Dec 1, 2020

Steven Mnuchin & Jerome Powell Testimony About CARES Act Transcript December 1

Steve Mnuchin & Jerome Powell Testimony About CARES Act Transcript December 1
RevBlogTranscriptsCongressional Testimony & Hearing TranscriptsSteven Mnuchin & Jerome Powell Testimony About CARES Act Transcript December 1

Fed Chairman Jerome Powell and Treasury Secretary Steven Mnuchin testified on the CARES Act before the Senate on December 1. Read the transcript of the full hearing and testimony here.

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Mr. Crapo: (02:05)
Three, two, one. This hearing will now come to order. This hearing is in a hybrid format and the hearing room has been configured to maintain the recommended six foot social distancing between senators, witnesses and other individuals in the room necessary to operate the hearing, which we have kept to a minimum. For those joining remotely, a few video conferencing reminders, which you should all be very familiar with at this point. Once you start speaking, there will be a slight delay before you’re displayed on the screen. To minimize background noise, please click the mute button until it is your turn to speak or ask questions.

Mr. Crapo: (02:48)
If there is a technology issue, we will move to the next Senator until it is resolved. Once again, I remind all senators and our witnesses that the five minute clock still applies. Those remote should have on your screen, one of the boxes labeled clock that will show how much time is remaining. We’ve had some trouble getting those boxes on everybody’s screen apparently, or at least getting everybody to be able to find them and follow them. We are going to continue a practice that we started at the last hearing. At 30 seconds remaining, you will hear a bell ring to remind senators that their time is almost expired. I encourage the senators and our witnesses to recognize that bell and wrap things up on the answers as well as the questions in time to keep within the five minutes. To simplify the speaking order process, Senator Brown and I have again, agreed to go by seniority in this hearing. Today, we welcome the witnesses to the committee to provide testimony as required under title four of the CARES Act or witnesses are the Honorable Steven T. Minutian, Secretary of the Department of Treasury, and the Honorable Jerome H. Powell, Chairman of the Board of Governors of the Federal Reserve System. Welcome to both of you.

Mr. Crapo: (04:10)
On November 19. Treasury Secretary Minutian requested for the Federal Reserve to return unused funds that had been appropriated under title four of the CARES Act for 13(3) facilities and direct loans. I agree with Secretary Minutian on the success of the 13(3) facilities and the termination language in the CARES Act. The 13(3) facilities funded under the CARES Act were effective and fulfilled their purpose to stabilize markets, facilitate credit flow and provide liquidity. The Wall Street Journal Editorial Board summed it up well. All of these programs were created in an emergency at the onset of the pandemic when the financial markets were in danger of melting down. Adding that, the programs worked even as the pandemic and government shutdowns have waxed and waned, financial markets have healed. Lending spreads have fallen and liquidity is ample in nearly all markets.

Mr. Crapo: (05:10)
The most recent Federal Reserve financial stability report pointed to some of these successes. It said the announcements of the primary market corporate credit facility, secondary market corporate credit facility and municipal liquidity facility in late March and early April led to rapid improvements in corporate and municipal bond markets well ahead of the facility’s actual opening. The report also said since the announcement of the backstop facilities and funding market stabilization measures, more than $1 trillion in new non-financial corporate bonds, and more than $250 billion in municipal debt have been issued, purchased almost entirely by the private sector. With respect to asset-backed securities, the report noted that similar to other backstop facilities while outstanding balances in the term asset backed securities facility have remained modest. Spreads in the asset-backed securities market have narrowed considerably and private market issuance has resumed. With just one month until the December 31 termination date, only $195 billion of the $454 billion needed to be allocated to the 13(3) facilities. Those facilities have not been accessed pensively used today.

Mr. Crapo: (06:36)
Returning the unused $455 billion to treasury, now allows those funds to be made available for other important purposes, such as providing more targeted relief to sectors of the economy that need it most or to reducing the national debt. The CARES Act funding supported these facilities. Supporting these facilities was always intended to be temporary. Additionally, as was mentioned in both Secretary Minutian and Chairman Powell’s letters, the exchange stabilization fund still has non CARES Act funds that are available to the extent permitted by law to capitalize any Federal Reserve lending facilities as needed. In fact, the fed has four facilities that were set up with non CARES Act funds, including the commercial paper facility and the money market liquidity facility. Although COVID-19 continues to spread across the United States and the world, there is hope in the economic recovery that we have seen so far and the reports of promising highly effective vaccine trials.

Mr. Crapo: (07:41)
However, we continue to look to steps that we can take to help Americans and businesses that need it the most. Republicans have tried for months to get another targeted bi-partisan COVID relief package passed and signed into law to provide support for those in need, but Democrats have rejected those efforts. It is time to find agreement where we can on a targeted bipartisan basis, provide relief. Turning for a moment to regulations. The CARES Act included other meaningful pandemic-related programs to provide relief to Americans. I’ve heard from banks and credit unions concerned about breaking through regulatory thresholds that stand to impose a much greater regulatory burden, due to the temporary growth they’ve experienced from customer deposits and participation in pandemic-related programs, like the Paycheck Protection Program and the economic impact payments. On November 20, the fed FDIC and OCC took an important step to mitigating banks’ regulatory burden by giving community banks under $10 billion more flexibility to use their asset size on December 31, 2019 for applying various regulations.

Mr. Crapo: (08:57)
I appreciate the banking agencies taking this action, which will foster a more certain regulatory environment for these banks and incentivize their participation in future pandemic-related programs, should they be needed. Secretary Minutian, as you know, housing finance reform remains a top priority of mine. Last year, I released a housing reform outline, which builds upon many of the same principles from previous efforts. While my preference was for Congress to pass a bipartisan deal, it is long past time to make the hard decisions and address this last unfinished business of the financial crisis. Because of that, I would encourage you and the director of the FHFA to continue to take important steps that move the system in the right direction. The status quo continues to be unacceptable. I want to thank each of you for joining the committee today to discuss the CARES Act and other critically important issues.

Mr. Crapo: (09:55)
Before I turn to Senator Brown for his opening, I also want to take some time to thank both Senators McSally and Jones for their contribution and time to this committee. I’ve enjoyed working with them, spending time with them, and getting to know them, and they will be missed. I wish you both the best. Finally, I want to thank Senator Brown and his staff for the time we’ve worked together on this committee. I’ve appreciated our time together on this committee and our friendship, even if at times we may not have seen eye-to-eye. Senator Brown.

Senator Brown: (10:31)
Thank you, Mr. Chairman. I welcome Senator Minutian and Chairman Powell. Good to have both of you here. I’d like to second what Chairman Crapo just said. I want to thank Doug Jones and Martha McSally for their service on this committee. They both contributed a great deal. Thank you, and thank you since this is Chair Crapo’s last hearing I believe, thank you for your … On this committee, thank you for your leadership, decency and patience. Mike, you can run, but you can’t hide since I also serve with you, obviously on the finance committee. I want to thank your staff director, Greg Richard, for his work and the rest of your staff, Laura in our office, and working together has been really meaningful and productive. We’ve worked together to deliver results, working to strengthen our review of foreign investment, to hold Russia, North Korea accountable, to give American manufacturers the tools they need to compete through a strong EXIM bank and to continue to protect our communities from terrorism attacks. I look forward next year to working with our colleague, Senator Toomey on these and other issues. I also appreciate Chair Crapo and his staff’s work to hold so many of our hearings virtually during this pandemic, protecting the people who work in the Capitol from the virus should not be a partisan issue. On this committee, it largely has not been. I wish I could say the same throughout this building and throughout the Senate. It’s something I wish there were more of with our government. Chair Powell, Secretary Minutian, the two months since last year, the situation around the country has only gotten worse. The virus is spreading unchecked. Job losses are up. Economic growth is declining. The number of new daily COVID-19 cases is up four-fold. Daily deaths have more than doubled. In many parts of the country, the case numbers and hospitalizations are worse than in the spring.

Senator Brown: (12:27)
I spent much of yesterday talking to hospital leaders around my state, all feel besieged, all are doing their work. The healthcare workers, surely as we know are heroes, we simply don’t give them enough support. Just last week, 748,000 people filed for unemployment insurance. Millions more have been out of work since April. In October, 3.4 million homeowners were past due on their mortgages. Many of them will run out of forbearance options by April. As many as 40 million renters will spend the holidays worrying that they will be evicted on January 1st if their government, if we don’t, if their government doesn’t do its job. Behind all those numbers are real families who are doing their best, trying to figure out how to get by. During Thanksgiving week, there were hours long lines at food banks across the country. This is an extraordinary crisis that requires extraordinary action.

Senator Brown: (13:27)
We’ve had a president who has simply given up on leading the country. As far as I can tell. Secretary Minutian, you’re leaving the country worse off than you found it. With that record, it’s pretty obvious why 80 million Americans have voted for new leadership, a decisive margin, and other than using your final months in office to work for the people whom you have sworn to serve, you appear to be trying to sabotage our economy on the way out the door. After the election, you canceled the Federal Reserve lending programs, taking away critical tools to invest in the people, in the communities and the small businesses that make this country work. There is no legitimate justification for it. I met yesterday with 60 restaurant owners, remotely by Zoom, 60 restaurant owners in this state, my state, all of them are struggling, as you know,

Senator Brown: (14:19)
Either you’re purposely trying to stop President-elect Biden and Treasuries Secretary-designee Yellin from getting to work for the people we all serve, or you’re delusional that you think because the stock market is up … I understand taking the lead from the president that when the stock market’s up every way, everything is fine. Either way, it’s malpractice. It was only the end of October when you finally reduced the minimum loan size to the Main Street Program to $100,000, so the program would actually work for small businesses and communities. Now, after all the waiting and adjusting, the Main Street Program finally gets going, you take away another tool to help American businesses and workers. Even the policy had it, the Chamber of Commerce said that shutting down the emergency lending programs, “Closes the door and important liquidity options for businesses at a time when they need the most.”

Senator Brown: (15:13)
It’s always the same story as you know, Mr. Secretary, when the biggest banks and the largest corporations need help, their allies in Washington spring into action, but when the rest of the country needs investment and support, you want to pretend, we just can’t afford it. Decided congressional intent as a flimsy justification for your decision. I can tell you right now, we didn’t intend for struggling businesses to have to wait over three months to have access to the lifeline, providing the CARES Act. We didn’t intend for the loan requirements terms to be amended several times. We certainly didn’t intend for the legislation passed in March to be the only efforts the United States of America would take to fight a once-in-a-generation crisis. Anyone who’s watched the news at all in the last month would know that this is the time for action. Not for retreat.

Senator Brown: (16:03)
We watch hospitals fill up again. Our healthcare system is overwhelmed. Gig workers, self-employed workers lose their unemployment insurance just in five weeks, four weeks. Small businesses, local governments are running out of money. It didn’t have to be this bad. We have the world’s largest greatest economy. We have the resources to rise to meet the challenge, but Secretary Minutian, you appear to believe this is the best we can do. In this election, Americans made it clear they didn’t buy that. They’ve had enough of aiming low, of being told we can’t afford it. We can’t solve problems. We can’t govern. We can’t do this. We know we can do better. We’ve done it before. Remember what Bill Sprague’s in front of this committee said in September? “We didn’t win World War II by worrying about whether or not we could afford it. We were in a global crisis. We marshaled all of our vast resources and talent to rise to meet it. We grew the economy from middle-class out. We paid down the debt with rising wages.”

Senator Brown: (16:58)
If we learned anything from this crisis, it should be that we can do the same thing again. Remember what we did in March unanimously, Mr. Chairman? We came together. We took action and made a real difference in people’s lives. In the face of mass layoffs, we put money in people’s pockets. We helped them pay their bills. We kept spending in this economy, we kept 13 million people out of poverty. Those restaurant owners yesterday in Ohio said their situation is more perilous today than it was back in February and March and April and May. It means that we should do a comparable kind of action. What we did in March helped everyone, including the stock market that you love to brag about. There’s no reason other than a lack of political will, that we can’t do the same.

Senator Brown: (17:41)
Workers who about to lose their job, doesn’t care about the date on the calendar, who’s sitting at the secretary’s desk. They care about results. Secretary Minutian, if you and President Trump won’t deliver them, the least you can do is get out of the way. I know Chair Powell has been clear in previous hearings, we need more stimulus to have any chance of a real broad economic recovery. We need a big stimulus package. One that reaches beyond Wall Street, the sort of emaciated McConnell version reach beyond Wall Street to main streets in Cleveland, and Boise, and Scranton, and all over this country that shows up in people’s paychecks, not just corporate balance sheets. I hope today the American people will get reassurance that the Federal Reserve will be part of that effort. It’s time for all of us to use every tool available to rise to meet this challenge. Thank you, Mr. Chairman,

Mr. Crapo: (18:34)
Thank you, Senator Brown. We’ll now proceed to our witnesses. We will go in the order I introduced you and Secretary Minutia, you may proceed.

Steve Mnuchin : (18:44)
Thank you. Chairman Crapo, ranking member Brown and members of the committee, I’m pleased to join you to discuss the Department of Treasury’s unprecedented response to support the American people throughout the coronavirus pandemic. We continue to work to implement the historic CARES Act with speed, efficiency and transparency, but our job will not be complete until every American gets back to work. When I last testified before you in September, I stated that America was in the midst of the fastest economic recovery from any crisis in US history. I’m proud to say, while there is still more work to be done, that statement is even more true today. In the third quarter, GDP grew by 33% at an annual rate beating all expectations and nearly doubling the previous record set in 1950.

