Jerome Powell & Steven Mnuchin Testimony House Oversight Hearing Transcript December 2

Ms. Waters: (07:14) The committee will come to order. Ms. Waters: (07:24) Without objection, the chair is authorized to declare a recess of the committee at any time. I want to remind members of a few matters, including some required by the regulations accompanying House Resolution 965, which established the framework for remote committee proceedings. Ms. Waters: (07:44) I don't know if we've gone through this already, but I would ask all members on the WebEx platform to keep themselves muted when they are not being recognized. This will minimize disturbances while members are asking questions of our witnesses. Members on the WebEx platform are responsible for muting and unmuting themselves. The staff has been instructed not to mute members, except where a member is not being recognized and there is inadvertent background noise. Ms. Waters: (08:18) Members on the WebEx platform are reminded that they may only attend one remote hearing at a time. So if you are participating today, please remain with us during the hearing. Members should try to avoid coming in and out of the meeting, particularly during the question period. If during the hearing members wish to be recognized, the chair recommends that members identify themselves by name, so as to facilitate the Chair's recognition. Ms. Waters: (08:48) I would also ask that members be patient as the Chair proceeds. Given the nature of the online platform the committee is using. In addition, for members participating in person, the attending physician provided a guidance. Has that guidance has been given? Ms. Waters: (09:19) Has the mask information been given? Speaker 1: (09:21) Not yet. [inaudible 00:09:24] Ms. Waters: (09:23) I now recognize myself for four minutes to give an opening statement. Ms. Waters: (09:29) Today, the committee convenes to conduct oversight over the Treasury Department's and Federal Reserve's pandemic response. This pandemic continues to have a terrible impact across the nation. There have been over 13.4 million Coronavirus cases in the US, which has almost doubled the amount of cases when the Secretary and Chair last testified in September, and over 267,000 people have lost their lives to the virus. Ms. Waters: (10:01) Hospitalizations and deaths are surging as this crisis spirals out of control. Small businesses are shutting their doors permanently, and millions are at risk of eviction, foreclosure, and being laid off. Ms. Waters: (10:15) A historic number of Americans resoundingly voted for a new direction last month, overwhelmingly voting for President-elect Biden and Vice President-elect Harris. The American people have made it clear that they want a government that will fight this virus and will protect their families and small businesses from the impacts of COVID-19. Ms. Waters: (10:49) So Secretary Mnuchin, on a call last month many committee Democrats and I committed to not going home until we have a deal for a stimulus package that is desperately needed across the country. But as negotiations continue I'm appalled that you would knowingly make matters worse by permanently ending essential emergency lending programs, leaving states, cities, and small businesses out to dry as the nation faces a dire and worsening phase of the pandemic crisis. And there is simply no justification or justifiable reason to take these tools away with the pandemic crisis worse than it has been and the Biden administration arriving in January. And Chairman Paul, I'm also concerned that the Federal Reserve acceded to Treasury's requests after publicly indicating the importance of extending these facilities. Secretary Mnuchin, I'm also very concerned that the Treasury Department may be taking actions that will undermine our housing markets during the pandemic, by reportedly working with the Federal Housing Finance Agency to rush the government- sponsored enterprises out of conservatorships before the end of the Trump Administration. Ms. Waters: (12:07) And so these actions follow the Trump Administration's obstruction of the transition process, delaying important information sharing about the pandemic response and national security between the Biden transition team and the current administration. So today you will be held to account for your misguided actions. Ms. Waters: (12:32) Before recognizing the ranking member of the committee, the Gentleman from North Carolina, who is with us today, I'm going to make sure that our witnesses are received responsibly in a way that they should be received and thank them for being here. And so prior to that... I would normally recognize them, I suppose, at this point. However, I think that as the agenda has been laid out today, I'm going to go ahead and recognize the Gentleman from North Carolina, Mr. McHenry, for four minutes. Mr. McHenry: (13:15) Well, thank you Madam Chair. And look, I know there's been a lot of partisan talk by my colleagues on the Democrat side of the aisle attacking the actions of the Treasury Secretary and even Federal Reserve. And I know committee Democrats, and a lot of Democrats in Congress, said that they wouldn't go home until they had a deal. And then they went home for 10 days. So there's not a whole lot of believability coming from our fellow politicians here on Capitol Hill right now. It's quite frustrating, but Chairman Powell, Secretary Mnuchin, I want to thank you for being with us today and being so available. I also want to commend you for the quick and decisive work that you both have taken. And I think that that is something we should commend you for. Mr. McHenry: (14:12) But today I think there's also a reason for optimism. The Coronavirus vaccines are moving at an unprecedented pace. Last month, Pfizer announced its vaccine is 95% effective, and they're currently seeking regulatory clearance. Moderna announced on Monday its vaccine is 94.1% effective and will also seek regulatory clearance. The British announced today they're moving forward as well with their vaccine distribution. Mr. McHenry: (14:41) This is proof that the public-private partnerships like those in Operation Warp Speed can lead to phenomenal successes in record time. But we know a full economic will occur only when Americans can go back to work safely, send their kids back to school confidently, and have easy access to testing and treatments. There's still more work to be done. And so I do want to go back to our committee jurisdiction, The Treasury and The Fed's decisive actions back in March and April to prevent the worst of this economic crisis and saving millions of jobs. Mr. McHenry: (15:16) Chairman Powell, the Federal Reserve's emergency lending facilities continue to serve as a strong backstop to our financial markets and prevent disorder in the financial markets from impacting our real economy. Those programs stipulated billions of dollars in private sector lending and successfully operated as lender of last resort. And now they acted as that necessary source of liquidity in those urgent times earlier this year. They ensured the orderly flow of credits and the functioning of markets of all sizes, including supporting workers in communities across the country. So I want to commend you for that. Mr. McHenry: (15:58) But they are emergency facilities only, and they are backstops designed to support the functioning of private markets, and they're intended to be a lender of last resort, not to replace private markets. And from the start I've said that we need to be forward thinking and have a plan to wind down these firefighting measures when appropriate. And so I want to thank both The Fed and Treasury for having a plan to wind those measures down appropriately, as accordance to the CARES Act law. Mr. McHenry: (16:28) And I also know that, and I will ask you specifically about this, about the additional capacities that you will have with the CARES Act expiring on December 31st. Additionally, Secretary Mnuchin, thank you for your quick work on the Paycheck Protection Program that supported millions of small businesses. And I know we still need additional, really, for more small businesses in different segments. And thank you for continuing to work for a bipartisan agreement here on Capitol Hill and to not play the gamesmanship and partisan games that have bedeviled these talks in the last couple of months. Thank you for rising above that. Mr. McHenry: (17:13) So, but there is still work to be done. And I look forward to us coming together and having [inaudible 00:17:20] package that can support small businesses and do the responsible things necessary to help rebuild our economy to protect American citizens' lives. Thanks so much for being here to today, and I look forward to your testimony. Yield back. Ms. Waters: (17:34) Thank you very much. I now recognize the Chair of the Subcommittee on Oversight and Investigations, Mr. Green, for one minute. Mr. Green: (17:43) Thank you, Madam Chair. I thank the witnesses for appearing as well. Mr. Green: (17:46) Mr. Mnuchin has mad the comment that has caused some deal of concern, indicating that the markets have recovered significantly. This begs the question for my constituents, what markets? The rental market, of 6 million persons about to be evicted, hasn't recovered. The free food market. The food lines have one thing in common. After all the food is gone, lines are still long. The supermarket. The market prices there have gone [inaudible 00:18:15] 3.9% for the 12 months ending in October. Mr. Green: (18:19) The stock market does not measure certain things that are important to my constituents. It doesn't measure the hunger pains that my constituents suffer from. Depression, or the addictions. That's a measure of the working class uncertainty and the Coronavirus Misery Index. My concern today is, what is your agency doing to help the grim reality of this pandemic for consumers? I look forward to hearing [inaudible 00:18:43] answers. I yield back. Ms. Waters: (18:51) Thank you very much. I now recognize the subcommittee's ranking member, Mr. Barr, for one minute. Mr. Barr: (18:57) Thank you, Madam Chair, and thank you to our witnesses for being here today. Congress, The Fed, and Treasury acted boldly in the face of the economic turmoil brought on by the COVID pandemic, and showcased the true reach of the Federal Government's response. Through Congress's fiscal policy authority and The Fed's emergency lending facilities, we were able to stabilize markets, keep workers on the job and ensure the continued functioning of corporate credit markets. Mr. Barr: (19:22) As we continue on the path to economic recovery, it's important that we take stock of the tools used. We must evaluate which were effective and which were not, which should be redeployed and which can be wound down, which programs are legally set to expire and which programs should be reauthorized. That is the role of this committee with oversight of the US financial system. I look forward to hearing from our witnesses on this and other topics to help inform Congress's continued response to the pandemic. Secretary Mnuchin and Chairman Powell, I commend you on your work to promote economic stability in turbulent times, and I thank you for your service. I yield back. Ms. Waters: (19:58) Thank you. Ms. Waters: (19:59) I want to welcome today's witnesses to the committee. First, I want to welcome The Honorable Steven T. Mnuchin, Secretary of the United States Department of the Treasury. He has served in his current position since 2017. Mr. Mnuchin has testified before the committee on previous occasions, and I believe he does not need any further introduction. Ms. Waters: (20:24) I also want to welcome 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. Ms. Waters: (20:53) Without objection, your written statements will be made part of the record. Each of you will have five minutes to summarize your testimony. When you have one minute remaining, a yellow light will appear. At that time, I would ask you to wrap up your testimony so we can be respectful of the committee members times. Ms. Waters: (21:15) Secretary Mnuchin, You are now recognized for five minutes to present your oral testimony. Steven T. Mnuchin: (21:23) Thank you. Chairwoman Waters, Ranking Member McHenry, and members of the committee, I am pleased to join you today to discuss the Department of Treasury's unprecedented response to support the American [inaudible 00:21:34] throughout the pandemic. We continue to work to implement the historic CARES Act with speed, efficiency, and transparency, but our job will not be complete until we get every American back to work. Steven T. Mnuchin: (21:46) When I last testified before you in September, I stated that America was in the midst of the fastest economic recovery from any crisis. I'm proud to say, while there is still a lot more work to be done, that statement is true. In the third quarter GDP grew by 33% annually, beating all expectations and a previous record of 1950. Steven T. Mnuchin: (22:07) Americans are getting back to work. The October jobs report showed the economy gained back 12 million jobs since April, more than 50% of all jobs lost due to the pandemic. The unemployment rate has decreased to 6.9%, a rate not expected by the blue-chip to be achieved until the fourth quarter of 2021. Steven T. Mnuchin: (22:27) The historic bipartisan CARES Act provided the economic relief that is critical to supporting the economy recovering. Additional economic slowdowns, however, continue to impair and cause great harm to American business and workers. Based upon the recent economic data, I continue to believe that a targeted fiscal package is the most appropriate federal response. I strongly encourage Congress to use the 455 billion in unused funds from the CARES Act to pass an additional bill with bipartisan support. The PPP has unused money of $140 billion that could be sent out the door immediately to support many small businesses. The administration is standing ready to support Congress in this effort to help American workers and small business that continue to struggle with the impact of COVID-19. Steven T. Mnuchin: (23:21) Treasury has been working hard to implement the CARES Act in a transparent and efficient manner. We've released a significant amount of information on treasury. gov and usaspending.gov. We continue to cooperate with various oversight bodies, including the new Special IG, the Treasury IG, the Treasury IG for tax administration, the new Congressional Oversight Commission, the GAO. We have provided regular updates to Congress marking this my ninth appearance before Congress for the CARES Act hearing. We have also devoted significant resources to responding to inquiries from numerous Congressional committees and individual members on both sides. We appreciate your interest on these issues, and we remain committed to working with you to accommodate Congress's legislative purpose to advance the whole of government approach to defeating COVID-19. Steven T. Mnuchin: (24:14) Chair Waters, I do want to just respond to your comment where you said I had no justification and made matters worse on my termination of the facilities. I just want to emphasize this was not a political decision. I was merely implementing the CARES Act. I'm happy to walk you, your staff, or other members of the committee through Section 4029, which makes it very clear. Steven T. Mnuchin: (24:38) I find it implausible that any member of the committee believed in voting for the CARES Act that you are authorizing me to invest $500 billion in Federal Reserve facilities to make loans and purchase corporate bonds in perpetuity with no expiration date. But that is exactly what you would have to believe if you disagree with my interpretation of Congressional intent on the issue. And since I was personally there and negotiated most of these documents, I am very familiar, but