Refinitiv Newscasts - Powell, Yellen testify to House on pandemic response 1

Graham Holdings

30/09/2021 20:41

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Source: Reuters

Description: WASHINGTON D.C. - Federal Reserve Chairman Jerome Powell and
Treasury Secretary Janet Yellen testify on oversight of the Treasury
Department's and Federal Reserve's Pandemic Response at the U.S. House
Committee on Financial Services.
Short Link: https://refini.tv/3kVHz09

Video Transcript:

  FOREIGN  >> The committee will come to order. Without objection, the chairs
authorized to declare recess of the committee at any time. As a reminder, I
ask all members participating remotely to keep themselves muted when they are
not being recognized. The staff have been instructed not to mute members
except where a member is not being recognized and there is inadvertent
background noise. If you are participating remotely today, please keep your
camera on. If you choose to attend a different remote proceeding, please turn
your camera off. As a reminder to all members. We will conclude today's
hearing at 12:15 PM. Members who were unable to ask questions at our March
23rd hearing with Secretary Yellen and Chair Powell will be given priority to
ask their questions today and we will return to our normal order of
recognition once those members have asked their questions. These hearing is
entitled Oversight of the Treasury Department and Federal Reserves Pandemic
Response. I now recognize myself for four minutes to give an opening
statement. Welcome back, secretary Yellen and Chair Powell. As this pandemic
continues, the Biden administration and congressional Democrats continue to
work around the clock, to get essential relief to individuals, families, and
small businesses across the country. Following the catastrophic failure of the
Trump administration to tackle the pandemic crisis. The Biden administration
and Democrats in Congress swiftly moved to enact the American Rescue Plan,
which provided $1.9 trillion to address the impacts of COVID-19. The
legislation included billions and funding to support individuals and families,
including renters, homeowners, and people experiencing homelessness, as well
as small businesses during this crisis. We are also working together to put
President Biden's, Build Back Better Agenda into action by making long-overdue
investments into the nation's housing programs, childcare, education,
workforce, and other critical aspects of our economy, all while being
completely paid for. Democrats are also working to address the past failures
of the Trump administration's approach to the pandemic. For example, we're
working with Secretary Yellen and the Treasury Department to correct
administratively burdensome requirements initiated by Republicans that made it
harder for renters and landlords to obtain relief in the earlier versions of
the emergency rental assistance program. My legislation, the Expediting
Assistance to Renters and Landlords Act of 2021 would further speed up relief
and cut down unnecessary barriers that are standing in the way of a for
renters and landlords. Of course, the Federal Reserve has also played a part
in the response to the pandemic through the creation of emergency facilities
to help tackle the crisis until they were prematurely shut down by former
Secretary Mnuchin. These facilities play a vital role in stabilizing financial
markets last year. Moving forward, our committee is committed to exploring
ideas to ensure that facilities like this can more directly protect workers
and support small businesses as well as state and local governments the next
time there is a crisis. Amid Democrats continuing efforts to ensure that
relief reaches communities across the country and that our economy is strong
for the future, republicans continue to operate recklessly. Even now,
Republicans are threatening to throw the economy into unnecessary turmoil by
blocking legislation to suspend the debt ceiling it's completely unacceptable
for Republicans to hold our nation's economy hostage, especially in the middle
of these continuing public health crisis and when fully one-fourth of the
increase in the debt ceiling is attributed to Trump's tax scam for the rich.
Secretary Yellen, Chair Powell, I expect to hear your thoughts on these issues
and to hear more about what will happen if Republicans forced the country to
default. I also look forward to discussing your ongoing work to respond to the
pandemic today. I now recognize the ranking member of the committee, the
gentleman from North Carolina, Mr- >> McHenry, for five minutes. >> Today, the
Financial Services Committee is holding its second statutorily required
quarterly hearing the Biden administrations pandemic response. Now, the only
problem is that this hearing should have occurred in actually the second
quarter it's the third quarter. But then again, that just perfectly
encapsulates the incompetence and dysfunction of a Democrat run Washington,
where Democrats run the House, the Senate, and the White House. Let's just
review briefly. The incompetence of the rental assistance program, which
Republicans have highlighted since March, there's no solution in sight. The
so-called Biden agenda appears to be on the rocks. Democrats are no closer to
raising the debt ceiling ahead of the October 18th deadline than they were in
August when it expired. What do all of these problems have in common? They
were foreseeable. They are known things, not just to Democrats but to the
world. Now markets are taking notice, our allies, our adversaries are watching
closely to see what happens next. But in the midst of this chaos we at least
have you two individuals in your respective seats. The two of you instill
confidence in our financial system, especially in a moment like this. That
credibility of your institution is deeply connected with each one of you right
now. Chairman Powell, you're decisive action help prevent the worst to the
economic impacts of COVID. You are thoughtful, deliberate, and transparent.
The antithesis, I would say, of dangerous. To think otherwise, frankly
reckless and unmoored from reality. Anyone who would say that, frankly, I
appreciate their courage to speak their truth. Chairman Powell, my country
will be better off with your continued leadership at the Federal Reserve.
Secretary Yellen, your experience as Fed Chair and steady hand throughout the
financial crisis and then as your term as chair of the Fed made you a natural
pick for the Treasury Department and I'm glad you're in your seat. That's why
I'm sorry, you're in such a bad situation given this administration's
strategy, bad strategy and worse fiscal plan from a Democrat run Washington
will have consequences I believe. Consumer prices continue to rise. Businesses
can't find workers and the government, because of overspending, will not be
able to pay its bills in a little more than two weeks. What's the plan? All
I've heard from Democrats this year is a plan to spend more money two trillion
in March, more than five trillion now. Five trillion was a compromise I want
to remind you. Bernie Sanders and the progressives wanted a six trillion
dollar reconciliation package and President Biden proposed a six trillion
dollar budget in June but Democrats couldn't agree on that either so here we
are. To be clear, the Biden administrations treasury department can't even
keep track of the $46 billion of rental assistance so how are the American
people supposed to trust Democrats with another $5.5 trillion? This isn't a
plan. Frankly, it's a heist. The Democrat run Washington tax and spend
policies will only increase prices more for consumers. They're using you,
Madam Secretary, and your credibility to sell this bad agenda. Over the last
several weeks, you've called on Congress to address the debt limit. I couldn't
agree more. Yesterday the House passed a debt ceiling bill that is doomed in
the Senate. It was political theater and they know it, we know it and the
American people in fact know it as well. It's theater designed to distract
Americans from the fact that Democrats have no idea how to govern. They've
known this deadline was coming. They knew it the day they took control of the
Senate. They knew it the day that President Biden was sworn into office, and
they knew it the day that the Treasury Secretary was confirmed. The Democrats
have him in charge of our country for nearly a year and they did nothing to
prepare for this moment. We'll except spend more money and bring the date
forward by which we have to address the debt ceiling. I want to be clear, the
US government is run and controlled by Democrats. It is defined by
dysfunction, incompetence and fiscal irresponsibility. Late in the game,
asking Republicans to bail out your agenda so you can pass more spending is
frankly absurd. This is no way to run the country. I yield back. >> Thank you
ranking member McHenry. I now recognize the gentleman from Texas, Mr. Green,
for one minute. >> Thank you, Madam Chair. Madam Chair, we must raise the debt
ceiling. Raising the debt ceiling does not authorize new spending. Raising the
debt ceiling allows the United States to pay its existing debts. Congress has
raised or suspended the debt ceiling on a bipartisan basis 78 times since
1960. There are no secret weapons in the treasuries also know that will save
us from default if this body fails to act responsibly and swiftly. Madam
Chair, we passed a Cares Act and other pandemic relief legislation. Let us
come together again and stand behind the debts of our nation with the full
faith and credit of the United States of America. We must raise the debt
ceiling. I yield back. >> I now want to welcome our distinguished witnesses
today, who I believe needs little introduction to members of the committee.
First, I want to welcome the Honorable Janet Yellen, secretary of the United
States Department of the Treasury, who has served in that role since her
confirmation in January of this year. Our other distinguished witness today is
the Honorable Jerome Powell, the Chair of the Board of Governors of the
Federal Reserve System, and who has served in that role since February of
2018. Without objection, your written statements will be made part of the
record. You will have five minutes to summarize your testimony. You should be
able to see a timer on the screen in front of you that will indicate how much
time you have left in your testimony. Secretary Yellen, you are now recognized
for five minutes to present your testimony. >> Thank you. Chairwoman Waters,
ranking member McHenry, members of the committee it's a pleasure to testify
today. >> We're in the midst of a fragile but rapid recovery from the
pandemic-induced recession. While our economy continues to expand and
recapture a substantial share of the jobs lost during 2020. Significant
challenges from the Delta variant continue to suppress the speed of recovery
and present substantial barriers to a vibrant economy. Still, I remain
optimistic about the medium-term trajectory of our economy and I expect we
will return to full employment next year. Rebound like this was never a
foregone conclusion. In fact, the American recovery is stronger than those of
other wealthy nations. One key factor for overperformance is the policy
choices the Congress has made over the past 18 months. Those choices include
the passage of the CARES Act, that Consolidated Appropriations Act, and the
American Rescue Plan. Treasury, as you know, was tasked with administering a
large portion of the relief dollars in those bills. When we last met, our
department was busy standing up programs to help individual families, state
governments, and organizations of every size in between. We still have much
more work to do. We have made significant progress and I wanted to give you an
update. Let's start with families. In July our department started sending the
monthly expanded child tax credit payments to the families of nearly 60
million children across the country. To date, $46 billion and payments have
been made. We're already seeing the impact. Analysis by the Census Bureau
found that after the first payments in July, food insecurity among families
with children dropped 24 percent. As for state, local, tribal, and territorial
governments, COVID-19 decimated their budgets. There were mass layoffs in the
health and economic emergencies. We knew that communities would need funding
to hire educators to bring kids back to school, for example, or front-line
workers to administer the vaccine. The American rescue plan included $350
billion to that end. Those dollars are indeed helping the machinery of local
governments get up and running. States and localities can rely on relief money
that's available instead of resorting to painful budget cuts. Congress rightly
designed the state and local program with flexibility in mind. I think many of
us knew the recovery could run up against some unforeseen challenges. We
wanted communities to be able to devote resources wherein when they saw a fit.
I want to note that this flexibility is paying off now, especially with the
spread of the Delta variant. Harris County, Texas, for instance, has use this
funding to boost its immunization rate, offering $100 to each person who gets
their first vaccine dose. For the relief dollars not yet out the door.