Steve Mnuchin : (19:33)
Americans are getting back to work. The October jobs report showed that the economy has gained back 12 million jobs since April. More than 50% of all lost jobs due to the pandemic. The private service sector, which includes those industries that were impacted by the initial economic shutdown, has regained 58% of the lost jobs. The unemployment rate decreased to 6.9%, a rate not expected to be achieved until the fourth quarter of 2021. The historic bipartisan CARES Act provided the economic relief critical to supporting our robust economy. Additionally, economic shutdowns, however, continue to impair this remarkable progress 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 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.

Steve Mnuchin : (20:48)
Treasury has been working hard to implement the CARES Act in a transparent and efficient manner. We’ve released significant amount of information to the public on our website, treasury.gov and on USAspending.gov. In many instances, we released more information than what is required by the statute. We continue to cooperate with various oversight bodies, including the new Special Inspector General, the Treasury Inspector General, the Treasury Inspector General for Tax Administration, the new Congressional Oversight Commission, the GA. We have provided regular updates to Congress with this marking my eighth appearance before Congress for a CARES Act hearing. We have also devoted significant resources to responding to numerous congressional committees and individual members of Congress on both sides of the aisle. We appreciate your interest on these issues. We remain committed to working with you to accommodate Congress’s legislative requests and to further advance our whole of government approach to defeating COVID-19. I’d like to thank the members of the committee for working with us to provide critical economic relief to the American people, and I am pleased to be here to answer any questions.

Mr. Crapo: (21:59)
Thank you. Chairman Powell.

Jerome Powell: (22:05)
Chairman Crapo, ranking member Brown and other members of the committee, thank you for the opportunity to update you on our ongoing measures to address the hardship wrought by the pandemic. Pardon me. 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’ve 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 real GDP rose at an annual rate of 33% in the third quarter. 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.

Jerome Powell: (23:07)
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. 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. 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. The economic downturn has not fallen equally on all Americans and those least able to bear 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. The economic dislocation has upended many lives and created great uncertainty about the future.

Jerome Powell: (24:14)
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. The rise in new COVID-19 cases, both here and abroad is concerning and could prove challenging in 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. Recent news on the vaccine front is very positive for the medium term. For now, significant challenges and uncertainty remain, including the 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. 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.

Jerome Powell: (25:14)
Our actions taken together have helped unlock almost $2 trillion of funding to support businesses, large and small, non-profits and state and local governments since April. This in turn has helped keep organizations from shuttering and has put employers in 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. Many of these programs have been supported by funding from the CARES Act and I’ve included detailed information about those facilities in my written testimony.

Jerome Powell: (26:03)
The CARES Act assigns sole authority over its funds to the Treasury Secretary subject to the statutes specified limits. The secretary has indicated that these limits do not permit CARES Act funded facilities to make new loans or purchase new assets after December 31 of this year. Accordingly, the Federal Reserve will return the unused portion of funds allocated to the lending programs that are backstopped by the CARES Act in connection with their termination at the end of the year. 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.

Jerome Powell: (26:38)
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.

Mr. Crapo: (26:54)
Thank you, Chairman Powell. My first question, I think will be toward you, Secretary Minutian. I’m actually quite surprised to hear you criticized for following the law in how you have dealt with the return of the CARES Act funds that we were in the room together negotiating these provisions as the CARES Act was created. Interestingly, it seems to me that the real problem here is, well, you’ll recall, you and we were accused of creating a big slush fund. Now, when we have terminated these funds as required by the law so that we can utilize them more effectively in the next act, the criticism is that this fund should not have been terminated. I just find that kind of confusing.

Mr. Crapo: (27:45)
That’s also confusing in the context of the fact that we have tried to get the very kind of relief in follow up legislation that we’ve now been criticized for not doing just a few months ago. Extending things like the Paycheck Protection Program, which would help those restaurant workers that Senator Brown mentioned. Extending and improving it, by the way. Redirecting some of these funds so that we get to those industries and sectors of our economy that have not yet been reached by the 13(3) facilities, and really need to have a different kind of direct support system put into place for them.

Mr. Crapo: (28:21)
Adding rental assistance that we need to have, in my opinion, and which I’ve been working very hard on to try to get. As we tried to get these things, they were rejected by the other side. It’s just confusing to me, or a little bit surprising to see these kinds of attacks leveled today in this hearing. Secretary Minutian, could you just help make a little sense from your point of view as to why the decision to make the return of these funds away from the 13(3) facilities at this time is the best thing and what the intent that you had was in making that termination?

Steve Mnuchin : (29:02)
Thank thank you, Mr. Chairman, and let me first say, I want to thank the Senate for passing the CARES Act, which was 96 to zero in an unprecedented response. As you know, I lived in the LBJ room for over two weeks, so I’m very familiar. I personally negotiated many of these provisions. Matter of fact, I brought the CARES Act with me because I reference it and keep it next to my desk. Mr. Chairman, I would just ask you to recall, you and I were sitting outside Senator Schumer’s office with his staff. It was after 1:00 AM in the morning, on the night that we finally finished this. I asked you to come to sign off on, on behalf of leader and others, the final red lines, we went through this very carefully. I would direct you to section 40-29, which is very clear, which says, “Except as provided in subsection B on December 31, 2020, the authority provided under the subtitle shall terminate.”

Steve Mnuchin : (30:09)
It was very clear. My decision, first of all, I want to thank Chair Powell, because he has been a terrific partner in everything we’ve done. I really want to thank him and the people at the Fed. He and I had been speaking constantly in deference to him, I did extend the four of the facilities that use non CARES money. My decision not to extend these facilities was not an economic decision. I’m surprised to hear Senator Brown use words like sabotage, no legitimate justification, delusional, malpractice, time for action. I’d be more than happy, Senator Brown, to come see in your staff and walk you through the legal analysis, but this is perfectly clear.

Steve Mnuchin : (30:58)
The Senate provided unprecedented authority to the Secretary of the Treasury in giving me $500 billion. The statute was very clear. Matter of fact, I find it implausible that any member of this committee believe that in voting for the CARES Act, you are authorizing me to invest $500 billion to make loans in perpetuity. If you don’t read, this is there is an expiration, then you must read this, that there was a loophole in the law that I could invest the $500 billion forever had I permitted it upfront. I don’t believe that was the intent. I would also just conclude, I echo what Senator Brown said about restaurants. The President and I believe that restaurants have been unfairly targeted and I’d urge Congress to support another $300 billion for PPP. This would have a real impact. These restaurants need grants. They don’t need loans. Thank you.

Mr. Crapo: (31:56)
Thank you, and as you can tell by the bell, Chairman Powell, I don’t have time to ask you my questions, but I will have you respond to them …

Mr. Crapo: (32:03)
I don’t have time to ask you my questions, but I will have you respond to them either later in the hearing or else, I’ll send them to you in writing. Senator Brown.

Senator Brown: (32:10)
Thank you, Mr. Chairman. Secretary Mnuchin, I see by your testimony today, you really don’t understand what’s happening in families across our country, almost celebrating your marvelous work of you and the president that the country so decisively rejected. One of my favorite Abraham Lincoln quotes is… He used to talk about going out and getting his public opinion bath. It’s pretty clear. I appreciate what you said about restaurants, but it’s pretty clear that you have left behind. The administration has left behind. The president is only concerned about seeing something that’s not there: fraud and an election as so many Republican judges and a few courageous Republican office holders have spoken out against about.

Senator Brown: (32:58)
On our last hearing, I asked you and Secretary Powell to read a piece by ProPublica about a small business owner in Cleveland whose business couldn’t get up while the giant corporation occupying the same building has gotten plenty of taxpayer support while laying off its workers. I’m hoping you would’ve read it and made a more serious effort to understand what’s happening in places like Cleveland, and Mansfield, and Shelby, and Springfield, Ohio. Millions of American workers are still struggling. Millions more are out of work. All the numbers are going in the wrong direction. You wouldn’t determine that from your comments today. It’s clear you were never serious about fighting. I sat in that room, too, in the LBJ room. It’s clear you were never serious about fighting for the real people who make this country work. Instead of making a deal that would have done more to help them, you push to make life just a little bit easier for the nation’s biggest banks.

Senator Brown: (33:55)
Now you’ve killed the CARES Act loans that were supposed to be a tool to help smaller businesses and their workers and buried the money. It looks like you, and the president, and others in the current administration are trying to spend your final days in office, preemptively. I’ll use that word again, sabotaging the next administration’s efforts to clean up your mess, but you still work for the American people even though I don’t think you’re acting like it, Secretary Mnuchin. I wish you and your administration would stop crowing about the stock market and stop passing the buck instead of doing the hard work. President-elect Biden and your success will have to fix the mess you’re leaving behind.

Senator Brown: (34:33)
Now my question’s for Chairman Powell. Chairman Powell, you’ll be around at the beginning of the next administration. You’ll be part of the cleanup crew. You’ve made clear, and I appreciate the conversations we’ve had where you’ve made clear that Congress needs to do more fiscal support. You’ve also committed recently that even if we take bold action, we’re not going back to the same economy and that it will be more difficult for workers going forward. My question is this. We’ve seen how the Fed and Treasury action supported the stock market and benefited the wealthiest people in this country. What can the Fed do, Chairman Powell, to make sure that workers don’t get left behind again?

Jerome Powell: (35:14)
Thank you, Senator Brown. I would say this. We have provided and will continue to provide very strong support for the economy and for workers in particular through the use of our tools. We remain committed to using all of our tools to their fullest extent for as long as it’s necessary to get us through this difficult period. We’ve thought about this collective effort, this government-wide effort, as one that involves getting the people and the businesses that constitute the economy across the chasm created by the pandemic, getting them safely to the other side, to the post-pandemic economy.

Jerome Powell: (35:57)
I think, frankly, that the fiscal policy, particularly the CARES Act, deserves the lion’s share of the credit in creating that bridge so far. It may be that we need more on that front. From the standpoint of the Fed, you can be sure that we’ll continue to use our tools. By the way, those tools would include Section 13(3) facilities, which remain available to us under the law. As the secretary pointed out in his letter, they can be backed up by Exchange Stabilization Funds should the legal requirements for such funds be met.

Senator Brown: (36:30)
Chair Powell, does the Fed have an obligation to address the problems of inequality that he argued Fed actions have amplified, especially in addressing inequality in communities of color?

Jerome Powell: (36:45)
I think inequality is a very important and ever more broadly understood problem in our economy. These persistent disparities along racial, and gender, and other lines really hold our economy back. I think that the Fed has a contribution to make there. It is not the principle contribution. I think that, really, fiscal policy, and Congress has, and the private sector, too, have very important roles there. What we can do is a lot of what we’re doing, which is to focus on maximum employment, which is your order to us. That’s the goal you’ve set forth for us, and to really take that idea seriously. I think you’ve seen with the most recent modifications to our operating framework that we are taking it seriously and focusing on these issues more as holding the whole economy back.

Senator Brown: (37:35)
Thank you, Mr. Chairman.

Mr. Crapo: (37:35)
Thank you. Before we go to Senator Toomey, I just have to say, Secretary Mnuchin, you’ve been accused of killing the CARES Act loans for small businesses. I think that’s mostly the PPP program, which we tried to reenergize and extend on the floor of the Senate, only to have it killed by the other side when we were trying to do that. We’ll continue to have these debates back and forth. Turn next to Senator Toomey.

Senator Toomey: (38:02)
Thank you very much, Mr. Chairman. Mr. Chairman, as this might be the last Banking Committee hearing of your chairmanship, I do want to thank you for your leadership, and the really hard work, and outstanding work that you’ve done.

Mr. Crapo: (38:13)
Thank you.

Senator Toomey: (38:14)
It’s been a pleasure working with you. What I want to do is, first of all, I want to applaud Secretary Mnuchin for closing the 13(3) facilities by year end, exactly as the law requires and as Congress clearly intended. I want to thank Chairman Powell for returning the unused CARES funds back to the Treasury. Fact is, Congress entrusted both of you with some extremely powerful, unprecedented, emergency, and yet temporary tools. I commend you for working together to deploy those tools for their intended purposes and then putting them away now that that specific purpose has been achieved.

Senator Toomey: (38:58)
I think it’s important to review what was happening and why we designed the CARES Act as we did. The fact is, in March, we had unprecedented turmoil in our capital markets threatening the ability of businesses, municipalities, states to access capital and credit. Credit markets were on the verge of completely freezing up. There was a mass investor flight to cash. In many cases, there were no buyers in sight. Private credit wasn’t flowing to any institutions that needed it. This freezing of our financial system was a very serious threat, that it could precipitate a full-blown depression that would last for who knows how long.

