. We directly supervise financial institutions. We do supervise for institutions that are in areas of the country that are susceptible to significant weather problems such as hurricanes and things like that. So we do that, but... So just in response to your question, I would say that. Rep. Bill Posey: (01:11:05) How would this be used? I mean, some people think it will be a federal infomercial, like the Al Gore movie or, or something like that. I mean, how do you plan to utilize this information? Chair Jerome Powell: (01:11:17) Well, let me say that first of all, many of the large financial institutions are already doing this and the reason they're doing it is just what the secretary said, it is to try to understand at an early stage of this science really, understand what are the risks that are involved in climate change. And one way to do that is to run simulations and ask what would happen if what would happen to that? There are no regulatory consequences contemplated. It is an exploration in understanding better what the risks are to the core of our financial system. And we feel like that's our obligation is to understand that. And again, the financial institutions are very much actively doing this on their own. It's not something we're forcing them to do at this point. Rep. Bill Posey: (01:12:06) Who is doing it? Give me some examples of who might be doing that right now. Chair Jerome Powell: (01:12:10) I'm not going to name individual financial institutions. Many of the large banks are very active in trying to understand how climate change would affect their business over the long sweep of time, many or even all. And by the way, that's also true of large industrial companies in the United States. Rep. Bill Posey: (01:12:28) And so are they sharing that information with you? Chair Jerome Powell: (01:12:31) They're sharing with the public. Rep. Bill Posey: (01:12:33) Does it seem consistent? Chair Jerome Powell: (01:12:37) It's early days, honestly. It's really very early days and trying to understand what all this means. It clearly can have longer term implications for our economy, for our financial system, and for the people that we all serve. And I think our obligation is to try to understand that. And again, I would say it is early days, but we feel like we have a responsibility to start the process of understanding. Rep. Bill Posey: (01:13:02) And do you think you will discover revelations that they have missed, or- Chair Jerome Powell: (01:13:11) I think we have a job, which is to assure that the institutions we regulate are resilient to the risks that they're running. The public will expect that. And they have every right to expect that over time. So we don't have a new mandate. This is consistent with our existing mandate of supervision of financial institutions. It's just the same mandate and a different risk. Chairman Waters: (01:13:35) Gentleman's time has expired. The gentleman from Texas, Mr. Green, is recognized for five minutes. Rep. Al Green: (01:13:43) Thank you very much, Madam Chair. Madam Chair, I don't want the historic aspect of this hearing to escape us. I'm a senior member of this committee. I have had many persons to appear before this committee, many secretaries of the treasury and chairs of the fed. And I must tell you a paradigm shift is taking place, and I don't want it to be overlooked. Rep. Al Green: (01:14:10) On your leadership, I have here the statement of the chairperson of the fed. And in his statement, he says, while addressing progress that's being made, he states, "We welcome this progress, but we'll not lose sight of the millions of Americans who are still hurting, including lower wage workers in the service sector. African-Americans, Hispanic, and other minority groups that have been especially hard hit." And then the secretary of the treasury in her statement, she indicates that since taking office two months ago, we have been expediting relief to areas of greatest need, for example, small businesses, especially the smallest small businesses, which are disproportionately owned by women and people of color. Rep. Al Green: (01:15:03) Now, I understand that there's still great work to be done, but I just don't want to overlook the fact that people are talking more now about the needs of minorities and women. Secretary Yellen, you have indicated in the message that you've presented not so very long ago when comparing the 1.8 million fewer men in the labor force to the 2.5 million fewer women, you call this extremely unfair. This is the secretary of the treasury. So I'm grateful to both of you for understanding that it is now time for us to move forward on the issues associated with the wealth gap, as it relates to minorities in this country, and especially issues related to women who happen to be more than 50% of the population of the country, that this is historic to see this movement under your leadership, Madam Chair. I commend you, and I'm honored to serve under your leadership. Rep. Al Green: (01:16:07) Now, to Secretary Yellen. I have a concern, and I'm concerned about the $10 billion that will go to the state small business credit initiative. I'm concerned because when this program was instituted on a previous occasion, we have reauthorized it in the rescue plan, but when it was authorized initially it went to the state through the agriculture department. Then the agriculture department had the responsibility and obligation of making sure that it moved down to other units of the state. Rep. Al Green: (01:16:48) Well in Texas, that probably is not the best way to do business. So I have this consternation about it. And my hope is that we'll be able to get this to the end users in a much more expeditious way, such as what you have indicated you've been trying to accomplish. So my question is this, Madam Secretary, will you send us an outline of the timeline for implementation from money in the treasury to capital in the coffers of the end users and the $9 billion emergency capital investment program that has come into being under the Honorable Maxine Waters leadership, had the privilege of working on this program. And the $10 billion state small business credit initiative, similarly came into existence. Rep. Al Green: (01:17:42) And I would add also this last one had the help of the chairwoman of the diversity and inclusion subcommittee, Ms. Beatty, who helped us to hone this and refine it to the extent that we are helping the smallest of small businesses. So I'm hopeful that we can get such an outline because I have people who questioned me daily about when will the money be available for us as end-users to benefit from it. And I believe that your heart's in the right place. I believe you're working expeditiously. I just want to be able to answer those questions when they are posed to me. So again, I thank you. I'm grateful for this historic moment. And my hope is that this is only an indication of the better things to come. And Madam Chair, I will yield back some 12 seconds to you. Chairman Waters: (01:18:39) Thank you. Thank you very much. I now recognize the gentleman from Missouri, Mr. Luetkemeyer for five minutes. Rep. Blaine Luetkemeyer: (01:18:47) Thank you, Madam Chair. And congratulations to Madam Secretary Yellen on your new position. Good to see you again. Sec. Janet Yellen: (01:18:53) Good to see you. Rep. Blaine Luetkemeyer: (01:18:55) My only comment is just for you. I also have another duty here in Congress, which is to be the ranking member of small business. And during your opening statement, which I'm sure was written by your staff, they made, or you made some comments with regards to this administration being responsible for all the loans that are out there that were being taken by those entities, those small businesses under 20 or 10 employees. And I can quote you from my own press release as the ranking member of small business that the loans have been at roughly 75% to 80%, 10 employees or less already, and is generally about over that little over 90% of 20 employees or less. Rep. Blaine Luetkemeyer: (01:19:43) And for the administration to actually pause that ability of small businesses over 20 to have access to the program is actually harmful from a standpoint that if we don't pass the extension of the PPP bill that we passed in the House and the Senate is now has it, if we don't pass that, those small businesses are actually at a