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tv   Federal Reserve Chair Testifies on Monetary Policy  CSPAN  July 15, 2021 2:34pm-4:52pm EDT

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♪ >> peter us knows has published hundreds of nonfiction books in his career as founder of the new york-based public affairs book. he's written a memoir about his own life. the national book review rights, aust knows has not written a memoir so much as a report from the front. many fronts. the great news events of the past century. we talk with mr. oz knows about his time in vietnam and the soviet union, among other things. >> peter snow's, on this episode of podcasts. -- book notes+. >> the federal reserve chair, jerome powell, testified earlier about the u.s. economy inflation and u.s. labor shortages. he took questions from members
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of the senate banking housing and senate affairs committee. >> today, our economy is growing because the america rescue plan and the biden harris administration's leadership. putting shouts and arms and money in pockets, families have a little bit of extra help to pay the bills. beginning today, july 15, most
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parents will see a $250 or $300 monthly payment in their bank accounts for each child. 92% of children are eligible in my state. small businesses are reopening their doors, workers are safely going back to work, often at higher wages. last month, we added 850,000 jobs to the economy since president biden took office. we gained 3 million jobs more than any -- more in the first five months of any presidency in modern history.
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the fastest way growth since ronald reagan said it was morning in america. that is what happens when we invest in our greatest asset, the american people. instead of hoping money trickles down from large corporations, it never does, and pretty much every senator sitting on both sides of the aisle here knows that. we invested directly in our workers and our small businesses in our community's. when workers win, our economy wins. when everyone -- when everyone does better, everyone does better. you said the fed can help make the economy work for everyone by ensuring a strong and competitive labor market, one where everyone can get a job, one where employers actually come feet for workers. -- compete for workers.
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these are the places often overlooked or worse preyed on by large corporations and wall street banks. any of these committees watched for decades as investments dried up. companies closed down factories and moved good paying union jobs abroad. small businesses struggle to compete against big box chains, big banks buy up smaller ones only took close branches, leaving check cashers and payday lenders as the only options. thing about the opportunity and growth we can unleash in this country if we gave these communities the investment to
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fulfill that potential. of course, we know what happens whenever the economy starts to grow. the largest corporation and biggest bank throw their efforts and resources in finding ways to direct those gains to themselves. last year, during a global pandemic and deep recession, ceos paid themselves 299 times what their average worker made. even bigger before the pandemic. imagine the windfall they will try to rake in during this boom. we have seen it over and over, consumer -- stock buybacks, while complaining about workers demanding higher wages. big banks break in cash and spend it on executive compensation and dividends and buybacks and the fed has usually allowed them to instead of lending and communities reducing capital to reduce risk. the fed should be fighting this trend protecting progress from wall street greed and
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recklessness not making it worse. during your tenure, the fed rolled important safeguards making it easier for the big banks to pump up the prices of their stock and boost their already enormous power in our economy. wall street would have you believe removing those protections has increased lending and support of the real economy. we've been assured the banks have plenty of capital to withstand the crisis. but during the pandemic it was community banks and credit unions, not the megabanks that increased lending. the fed supported the biggest banks to the tune of hundreds of billions of dollars. they spent it shockingly on themselves while small business is trying to get ppp loans couldn't sometimes get their phone calls return. we have to try something different. we need a banking system that works for everyone. we can't another biggest banks to funnel the extra cash and their funds in to stock buy backs. we can't let big banks merge into bigger and bigger banks and making small are banks harder to compete.
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living communities behind. we need banks to serve communities still scarred, still scarred by the legacy of black codes and jim crow and red lining. we can't allow repeat performance of the years during the last recession. wall street destroyed our economy. cost families their jobs and their homes and their savings and them came roaring back. families limped along behind them. for the vast majority of americans who get money from a paycheck and not a brokerage account, the economy never looked that great in the years that followed. long term interest rates are not enough, if every decade a financial crisis hits and strips away what people worked so hard for. low unemployment is not enough if the jobs pay rock bottom wages and workers have no power. gdp growth isn't enough, if it only benefits those at the top and not the workers who made it possible. we need to create a different system, one that's stable for the long run.
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one where workers, not wall street, reap the benefits. charman powell, you're in charge of ensuring financial stability and overseeing the biggest banks. both those jobs are equally important. they affect workers jobs and paychecks. as public servants our responsibility, your, mine, toomey, our responsibility is to the people that make this country work. it's up to us to grow an economy that delivers for them not just those at the top. ranking member. >> thank you, mr. chairman. welcome back, chairman powell. the company has come roaring back from covid. gdp is above its pre-pandemic levels now, and the fed forecast gdp will grow by an amazing 7% this year. the unemployment rate is already at 5.9% which the fed expects to fall to 4.5% by the end of the year. to put that in context, the average unemployment rate for the last 20 years before the pandemic was 6%. with these conditions, the fed's rationale for continuing negative real interest rates and
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a $1.4 trillion in annual bond purchase is puzzling. the fed's policy is especially troubling, because the warning siren for problematic inflation is getting louder. inflation is here. it's more severe than most including the fed itself expected. it is more than offsetting the wage gains so leaving workers worse off despite their nominal wage increases. for the third month in a row, the consumer price index was higher than expectation, core cpi, which excludes volatile categories like food and energy, was up 4.5% in june. the highest reading in 30 years. to be clear this is beyond the so-called base effects. two year change in core cpi was at a 25 year high. with housing prices soaring to unaffordable levels, i have to ask, why is the fed still buying $40 billion in mortgage backed
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bonds each month? the fed assures us this inflation is transitory, but its inflation projection over the last year have not inspired confidence. last june, the fed projected pce, one standard measure of inflation, would be 1.6% for the 12 months ending 2021. then in december, the fed raised that figure up to 1.8%, and now the fed's most recent forecast for 2021 year end is 3.4%, more than double what the fed thought inflation would be a year ago. but in coming months, the fed is almost certain to revise that projection up yet again, because so far this year, pce has already risen by 6.1% on an annualized basis. so for the rest of the year, inflation would near to be nearly zero for the fed's latest projection to be proven correct. i'm very concerned that the fed's current paradigm guarantees it will be behind the curve, if inflation becomes problematic and persistent for several reasons. first, as i pointed out, the fed has consistently and
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systematically underestimated inflation over the last year. second, the fed has announced it will allow inflation to run botch its 2% target level. it's already well above 2%. and third, the fed insists the inflation rate we're experiencing now is transitory, despite the fact that recent unprecedented monetary accommodation has driven the inflation. since fed has proconvenient unable to forecast the level of inflation, why should we be confident that the fed can forecast the duration of inflation? and, after all, you can only know something is in fact transitory after it's ended. what if it doesn't end? if it's wrong, by the time the fed knows and acknowledges that it's gotten it wrong, we could have a big problem on our hands, and past experience has shown it's very difficult to get the inflation genie back in the bottle, once it's out. the fed may have to respond by raising interest rates much more
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aggressively to reign in significant inflation. that could have severe consequences. the fed's current monetary approach seems it need to prioritize maximum employment over price stability, despite the fact that employment policies enacted by congress are clearly impeding our ability to get back to maximum employment. i would argue, it's not the fed's job to offset flawed congressional policies at the expense of its price stability mandate. when the fed subordinates its price stability mandate to maximize employment, the fed risks failing on both fronts, because you need stable prices in order to achieve a strong economy and maximize employment. this is not a partisan argument. prominent democratic economists
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including larry summers and many others have expressed their concern about the risk, the risk of rising and persistent inflation. lastly, i just want to acknowledge the unique and crucial role played by the fed in our economy, and some of the responsibilities that attend to that. the ability to direct interest rates and control the money supply is an extraordinary power, and congress has given the fed a great deal of operational independence, in order to isolate it from interference, but congress also gave the fed narrowly define mission. -- a narrowly defined mission. i'm troubled by the fed especially some of the regional banks misusing this independence to wade into politically charged areas, like global warming and racial justice. i would suggest that instead of opining on issues that are clearly beyond the fed's mission and expertise, they should focus on the mission, that's controlling inflation. if it doesn't, the fed will find its credibility and independence may also have turned out to be transitory.