Senator Toomey: (39:39)
Kent Hiteshew, the Deputy Associate Director for Financial Stability of the Fed, noted in a Congressional Oversight testimony. I want to quote because he summarizes this very well. He said, “The conditions that prevailed in March were unprecedented, far worse than during the onset of the financial crisis in late 2008, or even in the days after 9/11, when the municipal market was briefly closed. Interest rates soared. Mutual fund investors pulled over $41 billion of assets out of the market in less than three weeks, and market functioning deteriorated to the point that buyers and sellers had difficulty determining prices. Ultimately, this meant that state and local governments were effectively unable to borrow with most new issues canceled for lack of investor demand,” end quote.

Senator Toomey: (40:26)
Mr. Chairman, that was the problem that Congress was seeking to address to solve by providing the CARES Act funding for temporary emergency facilities. Congress’s intent was clear. The facilities were designed to create a liquidity backstop until the crisis passed and then cease operations no later than the end of 2020 in any case. Of last week, I would point out that every Republican on this committee signed a letter sent to Secretary Mnuchin and Chairman Powell affirming that this is in fact our interpretation of the law and the intent of Congress. I also think it’s important to underscore how remarkably successful these facilities were in achieving that intended purpose of stabilizing credit markets and restoring the flow of private credit.

Senator Toomey: (41:16)
In fact, they worked better than, I think, most of us thought even possible. Markets didn’t just improve. They didn’t just restore liquidity, but we reached record volumes of debt issuance. We did so at low spreads, low yields, affordable interest rates. Regional banks extended credit to their customers. According to business surveys, unmet demand for credit among credit worthy borrowers is almost non-existent. Let me go through some of the arguments that we’ve heard for why we should not have closed down these facilities because I think they’re all mistaken. One was that the viability of the credit markets depends on these backstop facilities. Well, that’s clearly been disproven by the fact that the announcement of their end brought absolutely no disruption to any financial markets that I can tell at all.

Senator Toomey: (42:06)
The second suggestion by some is that, well, we need to keep these facilities around because some bad thing might happen someday in the future. Well, it’s always been the case that you could imagine some bad thing happening in the future. If some terrible thing were to happen to threaten the viability of our financial markets, then the Treasury and the Fed should come back to Congress and ask for appropriate facilities at that time. Others point out that there are whole industries that are actually in big, big trouble. That is a true fact, especially travel and hospitality, entertainment, where consumer demand has basically disappeared. It’s up to Congress to decide what to do about that. It is not up to the Fed to lend money to what are probably insolvent companies.

Senator Toomey: (42:53)
Let’s be clear. These facilities were designed for a very specific purpose. They achieved that purpose more successfully than we could have reasonably hoped, and we should not use them to morph into some other purpose, like as a supplement and, or compliment to fiscal policy. I want to thank the chairman and the Treasury secretary for, really, the outstanding work they did in helping to ensure the viability of our financial markets and thereby avoid a prolonged depression.

Mr. Crapo: (43:22)
Thank you, Senator Toomey. Senator Reed.

Senator Reed: (43:26)
Thank you very much, Mr. Chairman. Let me thank Secretary Mnuchin and Chairman Powell for being here today. Chairman Powell, in your November 5th press conference, you said, “The fiscal policy actions that have been taken thus far have made a critical difference to families, businesses, and communities across the country. Even so, the current economic downturn is the most severe in our lifetime. It will take a while to get to the levels of economic activity and employment that prevailed at the beginning of this year. It may take continued support from both monetary and fiscal policy to achieve that.” Chairman Powell, how long will it take us to get back to a pre-COVID level of economic activity and employment without any further physical relief this year from Congress?

Jerome Powell: (44:16)
It’d be very difficult to say how that would play out in terms of the time. I will say though that, first of all, the economy has actually performed better than expected. It’s been more resilient to spikes in cases than expected. We’ve had a recovery that’s been faster than most forecasters have expected so far. Nonetheless, we do have a long way to go. We’ve got on the order of 10 million people who lost their jobs because of the pandemic. For reference, that’s more than lost their jobs during the global financial crisis in the United States. It’s a lot of people, so there’s a long way to go.

Jerome Powell: (44:56)
I think we can both acknowledge the progress and point out just how far we have left to go. As I said earlier, the lion’s share of the credit really should go to fiscal policy. Of course, the timing, and the scope, and the size, and the components of that are entirely up to you. I just point out that we’ll use our tools until the danger is well and truly past. That may require help from other parts of government as well, including Congress.

Senator Reed: (45:30)
Well, thank you, Chairman Powell. Also in your November 5th press conference, you pointed out to the collective desire to keeping this episode short as it can be and avoiding unnecessary business bankruptcies, unnecessary household bankruptcy, unnecessary long-term’s phase of unemployment. There’s a real threat of those things, and we’re trying to do everything we can to minimize them.

Senator Reed: (45:55)
We’re beginning to see that right now. Several of my colleagues have alluded to the fact that as these eviction and foreclosure moratoriums expire, there could be thousands and thousands of people thrown out of their homes, which will affect, I think, the financial markets. In that case, it might be good to have a facility backed by the CARES Act. Some of these issues aren’t hypothetical. They’re not sort of a crisis in the future that we don’t see. They’re very real. In fact, they’re coming unless we take appropriate action. That would be, I would think, fiscal action. Do you think that these threats are just sort of substantial, or they’re descending upon us?

Jerome Powell: (46:47)
As I mentioned in my testimony, Senator, I think there’s a real distinction between the near-term and the medium-term. In the near-term, we see the spread of the disease. We met with a group of community bankers that we regularly meet with a week or so ago. What we’re hearing is that there are a lot of small businesses that are at risk of going out of business during this winter, which could be a tough few months. At the same time though, we’re getting this news about the vaccines which are more effective, and they’ve come sooner. There really is, in the medium-term, upside risk here.

Jerome Powell: (47:23)
The other thing I’ll say is that the fact that the economy was in very good shape at the beginning of the pandemic… That may be one of the reasons why it has recovered faster than we thought and kind of continued to defy expectations of problems. I do think those are real risks though. I think the risk of small businesses going out of business, the risk of people at the lower end of the income spectrum where the bottom quartile… I think the unemployment rate is still 20%. These are not people with a lot of savings, a lot of resources, or a lot of opportunities right now. I think that there are parts of the economy that really will need help or might need help to get that last span of the bridge in place to get to the other side of the pandemic.

Senator Reed: (48:10)
I think one of the points you’re making is that the impact of this crisis economically is not shared equally by all Americans. There are groups that are impoverished now and are on the edge or even worse disasters unless we act. If we don’t act, then we will have two separate but unequal groups of Americans. That’s not a recipe for a country that can move forward. Thank you very much.

Mr. Crapo: (48:39)
Thank you, Senator Reed. Before we move to Senator Scott, I would just indicate that we are moving a few minutes into a series of votes on the Senate floor. I’m going to leave right now to vote early on the first vote and then return as quickly as I can. I’ve asked Senator Tillis, who’s present here in the hearing room, to chair for me while I am gone. Senator Scott.

Senator Scott: (49:00)
Thank you, Mr. Chairman. Before you leave, I’d like to say to you, thank you for your leadership on our committee. You have done a fantastic job. You’ve listened to both sides. You’ve led in a bipartisan fashion of a nation desperate to see their Congress, their Senate working well and working together. Frankly, disagreeing is a part of what we signed up for, but looking for opportunities to bring the committee together and bring this nation together. I think you have been a shining example of that, Mike. I want to say thank you for your leadership.

Senator Scott: (49:34)
To Chairman Powell as well as Secretary Mnuchin, you both have done a pretty good job under incredibly negative circumstances. The situation continues to change. Certainly, thank you, Chair Powell, for your leadership for our nation under these challenging times. Secretary Mnuchin, you have stepped up to the plate and have provided programs and resources in a way that we’ve never seen in the history of the country, from my perspective. I thank you for your strong leadership.

Senator Scott: (50:05)
With that said, one of the things I’ve noticed as we’ve worked our way through this pandemic, small businesses have been struggling. Frankly, as a former small business owner myself, I understand the pain and the misery of being in small business. I also remember the thrill of victory more than I do the agony of defeat. I remember the blessing of employing members from my neighborhoods where I grew up, and having folks join the team as customers, and seeing the revenues increase, and the opportunities for my employees increase. One of the things that is often missing when we’re talking to small business owners is the important ingredient that for most of us, our small business employees are an extension of our family.

Senator Scott: (50:53)
When you start talking about the small business environment and small businesses being decimated by this pandemic, you’re actually talking about the fragile nature of small business and the absolute implosion of the foundation for so many employees around the country. I think we sometimes miss the fact that when you’re talking about small business, you’re actually talking about employees who work at the small businesses more than you are the small business owner.

Senator Scott: (51:22)
To that end, Secretary Mnuchin, you have watched as I have, and Chair Powell, you have as well, that 20-plus percent of all small businesses fail. That number is even higher for Hispanic business owners. They’re in the 30s. That is devastating to the community and to the employees of those small businesses who now no longer have a job to go to. Frankly, in the African American community, that small business number is in the 40s.

Senator Scott: (51:51)
My question, Secretary Mnuchin, is minority owned businesses have been the hardest hit in this COVID-19 economic slowdown. Do you agree with the assessment that direct assistance, tailored assistance for those in similar situated businesses would have a wide-rippling benefit to the economy?

Steve Mnuchin : (52:16)
I do, Senator, absolutely. I would say, despite the success of Project Warp Speed and the fact that we will have vaccines distributed in large mass, the problem is now, as you said, these small businesses can’t wait two or three months. I would urge Congress again to reallocate unused money and more money to PPP, do a set-aside as we did last time, particularly for the underserved areas, I know that you, and Senator Warner, and others have worked on a possibility of $10 billion to be invested into CDFIs, which could lend a hundred billion dollars into underserved communities. I think there’s a lot that can be done and should be done very quickly.

Senator Scott: (53:03)
Thank you, Secretary Mnuchin. I would say in addition to what we’ve already done and what we can do… If I’m correct, Secretary Mnuchin, what you’re referring to is that the Paycheck Protection Program still has unused resources sitting there, over a hundred billion dollars that could be available for small businesses right now if Congress would get our act together, and make those funds available to the market. That could have a significant positive impact on the employees of these small businesses who today simply cannot find a way forward.

Senator Scott: (53:36)
With my last few seconds, I think another opportunity that we have before us is to look at the Paycheck Protection Program. Forgiveness, making it simple… It may take congressional action for us to simplify the process. Do you see any ability from the administration’s perspective to streamline and to simplify the process for banks and therefore, making it easier for small businesses to find a little calm and a little comfort in knowing that their small business loan that was to be a grant is actually going to become a grant?

Steve Mnuchin : (54:14)
I’ll be quite brief in responding. I would say we’ve created three separate forms. We’ve done everything we can on administrative action, including a separate form for 50,000 and less. I would urge Congress to make changes to the legislation to allow for simpler. Again, I would urge Congress to reallocate the $140 billion that’s sitting there that can have an enormous impact for small businesses and the PPP immediately.

Senator Scott: (54:41)
Thank you, secretary. That can be done today. We can do that today if we decide to do so. I’m supportive of that concept. Thank you so much.

Senator Tillis: (54:54)
Senator Menendez.

Senator Menendez: (54:57)
Thank you very much. Secretary Mnuchin, according to the National Bureau of Economic Research, at least 3.3 million small businesses have closed, 441,000 of which are black-owned small businesses and 657,000, which are Latino-owned businesses. 1.1 million state and local employees have lost their jobs according to the Bureau of Labor statistics. You don’t dispute those figures. Is that fair to say?

Steve Mnuchin : (55:30)
I don’t have them in front of me, but I have no reason to dispute them. I assume you’re quoting them accurately.

Senator Menendez: (55:36)
How many more small businesses do you project will permanently shutter after you end the CARES Act lending facilities? How many more state and local employees will be laid off as a result of your decision?

Steve Mnuchin : (55:48)
Again, let me be clear, Mr. Senator. My decision is a legal decision, not an economic decision. Congress can reauthorize this money if you want to extend it. I think those small businesses need grants. They don’t need loans. They can’t qualify for Main Street. That’s why Main Street did only $10 billion, and they need PPP money.

Senator Menendez: (56:07)
Well, let me just say that you cited earlier in response to, I believe, the chairman’s questions, Section 4029 of the CARES Act as the reason that you had to close down these facilities. What is wrong with that recitation is that this provision applies to Treasury’s authority to invest in new Fed facilities and not the ability of those facilities to make loans to companies in the real economy. While I agree with you on grants in the interim, we need to use every tool we have. No one will be better off after you end the CARES Act facilities. As we enter a third wave of COVID, I think any of these facilities is not mandated by law. It’s important as an economic backstop. It will have real and harmful consequences on our recovery, on our businesses, on American workers.

Senator Menendez: (57:16)
During your previous appearances before the committee, not a single member, we went through the records, even suggested that you should close the facilities. In fact, most of us on both sides of the aisle, Chairman Crapo, Senator Brown, Senator Tillis, myself, and others, have been urging you to make changes to the facilities so that they could provide more relief to businesses and state and local governance. As a matter of fact, in October, in response to questions from the Congressional Oversight Commission, you didn’t say that the CARES Act legally required you to end the facilities. You just said you didn’t think that they were needed. Mr. Chairman, I ask the Treasury Department’s responses to the Congressional Oversight Commission, dated October 16th, be entered into the records.

Senator Tillis: (58:07)
Without objection.