disadvantage because the over 20 were delayed. And if they don't get their loan in the pipeline soon, the pipeline's not going to get processed and they won't even get their loan processed. Rep. Blaine Luetkemeyer: (01:20:14) So my comment would be please tell your staff to quit politicizing your statement, and please stop taking liberties with the facts. Mr. Powell, we're halfway through the two year cycle now on Cecil. And the Capitol delay, which will end in 2022 and began the phasing of deferred impacts on the Capitol. We've now had nearly four quarters of Cecil data available and have bank agencies reviewing the data. Can you tell us what the Fed's review of that data is? And if you would consider a more permanent calibration or revision to the current approach? And if you could unmute, that'd be great. Chair Jerome Powell: (01:21:02) I, once again, double-clicked. So we're continuing to look at Cecil. I honestly don't have anything for you on that data. I will get a look at it quickly and come back to you. Rep. Blaine Luetkemeyer: (01:21:14) Okay. That'd be great because I think having deferred it to something that you agreed to upfront last year and in the process, it was something that I think you you'd probably agree to again this time. And I think it's something we certainly need to review for sure, if not get rid of altogether, if a delay is something that we all believe is in the best interest of everybody affected by it. Rep. Blaine Luetkemeyer: (01:21:36) Also Mr. Powell, for Chairman Powell, at this point Fed data from third quarter 2020 indicates that 51% of the commercial real estate debt is now held by banks and the FTIC data indicates community banks have a higher concentration of these loans, the lenders. At this point, again, Congress has provided relief from the financial institutions, with these assets through the suspension of TDRs and the extension of the foreclosure moratorium. I think it's important we can have the discussions around this and what will happen when this relief ends. Can you give us a little heads up of what you think will happen, the impact on balance sheets, economic recovery, if we take that extension or we take that foreclosure moratorium off? Chair Jerome Powell: (01:22:27) I will look into that for you. Sorry. Rep. Blaine Luetkemeyer: (01:22:30) I apologize for my voice. I've got really bad allergies today. Chair Jerome Powell: (01:22:34) It's that time of year. So you're right. We're monitoring CRE very carefully and you're absolutely right that it's concentrations arise principally in smaller banks and we'll have to monitor it carefully as we allow those more terms to elapse. And I don't have anything for you on that today, but we're well aware of the issue and we'll be sure to move very, very carefully when we do address that. Rep. Blaine Luetkemeyer: (01:23:03) Well, as you know, I'm very concerned about this situation because as we saw in '08 and '09, when we went in and very punitively shut down entire industries, especially in commercial real estate and real estate development areas, it had a really, really devastating effect on not only local economies, but the economy as a whole. So I hope we are very, very cautious about this. You and I have talked about this before, with regards to forbearance and being able to allow these businesses to get back on her feet and see what the real loss is before we go in and sort of a scorched earth getting rid of all these folks. Rep. Blaine Luetkemeyer: (01:23:37) But I appreciate your interest on that and your support on that. I know that you all are doing a good job of working with the banks at this point. And I would ask that you continue to do that. I realize some loans are bad. You've got to write them off. That's fine. But I think if time is given with what the nature of the economy is, I believe we can get out a lot of the mess that we're in without having to go through the process of foreclosure. So I thank you for your thoughtfulness and I yield back, Madam Chair. Chairman Waters: (01:24:04) Thank you very much. The gentleman from Missouri, Mr. Cleaver is recognized for five minutes. Rep. Emanuel Cleaver: (01:24:10) Madam Chair, let me again, hopefully for the last time, I apologize to you. The members of the committee certainly are witnesses for not being properly attired due to my current medical situation, but I thought it might be better for me to do this than miss the meeting. Rep. Emanuel Cleaver: (01:24:33) If I can, Madam Secretary, I was here and probably everybody, at least on the Democratic side, who's spoken so far was here and I think probably all of the Republicans as well were on the committee when the tax cuts were approved, the tax cuts and Jobs Act, I think it was called. And it temporarily organized or authorized what was called the opportunity zones. And I became somewhat excited about it. Didn't matter whether it was designed by Republicans, Democrats, or the Tampa Bay Buccaneers. I thought it was... Maybe that's going too far, but opportunity zones, the incentives were designed to encourage private investment in the economically distressed areas around the country. Rep. Emanuel Cleaver: (01:25:34) And I've become concerned, even though I had great enthusiasm for this program, that the larger promise of this organization has not been realized. I thought, I believed, I hoped that we would have affordable housing. Community oriented amenities, like grocery stores, drug stores, like CVS, would would improve the quality of life in these low income areas. But my dream remains unrealized. Rep. Emanuel Cleaver: (01:26:11) Now today, Chairman Green and I sent a letter. And let me say, parenthetically that opportunity zones is in ways of means. And I'm respecting that, except that, there are some parts of this, especially as it relates to affordable housing, where opportunity zones could be extremely important. So here we are. I mean, we've seen some things to happen that I think are extremely unfortunate and they bode poorly for what we can do in the future. Rep. Emanuel Cleaver: (01:26:48) And one of those things, Madam Secretary is that we have seen, for example, the Brookings Institution talked about in one of their reports, in some of the states, had picked the opportunity zones covering college campuses, located in census tracks where over 98% of the residents are students. And I'm all for students, but I don't believe the program was designed, as I recall and read the initial proposal for colleges. It was designed for distress communities. At any rate, I'm talking too long, but I want to make sure that you understand the concerns we have. And in the remaining time, could you talk about what economics says about the benefits if we have this program maybe tweaked or redesigned in some ways, so that the incentives actually help people in what we thought were going to be zones? Sec. Janet Yellen: (01:27:55) I think it's critically important to increase opportunities to provide affordable housing, especially for low-income and historically marginalized families and opportunity zones appropriately structured could contribute to that theory. A number of other tools that we have that can contribute to affordable housing goals. The Low Income Housing Tax Credit, I think is important in serving that purpose. The Capital Magnet Fund can also serve to facilitate investment in affordable housing construction. Sec. Janet Yellen: (01:28:46) This is a top priority for the Biden administration. We're certainly open to exploring opportunities at treasury and across the government to address the affordable housing shortage. We're operating at treasury the CDFI fund and the programs that we'll invest in CDFIs and minority depository institutions. And I think they can make a contribution, but we have heard from a variety of programs and would look forward to working with you, to see how we can use them to address this problem. Rep. Emanuel Cleaver: (01:29:31) Thank you [crosstalk 01:29:31]. Chairman Waters: (01:29:31) Your time has expired. Thank you. The gentleman from Michigan, Mr. Huizenga is recognized for five minutes. Rep. Bill Huizenga: (01:29:40) Thank you, Madam Chair. And I'm going to be trying to move through a couple of quick things, but Secretary Yellen, one, congratulations on your new position. And I look forward to continuing to work with you, but I have to read you a part of an email I