if Congress wants to extend this money for federal purposes for these facilities, Congress can add that to new legislation. Steven T. Mnuchin: (25:14) I'd like to thank the members of the committee for working with us, and I'm pleased to answer any additional questions. Thank you very much. Ms. Waters: (25:21) Thank you very much, Secretary Mnuchin. Ms. Waters: (25:24) Chair Powell, you [inaudible 00:25:26] recognized for five minutes to present your oral testimony. Chair Powell: (25:31) [inaudible 00:25:31] Waters, Ranking Member McHenry, and other members of the committee.,Thank you for the opportunity to update you on our ongoing measures to address the hardship brought by the pandemic. Chair Powell: (25:42) Our public health professionals continue to deliver our most important response, and we remain grateful for their service. The Federal Reserve, along with others across government, is using its policies to help alleviate the economic burden. Since the pandemic's onset, we have taken forceful actions to provide relief and stability to ensure that the recovery will be as strong as possible and to limit lasting damage to the economy. Economic activity has continued to recover from its depressed second quarter level. The reopening of the economy led to a rapid rebound in activity and GDP rose at an annual rate of 33% in the third quarter. Chair Powell: (26:22) In recent months, however, the pace of improvement has moderated. Household spending on goods, especially durable goods, has been strong and has moved above its pre-pandemic level. In contrast, spending on services remains low ,largely because of ongoing weakness in sectors that typically require people to gather closely, including travel and hospitality. Chair Powell: (26:45) The overall rebound in household spending is due in part to federal stimulus payments and expanded unemployment benefits, which provided essential support to many families and individuals. Chair Powell: (26:57) In the labor market, more than half of the 22 million jobs that were lost in March and April have been regained as many people were able to return to work. As with overall economic activity, the pace of improvement in the labor market has moderated. Although we welcome this progress, we will not lose sight of the millions of Americans who remain out of work. Chair Powell: (27:15) The economic downturn has not fallen equally on all Americans, and those least able to shoulder the burden have been hardest hit. In particular, the high level of joblessness has been especially severe for lower-wage workers in the service sector, for women, and for African-Americans and Hispanics. Economic dislocation has upended many lives and created great uncertainty about the future. Chair Powell: (27:41) As we've emphasized throughout the pandemic, the outlook for the economy is extraordinarily uncertain and will depend in large part on the success of efforts to keep the virus in check. Rise in new COVID-19 cases, both here and abroad, is concerning and could prove challenging for the next few months. A full economic recovery is unlikely until people are confident that it's safe to re-engage in a broad range of activities. Chair Powell: (28:06) Recent news on the vaccine front is very positive for the medium-term. For now, significant challenges and uncertainties remain, including timing, production and distribution, and efficacy across different groups. It remains difficult to assess the timing and scope of the economic implications of these developments with any degree of confidence. Chair Powell: (28:25) 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. We've been taking broad and forceful actions to more directly support the flow of credit in the economy. Our actions taken together have unlocked almost $2 trillion of funding to support businesses large and small, nonprofits, and state and local governments since April. This in turn has helped keep organizations from shuttering and has put employers in both a better position to keep workers on and to hire them back as the economy continues to recover. These programs serve as a backstop to key credit markets, and have helped restore the flow of credit from private lenders through normal channels. We've deployed these lending powers to an unprecedented extent. Our emergency lending powers require the approval of the Treasury, and are available only in very unusual circumstances, such as those we find ourselves in today. Many of these programs have been supported by funding from the CARES Act, and I have included detailed information about those facilities in my written testimony. Chair Powell: (29:29) The CARES Act assigns sole authority over its funds to the Treasury Secretary, subject to the statute's specified limits. The Secretary has indicated that these limits do not permit the CARES Act-funded facilities to make new loans or purchases or purchase new assets after December 31st of this year. Accordingly, The Fed will return the unused portion of the funds allocated to the lending programs that are backstopped by the CARES Act in connection with their termination at the end of the year. Chair Powell: (29:56) As the Secretary noted in his letter, non-CARES Act funds in the exchange stabilization fund are available to support emergency lending facilities if they are needed. Everything The Fed does is in service to our public mission. We're 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. Ms. Waters: (30:24) Thank you very much, Chair Powell. Ms. Waters: (30:28) [inaudible 00:30:28] now recognize myself for five minutes for questions. Ms. Waters: (30:32) Secretary Mnuchin and Chair Powell, just last month the Federal Open Market Committee met, and according to the minutes, "a few participants noted that it was important to extend the emergency lending facilities beyond year end." That's the quote. A few days later, you Secretary Mnuchin requested that The Fed eliminate its CARES Act emergency lending facilities at the end of the year. Ms. Waters: (31:03) ... emergency lending facilities at the end of the year, and return $419 billion so that it could not be used in the future. Initially, the Fed resisted publicly, but the next day, Chair Powell, you acquiesced. Secretary Mnuchin, your own Office of Financial Research warned that we should expect and again, quote, "potentially severe losses from bar defaults and bankruptcies," end quote. Moreover, the outlook for states, cities, airports, and hospitals is not good. And despite what President Trump suggests, it is not limited to blue states. For example, the day after New York state's credit was downgraded, Mississippi's credit was downgraded, with the pandemic worse than at any point, since it began. It is foolish and reckless to take away emergency lending options at this time. Secretary Mnuchin, you agree, you argued rather, it was congressional intent for these Fed facilities to be shut down at the end of the year. Ms. Waters: (32:16) But the law does not say that, and even the actions of my Republican colleagues belie that novel interpretation. Senator McConnell filed a COVID 19 bill that would change the law to require the Fed to close all of its facilities after January 19, 2021. So if law already required this, this bill wouldn't be necessary. The CARES Act was passed to stabilize the economy during the entirety of the pandemic, not until the end of your tenure as Treasury Secretary. Secretary Mnuchin, it was reported last week that you intend to transfer the unused portion of the CARES Act, that 500 billion appropriation to treasurer's General Fund, so that the next secretary can have access to the bonds. However, section 4027 of the CARES Act explicitly states that funds may only be transferred on January 1st, 2026, not before January one, 2026. What you're doing is contrary to what is lawful and it puts our entire economy in jeopardy. Ms. Waters: (33:36) And what's more, it has also been reported that you are working with Director Calabria of the Federal Housing Finance Agency to sell off the government stakes in the housing giants, Fannie Mae and Freddie Mac, likely destabilizing the entire housing market in the next few months. As I understand it, Secretary Mnuchin, the Obama administration showed you every courtesy when your team was taking the reigns. Similarly, the Bush administration worked closely with president Obama's incoming team during the financial crisis, even before he was sworn in. They did so because they were honoring the decision of the American electorate. Tell me, Secretary Mnuchin and Chair Powell, does the secretary's expected successor, Janet Yellen, support what you're doing? Does she agree that the emergency lending facilities are not needed, even though thousands of people are dying each day, millions more are being infected each week, tens of thousands of small businesses are closing permanently and our cities and states are struggling? Does Yellen support Director Calabria's plans to fundamentally remake the housing markets where millions of people are struggling to pay their mortgage and rent each month? Secretary Mnuchin? Steven T. Mnuchin: (34:58) So again, let me first comment on, and in all due respect, I believe I am following the law. Section 4029 makes very clear on December 31st, 2020, that the authority provided under new loans, guarantees or investments shall terminate. [crosstalk 00:04:18]. Ms. Waters: (35:17) Thank you very much. I'm going to reclaim my time. Do you agree? You agree, Mr. Powell? Steven T. Mnuchin: (35:23) Again, the funds, let me just continue. The transfer of the funds is not up to me. When funds come back, they go into [crosstalk 00:35:33]. Ms. Waters: (35:32) I'm reclaiming my time. I need to have an answer from Mr. Powell. Do you agree with Secretary Mnuchin? Chair Powell: (35:39) The secretary has sole authority over the CARES Act funding under the CARES Act. That the Fed is not involved in that. His reading of the law thus is the authoritative one, and we accept it. Steven T. Mnuchin: (35:50) I would also just say if I was politically motivated, I wouldn't have extended the four facilities in deference to the Fed's view that were non-Care's Act facilities. So had I been trying to be political, I would have [crosstalk 00:36:03]. Ms. Waters: (36:02) Thank you. My time has expired. I now recognize the distinguished ranking member, Mr. McHenry, for five minutes. Mr. McHenry: (36:10) Well, Secretary Mnuchin, let me just give you a moment to answer. It sounds like you have additional things you want to explain in your reading of the CARES Act. The CARES Act expires on December 31st of this year. That is in the law. So let me give you the opportunity to give a full answer on your decision with the exchange stabilization funds. Steven T. Mnuchin: (36:41) Thank you very much. There's three sections I direct people to, 4029, which is the termination date of December 31st of 2020, to make new loans, loan guarantees or other investments shall terminate. That's perfectly clear. There is section 4003, which references deposit of proceeds. So when proceeds come in, we allocate proceeds. Whether it's the return of an airline loan or money from the Fed, we allocated very clearly in section 4003. There's also, as the chair referenced, section 4027, which references, if there was money left over, okay, and there's limited uses of what that money can be either expenses or follow on investments on existing loans. So if we had to make an advance on an investing loan to an airline, that's under 4027, and any money on 2026 will come back vis-a-vis that. So again, section 4003, section 4027, section 4029, and again, I personally negotiated this language. And again, Congress has the ability to change this if they think the money should be spent otherwise. Mr. McHenry: (37:58) Secretary Mnuchin, you and I talked regularly during those negotiations. I was a strong advocate for as large an Exchange Stabilization Fund dollar amount as possible, so that both the treasury and the Federal Reserve would have maximum firepower to put out what we did not fully understand would in the coming weeks or coming months with the nature of the virus. And so we, in the midst of this negotiation, had a very, very large Exchange Stabilization Fund. Absent the CARES' $454 billion in Exchange Stabilization Fund, how many dollars are allocated to the Exchange Stabilization Fund? Steven T. Mnuchin: (38:49) Again, we allocated something like $20 billion from the ESF for the pre-CARES facilities prior to the CARES Act. As I said, in deference to the Fed, those facilities don't have this restriction and still exists. And there's still something like an additional $50 billion that could be used in the future for emergencies, which would support another 500 billion. And again, I want to thank Congress for giving extraordinary authority to the secretary of the treasury for $500 billion. As people have noted, many people criticized that authority, and I'm merely following the law and returning that authority back as Congress intended. Mr. McHenry: (39:33) So Chairman Powell, these facilities of the Feds served a very important purpose in the early days. Their utilization in recent months had not significantly changed in dollar value of the Fed lending facilities. And so the four remaining facilities are still important as a lender of last resort facility, of course. And so I want to thank you for your work to stand up those facilities, and your work in the last eight months of this year to stand up more facilities than were stood up in the fullness of the financial crisis of 2007, 2008, 2009, 2010. You stood up more facilities in eight months, well actually, in three months than they did in four years. Mr. McHenry: (40:26) So thank you to you and the staff of the Federal Reserve for their solid, great work to support our economy and to ensure that this health crisis that's become an economic crisis, did not become a financial crisis. I want to commend you for that. Finally, I want to note that I have consistently been an advocate of the independence of the Federal Reserve for making monetary policy and supporting our economy. I do think it's important, an important hallmark, whether it was a Chair Yellen in your seat Chairman Powell, or your service as Chairman of the Federal Reserve that we honor the independent policymaking and monetary policy decisions of the Federal Reserve, and I want to thank you for your leadership. Yield back. Ms. Waters: (41:15) Thank you very much. The gentleman from Guam, Mr. San Nicolas, who is also the Vice Chair of the Committee on Financial Services, is recognized for five minutes. Mr San Nicolas: (41:27) Thank you, Madam Chair, Chairman Powell, and Secretary Mnuchin, thank you so much for making time to be with us here today. I wanted to open with some questions regarding the Main Street Lending Program, Mr. Chairman. Are you familiar with how much has been authorized for the MSLP at this time? Chair Powell: (41:50) Yes, I am. We made about $5 billion in loans, a little bit [inaudible 00:41:54] five billions in loans. Mr San Nicolas: (41:57) Okay. So we have about 5 billion out there in MSLP. Now, those programs are administered by participating banks, that's correct? Chair Powell: (42:07) Yes. Mr San Nicolas: (42:10) Are the banks- Chair Powell: (42:10) Well, put it this way. We work through the banking system. We access borrowers through the banking system. We administer the overall program, but the banks are facing off against the actual borrowers. Mr San Nicolas: (42:22) Right. And so these borrowers that are receiving these MSLP funds, are they required to be investment grade borrowers? Chair Powell: (42:33) No. Mr San Nicolas: (42:37) That just brings me full circle, Mr. Chairman, because the last we spoke, I was discussing the municipal liquidity facility and the fed's inability to allow municipalities that are below investment grade to be able to access that