Senator Menendez: (58:10)
There is a choice here. Unfortunately, the choice you’re making is really consequential to businesses, to people, to our recovery. Mr. Secretary, last Tuesday, a Treasury Department spokesperson said that you plan to put the $429 billion you’re withdrawing from the Fed’s lending facilities into the Treasury’s general fund. Is that a correct statement?

Steve Mnuchin : (58:35)
Again, let me just first comment on the first part. I don’t agree with your reading. I believe that the section applied to direct and indirect. Had you thought it applied otherwise, there would be a loophole, and there would be no point of having the date. I was never asked about the December 31st date. I always assumed that if Congress wanted to extend that, they can.

Steve Mnuchin : (58:55)
Now, as regards to the proceeds, let me direct you, section 4003, which talks about the deposits of proceeds. Again, it is my intent to completely follow the law. The law requires the amounts transferred to go to the financing account and then to repay any money went to treasury. Again, we will completely follow the law. This is not discretionary. Again, I urge Congress-

Senator Menendez: (59:21)
Let me-

Steve Mnuchin : (59:21)
If you want to extend this, bring back legislation which would authorize me to do it.

Senator Menendez: (59:26)
Well, you can keep putting the onus on Congress when in fact you have the abilities. Let me read to you Section 4027 of the CARES Act that provides Treasury with the appropriation of these funds. Quote, “On January 1st, 2026, any funds described in paragraph one that are remaining shall then be transferred to the general fund of the Treasury.” It doesn’t say, by or no later than January 1st, 2026. These funds being moved ultimately undermines. I hope, Chairman Powell, that you will commit to not return any funds to the Treasury until we are assured that Congress and the public, that those funds will remain in the Exchange Stabilization Fund as required by the CARES Act.

Steve Mnuchin : (01:00:15)
Just for the record, they don’t go back into the Exchange Stabilization Fund as I cited in the Act.

Senator Tillis: (01:00:20)
Senator Cotton.

Senator Cotton: (01:00:26)
First off, I want to join our colleagues in thanking Chairman Crapo for leading this committee so ably. I do want to point out though, to paraphrase Mark Twain, reports of his demise may be greatly exaggerated. He’s not going anywhere. He’s still going to be a senator. He’s simply going to be chairing the Finance Committee next year. We’ve all appreciated his leadership.

Senator Cotton: (01:00:44)
The economy is recovering more strongly than I think anyone predicted in March. I think that’s in part because of the response of this Congress and the CARES Act at first, and then in the way the Trump administration in particular, the Department of the Treasury, and the Federal Reserve has directed it. I want to commend both of you gentlemen on your stewardship over these last nine months.

Senator Cotton: (01:01:04)
Now, the economy could continue to recover even more strongly in effect, and especially for those people who are still struggling the most: the waitresses, and the busboys, the bartenders, the karate instructors, the music teachers, people who work in fields and industries that have lots of in-person, close, continual contact. There’s two things we can do to help solve that problem immediately.

Senator Cotton: (01:01:26)
One is to tell these Democratic governors and mayors to stop with their irrational lockdowns. Tell the governor of California, Gavin Newsom, not to lock down small mom-and-pop restaurants while he goes off with all of his lobbyist buddies to eat at French Laundry, one of the world’s most expensive and exclusive restaurants paying $300 for caviar and truffles.

Senator Cotton: (01:01:45)
Second, for Congress to pass a new coronavirus relief bill. We all have bipartisan agreement to support those people who are still in need. Yet Chuck Schumer and Nancy Pelosi will not relent on their three and a half trillion dollar wishlist. They want to hold up funding for small businesses, and for restaurants, and for industries like airlines, money to help schools reopen in some states or stay open, as the case is in Arkansas, so they can get things like welfare checks for illegal immigrants, or they can override state voting laws, or let violent felons out of prison, things that have nothing to do with the coronavirus. Those are the two most important things we could do to help those who are still struggling from this virus. Get back to work until vaccines are approved and widely distributed.

Senator Cotton: (01:02:38)
What will not help? What was not designed to help were the 13(3) programs that have been so much to the point of discussion in this conversation today. The 13(3) facilities have achieved their purpose. The reason we wrote it and the reason members of this committee helped draft that language in March was to stabilize credit markets, to help ensure the flow of credit to fundamentally credit-worthy businesses, and states, and cities. It wasn’t to subsidize unsound or failing businesses that were not going to be able to succeed before China unleashed this plague on the world. It wasn’t to bail out fiscally irresponsible, mostly democratically-led states and cities who had mismanaged their finances for years or even decades. It was to stabilize credit markets. I have to say it appears at the time, there was some bipartisan concern that these funds could be misused. I will just quote from a few people and what they said at the time about our Treasury Secretary. Joe Biden referred to these facilities as a $500 billion slush fund and a blank check. Ironically, Senator Brown, given the fact that he accused Secretary Mnuchin today of sabotaging the recovery or intending to drive the economy off in a ditch, said at the time…

Senator Cotton: (01:04:03)
Intending to drive the economy off in a ditch, said at the time, the money, $425 billion, the Secretary of the Treasury can decide is a slush fund or where to direct that money. Senator Warren said that we’re at $450 billion slush fund that would go to the Secretary of the Treasury to help whoever he wants. And ironically, given what Senator Menendez just said to Secretary Mnuchin, this bill has a $425 billion slush fund with which basically, the Secretary of The Treasury can say, “I like you, you get this. I don’t like you, you get nothing.” I guess the shoe might be on the other foot now. And it seems like the Democrats, with the hope of having a new Secretary of the Treasury and a new administration, would like a $450 billion slush fund to reward politically favored organizations, like I don’t know, abortion providers, or marijuana dispensaries, or maybe to bail out their partisan allies in states and cities that have mismanaged their finances for years.

Senator Cotton: (01:05:05)
But that’s not what the law says. And that’s the point that Secretary Mnuchin has been making all along if I’m not mistaken. This is not an economic decision. This is a legal decision. This law was designed from the beginning to stabilize credit markets at the height of the uncertainty of this pandemic in the spring, and that’s exactly what it did. Secretary Mnuchin does not have legal authority to keep these programs in place. He took the right action. And if our democratic colleagues want this money to be available, then they need to work with us to pass new legislation. Thank you.

Speaker 2: (01:05:45)
Senator Tester.

Senator Tester: (01:05:48)
Thank you, Acting Chairman Tillis. And I also want to thank Jones and McSally for the opportunity to serve with them on this committee and in the United States Senate. And I also want to thank Chairman Crapo for his even handedness, and it his ability to work with both sides of the aisle and quite frankly, unlike the last Senator, actually bring people together and not divide them. So I appreciate Senator Crapo in that regard.

Senator Tester: (01:06:17)
Look, I have the feeling we’re at a fulcrum here where the economy is still is in a very, very difficult conditions, and not to what Senator Toomey didn’t say wasn’t correct six, eight months ago, it was correct, but we’re not out of the woods yet. And Chairman Powell, I have the feeling that if we just fold up our hands and walk away that this economy, not only might, it will slip backwards over the next few months. That might be by design by itself, [inaudible 01:06:57] in the United States Senate or in the administration, but it certainly isn’t my goal. And so I would like Chairman Powell to highlight the importance of additional fiscal support for the success of the economy moving forward.

Senator Tester: (01:07:14)
You talked about, Chairman Powell, you talked about the folks out there who continue to hurt, and I will tell you that I think it’s bigger than just a PPP program extension. I think our healthcare system is, quite frankly, stressed to the max. In Montana, I’m not sure there’s any beds available for this pandemic right now, they’re all full. And I can tell you, I think that’s the way it is in many parts of the state. So we want to talk about not locking down. Let’s go bury our heads in the sand and assume that this pandemic hasn’t even happened and it has no importance, I got news for you. My wife’s been in treatment for cancer and the cancer she will survive. If she gets this COVID, I’m not sure she will. So I think we need to wake up in the United States Senate when it comes to who’s locking down what, and the reasons for it.

Senator Tester: (01:08:08)
But that aside, without any other comments, I would just say, Chairman Powell, can you talk about the importance of addressing our healthcare business, our hospitality businesses, our working families that as you had said, some are in really tough shape, local governments? And by the way, mismanaged local governments, give me a break. The United States Senate, under some of the best economic times ever, borrowed a trillion dollars a year. And you accuse local government of mismanagement? Holy mackerel. It’s hard for me not to cuss, and educational units. So Chairman Powell, could you talk a little bit about what’s really needed out there where this economy may slip back? Do you see it the same way I do?

Jerome Powell: (01:09:00)
Thank you, Senator. I think I would put it a little bit in context, we’ve done a lot and we really appreciated the working relationship we’ve had with Treasury on the facilities and thank them for the productive work we’ve been able to do together. Our thinking is that we would have left facilities in place to be backstops. We don’t question the Secretary’s decision about the Cares Act money because that’s entirely his decision to make, but I think Central Banks generally would’ve done that. In terms of what more may be needed, we are hearing a lot from our discussions with people throughout the Federal Reserve system and across the country about small businesses that may struggle during this period of just the next few months, during the winter with the spread of the virus high, and it is those people who are in a public facing jobs in vulnerable industries. And they may see what may be the light at the end of the tunnel in the middle of next year, as the vaccines come out and are widely distributed, but they may need more help to get to that place.

Jerome Powell: (01:10:16)
And so that’s the way we’re looking at it. We will continue to use our tools to their fullest extent, and that will include 13(3) facilities if appropriate, if appropriate and if they meet the legal requirements. But it may also include help, to direct help to businesses that really don’t need to borrow anymore. As the Secretary was noting, some of these businesses, what they need is fiscal policy, is a grant to get them through this last bit of the pandemic rather than borrowing more through a Federal Reserve facility.

Senator Tester: (01:10:51)
I think we all agree with that. In the end, if nothing is done and I don’t think anybody on this committee, at least I hope not everybody on this committee wants nothing to be done, but by the same token, I don’t think we go into a job and do it half-assed either. I think there are plenty of folks out there who are hurting big time, and I’m not just talking workers, there’s workers that obviously are looking for a job for so long that they’re actually falling off the unemployment roll. But small businesses, whether we want to pound our chest or not, but local governments that have been put in a situation because of reduced income, because of this pandemic, are in a tough situation. Educational units, because there are many schools that are doing dual distance learning and in-person, need additional dollars. Do you see us sliding backwards if we do nothing? Or do you see the economy being static for an extended period of time?

Jerome Powell: (01:11:57)
I think there’s a risk. I would characterize this as risks. The economy has continued to perform better than we expected. It’s been more resilient to further outbreaks than we’ve expected. At the same time, this is a very large outbreak and what we’re hearing suggests that there is a real risk of small businesses and people who are on unemployment for extended periods, and I think those are real risks that should be taken into account.

Senator Tester: (01:12:25)
I want to thank both Chairman Powell and Secretary Mnuchin for being here today. I appreciate your work.

Speaker 3: (01:12:32)
Thank you. Senator Rounds.

Senator Rounds: (01:12:36)
Thank you, Mr. Chairman. First of all, Mr. Chairman, I’d like to say thank you to you for your leadership and on the committee. And I do appreciate the fact that we’ve been able to do some things on a bipartisan basis, and that has a lot to do with your hard work.

Speaker 3: (01:12:53)
Thank you.

Senator Rounds: (01:12:53)
I’d also like to thank both of our guests here today. Chairman Powell and Secretary Mnuchin, I think you have done very, very good work under some very trying circumstances, But I’d like to begin my questioning today with Secretary Mnuchin. Housing has been one of the bright spots of our economy during the pandemic, and I want to make sure that we do everything we can to continue providing the necessary support. One of the potential threats I see is ending the conservatorship of the GSEs. While I agree in a perfect world that conservatorship should have been ended some time ago, I am concerned that if recent conversations come to fruition and Fannie and Freddie are prematurely released from the FHFAs control, the strength we’ve seen in the housing sector could be called into question. For Secretary Mnuchin, in light of the pandemic, what are your recommendations with respect to the timeline for when conservatorship can be safely unwound?

Steve Mnuchin : (01:13:57)
Well, let me just say, I don’t think that they should be let out from conservatorship without appropriate capital. There’s obviously different opportunities to accumulate capital and raise capital. This is one of the areas that I will continue to try to work with this committee and others. I think there should be housing reform. I think that the appropriate scenario is for these to have real capital and ultimately then be released.

Speaker 4: (01:14:28)
Thank you, sir. Chairman Powell, follow up. The Federal Reserve is the largest investor in mortgage securities. Would you share your thoughts about the impact to the housing market if an end to conservatorship were to occur prior to the time in which the pandemic impact has been eased?

Jerome Powell: (01:14:49)
I would just echo the Secretary’s point that I think I would certainly like to see the GSEs returned to private hands over time, and the housing finance sector and system standing on its own two feet with a lot of private capital behind it. So I think it’s something that time needs to be taken on. And I would applaud the new capital standards that have been put in place, but that capital is still has to be raised. And I do think it’s something to do carefully, and I know that’s consistent with what the Secretary is thinking.