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thank you, mr. chairman. >> we have an 11:00 vote. i informed the ranking member and chair we'll work straight through and not break during that 11:00 vote. we'll just figure that out. i will introduce today's witness. today, we'll hear from jerome powell and the state of u.s. economy. under law, he comes before us twice a year, at a minimum. the federal reserve plays a key role in making sure our economy and banking system work for all americans. chairman powell, thank you for your years of government service and for you testimony today. you're recognized. >> thank you. chairman brown, toomey and other members of the committee, i'm pleased to present the report. at the fed, we're strongly committed to achieving the monetary policy goals that congress has given us. maximum employment and price stability. we pursue these goals based solely on data and objective analysis, and we are committed to doing so in a clear and transparent manner.
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today i'll via the current economic situation before turning to monetary policy. over the first half of 2021, ongoing vaccinations have led to a re-opening of the economy and strong economic growth, supported by accommodative fiscal and monetary policy. real gdp is on track to post its fastest rate of increase in decades. household spend is rising at a rapid pace. -- spending is rising at a rapid pace. boosted by strong fiscal support, financial conditions, and re-opening of the economy. housing demand remains very strong and. overall business investment is increasing at a solid pace. as described in the monetary policy report, supply constraints have been restraining activity and most notably in the motor-vehicle industry, where the worldwide shortage of semiconductors has sharply cure tailed production so far this year. conditions in the labor market have continued to improve, but there's still a long way to go. labor demand appears to be very strong. job openings are at a record high. hiring is robust. many workers are leaving their jobs to search for other ones.
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employers added 1.7 million workers from april through june. however, the unemployment rate remains elevated in june at 5.9% and this figure under states the short fall image employment particularly as participation in the labor market has not moved up from the low rates that prevailed for most of the past year. job gains should be strong in the coming months, as public health conditions improve and as some of the other pandemic related factors weighing on them diminish. as discussed in the monetary policy report, the pandemic induced declines in employment last year, the largest workers with low wages and african-americans and hispanics. despite substantial improvements for all ethnic groups, the hardest groups have most ground left to regain. inflation has increased notably and will likely remain elevated. before moderating. inflation is being temporarily
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boosted by base effects, as the sharp pandemic related price declines from last spring drop out of the 12 month calculation. strong demand in sectors where production bottlenecks has led to especially rapid price increases for some goods and services, which should partially reverse as the effects of the bottlenecks unwind. prices for services that were hard-hit by the pandemic have also jumped in recent months, as demand for these service has surged with the re-opening of the economy. to avoid sustained periods of unusually high or low inflation, the fomc monetary policy framework seeks longer term inflation expectations that are well anchored at 2%. the inflation objective. measures of longer term inflation expectations have moved up from their pandemic lows and are in a range that's broadly consistent with the foic's inflation goal. two box in the july monetary policy report discusses recent
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developments in inflation and inflation expectations. sustainably achieving maximum employment depend on a stable financial situation. we continue to monitor one nobility is here -- monitor vulnerabilities here. while asset valuations have generally risen with improving fundamentals as well as increased investor appetite household budget are quite strong. business leverage has been declining and institutions at the core of the financial system remain resilient. turning now to monetary policy, at our june meeting, the fomc kept the fun's rate at zero and maintained the pace of our asset purchases. these measures along with strong guidance on interest rates will ensure monetary policy will continue to deliver powerful support to the economy until the recovery is complete. we continue to expect that it will be appropriate to maintain the current target range for the fed fund rate until labor market
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conditions have reached levels consistent with the committee's assessment of employment and inflation has risen to 2%. it is on track to exceed 2% for some time. we'll aim to monitor inflation above 2% for some time. as always, in assessing the appropriate stance of monetary policy, we will continue to monitor the implications of incoming information for the economic outlook and would be prepared to adjust the stance of monetary policy as appropriate, if we saw signs path of inflation or longer term were moving materially and persistently beyond levels consistent with our goal. in addition, we're continuing to increase our holdings of treasury securities and agency mbs securities at least at their current pace until substantial further progress has been made towards our maximum price stability goals.
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these purchases have materially eased financial conditions and are providing substantial support to the economy. at our june meeting, the committee discussed the economy's progress towards our goals since we adopted our asset purchase guidance last december. while reaching the standard of substantial further progress it is still a ways off, participants expect that progress will continue. we will continue these institutions at coming meetings. as we've said, we will provide advanced notice before announcing any decision to make changes to our purchases. we understand that our actions affect communities, families and businesses across the country. everything we do is in service to our public mission. the resumption of our fed listens initiative will further strengthen our ongoing efforts to learn groups about how they are recovering from economic hardships brought on by the pandemic. we will do everything we can to support the recovery and foster progress toward our goals of maximum employment and stable prices.
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thank you, i will look forward to you are discussion. >> thank you, chair powell, for your testimony. our economy looks a whole lot better today than it did last year. we still have a long way to go, yet many of my republican colleagues have been stoking inflation fears, demand that go we pump the brakes on our economic recovery, complaining that we are just investing too much money in the american people. if my colleagues are suddenly concerned about the costs that have been rising for workers and families for decades, they can join democrats in the fight to raise wages, to lower the cost of health care, to make housing more affordable, to pass the american jobs plan. of course, most of them won't say aloud what all this inflation alarmism is all about, it's simply they don't want workers to have more power. in reality, the biggest risk to our economy, mr. chairman, is not doing enough to empower workers, and not doing enough to curb wall street greed in excess.
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so, chair powell, my question is, you have supported vice chair corals as the vice chair -- his efforts to weaken capital requirements through the largest banks through the stress buffer and oversaw weakened stress tests which decide how leveraged the biggest banks are. governor brainard has pushed back against your efforts to weaken financial regulations, president rosengren of the boston fed made the case that strong regulation enables the fed to be more aggressive in its full employment mandate. the president of the cleveland fed and the president of the minneapolis fed are outspoken on the need for the board to keep its eye on financial stability, weakening financial safeguards doesn't help working families, it just increases the risk of a financial crisis, wiping out everything they've worked so hard for. we're finally making progress as i had said earlier, and workers are getting a better seat at the table. we can make the economy safer and fairer with higher capital
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requirements of the biggest banks. my question, mr. chair, is why have you been against stronger capital requirements and using the countercyclical capital buffer in curbing run away executive bonuses and stock buy backs? >> so i guess i would say with the stress test -- the severity of the stress test has very much been maintained, the effect of the stress capital buffer overall was to raise capital requirements for the largest firms, and they did manage to get through the recent pandemic and the acute phase of it and the recovery and did their jobs during the -- so i think our -- i think that by and large our financial institutions are well capitalized. we limited their distributions during the pandemic and their capital levels rose quite materially, during the course of the pandemic. so the financial system is strong and the banks are strong. i have felt and i've said on a number of occasions that the
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level of loss absorbing capital in the system is about right. i think the experience of the pandemic bears that out. i would be prepared to deploy the countercyclical capital buffer, if i thought that the conditions we laid out were triggered, but i haven't so far felt that way. >> every time the fed -- thank you for that answer. every time the fed has taken action to lower capital standards, it claims that doing so would increase lending in the economy and otherwise promote economic growth. that hasn't been what's happened, instead, buy backs, dividends, executive compensation have continued to go up even during the pandemic. we empower workers by maintaining tight labor markets and strong financial regulations. i believe strong financial regulation enables the fed to be more aggressive in helping workers, and that should be your mission. it's time, mr. chair, respectfully, you changed the way you think about regulating the biggest banks. one other question, mr. chair.