liquidity. And it was mentioned in our hearings that the Federal Reserve does not provide funding to non-investment grade entities. And yet through the MSLP indirectly, the Federal Reserve, as you've mentioned, is willing to do so for private sector entities. Chair Powell: (43:09) So as you'll recall, the territories, there are no investment grade overall sovereign investment grade, but we worked with you and your office to work with one of the below sovereign level facilities, and the name of it doesn't come to mind. And we also worked with you to be in touch with the treasury department under various loan programs that might be useful. But no, the overwhelming majority of municipal borrowers are investment grade, and we did limit the facility to that. Mr San Nicolas: (43:44) Well, the reason why I'm raising this point, Mr. Chairman, is because I just wanted to highlight the inconsistency in the policy. Because if investment grade is a requirement for the Federal Reserve to be providing financial support, particularly as the lender of last resort, and it's not imposing that same requirement on private sector entities that are accessing the MSLP, I again beg the question, why are we doing so for municipal entities trying to access the municipal liquidity facility? Mr San Nicolas: (44:15) I appreciate your staff trying to work with us in looking for work arounds in this environment. But I mean, it's just so glaring, Mr. Chairman, that these private companies are not investment grade. They're able to access the support. I'm glad they are. I want them to, but we're not allowing municipal entities who are not investment grade to be able to access the specific facilities that we set up for our municipal circumstances. So I just wanted to put that on the record, Mr. Chairman. I'm hoping that you guys can again go back to the table and reconsider this, given these issues that we're bringing to light. And at the end of the day, we need a solution for our municipal [inaudible 00:44:56] that are below investment grade, but are in the same boat as all of these private sector entities that are able to access capital through the MSLP. Thank you, Madam Chairman. I yield back. Ms. Waters: (45:08) Thank you very much. The gentlewoman from Missouri, Ms Wagner, is recognized for five minutes. Ms Wagner: (45:18) Thank you, Madam Chairwoman, and a welcome Secretary Mnuchin and Chairman Powell. I'd like to thank you both, both of you and your staff for your service to our nation and your tireless efforts during this pandemic to implement the CARES Act, and for propping up the Federal Reserve's emergency lending facility. While economic data continue to trend in a positive direction, and we do know that credible and safe vaccines are just weeks away, the surge in cases and lockdowns occurring across the country could result in our economy backsliding again, if we do nothing. I want to reiterate the urgency, the overdue urgency for Congress to provide immediate, targeted relief now, not next year. It should have been months and months ago. Our nation's hospitals, small businesses, school, many of our hardest hit industries, and certainly the continued unemployed cannot continue to wait any longer for relief. Ms Wagner: (46:40) Just this week, St. Louis County, which I have the privilege of representing, reported an average of 660 new cases being added every day, with a total of 51,324 confirmed coronavirus cases as of Sunday. Many of my constituents in Missouri's second districts are under mask mandates, and restaurants and bars have been completely shuttered and are closed down. Capacity limits of gatherings are down to 10. Our families and our businesses are asking Congress for additional relief to combat this health crisis. Hospitals are filling up and many businesses are worried that they will not survive. They are reaching the desperation point. We must stop playing partisan politics and come to a bipartisan agreement to provide a direct COVID related stimulus and support now. Chairman Powell, according to the data you are seeing, what parts of our economy are most in need of fiscal stimulus measures provided by Congress? Chair Powell: (47:57) Thank you. I think there are many sectors that could use some help, and of course those decisions are really up to you and the administration, but I'll just mention quickly. I would start with the labor market. I think we ought to remember that despite the rapid progress in getting people back to work, which is so welcome, there's still 10 million people who are out of work because of the pandemic. And that's more than lost their jobs in all of the global financial crisis 10 years ago, which at the time was the biggest recession that we'd had in a long, long time. So there's a lot of work left to do there. The unemployment insurance programs are expiring at year end. I think that's an area where I would certainly look. Chair Powell: (48:34) Another that comes up all the time in our discussions is smaller businesses. And we met with a group of community bankers a week or so ago, and they were telling us, there are just a lot of smaller businesses in their communities that will struggle to make it through this winter. Because as you say in Missouri's second district, it's true all over the country, COVID is moving up and in the cold weather people are staying in, and it's going to be tough on a lot of small businesses. That's another place where I would look. Last is, I do think state and local governments, and it does differ state to state, but they've had... Revenue is down, and maybe not so much in some states, but in some states by a lot, but costs going up. And I think that they deliver critical services, they're living under balanced budget requirements. And so they lay people off and they've laid off more than a million people already. So that's another area where I think it would be profitable to look. Ms Wagner: (49:35) Thank you. I appreciate that. Secretary Mnuchin, I'll ask you a similar question. You've mentioned the need for a targeted fiscal package with the $455 billion in [inaudible 00:49:48] funds from the CARES Act that that did need to be returned to treasury given the law. How do you suggest we try and tap or reappropriate this money to support the most vulnerable sectors of our economy? Steven T. Mnuchin: (50:05) My single highest priority would be to activate the 140 billion in PPP funds that are not spent, that we could immediately send out to the hardest hit small businesses whose revenue is down dramatically. I also think Congress should consider extending some of the unemployment insurance programs that expire at the end of the year. Ms Wagner: (50:34) I appreciate that. And the Paycheck Protection Program is estimated to have saved more than 50 million jobs, including many jobs across Missouri's second congressional district. Ms. Waters: (50:46) The gentlelady's time has expired. Ms Wagner: (50:48) Thank you. I yield back. Ms. Waters: (50:49) The gentleman from Illinois, Mr. Casten, is recognized for five minutes. Mr Casten: (51:05) I'm sorry. It took a little bit of time to get off mute there. Thank you very much. We really appreciate you all being here today. I was really pleased that the Federal Reserve's Financial Stability Report identified climate change as a risk to financial stability. The report stated that quote, "Different sectors of the economy and geographic regions face different risks that will diverge from historical patterns." It also said that, "Levered financial institutions may be exposed to losses from disasters made more likely by climate change." Chairman Powell, while there's more to explore about how to incorporate these risks into modeling, do you think it is appropriate for financial institutions to incorporate climate risk into credit assessment? Chair Powell: (51:52) Let me say this for starters, climate change is an important issue. I want to say that society's broad response to climate change really has to come from elected representatives. I think there is a role for the Fed here, and we're working our way through understanding what that will be. But one thing is the public will expect it in our supervision and regulation of financial institutions and financial market infrastructure, that they will be resilient. We will make sure that they are resilient to climate change risks. And I do think that it does fall on banking institutions and CCPs and other financial market infrastructures to evaluate that and incorporate in their own operations. And also, I would think, ultimately, in the credit that they extend. Mr Casten: (52:42) So I think I'll take that as a yes, because I was really just asking, is it appropriate for financial institutions to incorporate. What role the Fed has is of course a separate question. I certainly agree with you. And I asked the question because I'm really concerned with the OCC's latest rule that would prevent banks from integrating climate related risks into their credit assessments, despite the fairly significant financial risk that climate poses. The OCC rule specifically says that the risks of lending, quote, "Would not change based on the sector in which the firm operates," which is categorically false. I don't know how you would tell banks that somehow they need to ignore the dynamics in a sector without imposing significant systemic risk on the banking sector. Allowing banks to account for the sector of the economy, where it sits, it just defies logic and market fundamentals. The report also stated that within the financial system, increased transparency through improved measurement and disclosure would improve the pricing of climate risks. What additional transparency would be helpful to appropriately assess the overall risk of financial system due to climate change? Chair Powell: (53:51) So as you can tell, I'm glad you read that box in our financial stability report. We're really at the beginning of the process of thinking our way through these things, and so are other market regulators and central banks and financial institutions around the world. So the point there was that we're going to need transparency about how financial institutions are thinking about these risks, how they're incorporating it in their business model. We don't actually regulate transparency. That's really more of a market regulator job is, what is the required disclosure? I think we're all moving in that direction, but it is, in terms of interaction between financial regulators and financial institutions, we're at the beginning of the work. Mr Casten: (54:36) Would a standardization of climate related risk disclosures from publicly traded companies be useful for you in order to continue that work? Chair Powell: (54:44) I think certainly where we're headed over time. Again, that's not our responsibility. That would be the market regulators responsibility, but I do think that's where we'll be going. Mr Casten: (54:55) Thank you, and I yield back the balance of my time. Ms. Waters: (55:03) Thank you. The gentleman from Kentucky, Mr. Barr, is recognized for five minutes. Mr Barr: (55:09) Thank you, Madam Chair. Chairman Powell, some in the press this morning, and some of my colleagues, have seemed to try to make the argument that you and the treasury secretary are in disagreement about the exchange stabilization fund. I don't detect much of a disagreement. What I hear the secretary say is that his decision to not extend the 430 billion left in the Exchange Stabilization Fund is rooted in his interpretation of the statute of the CARES Act. And what I heard you say is that you believe that the secretary under the law has the authoritative interpretation of that, and you accept that. Now, obviously, you stated yesterday that you think it's perhaps premature to be pulling back from emergency lending programs, but I hear the treasury secretary say that that's within a Congress's ability to authorize that. So I don't see a disagreement here. But given the modest take-up in some of the emergency lending programs, particularly Main Street, wouldn't it be wise for Congress to repurpose at least some of that $430 billion towards what admittedly has been an effective program, the Paycheck Protection Program? Chair Powell: (56:26) I hope you won't mind if I use just a couple seconds to clarify the what's going on. Mr Barr: (56:32) Sure. Chair Powell: (56:33) So, as I said earlier, the secretary has sole authority over CARES Act funds. He reads the statute, and reads it to say that there's no support for lending after December 31. We accept that we don't have a role in reading it. And so that's one thing. Our thinking is not about the CARES Act money. It is more about support for the economy. Mr Barr: (56:55) Sure. Chair Powell: (56:56) We were concerned that the public might misinterpret this as the Fed stepping back and thinking that our work is done. And that's very much not the case, so we needed to send a signal to the public to that effect. And as the secretary pointed out in one of that in his letters, as we pointed out in our letter, there is Exchange Stabilization Fund money that's available to site to support the reestablishment of these facilities or other facilities if they are needed, and they meet the legal requirements and that kind of thing. Mr Barr: (57:24) Let me just ask this though, wouldn't it be wise for Congress, at this point before the end of the year, to repurpose some of those CARES Act funds towards the Paycheck Protection Program, given the concerns of the small businesses that you referenced? Chair Powell: (57:39) I would just say that what I'm hearing from across the isle and on both sides of The Hill is the desire to do something to fund these causes that the secretary just talked about, and others. And I think that would certainly be a help for the economy. As to where that money comes from, that's really up to you. Mr Barr: (57:55) But one area where there's, I think, significant bipartisan support is for streamlining the forgiveness process. A recent survey in Kentucky found that 27% of community banks in Kentucky would not participate in a new round of PPP without streamlined forgiveness and clear rules of the road. Many of the businesses in my district who have applied for forgiveness, tell me that the process from the SBA is slow and cumbersome. It's a big problem if lenders will not participate in a second round because of inadequate streamlining of the forgiveness rules. Secretary Mnuchin, you previously indicated your support for legislation to streamline PPP forgiveness. Is this still the case? And what more can we do to ensure participation by community lenders in a new round of PPP? Steven T. Mnuchin: (58:42) I do support that, and we've created three different forms for forgiveness using what authorities we have and making it as simple as possible for loans that are less than 50,000. But I know there's bipartisan support to pass a bill, I believe it's all loans, 150,000 or less, and we fully support that subject to audit. Mr Barr: (59:04) Thank you, Chairman Powell, the statutory language in the CARES Act temporarily suspends accounting rules related to troubled debt restructurings, and that expires on December 31st. It's important that Congress extend this important tool to allow lenders to continue to work with their customers. What authorities do you have at the Fed to extend TDR relief administratively versus what Congress must do to ensure lenders can continue to accommodate borrowers? Chair Powell: (59:31) We actually don't have authority to extend TDR. It's an accounting role. We have a lot of authority though, and we will use it to make sure that banks continue to work with their borrowers and encourage them to do so, I should say. Mr Barr: (59:44) There's some uncertainty among the auditing community about whether life insurers would qualify for TDR relief under CARES. This is a problem because insurers make up over 13% of