Speaker 4: (01:15:30)
Thank you. I appreciate it also, the flexibility that our banking regulators have given financial institutions who have wanted to work with customers experience with the COVID related hardships. Unfortunately not many of us thought that the pandemic would last as long as it has, and several sectors of the economy, like the airline industry, travel, hospitality, all still face challenges. What do we need to be doing to support the financial institutions who want to continue working with customers in these hard hit industries? And I know we talk about targeted and specific assistance, but financial institutions have really been right in the middle of this whole thing. And the expectation has been that we have allowed them flexibility. I think it’d be very helpful to hear each of you, your thoughts in this particular issue. And in this case, I’d ask Chairman Powell to go first.

Jerome Powell: (01:16:29)
I think the most important thing is that as the economy recovers, companies are recovering, and the more they recover and the faster they recover, the smaller the losses will be. I also think we will continue to encourage banks to work with their borrowers and continue to keep in place the very targeted relief that we provided, which doesn’t undermine safety and soundness in any way, but that allows banks the room to do what they want to do, which is to serve their customers. So we wouldn’t want supervision and regulation to undermine the process of working with customers where it doesn’t implicate safety and soundness.

Speaker 4: (01:17:14)
Secretary Mnuchin.

Steve Mnuchin : (01:17:15)
I would just echo the Chair’s comments, and I think they’ve done a very good job across regulators in providing the right flexibility.

Speaker 4: (01:17:23)
Thank you. And Mr. Chairman, I will yield back my final 15 seconds.

Speaker 2: (01:17:28)
Thank you. Deeply appreciated. Senator Warner.

Senator Warner: (01:17:35)
Let me also echo what all my colleagues have said. Thank you for your leadership on this committee. And let me thank you in particular, Secretary Mnuchin, so many of us on both sides of the aisle for your help on putting together a plan to help black and Latino businesses that have been pretty hard hit by COVID.

Speaker 2: (01:17:53)
Thank you.

Senator Warner: (01:17:55)
You may know that this morning a bipartisan group of senators announced, which I was proud to be part of, an emergency relief framework that would help us get through, what I fear will be the worst days of the pandemic coming ahead. I don’t think the stakes should be higher. We all know that UI will start running off the books the day after Christmas, we know we’ve seen the food lines across our country. We know that small businesses are on their last legs. We know that many state frontline workers will soon have to be laid off. And literally, we could have millions of people put out of their homes as early as middle of January. I think that’s simply unacceptable. And my hope is that members of the administration, members of the Congress, will sit down and figure out whether this framework and alternative can be that bridge, and we get it done before the holidays.

Senator Warner: (01:18:45)
It is this bridge, and it’s not a long-term plan that I know that Secretary Mnuchin was negotiating with Speaker Pelosi. It’s not maybe even what President Biden will want to do. But this package, which weighs in at $908 billion, does take care of UI, it takes care of health, it takes care of student loan assistance, it takes care of small business with a focus on those CDFIs, it takes care of broadband, it takes care of food insecurity. And at the end, I’m going to make sure I ask both of you whether, without knowing the details, you think generally this is a direction we ought to head?

Senator Warner: (01:19:22)
Let me also take one more minute, because this is something that Senator Crapo, Senator Scott, [inaudible 00:15: 30], Senator Tillis, a number of us on our side, have come together on, and that is in this package, the $12 billion provision for new capital investments for minority-owned banks and CDFIs, community developed financial institutions. We know the black and Latino businesses have been particularly hard hit by COVID. We’ve lost 440,000, black owned businesses have shut their doors. That is a generation of wealth in relation that is closed down. We know that 40% of Latino owned businesses have closed their doors. I heard, for example, from Dr. Anne Peoples, a constituent of mine, who five years ago opened up People’s Pharmacy and Diabetic Center in a low-income neighborhood in Norfolk. COVID-19 hit her business really hard. And she said, “I treat folks the way I want you to treat me. And when you ask them to walk through the door, I want to receive compassionate care that you deserve.” That’s exactly what they do. Her businesses on the brink of shutting down.

Senator Warner: (01:20:28)
Mr. Chairman, I would ask that her article from the news story about Ms. People’s business be turned into the record.

Speaker 2: (01:20:35)
Without objection.

Senator Warner: (01:20:37)
And in my last two minutes here, I will ask Chairman Powell and Secretary Mnuchin. One, while you’ve not seen the details of the $908 million plan that was bi-partisan, [inaudible 01:20:51] put out this morning, framework, do you think directionally, this kind of bridge emergency relief is needed at this point? Chairman Powell, would you go first?

Jerome Powell: (01:21:03)
I would, of course, defer to you and to the Secretary who have authority in this area on the particulars of it. But as I’ve said, I think it sounds like you’re hitting a lot the areas that could definitely benefit from help and these are areas that are going to be experiencing a challenging winter. But I can’t really speak to the particulars of the bill having not seen it.

Senator Warner: (01:21:30)
No. [inaudible 01:21:31]. I appreciate that. And again, Secretary Mnuchin, and I know you know that, while you’ve not seen any of this, I know you were negotiating on many of these same particulars, again, directionally, without going into particulars, do you think this kind of effort is needed?

Steve Mnuchin : (01:21:43)
Well, let me first say I did comment earlier to Senator Scott, and I applaud the work that you’ve done on the CDFI program. So whether it’s $10 or $12 billion, I very much support that, that could create a $100 billion of lending quickly. I look forward to reviewing with you the overall package. I do think that more fiscal response is needed. I think what’s more important is what we can pass quickly on a bipartisan basis to target the most difficult parts of the economy, and hopefully that will be needed and done quickly. So I look forward to following up with you. I missed the press conference because I’m here to testify.

Senator Warner: (01:22:25)
I understand. I promise you we will share that with you immediately. Mr. Chairman, I just want to appeal to all my colleagues. This is our best effort at a framework. I hope everyone will give it a reasonable review, and again, appreciate your leadership on this committee. Thank you.

Speaker 2: (01:22:43)
Thank you, Mark. Most of our members are off voting right now, but I understand that Senator Warren is with us.

Senator Warren: (01:22:51)
I am.

Speaker 2: (01:22:52)
Go ahead and please.

Senator Warren: (01:22:53)
Thank you very much, Mr. Chairman. So today more people are getting sick from the Coronavirus than in any other time during the pandemic. And on top of that the help that many people have relied on is about to disappear. So the day after Christmas, 12 million workers will lose unemployment benefits. That same week Secretary Mnuchin will be shutting down the Federal Reserve programs that are designed to help the economy. So Chair Powell, you have been clear about the need for more fiscal support to help families and businesses get through this crisis. So let me ask you specifically about help to individuals that puts more money in their pockets during an economic crisis. This is economic stimulus 101. If individuals have a bit more cash to spend every month that helps them, but it also helps the economy, right?

Jerome Powell: (01:23:47)
Yes.

Steve Mnuchin : (01:23:48)
Yes.

Senator Warren: (01:23:49)
Okay. So there are two ways to get more money into people’s pockets. The first is providing payments, like stimulus checks or unemployment insurance, which I strongly support. The second is by canceling the debts that people owe, so they can spend that money elsewhere. The largest category of household debt, other than mortgages, is student loans. And most of that debt is owed directly to the federal government. Now, right now, those debt payments are paused, but the clock is running out. On New Year’s Day, the median borrower will have to restart paying more than $200 a month to the federal government. That’s at a time when our economy needs people to be able to spend more money, not less.

Senator Warren: (01:24:33)
So, Mr. Chairman, you’ve said in testimony before Congress, that you think that rising student debt is, “The main concern when looking at the overall household debt picture.” You’ve also said, “It’s been rising fast and is now large. There is increasing evidence that shows that students who can’t pay that debt have difficulty having normal economic lives and buying homes and things like that.” Mr. Chairman, would you agree that high levels of student debt will have a negative impact on our economic recovery of millions if households have to reduce spending in order to make debt payments?

Jerome Powell: (01:25:17)
Others and I have been calling out the rising student debt for some years now, particularly since we’ve singled it out for not being able to be forgiven and insolvency among all different kinds of debt, so that’s a longer term problem. In terms of what relief would be appropriate here in the current situation, I would have to defer to those who have authority to make that decision.

Senator Warren: (01:25:41)
Well, I’m not asking you about what the question is about what Congress should do. I’m asking you the question about what it does to the economy. If people who, instead of spending that money in the economy, are spending that money by sending money back to the federal government on their student loan payments. That is a problem for the economy? Is it not?

Jerome Powell: (01:26:02)
Certainly people who are weighed down by debt, in a situation like this, where they may be unemployed, where unemployment is very high among, for example, low wage workers that can weigh on economic activity. Yes.

Senator Warren: (01:26:14)
Fair enough. But I think we started with economic stimulus 101, $200 bucks is $200 bucks that could be spent in the economy. Now, Mr. Chairman, you’ve also noted that student loan debt has another impact on a struggling economy, and that is that student loan debt makes it harder for people to qualify for mortgages, to buy homes, to start small businesses. You’ve noted that those things drag our economy down. Do you still feel that way?

Jerome Powell: (01:26:45)
Yeah. I think datas are showing that over longer periods of time people who take on student debt in an effort to make their lives better and brighter, and if that doesn’t work out that way, they drag that debt down through their economic lives and it can get in the way of their credit history, of course, and their ability to own a home and their whole economic life for many years.

Senator Warren: (01:27:09)
Right. And then that has an overall impact on the economy in terms of home sales or in terms of business startups, is that right?

Jerome Powell: (01:27:17)
Yes. And in fact, those people are unable to participate, perhaps, in the economy to the full extent that they might be able to, which would weigh on the economy.

Senator Warren: (01:27:25)
So thank you, Mr. Chairman. I know you’ve said you don’t know how you could be clearer on pushing Congress to act on more fiscal stimulus, and I agree entirely with you on that. But most types of economic stimulus are pretty much impossible when the Republicans in Congress refuse to take action, aid to state and local governments, unemployment benefits, checks for families, right now Republicans are blocking help on all of these, but student loan debt is different. All on his own, President Elect Biden will have the ability to administratively cancel billions of dollars in student loan debt using the authority that Congress has already given to the Secretary of Education. This is the single most effective economic stimulus that is available through executive action. And as you’ve noted in the past, research shows that canceling student loan debt would boost GDP, create jobs, reduce unemployment, jumpstart small business formation, support the housing market, promote job and economic and geopolitical mobility, and increase the annual incomes of borrowers by about $4,000. So it would also help close the racial wealth gap. It is time to act. Thank you very much. Thank you, Mr. Chairman.

Speaker 2: (01:28:44)
Thank you. And next will be Senator Shots.

Senator Shots: (01:28:47)
Thank you, Mr. Chairman. Thank you, Secretary Mnuchin and Chair Powell for participating in this hearing and for your really extraordinary efforts during this difficult time. The first question is for Secretary Mnuchin. Where are we with negotiations? You’ve been a lead negotiator on behalf of the administration when we were successful and leading negotiator when we were not as successful. And I just want to get a sense for the public and for the whole Congress, so that we’re not just reading this on political, where we are with respect to Coronavirus relief? Whether the idea is to pass a standalone package from your perspective for something to ride on the Omnibus? And what would your priorities be?

Steve Mnuchin : (01:29:31)
I had a conversation yesterday afternoon, as well as this morning, a follow up conversation with Mitch McConnell, Kevin McCarthy, myself and Mark Meadows. I spoke to the President this morning and updated him. We all believe that there should be targeted fiscal response. I would say that my motivation in the fed facilities was not political. As I said, it was purely legal, but those funds can be reallocated. The PPP money can be reallocated. I would say things like PPP and unemployment that are running out are high on the list. I’ll be speaking to Speaker Pelosi this afternoon about the government funding. We obviously did not intend for there to be another CR. We signed the two year caps deal. We wanted to get funding done, and I’m sure I will speak to her about Cares funding as well. So we support targeted quick relief.

Senator Shots: (01:30:33)
Okay. And I’ll just editorialize for about 30 seconds here. The election is over and lame ducks are for doing necessary things that we were fighting about previously, that’s what a lame duck is for, and especially during a pandemic, that’s what a lame duck is for. And so we all need to put our weapons down and I applaud the efforts of Senators Warner, and Collins, and Coons, and others, because we really need to deliver relief. And especially because we need to recognize that, if we can’t get something done during a lame duck, during a pandemic, that says something about all of us and our unwillingness to find a middle ground.

Senator Shots: (01:31:15)
A separate topic for Chair Powell. I am really encouraged to see the fed discuss climate risks in their semi-annual report on financial stability, you and I have had several exchanges in the past few years about the financial system’s vulnerability to climate shocks, and I’m really pleased to see the fed address this issue head on. The report calls for increased transparency through improved measurement and disclosure, and to improve the pricing of climate risks. So the question I have for you is, what specifically should companies be disclosing to enable the accurate pricing of climate risks?

Jerome Powell: (01:31:57)
Of course, corporate disclosure is really something that we don’t have responsibility for. I think what we’re talking about is a general idea. At this stage, it’s an early stage in trying to understand the implications of climate change for financial stability. And thank you for calling out our box, I thought that the box we put in our financial stability report did a good job of laying out the connections that we do see, but I think we’re a long way from understanding really what that means. I think the public will expect that we do figure out what are the implications of climate change for financial stability and that we do put policies in place. Some of that will be through disclosure and some of it will be through many other channels.