Treasury is doing everything it can to expedite their delivery. The Emergency
Rental Assistance program is one example. Prior to the pandemic, there was
essentially no national infrastructure to get money from government coffers to
renters and landlords. Building that infrastructure has been a massive
undertaking for states, localities, and tribes. The program is scaling up
quickly with 1.4 million payments made to help struggling renters keep a roof
over their heads. Still, too much of the money remains bottlenecked at the
state and local levels. That's why our Treasury team has worked to eliminate
every piece of red tape possible in order to ensure more payments can get to
renters and landlords. But states and localities must also work to remove
barriers that can speed up distribution of rental assistance funds. I'll end
my remarks there, except to say this, it is imperative that Congress addressed
the debt limit. If not, our current estimate is the Treasury will likely
exhaust its extraordinary measures by October 18th. At that point, we expect
Treasury would be left with very limited resources that would be depleted
quickly. America would default for the first time in history. The full faith
and credit of the United States would be impaired and our country would likely
face a financial crisis and economic recession as a result. We must address
this issue to honor commitments made by this and prior Congresses, including
those made to address the health and economic impact of the pandemic. It's
necessary to avert catastrophic event for our economy. Representatives, the
debt ceiling has been raised or has suspended 78 times since 1960, almost
always on a bipartisan basis. My hope is that we can work together to do so
again and to build a stronger American economy for future generations. Thank
you, and I'm pleased to take your questions. >> Thank you, Secretary Yellen.
Chair Powell, you are now recognized for five minutes to visit your testimony.
>> Thank you, chairwoman waters, ranking member McHenry and other members of
the committee for the opportunity to discuss the measures we have taken to
address the hardship brought by the pandemic. Since we last met, the economy
has continued to strengthen. Real GDP rose at a robust pace in the first half
of the year. Growth is widely expected to continue at a strong pace in the
second half. The sectors most adversely affected by the pandemic have improved
in recent months. But the rise in COVID-19 cases has slowed the recovery.
Household spending rose at an especially rapid pace over the first half of the
year, but flattened out in July and August as spending softened in COVID
sensitive sectors. Additionally, in some industries, near-term supply
constraints are restraining activity. >> As with overall economic activity,
conditions in the labor market have continued to improve. Demand for labor is
very strong and job gains averaged 750,000 per month over the past three
months. In August, however, gains slowed markedly with the slowdown
concentrated in sectors most sensitive to the pandemic. The unemployment rate
was 5.2 percent in August. This figure understates the shortfall in
employment. Particularly as participation in the labor market, has not moved
up from the low rates that have prevailed for most of the past year. Factors
related to the pandemic appear to be weighing on employment growth. These
factors should diminish with progress on containing the virus. The economic
downturn has not fallen equally on all Americans, and those least able to
shoulder the burden had been the hardest hit. In particular, despite progress,
joblessness continues to fall disproportionately on lower wage workers in the
service sector and on African-Americans and Hispanics. Inflation is elevated
and will likely remain so in coming months before moderating. As the economy
continues to reopen, we are seeing upward pressure on prices, particularly due
to supply bottlenecks in some sectors. These effects have been larger and
longer lasting than anticipated, but they will abate and as they do, inflation
is expected to drop back toward our longer run percent percent goal. The
process of reopening the economy is unprecedented. As it continues,
bottlenecks, hiring difficulties and other constraints could again prove to be
greater and more enduring than anticipated posing upside risks to inflation.
If sustained higher inflation were to become a serious concern, we would
certainly respond and use our tools to ensure levels that are consistent with
our goal. The path of the economy continues to depend on the course of the
virus and risks to the outlook remain. The Delta variant has led to a surge in
cases causing human suffering and slowing the recovery. Continued progress on
vaccinations would support a return to more normal economic conditions. The
Fed's policy actions are guided by our dual mandate to promote maximum
employment and stable prices, along with our responsibilities to promote the
stability of the financial system. In response to the crisis, we took broad
and forceful measures to support the flow of credit and to promote the
stability of the financial system. Our actions taken together helped unlock
more than two trillion dollars of funding to support businesses, large and
small, non-profits, and state and local governments between April and December
of 2020. This helped keep organizations from shuttering and put employers in a
better position to keep workers on and to hire them back as the recovery
continues. These programs have served as a backstop to keep credit markets and
help to restore the flow of credit from private lenders. We have deployed them
to an unprecedented extent. Our emergency lending tools require the approval
of the Treasury and are available only in unusual and exigent circumstances,
such as those brought on by this crisis. Many of these programs were supported
by Cares Act funding. Those facilities provided essential support through a
very difficult year and are now closed. The Fed completed its sales of assets
from the secondary market corporate credit facility on August 31, where we
were able to wind down the facility rapidly and efficiently with no adverse
impact on credit conditions. We also recently closed the PPPLF to new lending
and are managing the pay down of assets in our other Cares Act facilities as
they wind down. We continue to analyze their efficacy and to review the
lessons learned. The Fed's actions affect communities, families, and
businesses across the country. Everything we do is in service to our public
mission. We will do all we can to support the economy for as long as it takes.
Thank you. I look forward to your questions. >> Thank you very much Chair
Powell. I now recognize myself for five minutes for questions. Secretary
Yellen, your department reports that as August, 21, 7.7 billion in emergency
rental assistance had been allocated to households assisting approximately two
million renters. Although spending has increased over the past several months,
I think we're all concern that the pace of delivery of this critical
assistance is not happening quickly enough. Can you talk about the challenges
you have faced after taking oversight of ERA 1 from the Trump administration.
What do you believe are the most significant improvements to the program
guidance you have made and what impact have you seen? >> Well, thank you for
that question. This is a critically important program that Treasury has been
very focused on expediting the delivery of these rental assistance funds to
those who need it. As I mentioned in my opening statement, getting these funds
out has involved creating a national infrastructure where none existed before.
That's been a very difficult and slow process. Treasury has done everything
possible to facilitate getting these programs up and running around the
country. In particular, we've tried to give states and localities flexibility
to administer the program in ways that are appropriate for different
communities to reduce the paperwork requirements while also making sure that
we have accountability and transparency. We've provided technical assistance
and working to provide more technical assistance. I do think we're seeing a
payoff. As I mentioned, we've had 1.4 million renters held by this assistance
and the pace at which it's flowing out is increasing. Also, I would note that
the Act requires Treasury to begin to reallocate funds on September 30th from
those localities that are either are not effective in getting assistance out
or have less need for the funds and to reallocate them to those that are more
effective and have demonstrated need. >> Well, thank you very much. I want to
thank you and your team for working with me on HR5196, the Expediting
Assistance to Renters and Landlords Act, which would make it easier for both
renters and landlords to apply for assistance and provide for the deeper
involvement of Treasury to support grantees, to get the bonds out the door. Or
their particular provisions that you think with aid, Treasury's efforts to
make the rental assistance program was successful. You've given us quite a bit
of information about what you have been involved with. Is there anything else
you would like to share? >> Well, two woman were very supportive of your
efforts to try to put in effect changes that would expedite the delivery and
the effectiveness of this program. We look forward to continuing to work with
you. I think we've offered substantial technical assistance and absolutely
want to work with you to make sure this program is as effective as possible.
>> Thank you very much. The gentleman from North Carolina, Mr. McHenry, who
has a ranking member of the committee, is now recognized for five minutes. >>
Well, thank you. Chair Powell, I know the policy of the Federal Reserve to not
comment on fiscal policy. Fiscal policy does impact the Fed's economic
projection, does it not? >> Yes, it does. We make assumptions about fiscal
policy and then once it's enacted, we would put that into our models. >> But
your public models are a statement about current law rather than proposed
policies; is that largely correct? >> Well, we don't really publish a forecast
as the Federal Reserve individual participants publish their forecasts in the
summary of economic projections, but that would include their personal
assessments of likely fiscal actions. >> Okay. About these fiscal actions,
Secretary Yellen, I said this in my opening statement and I'll say this to
both of you again. I am grateful as an American that you both are in the seats
that you're in right now. Because we're in a special circumstance here in the
fall of this year. It was a foreseeable, slow-moving disaster, but here we
are. But your credibility of your relative agencies and the credibility of you
two individuals is a substance right now, a very important to us as an
American government. Secretary Yellen, you said in July, right before the debt
limit was reinstated, the CBO, said, "Treasury would probably run out of cash
sometime in the first quarter of next year or the fiscal year, most like an
October or November." Secretary Yellen and you began exercising Treasury's
authority to take extraordinary measures to prevent a default back in August;
is that correct? >> Yes. The debt limit, this suspension expired on August
first and we began using extraordinary measures to remain under the debt
ceiling. >> But those extraordinary measures were just a band-aid for a period
of time? >> Well, as I indicated, we expect them to be exhausted on October
18th. >> It would be a disaster if we did not. >> It would be a catastrophe if
congress fail to raise the debt settling. >> Here's the deal for Republicans.
Democrats control the House and the Senate and the White House. Since January
20th, the approach of this congress is that they do not need Republican votes
to do anything. That's been the approach. Now, they want the political cover
in the midst of this massive amount of new spending to Republicans raise the
debts yet, that's really the request. Here's my question you Secretary Yellen.
For the seat you sit in, do you care whether or not the debt limit is raised
with Republican votes, or do you just care if it's raised? >> I think it's
important that this be done on a bipartisan basis. I think it should be
bipartisan in recognition of the fact that both Republican administrations and
congresses and democratic ones have run budget deficits for most of the
post-war period with only a few years serving as an exception and that
requires on a regular basis raising the debt ceiling. The need to do so has
nothing to do with future spending or tax plans that haven't been enacted,
it's necessary to pay our bills. >> I understand secretary Yellen. >> That's
something that Republicans and Democrats really need to share that
responsibility. >> Chair Yellen, as I said to you on the phone last week, I've
been a part of every single debt ceiling increase for the last decade. Every
fiscal consequence of Congress, and some of them have been very bad. But I've
tried to make things better. I've been a part of the solution for last decade
and the call that I received from you last week, was the first Outreach I've
had from this administration to do something on a bipartisan basis and you
called me to raise the debt ceiling, not with a plan, not for a fiscal plan,
not for my buy-in, but simply for my vote and that to me speaks volumes. Now,
I'm grateful for the outreach from you, but it speaks to the larger issue for
the administration. I don't envy the position you're in, I don't. Because the
bad strategy from this White House and the leadership of this house and the
senate is showing they don't want Republican votes. We did bipartisan bills
last congress. In the midst of COVID, bipartisan bills, major bipartisan
bills, we can work together in a responsible manner, but to ask for my vote
the week before it comes up in a house, is not in keeping with the realities
of the situation. Well, we have the tools, we have the votes to get this thing
done through Congress. It's just a question of who votes for it. >> I would
like to point out that in 2017, when the White House and both houses of
Congress were controlled by Republicans and a reconciliation bill was in
progress that led to the 2017 tax cuts, the debt ceiling was raised and it was
done in a bipartisan business. >> Eleven and 13, I voted for a bill that
President Obama signed, so I'm willing to participate bipartisan way? It's
just a question of housing votes for it in the circumstances of seven trillion
of new spending this year? >> The gentleman from New York, Mr. Meeks, who is
also the chair of the House Committee on Foreign Affairs, is now recognized
for five minutes. >> Thank you, Madam Chair and I got to just say initially,
I'm shocked at the ranking member, McHenry saying that because he wasn't asked
for a vote, something is going to determine whether or not American people,
Democrats and Republicans will suffer if we don't raise this debt ceiling.