received from a CPA constituent of mine. And this echoes what Mr. Sherman had to say. Rep. Bill Huizenga: (01:30:02) He says, "Extending the filing date of the 2020 tax returns was not an option. It was a necessity because of all the stuff being thrown at us this year. Making changes to the 2020 income tax rules in March? Really?? It's going to take software developers two weeks at least to get this into the software correctly. Can you even imagine the amount of incorrect correspondence the IRS system is going to create as a result of this and how much we are going to have to deal with straightening this out for them because they also can't get their systems changed correctly that quickly? It's going to be a mess this summer, for sure. Extending the 2020 deadline by 30 days is minimal. It should have been till June as the ICPA and the ways and means committee recommended, but we can deal with that. Having the first quarter '21 estimated payment due on April 15 after extending the tax filing date to May 15 is the most ridiculous thing I've ever heard. How do you think we determine what those estimates should be? Through the completion of the prior year return ought to have the first quarter estimate due on April 15, without knowing where the prior return ended up is ridiculous. They should have just kept the filing date at April 15." Rep. Bill Huizenga: (01:31:16) So one, I want to know if you are aware of this problem. And two, whether you are committed to actually try to straighten that out and move that date to make it workable. Sec. Janet Yellen: (01:31:30) Sorry. I believe the logic of moving the one day, but not the date for estimated taxes is based on the idea that it's mainly high income taxpayers who file estimated taxes, and that they're able to file by April 15th, where- Rep. Bill Huizenga: (01:31:53) Well, let me just stop you right there. As a former realtor and independent contractor coming out of college, I was not a high income earner, but I paid quarterly taxes. I paid quarterly estimates. And there's all kinds of people like that who are small business owners, and they're in the middle of trying to keep their restaurant open, much I might add like Marlena, who is a restaurant owner, immigrant restaurant owner, who is in jail right now because she violated the Michigan Health Department's order to shut her restaurant down because she was trying to save her business. But we've got a lot of those folks that need to understand what their tax liability is before they are going out and sometimes having to borrow cash to make that first estimate payment, especially those that are in seasonal work, such as construction, landscaping, those kinds of things. Rep. Bill Huizenga: (01:32:43) So I don't want to take any more time on that. I do want to have that conversation with you and your staff offline. Mr. Powell, materiality. I want to touch on that. And the Fed's involvement in the network for greening of the financial system, you have a rather interesting quote saying regardless of the nature of any future engagement with them, we'll continue to set supervisor and regulatory expectations basically as normal. So one, that begs the question, why the involvement in that? And two, materiality. Doesn't it need to be definable as well as quantitative? Chair Jerome Powell: (01:33:25) So what the NGFS really is, is a regulator supervisors from countries around the world who are trying to understand together what are best practices. Rep. Bill Huizenga: (01:33:35) I know what it is. What I need to know in the short amount of time is about the materiality. When nobody can define it or come to an agreement on it, how can it be measured and be quantitative? Chair Jerome Powell: (01:33:50) Well, we're not trying to measure or quantify something right now. We're trying to understand at a high level, what is the nature of the risks that will affect banks over time from climate change? Rep. Bill Huizenga: (01:34:01) That might be your goal and objective. I know that's not the goal and objective of number of my colleagues who have actually been talking about this needing to be into the review currently. And what I'm afraid is that we're going to get dragged into that. My remaining last little bit, I do want to talk about Secretary Yellen. You're a professor, a lifelong educator. Do you agree that we should safely send our kids back to school to ensure their educational development? I'm very concerned about that impact on the future of our economy. Sec. Janet Yellen: (01:34:33) Well, I am concerned about the impact of children being in school, and it is an important objective to reopen this schools safely as soon as we can. Rep. Bill Huizenga: (01:34:47) All right. My time has expired. I appreciate the time. And I look forward to that other conversation about the IRS. Chairman Waters: (01:34:52) Thank you. The gentleman from Connecticut is recognized for five minutes. Rep. Jim A. Himes: (01:35:04) Thank you, Madam Chair. And thank you to both of you. Thank you to both of you for appearing. Couple of quick things. Then I do have one question for both of you. Chairman Powell, I saw the great interest in your comments on cryptocurrency, out of the Fed. You've said we would not proceed without support from Congress and urged great care and transparency. I appreciate that. I think my subcommittee would probably have jurisdiction over that in some combination with Mr. Sherman's subcommittee. So I just want to do a tip my hat to that sentiment, and I think we should work together. There's quite a bit of education, I think, to be done with the United States Congress on that very important topic. Rep. Jim A. Himes: (01:35:40) Secretary Yellen, thank you for all the work that you and your people have done. I would be remiss if I didn't urge you to be particularly quick on the roll out of the rules for the restaurant revitalization fund. That obviously is a sector that has been brutally hit in the last year or so. So we're hoping that those funds become available quickly. In my remaining four minutes, I have one- Rep. Jim A. Himes: (01:36:03) ... that those funds become available quickly. In my remaining four minutes, I have one question for both of you that I'd like to offer. It's undeniable that everywhere we look today, we see the effects of the very substantial liquidity in the system, and by the way, it's gratifying to see monetary and fiscal policy working in tandem. This was not true when I was a freshman in '09 when the fiscal policy was working against the monetary policy for recovery. It's very gratifying to see that, but again, everywhere we look, we see the effects of a flood of liquidity in the system. That, of course, is in equity market prices, which have had a remarkable run, the high yield market, which is now yielding something like 4%. everybody and their brother has a SPAC. Real estate prices, very, very, growing around the country. Rep. Jim A. Himes: (01:36:48) So my question for both of you, and let me ask you each to take a minute and a half to two minutes. We learned in 2008 that trees do not grow to the sky, so I wonder if you each would just take 90 seconds to tell us what you see as the near to medium term risks associated with the inevitable contraction, though we may not know when it comes, of liquidity in the system. Let me start with the treasury secretary for a response and then go to the chairman. Secretary Yellen, you may need to unmute. Sec. Janet Yellen: (01:37:33) Apologies. I'd say that while asset valuations are elevated by historical metrics, there's also belief that with vaccinations proceeding at a rapid pace, that the economy will be able to get back on track. I think in an environment where asset prices are high, that what's important is for regulators to make sure that the financial sector is resilient and to make sure that markets work well and that financial institutions are appropriately managing their risks. Rep. Jim A. Himes: (01:38:26) Chairman Powell, that's a pretty good segue over to you. Chair Jerome Powell: (01:38:30) So monetary policy is highly accommodative right now. That is appropriate given how far we are from our employment goal and our inflation goal for that matter, and I think the first thing I would point to is just our overall monitoring of financial stability. So we look carefully at financial stability on an ongoing basis. We have a framework with four