Senator Shots: (01:32:41)
So the feds staff is actively conducting research on climate related financial risk. What kinds of tools are you developing? And what kind of data sets do you need to measure that risk?

Jerome Powell: (01:32:54)
Well again, it’s early to be talking about… Really there’s, as you pointed out, there’s a great deal of research going on in the economics community, and we have probably the largest economic staff, certainly in the United States, one of the largest in the world. And there are people working on climate change and the implications of climate change for the economy and for financial stability. And it’s a little early to say exactly what those tools will do. And I ought to start by saying that the broad response to climate change on the part of society really needs to be set by elected representatives. That’s you. We see implications of climate change for the job that you’ve given us. And that’s what we’re working on is just aspect of it. The broader aspect of it really is for elected representatives.

Senator Shots: (01:33:45)
Absolutely. And Chairman, I agree with you, risk is risk. You are charged, at least partly, with measuring the risk in the financial system. You are not charged with solving climate change, that’s the policy-making part of the government, but it is important that you fulfill your statutory mandate to make sure that risk is measured accurately. And one final thought here, I’m not sure it’s so much that it’s early. I think it’s more that this stuff is hard. And I can see that this stuff is difficult, that we want to develop common platforms. We want to develop common tools and data sets so that we do this intelligently and responsibly, but it is not early. It is just that this stuff is difficult to do. And we want to give you the space to do it right, but we can’t take several years to develop these tools and datasets. Thank you.

Speaker 2: (01:34:36)
Thank you. Senator Kennedy.

Senator Kennedy: (01:34:40)
Thank you, Mr. Chairman. Chairman Powell, has the federal reserve done a state-by-state analysis of how much money state governments have received from Congress to bolster their economy and how much of that money they have left to spend?

Jerome Powell: (01:35:05)
Senator, I’m confident somewhere in the Federal Reserve system, that information does exist. I don’t have it close to hand though.

Senator Kennedy: (01:35:15)
Well, what does that information show?

Jerome Powell: (01:35:20)
Honestly, I’d have to get the information in front of me to be able to answer that.

Senator Kennedy: (01:35:26)
Then how do you know state governments need more money?

Jerome Powell: (01:35:35)
Well, I didn’t say that today, that they did need more money, but I would say we do know that at the aggregate level… I can give you some data that I believe is true, and that is that states that have particularly high tourism as part of their economy are feeling this significantly and they’ve got much lower tax revenue, so they’re feeling…

Jerome Powell: (01:36:03)
… billing this significantly, and they’ve got much lower tax revenue. So they’re feeling that states that don’t really have exposure to travel and leisure may not have had much of an effect at all. So it does vary quite a bit, but there are states, I think Florida, for example, has, I read, has lost something like 11% of its revenue overall. I can’t fact check that in real time here, but that’s the statistic that I saw. So I think it varies a lot state to state.

Speaker 5: (01:36:30)
On November 16, The Wall Street Journal reported that California recently reported that its tax revenue for this fiscal year is running 19% above projections. Do you disagree with that?

Jerome Powell: (01:36:55)
I don’t have any reason to. No.

Speaker 5: (01:36:59)
In the same analysis, the Journal reported that personal income tax revenue in October in California was $1 billion, or 16% higher than the previous October, and sales taxes were up 9.2%. Is that consistent with the Fed’s information?

Jerome Powell: (01:37:22)
I haven’t seen any information at the Fed. As I mentioned, I think the bigger fact is that state and local government revenues, tax revenues, have been less affected so far than we thought they would, and there there’s a lot of research on why that might be. Nonetheless. State and local governments have laid off more than a million people, and some states are feeling this. The ones that are more exposed to he travel and leisure industry, for example, are actually really feeling that pinch.

Speaker 5: (01:37:57)
The Wall Street Journal on November 16 also reported that in New York State, overall tax revenue was up 4.3% in September compared to September, 2019. A large part of the reason for that is that New York State taxes unemployment benefits. Do you have any reason to disagree with that?

Jerome Powell: (01:38:29)
No, sir.

Speaker 5: (01:38:31)
Okay. The Journal also reported that personal income tax revenue in Connecticut increased 2.9% in September from the previous year, and in the fiscal year that started in July, income tax receipts in Connecticut are running 0.3% ahead of last year, and sales tax revenue is up 5.3%. Do you know if that’s accurate or not?

Jerome Powell: (01:39:02)
I don’t.

Speaker 5: (01:39:04)
Okay. Do you believe that Congress should appropriate money to states and allow those states to use that money to support their pension systems?

Jerome Powell: (01:39:28)
I think that’s a question for you, sir.

Speaker 5: (01:39:30)
Well, I’m asking you, though, Mr. Chairman. You’ve been pretty vocal about … And I’m not being critical. I appreciate the advice, but about the need to pass another coronavirus bill, do you think we should allow the states to use the money to shore up their retirement systems?

Jerome Powell: (01:39:49)
I think states provide critical services. I think at least some of them have had significant hits to revenue. I think they’ve laid off more than a million people. They’re very big employers, something like one of the largest employers in the economy. So I think it’s an area that, I’ve always said, it’s an area where I think it’s worth looking, an area we might-

Speaker 5: (01:40:11)
Don’t you think that … I’m sure you would agree with this. Don’t you think, though, before we appropriate more money, we should actually base the decision on empirical data, like, how much have we given each state? How much have the states spent? How much of that money do they have still just sitting? There don’t you think we ought to approach it as opposed to just using anecdotal evidence?

Jerome Powell: (01:40:42)
Certainly I wouldn’t recommend you use anecdotal evidence, but really these questions are way off my ranch. We don’t have views or express views on really specific fiscal questions. Try to stay at a high level.

Speaker 5: (01:40:55)
Thank you. Thank you, Mr. Chairman.

Chairman Mike Crapo: (01:40:58)
Thank you. Senator Van Hollen.

Senator Chris Van Hollen: (01:41:03)
Thank you. Thank you, Mr. Chairman, and thank you, Chairman Powell, Secretary Mnuchin, for your testimony. And listening to both of you, there’s clearly agreement that we need more fiscal relief. Mr. Chairman, you said on October 6 that, quote, “Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses.” And more recently, as the cases from the pandemic have accelerated, you’ve said there hasn’t been a bigger need for it in a long time, meaning fiscal relief. And President Trump in October tweeted out, “Go big or go home,” to Congress, and just picking up on Senator Schatz’s comments and others’, we do need to get this done. We cannot go home before the end of December without addressing the urgent needs and the pain that American households and small businesses are facing.

Senator Chris Van Hollen: (01:42:18)
So Chairman Powell, first to you, I assume you agree today with the statements you’ve made previously about the urgent need for substantial fiscal relief.

Jerome Powell: (01:42:31)
Well, when I said, “This is the most urgent need,” I was talking about the whole pandemic. I was talking about the need for the CARES Act, and I wasn’t trying to speak about the need for another full CARES Act at that point in time. That that’s what I believe I was referring to. It is a couple of months ago. But yes. My view really hasn’t changed. I think that the risk of overdoing it is less than the risk of underdoing it. That is the record of pandemics and crises. People are always worried about doing too much, and you look back in hindsight and you say, “Well, we didn’t do too much. We might’ve done a little more and done a little sooner.” I think we tried to live with that lesson this time, as with the CARES Act and with the things that the Fed did, and other parts of government. We really did act aggressively.

Jerome Powell: (01:43:22)
So I would just say that we’ve come a long way. The CARES Act did a tremendous amount of good. We can see what may be the light at the end of the tunnel, with the vaccines. And I just would want us … We at the Fed will keep at it until we’re really done, and I think that some fiscal support now would really help move the economy along as well, at least to guard against those downside risks we’ve been talking about. Smaller businesses, households, and others who are directly affected.

Senator Chris Van Hollen: (01:43:48)
Well, I agree. And with respect to state and local governments, I was listening to your discussion with Senator Kennedy. And I would say one million people who have lost their jobs is not anecdotal. That is real. As you pointed out, those are people who no longer have an income, and therefore are relying on a safety net until we get everybody back to work.

Senator Chris Van Hollen: (01:44:12)
Secretary Mnuchin, again, I quoted President Trump back in October saying to Congress, “Go big or go home.” Just recently, he tweeted again, “Go big and be focused. Make it big and focused.” So do you share the President’s view that we continue to need to go big on fiscal relief?

Steve Mnuchin : (01:44:36)
I do believe we need more fiscal relief, and I think there’s more work to be done, as I said in my testimony. I think fortunately, the CARES Act has worked, and the numbers are better than they were two months ago, but I’d urge Congress to pass something quickly to make sure we get something done in this session.

Senator Chris Van Hollen: (01:44:57)
I couldn’t agree with you more. And I know that you were engaged for a period of time with Speaker Pelosi and others. What was the Trump Administration prepared to do in terms of its top line number at that time? Because the Chief of Staff for the President was quoted as saying somewhere around $1.2 trillion or more. Is that accurate?

Steve Mnuchin : (01:45:22)
Well, I think as you know, we made lots of proposals along the way. There were different proposals and different components, and as I said earlier, I spoke to Leader McConnell, and McCarthy, and Meadows this morning, and the President, and we will continue to work with Congress to try to get something done quickly.

Senator Chris Van Hollen: (01:45:43)
But Mr. Secretary, you would agree it would be a mistake to allow the emergency pandemic unemployment insurance to expire at the end of the month, right?

Steve Mnuchin : (01:45:51)
I do believe that’s one of the areas I think there needs to be some technical fixes, but I do support extending it. I also absolutely support the unspent money and the PPP being authorized to be used immediately.

Senator Chris Van Hollen: (01:46:06)
And you also supported, I saw the President did funding for some state and local government relief. I can tell you, I had a conversation this morning with the General Manager of the Washington Metro Transit System. You can read on the front page of the Washington Post Metro Section today that they’re going to lay off 1,200 people in December, and that their budget for next year, if they don’t get any more relief, contemplates another over 2,000 people. So I hope we will all recognize that we’ve got to do something. There seems to be a lot of running room between the two positions that have been outlined, and I just think it would be shameful if the Congress goes home and the administration, if we’re not able to do this before the end of the month. So thank you, Mr. Chairman.

Chairman Mike Crapo: (01:46:58)
Thank you. Senator Jones.

Senator Doug Jones: (01:47:02)
Thank you, Mr. Chairman, and thank you to both of our witnesses for your service. Secretary Mnuchin, you and I haven’t had as much personal interaction, but I want to tell you how much I appreciate your service in some difficult times over the last two or three years. Chairman Powell, thank you very much for allowing me to get to know you, for the work that we had. I so much appreciated the fact that even though your nomination was going to sail through the United States Senate, you still made a point of coming to visit with me as soon as I got sworn in, in January of 2018, to get to know me and to understand the office and my work on the Banking Committee. So thank you for that.

Senator Doug Jones: (01:47:47)
I’d like to kind of revisit something that I have talked about on many occasions, and that’s the racial inequalities that we have witnessed in this country. As the nation kind of grapples with the racial inequality, we’ve seen the Federal Reserve’s recent survey of consumer finance kind of caught my eye. Highlights longstanding substantial wealth disparities between families in different racial and ethnic groups. The typical white family has eight times the wealth, eight times the wealth of the typical Black family, and five times the wealth of the typical Hispanic family. Raphael Bostic, the President of the Federal Reserve Bank in Atlanta, recently published a paper arguing that the country’s racial economic gaps were cemented over centuries, and called on the Fed to reduce racial inequalities and bring about a more inclusive economy.

Senator Doug Jones: (01:48:40)
And let me say very quickly that I know coming from a state of the old Confederacy that most people think that some of this is just based on the state Jim Crow laws of years past. But in fact, we all know that this is not just a Southern problem. It is not just a Jim Crow problem. Those policies had been cemented by policies of the federal government, laws passed by this Congress, maybe giving some accommodation to white southern segregationists in the House and the Senate at the time, but laws of housing, healthcare, even the GI bill really kind of cemented inequalities that have lasted now for decades.

Senator Doug Jones: (01:49:26)
So initially to you, Chairman Powell, as we go forward, I don’t want to look back right now, I want to look forward, becomes as we’re coming out of this pandemic, we’ve got some real opportunities, I believe, to address these inequalities in healthcare and the economy in so many areas. So what can the Fed do as we come out of this economy? What strategies would you recommend to kind of address the inequality we see in the economy, whether it’s minority businesses or individuals?

Jerome Powell: (01:49:58)
So these are longstanding inequalities over a very long period of time, and there’s a real concern that we have at the Fed that the pandemic will make that worse, because of course minorities are much overrepresented in these service industry jobs that were so heavily affected by the pandemic. So there’s a concern that things will get worse. And the last couple of years were very encouraging, because as the longest expansion in our recorded history continued, we actually saw the racial unemployment gap diminishing to its lowest level since we began measuring it. And so it’s really disappointing to see that.

Jerome Powell: (01:50:38)
So what can we do going forward? The most important thing we can do with the Fed, I think, is to take seriously the job of achieving maximum employment. And we’ve now changed our operating framework to acknowledge that maximum employment is a broad and inclusive goal. And by that we mean that we’re going to look at various different measures of labor market conditions, including minority unemployment rates, frankly, and minority participation, labor force participant rates, and wages and things like that. We’re going to look at all of those things as we try to achieve our maximum employment goal.