I've been here for 22 years between whether it's Democratic or Republican
administrations and each time when it came to the credit of the United States
and our economy, it didn't make a difference to me whether or not the
administration was Democratic or Republican, or whether or not someone called
me to ask me for my vote. I'm here to try to do the best thing for the
American people, not play politics. When it comes to the credit, for the
United States and the economy moving on, it's not about who's the president or
who called and asked me for a vote. It's about doing the right thing for the
American people, Democrats and Republicans, and moving up this debt to making
sure that we don't default on our debts is essential to that. It's essential
to our responsibility as members of Congress, and not to say, "Oh, nobody
called me for a vote." That's simply that our responsibility. Now, Madam
Secretary, there are consequences if we don't pass and increase the debt
ceiling, I mean like the increase in the cost of borrowing for a home or a car
or through one's credit cards, of which folks will say on the other side, I
don't have to deal with that, but then it's going to be play politics with it.
I was wondering, as we are recovering from this economy, what setbacks will a
default on debt cost American households be they're Democratic, Republican,
Independent, non-voters, what cost would it cost us? >> Well, I think that
would be catastrophic for the economy and for individual families. Nearly 50
million seniors could stop receiving Social Security payments or see them
delayed. Our troops would not know when they would get their next paycheck. We
have 30 million families who rely on the monthly child tax credit and they
would not receive that relief at least on time. As we saw in 2011 when the
debt ceiling was raised at the absolute last minute and investor and consumer
confidence were shaken in the run-up, we saw a marked increase in interest
rates, a marked drop in the stock market, and when US interest rates go up and
the credit rating of the united States was downgraded, that means higher
interest payments for everyone who has a loan, whether it's a small business,
a homeowner with a mortgage, a credit card payment. Anyone who borrows would
see higher interest costs of their debt. >> We must raise the debt ceiling for
the benefit of the American people. I don't care what party they are from. Let
me go to Chairman Powell. Now, the Fed is rightfully focused on controlling
inflation while boosting employment with the aim of guiding our economy back
to it's pre-pandemic normal. At the European central forum, you mentioned that
it's urgent for the Fed to resolve the tension between these two policy goals
since taming prices by my raising interest rates would weaken our labor
market. As the Fed considers its monetary policy, how will you manage the
trade-offs between control and prices and ensuring full employment, and how do
you plan to resolve the tension between the two that you spoke on on
Wednesday? >> That's the very difficult situation we find ourselves in and
almost all of the time inflation is low when unemployment is high and so
interest rates work on both problems now. Right now we're far away from full
employment, so that gives us an incentive to keep accommodative policy in
place. Inflation is well above target and we have an expectation that high
inflation will abate because we think the factors that are causing it are
temporary and tied to the pandemic and the reopening of the economy. What we
say is we just have to balance the two, but I would say our expectation is
that inflation will come down and we won't ultimately face that difficult
trade-off of having the two goals intention. >> Thank you. The gentlewoman
from Missouri, Mrs. Wagner, is now recognized for five minutes. >> Thank you,
Madam Chairwoman and Secretary Yellen thank you for finally taking the time to
appear before this committee. I know that the ranking member has formally
requested your presence at least twice within the last few months with no
response. Last week, Treasury released the latest data on its Emergency Rental
Assistance programs. As you know, $46 billion was made available to supposedly
help COVID impact in low-income families pay off there back rent and to help
make mom and pop property owners whole in Missouri, second congressional
district and beyond. After more than nine months and an entire summer of
republicans pushing Treasury, your own data still shows more than 83 percent
of your funds remain unspent while millions of renters and property owners
remain stuck in limbo. It's certainly doesn't sound, ma'am, like it has been
in your words, expedited program. Now, I have a series of yes and no
questions. Because my time is limited, I would appreciate and will insist upon
a simple yes or no, ma'am. First Madam Secretary, do you consider Treasury's
Emergency Rental Assistance program to be a success? Yes or no? >> Yes. >>
Amazing. Are you aware that in December of 2020, when Congress appropriated
the first 25 billion dollars for emergency rental assistance program funds
were to be used by December of 20- >> Yes or no? >> Yes. >> Do you know why
Congress set that initial deadline? >> To make sure that funds get to those
who are in need. >> Right, to get it out the door to renters and landlords
asap. Madam Secretary, are you aware that just this past March Democrats
extended the timeframe for emergency rental assistance program to the years
2022, and are you ready for this, 2025 for the two respective programs? Yes or
no? >> Yes. There's significant need and it will continue-  OVERLAPPING  >> In
2025 ma'am? I continue, does extending the program's deadline incentivize
grantees to get funds out by extending this, does it incentivize grantees to
get funds out the door? Yes or no? >> We're doing everything we can and the
states- OVERLAPPING  >> It's not fast enough. >> Or to get it out the door. As
I indicated in my opening statement in response to previous question, the
infrastructure to do this had to be built and the pace at which  OVERLAPPING 
>> There was plenty of time for the infrastructure to be  OVERLAPPING  Our Fed
programs, our PPP programs, all of those expeditiously got money to people who
needed them. This was a complete and abject failure. >> I'm sorry. This was-
 OVERLAPPING  >> I want to read a quote to you from a treasury official to
journalists on September 24th and I quote, "To simply take the amount of money
that has gone out in the first five or six months, and then compare that to
what was allocated for four or five years is just a meaningless number."
Secretary Yellen is getting money out the door as soon as possible a
meaningless gauge particularly when we're talking about a pandemic related
eviction crisis, yes or no? >> Our objective is to get the money-
 OVERLAPPING  >> It hasn't gotten out the door. Eighty three percent of it is
still sitting in the treasury coffers. >> I'm sorry  OVERLAPPING  1.4 million-
>> Ma'am, because my constituents is St. Louis and I do not find it
meaningless when we are talking about emergency assistance meant to keep
individuals and families in their homes today during a pandemic, not years and
years later out to 2025. Moving on, Chairman Powell, with spiking energy
prices and bottlenecks and supply chains around the world, there are concerns
that there is a rise in inflation may not be as transitory as you originally
predicted given our current economic situation and the fact that democrats
want to pass trillions and trillions more on spending, what makes you believe
we will not say more sustained, higher inflation, especially when we've seen a
significant consumer price increases, etc? >> As I mentioned in my opening
remarks, we do think that inflation will remain elevated before these
supply-side bottlenecks are resolved and we think that it will then move back
down toward our goal. >> Timeframe? >> These are not things that we control.
We don't control-  OVERLAPPING  >> Not for a transitory sir. It seems pretty
dug in. >> Remember, this is a function of supply-side bottlenecks silver,
which we have no control. But I would say that we do expect in the first half
of next year to see some relief, depending on the bottlenecking question and
inflation should move down over the course of-  OVERLAPPING  >> Not a time to
be spending trillions and trillions of dollars [inaudible 01:12:53] >> The
gentle woman from New York, Ms. Velazquez was also the chair of the House
Committee on Small Business, is now recognized for five minutes. >> Thank you
Chairwoman-  OVERLAPPING  >> Ms. Velazquez we can't hear you. >> Can you hear
me now? >> You seem to be unmuted, but the sound is not coming through very
well. >> Can you hear me now? >> No, we can't hear you. Would you try it
again, please? >> Can you hear me now? >> Yes. >> Thank you Chairwoman.
Secretary Yellen, I would like to pick up with what Chair Walters was asking
on [inaudible 01:14:06]. Can you please explain the type of resistance the
Treasury Department continues to face from some state and local governments?
How is the Treasury Department trying to expedite this funding to tenants and
landlords who needed the most despite these challenges? >> In cases where
states and other grantees launched their programs late, they faced an array of
complications. The most significant involved obtaining the necessary
authorizations from a grantee's governing body and there were procurement
challenges that arise when grantees I have to engage outside partners and
contractors. We've received a lot of feedback indicating that the guidance the
Treasury has released really does give state and local programs the tools they
need to move forward expeditiously. I'd also note that we've been partnering
with HUD to sent out our technical experts who can help grantees accelerate
their programs and help them document best practices. >> Thank you. Early on,
New York was one of the lowest performance states in distributing era funding
but significant progress has been made and the state now runs first nationally
with more than $1.2 billion in payments made or obligated. Unfortunately, more
assistance is needed. The Treasury Department is required to start
reallocating excess first round funds of the end of September. Can you tell us
how this process will unfold? >> Thank you for that question. Our objective
will be to maximize the number of eligible households that are served by
ensuring that the resources of the program are appropriately aligned with each
grantee's needs and ability to deliver re-assistance. Reallocation will be
really critical in achieving that objective. We will identify localities that
have access funds, we'll use clear expenditure benchmarks that increase over
time. We will strive to keep reallocated funds within the same state when it's
possible and afford a venue for voluntary reallocation among grantees. >>
Thank you. Under the American rescue plan, Secretary Yellen, Democrats
reauthorized the state small business credit initiative, providing $10 billion
in fair reforms to support up to 100 billion in new loans and initiatives for
small businesses through state, territorial, tribal, and local governments.
Under the program, potential grantees must have made a completed application
by February. How is the Treasury Department conducting outreach and working
with local governments to ensure completed applications are submitted on a
timely basis. >> Well, thank you. This is a very important program. Our staff
have contacted each state individually to follow up on the application notice,
see if there are questions or if help is needed. We have set up webinars,
we're assisting in program design, in helping to develop programs with respect
to tribal governments. We've been conducting extensive outreach. >> Thank you.