pillars. If you look at those, the evidence is kind of mixed. You can say that asset prices are somewhat, some asset prices are a bit high, but the banking system is highly capitalized and funding risk is relatively modest. The remaining category is really leverage among households and businesses, which is somewhat elevated, but nothing like it was before the financial crisis, so it's a mixed picture on that. Chair Jerome Powell: (01:39:22) The main thing is to have a resilient financial sector that can withstand the sorts of disruptions that will come. In terms of moving forward, we've said that we would start to taper our asset purchases when we've seen substantial further progress toward our goals. When that comes, we'll communicate well in advance of the time of actually tapering. That's what we do. We've learned over the course of some years now that we need to communicate carefully and move slowly well ahead of time. We will let people know what's coming, and that's the best we can do to make sure that it's a transition away from very highly accommodative monetary policy as the economy reaches full employment and price stability goals that will transition to a different policy. Maxine Waters: (01:40:12) Thank you. The gentleman's time has expired. The gentleman from Kentucky, Mr. Barr, is recognized for five minutes. Rep. Andy Barr: (01:40:19) Thank you, Madam Chairman. And Secretary Yellen, you have created a team within Treasury to focus on climate change. You are also the chair of the Financial Stability Oversight Council, which is charged with identifying systemic risk to the financial system. I certainly understand that changes to weather and weather patterns could pose risks to individual credits or insurance policy holders, but linking hypothetical climate scenarios to risk to the entire financial system seems to me highly speculative. And on the flip side, I worry that injecting ill-defined climate scenarios into financial regulation and supervision creates the immediate and very real risk of driving investment and credit allocation away from job producing industries like fossil energy, an industry that still provides 80% of total energy consumed in the United States and remains the most affordable and reliable source of energy to the American economy. Rep. Andy Barr: (01:41:19) Are you incorporating this real risk into your assessments around climate, and how do you plan to account for the disruptions in the labor market, the very significant disruptions to the labor market from lost energy jobs? And what about increasing energy prices and decreasing reliability for consumers? Is that something FSOC will look at in the context of your climate czar? And you need to unmute. Sec. Janet Yellen: (01:41:51) I believe that FSOC can play a role in reaching discussions among financial regulators, all of whom have responsibilities for assessing risks from climate change to the financial institutions that they supervise and regulate to coordinate a system-wide response using the best available tools. I think FSOC can facilitate the identification of data and information including high quality financial disclosures that are needed understand climate risks and make sure that climate risks are addressed fully in light of these assessments. I don't see FSOC as playing a role in telling financial institutions what kinds of lending they can do, but information is important. Rep. Andy Barr: (01:42:58) Thank you. And just reclaiming my time, I would just encourage Treasury to consider the role that shifting consumption away from fossil energy towards renewables, despite the market's continued demand for fossil, that, that the impact that that could have on the economy as well, and systemic risk as opposed to just looking at hypothetical climate scenarios. Broadband, Madam Secretary, the pandemic has been especially hard for rural families who don't have broadband connection in my home state of Kentucky, and I'm glad that the American Rescue Plan allows for necessary investments in broadband, but one of the ongoing problems we've had is it funding on broadband infrastructure often goes to areas that already have broadband, and the dollars never get to underserved areas like in my district. I was disappointed that this committee in the markup of the American Rescue Plan rejected my amendment to dedicate funds to rural areas for broadband. Will you commit Treasury to using its authority to see that in the American Rescue Plan broadband funding is spent first and foremost in underserved rural areas? Sec. Janet Yellen: (01:44:10) Well, we need to distribute the funds to states, localities or territories and the like based on the requirements that are in the ARP, and using the funds for broadband or water or sewer are for the state and local funding is certainly a permitted use. But we're going to give flexibility to the recipients of these funds as to precisely how they deploy them them consistent with the requirements of the act. Rep. Andy Barr: (01:44:53) Thank you. Thank you, and I look forward to working with you and Treasury on that. I appreciate that. I think we can work together on that. Final question. With the multi- trillion dollar deficit spending bill just passed, the promise of an additional $3 trillion in spending by this administration on top of the $4 trillion and borrowing because of COVID last year, does the Treasury or the Federal, both of you intend to lengthen the maturity of government debt before interest rates rise? Sec. Janet Yellen: (01:45:24) Treasury has been looking at this question and has no current plans to do that. Maxine Waters: (01:45:32) The gentleman's time has expired. The gentleman from Illinois, Mr. Foster, is recognized for five minutes. Bill Foster: (01:45:41) Thank you, Madam Chair. Secretary Yellen, Chair Powell, I'd like to probe a little bit deeper on central bank digital currencies, and in particular the need for a secure digital ID for participants. I believe that both of you are on the record as acknowledging that an anonymous untraceable digital dollar is not a viable option for our country or the free world, because its ability to be abused for money laundering, terrorism financing, ransomware, and so on. Is that principally correct? Chair Jerome Powell: (01:46:13) I don't think I am on the record for that, but I'll go on the record now for it. Sec. Janet Yellen: (01:46:21) Nor am I on the record, but I would agree with that we need to be very careful about the use of a digital currency for illicit finance, and an anonymous currency makes that much harder to control. Bill Foster: (01:46:40) Yeah. I concur. I think it's sort of logically impossible. And so on the other hand, I believe that the Chinese approach to digital currencies that give the government immediate and unconditional access to all transaction information will be equally unacceptable to Americans and to most citizens of the free world. Therefore, a digital dollar will be crucially dependent on having an effective authentication component. That is a secure and legally traceable and maximally privacy preserving way for participants to authenticate themselves as a unique legally traceable individual, a secure digital ID, and it must be backed by a trusted court system and a clear legal regime to determine the conditions under which the participants might be unmasked. And as a digital dollar, if it's to be used internationally, we're then going to need a digital ID system that operates internationally, at least among the free countries of the world. I'd like to thank you both for beginning engagement with authorities and other countries on central bank digital currencies, and I was wondering where you see this discussion going as far as a secure digital ID and a means of authentication across boundaries, across countries. Sec. Janet Yellen: (01:48:03) Maybe I should let Chair Powell start with this, because he's been more involved than I have. Chair Jerome Powell: (01:48:12) Thank you. So yeah, I mean, where we are is we are engaged in a process of looking at all of the technical issues and design issues which interact with each other, and that's one of the most basic ones. Reflecting your earlier question, I don't think that a system that relies entirely on, for example, completely private governance or completely secret information about who's actually owning the digital dollar would not be viable, and