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in addition to adopting pro-worker financial stability policies, the fed can further help communities of color by leading the push for a strong update to the community reinvestment act, we've seen some good developments there with a different controller of the currency. last year, the fed unanimously released a framework for modernizing cra that was well-received by representatives of the civil rights community and by banks. my question, mr. chair, is the federal reserve still committed to full, not piecemeal, full cna modernization with an inner agency approach and what is the timing? >> we're very much committed to that outcome, and i feel good about where we are on this. we're resuming our interagency discussions on it, and i'm optimistic we will come out with something that has broad support among the community of intended beneficiaries, and also among the financial institutions, and that it will be a good solid updating after many years into the more technologically enabled era that will help the intended beneficiaries quite a bit.
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>> and the timing, mr. chair. >> working on it now. we're reacting to a very large quantity of comments and discussing that with particularly with the occ, but also the fdic it's not clear what their role will be at this time, but we hope they will join in. i think we will be making visible progress in coming months, i can't give you a finished date yet, but i think we're moving now. >> thank you. we will be watching. senator toomey. >> thank you, mr. chairman. chairman powell, in your testimony, you said that substantial further progress is still a ways off for the economic recovery, and i think you cite that as a justification for the extremely accommodative policy that you have. i don't think you are referring to the need for substantial further progress in gdp growth, i think it's employment that you're thinking of, the unemployment rate has declined dramatically, but it hasn't reached the pre-pandemic lows.
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i think you've also made references to the workforce participation rate. i guess my question is, isn't it entirely possible that for a variety of factors, not the least of which is legislation that we've passed, the labor force participation rate may not get back to the record highs that we recently saw? and we've made it more difficult for the unemployment rate to get back to the record lows that we were at before, and do you take that into account when you determine how much progress we've made towards full employment? >> so, what was happening toward the end of the very long expansion, longest expansion, was that people were staying in the labor force later into their careers, and so labor force participation consistently remained above all estimates of where it was going to be. then, what happened in the pandemic was a lot of those people retired. so there have been really significant amounts of retirement. so the truth is, we don't know
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where that's going to settle out and it will take a period of years for us to really understand what the new trend is. i don't see that as a problem for the standard we've set forth for tapering asset purchases which is substantial further progress. we are not going to need to know the answers to those questions to make a decision that we've made substantial further progress. it will be more of a consideration for raising rates where we've set a higher bar. >> okay. i just -- i just hope there is a focus on the distinct possibility that we are just not going to get to those levels anytime soon. let me turn to housing prices a bit. the home price index showed housing prices across the u.s. as a whole increased in may by more than 15% from the previous year, and that wasn't a base effect, there was no big decline in may of last year. 15% clearly is making housing less affordable, more out of reach for more people. so the number of voices within the fed seem to be increasingly concerned about this.
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the st. louis fed president james bullard said this week that he is, quote, a little bit concerned that we are feeding into an incipient housing bubble. dallas fed president kaplan said that the fed should begin tapering to begin offsetting, quote, some of these excesses and imbalances, the boston federal president raised alarms that the fed's mortgage backed security purchases may be contributing to the current boom in real estate prices, citing the potential financial stability implications. i guess, you know, i've been clear for a long time, i've been very skeptical about the ongoing mortgage backed purchases. are you at all concerned about the unintended consequences that are associated with $40 billion of mortgage backed security purchases that continue month after month? >> so housing prices are going up, as you mentioned, around 15%. this is a very high rate of increase. a number of factors are contributing, monetary policy is certainly one of those factors. there are also other factors, people have very strong balance
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sheets, so they're able to make downpayments, there are also supply factors that are constraining the supply at least temporarily. you know, our best -- my best thinking is that the difference between treasury purchases and mbs purchases for this purpose is not a large one. probably mbs purchases are somewhat more supportive of housing. that's not their intent, but it may be the effect. really, the larger point is that monetary policy is supporting this, and that is something -- that is a discussion we are going to be having on an ongoing basis. we talked about some of these things at our last meeting and we will talk about it at the next meeting in a couple of weeks. >> i think that's important. let me close with a question on a central bank digital currency. during your testimony yesterday, i sensed what i wasn't sure, but thought might be a change in your tone about the virtues of a central bank digital currency being issued by the fed.
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one of the things you said yesterday is that one of the stronger arguments in favor of a cbdc is that, quote, you wouldn't need stable coins, you wouldn't need cryptocurrencies if you had a digital u.s. currency. isn't the reverse also true, if you have stable coins, cryptocurrency is in use, maybe there is no need for a central bank digital currency? i guess two points. it is my view that the development of a central bank digital currency by the fed would require congressional authorization. i'm wondering if you share that view. and secondly, it is still not clear to me what problem a central bank digital currency would solve, and i wonder if you think there are problems that only a central bank digital currency can solve. >> first, i'm legitimately undecided on whether the benefits outweigh the cost or vice versa on a cbdc. yesterday, i was answering a
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direct question, and i said in favor, that would be one of the stronger arguments. i would agree that the more direct route would be to appropriately regulate stable coins, which were not -- we don't do right now, and that's going to be a very important thing that we do do. so in terms of congressional authorization, you know, there are different views on that. i've said publicly, and i think this is right, that we would want very broad support in society and in congress and ideally that would take the form of authorizing legislation as opposed to a very careful reading of ambiguous law to support this. it's a very, very important initiative, and i do think we should ideally get authorization. in terms of what the problem is to solve, i think that is exactly the right question. i think our obligation is to explore both the technology and policy issues over the next couple of years. that's what we're going to do so that we are in a position to make an informed recommendation, but again, my mind is open on this, and i honestly don't have a preconceived answer to these questions. >> thank you, mr. chairman.
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>> senator menendez of new jersey is recognized. >> chairman powell, as the federal reserve seeks to fulfill its mandate of maximum employment, i want to ask you -- discuss with you the tremendous impact that immigration has on the labor force. isn't it true that over the past ten years the immigrant labor force participation rate has been consistently higher than that of native-born workers? >> i believe that's right. yeah. >> let me help you verify that. the st. louis fed noted in their study that as of june, 2021, the foreign-born labor force participation rate is 3% higher than the native-born rate, and that gap hasn't ever been lower than nearly 2% for the past ten years. and an important but often overlooked characteristic of these immigrants is their youth. according to the bureau of labor statistics, 71.8% of foreign-born workers are between
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age 25 and 54 years of age compared to 62.2% of the native labor force. so, as the american labor force ages, will immigrants and therefore immigration policy play an increasingly important role in maintaining a healthy u.s. labor force therefore a healthy economy? >> senator, i'm going to stay away from making any recommendations on immigration policy, it's not in our wheelhouse. i will say that labor force growth is one of the two things that can drive the top line, the other being productivity growth. you know, in recent years, immigration has been a significant part of -- accounted for a significant part of growth in the workforce. >> well, i appreciate that. i'm not asking you about immigration policy. what i am saying is that one of the newest studies shows that nearly one in four americans is projected to be 65 years of age or older by 2060.