Chair Powell, would you agree with what Secretary Yellen is saying regarding
racing that debt ceiling? >> Yes. I think it's essential the debt ceiling to
be raised in a timely fashion so we can pay our bills. I think the
consequences of failure to do so would be potentially severe. >> Thank you,
Chairwoman [inaudible 01:18:51]. >> Thank you very much. The gentleman from
West Virginia, Mr. Mooney, is now recognized for five minutes. >> Thank you,
Madam Chair. Secretary Yellen, do you believe that President Biden's
reconciliation package proposal, the one with the $3.5 trillion in total
spending will cost zero and be fully paid for? >> Yes, I do. We have a full
program that the President has proposed to raise revenue that would cover the
costs of the program. In the President's budget, of course, there are changes
under consideration as this goes through Congress, but there are a host of
revenue raisers, and I do believe it will be actually deficit inducing beyond
the first 10 years of the program. >> Okay. Thank you. Yesterday, Speaker
Pelosi claimed the same thing that the Democrats reconciliation proposal would
cost zero, it would be paid for. President Biden said the same thing in a
Tweet earlier. Call me skeptical, but given the record of the Democrats in
Congress here on runaway spending, I just don't believe it. I'm not the only
one. The Washington Post called President Biden's claim that the bill would be
budget neutral, misleading, and gave it a score of two Pinocchio's. We're
passing bills out of committee, I understand without even CBO scores,
Congressional Budget Office scores, so we don't really know and that we've not
done that before. That's a change in our policy. The truth is we're spending
on alarming rate in this country. Since the COVID-19 pandemic began last year,
the federal government has spent more than $5.3 trillion on relief. That's
roughly $16,000 for every American. Our ballooning debt is not some abstract
problem. Out-of-control spending proposed by Biden and being rumor stamped
here in Congress will leave a mess that our children and grandchildren have to
clean up and pay for. The decisions we make today, 20 or 30 years from now,
our children and grandchildren have to pay this money back. I'd like to move
to a different aspects of the package. One of the attempt to pay for is in the
package that's alarming to me, is tax increases will make our economy less
competitive. Again, Secretary Yellen, my question is, the proposed corporate
tax rate in the House Reconciliation Bill is 26.5 percent. This actually moves
us higher than Communist China's corporate tax rate of 25 percent. We're going
to have a higher tax rate than a country that has been taking our jobs. It is
of communist ideology. Can you explain why raising our corporate tax rate
above China's is a good idea if you think it is, and do you think it would
hurt our competitiveness with China and around the world? >> Our companies
that the most competitive and profitable in the world. The effective tax rate
that they pay is very low, and recent studies suggest that among advanced
countries, the United States has an effective tax rate that is among the
lowest of countries around the world. We can certainly afford to take the
corporate tax rate up to 26.5 percent, as in house ways and means without
negatively impacting firm's performance. We propose to do that in the context
of an international agreement that has received the support of over 130
countries worldwide to establish global minimum tax rates that will apply to
other countries' firms. Right now, the United States is the only country with
a global minimum tax rate on its multinational corporations. >> We propose to
raise that, but at the same time, other countries will raise theirs much more.
That means that the competitiveness of American firms will be enhanced and we
will be reducing the incentives that exist in our tax law right now to export
jobs and profits. >> Thank you. I don't know how much time I have left, but
thank you, Secretary Yellen. One thing we've learned over the last several
years is we need to take the threat from China more seriously here in America,
making America less competitive and despite what you said, raising our
corporate tax rate makes us less competitive and our economic adversaries like
China, is too high of a cost for all the spending. Running up these massive
debts that our children will have to pay back for this spending, is just not
right. So despite what we're hearing and what many are saying, this
reconciliation package will be expensive in terms of dollars and frankly to
the future of our competitiveness in this country, racking up this debt. I
just fear we're going to pay for this for years to come. So thank you, Madam
Chair. Back to [inaudible 01:24:12] >> Thank you very much. The gentlewoman
from Ohio, Mrs. Beatty, who is also the Chair of the subcommittee on diversity
and inclusion, is now recognized for five minutes. >> Thank you, Madam Chair
and thank you to our witnesses today. Certainly, as I've been listening, a lot
of descriptive words were used. Everything from dysfunctional to meaningless
to irrational. Well, I could think of a lot of other words that I could use,
but certainly those words are appropriate to describe what Democrats inherited
from the last administration. Whether that's irresponsible mess of the past
administration, whether it's all the debt that occurred because of the Trump
administration. I think those words are appropriate just Madam Chair, by my
colleagues were very misdirected, in my opinion, you should look at your own
house and home before throwing stones, and especially when they're not
appropriate. Now, with that said to our two witnesses and very responsive, I
say thank you. Let me get in quickly to my first question on the Federal
Reserve. Certainly, you know, Mr. Chair, we've had a lot of conversations
about diversity. I want to thank you for responding and continuing to increase
your diversity. But as you know, recently, there's been two Federal Reserve
presidents who have left, quit, retired, bottom line, immediately, leaving or
gone from the Bank of Dallas and Boston. So my question is, you know where I'm
going with this. I would certainly be helpful that we could increase our
numbers and diversity beyond Raphael Bostic by asking that we use the
[inaudible 01:26:36] rule pattern after the Runing rule to do as we did with
the Atlanta Federal Reserve president and make sure in that interview process,
we have a African American or female. Do you have any comments on that? >> I
do. Thank you, Miss Beatty. I can absolutely guarantee you that we will work
hard in both of those processes to find and give a fair shot to diverse
candidates for those two jobs as we do, and it'll be a big focus of both of
those processes. >> Thank you. Secretary Yellen, you will recall back in 2016,
Secretary Lew made his historic announcement that Harriet Tubman would be the
face on a 20 dollar bill. I sent you a letter in July or early July, along
with my colleague, Congressman Katko, requesting the committee to move forward
with the Obama administration's plan to put her on the face of the 20. I
understand your staffs have been in discussion on this issue and I'm hoping to
get a high level overview and to ask you if there's any comment you can make
on this. >> Well, thank you for that question, representative Beatty, we
believe it is very important that our notes reflect the history and diversity
of our country. I couldn't possibly think of a better way to honor Harriet
Tubman's legacy and her courage in fighting for the freedom of enslaved people
and women's right to vote than seeing her on the 20 dollar bill. Issuing
notes, as you know, is a very lengthy process. It involves collaboration among
a number of different agencies and it's necessary to design new security and
counterfeit of features. Unfortunately, that means the lead time to redesign
new bills and ensure their security is long. >> Madam Secretary, I'm going to
my rental question because the clock is down and we will follow up with your
staff. Just prior to the new administration coming into office the former
administration rest the regulations and questions for the rental assistance
program. Those regulations were so unworkable that States like my State, Ohio,
and others were telling me that they weren't even sure if they would be able
to distribute rental assistance funds under those guidelines. Secretary Yellen
isn't it true that the secretary under the new administration had to spend
weeks going back and redoing all of that to make sure that the funds could
actually be distributed. >> That's correct. >> Thank you, I want that to go on
the record, some of my colleagues wanted to drill down and make our Secretary
[inaudible 01:29:59] answering those questions. So Thank you. >> Thank you.
The gentlelady's time has expired. The gentleman from Ohio. >> Mr. Davidson is
now recognized for five minutes. >> Thank you, Madam Chair Woman, I think our
witnesses and our colleagues appreciate this hearing. Chairman Powell, you
have extensive private sector experience and of course, as Chairman of the
Federal Reserve, you have a role in bank regulation. In your experience, do
banks or lenders increase lines of credit unconditionally? Isn't there some
level of underwriting involved? Wouldn't banks have problems with their
regulators if they didn't know underwriting for a line of credit? >> Yes. No,
of course, they are very careful in the lending they do. >> Well, I submit
that it's perfectly rational for Congress to expect something in exchange for
an increased line of credit. The plan presented is atrocious. It will no more
balance. It doesn't even proposed to balance in 15, 20, 30 or a 100 years.
There's no plan to quit bankrupting America, Madam Secretary. Now, thankfully,
under the Federal Reserve's leadership and 13-3 authority, we had some
facilities in place to prevent real financial calamity. Recently, the
Subcommittee on National Security, International Development and Monetary
Policy held a hearing to discuss the Federal Reserve's lending facilities
under Section 13-3, and how those facilities were utilized prior to incense
the passage of the CARES Act. Some of my colleagues, I fear don't understand
even how some of the products like bonds or margin calls work as they've
criticized programs where there is literally no buy-side in the market. Of
course, the Federal Reserve stepped in to create a buy-side and support the
markets. I've heard colleagues say, well, there were only two loans under the
municipal liquidity facility, for example, while there were hundreds of loans,
hundreds of billions of dollars of credit extended, how important are the 13-3
provisions to the financial stability of our country? >> They're very
important in that, but there are reserved for real economic emergencies,
financial emergencies. As you point out, they function I think very well in
the crisis as backstops, that when we put them in place in the private capital
markets started working. Really that's success. That's what success looks
like. >> Do you think 13-3 should ever be used for a political goal or
something to fulfill a dual mandate rather than an emergency? >> Actually no,
I don't. I think the current institutional arrangements are very good. I think
we need the approval of the Treasury Secretary. Realistically, we work with
Treasury and we're constrained for very specific circumstances, unusual
circumstances. There are a number of tests in the law, and I think it's an
arrangement that works. >> Thank you, Chairman. Recently Federal Reserve
Governor Michelle Bowman gave a speech in which she discussed the evolution
enhancement of bank supervision, particularly during the COVID pandemic. In
that speech she stated that the Fed avoided overreacting and instead approach
supervision in a more measured way that allowed banks the flexibility to work
with their customers. There are a range of topics she's addressed and others
have with bank regulation. I'll just share this from her paper. She says, the
goal of this initiative is to ensure our supervisory approaches accommodate a
much broader range of activities while ensuring we don't create an unleveled
playing field with unfair advantages or unfair disadvantages for some types of
firms versus others. For that reason, I'm working on a bill that would study
the evolution of consumer finance and the viability of updating our prudential
regulatory structure through consolidation of bank supervisors. Of course,
there's some level of coordination the Fed does, but could either have you
give an opinion on scenario where the United States consolidates banking
supervision? >> That's something we'd have to look at. I know it does tend to
get looked at over intervals and it hasn't happened. I think each institution
has a different role in our society. I know we have more bank regulators in
other countries, but we do seem to work pretty well together. >> Thanks for
that. Secretary Yellen, obviously, there are a lot of provisions and a large
void in the digital asset space. In your opinion, what is a digital asset for
purposes of tax reporting? >> For purposes of tax reporting, I believe the IRS
will issue detailed regulations that will answer that question for the
purposes of tax reporting. >> Thank you. Our law hasn't really kept up with
this and frankly, it lead to regulation by enforcement, of course, with the
SEC and a host of others. But I appreciate it when you were Chair of the Fed,
the Faster Payments Initiative that got launched, a lot of this involves
payments, but so much in the digital asset space isn't a currency or a payment
system. There are a gazillion use cases and it'd be a shame to see the
regulatory framework curtail that. I'll look forward to seeing FinTech
flourishing in the future. I yield. >> Thank you. The gentleman from Florida,
Mr. Lawson, is now recognized for five minutes. >> Thank you, ma'am Chair and
ranking member, [inaudible 01:35:38]. Chairman Powell, Floridians
unfortunately have seen firsthand the impact of climate change and the impact
are only becoming worse as we experienced most severe and frequent hurricanes
and risks of rising sea level. I'm glad to see greater attention given to how
we can better assess to manage climate related risk. It is my understanding
many financial institutions conduct scenarios analysis to assess credit,
market liquidity, and operate risks related to transition risk, such as
physical risks like hurricane, flooding, [inaudible 01:36:27], and drought.