Jerome Powell: (01:51:17)
The last thing I’ll say is I think we also enforce fair lending laws in our Division of Consumer and Community Affairs. We need to continue to do that rigorously. Ultimately, though, we will do whatever we can with our tools, but really it’s going to take a broader attack on these problems than just the federal loan can mount.

Senator Doug Jones: (01:51:41)
Thank you, Mr. Chairman. Secretary Mnuchin, I got just a few minutes left. Any advice that you would give … A few seconds left, actually. Any advice that you would give to the incoming administration or the incoming Congress about how to address these from an economic standpoint?

Steve Mnuchin : (01:51:55)
Well, as I’ve mentioned earlier, I do think the CDFI investments are something that can be done quickly that will particularly help minority and underserved communities.

Senator Doug Jones: (01:52:05)
All right. Thank you, Mr. Secretary. Mr. Chairman, if you would bear with me just a couple more seconds, I wanted to express my appreciation to you and the Ranking Member and to all the members on the committee for the work that we’ve had together over the last three years. It’s been remarkable to work with you, to watch the two of you work, but also the work that I’ve done with other members on the committee on both sides of the aisle. It has been an honor and a privilege to work with the entire committee. I hope that as you, Mr. Chairman, move over to another committee and assume additional duties, that Chairman Toomey, or Ranking Member Toomey as the case may be, we don’t know yet, will carry on the work of this committee. I have really enjoyed my time with you over the last three years, so thank you both very much.

Chairman Mike Crapo: (01:52:55)
Thank you, Senator Jones. Senator Tillis?

Senator Thom Tillis: (01:53:00)
Thank you, Mr. Chairman. I want to thank both Senator McSally and Senator Jones for their service on this committee. They were serious legislators, and I had the opportunity to work with both of them. I also want to thank you for your leadership. You’ll leave it in good hands, but I’m going to miss you as our Chair.

Senator Thom Tillis: (01:53:20)
Gentlemen, thank you for being here. As I heard the discussions, I had to go vote. I’m sorry I wasn’t here for the whole of the hearing, but I remember vividly back in March when we were negotiating, the “we” I say, with Secretary Mnuchin and members of the Senate working together, we had an underlying set of assumptions. Some that proved to be true, some didn’t. We knew we needed to do something big, bold, and fast. And we came up with the CARES Act, and I think the paycheck protection program saved a lot of jobs. I also think the main street lending facility was a necessary facility, even though at the time, very few of us thought that it would be fully subscribed, and it’s proven to be true.

Senator Thom Tillis: (01:54:07)
We also made certain assumptions about how long this virus was going to impact the economic base. I mean, there were a lot of people thinking 90 days, six months. On the outside, maybe the end of the year, which was the basis for the date that Secretary Mnuchin mentioned. Well, things have changed, and I for one think that we do have to provide a bridge to what should be a trending positive environment, maybe sometime in the second half of next year, if we make certain assumptions about the manufacturing distribution of the vaccine, that I think can be valid with the historic approval of two vaccines in less than a year.

Senator Thom Tillis: (01:54:44)
But Secretary Mnuchin, I have to remind everybody of what you’ve said. You have said that you think that these dates are important, and that Congress needs to act, but you’ve also in the same breath said that we need hundreds of billions dollars more and the paycheck protection program to provide that bridge, that stabilization. Is that your basis for that, that we just need to cover that window of opportunity, probably through the second half of next year?

Steve Mnuchin : (01:55:09)
That is correct. Maybe the first quarter or second quarter.

Senator Thom Tillis: (01:55:12)
Yeah. And Chairman Powell, I think you feel the same way. I don’t think that we’re necessarily talking about something on the scale of either the first CARES Act or the HEROES Act, but something that does provide some of the fundamentals for the businesses, and I think that they do need to be grants, not loans. But do you agree with that window that we really need to provide the bridge, based on the information we have today?

Jerome Powell: (01:55:38)
I think the bridge is exactly the right way to think about it. I won’t have a view on exactly how much that needs to be, but that’s the way … We can see the end. We just need to make sure we get there.

Senator Thom Tillis: (01:55:49)
Yeah. One thing, and Chairman Powell, this may be for you, of the 10 million jobs that are still outstanding, has there been any analysis on the length of time that they’re likely … We’ve got, in North Carolina, we have about 19,000 restaurants. 4,000 of them have closed permanently. So there’s a structural element of unemployment where even when the economy comes raging back, the job creators are not going to come back in time to see that pickup saving in the second half. So do we have any analysis on the amount of unemployment that if we provide additional stabilization funds, if we see the trending in the right direction with the vaccine, what is our structural deficit for that remaining unemployment? How much of that is structural longterm versus likely to bounce back as the economy bounces back, because the jobs are there as the business reopens and expands?

Jerome Powell: (01:56:48)
That really is the big question we’ve been asking ourselves. And you have to make a lot of assumptions to have an answer about that. It really is, “What does the post-pandemic economy look like?” And I think the faster we get there, the sooner the vaccines arrive, et cetera, then the smaller that number of people who are structurally unemployed will be. And there are various numbers. We’ll be happy to share something with you, with your office, if you’d like.

Senator Thom Tillis: (01:57:12)
Yeah. In my closing time, number one, I just want to thank y’all for the extraordinary leadership in the job. I want to thank the banking industry for actually being a partner that helped us make the paycheck protection program a success. I believe that we have to look at programs to take a look at the first in, last out industries. We’ve talked about a lot of them. Restaurants, live performances, motorcoaches, transportation. There’s a lot of work that needs to be done, but I don’t think anyone can rightfully criticize or suggest that the CARES Act hasn’t been anything short of the MVP for stabilizing the economy when we had the crisis. And you guys were two people on the team that made it successful. I don’t believe that we should be asking Secretary Mnuchin to do Congress’s job. If Congress is serious about funding paycheck protection, if they’re serious about stabilizing the economy, then get serious about passing a follow-up to the CARES Act. Thank you, Mr. Chair.

Senator Thom Tillis: (01:58:13)
And now I guess I’m Mr. Chair. Senator Cortez Masto. Senator Smith.

Senator Tina Smith: (01:58:25)
Well, thank you, Mr. Chair, and hello everyone. First, I just want to say it does my heart good to see my colleague, Senator Doug Jones, who I’m used to sitting next to on the Banking Committee, and I just want to thank you so much for your service, and we are going to miss you. And thanks, also, of course, to Senator McSally, And I know that the Chair isn’t here, but I want to also thank Chair Crapo for his leadership. He has been nothing but welcoming to me, and I think though as Ranking Member Brown said, we don’t always agree, I always feel that there is a way for us to work together, which is so important.

Senator Tina Smith: (01:59:02)
I want to just start by saying, I want to add my voice to the many voices on this committee today who have said that it’s really important that we get something done to help families and small businesses that have been really struggling through this pandemic. You know, we’ve got to get something done, and I also agree that we shouldn’t make perfect be the enemy of the good here. That is what I am hearing in Minnesota. And I have to say, I have never worked any place where I heard more people talking more loudly about the need for action with less action happening. I haven’t had a chance to see what our colleagues’ bipartisan group have put together yet this morning, but I’m encouraged by that, and hope that that will take us somewhere, and I might ask my Republican colleagues to bring this up with Senator McConnell when you all have lunch together in a couple of minutes. Because there’s a great need for action here.

Senator Tina Smith: (01:59:53)
I want to actually pivot to something, and have a little bit of a dialogue with you, Chair Powell, about this. You have used, I think, very appropriately, this metaphor of how we need to build a bridge to a post-pandemic recovery. You point out that our economy has been responding better than we expected, but we still have a really, really long way to go. And we also know that we are seeing long-term trends in inequality, which make it harder and harder to generate the economic activity, the spending, that is going to drive growth in the long-term. And that is what we see because of raising long-term trends in inequality that are holding back spending for families of color, minority businesses of color. This is something several of my colleagues have brought up today.

Senator Tina Smith: (02:00:45)
So Chair Powell, could you just talk a little bit about this? And I’m especially interested in using your bridge analogy. What are the risks of not building this bridge? What happens if we don’t take this action right now and, and the long-term impacts of this growing inequality on our economy, post-pandemic?

Jerome Powell: (02:01:10)
Thank you, Senator Smith. So these disparate economic outcomes across racial and other lines are a longstanding feature of our economy. They’ve been with us for a very long time. And there is a great risk that the pandemic is making them worse because the people who were most affected by the job losses were people in relatively low paying parts of the service industry that happens to skew more to minorities and to women.

Jerome Powell: (02:01:39)
And so there’s a real concern that if we don’t act as quickly as possible to support those people, get them back to work, get the economy up and running as much as possible, that we’ll leave behind a more unequal situation, which is tragic, because we actually had been making good progress on these issues for the last few years. As the very long expansion, longest in our recorded history went on, we started to see the gains go more to people at the lower end of the income spectrum. We saw racial income gaps declining, racial gaps in labor force participation and unemployment declining. We saw some very constructive things, but waiting for the eighth or ninth year of an expansion is not a perfect strategy. So I think there is an issue of wanting to do as much as we can to avoid exacerbating these longstanding differences, and get back to a strong economy where we can start making progress again, which is what we were doing just back in February.

Senator Tina Smith: (02:02:38)
Right. Right. Well, and as the Fed Chair, and as the Fed, you have the dual mission of low unemployment and managing inflation, hitting inflation target rates. What if the Fed in this need to spur job growth? And we see that there hasn’t been a big worry about inflation in the long term. What if the Fed were to lower its target for employment, lower it to 3% or even under 3%? what impact might that have on addressing longterm needs for addressing inequality?

Jerome Powell: (02:03:11)
So actually we’ve made a change in our operating framework, which I think addresses that directly. And that is while we’re going to have an estimate of the natural rate of unemployment, we’re not going to act on that, even if unemployment goes below that, unless we see inflation or some other problematic thing that seems to be linked to where our rates are. So we’re not going to preemptively raise rates until we see actual inflation now as a consequence of low unemployment, and I think that’s a lesson that we learned during the last expansion, when we saw very low, 50-year lows in unemployment and very high participation, really as strong a labor market as we’ve seen in my lifetime, without inflation acting in a way that was concerning.

Senator Tina Smith: (02:03:58)
Thank you, Chair Powell. Thank you, Mr. Chair, and I also want to extend my thanks to Secretary Mnuchin for his service. So thanks very much, everyone.

Jerome Powell: (02:04:05)
Thank you.

Senator Thom Tillis: (02:04:06)
Senator Cramer.

Senator Kevin Cramer: (02:04:08)
Thank you, Mr. Chairman, and thank you to the two witnesses, of course, for being here. And let me just also say congratulations to Chairman Crapo on a wonderful two years as Chairman, and you’ve been great to me, and to the whole committee, and really, really appreciate your approach. And also thank you to Senator McSally, Senator Jones. We will miss you both, and we’re very grateful for your service.

Senator Kevin Cramer: (02:04:35)
Now, it shouldn’t surprise anybody that the issue on my mind, the one that I pretty much wake up thinking about every day, I’m wondering how we’re ever going to tackle it, of course, is with the CARES Act, is PPP forgiveness. And Secretary Mnuchin, I just want to address a couple of things directly to you. You know, of course that Senator Menendez and I, along with Senator Tillis and Senator Sinema, and about 28 of our closest friends and allies from both political parties, have introduced Forgiveness Bill, Senate 4117. Takes all the loans out $150,000 or less. One page attestation, and those would be forgiven. Those $150,000 and less loans make up, like I said, 85% of the total loans, but only 26% of the dollar amount.

Senator Kevin Cramer: (02:05:28)
And you both of you know, both Chairman Powell and Secretary Mnuchin have said during this hearing that what businesses need are not loans, but they need grants. Well, forgiveness was a major component of our bill. And once again, in my view, Congress did what it often does and it doesn’t prescribe enough of a solution, and allows the bureaucracy, which I fear more than the devil himself, frankly, to come up with their own rules, regulations, that are always aimed at CYA, no understanding of how a business operates or how it keeps employees.

Senator Kevin Cramer: (02:06:06)
But when we passed PPP, as you’ll recall, it was designed to largely be forgiven. It was designed to keep people on a payroll so they avoided the unemployment rolls. We encouraged, almost forced, small lenders and small borrowers to use program. I’ve talked to literally hundreds, multiple times, hundreds of community banks, consumer banks, large banks, credit unions, even farm credit services, about PPP and why it needs to be utilized. And yet here we are still waiting for another package. It is my hope, desire, conviction to work my tail off to prescribe a solution to this. But in the meantime, Mr. Secretary, I’ve been very disappointed in SBAs response. They seem to use, like the bureaucracy always does, use their discretion to the advantage of the government, not to the advantage of the small business. Let me give you just some specific examples that I’ve heard from my constituents, and I’m going to give you one borrower example. Small business, pretty typical I think. Here’s what they wrote to me. “Senator Cramer, please help.” That’s the opening line. “With Congress not passing a new stimulus. It leaves many small businesses in a bind. The problem is, as we go to our bank and ask for an operating loan, they tell us, ‘Not until you get your PPP forgiveness.'” Now, why haven’t they gotten it? We’ve been pretty instructive on this. “The bank says until we received notice from SBA that original PPP loan has been forgiven, they aren’t going to give us the money.” Here’s how slowly they’re working on this particular loan. This is a loan of just right at about $100,000. They have moved so slow that they needed some pressure from us, so we applied that pressure and here’s what it took. It took nine weeks. Nine weeks, Mr. Secretary, to forgive a $100,000-

Senator Kevin Cramer: (02:08:02)
Mr. Secretary, to forgive a $100,000 loan where the program was designed for it to be forgiven, this is a small motel, hotel operation in Bismarck, nine weeks, and guess what? It took really nine weeks in one day, because the day that we made the call to inquire at SBA, they finally forgave the loan. Now, this is one. This is just one example out of hundreds, maybe even thousands of them.