the lack of privacy in the Chinese system is just not something we could do here at the same time. So there's got to be a balance, and it does call for using the two tiered system in some way so that there's a wallet outside of the central bank and transfers can take place there, and that there are appropriate protections. We're only beginning to think carefully about these things, and it's going to be a careful, detailed, and probably lengthy process of consideration, one that we're investing quite a bit in now and that I expect will last some time. Bill Foster: (01:49:30) Yeah. Secretary Yellen, did you have any thoughts on this? [crosstalk 01:49:36]. The issue of a secret digital ID is very much in your court having to do with ... One of the things that coronavirus laid bare is the lack of simply a list of citizens of the US and our ability to rapidly distribute funds, particularly to the under-banked. A high quality and universal digital ID in the US would have made that immeasurably easier, as well as everything from vaccine certificates or you name it. And so this has been ... it's an ongoing discussion on many fronts, and there are also specific proposals. I believe you had letters urging both of you to look into this in more detail. So I was just wondering what, just simply as a means for citizens to receive payments. Fed accounts, each one of us has already an account with the federal government, the IRS at least, and I was wondering how you saw this part of the conversation going. Sec. Janet Yellen: (01:50:43) I think it's something that's worth exploring. I've not done so, but we would be glad to have further conversations with you about how something like this could work. There's certainly a problem, as you've mentioned. Bill Foster: (01:50:59) Thank you. Maxine Waters: (01:51:00) The gentleman's time has expired. The gentleman from Texas, Mr. Williams, recognized for five minutes. Roger Williams: (01:51:08) Thank you, Madam Chairman, and thank you, Madam Secretary and Chairman Powell for being with us. The Biden administration's tax plans are becoming clear each day, and from what we've learned so far, the president was not really telling the truth when he told voters that anyone earning less than $400,000 would now have a penny raising taxes. This number has been reduced to anyone making $200,000 a year, and a significantly greater number of families can expect the government to take more of their hard-earned paychecks as Democrats can fund their progressive priorities. In addition to individual tax rates going up, the corporate tax rate's also expected to be raised, and we will no longer have one of the most competitive tax rates in the world. This will stifle business investments, prevent employers from hiring more people and reduce capital struggling businesses that will need to make the necessary changes to accommodate the new normal after COVID-19. So Chairman Powell, can you talk about that correlation between business investment and productivity gains and how increasing productivity benefits workers and the overall economy? Chair Jerome Powell: (01:52:10) Sure. I mean, really the way living standards rise over time is through increasing productivity, more output per hour. Without that, incomes can't sustainably rise, and that is significantly connected to investment, investment in human capital and also advancing technology. Roger Williams: (01:52:29) Okay, thank you. At the beginning of 2020, Congress updated the Bank Secrecy Act and make some of the largest changes toward anti-money laundering laws in decades. When this legislation was signed into law, there were some concerns coming from the business community about the impact this will have on small businesses in the form of additional regulatory costs. As a small business person, I can tell you that's a burden that we do not look forward to, and as you start putting out guidance and implementing the law, I hope you will be mindful of this and do all you can to ensure businesses will not be stuck with significant new expense. So Secretary Yellen, can you give us a status update on Treasury and FinCen's work in implementing the Anti-Money Laundering Act of 2020? Sec. Janet Yellen: (01:53:16) Yes. Timely and effective implementation of the Anti-Money Laundering Act of 2020 is the top priority. At FinCEN, our efforts are well under way, and several of the provisions of the act that involves FinCEN looking at innovation, regulatory reform and the like, we're actively engaged in. So this is something that's a high priority, and we're making progress on it. Roger Williams: (01:53:58) Okay. Thank you. Chairman Powell, in the past, we have talked about the workforce participation rate and how we need to get people off the sidelines and contributing to our economy. In other words, just put them to work. In your testimony, you note that this figure is still notably lower than it was before the pandemic, and yet the COVID-19 bill recently extended the enhanced unemployment benefits until September. I have consistently expressed my concerns about how this policy will be detrimental to our economic recovery and make it more lucrative to, frankly, live off these overly generous government programs than go out and find a job. So Chairman Powell, given the enhanced unemployment benefits are now the law, how should we be incentivizing people to get off the sidelines and back in the workforce and make a good living for their families? Chair Jerome Powell: (01:54:50) I think the most important thing is for people to get vaccinated so that we can get the economy fully reopened, so that those jobs can come back and people can feel safe doing them. Roger Williams: (01:55:03) Do you have an answer to that, Mrs. Yellen? Sec. Janet Yellen: (01:55:06) Well, I agree with that. So many people who are not working are not doing so because of safety considerations or because they have children out of school, and the studies that have been done about whether or not the additional payments discourage work show pretty clearly that they don't serve to do that. In addition, they they will be expiring in the fall. Roger Williams: (01:55:41) Well, in my remaining time, we talked about increasing taxes earlier. I would just say, as a small business owner that employs hundreds of people in Texas, it's pretty simple. If you cut taxes, you increase jobs. If you raise taxes, you cost jobs any way you look at it. So I hope that everybody will understand that raising taxes to any of any business is not good for our economy. Within that, I yield back my time, Madam Chairman. Maxine Waters: (01:56:07) Thank you very much. I now call on Mr. Vargas from California for five minutes. Juan Vargas: (01:56:16) Thank you very much, Madam Chair. I appreciate very much this hearing. I also congratulate in the strongest way Secretary Yellen. What an honor to have a woman now running Treasury. It's very, very exciting. Sec. Janet Yellen: (01:56:43) Thank you. Juan Vargas: (01:56:44) [inaudible 01:56:44] about deficit spending, when we democrats are in power. They don't seem to remember that when they are, especially their $1.9 trillion giveaway to the wealthiest Americans, tax giveaway. It's probably even more now because the wealthiest have made so much money during this pandemic. But one of the things that I found so interesting about this particular hearing is that we have two incredibly intelligent people presenting today, and one's a Democrat, and one's a Republican. One was appointed by a Democrat and one was appointed by a Republican, and yet they seem to be principled, scientific, speaking about the facts and not crazy things. I mean, this is the way it used to be, and so I appreciate it very, very much and again can't tell you how much I have enjoyed listening to this intelligent conversation. I'm sure that the Secretary and the Chairman have differences of opinions, as they should, but it would be done on a factual basis, and it would be done, I think, intelligently and scientifically. Juan Vargas: (01:58:07) So in that spirit, I do want to ask about climate change. It seems that both of you have the notion that climate change could be a big deal and is, and you're studying. So what are the long-term investments that we need to be looking at with respect to climate change in our economy? And either one can go first. Sec. Janet Yellen: (01:58:33) Well, I'd start off by saying