Mr. Powell, is scenario analysis a good tool to assess the climate related
financial risk? Could you please discuss the difference between scenario
analysis and stress testing? What are the tools that the Federal Reserve have
to assess climate related risks, financial risks? >> Thank you. Our role, of
course, is to make sure that the financial institutions we regulate and
supervise understand and can manage their risks, including the risks from
climate change, the financial risk from climate change. Scenario analysis is
almost certainly going to be one of the principal tools for doing exactly
that. It's very different from the stress tests. Scenario analysis at this
point is about institutions really understanding what these risks will be. How
they will develop over time? What are the channels through which they will
develop? >> It's early days in understanding how those risks will interact
with the economy and with the financial system. Scenario analysis is meant to
help do that. We at the Federal are working on developing a program of
scenario analysis. Many of the large institutions are doing so as I mentioned,
quite different from stress tests which have consequences for distributions
and that thing. I think overall, we see our job, as I mentioned, as making
sure that these financial institutions understand the risks and can manage
them and that's just a lot of basic supervisory tools. Understanding what
they're doing and to have the processes in place, and the analytical tools in
place and the focus, and that's what we'll be doing. >> Thank you. Secretary
Yellen, I'm concerned as small business, particularly within the communities
of color will have less than economic damage coming out of this pandemic. The
American rescue plan extended assistance to small business by authorizing a 10
billion program called the State Small Business Credit Initiative with 2.5
billion of these funds set aside for minority owned business. The Florida
Department of Economic Opportunity is waiting for the Treasury to release
applications, requirements, and program guidelines, when can we expect the
guidance to be released and can we share how Treasury plan to ensure that
their system knows the small business that would be highly impacted by the
pandemic. >> It's the State Small Business Credit Initiative is an extremely
important program and we are in the process of implementing it. We will
absolutely make sure that it reaches small businesses that have been very
severely affected by the pandemic and certainly in underserved areas and
communities of color. I think, you know the Congress required that Treasury
provide funds to states based on the extent of job losses that had been
suffered and it sets aside significant funds for businesses that are owned by
socially and economically disadvantaged individuals. We will make this funding
available and provide technical assistance, working with communities to make
sure that it's used as intended. >> Thank you very much. With that I yield
back >> The gentleman yields back. The gentleman from North Carolina, Mr. Budd
is now recognized for five minutes. >> Thank chairwoman and thank the
witnesses. The federal government's spending and not even talking about debt,
but just the spending here, it's expected to reach record highs this year
2021. Democrats are trying to dump trillions of what I believe is very
reckless spending into an already inflationary economy. So as percentage of
GDP, our public debt has reached 125 percent in the second quarter. Secretary
Yellen, very briefly, do you believe that there is a level of debt that is
unsustainable in our economy. If so what is that number? You can share that
with me either in dollars or as a percentage of GDP. >> Well, I believe that
the debt held by the public relative to GDP is around 105 percent. That's a
number that is higher than we've had during most of the post-war period in the
United States. But it is not a number that I think is fiscally irresponsible
or unsustainable. >> One second. Do you have the threshold that is
irresponsible, they're in percentage or in dollars. >> One way that I would
judge that is by looking at the interests burden, the real interests burden on
the debt. That really is the burden, a better measure of the burden it places
on our economy and this year that interest burden has actually been negative.
Interest rates have been exceptionally low. This dates back to before the
financial crisis in 2008, and most economists believe that there are deep
structural reasons why low interest rates are likely to continue, even if
normal interest rates move back toward a more normal levels that interest
burden,. >> Just because I want to be aware of the time constraints, thank
you, secretary. If the interest rate was zero. What is irresponsible in
percentage or dollars? >> I think that if the real interest burden stays as
historical norms, what, I'm sorry, if interest rates are zero? >> Let's say
zero, let's say as is pick one of those and let's say what is irresponsible as
a percentage or total dollars of debt. >> Well, if interest rates are zero and
negative in real terms, certainly we could have a substantially higher burden,
although there are always risks pertaining to the path of interest rates that
need to be taken account of. >> I understand. Thank you. Let me shift gears a
bit. One of my recent telephone town halls, I asked a poll question to those
who were able to join me and said, "Have you or your family noticed a sharp
rise in prices for food, gas, or electricity?" Ninety four percent of the
respondents, and it was a good sample size, they said, yes, inflation is
eating away at the buying power of every single North Carolininian. Bottom
line, inflation is a tax on working Americans. Chair Powell, I know that
you've called the inflation that we're dealing with transitory and boy, I sure
hope you're right. But what would you tell people back in my district,
especially those on fixed incomes, when they are struggling to make ends meet
right now, what would you tell them? >> I would say that we are dealing with
very unusual event that's really part of the COVID, the broader COVID event
that the economy is now reopening, that we're hitting the supply-side
bottlenecks. For example, it's hard to manufacture cars without
semiconductors, which are in short supply. So car prices are going up and lots
of prices are being affected by supply side constrictions. >> We expect that
those will abate, that they'll lesson and over time, inflation will come back
down exactly when that will happen, is not possible to say. But I would say we
should be seeing some relief in coming months and over the course of the first
half of next year. >> I hope you're right. The folks I talked to back in North
Carolina are doubtful that, but I do hope you're right. Chairman Powell, next
question. In a July hearing before this committee, you were asked about CBDC,
or the Central Bank Digital Currencies and their impact on stablecoin and
other cryptocurrencies and you stated, I think I quote you correct me here,
"You wouldn't need stablecoins, you wouldn't need cryptocurrencies if you had
a digital US currency." So, Mr. Chairman, as a matter of policy, is it your
intention to ban or limit the use of cryptocurrencies like we're seeing in
China? >> No. I immediately realized that I had misspoken there, I didn't
mean, take the word cryptocurrency out of that sense and I would say fairly
widely understood that Central Bank Digital Currencies could perform. >> But
no intention to ban. >> No intention to ban them. But the stablecoins are like
money market funds, they're like bank deposits. But they're to some extent
outside the regulatory perimeter and it's appropriate that they be regulated,
same activity, same regulation. >> Thank you. I yield back. >> Thank you. The
gentleman from Illinois, Mr. Casten. Who's also the vice chair of the
subcommittee on Investor Protection, entrepreneurship and capital market, is
now recognized for five minutes. >> Thank you, Madam Chair, and thank you so
much to our witnesses. We are truly fortunate to have you steering us through
some past and future crises. I want to talk about those, but before that I
want to just talk about manufactured crises, which I'd like to avoid.
Congress, everybody on this call in some fashion has voted to approve our
spending. Congress, everybody on this call in some fashion has voted to decide
how much of that spending will be paid with tax revenues and then somewhat
uniquely, we give ourselves the authority to decide how much of the residual
which is paid with debt we are going to pay for. It's political suicide, I'm a
co-sponsor and supporter of my friend. Mr. Foster's bill HR3305 to end the
default act and take that tool away from Congress because Congress has proven
that we cannot be trusted with that responsibility. Secretary Yellen, without
getting into the specifics of Mr. Foster spoke, would you support simply
eliminating the debt ceiling, so that we don't have to deal with this in the
future and can focus on real crisis? >> Yes, I would. Because I believe when
Congress legislates expenditures and puts in place tax policy that determines
taxes, those are the crucial decisions congress is making. If to finance those
spending and tax decisions, it's necessary to issue additional debt, I believe
it's a very destructive to put the President and myself, the Treasury
Secretary, in a situation where we might be unable to pay the bills that
result from those past decisions. >> Thank you. I'm glad to hear it and will
hopefully try to get that through Congress. Moving onto past crises. Chair
Powell, I think all of us and all of our districts are hearing about labor
market tightness and I think a lot of people are explaining that labor market
tightness to justify pre-existing political biases as you know. We saw
unemployment go from 3.5 percent to almost 10 percent, and back down to 5.2
percent. But I'm much more concerned that workforce participation went from 63
to 61 and has stayed low, can you just explain for the committee briefly, what
is driving the reduction in workforce participation and what if anything, we
can do to get that number back up to make sure that employers have access to
folks who are ready and able to work? >> I'd be glad to. The two biggest parts
of that are caretakers and retirees. That makes up a lot of the shortfall from
where we were with labor force participation before the pandemic crisis.
Within caretakers, some of that is going to be connected to schools not being
opened, or people who are afraid to go into an unvaccinated workplace and are
afraid of COVID and things like that and other reasons. That's a part of that
and that should abate over time. In terms of the retiree piece, it's not clear
about that. I would say the law is that people don't come out of retirement
except, I would say all during the last few years of the very long expansion
that ended by the pandemic, we were constantly surprised to the upside on
participation, including older people staying in the workforce longer. I think
my prayer would be that we will get back a big chunk of the so called retirees
and that we should be very open-minded about how much labor force
participation can go up. United States has low labor force participation
compared to our advanced economy peers and this is not something that has to
be that way. It's not something that's good. >> Well, thank you for that.
Certainly, when I talked to folks in the district, everybody acknowledges that
it's the boomers who retired, who are creating a lot of their skills gap and
that's hard to challenge. Going back to you, Secretary Yellen. I think
subsequent to your first epsilon carrying when you identified climate changes
and emerging threat, President Biden, issued an emergency order on climate
financial risk directing agencies including yours to analyze and mitigate
risks that climate change poses to the financial system. In the little time
we've got left, can you give us any updates on status milestones and
deliverables that the Treasury Department has in response to that executive
order? >> Yes. We're in the process of completing the report and we expect to
issue it in late October or early November within the 180 day time frame. What
we'll be doing is looking at the work of individual regulators to incorporate
climate change risks into their regulatory and supervisory activities and
describing some of the challenges that they face in carrying that out. >>
Well, thank you. I'm out of town. I will clear my calendar of time to allow
some time to read that week. I yield back to the chair. >> Thank you very
much. The gentleman from Tennessee, Mr. Custof, is now recognized for five
minutes. >> Thank you Madam Chair, for calling today's hearing and thank you
to the witnesses for appearing. >> Secretary Yellen, if I could, there was an
article in the Wall Street Journal dated September 15th. The headline is
Yellen, IRS pushed Democrats to require banks to report taxpayer annual
account flows. Now I want to read the first two paragraphs just briefly.