the commercial real estate lending markets, a sector that's deeply impacted by the pandemic. Chairman Powell, do you agree that life insurers, given their participation in the commercial real estate lending market, should qualify for TDR relief? Chair Powell: (01:00:06) I'd have to go check on that one. I'll come back to you. Thanks. Mr Barr: (01:00:08) We think that's an important thing to look into. My time has expired. I yield back. Ms. Waters: (01:00:13) Thank you very much. The gentlemen from New Jersey, Mr. Gottheimer is now recognized for five minutes. Mr Gottheimer: (01:00:21) Thank you, Madam Chairwoman, and thank you Chairman Powell and Secretary Mnuchin for being here today. The COVID-19 pandemic, as we've been talking about, has caused ongoing global health and economic crisis. Certain aspects of our economy are recovering. Billions of Americans and thousands of my constituents are in dire need of help. We can't go home from Washington, given what's going on, and without risking a double dip recession. As you said earlier this month, Chairman Powell, further support is likely to be needed to avoid another spread of the virus and help individuals. We're obviously in a lame duck session of Congress. The American people have waited long enough. Our families, our businesses, and our communities are all suffering, and it would be unconscionable for any party to walk away from so many who are hurting right now. Yesterday, the Problem Solvers Caucus joined a bipartisan group of senators in releasing a new $908 billion emergency short term stimulus package. It is intended to be a critical down payment to get through the next months. If I can start with you, Secretary Mnuchin, have you had a chance to review the framework, by chance? Steven T. Mnuchin: (01:01:23) Well, first let me just say, I really appreciate the work that you have personally done, and the Problem Solvers have done in trying to reach bipartisan solutions. I did review it briefly yesterday after my testimony, and I'll be spending more time on it today. Again, I would urge Congress to move quickly on the PPP, which there seems to be enormous bipartisan support. But again, thank you personally for your efforts. Mr Gottheimer: (01:01:51) Thank you Mr. Secretary. And I appreciate the work we've done together on this. And obviously, I hope this would be something that if we can get the support here that the administration might support. Can you, if I could- Mr Gottheimer: (01:02:03) ... might support. If I could turn to Chairman Powell, would you speak to the urgency for fiscal relief? And what do you believe is at stake this winter for the economy and for families, if we don't get an emergency package done in the next week? Chair Powell: (01:02:21) My view would be that it would be very helpful and very important that there be additional fiscal support for the economy, really to get us through the winter. We've made a lot of progress, faster than we expected. And now, we have a big spike in COVID cases. And it may weigh on economic activity. People may pull back from activities they were being involved in, or not engage in new activities. So, I think it would be helpful if we could get that done. If you could get that done. Mr Gottheimer: (01:03:00) Thank you so much Mr. Chairman. Just to follow up on that, obviously, local governments are struggling through no fault of their own. It's putting law enforcement, firefighters, teachers and their [inaudible 01:03:11] on the line. What do you think the impact would be if we can't get extra resources to our state and local governments on the economy? Chair Powell: (01:03:19) So, these are really decisions for you, but I would say that state and local governments provide [inaudible 01:03:27] services. You mentioned them. And state and local governments live with Balanced Budget Requirements, unlike the federal government. Chair Powell: (01:03:34) And so, what happens when revenues soften and expenses go up is you see layoffs. And that was a big part of the story in the slow recovery from the global financial crisis a decade ago. We now have a little more than a million in layoffs so far. And so, I think it would be important to... State and local governments are one of the very largest employers in the country, and they provide those critical services. I think that's a worthy place for you to look in terms of where support might be appropriate. Mr Gottheimer: (01:04:08) Do you see it as sort of, just to follow up on that point, a ripple effect? You've got in New Jersey, about a third of our businesses have already, small businesses, have already gone out, including about 28% of restaurants. When you add that with the revenue declines for the state and local governments and all this is coming out, what do you see on the other side of the [inaudible 01:04:26] we're going to get [inaudible 01:04:27] the vaccine, but what could be the economic [inaudible 01:04:32] this brings along after the virus is behind us? Chair Powell: (01:04:37) So, I think, as you suggested, say, you have a near-term and medium-term difference. The near term does look challenging through the winter. Small businesses, we're hearing all over that small businesses are really under pressure. And then sometime in the middle of next year, it really does look like that may be the light at the end of the tunnel, we all hope so, and that the economy could be very healthy. The problem is, of course, people who lose their homes now or businesses that go out of business. These are sometimes small businesses that might have generations of sort of human capital built up in their activities. And once they're gone, they can't just be recreated. So, you could lose parts of the economy, and that will mean a slower recovery. Chair Powell: (01:05:23) And so, I mean, I like to think of it as a bridge over this chasm that was created by the pandemic. And we're trying to get as much of the economy and as many of the workers across that bridge to the post-pandemic economy. And we've done, I think, well at that, but there's still some work left to do. Maxine Waters: (01:05:40) Thank you. Mr Gottheimer: (01:05:43) Thank you so much, and I yield back. Maxine Waters: (01:05:43) The gentleman's time has expired. Maxine Waters: (01:05:43) The gentleman from Ohio, Mr. Gonzales, is recognized for five minutes. Anthony Gonzales: (01:05:48) Thank you, Madam Chair, for holding this hearing. And thank you both for all your work throughout this pandemic. I sincerely believe that we'll look back a decade, two decades from now, and the work that you two did together will be looked at in the most favorable light. And so, I couldn't be more grateful for your service. So, thank you both for that. Anthony Gonzales: (01:06:09) Look, we can see the light at the end of the tunnel, with two vaccines awaiting approval. And I think the bridge comment is exactly correct. We're looking to bridge from now until, call it April 1st or whenever that is. And I was pleased to join a group of bipartisan and bicameral members yesterday, as my colleague, Mr. Gottheimer, just mentioned, with the Problem Solvers Caucus to hopefully provide that bridge. And I hope we'll be able to do that. Anthony Gonzales: (01:06:37) Mr. Powell, Chairman Powell, before I move into some questions on that, going back to the Exchange Stabilization Fund a bit. The main purpose was to provide liquidity to the financial system to stabilize the financial system. As these programs expire, do you see the same or similar risks to the liquidity inside the financial system as you did, say, back in March or April? Or do we feel like we're in a much better place today? Chair Powell: (01:07:05) Yeah. We're clearly in a much better place. I mean, to be clear, the utilization in these facilities, most of them is very, very low now. Nonetheless, we see them as serving a backstop function. And that backstop function... a central banker would want, and we would want to leave that backstopping function in place for some additional period of time, but not forever. Chair Powell: (01:07:29) If you look back at what we did in the global financial crisis, we left them out there until we were well past the difficulty, and then we unplugged them and put them in the attic and put them away. None of them... a permanent feature of the landscape, and we hope these don't either. So, that's the way we think about it. Anthony Gonzales: (01:07:46) Thank you. That's helpful. And hopefully, as we debate a next package, we can consider that. Anthony Gonzales: (01:07:51) Secretary Mnuchin, in recent months, we've heard Speaker Pelosi, on multiple occasions, state effectively that nothing is better than something, with respect to additional relief. In your estimation, is nothing better than something for my constituents back home? Steven T. Mnuchin: (01:08:09) No. Something is clearly better than nothing. And, again, I would urge Congress to do something, if it's just the PPP or more. Anthony Gonzales: (01:08:19) And, of course, that's an obvious statement, which I think everybody knows, but, for whatever reason, the Speaker has chosen that path. My understanding is you have continued dialogue with her. I'm not going to ask you to divulge sort of specifics of those conversations, but you've been involved in a lot of deals in your life, certainly, as treasury secretary. As you've had these discussions, how would you characterize them with respect to willingness to actually get a deal done? Because I think there's a lot of people who like to talk around here, but when it gets down to it, actually don't do that much with respect to closing the deal. How would you characterize the discussions? Steven T. Mnuchin: (01:09:01) Well, I would say the good news is when we really needed to get this done last March, it got done with overwhelming bipartisan support. Republicans and Democrats came together in an unprecedented response. When we needed to extend the PPP, people came together in an unprecedented response. Steven T. Mnuchin: (01:09:22) Unfortunately, since that period of time, things that, in my opinion, there should be absolute bipartisan support and we could get done, unfortunately, the Speaker has had... a half a loaf is not good enough and wanted a full loaf. So, again, I would encourage Congress, particularly over the next few weeks, in the lame duck, let's try to get something done. Anthony Gonzales: (01:09:47) Yeah, no, I couldn't agree more. And, again, to state another obvious point, my colleagues on the other side of the aisle are in the majority. And in order for this to actually get done, we're all going to have to come together to do it, but really the pressure needs to come from them. And I hope that they will use the leverage that they have to encourage the Speaker to put a real bipartisan bill forward because, as Chairman Powell said, as you've said, as common sense demands, it is obvious that we need a bridge here... are people struggling. There are small businesses struggling. There are people who are unemployed who are struggling. And I can almost guarantee you, to the person, that every single one of them would prefer something to nothing. And I hope that this body will come to common sense and actually get that done. And with that, I yield back. Maxine Waters: (01:10:39) Thank you. And I object to all of the fault being placed on the Speaker's back. I would advise the president to get involved, and get off the golf course. Maxine Waters: (01:10:49) Ms. Axne, you are now recognized for five minutes. Cindy Axne: (01:10:54) Thank you, Chairwoman. And thank you both for being here. As we all know, we're in dire straits right now. Iowa's now had increasing unemployment claims for six straight weeks. And, of course, I'd like to remind everybody that we need to pay attention to the level of unemployment and not just the direction. This is all happening, when week after week, we see initial claims higher than the... that we saw in the great recession. That's 36 weeks in a row where we've seen record unemployment claims across this country. Meanwhile, The Century Foundation recently estimated 12 million people would lose their unemployment benefits the day after Christmas if we don't act. That seems very terrible for this country. Chairman Powell, what are the economic impacts of removing that support at a time when this recovery is so fragile? Chair Powell: (01:11:43) So, this is if the unemployment programs run out and expire... end of the year. We would be concerned that... The unemployment rate for people in the bottom quartile, for example, is about 20% still. And those are people with relatively low savings, low wealth. And we would be concerned that they'd be vulnerable to losing their houses or their rental, and just be in a very difficult place. So, we think that's an appropriate place to look for further help. Cindy Axne: (01:12:13) Well, I appreciate that. As we all know, 1 in 8 Americans are going hungry, more than 3 million businesses have closed, and we're approaching 100,000 people now hospitalized with COVID. So, I'm wondering for either one of you, does seeing this kind of need and the discussion that we've had today show the importance of passing another COVID aid package? And how quickly do we need to get that done? Chair Powell: (01:12:41) I would just urge, as the secretary has done, that this is a good time. This would really help the economy through these winter months and beyond. And, again, we can see the vaccine's coming, but we have a bit more of the bridge to build. And I think it would be very important for the economy to receive that help. Steven T. Mnuchin: (01:13:08) And I would agree with that, as I've echoed. Cindy Axne: (01:13:11) Thank you. And Secretary Mnuchin, I did want to discuss the CDC's eviction moratorium that currently expires on December 31st. A study recently showed 430,000 cases of COVID and more than 10,000 deaths are due to lifting the earlier state and local eviction moratorium. Are there plans to extend that to possibly protect 10 million households from eviction this January? Steven T. Mnuchin: (01:13:37) Well, I think, as you know, that wasn't our first choice. Our first choice was really assistance to those people, but I will discuss that with the president in extending it. And Chair Waters, I have been speaking to the president every day and updating him on the state of the negotiations. He would like us see additional funding. Cindy Axne: (01:13:56) Thank you. I hope we can get that done quickly so that we don't have a 20-day gap here, where millions of people are going to get evicted. So, please get back to us and the chairwoman on what we can expect from that. Thank you. Cindy Axne: (01:14:08) I'd also like to discuss what you're doing with the $450 billion of funds for the CARES Act. I know we've had some discussion here. I'm going to set aside the question of whether what you're doing is legal because I want to get into why you're doing this. One explanation I've seen is that because you think Congress should use this for fiscal aid. And I don't disagree with that. The problem with this though, is that if Congress wants to reappropriate money from the Exchange Stabilization Fund, we can do that the same as we can from the general fund. So, the only real difference I can see is that leaving it in the ESF makes it a heck of a lot easier for a future treasury secretary to use this money quickly to provide for economic support. So, why are you choosing to make it harder to support the economy in the future? Steven T. Mnuchin: (01:14:54) I just want to clarify because there's a bunch of confusion, whether it sits in the general account, whether it sits in the ESF. All of this is completely governed by the law. And, as I've said, the chair, in deference to him, I extended the pre-CARES Act facilities. If I was looking to do something that was political, I wouldn't have extended those. Steven T. Mnuchin: (01:15:16) My result