that climate change poses very severe risks to the wellbeing of humanity, and it's a global problem that demands a global solution. So while we need to address climate change at home, we also need to work globally to help other countries, particularly poor countries have the resources to address it as well. It is a top priority of the Biden administration. President Biden his released a detailed plan to combat climate change. We've rejoined the Paris Agreement. We intend to put forward a proposal to invest in sustainable infrastructure and to create new green jobs in the process. We've talked earlier in this hearing about evaluating the risks to businesses and to financial institutions from climate change, which the financial regulators are doing, and I hope to facilitate through FSOC the sharing of information on best practices. We need to focus on information and disclosure of information about the risks to companies that investors need to channel their capital in the right directions. Juan Vargas: (02:00:14) Mr. Chairman, so what about those risks to businesses and financial institutions, Mr. Chairman? Chair Jerome Powell: (02:00:21) So we see this through a different lens, appropriately from the Treasury Department, and that really is the lens of our existing mandate. We supervise banks and some other institutions to assure that they understand and are managing the risks that they're running in their business, and we don't have a new mandate that that's what we do. Climate change is an emerging risk, so we're looking at a carefully. We actually are just in the very early stages of considering stress scenarios, and that's what others are doing too. It's an emerging idea. It's not actually something that people are conducting now, but we're doing that and many other things, again, to get a basic understanding of how the financial system can be resilient against what may be very significant emerging risks over time. Juan Vargas: (02:01:11) Well, thank. Yesterday in the Foreign Affairs Committee, we talked to David Beasley, the World Food Program. Climate change was such a big deal there to famine and to other problems internationally, so again, I'm very thankful that you're working together and that you're scientific. Thank you. Sec. Janet Yellen: (02:01:27) Thank you. Maxine Waters: (02:01:30) Thank you very much, Mr. Hill, the gentlemen from Arkansas is recognized for five minutes. French Hill: (02:01:36) Well, thank you, Madam Chair, and let me welcome my good friend, Jay Powell, back to the committee for this oversight hearing. And what a pleasure to say, Madam Secretary, and welcome Janet Yellen back to the committee in your new role was our treasury secretary. It's a pleasure to have you both here. Sec. Janet Yellen: (02:01:54) Thank you. French Hill: (02:01:55) Secretary Yellen, China, Russia, Iran, Syria, Venezuela, and Myanmar are all subject to Treasury's OFAC sanctions programs. Secretary of State Blinken said last week China is committing genocide, and President Biden recently called Vladimir Putin "a killer." With Chairman Waters' strong support, now Treasury is considering sending billions of dollars to these dictatorships through the IMF's special drawing rights allocation. Wouldn't you agree that no strings attached liquidity for a genocidal regime like China runs counter to our national interests? Sec. Janet Yellen: (02:02:39) Well, I believe that our national interest involves augmenting the reserves of countries that need it, so that at this very difficult time, we don't pressure countries to take contractionary, deflationary actions that would make recovery more difficult. And it's especially important to channel our resources to the world's poorest countries that are having to deal with- French Hill: (02:03:17) Madam Secretary, I agree completely. And, of course, David Malpass has a made available $160 billion of concessional loans through the World Bank and the IMF, billions of dollars to those neediest countries through its facilities for some 80 countries. So I think we share that goal, but could you at least certify for us today that China won't receive billions of dollars in this no strings attached liquidity through the SDR allocation? Sec. Janet Yellen: (02:03:46) Well, so funds are allocated in accordance with the quotas that each country has at the IMF and in an unconditional way in. So China will be, if this allocation goes through, will receive resources. China is expected to use some of these resources, I believe, to, along with other countries, recycle their SDRs to some of the poorest countries through the Poverty Reduction and Growth Trust, and to provide relief to countries that have outstanding borrowing from China. So I think that China is likely to use SDR resources in ways that will be beneficial to the world. French Hill: (02:04:46) Thank you for that. I hope that's the case. I'll believe it perhaps when I see it. I hope that's an important part of this discussion of limiting their access. Would you in turn also ensure that third world countries that have been penalized by non-transparent predatory lending from the One Belt, One Road process from China's largest creditor will not be paid with SDR allocations from those poor countries? Can you certify that for us today? Sec. Janet Yellen: (02:05:17) We do want to make sure that SDR allocations are used to release poverty and address real needs, and we'll work with them and with China to ensure that they don't go to repaying wounds from Belt and Road Initiative. French Hill: (02:05:37) And China, turning to Russia, of course, as I noted president Biden acknowledged last week that Vladimir Putin is a killer. Killers don't double deserve a blank check from the IMF, do they? Sec. Janet Yellen: (02:05:53) Well, as I said, an SDR allocation goes to members in accordance with their quotas in the IMF. French Hill: (02:06:03) Well, I've argued, and I hope you'll work with us, you're skirting Congress by limiting the SDR allocation to $650 billion that you've discussed with your G7 colleagues, but you're not taking the efforts I think are important for America's national security to limit this hard currency access going to some of the worst regimes in the world. Will you commit to work with Congress to limit this SDR allocation access to Iran, Assad, Venezuela, Russia, China? Sec. Janet Yellen: (02:06:36) We are working with the IMF to craft rules that will promote transparency and make it difficult for countries. They need to find willing partners to exchange SDRs, and that requirement will limit the uses for some of the countries that you mentioned. French Hill: (02:07:02) Thank you, Madam Chairman. I yield back. Maxine Waters: (02:07:03) The gentleman's time is expired. Mr. Gottheimer, the gentleman from New Jersey, is recognized for five minutes. Josh Gotteimer: (02:07:10) Thank you, Madam Chairwoman, and thank you, Chairman Powell and Secretary Yellen, for being here today. Secretary Yellen, if I can start with you, the SALT deduction cap jammed through Congress in 2017 Tax Hike Bill raised taxes for majority of the families in my district. All four counties in the scores of middle-class families on represent had an average SALT claim above the $10,000 cap. For example, in Bergen County, the average taxpayer claimed $24,783 for the cap, when [inaudible 02:07:35] place and the average property tax alone was $12,398 last year. These are my communities, teachers, and first responders and small business owners, young people trying to start a family. All groups were struggling, obviously, during the pandemic. It's high time we fought back against these moocher states that put this into place. My district is taken advantage of by these folks enough. Our taxes need to be cut, not raised, as we recover from COVID-19, and removing the SALT cap has brought bipartisan support. Will the administration support eliminating ... Josh Gotteimer: (02:08:03) ... SALT cap has broad bipartisan in the support. Will the administration support eliminating the SALT cap and fully reinstating the deduction ending this misguided policy of double taxation on my constituents? Sec. Janet Yellen: (02:08:11) Well, I do think that the SALT cap is a feature of TCJA that will result in very disparate treatment. There are a lot of options that have been presented, and I would work with you to try to ensure that the inequities that this caused are remedied