"Treasury Secretary Janet Yellen and IRS commissioner Charles Rettig, press
lawmakers Wednesday to give the Internal Revenue Service more information
about tax payer bank accounts as the Biden administration tries to salvage its
struggling tax compliance proposal. In letters to lawmakers the administration
officials, again ask Congress to require banks to report annual inflows and
outflows from bank accounts with at least $600 or at least $600 worth of
transactions, a proposal aimed at letting the IRS target it's audits more
effectively. It would generate about $460 billion over a decade to cover the
cost of Democrats plant expansion of the social safety net and climate change
policies according to the administration." Those are the first two paragraphs
of the story. That's an accurate reflection of what you've done, correct? >>
Yes. We have proposed both augmenting the resources of the IRS so that it can
hire qualified auditors and augmenting the information flow so that the IRS
gets insight into opaque sources of income. Both together we believe can serve
to greatly address the SIP and trillion dollar estimated tax gap that we'll
see in this country. >> Madam Secretary, and you would tell my constituents
that they should not have any privacy concerns about what you're trying to do.
>> Well, they should not, because this is a simple matter for banks that
already file 1099 INT forms. >> Madam Secretary, the IRS leaked information
about taxpayers to ProPublica. There was published their entire tax returns,
their entire tax information. On the record, you tell my constituents and all
the other members here, their constituents, that they should have no privacy
concerns about banks reporting $600 or more and account value to the IRS. >>
What we've asked to have reported is the aggregate inflows and outflows from
these accounts each year in an annual basis. Two additional pieces of
information, not transaction level data. Look, every wage earner in this
country has a wage income- >> Bank accounts of atleast $600. Is that a correct
statement? >> Well, we want to make sure that this can begin by expanding. >>
That's different from transactions. Those are values of $600. Wall Street
Journal's accurate, correct? >> Excuse me. >> The Wall Street Journal's report
is accurate, correct? >> We did propose that. I don't believe it's an invasion
of privacy. Look, the IRS gets a great deal of information that it needs in
order to make sure the taxpayers comply with the tax code. It receives
individual information on wages and salaries that are received, on dividends,
on transactions. >> How did ProPublica received this information from the IRS
about the individual taxpayers? >> Excuse me. >> How did ProPublica publish
and obtain the information from the IRS about taxpayer information? >>
Independent agencies and law enforcement are currently looking into that and
attempting to figure out how that occurred. That is clearly a crime and an
orderly, unacceptable thing and it will be prosecuted when it's understood. >>
Your proposal purports to give more information to the IRS drilling down to
accounts of $600. >> We want to make sure that individuals can't game the
system by opening multiple accounts in order to evade. >> You give the IRS all
this other information about individuals. Last question, Madam Secretary, do
you support a move to the Department of Treasury from [inaudible 01:56:10]
Security of the United States Secret Service? >> I haven't taken a view on
that. >> Thank you. I yield back my time.  NOISE  >> The gentleman from New
York, Mr. Torres, is now recognized for five minutes. >> Thank you, Madam
Chair. I'm appalled by the Republican gamesmanship around the debt limit. I
heard a republican colleague on this committee complain about not receiving a
phone call from the administration or complained that we, the Democrats are
too partisan. The Republican argument seems to be the following, that since
the Democrats had been mean to us, we are going to sabotage the full faith and
credit of the United States, to exact revenge against those who have slighted
us. That pettiness has been wandering, are we in high school or the United
States Congress? Now, it has to be said that raising the debt limit would not
authorize new spending. It would simply pay the debts of previous
administrations, including the Trump administration. The Republicans cannot
pass $2 trillion worth of tax cuts and then refuse to pay back the debt that
made those tax cuts possible in the first place. That to me is worse than
fiscal responsibility. That's fiscal hypocrisy. I support congressman Foster's
legislation abolishing the debt limit so that we're no longer at the whims of
bruised egos, slighted by unreturned phone calls. Suppose for a moment, it is
October 18th. The use of extraordinary measures is exhausted. What happens on
October 19th? >> We're simply in an impossible situation in which it will be
impossible for Treasury on that day or a few days thereafter, depending on
we'll have very limited resources that will be run down quickly. We won't be
able to pay all of the government's bills. The treasury has been directed by
Congress to pay you all of the government's bills, to use the tax revenues
that are available and without that to issue debt and the debt ceiling will
make it impossible for us to do that. >> The damage could be irreparable. >>
Well, yes. We got a taste of that in 2011 when the debt ceiling wasn't raised
until the last minute. The fact that Congress might not raise the debt limit
and call into question, whether or not what is regarded as the safest asset in
the world. Dollar denominated US Treasury debt will actually be repaid is
simply a catastrophic event. >> I want to follow up on an exchange you had
with Congressmen Bud, who asked you about the debt to GDP ratio? The US debt
to GDP ratios over a 100 percent. What is Japan's debt to GDP ratio? >> Excuse
me? >> What is Japan's debt to GDP ratio? >> It's about 250 percent. >> The
highest in the world. >> Yes, it is. >> Japan is regarded as a successful
economy. >> It is and Japan also has low interest rates and is not found
[inaudible 01:59:30] >> I agree with your premise that the cost of servicing
debt is a more reliable measure of debt sustainability and the debt to GDP
ratio. If we were to breach the debt limit, as Republicans would have us do,
we would actually raise the cost of borrowing. It would raise interest rate
payments. >> Yes, it would. >> Which would make our debt burden less
sustainable, not more. >> That is absolutely correct. It would be regarded as
riskier. We might suffer, again, of credit downgrade and coming out of that,
we could expect to see higher interest rates on Treasury debt and on the debt
that private individuals have. Mortgage debt, credit card debt, auto loans,
and everything else. >> I want to quickly ask you about a title for loan under
the Cares Act. During the Trump administration, the largest recipient of the
title for national security loan was a trucking company, previously known as
YRC worldwide and presently known as Yellow Corporation. Do you think a nearly
bankrupt trading company whose conduct is a subject of a DOJ lawsuit for
overcharging, should have received the National Security loan from the Trump
administration? >> I'm afraid I don't know the details of that and I'd be glad
to have our staff get back to you on that. >> I don't want to be clear that
this loan is the subject of scrutiny from the bi-partisan congressional
oversight commission and this select subcommittee on the coronavirus. You said
that at the end of September, the funding for the emergency rental assistance
might be reallocated up to how much funding might be reallocated? >> I can't
to give you a dollar estimate, but the objective would be to shift it to areas
where there's need and proven success in getting it out. >> If the use of
extraordinary measures is exhausted on October 18th, what does the Federal
Reserve do on October 19th? What actions do you take in response, if any?
That'll be my final question. >> I guess I would just say if there were to be
a default on our obligations. No one should assume that the Fed or anyone else
can fully shield the American people from the consequences of that. >> My time
has expired. >> The gentleman from Indiana, Mr. Hollingsworth, is now
recognized for five minutes. >> Well, good morning. I'm going to ask most of
my questions to Secretary Yellen first and foremost, I want to associate
myself with the comments that Mr. Castoff made. I love serving on this
committee. I have a great time working on the policies emanate from this
committee, but rarely does something that this committee do lead to questions
in the grocery store, questions at convenience stores and questions around my
district. But I have to tell you the proposal that has been put forth about
expanding the amount of information that the IRS is going to get on private
bank accounts has been something I've been asked about at parks, at grocery
stores, at convenience stores around the district. This has people deeply
afraid about the emergence of an apparatus that can be used against them. I
want to better understand with specificity what is being proposed. Because
what I saw in the proposal as circulated by Treasury was extremely generic and
somewhat incongruent with what I heard today. You said to Mr. Castoff that the
only things that will be reported to the IRS under your proposal is the gross
inflow and the gross outflow from that particular account in a given year, is
that accurate or inaccurate at what you have requested? >> The proposal put
forward by the administration requested a bit more information than that, but
what is under consideration now in reconciliation would be limited to those
two pieces of information. This would be what you should tell people who ask
you about this in the park. Is that right now, much of the time of the IRS is
devoted to taxpayers that have relatively low incomes. We know that the tax
gap is something that comes from opaque sources of income and from high-income
individuals. What it rates on individuals earning less than $400,000 would not
increase. >> Wait a minute? Reclaiming my time, they're not worried about the
audit rates they're worried about yielding their privacy, yielding their
transaction history to a federal government. >> There is no transaction
history. >> Reclaiming my time to a federal government that has shown itself
time and time again, mobilizing that information against individuals, against
organizations, and against businesses has shown itself incapable of protecting
that data from breaches by nation-states, excuse me, reclaiming my time. This
is deeply concerning to them, so forgive me if I won't go back to them and
say, don't worry, despite all evidence to the contrary about their past
history, the federal government really means it this time when they say
they're going to respect your privacy, when they intend to build firewalls
around this enormous database of personal information to them. By the way,
what you brought up we're doing it for a really good purpose. We're doing it
for a really good purpose. Forgive them if they don't believe that the
government is showing up on their doorstep to ask about the inflows and
outflows from their personal accounts at a very deminimus level. That is going
to be used for only their good purpose. >> There is no transaction level data
would be reported to the IRS? >> Can you clarify what you mean by a bit more
data then. When you said I asked, is it just these two things and you said
it's a bit more, what does a bit more mean? >> The proposal by the
administration that was originally put forward requested some additional
information, particularly about businesses and partnerships, but there is no
transaction level data for individuals being considered by this Congress. Why
is it okay that we have businesses report wage and salary income or companies
report dividends? >> I think you're reclaiming my time. I think there's some
real concern about growing the amount of data the federal government has
proven itself and capable of handling correctly or at some point ethically to
the IRS. I heard testimony two years ago about how China was able to apprehend
many of the protesters in Hong Kong. The way that they did that was mining
financial data, not by virtue of great law enforcement work and advocates for
tori work, but instead by mining financial data about who was scanning their
credit card in order to buy subway tickets to those particular locations. This
worries Americans who are rightly concerned about a federal government that
does not have their best interests at heart, but it's telling them that for
the greater good, they need to yield more of their privacy, more of the things
that they do in their personal accounts because we might be able to close the
tax gap for other people who are cheating. With that, I'll yield my time. >>
The gentleman's time has expired. The gentlewoman from Iowa, actually, who's
also the vicechair of the subcommittee on housing, community, and development
and insurance is now recognized for five-minute. >> Thank you, madam chair,
and thank you, Secretary Yellen, and Chair Powell for being here. It's great
to see you. Listen, we've heard a lot about inflation, of course, but I want
to do a little bit into this. Chair Powell, you recently mentioned that price
increases are relatively concentrated in particular areas. I think most folks
can understand that things like airlines and hotels, etc, industries that took
a hit during COVID, because people weren't really traveling, this could be an
issue there. However, I want to get into some other areas where we've seen
price increases. One of the biggest areas in cars both land used. I wanted to
touch base about this. Secretary Yellen, one of the key causes of the shortage
is in the prices of the increased with our cars is because of shortages of
semiconductors and production issues. Is that correct? >> Yes, that is
correct. There've been significant semiconductor shortages, particularly,
affecting cars. >> Thank you. I hear regularly from businesses in my district
about supply chain issues coming off of the pandemic that are unfortunately
holding back our company. One recently told me that their sales are down $120
million really because they're producing to supply chain. Chair Powell, we see
that elsewhere too with ships waiting offshore on both coasts, difficulties
moving goods back and forth is satirized. Is that correct? >> Yes, it is. Very
correct. It's hard to see how long that will take but will resolve itself in
time. >> That shows us also that the prices of shipping goods from China to
the US has gone up. I think that's gone up 400 percent from pre-pandemic.