in not extending the CARES Act is merely an administration of my obligation under this law. It doesn't matter what account it's in. That has nothing to do. The money is administered pursuant to the law. And if Congress wants to change the law, that's fine. And the reason why I believe Mitch McConnell has put some new language in isn't in my interpretation of the law; it's because many of you seem to be confused that he wants to clarify. Cindy Axne: (01:15:46) Reclaiming my time. Reclaiming my time. Thank you, Secretary, but that's just not accurate. The CARES Act is very clear that existing investments can remain there, and that's what you've made happen with the Fed's facilities. So, that answer isn't acceptable. Why are you looking for a way not to help American people right now? This isn't your money; it's taxpayer money, and it should be quickly available to American people right now when we need the help. So, I see you undermining the American people on your way out the door. You need to reverse this decision so that these programs- Maxine Waters: (01:16:15) The gentlelady's time has expired. Cindy Axne: (01:16:18) Thank you for your service [inaudible 00:14:19]. Maxine Waters: (01:16:19) Thank you. Maxine Waters: (01:16:20) The gentleman from Tennessee, Mr. Rose, is recognized for five minutes. John Rose: (01:16:26) Thank you, Chairwoman Waters and Ranking Member McHenry. And I think you, Secretary Mnuchin and Chair Powell for being here today, and for this third oversight hearing required by the CARES Act. I want to thank you also for the great work by both the Department of the Treasury and Federal Reserve throughout this pandemic response. Your fast action has allowed businesses in my district in Tennessee, and across the country as well to keep their doors open and employees on the payroll. John Rose: (01:16:56) I also want to underscore the importance and impact of the CARES Act on stabilizing the economy. We continue to see strong economic recovery, and I hope we can continue that trend as we work towards the great American comeback. Congress has already provided approximately 1 trillion through bipartisan legislation, including the CARES Act to stabilize state and local economies, and support communities, including frontline workers, teachers, students, school employees, and employers and employees. John Rose: (01:17:28) In your testimony, you pointed out that 455 billion in unused funds remain from the CARES Act. Back in Tennessee, folks are talking about how these funds sit unused while House Democrats continue to discuss spending an additional 3.4 trillion, and that is with a "T," trillion, in the HEROES Act. In middle Tennessee, there have been several industries that are enjoying their best year ever, while others have been completely devastated by the government-imposed shutdowns due to the coronavirus pandemic. The American private bus and motor coach industry is one of the latter. John Rose: (01:18:07) The motor coach industry plays a vital role in our travel, tourism and music industries and provides nearly 60 million... or I'm sorry, 600 million passenger trips per year. In the wake of the pandemic, nearly all of the 3,000 companies in the industry at some point were completely shut down. 36,000 vehicles were parked, and most of the over 88,000 employees were laid off. We have billions of dollars sitting unused, and yet this industry still needs relief. John Rose: (01:18:40) Congress must act to provide targeted relief. Secretary Mnuchin, as a proponent yourself of targeted relief, can you detail what you would do to provide targeted aid to this devastated industry? Steven T. Mnuchin: (01:18:56) Yes. And let me just say, there's more than the 450 billion unused. There's actually another 140 billion in PPP on top of that. But I would support $20 billion in additional money in payroll support to the airlines, identical to what we've done before in the CARES Act. I think... be very meaningful in terms of employment and saving the industry. John Rose: (01:19:20) And I appreciate that, but unfortunately, that assistance didn't reach the motor coach industry, and so they have not enjoyed that same targeted relief that we saw go to the airline industry. Do you believe that the aid that you described should be included in an end-of-year package? Steven T. Mnuchin: (01:19:40) I apologize. I thought you were asking about the airline. So, I would support additional aid to motor coach as well. John Rose: (01:19:49) Thank you. Lastly, would you be willing to commit to having treasury staff brief my staff and Senator Marsha Blackburn's staff before the end of the year on ways that Treasury might be able to provide targeted assistance to the bus and motor coach industry, using any existing funds? Steven T. Mnuchin: (01:20:08) We'd be happy to. I don't think unfortunately, we can use existing funds, but we'd be more than happy to go through that with your staff. John Rose: (01:20:15) Thank you. Thanks to President Trump's Operation Warp Speed and the great American innovative industries that we have, we are getting closer and closer to widely distributing a vaccine. In Tennessee, if the FDA authorizes emergency use, we're expecting to see distribution beginning in December. Chair Powell, could you speak to the effect distributing an effective vaccine would have on our economy? Chair Powell: (01:20:44) Yes. Clearly, in the medium term, which is to say sometime in the middle of next year, we're not well-positioned to give a precise estimate of when that might be, people will regain confidence that they can gather in various activities that now seem too risky because of COVID. And that'll have a very positive effect on economic activity, on spending, on hiring. So, we do see very positive things coming. Chair Powell: (01:21:14) I just would add though, as I said in my testimony, the sort of path is a little bit uncertain because we are still learning, going to be learning about the efficacy of the vaccines and also about the speed of the rollout and who will get them in and in what order and what the effect will be on the public. But overall, I think we see a very positive set of developments coming at a somewhat uncertain time, but not so long into the future. Maxine Waters: (01:21:46) The gentleman's time has expired. John Rose: (01:21:47) Thank you. Chairwoman Waters, I yield back. Maxine Waters: (01:21:48) Thank you. Maxine Waters: (01:21:49) The gentlewoman from California, Ms. Porter, is recognized for five minutes. Katie Porter: (01:21:56) Thank you, madam Chair. Chair Powell, would you say the economic crisis caused by the [inaudible 01:22:01] is over? Chair Powell: (01:22:04) I'm sorry. I couldn't hear exactly what you said. I apologize. Katie Porter: (01:22:08) That's okay. Would you say the economic crisis caused by the pandemic is over? Chair Powell: (01:22:13) No, I would not. Katie Porter: (01:22:15) Okay. How long do you think it'll take before we know? Chair Powell: (01:22:18) Well, before we know, I think we'll know a lot in the next four to six months about vaccines. But the real issue though, is what are going to be the effects of people whose jobs may have changed or gone away. It's really the new... The post-pandemic economy's going to be different, and we're going to learn a lot about that in the second half of next year. And I think those people are going to need help, some of them. Katie Porter: (01:22:49) And I think that's, Chair Powell, a very fair answer. We can't know, unless we have a crystal ball, exactly how the recovery from this is going to proceed. Katie Porter: (01:22:57) Now, Secretary Mnuchin, who's also here with us today, he apparently disagrees with you. In fact, Secretary Mnuchin is so certain that the economic crisis is over, that he wants to ban the Fed from using any more of the $500 billion that Congress set aside in the CARES Act to help the economy. Two weeks ago, he wrote to you to request that you return the remaining 455 billion because our economy, in his opinion, simply doesn't need it anymore. In response, you, Chair Powell, said that the outlook for the economy is extraordinarily uncertain. The Federal Reserve would prefer that the full suite of emergency facilities established during the pandemic continue to serve their important role as a backstop for our still strained and vulnerable economy. Katie Porter: (01:23:55) Needless to say, it's highly concerning that the two people tasked with stabilizing our economy do not agree on whether the markets are stable, but it actually doesn't matter what either of you two think, because Secretary Mnuchin simply doesn't have the authority to recall the 455 billion. I'm reading aloud now from section 4027 of the CARES Act. On or after January 1, 2026, any funds that are remaining shall be transferred to the general fund. In other words, sent back to the treasury. Secretary Mnuchin, Is it currently the year 2026, yes or no? Steven T. Mnuchin: (01:24:41) First [inaudible 01:24:42] I do believe there's an economic emergency. Katie Porter: (01:24:44) Secretary Mnuchin, you're claiming my time. Steven T. Mnuchin: (01:24:44) You're putting words in my mouth that are not correct. Second of all, okay- Katie Porter: (01:24:49) You're claiming my time. Steven T. Mnuchin: (01:24:50) ... the answer is that 4027- Maxine Waters: (01:24:52) The time belongs to the gentlelady. Katie Porter: (01:24:53) Madam Chair? Reclaiming my time. Mr. Mnuchin, do start by answering my first question. And I will ask you others. Is today the year 2026, yes or no? Steven T. Mnuchin: (01:25:08) Of course, it's not 20 [inaudible 01:25:09]. How ridiculous to ask me that question and waste our time. Katie Porter: (01:25:14) Well, Secretary Mnuchin, I think it's ridiculous that you're play-acting to be a lawyer when you have no legal degree. Steven T. Mnuchin: (01:25:20) Well, actually, I have plenty of lawyers at the Department of Treasury who advise me, so I'm more than happy to- Katie Porter: (01:25:26) Mr. Mnuchin- Steven T. Mnuchin: (01:25:26) I'm more than happy to follow up with Chair Waters and explain all the legal provisions and the Ranking Member. So, more than happy to make that access. Katie Porter: (01:25:33) Secretary Mnuchin? Secretary Mnuchin, are you, in fact, a lawyer? Steven T. Mnuchin: (01:25:38) I [inaudible 01:25:39] not have a legal degree. I have lawyers that report to me. Katie Porter: (01:25:43) Thank you. Katie Porter: (01:25:44) Chair Powell, are you, in fact, a lawyer? Chair Powell: (01:25:48) I am a former lawyer, a recovering lawyer. Katie Porter: (01:25:52) You have a legal degree, correct? Chair Powell: (01:25:55) Yes, I do. Katie Porter: (01:25:56) Okay. So, Secretary Mnuchin, you are trying to tell Chairman Powell to send over [inaudible 01:26:04] remaining fund right now, and you're claiming falsely, in my opinion, that that is what the law says. You've gotten into a disagreement with someone who's actually a lawyer- Steven T. Mnuchin: (01:26:17) Are you a lawyer? Katie Porter: (01:26:17) ... and you're not listening to Congress, which actually wrote the law about what it says [crosstalk 01:26:23]. Steven T. Mnuchin: (01:26:23) Okay. Actually, I wrote the law with Congress, for what it's worth. And by the way, it's not 450 billion he's returning. I think it's approximately 175 billion. Katie Porter: (01:26:32) Reclaiming my time. There was no question there. Katie Porter: (01:26:37) Secretary Mnuchin, the CARES Act already says in section 4027, it says that you have to stop making any new investments, new investments, in Fed lending programs at year end. It doesn't say that the Fed programs must stop making loans or purchases. You are making a decision that does not align with the statute or congressional intent. Maxine Waters: (01:27:10) The gentlelady's time has expired. Maxine Waters: (01:27:14) The gentleman from Wisconsin, Mr. Steil, is recognized for five minutes. Bryan Steil: (01:27:18) Thank you, madam Chairwoman. Secretary Mnuchin, thank you for being here. Would you like to further your comments for just a minute on the last exchange there as to your rationale? I feel like you got cut off there for [crosstalk 01:27:32]. Steven T. Mnuchin: (01:27:32) Thank you very much. And, again, I think what I will do is follow up with the Chair and the Ranking Member so we clarify both 4027 and 4029. Again, I've had these discussions with the Senate. And, again, if there's any misunderstanding on this, again, this can be changed. Bryan Steil: (01:27:52) Appreciate it. Thank you very much. And thank you for being here. Bryan Steil: (01:27:55) Chairman Powell, if I can ask you a question. The Fed balance sheet currently stands at $7.2 trillion, more than 3 trillion above where we started at the beginning of the year. At the hearing on June 17th, I asked you about how the Fed would manage its balance sheet going forward to mitigate inflationary pressures. And I think we need to keep this issue in mind, in light of the unusual monetary and fiscal tactics we've been required to employ this year to maintain the economic growth and stability that we've had. Bryan Steil: (01:28:27) When we spoke, you commented that during the last recovery, going back a ways, the Fed waited until it was quote "well down the path of recovery" before deciding what to do. In that, you asserted that the balance sheet, I think your words, doesn't present issues at the current time, suggesting that addressing the balance sheet size was not a priority. Bryan Steil: (01:28:50) We're now six months later. Our economy has begun to recover. The unemployment rate has fallen from approximately 10% to closer to 7%. Multiple vaccine trials have been successful, and we're expecting distribution in the not-distant future. We're not out of the woods yet, but there is cause I think for optimism about our economic recovery. Could you comment on the indicators that you're watching closely as you consider taking steps to begin to restore the Fed's balance sheet to its pre-pandemic levels? Chair Powell: (01:29:24) So, our priority remains supporting the economy until we're really well through this. We are going to keep our rates low and keep our tools working until we feel like we really are very clearly past the danger that's presented to the economy from the pandemic. So, we're not considering pulling back any of our support for the economy, and we're not going to until we feel very confident that it's no longer necessary. Chair Powell: (01:29:54) The time will come to start thinking about balance sheet issues. And we have the model of what we did in the last financial recovery. And I was at the Fed during those years when we were considering that. That time will come. It's well into the future. I think we know how to do it, and that's slowly and carefully. Chair Powell: (01:30:13) I think we've also seen all of these years of large balance sheets, and understandably people were concerned after quantitative easing began that there would be inflationary pressures or market distortionary problems, but we really didn't see them. So, we don't want the balance sheet to be, in the long run, any bigger than it needs to be. But the main thing for us is to keep the support that the economy needs until we're confident that it no longer needs it. Bryan Steil: (01:30:42) Thank you for your comments. If I can shift gears, Chairman Powell, as you know, LIBOR is linked to almost $400 trillion in financial contracts, so the implications of the transition away from the benchmark are quite significant. I'm especially concerned about some of the tough legacy contracts... reference LIBOR, and are unchangeable. On Monday, the Fed, FDIC and the OCC issued statement recognizing some of these developments and reiterating, among other things, that banks should transition away from US dollar LIBOR as soon as practical. Are you concerned that some financial market participants may continue to reference LIBOR in contracts