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so, while america gets older, the overall population is growing at a slower rate than it has in almost a century, leaving unfilled job openings in a future american committee. -- future american economy. i think we should be looking at our immigration policy, whatever that might ultimately be, i have my own idea, the u.s. citizenship act, as a source of dealing with the labor market. now, let me continue on the question of the labor market. one part of the fed's dual mandate is to maximize employment and understanding what factors inhibited people's ability to work, as a key to helping achieve that goal. on page seven of your monetary policy report, and i will quote directly from it, the effect of the pandemic on employment was the largest for workers with lower wages, workers with lower educational attainment, and for african americans and hispanics -- and these hard-hit groups still have the most ground left
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to regain. and the pandemic seems to have taken a particularly large toll on the labor force participation of mothers, especially hispanic mothers. >> that's very much true. >> so have disruptions in child care due to the pandemic had a negative effect on employment? >> yes, they have, and also schools being closed. caretakers generally are having a hard time getting back into the labor force for that reason. >> the federal reserve's data shows that the pandemic's effect on child care caused 9% of all parents to be unable to work late last year, and an additional 14% of parents had to decrease their hours, and this effect was especially pronounced among black, hispanic, and low income households. is the effect on child care, unemployment, isolated only to the covid pandemic? >> sorry? >> is the effect of the availability of child care that
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is affordable on employment isolated only to the covid-19 pandemic? >> i'm going to guess really that the answer to that would be no. >> yeah, and it is no. studies have shown that working families pay, for child care, 35% of their income on average, five times more than what the department of health considers affordable. so it seems to me that increasing the availability of high quality affordable child care, like what president biden proposes in the american families plan, has a positive effect on employment, enables businesses to more easily find qualified workers, and ultimately helps address supply bottlenecks. the same fed study i just cited notes that reducing or offsetting the cost of child care has a particularly strong employment effect on black, hispanic, and low income families. the pandemic showed all of the
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inequalities in our nation highlighted in a way so dramatically and particularly communities of color. now the employment challenges we all talk about, wanting to get people to work, the employment challenges that people have in being able to work, and they as i have shown in the fed -- st. louis fed statistics -- more gainfully employed the native born. it seems to me we should be working on making the pathway easier, so that businesses can have qualified workers. thank you, mr. chairman. >> senator rounds of south dakota is recognized for five minutes. >> thank you, mr. chairman. chairman powell, once again it's good to see you, sir, and i have most certainly appreciated the time that you spent trying to not only educate us, but also to work with us. i understand that clearly, you've made it your mission to adhere to the guidance for the fed, in which you worked to maintaining 2% inflation over a
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period of time, as well as full unemployment -- or full employment. when we talk about it, it's always a combination of which one you're more focused on and how you maintain that, while at the same time, responding appropriately in a nonpolitical way to the actions of congress and the administration. i'm just curious, with regard to today's position, we're coming out of a pandemic, we've put a lot of fuel into the economy with direct payments, and so forth, and people are trying to get back to work right now, and yet we've got inflation, which right now in this current state, seems to be above a 2% rate. can you talk a little bit about the measurements time period that you believe is appropriate for shooting for a 2% goal, and if there is a concern that you would express, or that you follow up with, when we talk about overinflating or perhaps
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putting fuel in? what concerns you would have and how you would respond to congressional activity. >> so, the inflation that we have today, what we said is that if inflation runs below 2% for an extended period, we want inflation to reason moderately above 2% for some time. this is not moderately above 2% by any stretch, this is well above 2%, and we understand that. and it's also not tied to the things that inflation is actually tied to. which is a tight economy and labor marker. -- labor market. this is a shock going through the system associated with reopening of the economy and its driven inflation well above 2%. of course, we are not comfortable with that. in in terms of the tests we articulated, we didn't tie ourselves to a formula. what we really want a inflation
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-- want is inflation expectations to be anchored at 2%. if they are not, there is not much reason to think inflation is at 2%. the challenge we're confronting is how to react to this inflation, which is larger than we or anybody had expected and to the extent that it is temporary, then it wouldn't be appropriate to act to it, but to the extent it gets longer and longer, we will have to continue to reevaluate the risks that would affect inflation expectations, and will be of a longer duration. that's what we're monitoring. >> you've been very careful, and i have appreciated the fact that you have done your best to be apolitical in this regard, and yet, at the same, time we're going to have a debate about whether or not we need to add additional fuel to the economy in terms of additional payments to individuals. and as we make that discussion, recognizing that you are going to do your best to be apolitical and simply to respond based upon
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your goals of the long term goal of 2% inflation and full employment, how do you see this right now, with inflation right now being the focal point, and yet the possibilities of more dollars being put into this economy in this recovery stage -- what concern would you express, if any? i know your job is not to give us advice. but rather to respond to. what are the tools available to you to try to maintain that long term goal of 2% during a time in which congress may be adding additional fuel to the fire, so to speak, for inflation? >> the way it works is, we watch what congress is talking about and then it reaches a point at which our staff will say that looks like it's got a good chance of happening and we will put something into -- the staff will put something into the forecast, and all of us will make our own judgment about whether that was the right thing to do, whether it's too big or
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too small. we never take that into the public sphere and say, please, don't do that for this reason or that reason. it's not up to us to play a role. >> but the tool that you would use would be within monetary policy of price of money. >> always, the tools we have are, you know, in monetary policy, is to raise interest rates, to tighten financial conditions more broadly, to slow demand down, and that's how you get control of inflation. and that's what you do. at a time like this, policy is so accommodative, it will be accommodative after we slow asset purchases, ultimately stop them and raise interest rates, it will be accommodative for quite a while, but that's what we do, and what we will do when and as we need to. in the meantime, we're trying to understand this particular inflation is just unique in history. we don't have another example of
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the last time we reopened a $20 trillion economy with lots of fiscal and monetary support. we are humble about what we understand, but we're trying to both understand the base case and also the risks. >> mr. chairman, thank you very much for your response and, mr. chairman, thank you. >> senator warner from virginia is recognized. >> thank you, mr. chairman. chairman powell, good to see you. thank you for your good work. one of the issues we've spent a lot of time talking about over the last year, plus, has been access to capital issues, and as we know covid disproportionately hit businesses of color, and as we've discussed in the past, i've been a big advocate with many on the committee to promote investment into minority institutions, community development, financial institutions, and actually
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working with former secretary mnuchin, we got $12 billion into the relief package back in december. some of that will go into -- as you know, capital into the cdfis, which can increase their lending capacity by 50%. getting that access to capital, to low and moderate income communities, is really, really important. is there more that the fed can do? let me give you a two-part question -- the fed can do to support cdfis and is thereanything similar to programs like the fed's ppp program liquidity facility which can be used? i'd like to see what your current thinking has been on this issue. >> we do see, and we saw particularly during the pandemic, the good that cdfis and minority deposit institutions can do and were
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doing. and we try to provide whatever resources we can, and a lot of it is just engagement and things like that, and also including the cdfis in the ppp liquidity fund, and doing everything we could to incorporate them in a way that was useful to them. all of those things are good. i think if we could think of more things to do within our mandate, given our authorities, we would do them, because we do see the good they would do in reaching communities that are not necessarily reached by other banks. >> and i do hope beyond cra, that we can look at -- i have a lot of community banks that want to get into this market, and i have some ideas that i'd like to come back to you and the fed on. because i think sometimes, there is a feeling there is not enough regulatory discretion, if they want to lean into lending.
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i want to raise one other issue. i think we all know housing prices are up dramatically, as a matter of fact, the federal housing financial agency's house price index showed that house prices were up 13.9% over the 12 months ending in march, 2021. i know a lot of discussion around inflation here, obviously if the housing market is overheated, that poses is huge issue. -- a huge issue. how overheated do you think the housing market is at this point? and what tools do you have that could help deal with that problem? >> price increases are very strong in housing, and it is across the country, and we see that and hear that everywhere. as i mentioned, there are a number of factors that work there, both demand and supply. there is demand, because household balance sheets are very strong in the aggregate shape.
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monetary policy is supportive of people wanting to get mortgages now, although most of the people getting mortgages have very high credit ratings. it's very different then it was before the global financial crisis. there are also supply constraints -- and this predates the pandemic, this problem will still be there whenever other problems are solved, which is difficulty in getting zoning and getting trained workers the raw material shortages and high prices and bottlenecks will probably abate over time, but it's not -- i have heard from many of you that this was a problem before the pandemic, and i think that that's probably going to remain the case. >> i agree. i think the supply issue is something we have to address. chairman brown has been working on this, i've been working on some ideas. i also think one of the things we have to grapple with, if we go back to the wealth gap issues, particularly racial wealth gap, black versus white families, that goes to homeowner ship, but i think it's also a
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-- that goes to homeownership, but i think it's also a challenge not only for black families, but first generation home buyers everywhere. i've been working on an idea that somebody else brought to me that would say, can we invest using ginny may also provide for the same payment you would have on a 30 year mortgage a 20 year mortgage product. we've called it the lift up program. i'd love to share more of that with you, as i will with my colleagues. >> senator kennedy from louisiana is recognized for five minutes. >> mr. chairman, i'm going to begin by thanking you once again , and your colleagues, some are whom are sitting behind you, we all remember well the spring of 2020, when the world economy almost melted down.