in a fair and responsible way. As you mentioned, there's a bipartisan proposal to repeal the cap. President Biden discussed a proposal that would cap itemized deductions at 28%. The caps could be increased. So I think we need to study just what impact it's had and look forward to working with you to find a fair way to address it. Josh Gotteimer: (02:09:06) Thank you, Madam Secretary. And I really look forward to working with you too on that. One other item. Given the number of rural locations throughout the country, including in my district that still don't have true broadband connectivity, I believe the treasurer should make sure any American rescue plan act broadband infrastructure dollars are targeted at truly underserved areas, to avoid overbuilding. For example, according to a recent survey by the census, only 69% of residents in white township in my district had broadband connectivity. So even in Northern New Jersey, there's lots of places that don't have connectivity, or very limited connectivity. I was wondering, based on the legislation that was just signed a law, will you commit treasury to using the authority Congress gave it to see that broadband funding is spent first and foremost on underserved areas and avoid overbuilding? Sec. Janet Yellen: (02:09:54) So I'm not sure if we have the ability under the law to impose that kind of restriction, but I will look at it. And I'd also mention that the ARP contains a coronavirus capital projects fund. It's 10 billion that can also be used to fund broadband infrastructure. So there's quite a bit of money in the ARP for infrastructure and I will look at what can be done. Josh Gotteimer: (02:10:29) I was thrilled about that. Obviously, something I fought hard for the $10 million fund for broadband. And I think the way it's written, the treasury has latitude here. And I'd love to talk to you about that further, to make sure that it goes to places that don't have broadband connectivity now, so we don't overbuild, which has been a mistake in the past, as you know, and try to avoid that. Last question in my minute left here, and if it's okay with you, Madam Secretary, the New York Times this week published an article stating that more than a hundred billion dollars of income goes unreported yearly to the IRS. This gap in reporting will reduce federal revenue by $1.4 trillion over the next decade. It's a great opportunity to make sure we go after tax cheats, or people who don't pay what they should, to avoid raising taxes otherwise, are you prioritizing and are you looking into the revenue raisers that don't require tax rates to increase, such as increasing the audit capabilities of the IRS to help close the tax gap? Sec. Janet Yellen: (02:11:28) Absolutely. I think this is something that would be both fair and not involve any increase in our tax rates, or burdens. It would make sure that those who were supposed to pay do. It does require more resources for the IRS. I'd like to work with Congress, to see if we can provide that funding, because I think this would be a very important initiative. I'm fully supportive of it. Josh Gotteimer: (02:12:00) Excellent. And I think we got a five or six to one return on that. Sec. Janet Yellen: (02:12:05) Absolutely. Josh Gotteimer: (02:12:06) Thank you so much for your time and I yield back. Thank you. Rep. Maxine Waters: (02:12:11) Thank you very much. The gentlemen from Georgia, Mr. Loudermilk is recognized for five minutes. Rep. Barry Loudermilk: (02:12:19) Thank you, Madam Chair, and appreciate the panelists being with us today. The first question is the majority and the administration recently enacted a massive $2 trillion stimulus bill, which they said was necessary, because we're in an economic crisis. But now all of a sudden the administration thinks the economy is strong enough to withstand a major tax increase, the first in 30 years, and during the middle of a pandemic. The notion that the economy is in crisis and the notion that the economy is strong, cannot both be true at the same time. So Secretary Yellen, can you tell us, which is it? Is it strong, or is it in crisis? Sec. Janet Yellen: (02:13:02) Well, right now it's in crisis due to the pandemic and the rescue package should provide the funding that's needed to address the pandemic and to relieve the suffering that it's caused, getting people to the other side of that. It's been deficit funded, there hasn't been tax increases to finance it. But once the economy is strong again, we're beyond the pandemic, President Biden is likely to propose that we engage in long-term plans to address longstanding investment shortfalls in our economy. In infrastructure and investments to address climate risk, investments in people, investments in R&D and manufacturing. And these will make our economy more productive. Raise wages, create good jobs. As necessary to pay for them, this would be spending over a 10 year horizon and would require some additional funding. He's been clear about the tax proposals that he would consider. Sec. Janet Yellen: (02:14:28) One of those would be an increase in the corporate income tax rate back to 28%, coupled with reform of the guilty to reduce the incentives of American companies to move their activities abroad, to offshore activities. And we're actively engaged in OECD negotiations that would make it possible to do that without negatively impacting the competitive positions of American businesses. We've had a global race to the bottom in corporate taxation, and we hope to put and end to that. And in that context, to collect more than the 1% of GDP corporate tax revenue that we now collect, which is very low and among the lowest of developed countries. Rep. Maxine Waters: (02:15:27) Well, Madam Secretary, that was a lot of explanation there, but it sounds like all of that is on the idea that the economy has been in crisis. And I, and several others beg to differ on that case, even during the pandemic, but economists, and even Chairman Powell were projecting up to 6% growth in 2021, before the bill was even signed into law. And the economists also believed the package is six and a half times larger than it needs to be. And I agree with the Former Democratic Treasury Secretary, Larry Summers, who said the reconciliation package is the most irresponsible economic policy in 40 years. So I don't think you can say it's in crisis and that our economy is strong. It's speaking out of both sides of our mouth here and Secretary Yellen... Sec. Janet Yellen: (02:16:28) We've lost nine and a half million jobs. We have an unemployment rate that if you add in people who've dropped out of the labor force because of the pandemic, is running it probably over 9%. So we have a huge problem of joblessness in our economy. Rep. Barry Loudermilk: (02:16:53) Well, I understand that, but reclaiming my time here, there are many states that are actually seeing more revenue tax revenue this year than they did... Rep. Maxine Waters: (02:17:19) Hello, Mr. Loudermilk, are you still on? I don't know if there's a technical glitch, or if he is muted. Mr. Loudermilk, can you hear me? I suppose now to our technician. Can you get Mr. Loudermilk back on? I see that his mouth is moving, but we can't hear him. Is he unmuted? Problem with the internet. Rep. Maxine Waters: (02:18:38) Unfortunately, there appears to be a problem with the internet and we have an agreement for a hard stop at this time. And so we will have Mr. Loudermilk, probably one of our first members who will be at the next meeting of our distinguished guests when they come. With that, I'd like to thank our distinguished witnesses for their testimony today. Without objection, all members will have five legislative days within which to submit additional written questions to the chair, which will be forwarded to the witnesses for their response. So I ask our witnesses to please respond as promptly as you are able, without objection. All members will have five legislative days, within which to submit extraneous materials to the chair, or inclusion in the record. And with that, this hearing is adjourned. (silence) Rep. Stephen F. Lynch: (02:26:30) The task force will now come to water, without objections. The chair is authorized to declare a recess at any time. And without objection, members of the full committee who are not necessarily full members of this task force are already authorized to participate in