even after the relevant phase-out dates? Chair Powell: (01:31:25) Well, as you know, we've provided guidance to market participants that we strongly discourage the use of LIBOR for new contracts after the end of 2021. And then there's a proposal, which will go out for comment, but the idea would be that LIBOR would cease to be published, would cease to exist, except in the tail, in the remaining outstanding contracts at June 30, 2023. So, it's very important that people understand those, that LIBOR should not be assumed to be continued to be published after that. Chair Powell: (01:31:59) That does mean there will be a so-called hard tail, and we do think that that will take legislation. And we've been working with Congress and also at the New York state level on that. So, we think that's important, but not urgent from a time standpoint, but something that we'll need to get done. Bryan Steil: (01:32:13) Thank you very much. Thank you both for being here. I yield back. Maxine Waters: (01:32:18) Thank you. Maxine Waters: (01:32:18) The gentlewoman from Massachusetts, Ms. Pressley, is recognized for five minutes. Ayanna Pressley: (01:32:28) Thank you, Madam Chair. Chairman Powell, you have consistently called for greater fiscal aid. You testified "the risk of overdoing it is less than the risk of underdoing it." I agree with you here, Chairman Powell. This is not a question of either/or. We absolutely need further stimulus. But Congress has also provided the Fed with over $450 billion to support lending to city, states and small businesses. Now, in fact, in your March 23rd press release announcing these emergency lending facilities, you state three times... Ayanna Pressley: (01:33:02) ... facilities. You state three times that the fed is quote, "Committed to using its full range of tools and authorities," end quote. Yet in less than 24 hours, you gave up any resistance to secretary of emissions' arbitrary demand to shutter these facilities by the end of the year, including the municipal liquidity and main street lending facilities. Ayanna Pressley: (01:33:23) So I wanted to build on my colleague, representative [Axony's 01:33:28] line, and just to further enumerate and unpack the sobering landscape likely before us. So yes or no please. With the ongoing pandemic, do you expect the number of cities and States facing historic budget shortfalls to continue to rise? chairman Powell? Chair Powell: (01:33:48) I don't really have a strong expectation on that, but that may be right. Ayanna Pressley: (01:33:53) I'll take that as a yes. Do you expect further state and municipal credit downgrades, making it more difficult for state and local governments to borrow? There have been 337 downgrades so far. Do you expect that to happen tomorrow, yes or no? Chair Powell: (01:34:07) I think it's probable. Ayanna Pressley: (01:34:11) Okay, I'll take that as a yes. Are we facing an unprecedented wave of small business closures? Yes or no? Chair Powell: (01:34:18) I think that's uncertain. Unprecedented wave, I don't know that we know that. Ayanna Pressley: (01:34:25) Okay. Is the rescue of small businesses essential to any long-term economic recovery? Yes or no? Chair Powell: (01:34:31) Yes, it's important. Ayanna Pressley: (01:34:34) And would failure to provide relief to cities, states and small businesses further widen existing in equalities, including but not limited to the racial and gender wealth gaps? Yes or no? Chair Powell: (01:34:46) Look, I think it is- Ayanna Pressley: (01:34:49) Yes or no? Chair Powell: (01:34:49) I'm sorry, yes or no questions for these questions, I'm just going to answer you. Which is that I think that it is important that these groups get additional fiscal support, thank you. Ayanna Pressley: (01:35:00) [crosstalk 01:35:00] Please, I don't want you to filibuster here, okay? Because these issues are of great import. And part of your job is forecasting, so I'm leaning in on your expertise. So again, yes or no? Does this exacerbate racial and gender wealth gaps, failure to provide relief to cities and states, and small businesses? Chair Powell: (01:35:19) I think there's a risk of that. I think there's a risk of that, yes. Ayanna Pressley: (01:35:24) So chairman, the Federal Reserve lends at a ratio of 10 to one. So if Congress set aside $400 billion to cover any potential losses, you can lend up to how much to these facilities? What's that amount? Chair Powell: (01:35:40) Whatever 10 times the amount of equity that's been pledged, so it would have been several multiple trillion, four trillion or so. Of course, that borrowing happened. That borrowing happened, it just didn't happen in the facility. Ayanna Pressley: (01:35:50) So over four trillion dollars. So, you have a responsibility to support maximum employment. Yet in the midst of a global pandemic, you have been complicit in eliminating over four trillion dollars in potential relief to cities, states and small businesses. And then adding insult to injury, the secretary wants to move this money to Treasury's general fund, conveniently out of reach of the incoming administration and in direct violation of the CARES Act. I know there's been this Jedi mind trick going on here, but we know what our intentions are and we can read, and [inaudible 01:36:25] are supposed to be available for up to five years so I'm not even sure why we've been going back and forth on that. But I did also just want to ask about... Let me for a moment just turn to Secretary Mnuchin, just building on the line from my colleague Congresswoman Porter here. So what does it state in section... What does it state in section 4027, subsection C, paragraph two of the CARES act? I just want to make sure we're all operating with the same information. Steven T. Mnuchin: (01:37:02) 4027 allows to the extent we've made... An example, an existing loan to an airline. If we need to advance additional money to that airline in a protective capacity, or if we have expenses? That's what 4027 applies to. And again, it says very clearly that there are certain funds that can be used to 2026 and will continue to be available in 4027. 4027 and 4029 work together, 4029 has to December 31st, 2020. Ayanna Pressley: (01:37:38) I'm reclaiming my time, because I don't know, we must be reading a different text. So Mr. Secretary, section 4027 [crosstalk 01:37:45]. Ms. Waters: (01:37:44) The gentlelady's time has expired. Thank you. Ayanna Pressley: (01:37:48) Thank you. Ms. Waters: (01:37:50) The gentlemen from [inaudible 01:37:49], Mr. Gooden is recognized for five minutes. Mr. Gooden: (01:37:54) Thank you Madam chairwoman. Secretary Mnuchin, thank you for your prior support for credit risk transfer. As a means of reforming Freddie and Fannie as expressed in treasury, the administration's housing reform plan. Does that support still exist, and do treasury and the administration still support CRT for the GSEs, and more importantly the de-risking of Fannie Mae and Freddie Mac that protects taxpayers? Steven T. Mnuchin: (01:38:18) Yes. Mr. Gooden: (01:38:19) Would you like to elaborate any on [crosstalk 01:38:21]? Steven T. Mnuchin: (01:38:21) I think the credit risk transfer is a very effective mechanism of supporting the institutions. I also think that capital accumulation is something that is very important and ultimately capital raising so that taxpayers are not at risk. Mr. Gooden: (01:38:37) Thank you. As you know, myself and many of my colleagues in both chambers of Congress, a variety of stakeholders who have filed comments have urged FHFA to ensure a robust, risk-based CRT market in the new capital framework for the GSEs. And while I support the capitalization of the enterprises, I have real concerns about the impact of FHFA's capital role on the CRT market. FSOC and Treasury provided a brief four page review of FHFA's 400 plus page proposed capital rule with little to no analysis of the impact on the markets for CRT or mortgage-backed securities. Do you think FHFA's capital rule provides adequate capital relief for CRT, and has Treasury, FSOC or the Office of Financial Research examined the effects this rule could have on the CRT market or access to mortgage credit? Steven T. Mnuchin: (01:39:29) We have done some work on that, and we'd be happy to follow up with you on it. Mr. Gooden: (01:39:33) Thank you, I would appreciate that. Mr. Powell, you were filibustered earlier. Did you have any further comments? The floor is yours, I'll give it to you, I've got three minutes. Chair Powell: (01:39:42) Thank you. I just would say that for example, the muni facility? The level of municipal borrowing is set to exceed the all-time annual record this year. And that's because of the backstop of this facility. You don't measure the success of the facility by the amount of lending it does. It succeeded in restoring borrowing in the markets at very low levels for municipalities and other state and local government entities across the credit spectrum, small, medium, and large. So I just say, I think it's been quite a success. Mr. Gooden: (01:40:14) Thank you, I appreciate it. Madam chair, I yield back. Ms. Dean.: (01:40:22) The gentlewoman from New York, Ms. Ocasio Cortez is recognized for five minutes. Ms. Ocasio Cortez: (01:40:28) Thank you both so much for coming to offer your testimony today, and your expertise. Secretary Mnuchin, not to belabor the point, but I did want to dive back in here to section 4027 and 4029 that you're referencing. I do think it's important that we discuss this, because you are bringing it up as the main rationale as to why you are bringing these funds back into the exchange stabilization fund. So first and quickly, section 4027 has of CARES explicitly states that unused funds are to be returned to the exchange stabilization fund until, or rather on January 1st, 2026. Correct? Steven T. Mnuchin: (01:41:20) It is correct, and that will occur on January, 1st, 2026. Ms. Ocasio Cortez: (01:41:26) And that's with respect to the unused funds. Now, section 4029 of the first- Steven T. Mnuchin: (01:41:31) No, it's not the unused funds, it's the unused funds in the ESF at that time, that's correct. Ms. Ocasio Cortez: (01:41:35) Yes, yes. Thank you. Now, section 4029 refers to rescinding authority to making new loans, right? So the law explicitly does contemplate, it has that section, A, B and C. And it does explicitly contemplate that remaining funding as of January 1st, 2021, which is just in a matter of weeks to be available for restructuring, modification, amendment and administrative costs. Is that right? Steven T. Mnuchin: (01:42:06) That is correct. Ms. Ocasio Cortez: (01:42:09) And so I was wondering if I could give you the opportunity to discuss about, instead of choosing to return those funds. And you are choosing to return those funds, right? Steven T. Mnuchin: (01:42:24) I'm not choosing to return those funds. Whether the funds are returned or the funds aren't returned, 4029 governs both direct and indirect. So again, I could have allocated all 500 billion on day one to the Federal Reserve, I allocated 200 billion. It really is irrelevant. The 4029 governs the same provision, whether money's sitting in any of the accounts. That was the purpose of 4029. If you don't read that way for 4029, then it shouldn't have existed. There is no purpose to have the December 31st, 2020 date. And again, I personally negotiated these documents. Ms. Ocasio Cortez: (01:43:04) I understand, and I'm trying to seek clarification, because we are in such a desperate position, given the unfortunate gridlock. I think that we're all aligned in interest in trying to figure out where we can explore maximum flexibility as offered by the statute. And so I'm just curious if instead of choosing to return... Or rather, instead of returning these funds, instead of reading the interpretation as returning these funds to the SF, could we use this modification statute to recapitalize loans? Steven T. Mnuchin: (01:43:46) Recapitalize existing loans? Ms. Ocasio Cortez: (01:43:49) Yes. Steven T. Mnuchin: (01:43:50) So again in my example, we have made airline loans. So people are focusing on the 13-3, these facilities, this governs both the direct loans and the indirect loans. In the case of if there's an airline loan that we have already made, and we need to make protective advances after December 31st, 2020? The statue allows us to do that. And again, it doesn't matter whether I had allocated 500 billion, I just want to put this in perspective. Of the 190 billion I allocated that would have done two trillion dollars of lending, I believe we've done like 25 billion in total. So we're talking about this, this is irrelevant in the broader scheme of things. Ms. Ocasio Cortez: (01:44:40) And to return to the airline example, are there other examples of advances that could be provided ahead of the sunset date? Steven T. Mnuchin: (01:44:49) Again, on any of the existing, underlying loans. So if there is a main street loan that has already been made, and that main street loan needs a protective advance after December 31st, 2020, that can be done. The difference between 4027 and 4029 has to do with existing loans versus new loans. So again, it's very clear 4029 refers to make new loans, loan guarantees or other investments shall terminate. Ms. Ocasio Cortez: (01:45:27) All right, thank you very much. Ms. Dean.: (01:45:31) The gentleman from South Carolina, Mr. Timmins is now recognized for five minutes. Mr. Timmins: (01:45:38) Thank you madam chairwoman. I want to first align myself with the comments from my colleagues on both sides of the aisle. We need to help small businesses across this country. It is critical, it is past time. Businesses in my district in the state of South Carolina are struggling. We have tourism-related businesses that are setback. We have businesses, we have bars and restaurants, gyms, yoga studios, they're struggling. And that's in South Carolina, where we're mostly reopened. Here in DC, they just went to 25% capacity for restaurants. The hotel I'm staying in has permanently closed their restaurant and their rooftop bar until the restrictions are lifted. Mr. Timmins: (01:46:23) We need to help the businesses that are being put out of work by the government. Government closures are helpful in certain cities, but in others, we need to safely reopen. And any business that is being closed because of the government must get relief, it is a taking and it is wrong. So first, we need to get additional PPP loans, we need to help the businesses that are struggling the most. But we've got to be surgical about it, we don't need to paint with a broad brush. To that end, my first question is to both of you. Mr. Timmins: (01:46:57) There's no denying that the federal government has spent an exorbitant amount of money this year to combat both the health and economic toll of the virus. As our national debt climbs towards 30 trillion, it could very well hit 30 trillion next year between the next COVID relief package and Def's spending for next year. But we as policymakers are looking to provide targeted relief for our constituents. How do we get the best bang for our buck? In other words, what type of economic relief or stimulus will be the most effective in preserving and creating jobs. And secondly, how would you recommend policy makers address our mounting debt over the next few years? Steven T. Mnuchin: (01:47:38) Well, I would say for small businesses, the simplest and most effective thing that can be done is authorize me to use the 140 billion sitting in the accounts of the general fund for additional PPP loans. We spent a lot of time on 4027 and 4029, I unfortunately don't have the legal authority to spend this money and I would like the legal authority. That'd be the simplest thing to do. Mr. Timmins: (01:48:04) My next question is, is that enough? Is that enough? What about the businesses that have had a 97% revenue loss? Whether it's an event venue, or a minor