That's going to, of course, add to the cost of anything we buy from China.
While we've got you to hear, I guess what I'm wondering about are, what are
the solutions? Chair Powell, if we have issues with our ports or with the
supply of semiconductors or other components, does it make much sense for the
economy to pull back on investments in the bottlenecks? Or would we do better
to expand that capacity? >> I think that's really a question for fiscal
policy. I will say these are tangled supply chains right now and it's a
combination of a bunch of factors which should debate over time. But in terms
of obviously investment in supply chains would make them more efficient over
time. >> Thank you. I want to point out here that most of the things we've
produced do require workers. I spoke to you Chair Powell about this in
February, but Secretary Yellen, you of course studied labor markets throughout
your career. When we have constraints on our supply chain, does it make sense
to limit the numbers of people able to work? Or should we instead invest in
policies like childcare that help get people into the workforce? >>
Absolutely. I think over the longer term, we've had a problem with declining
labor force participation of prime-age workers and we're proposing paid leave,
childcare support, early childhood education, supports that would help expand
labor force participation in the short run, of course, dealing with the
pandemic to make sure schools can operate on a normal schedule. Get people
back to work will help as well. >> Then there are other countries around the
world that obviously have some of these pieces put in place like better
childcare, early childhood education. In your studies with them, do you see
economic growth coming as a result of putting these practices in place? >>
Yes. It's been an important source of growth in the United States and
elsewhere. Once upon a time, the United States, just with respect to women's
labor force, participation had about the highest in the world, and that's
changed radically in recent decades as we have failed to expand and provide
the level of support for female, especially for women's labor force
participation we've fallen behind other developed countries. >> Absolutely.
Thank you. What I'm hearing, it sounds like to me that Democrats, what we're
proposing is actually a solution to some of these inflation concerns and that
doing nothing will actually exacerbate issues and make it worse. I'm for one
not in the business of telling people what they can't buy. What I'm hoping
that we can do is find solutions like childcare, like paid family leave, like
lowering the cost of prescription drugs to keep money in people's pockets so
that we can stop artificially limiting the capacity of America's economy and
get people back to work to help create more products and move products around
our country. Things like childcare, paid leave and other policies will
actually help expand the workforce. Thank you so much. >> Gentlelady's time is
expired. The gentleman from Tennessee, Mr. Rose is now recognized for five
minutes. >> Thank you, Chairwoman Waters and ranking member McHenry. I want to
thank Chairman Powell and Secretary Yellen for being here today. I'm just
going to just dive right in and I do want to follow up on a couple of things
that have been talked about quite a bit this morning, the debt limit. First of
all, I feel like there's a lot of misinformation that circulates about this.
To be clear, if we suspend the debt limit, that's to allow for the enlargement
of the debt. Some of that for programs that have been in place historically,
but much of that for that would likely facilitate new spending. I learned a
long time ago from my dad not to sign blank checks. It seems to me that if we
suspend the debt limit, that's like signing a blank check, and frankly, I'm
not willing to participate in signing that blank check if we had assurances
that that increase would go simply to cover the the current built-in costs of
operating the government, then that might be a different discussion, but
that's not the one we're having. Then Secretary Yellen I want to follow up
just for a second about the IRS reporting for bank account information and I
wonder in the administration's proposal, is there any allowance in that
proposal to defray the cost that banks and financial institutions would incur
from reporting from the added reporting expenses of providing this additional
information to the IRS? >> I don't believe it was in the administration's
proposal, but if appropriate, we would be glad to work with Congress on that
to defray any expense. >> I certainly know that the existing reporting
requirements that banks face is to be short onerous and expensive and of
course, ultimately their customers end up bearing that cost. I want to shift
gears now. In May, the Treasury Department published in the interim final rule
to implement the coronavirus state and local fiscal recovery fund. Although
the guidance was much needed, I continued to hear from cities and count mayors
across my district. Many of whom are here in town today across my district,
asking for additional clarification and flexibility. I wrote a letter to you
in July requesting this additional flexibility in the final rule. Secretary
Yellen, can you tell us when we can expect this updated guidance and if there
will be increased flexibility included. >> We've tried to provide a great deal
of flexibility in the guidance we have provided. There is an interim final
rule that's in place and states and localities can rely on it. Was out for
comment. We've received a very large number of comments that we're working
through carefully and we'll work to produce a final rule. But- >> Any interest
at all when that rule might be available? >> Later this year. But the interim
final rule is quite permissive in terms of flexibility. >> We look forward to
seeing that reclaiming my time, Secretary Yellen. Earlier this month, the
committee reported the chair woman's partisan bill that will have the effect
of slowing down in my opinion, the distribution of emergency rental assistance
funds punish landlords and expose taxpayers to fraud. Part of her bill would
replace having grantees determine if a household was in fact an eligible
low-income household as Congress intended with the self attestation that
requires grantees to accept any attestation of the household as true.
Secretary Yellen are you concerned that requiring grantees to accept all self
attestations of applicants who want to get free rental assistance money will
increase the likelihood of fraud? >> We're working carefully with Chairwoman
waters and want to make sure that we get money out in the most effective and
rapid way possible while maintaining adequate controls to prevent fraud and
abuse. >> Secretary Yellen, we've had several hearings regarding the emergency
rental assistance program that is dispersed through Treasury and yet you
haven't appeared a single one and for that matter, you failed to appear at the
Small Business Committee hearing as well. I'm going to yield the remainder of
my time to my good friend, Mr. Luca Meyer, the ranking member of the Small
Business Committee. >> Thank you, Mr. Rose, Secretary Yellen. I'm also the
ranking member of the Small Business Committee, as Mr. Rose indicated and in
last December Congress passed a Bipartisan Bill that required you to testify
and from the Small Business Committee on the paycheck protection program, that
deadline has now passed 157 days ago and you're still not there. You're
willfully refused to come for the committee and willfully refused to obey the
law. My question is very simple. Why can you, a cabinet member of the Biden
administration, pick and choose which laws you choose to follow. Please close
your vendor and please respond off the cuff. Why can you pick and choose which
laws that you respond to? >> I have testified 11 times before Congress during.
>> You never informed the small business about the share. >> Please allow me.
>> Eleven months I have agreed to do so. We've not been able to find an
appropriate date that works. I have offered, I have my - >> I can show you a
list of- >> Your time has expired. >> Come in contact with. >> The gentleman
from Massachusetts, Mr. Lynch, who's also the chair of the task force on
financial technology, is now recognized for five minutes. Excuse me Mr. Lynch,
please turn your microphone. >> I apologize to Miss Adams. First of all, as
someone for the past 20 years, has worked with both Republican and Democratic
administrations to allow our government to meet our obligations to our senior
citizens and Social Security payout troops and pay our bills. I view this
latest threat to default on our debt as a direct attack on the American people
on our government itself. Never has it been a good time to destroy the full
faith and credit of the United States. I fully support Mr. Fosters Bill House
3305, which would change the whole dynamic of raising the debt limit. I would
like to ask you about the rollout of the Cares Act. Madam Secretary, I know
that was a joint program between Treasury and the SBA. >> As Chairwoman Waters
pointed out, I chair the taskforce on Fintech, and while there was very little
connections between most of the Fintech firms and the SBA prior to the
pandemic. Once we gave them about $330 billion in the second phase of the PPP
program, the Fintechs engaged, they were able to put out I think 15 percent of
the funding through Fintech lenders to people who needed it. Unfortunately,
however, about 75 percent of the fraud that we detected was from that 15
percent that went out through Fintech lenders. These were even some of our
best Kabbage, which previously had never handled an SBA loan, they were one of
the companies that had difficulties. I'm just wondering if there were any
lessons learned about that roll out. I know we were rushed, we were pushing to
get especially the first phase, the banks took care of their favorite
customers, I understand that, and those were known entities. Then we in
Congress encouraged a further reach out for the SBA for people who were not
met and were not addressed in the initial phase. We had the rushed aspect of
it, there was also, I'm not sure what the API interfaces between the SBA and
these Fintech lenders, I know the relationships are no, but did we learn any
lessons from that interaction and getting money out to people who need it
through the Fintech companies and lenders that we used? >> Well, certainly
there are oversight and review processes that are taking place. I can get back
to you, I don't have details on what we've found about Fintech lenders, and I
guess the SBA is probably doing much of that review of the Paycheck Protection
Program. But in every aspect of developing programs that have been assigned to
Treasury, we've worked right from the outset with our offices of Inspector
General and others to make sure that we have appropriate reporting and fraud
control in place to minimize fraud in the programs and make sure that we have
controls in place. >> Chairman Powell, any thoughts on that or would you
rather take a pass? >> I'll follow up and also see if we have anything on that
for you. Of course, PPP was administered by the SBA. We did the liquidity
facility. In that part, I'll be happy to check and come back to you. >>
That'll be great. Madam Secretary, would you again talk about what happens
upon default and what that means for the American people? >> It's a
catastrophe. We're likely to end up with a financial crisis, surely your
recession, and millions of individuals who are counting on checks from the
government, not receiving those in a timely fashion and long-lasting
consequences of higher interest rates for everybody who borrows. >> Thank you
very much. I yield back, Madam Chair. >> Thank you. The gentleman from
Wisconsin, Mr. Steil, is recognized for five minutes. >> Thank you very much
Madam Chairwoman, Chairman Powell, Secretary Yellen, thank you for being with
us here today. Out of the gates, Secretary Yellen, I'd just like to note that
the proposal for bank account reporting that you do not believe to be an
invasion of privacy. I just like to be on the record that I believe that this
would be an invasion of privacy and I remain concerned with it. I'd like to
jump over to debt to GDP. In a previous question, you noted that crossing the
threshold of 100 percent of debt to GDP in the United States is now roughly
105 percent, was not fiscally irresponsible , is that correct? In a comment to
Mr Torres he was examing- >> Yes. I believe we're in a place where we can
certainly bear the burden of the debt now and in the future. >> You believe
that because we're currently in a low inflationary environment with low
interest rates, is that accurate? >> That's right, but I'm assuming the