Senator Kevin Cramer: (02:08:25)
Here’s one from a lender before I let you answer it. Here’s a lender that says, “Just reaching out as FYI, SBA has requested additional documentation on 5% of the loans ranging from $3,700 to $134,000, an average of $3,000 per loan. It’s a waste of time.” So the bureaucracy, again, always does what the bureaucracy is going to do.

Senator Kevin Cramer: (02:08:50)
Mr. Secretary, this is very disappointing. This is very disappointing to people who didn’t even want to take a loan. They could have laid all of these people out. They could have gotten that very generous unemployment extension program, but they trusted us, and SBA did what we just know the bureaucracy I was going to do. They’ve extended the time. They’ve asked for more documentation. They’ve put more demands on them. The cost, the cost to comply is now $2,000 per borrower, and it amounts to billions of dollars. Obviously, my time is up. I’d love to hear more from you. I’ve got lots more to say about it, but we’ve got to do better than this, Mr. Secretary.

Steve Mnuchin : (02:09:26)
I agree with you. We need to do better, and we support legislation to help forgiveness.

Senator Kevin Cramer: (02:09:32)
But in the meantime, use discretion. Please use the flexibility that the agency has and tell the bureaucracy to stop being such a bureaucracy.

Steve Mnuchin : (02:09:40)
We will.

Senator Kevin Cramer: (02:09:40)
There’s a big disconnect between the bureaucrat and the business and billionaires in the business. We need small businesses to thrive.

Mr. Crapo: (02:09:48)
Thank you. Senator Cortez Masto.

Senator Cortez Masto: (02:09:52)
Thank you. Gentlemen, thank you. It’s great to see you again. So appreciate you being here. Let me jump right into it. As you know, I talk to you about this all the time. I come from Nevada. The hospitality and leisure industry has been so hard hit. Nevada’s unemployment rate now is more than 12%. We know that more than 175,000 people continue to claim unemployment insurance. Just the statistics from the American Hotel and Lodging Association that nearly 70% of hotels may close by the end of this year if they do not receive additional government funding, and I will tell you, in Las Vegas and Reno, employment in our hospitality and leisure sector is down nearly 25% and 14%, respectively. So let me start there with both of you. Secretary Mnuchin, what is the administration and/or what are you advocating, moving forward, that we should do to address, really, the impact that we are seeing on our leisure in the hospitality industry?

Steve Mnuchin : (02:10:55)
Well, specifically, and I agree with you that this industry has been devastated. I believe that the PPP could immediately help people. I think that the airlines have also been devastated, so we support additional relief for the airlines. But hotels, small businesses, entertainment, all of these companies could access the PPP.

Senator Cortez Masto: (02:11:24)
Well, let me jump back there, because when I talk about hospitality and leisure, I’m talking about restaurants, I’m talking about live events, and if they’re accessing the PPP, they’re not looking for loans. I think you’ve said it earlier. It’s not the loans that help. It’s the grants. Isn’t that correct? Shouldn’t we be looking at providing them more opportunities for grants than loans that they have to pay back, or no?

Steve Mnuchin : (02:11:45)
Well, the PPP, if it’s used correctly, is a grant. So it’s a loan that should get forgiven without the bureaucracy. But yes, the PPP is effectively a grant, and that’s what they need, not more loans.

Senator Cortez Masto: (02:11:59)
Yeah, effectively, it is. But as we’ve heard, there’s challenges with it and ensuring. I think the confusion even for these businesses is whether that will turn from a loan into a grant is still questionable for many of them, and that’s why we’re seeing the concerns that we see for so many not even applying. Let me ask Chairman Powell. I know you and I have had this conversation. Again, do you believe that the hospitality and leisure industry needs another stimulus package, a comprehensive package for relief to sustain this industry?

Jerome Powell: (02:12:33)
I would agree that the industry has really been devastated, and the two things it needs is for the pandemic to be over, which we really can’t do, and it needs grants, which we also can’t do. Our loan programs are really not … You can’t over-generalize, but for most people, most businesses in that industry, really what they need is more fiscal support.

Senator Cortez Masto: (02:12:53)
That’s right, and so let me jump back then to another conversation that I’ve heard with state and local governments. Let me just reassure, gentlemen, you that the states and local governments need an additional relief. My state does in the state of Nevada, for the very reasons that I’m talking about. We have a budget hole of over a billion dollars, but that’s just not Nevada. That’s all of the states. There’s bipartisan support that I have seen, as most recently as September of this year from the National Governors Association, bipartisan support for additional relief for state and local governments, for the very reasons that we’re talking about. So this idea that there are red states and blue states or states don’t need it, they’re going to misuse it I think as a misnomer. It’s getting in the way of, really, the needs that we have across this country in a bipartisan way. So let me just reassure you governors from Republican and Democratic states or Republican and Democratic governors are both asking for additional relief for state and local governments, and we need it for the very reasons I’ve just talked about. But let me ask you this. Secretary Mnuchin, jumping back to the 454 billion that was appropriated to the Federal Reserve’s Exchange Stabilization Fund, is it your position that, by the end of this year, Congress doesn’t make changes or change the legislation, that not only your authority stops, but that you will actually transfer those additional funds back to the state treasury?

Steve Mnuchin : (02:14:30)
Well, I’ve commented on this several times already, and I’ll repeat it again. My actions are not economic. It’s purely by interpretation of the law. I think the section was pretty clear. I cited it earlier. I’d be happy to follow up with you or anybody else on this. As regards to when the money comes back, it’s fully prescribed within the law what happens to the money. So there’s no discretion on my part.

Senator Cortez Masto: (02:14:58)
Okay, and that’s what I want to get back to, because I absolutely agree with you. It’s very specific in the law, the termination of the authority, of your authority, but it’s also specific on where that money is supposed to stay and that you do not have the authority to transfer it under this law. I just wanted clarification with that. If your legal authorities are telling you something differently or your attorneys, I would like to know that, because the way I read it, you don’t have the authority to transfer this money back to the Fed under at least the CARES Act authority. So please share that with me, I know my time is running out. I’ll submit the rest of my questions for the record.

Senator Cortez Masto: (02:15:35)
Let me just say, Secretary Mnuchin, thank you for your service. It is not an easy thing to do, particularly in this atmosphere, where there is so much partisanship. We didn’t always agree, but I appreciate your service, so thank you. I also want to thank my colleagues, Senators McSally and Jones. I’ve enjoyed working with them, and their contributions to this committee have at least helped me understand as well numerous issues that impact this country in our financial sector. So thank you all again for your service.

Steve Mnuchin : (02:16:07)
Thank you.

Mr. Crapo: (02:16:11)
Thank you, and our final senator, who will be by telephone, is Senator Sinema.

Senator Sinema: (02:16:16)
Oh, thank you, Chairman Crapo, and thank you to our witnesses for being here today. Arizonans are struggling to make ends meet during the pandemic, and I regularly hear from families and small businesses back home that are concerned they won’t make it through the winter, especially since coronavirus cases are spiking across the country. By passing the CARES Act and authorizing the Treasury Department’s backing of the Federal Reserve’s emergency lending facilities, we lowered borrowing costs for households and businesses alike, protecting jobs and stabilizing our economy as we continue to fight the coronavirus.

Senator Sinema: (02:16:49)
With cases on the rise, now is not the time to pull back critical support for families and businesses in Arizona, and that’s why I’m disappointed by Treasury’s decision to withdraw financial support for the lending facilities, particularly the Main Street lending facility. It moves us in the wrong direction. It puts relief further out of reach for people that desperately need it. So Secretary Mnuchin, recognizing that many US businesses need direct relief as well as access to credit, do you believe that businesses, particularly local restaurants, retail businesses, and those in the hospitality industry have what they need right now to survive the winter?

Steve Mnuchin : (02:17:27)
No, I don’t. I think that’s why I encourage Congress to authorize us to spend the 140 billion of unspent PPP money so we can give them second loans that, if used properly, will turn into grants and save lots of jobs.

Senator Sinema: (02:17:40)
Well, this is an area where we agree, Secretary Mnuchin.

Steve Mnuchin : (02:17:43)
Thank you.

Senator Sinema: (02:17:43)
I also think that those dollars should be released and used by businesses around the country. I do hear from business leaders across the state, though, that we need to expand and improve, not retreat the lending facilities. So I’m hearing from folks at home that many small and mid-sized businesses in Arizona won’t make it without additional relief, and if they can’t get direct relief, they should at least get access to credit. I think they should have both. Of course, this isn’t just about the businesses. This is about the small business owners and the workers and their households. There’s a lot at stake here, and families, jobs, and their homes hang in the balance.

Senator Sinema: (02:18:19)
Back home in Arizona, most people don’t think that Washington cares very much about what happens to them. My concern is that decisions to end the Main Street lending facility, where things are getting caught up in partisanship and procedure and people are losing sight of the end results, it makes me think that folks in Arizona might be right to have given up on Washington. Now, Secretary Mnuchin, if you could just briefly respond to my question about the Main Street lending facility, we agree on funding for PPP, but I’d like to hear your thoughts about the Main Street lending facility and why you think that this should be eliminated or ended for mid-sized businesses in Arizona and throughout the country.

Steve Mnuchin : (02:19:01)
Well, again, my reason of why it should be ended is because there’s a December 31st termination date in the law. I think it’s very clear. I’ve already cited the section. I have it with me. I won’t go through it again. I’d be happy to send it to you. Congress can extend it. I personally think that EIDL loans out of the SBA are more effective. One of the problems with the Main Street facility was that a lot of those small companies that are doing well had access to the banks and the companies that didn’t didn’t fit the program. But, again, it was not a judgment on my part. It was merely following what the law prescribes.

Senator Sinema: (02:19:41)
Now, Secretary, I know that Senator Cortez Masto asked to see the legal reasoning for your decision to end. I’d like to see that as well. We have known about some concerns around the Main Street lending facility for months, and in our last time together, I lamented the fact that I believe that Treasury and Fed jointly set these terms too stringently and that many businesses in Arizona were unable to take advantage of them. So I’d like to reiterate that I believe that the program should be continued and that eligibility should be expanded for the facility and the term sheet should be changed so we can help more businesses in need.

Senator Sinema: (02:20:18)
Now, Chairman Powell, I’ve seen your take on this, and I know that you and Secretary Mnuchin don’t agree on the extension of the Main Street lending facility. Do you think that households and businesses will risk having lower or higher [inaudible 02:20:31] costs because of the end of the Main Street lending facility?

Jerome Powell: (02:20:36)
Actually, it’s a little more complicated than that. The Congress gave the secretary sole authority over the CARES Act funding. We play no role in that, and that’s in distinction to the 13(3) facilities, which we designed together because we both have to approve. The secretary reads the law as he said, and, really, his voice is the authoritative one on that. We accept that. We accept that reading of the law.

Jerome Powell: (02:21:02)
So our point really was that other central banks and any central banker would tell you that it’s premature to be pulling back support for the economy. The secretary did indicate in his letter and it’s true that we can either re-establish facilities or institute new facilities, and we can even have exchange stabilization fund backing for that, provided the legal requirements are met. I hope that’s responsive to your question.

Senator Sinema: (02:21:30)
It is. Thank you. I see that my time has expired. Mr. Chairman, I do have a couple further questions, but I’ll submit those for the record. Thank you.

Mr. Crapo: (02:21:38)
Thank you, Senator Sinema. That concludes the questions. Senator Brown has asked for a little bit of time for closing remarks, and Senator Brown.

Senator Brown: (02:21:48)
Thank you, Mr Chairman, and thanks again for your service on this committee. [inaudible 02:21:52] Republicans told us today the only thing we set out to do is to stabilize the markets when we’ve achieved those goals, so we can end support to the facilities. Look around us. That’s not the reality we’re facing. In our states, people are dying in larger numbers than ever before from this virus. Businesses are still closing, restaurants. 60 restaurant owners collectively told me yesterday that it’s worse than it was in February, March, and April. People are increasingly worried about the virus. People are still losing jobs. They’re working at unsafe jobs in an unsafe environment. Secretary Mnuchin ended programs that are still helping small and medium-sized businesses and helping state and local governments. He just simply didn’t need to do that. Thank you, Mr. Chairman.

Mr. Crapo: (02:22:42)
Thank you, and that concludes the questioning from today’s hearing. For senators who wish to submit questions for the record, those questions are due to the committee by Tuesday, December 8. To each of our witnesses, we ask that you respond to those questions as promptly as you can. I want to thank you for joining the committee today and for your service, and this hearing is adjourned.