league baseball team or any other business that has been totally shut down? They are not looking at this as a, "We need more PPP loans," they're looking at it from the perspective of the government has literally ended all revenue. Ended all revenue. What do we do for those businesses? Steven T. Mnuchin: (01:48:33) Well, the good news about PPP loans, is if you use the money correctly, they go and immediately become grants and they're forgiven. And I do agree, we should pass legislation to simplify the grant forms. And I agree with you. Stages, restaurants, entertainment business, and 140 billion isn't enough. I would allocate 300 billion to this immediately. Mr. Timmins: (01:48:58) I couldn't agree with you more, and I appreciate that sentiment. And I urge everyone involved that we pass this immediately, it needs to be done before Christmas. And I don't think it's productive talking about whether the president's playing golf or not, everyone is at fault. Politics are what is to blame, and we need to rise above the politics and we need to get this done. I'm going to ask some additional questions. Secretary Mnuchin, yesterday before the Senate banking committee, you indicated that Fannie and Freddie should not be released from conservatorship without appropriate capital. Can you expand on that a bit? Does that mean that they should have at least the required amount of capital under the FHFA's new capital rule, and would that be the minimum capital level or the minimal capital level plus the buffer specified in the 2020 rule? Steven T. Mnuchin: (01:49:53) Well, let me just be clear. Despite the fact that the director and I are having conversations, we've made no decisions at Treasury whatsoever yet, we are contemplating. But there could be a scenario where at some point between basically the zero capital they have and the full capital requirement, there would be a consent order and they would be released subject to a consent order. But as I've said yesterday, there's got to be significant capital for them, in my opinion, to be released. Mr. Timmins: (01:50:26) Thank you. I want to really thank both of you for all the work you've done in the last year, it has been truly remarkable, and I'm optimistic that we can get on the other side of this pandemic soon and get our economy back humming. And with that, I yield back, thank you. Ms. Dean.: (01:50:42) The gentleman yields back. The gentleman from Virginia, Ms. [inaudible 01:50:45] is recognized for five minutes. Speaker 2: (01:50:49) Thank you, Madam chairwoman, and thank you very much Secretary Mnuchin and chairman [inaudible 01:50:54] for joining us here today, and for all your work during this pandemic. Secretary Mnuchin, one of the facilities that you're allowing to expire at the end of the year is the main street lending program, which as we've discussed has had a number of issues and I would submit has been really a disappointment. It was designed to support up to $600 billion in lending to small businesses and medium-sized businesses, but in eight months it's only supported about five billion dollars of loans to about 420 companies. Do those numbers sound right to you, Secretary Mnuchin? Steven T. Mnuchin: (01:51:26) They do, and I would acknowledge I'm disappointed as well that there wasn't more take-up. It was something the Fed... And we worked very hard, but it was very difficult to design a program that could be really used. Speaker 2: (01:51:39) Well, one of the loans there was to Wellshire Financial Services, the company that is in car title lending. And I assume you're familiar with this loan, because it has been reported in the media lately. Are you familiar with this loan that was made? Steven T. Mnuchin: (01:51:55) I'm really not familiar with the loan. I've seen things in the media, but I don't have access to the underlying loan documents and the underlying loan files that the Fed has. Speaker 2: (01:52:05) Right. So you didn't have role in making this loan, because it was only between the lender and the borrower, right? Steven T. Mnuchin: (01:52:12) I had no role other in setting the policies with the Fed chair for the facilities. And I assume the loan complies, but I don't know. Speaker 2: (01:52:20) Okay. And one of the policies though was that those loans would not be available to finance or lending institutions, correct? Steven T. Mnuchin: (01:52:32) I believe that's correct, but I'm not familiar with the details of the loan as I said you're referring to. Speaker 2: (01:52:38) Well, I'll tell you a little bit about it, because they were able to exploit a loophole in the law by organizing into this as a consumer credit access company rather than a lender. And they did that in Texas to avoid their usury laws there, and so now they have a $25 million loan from the US government, taxpayer funded at three percent, which they're lending out to people at 350%. Assuming that that is correct, would you agree that this violates the spirit and the intent of the law and the regulations? Steven T. Mnuchin: (01:53:16) I would, and I would expect that [inaudible 01:53:17] will be reviewed and audited it. Speaker 2: (01:53:20) Okay, so you agree that it's not a good look, especially given that it has come to light that the owner of the company is a major donor to the President? Steven T. Mnuchin: (01:53:30) Again, as I've said, I don't know the specifics alone. But I agree based upon what you're saying, that was not the spirit in the intent of the use of the loans. Speaker 2: (01:53:39) Can I get a commitment from you here today that you'll review that loan, and consider clawing back the money? Steven T. Mnuchin: (01:53:45) You'll have to get that from the Fed, because they administer the program. I don't administer, I don't have that ability. But I'm sure chair Powell can respond to that. Speaker 2: (01:53:53) Chairman Powell? Chairman Powell, can we get a commitment from you to consider clawing back the money and review this loan to Wellshire Financial? Chair Powell: (01:54:03) So let me just... It's really inappropriate for me to try to comment on individual loans. Like the secretary, I'm not involved in the process. I will say this. People make representations. We set out clear rules, they have to be obeyed and we'll always look. And if they're not obeyed, or if incorrect representations are made, then the consequences will follow and we will look at all of the loans in that light. Speaker 2: (01:54:27) Very good, thank you. Secretary Mnuchin, a lot of discussion has been taking place in this hearing today about whether these programs have to expire the end of the calendar year or whether you're allowing them to expire. And I understand that you were saying, you were reading and your interpretation is that they expire and you don't have any discretion in that. I can't help but suspect that had the results of the election for president been different, your interpretation would be different. But I would inquire, have you had an opportunity to speak to incoming treasury secretary Yellen? Steven T. Mnuchin: (01:55:05) I have. Speaker 2: (01:55:05) Okay, very good. And have you discussed with her your intention to end these facilities? Steven T. Mnuchin: (01:55:12) I have discussed with her, we are cooperating with the transition. I had a very good working relationship with her when she was the Fed chair, and I have advised her that my reading of this and my interpretation was nonpolitical and it was following the law. So yes, I did advise her of that. Speaker 2: (01:55:31) And was she disappointed, or did she disagree with your interpretation of the law? Steven T. Mnuchin: (01:55:36) She didn't reflect a interpretation one way or another. Speaker 2: (01:55:43) Thank you very much, I yield back. Ms. Dean.: (01:55:46) The gentleman yields back. The gentleman from Texas, [inaudible 01:55:49] Taylor is recognized for five minutes. Taylor: (01:55:50) Thank you Madam chair, I appreciate that. I appreciate this hearing, and I appreciate your gentleman's hard work during an unprecedented 2020, one that we really didn't see coming. I want to talk about the policy decisions that are made in this building versus broad help, which is what we did in the spring, versus targeted help, which I think is something that we're talking more about. Heretofore, I have heard some reluctance to go to targeted specific help, and I'll use airlines as an example. So that's something we made a decision in the spring, we're going to give targeted, specific help in the airline space because there's need there. Madam chair, could we get that... Ms. Dean.: (01:56:33) If you'd suspend for a moment until we get the audio straightened out. Speaker 3: (01:56:47) It's gone. Ms. Dean.: (01:56:51) We can resume. Taylor: (01:56:58) Okay, thank you. And so as we think about... Something I've been very concerned about is the hospitality space, largely because of the unemployment, their numbers are so enormous. We're talking of the 10 million people that are currently unemployed as a result of COVID, approximately half are just in one specific sector in the hospitality space. So it is my concern or belief that we need to be targeted in this building, and I'll point out that the problem-solver package that came out yesterday, the PPP reload was designed specifically... It's a much smaller number by saying you had to have a 35% drop in revenue. So that created a limiter of kind to say, "All right, hey, if you're doing well? You're not going to be able to get a PPP reload." And I have businesses in my district that do telemedicine, and their sales are up 100, 200, 300%, because telemedicine's a big thing. They're doing better, they don't need a PPP loan. They still have business problems, but it's not a PPP reload that they need. Taylor: (01:57:59) Chairman Powell, would you concur that it is time to begin to think more about specific targeted help, rather than broad help into sectors that are in harm's way? Chair Powell: (01:58:12) I think the timing and the scope and the components of this are really up to you. I would say I do see a number of areas, and I mentioned them earlier, including small businesses that do need help, and I think that would be broadly very helpful for the economy where that to happen. Taylor: (01:58:26) And I I'll point out, it's probably better for the taxpayer, rather than just handing out tons of money everywhere to be specific. Secretary Mnuchin, would you like to speak to the need of targeted assistance versus broad assistance? Chair Powell: (01:58:39) Yes, I agree completely. And as you've rightly said, if we're going to do more PPP loans, we should have a provision that company's revenues are down. That's a pretty straightforward. Taylor: (01:58:52) Okay. Well, I certainly appreciate your guidance and insight, and we'll continue to advocate on that front. And I have to admit I've been somewhat entertained by the discussion of section 429, which I've had to pull up and [inaudible 01:59:10], just to make sure I was thinking about it correctly. And I'll just read 429-B. On December 31, 2020, the authority to provide under this subtitle to make new loans, loan guarantees or other investments shall terminate. That seems very clear in terms of... that's 429-B. So the ability for you to make new loans Mr. Secretary, new loans, loan guarantees or other investments terminates. That's what the law says, I think that's what you're saying. Steven T. Mnuchin: (01:59:37) It is. And as I've said, if anybody on this committee doesn't think that's what it said, and they think that that doesn't apply? Then they would have given me unlimited authority to use this money forever, and I don't know why 4029 would have been inserted. So I haven't had anybody rightfully explain if 4029 doesn't, then what was the purpose of it? Taylor: (02:00:01) Sure. And in 429-B again, it could have said December 31st, 2021. In which case it would go on for another year, but it's clearly the end of this year is the termination of your authority under the law. And I just want to say, I'm a believer that equal law, equal protection under the law, and then I commend you for following the law and reading the law, and not trying to twist it into something that it was never meant to be. The law seems very clear to me, mr. Secretary, and I certainly applaud your efforts to comply with it, despite a lot of bizarre efforts to try to twist it into something that it's not. Steven T. Mnuchin: (02:00:37) Thank you. Taylor: (02:00:40) Thank you. Steven T. Mnuchin: (02:00:41) I wish we spent as much time talking about PPP loans as we have as 4027 and 4029. And I would also just say, when we pass this law, we thought it was highly unlikely that we'd need to be using these at this period of time. Taylor: (02:00:59) All right, thank you, Mr. Chairman. Madam chair, I yield back. Ms. Waters: (02:01:05) Thank you. The gentlewoman from Massachusetts. The gentleman from Massachusetts, Mr. Lynch is recognized for five minutes. Mr. Lynch: (02:01:14) Thank you, Madam chair. I want to thank Chairman Powell, secretary Mnuchin for attending the hearing and for helping the committee with its work. So let's talk about January 1st, because we have much pandemic-related support that's going away right now unless action is taken. We also had last week, I think 827,000 new unemployment claims. Again, going back to the rental assistance that's pandemic related, that's scheduled to expire December 31st as well. Mr. Lynch: (02:01:56) Mr. Sec, I'm sorry. Mr. Chairman, we're going to be in a bad place I think on January 1st. And even if there were a last ditch effort by Congress to put something in place, what we saw in the CARES Act was there was a considerable lag time before we could actually get the help out to the American people, whether that was small businesses or people waiting for stimulus checks or supplemental unemployment benefits working with the States. Is there a power that you have, independent of Congress in terms of an appropriations? Mr. Lynch: (02:02:48) Let's take renter's assistance for right now, the forbearance that we might allow renters who don't have the ability to pay their rent. Of course, we'd have to protect the small landlords, the landlords that are out there who are getting pressure from banks and mortgage companies to render payment to them, and then ultimately to the bond holders as well that underwrote those mortgages and are expecting payments. Do you have independent power that might pro provide relief in the short term until Congress can get its act together and come to agreement on a larger package, similar to what we did in the CARES Act? Chair Powell: (02:03:42) Sir, we do have broad powers, but we don't have that kind of powers. Those are really powers that fall to the legislature. Nobody elected us, you created us under statute, you gave us very specific powers and they don't involve- Speaker 2: (02:03:54) I understand that. But I was here in 2008, and the folks on your side of the table were doing their darnedest to rescue- Mr. Lynch: (02:04:03) ... were doing their darnedest to rescue wall street. Now it's Main Street that's under the gun. I'm just asking for the same consideration and the same sense of urgency when it's regular workers or just average families that are struggling to pay their rent. I would just like to see that level of urgency and seriousness that I saw back in 2008 when we were trying to rescue the big banks. I have to be honest. I think I see a little bit of laissez-faire with respect to average families. I don't see that sense of urgency. Mr. Secretary, with all due respect, you seem way too eager to give away or give back or render back the resources that were available. Mr. Lynch: (02:05:02) I didn't see a long and hard discussion about, "How can we get this money out to the people who need it?" Rather, it was, "Well, this is what the law says. I'm going to do it." I didn't see any extraordinary effort on the part of Treasury to find a way, go into court, ask for an interpretation to say, "Do I have the ability to continue these payments and this relief to the American people, or am I prohibited from doing so?" rather than huddling with lawyers who work for you. I've got lawyers that work for me as well. I didn't see an extraordinary effort on your part to try to make sure we could find a way to make sure that the incoming administration has some resources to deal with this problem. Steven T. Mnuchin: (02:05:57) I just want to be clear. I spent the last four months trying to work with Congress to get additional legislation passed. I've been on probably... Mr. Lynch: (02:06:04) We all have. We all have. Steven T. Mnuchin: (02:06:05) ... 