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it didn't, in substantial part, because of the actions that you and your colleagues took. you kept this thing in the middle of the road. now, some days, you had to do it with spit and happy thoughts, but you kept it in the middle of the road. i remember, particularly, your currency swap lines. i didn't read a lot about it, but i can understand, when the world is melting down, if other countries seek out treasuries, but when they don't like treasuries, they want hard, cold, american dollars. that's scary. so i want to thank you. this is my question. we have spent, not just during the biden administration, but during president trump's administration, we have spent an enormous amount of money. i mean, it's breathtaking.
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now, some agree with us, some disagree with it, but some say disagree with it, but some say -- now, some agree with us, some disagree with it, but some say you shouldn't have done it, some say we had to do it, it's probably a little bit of both. a lot of it wasn't paid for. and i look around, and president biden is asking us in the next, i don't know, six months to spend, what, another $5.5 trillion? and there's a lot of talk about pay for's, but it won't all be paid for. we know that. at what point do these deficits matter? are we living in a different world? i mean, i know you will probably say, well, deficits always matter, but at what point does the marginal benefit of the extra deficit spending become less than the marginal cost? >> i don't think there is a
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precise point that i can identify. i will say that we are not on a sustainable path, we actually haven't opinion for a long time, that just meaning that the debt is growing substantially faster than the economy, and in the long run, that is not sustainable. the laws of gravity have not been repealed. we will need to get back on a sustainable path, at some point. i think the time to do that is when the economy is strong. unemployment is low. taxes are rolling in. that's the time to do it, and to do it, you know, with a longer term plan that matches up our spending needs and our revenues. >> when do you think that will be? >> the dollar is the world's reserve currency, people are buying our paper around the world. i don't think there's, you know, any issue of being able to fund our deficits in the near term, in the medium term, there is no evidence that there is, but, you know, we shouldn't wait until the urgent need arises. >> yeah.
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it's too late then. well, i mean, everybody seems to be a kanesean now, he was brilliant, but some people forget the chapter in one of his books where you step on the economy and you borrow, but then you pay it back. he said that very clearly. you pay it back. none of us wants inflation. but it's not just inflation, it's inflation expectations. as you know much better than i do. i worry that if we spend this extra $6 trillion or $5.5 trillion, that president biden wants to spend, that the private sector is going to say, you know, we're going to have more inflation. i don't care what they say at the fed, we're going to have more inflation, and we're going to start raising prices. you don't have to be einstein's cousin to figure that out. don't you think that's something
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we have to consider? >> i would agree with you that inflation expectations are really central to what we think are central to what create actual inflation. -- creates actual inflation. we see them now have moved up, they moved down at the beginning of the pandemic, they moved up to where they've been at recent years, so it is something we will be carefully watching. >> last point, i'm not expecting a response. resist the pressure. you're going to be asked by a lot of people to get involved in social policy, in cultural matters, and what some will call economic policy, that really has nothing to do with the fed's mission. and it's not just happening here, it's happening all over the world. don't let us become turkey,
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where the whole central banking system has been politicized. please, resist it. thank you, mr. chairman. >> >> thank you so much to chair powell for being with us. i appreciated the chance to have a longer conversation with you earlier this week. i want to try to touch on two issues that are important to me. the first is following up on senator brown's questions around the community reinvestment act and i want to go to the systemic risk that climate change poses. you and i had a chance to talk about this earlier this week and i see the community reinvestment act as the main rules that govern how banks provide services to low and moderate income communities and communities of color, which have experienced systemic lack of access to capital and lending and financial services due to
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discrimination. i'm glad to hear you think you will see updates in the coming months and i wonder if you could tell us more about what the fed has learned from the comments you have received from the cra proposal you released last year. chm. powell: voluminous comments and as you can imagine, from all corners. i think we are learning a lot and we are going to incorporate improvements but broadly speaking, this proposal, this approach has the support of the intended beneficiary community and also, to a significant extent, the support of the banks, who want -- they want cra to be effective and well measured. they are committed to having it be an effective program so generally, you know, we are in the middle of setting up to try to write something that reflects
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the appropriate comments and we will publish that again and it will take time and we hope to get all the banking agencies on board for that. i am optimistic this is going to -- sen. smith: i think a well-functioning and modernized cra is absolutely crucial to make sure all sectors of our economy for all people are growing and working and as senator brown says, it is essential we fulfill that promise and we all do better when we all do better. that is at the heart of cra. let me move to this question of the risk posed by climate change. in your testimony yesterday you indicated the fed is in the beginning of working on a program that will engage financial institutions on climate risk. the last time you came before the community, you believed it was important for firms to publicly disclose their climate-related risks and since
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then the fcc have received hundreds of comments. the vice chair has highlighted the importance of climate risk disclosure and ftc chair cansler has signaled his intention to begin rulemaking around climate disclosure. can you comment on how you see the role of the fed on climate risk disclosure for financial institutions? chm. powell: i would start by saying the foundations of all of this are that we need to get good data on the implications of climate change and how to think about that in terms of the risks the financial institutions and other parts of the economy are running. that is a basic exercise and we do not have that. once you have the data disclosure will be imported because markets will work and be important and the investor community will be interested.
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those two things -- the fed can help with research and data collection but disclosure issues are squarely in the departments of the ftc and they are working hard. around the world there is progress to focus on these things. i think they are central to anything we are able to accomplish. sen. smith: it is fair to say the european central led the way. what can we learn from the approach they have taken? chm. powell: one thing i would point to is the climate stress scenarios that have been developed either network for greenert financial systems and a number of the european central bank's are running climate stress scenarios very distinctly. what they are trying to do is with financial institutions, look at what the effects over a long. of time -- effect over a long period of time what the effect of business could be for the
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evolving climate measures. it could be a probable -- profitable exercise for the financial rut -- institutions and regulators. we are in the process of looking very carefully at that. my guess is the direction will go that we are not ready. sen. smith: thank you. i realize i am out of time. i want to note i think some would say climate risk is a political issue. i see it as as systemic financial risk just like other systemic financial risks that big banks and medium-sized banks have to address. i think it is important and i urge the fed to continue to look at these impacts and to move with alacrity because i think the markets are looking for clarity about how to measure and assess these risks are the good of investors and everybody. thank you.