interest rates as the economy recovers, we'll move up to a more normal level
in line with the forecasts of many professional forecasters. >> In the event
that the inflationary rate increase beyond that current forecast by the
experts that you're speaking with that would increase the burden on the debt,
would that then become fiscally irresponsible to have a debt to GDP ratio over
100 percent? >> Well, it depends what happens to real interest rates in the
economy. If they were to rise significantly, that of course poses a risk that
we need to take into account. >> I think we should absolutely take it into
account. I'm very concerned with the spending proposals from the Biden
administration and the impact that that would have in the event that we enter
a more inflationary period where interest rates increase. >> I want to make
clear that the proposals from the Biden administration are neutral with
respect to the debt path that the projections that we've shown, display
essentially a level debt path over the next 10 years and beyond 15 years
substantially reduce the outstanding debt to GDP ratio. >> I remain very
concerned about the debt path that the Biden administration is taking us on
and a whole array of spending proposals that we're seeing. Let me shift gears
slightly over to you, Mr. Chairman Powell, if I can, and build on this topic
as relates to inflation. It something I've spoken with you many times about,
in particular in this committee in July, December of last year, and in those
times you've suggested, I think you've continued to state, the Fed's not ready
to take action to head off inflation, yet we're continuing to see prices to
increase. We saw consumer prices increase 5.4 percent year-over-year more
recently and regardless of what the White House press team says, I think
people are really seeing the impact of higher prices day in and day out. >>
Now, I know that you've said many of these you believe to be transitory, that
you think they'll come down. But here's my concern, is that individual in the
public expectations are beginning to change as people truly see the price
increases when they go to fill up their car with gas, when they go to a
grocery store, when they go back to school shopping. In a recent poll, we saw
87 percent of Americans that are concerned about inflation, and New York Fed
report reported the consumers expect to see higher inflation over the medium
term, and so can you provide a little colors to what you think, how the Fed's
going to respond to consumers expecting to see inflation? >> Well, essentially
what would need to happen for inflation to remain high year upon year upon
year, is we'd have to have a new inflation regime in which people began to
enter their psychology and they began to think that it was coming and expect
that it was coming. >> But with others, don't we see that evidence in some of
the Fed report that showed that people are expecting inflation or no. >> Well,
we don't measure these things precisely, but we do measure them a lot, and
there are many different measures , and broadly speaking, those measures are
at levels that are consistent with our two percent inflation goal, not for the
near term but for the medium and longer term. But nonetheless, that's the
right issue. We monitor that very carefully and to the extent we were to see
expectations probably drifting up and the regime changing. We would certainly
use our tools to make sure that inflation is consistent with our goal. >> I
appreciate you're tracking this because I believe as Americans are looking at
the runaway spending here in Washington DC without a long-term plan to pay for
it, that these expectations of inflation will continue to increase and as the
expectation plays out, as you noted, I think we'll see real inflation the
future having a significant impact on the debt burden that the debt to GDP
ratio holds. Recognizing the time I yield back. Thank you for being here. >>
Thank you. The gentlewoman from north Carolina Ms. Adams, is now recognized
for five minutes. Please unmute. >> Thank you, Madam Chair. Secretary Yellen,
Chairman Pao, thank you both for being here. I'd like to follow up on a
question that Senator Brown posed to both of you on, I think Tuesday. He
raises an excellent point that no Black woman has ever served on the Fed's
Board of Governors, and you both indicated that you want diverse viewpoints
represented at the highest levels of our economic policymaking bodies, and
last year we had our own [inaudible 02:29:48] directors testifying before us
about their efforts to diversify your entities. But I'd like to hear directly
from you both, what are you doing in your respective organizations to
encourage appointment and hiring of black and brown women at all levels of
seniority, and have you consider recruiting on the campuses of HBCUs and other
MSIs? >> Well, I can start off and say that we have a very active program at
all levels at the Treasury Department, including political appointments, at
recruiting a diverse workforce in leadership. I think if you look at the
appointments that we've made or proposed, that we've made good on that
commitment and continue to give it the highest priority with respect to the
Federal Reserve. I and others will provide advice on nominations to the
president, will be up to him to nominate individuals to serve at the Fed
board, and we certainly will ensure that he has a diverse slate of candidates
to consider in making these appointments. >> Thank you. Mr. Powell. >> We
worked very hard to recruit diverse talent, diverse people to the board, and
we worked very hard to keep and make sure that the people that we do succeed
in recruiting have good opportunities, are included in opportunities to learn
and have as many opportunities as they can have so that they can have a career
at the Fed. It's very high profile focus for us. >> Thank you. Secretary
Yellen, it's always a pleasure to have me before us in case you don't know,
like you as a professor for over 40 years, and I tell folks all the time that
I might not be in the classroom anymore, but I still enjoy educating those of
us here in Congress, and so if you don't mind I'd appreciated it if you'd take
us back to the classroom I'm in and help educate us a bit. So do you believe
economic recovery is strong enough to handle the withdrawal of current
pandemic relief efforts? >> Well, I think the relief efforts have been very
important in stimulating a strong recovery, and I mentioned in my opening
remarks that the United States is outperforming most other developed. We had a
good deal of impetus or stimulus this year and it will diminish substantially
next year. Nevertheless, most forecasters in the administration believe that
the recovery will continue and that private spending will be sufficient to
have us pass the baton to it and keep the economy growing. We're in the middle
of, as you know, with reconciliation and the programs under consideration
there are really on spread out over 10 years, provide some modest stimulus in
each of those years. But at a much lower levels than the risk you planned
oriented towards structural issues in the US economy. Thank you. So now we
know I mentioned he is to ensure that the economy continues to recover for all
Americans. So if Congress fails to raise our statutory debt limit by
mid-October, what would the effect be to the economy? >> It will be
devastating to the economy. We'll be unable to pay your bills for the first
time in American history. It could provoke a financial crisis and a recession,
and it will harm every American. >> Thank you. It's irresponsible I believe
that my colleagues in both the House and Senate would risk our recovery from
this pandemic for political points, I'm glad here that you agree, and I look
forward to this body protecting all Americans, by doing the right thing and
raising the [inaudible 02:34:13] >> Thank you very much. >> The gentleman from
South Carolina, Mr. Timmons, is now recognized for five minutes. >> Thank you,
Madam Chair. Secretary Yellen, Chair Powell, thank you for being here with us
today. Just yesterday, Speaker Pelosi gave oxygen to the idea that President
Biden has the ability to mint a trillion dollar commemorative coin made of
platinum deposit in the Federal Reserve and then use that to pay our bills. A
number of other members who also had adamantly promoted this proposal too
include Congressman Nadler. Just Tuesday, my colleague Al Cross tweeted
#MintTheCoin. Chair Powell, please tell me you think this idea is as
ridiculous as it sounds. >> Really, that's not a question for me. >> I had a
feeling you would say that. I just wanted to start there. Madam Secretary,
please tell me that this is not a legitimate policy proposal and that this is
not something that we're considering. >> I believe that the only way to handle
the debt ceiling is for Congress to raise it and show the world the financial
markets in the public that we're a country that will pay our bills when we
incur them. >> I really appreciate the response more than you can possibly,
though. Thank you so much. That cuts some of the next few things I was going
to say short. We are not going to mint a trillion dollar coin. These are not
serious policy proposals. Speaking of serious policy proposals, I want to talk
about what Congressman Kustoff and Congressman Hollingsworth touched on. I
guess it's changed because as the Biden administration proposed it, it was
originally all transaction histories of any account with more than $600 in or
out of it. You testified about 15 minutes ago that it's now in reconciliation.
It's not being considered, it is just the account balance , so it's changed?
>> I never said that the administration ever proposed collecting detailed
transaction data from individuals. That is never anything that the Biden
administration contemplated. >> You just said it's changed since the original
proposal to what is now being considered. How does it change? >> A few
additional pieces of information were contemplated for businesses. >> It's
getting better. It's moving in the right direction because I've had a number
of banks and credit unions reach out to me. It's remarkable. Generally, they
do not agree. They are in agreement that this is a terrible proposal. I know
that we're trying to figure out how to pay for five trillion dollars in
spending, but just as Mint the coin is not a serious policy proposal. This is
not a serious policy proposal. >> This is a very serious policy proposal. We
have a seven trillion dollar estimated tax gap that we have a great deal of
tax avoidance by individuals and businesses. Typically, very high net worth,
high-income individuals and businesses that have opaque sources of income that
are not paying the taxes that we do. >> Respectfully, what does it have to do
with $600 accounts? That's every single account of, what was it, 99 percent of
Americans? >> Well, listen. Banks already report interests amounting to over
$10 to the IRS on every account in the country. This proposal involves two
additional pieces of information that are not at the level of individual
transactions, and this will help low-income individuals who now are
disproportionately subject to audits by the IRS. What this will do is let the
IRS focus its compliance efforts on those individuals who are avoiding paying
the taxes. >> Madam Secretary, please. We had a hearing just yesterday in this
very room about the under-banked and the unbanked, and one of the biggest
concerns is about privacy. For us to make it far more challenging for people
to trust the very system, we're hoping that people use the banking system, the
backbone of our economy. We're moving in the wrong direction here, and I
appreciate that we have changed the expectation from the original proposal to
now what's being considered reconciliation, but the American people don't want
this. They don't think it's reasonable. Go ahead, and this is what's going to
happen. It's going to get pulled out because there's no support from the
American public and it's not going to happen. With that, I yield back. Thank
you. >> Thank you very much. I'd like to thank Secretary Yellen and Chair
Powell for their testimony today. Without objection, all members will have
five legislative days within which to submit additional written questions for
the witnesses to the Chair, which will be forwarded to the witnesses for their
response. I ask our witnesses to please respond as promptly as you're able.
With that objection, all members will have five legislative days within which
to submit extraneous materials to the Chair for inclusion in the record. This
hearing is adjourned, and I thank our witnesses so very much for being here.
We have the hand to stop now right at 12:15. We're on time. Thank you very
much