100 calls. Mr. Lynch: (02:06:06) We all have. Steven T. Mnuchin: (02:06:07) What people need... Mr. Lynch: (02:06:07) We all have. Steven T. Mnuchin: (02:06:08) ... people need fiscal response. These programs were not used. Let me just be clear. Again, people need more PPP money. They need grants. They need airline support. They need unemployment insurance. These facilities were not being used. I've worked every day to try to get Congress to pass more legislation, so I don't appreciate that comment that I haven't worked hard. Mr. Lynch: (02:06:33) Well, sir, I would just say that what I saw when Wall Street was on the hook was creativity to the nth degree and ways of repurposing money to make sure they got what they needed. I would just- Madam Chair Waters: (02:06:50) The gentleman's time has expired. Steven T. Mnuchin: (02:06:50) [crosstalk 02:06:52]. Mr. Lynch: (02:06:50) I yield that. Steven T. Mnuchin: (02:06:53) If I had any [crosstalk 00:02:53]. Madam Chair Waters: (02:06:53) From New York, Mr. Zeldin is recognized for five minutes. Mr. Zeldin: (02:06:58) Thank you, Madam Chair. Secretary Mnuchin, feel free to use some of my time here to complete your thought. I'll yield to you. Steven T. Mnuchin: (02:07:06) Thank you. I was just saying if I had any legal authority or I could get the president to sign an EO tomorrow to send out the 140 billion to small businesses that need PPP loans, I would do that. Again, for all the conversations we've had on these facilities, which were barely being used, most of which did support big corporations, I might add, and not Main Street, enough money to main Street, Main Street needs more money grants, PPP. Thank you. Mr. Zeldin: (02:07:40) Thank you [inaudible 02:07:41] for being here today. Thank you to Chairwoman Waters [inaudible 00:02:07:48]. Secretary Mnuchin and Chairman Powell, I'd want to start off by saying thank you to both of you for your leadership during this pandemic, especially as it pertains to standing up and fine tuning these needed liquidity facilities. First off, I would share that I [inaudible 02:08:08] Paycheck Protection Program. I've heard from business owners in my district, from local mayors and others about how the Paycheck Protection Program has not only saved small businesses and small business jobs, but saved in the entirety of main streets in the first congressional district of New York. With regards to the facilities, the original Municipal Liquidity Facility Term Sheet excluded my home county of Suffolk, where my constituents live, but the Federal Reserve and Treasury listened to the concerns that I and others raised about lowering the population thresholds for eligible issuers. Mr. Zeldin: (02:08:51) This provided greater access to a much needed backstop financing tool for many state and local governments and entities like the MTA. I want to say thank you for your attention to this critical market and the commitment to remaining vigilant of any problems as they arise, because we need all levels of government to work together. This is not a time to be Republicans first or Democrats first. This is a time to be Americans first. Secretary Mnuchin late one night got on the phone with a local Democrat county executive to talk to us about the Municipal Liquidity Facility and getting eligibility for Suffolk County, and you listened to our concerns. Mr. Zeldin: (02:09:34) The Municipal Liquidity Facility is set to expire at the end of this month and that all unused CARES Act funds at the liquidity facilities, my understanding, will be returned to the Treasury Department, but I want to make sure Congress, Treasury, and the Federal Reserve are working together and remaining vigilant into 2021 as well. To ensure adequate municipal debt liquidity, the Municipal Liquidity Facilities should remain in operation into 2021 so we know for sure we are out of the woods. The onus is not just on the Federal Reserve and Treasury. Congress needs to step up to the plate and get a COVID-19 relief bill across the finish line. Secretary Mnuchin, I know how hard you have been working over the course of what has been many months, which is why I'm glad that you had an opportunity here to help clear the record as to the allegations and the charges that were just being made in your direction. Mr. Zeldin: (02:10:28) You've been working extremely hard. I want to thank you for your efforts in negotiating the next bill. Congress provided support for state and some local governments in the CARES Act but limited the support for local governments with more than 500,000 in population. Chairman Powell, at the Senate Banking Committee hearing in May, you talked about the negative effects on the overall economy that come about when state and local governments face serious fiscal constraints, citing evidence from the 2008 financial crisis. It is clear that fiscal solvency of all levels of government is important for economic recovery. Can you elaborate on the importance of the health of all levels of government for the health and growth of the overall U.S. economy? Chairman Powell: (02:11:13) State and local governments, as you suggest, provide critical services, fire, police, sanitation, all those things that people depend on, public safety, and live under balanced budget requirements in essentially all the states. What happens when costs go up and revenues go down is that they lay people off, and they've laid off more than a million people so far. That was a big problem in the years after the global financial crisis. We hope it doesn't become a big, big problem here, but these are critical government services. As I've said, it's up to Congress and the administration, but I think that's an important area to look at for further support. Madam Chair Waters: (02:12:00) I thank you both for all of your efforts since we were first hit by this pandemic. Again, thank you, Chairwoman [inaudible 02:12:07] for holding, and I yield back. Thank you. The gentlewoman from Hawaii, Mrs. Gabbard, is recognized for five minutes. Mrs. Gabbard: (02:12:16) Thank you very much, [inaudible 02:12:18] Chair. Thank you both for making the time to come and have this discussion today. Secretary Mnuchin, you made a comment about how you wish there were more questions about the PPP Program. I wanted to ask you to talk a little bit about that today, given a comment you just made, and also the news that's come out about how some of the largest businesses that qualified under PPP took up the majority of the money. As we look to a new stimulus package, whether it's this year or it comes out early next year, what improvements would you recommend that the PPP Program take on to ensure that the majority of those dollars are actually going to the small businesses within our communities who are barely keeping their heads above water, trying to survive? Steven T. Mnuchin: (02:13:13) Well, thank you. When we created the original program, the entire economy was shut down, but now that that's not the case, I agree with you. It should be much more targeted. I think it should be focused on the smaller businesses. I think it should be focused on a revenue decline. Chair Waters and I worked on a set-aside to make sure there was money available for underserved areas. I think that's something that should be done again. We've signed up many more CDFIs since then that are ready to go. I also very much support a program. I'm investing $10 to $12 billion in CDFI so that they can do $100 billion of lending. I think there's big bipartisan support. I've spoken to Chair Waters, Senator Warner and Crapo and others. I think there's a lot of things that could be done very, very quickly that would have a big impact. Mrs. Gabbard: (02:14:10) There's no question that the need is there, and the frustration, especially, as these reports come out about where the money has gone and a lot of folks have been left stranded. I want to pivot for a second in a different direction that hasn't been covered today in the area of sanctions. I have served on the Foreign Affairs Committee for my first six years in Congress, and both in Congress, as well as in the executive branch, sanctions is often one of the first go-to actions to take within the realm of foreign policy for a variety of reasons. Mrs. Gabbard: (02:14:47) I pulled recently the list of U.S. sanctions that we have on countries and industries and individuals around the world, and it is a very exhaustive list, as I'm sure you're aware, with some sanctions even going back decades. Can you speak to the Department of the Treasury's process and whether or not you work with other federal agencies and departments, like the Department of State, Department of Defense, and others, to assess effectiveness of these economic sanctions once they have been levied? If you do that, how often really with the intent of saying, "Okay, these sanctions have been put in place. Are they achieving the intended objective?" If not, what are they doing, and what unintended negative consequences are there? Steven T. Mnuchin: (02:15:40) Well, first let me just say, I really appreciate you bringing up this subject, and I'd be more than happy to follow up with you offline. I spent an enormous amount of my time. Really, before the pandemic, I was spending 50% my time on the sanctions. I think they're very, very effective foreign policy tools. We coordinate 100% with both the State Department, the National Security Council, the intelligence agencies on anything we do, so we have a robust inter-agency process. I am going to encourage Chair Yellen to spend time on this. I also want to thank the committee and Congress. You've given us a lot of funding over the last four years. We've increased the number of people we have in these areas. These are very effective tools, combined with our strong military, but in many cases, they are very, very powerful tools and don't put our military in harm's way. Chairman Powell: (02:16:43) Before my time runs out, if you can speak briefly, and if not, I'd like to follow up with you, I'd love to know what specific mechanisms and measures of effectiveness you and these other departments use in order to make sure that they are achieving an intended objective, as well as what measures of impact do you use to say, "Hey, these sanctions against this country were intended for this purpose, but it's actually stopping this country from getting medicine and food and basic supplies, creating a negative humanitarian effect"? Steven T. Mnuchin: (02:17:18) That's a very thoughtful question, I might just add. In the best case scenario, we see a specific action as a result of the sanction, and we remove the sanctions, but we also work very hard on humanitarian issues and issuing licenses for that. Chairman Powell: (02:17:34) [inaudible 02:17:35]. The gentleman from Ohio, Mr. Davidson, is recognized for five minutes. I'm sorry. Where is he? Mr. Davidson, you're on mute. I think he's trying to get off of mute. Mr. Davidson: (02:18:34) [ inaudible 02:18:35]. Chairman Powell: (02:18:37) I think you're on- Mr. Davidson: (02:18:37) Hello? Okay. Good. Thank you. Madam Chair, thank you for [inaudible 00:14:44], and Secretary Mnuchin, thank you for the time you've given us today. I really appreciate the way you've handled our questions and the way you've pointed out what the law that Congress passed actually says and, frankly, for faithfully following that law. We do need fiscal policy, not just monetary policy, and frankly, we need Congress. By the way, it sounds some of my colleagues would just strike Article One from the constitution and have the Executive Branch do everything. I'm glad that the body stays relevant, and I'm hopeful that we can do some of the good things that did happen. Let me highlight a couple things that constituents in the Eighth District of Ohio share with me. [inaudible 02:19:30] Chairman Powell, the Federal Reserve had a very robust and very swift and decisive response in the last half of March and the early days of April. Those first two to three weeks, there was a true liquidity crisis that was hitting our markets, and truly global, because the demand for dollars wasn't just here in our markets. The demand was global. Mr. Davidson: (02:19:55) You saw OPEC countries dump oil into the market, sucking cash, U.S. dollars, into their countries as a way for them to get liquidity. We saw holders of all sorts of assets, including municipal bonds, generally considered very safe and liquid, disappear. There was no buy-side. The Federal Reserve's response in providing liquidity there, to me, fits right in line with the whole purpose of the broad authority under 13(3), but nevertheless, we saw under 13(3) some distortions that have carried over as we've seen the size of the Fed's balance sheet grow in, and some of the questions on that I think are irrelevant. How big does it grow? Well, big enough to make sure we provide economic stability. That was the clear intent of the CARES Act, but not so big that it causes true economic distortions. Mr. Davidson: (02:20:48) Where the inflation is showing up isn't in consumer prices. A lot of people fear and frankly know that it's in marketable securities on Wall Street. While that benefits retirement savings, it accentuates the wealth gap. Secretary Mnuchin, thanks for calling attention to the Payroll Protection Plan. That was tremendous for Ohio's Eighth District. In our district, we had about 9,000 loans made. 80% of them were for $150,000 or less. There were small loans, and overwhelmingly made by smaller lenders. What was the effect of that? Well, we had over 100,000 people in Ohio's Eighth District stay on payroll. The loan did go to the business, of course, but for the purpose of keeping payroll happen. The benefit of that was so many of these individuals, their families kept benefits, health insurance, and other things that come with employment. Mr. Davidson: (02:21:45) It's been a tremendous source of stability. I congratulate my colleagues on the success of the payroll Protection Plan, but frankly, on Treasury and the SBA and others, all of the banks that made this functional. The concern we have is the slow walking of forgiveness on the back end, so I hope you can give some attention to that. As time dwindles swiftly, I want to get to one topic that that is emerging. We've seen the rise of digital assets, and frankly, to the extent that some people have proposed a central bank digital currency as a response, due to our monetary situation right now. I think it's important that we do that very thoughtfully. [inaudible 02:22:33] Madam Chair Waters: (02:22:32) He finished. Male: (02:22:32) [inaudible 02:22:58]. Madam Chair Waters: (02:23:07) I think there are some technical difficulties here. We're past our hard stop, and I apologize for that. We're five minutes past. 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 for the witnesses to the Chair, which will be forwarded to the witnesses for their response. I ask our witnesses to please respond as promptly as you are able. Without objection, all members will have five legislative days within which to submit extraneous material to the Chair for inclusion in the record. With that, this hearing is adjourned. Thank you very much.