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sen. hagerty: i want to thank you, cheryl -- chair powell, for being here. i'm going to talk to you about inflation. it is the insidious tax of the bided administration on everyday working people in america and it is a great concern. in february, i discussed how the u.s. economy was forecast to see 6% growth this year. at that point, i expressed concerns about the democrats' $2 trillion of additional partisan spending on an economy that was already recovering rapidly. thanks to operation warp speed and the policies put in place during the previous four years that have put our nation on a solid footing in terms of tax cuts. very reciprocal trade. deregulation. the federal reserve is challenging to realize price of
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-- stability and maximum employments. the democrats are making your job harder than it is. the bill the democrats ran through in march spent roughly 10% of our gdp and we are looking to spend another 20% of u.s. gdp on a purely partisan basis. throwing around trillions of dollars like it is monopoly money. it is taxing americans hard-earned paychecks. it is very irresponsible. it is creating inflation outcomes that many of us have not seen in our adult lifetimes, certainly not since jimmy carter was president. with what ranking member to me said, the concerns he has raised about inflation, i worry things may spiral out of control if we do not show restraint. at the same time, president biden and the democrats are imposing policies that work against maximum employment. they are giving away employment
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sentence -- incentives and raising taxes, throwing away energy independence, and freezing american investments. the fed has more control over price stability than it does over employment. businesses create jobs. price stability allows american businesses and families to make business decisions and plan their everyday finances but now, americans have a sense of scarcity. i believe a sense of panic over inflation. the policies being imposed are causing families in tennessee and all across america to make financial decisions with soaring inflation in the markets. price stability is not a 12% annualized inflation jump like the one we saw. people in tennessee are seeing their buying power eroded like never before and they do not see this as transitory. i'm sure people in ohio and pennsylvania are feeling exactly
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the same way. as you know, inflation expectations can be self-fulfilling. inflation and pricing stability at this level is bad for america. chairman powell, this environment suggests to meet the emergency posture i understand the fed has opted during the pandemic needs to be reconsidered right now. i am very worried the feds continued level of asset purchases and balance sheet expansion is facilitating this runaway spending the democrats are imposing on us and adding to the inflationary pressures these trillions of additional dollars are going to add to our economy and continue to add to the debts our children bear and it is amazing to me not one democrat is willing to speak out about this. chairman powell, why is the fed maintaining this emergency monetary policy posture right now and why do i understand that
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it may continue into 2023? chm. powell: where we are is we are watching the evolution of the economy and noting that there is an elevated level of unemployment. inflation is well above target. we have discussed that. boot -we have said we would continue to-the economy has achieved further progress from december. we had a full meeting last june. last month to discuss we have got another meeting, coming up in two weeks. after we assess the progress toward that goal, we will begin to reduce our asset purchases. a separate test for raising interest rates is a higher test. that is how we are thinking of it. sen. hagerty: the policy positions undertaken by this administration go far beyond the transitory nature you describe.
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i think about the expectations of people in my home state. they are concerned about inflation. i would like to ask you a simple question. does continued government stimulus funding at this point make your job in terms of sustaining prices more difficult? chm. powell: we are not in the business of giving congress advice on fiscal policy. i have to leave that to you. we take what you do and put it into our considerations of policy but do not comment on it one way or the other. sen. hagerty: thank you. sen. warren: the chairman has two basic jobs. monetary policy, which everybody likes to talk about, and regulatory oversight, often in the weeds but keeps our economy safe from another banking meltdown. you have been chair for four years and have gone through the process of what you described as
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tailoring the regulations put in place after the 2008 financial crisis. there were a lot of changes but i want to talk about a couple in particular. to prevent taxpayer bailouts, banks are required to have living wills. this means banks will be able to show every single year how they can be shut down without wrecking the entire economy. in 2019, you changed the rules so the 13 banks with $250 billion and $700 billion in assets could submit living wills only once every six years instead of every year. that test is weaker now. chair powell, has the fed done anything over the past four years to make living will requirements stronger? chm. powell: two lake living will? -- to make living wills? we have strengthened capital.
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sen. warren: let's move to another regulation. the volcker rule. it works like glass-steagall lite to separate commercial banking from wall street risk-taking. in 2019, you accepted -- exempted more short-term trading holdings from roles so banks could take on more risk. that weakened the world. in 2020, you eased up the roast to let --rules to let banks invest in hedge funds. the full corolla got weaker again appear to let me ask. during the past four years, has the fed done anything to make the bulk of rules stronger and limit risky trading for the longest -- largest banks? chm. powell: by clarifying it, we made it more effective that what is it supposed to do -- what it is supposed to do. sen. warren: it's about whether
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you made it stronger not just clearer. it is whether you made it stronger or harder to engage in speculative trading. the answer is no. i have highlighted two examples of weakening regulations. there are more. producing capital requirements. easing liquidity requirements. shrinking bond requirements. killing back on supervision within the stress test. it is a long list. i realize you think these are good changes. i am trying to look at this from a regulatory perspective. is the chairman of the federal reserve making banking rules stronger or weaker? tell me, mr. chairman, is there a big role change that i missed? can you name a change that strengthened the rules and made the actual rules tougher? chm. powell: we did not weaken capital requirements for the largest banks and i actively
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resisted any move in that direction. the stress capital profit we implemented recently after years of consideration raises capital standards for the largest banks. stress tests. they are bound by them. we maintain the stringency of the stress test through this. sen. warren: i was asking about anything tougher. what i am looking for is that the feds's record over the past four years, i see one move after another to weaken regulation over wall street banks. that worries me. there is no doubt the banks are stronger today than they were when they crash the economy in 2008 but that is the wrong standard. the question is whether they are strong enough to withstand the next crisis. and whether the fed is tough enough to protect the american economy and taxpayer. in 2020, the giant banks that
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are the beneficiaries of these weakened rules made it through the crisis. researchers from the minneapolis fed found banks would have faced up to 300 billion dollars in losses if not for fiscal stimulus from the government. in other words, the current federals were not strong enough for the banks to withstand the pandemic without, once again, calling on american taxpayers to back them up. that is the heart of my concern. i understand the next crisis may feel far away but like the pandemic, it may come at us fast and from an unexpected direction. it is the job of the federal reserve and specifically the job of the chair of the federal reserve to use the regulatory tools congress has created in order to make sure banks remain strong and taxpayers will never be called on again for a bailout.
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thank you, mr. chairman. sen. tillis: i wanted to give an opportunity -- get an opportunity to respond to a question you were going to explain, the work on living wills. would you like to explain the work you have done? chm. powell: that was an incredibly labor-intensive and taxing issue that we went through cycle after cycle after cycle and the marginal gains from doing it every year diminished quite a lot. we conclude that for the largest banks, we would not require a full resubmission except every other year. anything that is material they must resubmit. i don't think it weakened our understanding about resolve ability. i will also sate we raise capital standards on the largest banks. they are higher now than they were. sen. tillis: with respect to the
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volcker rule, you were talking about clarifications. is the fed fully enforcing it based on congressional intent? chm. powell: absolutely. i would completely a great our job is to maintain the strength of these large financial institutions so that we know other have to worry about bailing them out again. i am committed to that. we aim to be strong so they can perform the roles they are supposed to perform even in a severe crisis. i admittedly with a lot of fiscal support and a lot of monetary support. sen. tillis: we can always do better. i have got to beat the inflation drum for a minute. the fomc members insist inflation is transitory but it hasn't inspired confidence. there was a statement -- a couple of statements by
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president mary bailey in february. she declared the pressures on inflation are downward in february. in may, when inflation readings were at three point 9%, she said the higher inflation readings would mean 2.4 to 2.6%. she was projecting in june inflation could go above 3%. despite months of relatively lowball projections, in response to tuesday's high inflation readings, she declared we expect a positive inflation like this. i hope from our perspective you could see that we are skeptical about some of the inflation projections and i have heard -- i've spoken with number of people in financial services and when i asked them about transitory, i am getting more of a response of transitory-ish. can you give me a reason you believe the fed's position on anything transitory, why that is
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still well-founded? chm. powell: let me start by saying no one has experience of what it is to reopen the economy after what we went through and so all of us are going to have to be guided by data. sen. tillis: let me interrupt you. i would like for you to answer that question in the context of the flow of money that has been passed through the covid relief packages. we heard an announcement this week from the speaker of the house and senator schumer that they have an agreement on another $3.5 trillion bill for infrastructure that could add another $600 billion. to answer the question in the context of how the future according to the leadership of congress outcome is going to occur, how does that fit into the credibility of future inflation projections? chm. powell: when we look at
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inflation, we look in the basket of things and we say which of the 100 plus things in the cpi basket are causing the inflation. it comes down to a handful of things, all of which are tied to the reopening. it is used, rented, and new cars. it is airplane tickets and hotel rooms. they account for all of the overshoot. we think those things are clearly temporary. we don't know when they will end but they will go away so we don't know when they will go away. we don't know whether other things will come forward to take their place. what we do not see is brought inflation pressures showing up in categories. the concern would be if we saw that. we do not. we will be watching carefully and we will not have to wait a tremendously long time to know whether our basic understanding of this is right. we will know because we will see -- if we see inflation spreading more broadly, that will give us information. sen. tillis: i appreciate that.