today's hearings. Members are reminded, as Lisa said, to keep their video on, video function on at all times, even when they are not being recognized by the chair. Members are also reminded that they are responsible for muting and unmuting themselves, and to mute themselves after they have finished speaking, that would be helpful. Rep. Stephen F. Lynch: (02:27:07) Consistent with the regulations accompanying House Resolution 965, staff will only mute members and witnesses as appropriate when not recognized, and for the purpose of preventing inadvertent background, noise. Members are reminded that all house rules relating to order and decorum apply to this remote hearing. This hearing is entitled Inclusive Banking During a Pandemic: Using Fed Accounts and Digital Tools to Improve Delivery of Stimulus Payments. Rep. Stephen F. Lynch: (02:27:37) I now recognize myself for four minutes to give an opening statement. Over the past several months, the coronavirus has spread devastation across our country. It has killed more than 110,000 Americans. It has robbed millions more of their jobs, and it has left Americans wondering how they will pay for even the most basic necessities, such as rent and food. In response to this crisis, Congress passed the CARES Act. Among its many provisions, we included economic impact payments, $1200 for every adult making less than $75,000 a year, with $500 per dependent and child. That was all with the intent to provide immediate relief to those most likely in need of it. The CARES Act was passed into law on March 27th. Today is June 11th. 76 days later, some Americans are still waiting on their so-called immediate relief. Many of those people who needed the help the most were the last to receive it. So the IRS and Treasury acted quickly to distribute payments to Americans. They quickly ran into problems. Now, some of those problems were foreseeable. They exist due to long-standing inequities and deficiencies in our banking system. We on this committee and the task force, have spent considerable time in this recent session, searching for ways to improve financial inclusion. But the simple truth is that millions of Americans still lack access to the traditional banking system. Rep. Stephen F. Lynch: (02:29:19) The FDIC has said that nearly eight and a half million households don't have a bank account, often because bank accounts are too expensive. Americans without bank accounts received their economic impact payments much, much later than those with bank accounts and direct deposit. And to make matters worse, many of those without bank accounts have had to pay check cashing fees, exorbitant fees, once they did receive their checks. Rep. Stephen F. Lynch: (02:29:46) A family is struggling to make ends meet, not having access to bank accounts is difficult enough in normal times. In times like these, it can be the difference between a fridge full of groceries and going to bed hungry. With all of our resources in this country, no family should have to experience hunger simply because they don't have a bank account. So today we'll hear testimony on ways to improve the delivery of direct benefit payments to Americans. Fed accounts, consumer accounts at the federal reserve have the potential to provide free access to bank accounts for the millions of Americans currently, without giving them immediate access to federal benefits. Rep. Stephen F. Lynch: (02:30:27) Further, we'll explore the ways in which new technology that many of us now use every day, such as the digital wallets on our phones and improve inclusion and efficiency in programs like this. This conversation is timely and necessary. The House passed another set of economic impact payments in the Heroes Act, to continue providing this important relief to Americans. We must learn from the immediate past and the mistakes we have recently made, to ensure that every American gets the access they need and deserve. And I look forward to today's discussion. I would now like to recognize the ranking member, my friend from Minnesota, Mr. Emmer for four minutes to give his opening statement. Thank you. Mr. Emmer, I think you're muted. If you look at that a row of icons just above the picture frame. Rep. Tom Emmer: (02:31:34) It's the financial service taskforce. And I warned Katrina when this started, that you would think we'll be better with the technology, but here we go. So you missed all the wonderful things I said about you, Mr. Chair. I want to thank you, my colleague from Massachusetts. For moving this task force ahead, making sure it continues to meet. I appreciate you. I appreciate all your staff that are making these things happen, but I just, for the record, want it to be known. This is outrageous, ridiculous and completely unnecessary. I think we should be in Washington doing our job. And I hope that people will see that soon. Rep. Tom Emmer: (02:32:14) Let's see, the conversation today stands to be a very insightful on two topics. The ways the federal government can better utilize technology to increase efficiency and delivery of government services and the concept of a centrally backed digital currency. I appreciate and look forward to our witnesses thoughts on these subjects. Two months ago, I led a letter, along with my colleague, Darren Soto, urging the Treasury to take additional steps, to leverage all that American ingenuity, entrepreneurship and innovation has to offer. As co-chairs of the Blockchain Caucus, we've been diving deep on all the technology and what it has to offer. It could help to serve both topics of this hearing I mentioned previously. Rep. Tom Emmer: (02:32:51) In addition, a wide array of technologies could help the Treasury distribute the remaining stimulus payments that have not been distributed yet. And I urge them and each agency to consider new technologies that could help the agencies operate more efficiently and more quickly. I want to turn now to the second topic and what I think could stand to serve as the sole topic of a hearing like this, a centrally backed digital currency. Representative Hill, who now serves as ranking member of the Subcommittee on National Security, International Development and Monetary Policy, highlighted this topic many months ago to the Federal Reserve and did it in a bipartisan fashion. Rep. Tom Emmer: (02:33:28) Since then, I've heard that the fed has been working to research and develop the concept, a process which I emphatically support, but unfortunately have not received the level of public consideration and transparency that I think is fundamentally necessary for such a pursuit. The dollar is changing and Americans deserve a full accounting of the work being done, and the considerations they will have to make in ensuring their leaders continue to guarantee their freedom and their methods of exchange. In fact, cash is a public payments infrastructure, available to all citizens without any need for permission. Currently cash works solely by the bearer of the instrument. As the economy moves increasingly online, the use of cash will diminish. To engage in electronic commerce, citizens need an intermediary, in most cases, including many cryptocurrencies. To be a truly permissionless digital cash, however, a digital dollar must have the same attributes as physical cash. Rep. Tom Emmer: (02:34:25) Anything less would simply create a new intermediate and it could even be one offered by the government in competition with private financial institutions. It is American values like freedom, privacy, openness, and permissionless entrepreneurship that have led us to dominate global commerce and innovation. We should have the courage of our convictions to build these values into a digital dollar and not to emulate systems like China's new digital one, which is closed, centralized, surveilled, and permissioned, so that access can be denied and payments blocked by those in power. Electronic cash will be aa susceptible to elicit use, just as the dollar is today. The same rules apply to physical cash that should apply to a digital dollar. Rep. Tom Emmer: (02:35:08) While this may not go far enough for some, the only way to go farther would be to create a permission closed and surveilled system like China's. I hope the conversation surrounding a digital dollar today takes into account these essential freedoms that Americans may often today take for granted, but must also ensure...