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i will listen to your responses. i think you publicly stated -- do you still stand by that? chm. powell: we don't like to bless individual rates but i would say if market participants have the freedom to choose the rates they want to choose, we are not forcing them to use this. this is for use. sen. tillis: you have said it is an appropriate rate for banks and funds to the american financial exchange. do you stand by this? chm. powell: i don't remember saying that but it was in a letter. sen. tillis: thank you, mr. chairman. i appreciate work. sen. tester: a lot of chairman's around here.
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i have appreciated you and your work during your tenure. especially as we look back over a difficult period of time where you are having to take a lot of issues that we had not seen in 80 years under consideration, getting attacked, trying to politicize the fed, i want to thank you. i appreciate it. your expertise and your knowledge has shown through. the cream has risen to the top. thank you. there is a lot of talk about infrastructure needs. i think you would probably agree china is trying to take over our role in the world of being the economic superpower. i am one that believes in infrastructure and investments in infrastructure is important to maintain our position as an economic power. the worldwide economic power.
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my question for you is, as you look at infrastructure investments and how that affects our economy, where would you put your focus? chm. powell: i would just say that well spent, well invested infrastructure money has the ability and it is up to you to make those decisions but it is the kind of thing that can raise the growth rate of the country over time. sen. tester: there are several proposals out there. there are proposals to invest in roads and bridges and broadband. some of us are a part of that. that is important. i think there are other proposals that are also very important but they are investing in a different kind of structure -- infrastructure like childcare and workforce housing. i don't need to put you on the
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spot but i value your opinion. what do you think those things fall? are they as important or do you think the economy is fine without any investment in those things like housing and childcare and that kind of stuff? chm. powell: i wouldn't get into the debate over whether those are infrastructure. sen. tester: from an economic standpoint. chm. powell: take childcare. we used to have the highest email late -- fema labor force participation rate among advanced economies. we are close to the bottom now. economic researchers point to the difference -- there is a lot of research -- that there is a different approach on childcare. it is up to you to look at that and see whether that makes sense in the u.s. context. do not have an opinion on that. that is a basic economic trend where we are used to leading and don't anymore. sen. tester: let me ask you this. many and the fed have done some
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work on issues in india and one issue is housing. they have a different situation because of their sovereignty and not having the kind of collateral folks who own a property have. the indian reservation i am talking about. do you have thoughts on what we could be doing outside of the infrastructure conversation? what can we do to impact indian country when it comes to housing? it is woefully bad. chm. powell: that's a hard question. as you know, we have four or five reserve banks that are involved, particularly in minneapolis. you know, we are not allowed to spend -- we don't spend taxpayer money on things like that but we would agree there is a significant housing issue in indian country.
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i'm not sure i have an answer. sen. tester: if you have ideas about incentivizing but how we can engage the private sector to do housing so they would be more inclined? i get the point of view. it is not traditional. they don't have the collateral they would have with feet properties. it is an issue. i appreciate what you're doing. i want to thank you for your work. i appreciate you being in front of the committee today and good luck. sen. shelby: chairman powell, we've been talking about inflation and it will not go away so we will continue to talk about it and you will be concerned with it. in june, u.s. inflation accelerated at its fastest pace
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in 13 years. consumer prices increased by 5.4% from a year ago. americans are paying higher prices for many of the goods and services they cannot deal without -- do without. the divine power of the dollar has diminished over the past 40 years. i will give you examples. you know all of this. according to the bureau of labor and consumer price index, one dollar today is seven times less valuable than it was in 1970. 3.5 times less valuable than in 1980. half as valuable as in 1990. 1.5 times less valuable than 2000, which seems like yesterday. recently, the price of commodities, as you note, has increased swiftly. the price of agricultural goods commodities have increased.
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corn by 50%. wheat by 17%. soybeans by 50 port -- 54%. the price of metals has risen. copper was used everywhere. that has increased 43%. isla mania has increased by 47% --aluminum has increased by 47%. the christ --price of crude oil has increased by 17%. gas prices are up 45%. prices for used cars rose 45% in the past year. 10.5% in june alone. airline tickets are up 25%. the cost of milk is up 7.5%. all of this on the rise. at this point, the biden administration continues to claim the increases in inflation
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are temporary. i, along with others, believe this could be the sign of things to come. we hope not. for instance, economists surveyed by the wall street journal forecasted higher inflation this month for the next couple of years. throughout the 1970's, as you will recall, high inflation crippled consumers with rapid and sudden price increases. many of those conditions exist today, such as loose, monetary policy and significant but -- government spending. if we fail to take inflation seriously, mr. chairman, i am concerned our nation could face the same challenges of years ago. yet in the midst of the increase in consumer prices, the biden administration is proposing trillions more in government spending. the fed's ability to maintain
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price stability is threatened by actual inflation or the expectation of inflation. chair powell, my question is this. taking all this into consideration, which you have data that we do not have, do you believe this nation, our nation is facing a real problem with inflation? if not, why not? how do you testify? chm. powell: i think we are experiencing a big uptick in inflation bigger than many expected. bigger than certainly i expected. we are trying to understand whether it will pass through fairly quickly or whether we need to act. one way or the other, we will not go into a period of high inflation for a long period of time because, of course, we have tools to address that. we do not want to use them in a
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way that is unnecessary or that interrupts the rebound of the economy. we want people to get back to work. there are a lot of people who are not yet. i am very well aware of the risks for inflation and watching carefully. if we come to the view -- if we see inflation expectations or the path of inflation moving in a way that is troubling we will react appropriately. sen. shelby: are you concerned about the things i related? all of the price increases? they are unprecedented in recent years. are you putting them aside? chm. powell: of course, we are night and day thinking about that. we are asking ourselves whether we have the right frame of reference. the right framework to understand this. sen. shelby: do agree with the economists who forecast higher inflation rates over the next couple of years, notwithstanding?
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chm. powell: that was the headliner. it got carried away. the forecast shows the median for 2022 was 2.4 percent pte and place in and for tooth that -- 2023, 2.3%. those are higher than it for the last 30 years but they are not that high. that forecast was not really as problematic as the headline suggested. sen. cortez-mastos: let me follow-up on this. are you confident you have the tools to address any type of inflation, whether transitory or for the future, that we are looking at right now? chm. powell: yes. sen. cortez-mastos: can i ask, and considering inflation, how
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can we compare cost to last summer when prices were below their current levels because of the pandemic? chm. powell: it is better to compare prices to prices where they were in february. if you look at inflation since then, that captures the dig -- decrease and increase. you get lower numbers if you do that. a lot of people are doing that right now. you get the inflation in the mid-2's. the 16 month inflation on annualized basis is 2.5%. not 5%. sen. cortez-masto: for purposes of the covid relief packages, all of them including the most recent one -- is that the sole cause for what you see with respect to the increase in inflation? chm. powell: a lot of things go into it. the main thing is that we have amanda rebounding very strongly. that is partly monetary policy. it is partly fiscal policy. what we see on the supply side
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is a cannot keep up with this demand. it is happening everywhere in the world. it is a combination of factors. sen. cortez-masto: unlike the last recession we live through in 2014 -- 2010 to 2014, i am curious, this is my interpretation of it -- when our economy opened up, it was gradually. this is a light switching on with the economy opening up quickly. that is why we seek concerns with supply and demand on so many different areas. that is why we see highly concentrated sectors where there is a demand like you have touched on today. is that accurate? chm. powell: it is accurate. i would add this was the response from fiscal and monetary policy in this episode. this is orders of magnitude different from what has happened in the past.
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we are back to pre-covid levels of economic output and on a path to be above the prior trend. within a year, if the forecast proves out. sen. cortez-masto: in nevada, our unemployment rate has fallen sharply. we are fourth in the nation for unemployment but as i watch our economy reopen, the travel industry is rebounding again, which is fantastic. more than 130,000 people last month applied for 6000 positions at a new resort in las vegas. part five of the federal reserve monetary policy reports notes that payroll employment increased by 3.2 million jobs in the first half of 2021, driven by a 1.6 million job gain in the leisure and hospitality sector where the largest losses occurred last year. in may 2021, federal research
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paper, it found the extra jobless benefits provided during the pandemic likely had little or very small labor supply induced impact on the unemployment rate. can you elaborate on that? chm. powell: that was reserve bank research, referring to 2020. it is too soon to say what the facts are going to be here. we will be able to learn something because many states, as you know, have stopped the additional benefits and we will be able to look and see whether that had an effect on people going back to work. it is too early to say. sen. cortez-masto: that is my next question. you will study that data to see the differences between states that cut it off early versus those that kept a going, whether that was an impact. chm. powell: everyone is looking to see a meaningful difference. too early to say. sen. cortez-masto: finally, you
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touched on housing. we are seeing home prices are up more than 15% since last year. how much is due to the federal reserve's purchases of mortgage-backed securities versus the supply issues? chm. powell: i think are purchases of treasuries and nbs are what is holding down and hoarding interest rates low. the overall picture of a company in monetary policy is contributing to what is happening in the housing market. i think mortgage-backed securities are contributing more than treasury securities but ultimately, it is roughly the same order of magnitude. was that your question? sen. cortez-masto: i appreciate that answer. thank you very much. sen. daines: good to have you here today. thank you for taking a steady hand during these tumultuous times.
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i want to join my colleagues in expressing my concern with the inflation in the economy. this way, we received two inflation readings with the highest increases in over a decade. they reflect what montana families are feeling, prices for every necessity going up. at the same time, majority leader should your -- schumer,, senator sanders, and the democrats proposing a 3.5 trillion dollar tax and spend package. i believe this is reckless. it threatens short, medium, and long-term prosperity of our country and i hope my colleagues on the other side will reverse course. i would like to turn to my questions. chairman powell, the unemployment rate has fallen since the height of the pandemic. at 5.9 percent, down from a high of 14.8%, in april of 2020, i am grateful, as you are, to see
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this great fall. more americans are getting back to work. we are digging into this and have concerns about the labor force participation rates. it sits at 61.6%. it has remained in a narrow band between 61 point 4% and 61.7% in june of 2020. the current participation rate is 1.7 percentage points lower than it was pre-pandemic. in february of 2020. the significant percentage of those folks have dropped out of the labor force. they are over the age of 55. recent data shows they are not reentering the workforce. a lot of those folks, they are nearing retirement age. they may never reenter the workforce. my question, chairman powell, is do you expect the vapor force participation rate for those 55 and older to recover to
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pre-pandemic levels and if so, why? chm. powell: you very accurately described the situation. people, toward the end of the last expansion, older people were saying in the labor force longer as a result for years and years. we were seeing higher readings that we expected for years. we thought that was a good thing. the u.s. has a low participation rate compared to our peers, surprisingly. the question is -- a lot of those people were tired. 3 million people left the labor force and attended to older people. what will be the equilibrium once the economy is going full board again? participation tends to lag. recovery tends to lag. unemployment recovery. when labor markets get tight, -- first of all, a lot of humility is appropriate. we don't know what the participation rate is. we went through eight years of
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watching labor force participation be higher than we expected. i fully took that on board and i think the u.s. can do much better in terms of labor force participation. i will not close my mind to the idea that we might get back. sen. daines: thank you for the thoughtful answer. i guess if that participation rate for those 55 and older permanently remained below pp -- pre-pandemic levels, how might you see that impacting the time it might take the economy to get back to full employment and what impact might that have as it links to inflation? chm. powell: there is less labor supply. you will hit full employment early. we consider a broad range of indicators. employment and participation. if there is less labor supply and lower participation structurally, you would see that in the form of higher wages and inflation. we would be able to see that. sen. daines: thank you. i want to get to my last question, regarding the balance
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sheet of the federal reserve. it eclipsed the $8 trillion. that is more than double what it was before the pandemic. when, if ever, do you think the fed balance sheet will fall below $1 trillion? could you describe what the risks are if the balance sheet remains this elevated level for an extended period of time? chm. powell: the last cycle is an example. we slowed the pace of asset purchases and froze the size of the balance sheet for a. of years. as the economy grows relative to the balance sheet, the size of the balance sheet become smaller. we did a bit of that. for a couple of years, we let the balance sheet run off and shrink as securities matured. we stop reinvesting and let the balance sheet shrink. we haven't made those kinds of decisions yet, but it's a reasonable starting place to think that we might hold the balance sheet constant for some
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time and then perhaps allow it to shrink under a trillion dollars. in the meantime, it become smaller as a portion of the economy. it is shrinking, in a way. sen. daines: thank you you, mr. chairman. sen. van hollen: i have heard the term unprecedented used to describe the jump in inflation. i think what is truly unprecedented is the number of jobs we have seen generated since president biden took office. 3 million jobs, the highest rate of job growth of any president in the united states history. as we work seriously to defeat the pandemic and as we passed the american rescue plan to give confidence to people in the future of the u.s. economy. i want to dig deeper into inflation because you made the point that you believe a
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temporary increase it is and if you look at long-term projections, they are closer to your targets. that is the expectation of folks in the financial markets. isn't that the case? chm. powell: broadly speaking. sen. van hollen: it is interesting how a short period of time changes things. i am looking at may 2019 when people were afraid the inflation rate was below targets and too low. at that time, you thought it was transitory. you were right. you use the different measure of trimmed means cpi to describe your thinking. could you talk about what that measure is? chm. powell: one thing people do, at times like this, is chop off the tail and look at the middle of the distribution, because sometimes the overall inflation measure could be distorted by a couple of categories. if you did that here, this is the jealous trimmed mean --
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dallas trimmed mina. it will show inflation in the low 2's. you're getting rid of that small group of categories. the risk is you shop for inflation measure that is appropriate. we tried not to do that. it is sending a signal that this is more idiosyncratic than broad across the economy. sen. van hollen: this is not the case that increase prices of used cars rose by 10% in june alone and accounted for more than one third of the entire increase in the cpi in june. chm. powell: yes, it is. those are the anomalies you are referring to, right? used cars. new cars. rental cars. airplane tickets. hotels. all things that have a story related to the pandemic. that is what it is now. i think, rather than rush to create alarm about inflation, i think we should all be together in focusing on important
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increases in job growth and wages that we are seeing. sen. van hollen: i know you said yesterday you expected we should be able to get back to 3.5% unemployment as we move forward. i do secretary gallen has talked about that this time -- it this time last year. we talked about persistent long-term unemployment in the past. if you look at the june numbers, the long-term unemployed, and these are individuals jobless for more than 27 weeks, increased by 230 thousand to 4 million total. that followed a decline in long-term unemployment in may. my question is, is there anyway to get back to 3.5% unemployment if we do not get this number down when it comes to the long-term unemployed? chm. powell: we saw what a strong labor market does is pull people in and pull people in on
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the sidelines. it keeps people from leaving. there is so much to like about a strong labor market. sen. van hollen: i agree with you, mr. chairman. if you look before the pandemic in february, three point 5% unemployment. we had over one million americans long-term unemployed. we hope the growing economy will be a magnet. i am sure it will. it will bring people into the job force. i think all of us are concerned about laborforce participation. i think a stronger economy will address that. there is this group of long-term unemployed and my concern is, as you know, the data shows the longer you are unemployed, the harder it becomes to get back into the workforce. then you get into the lower wage , which stays with you throughout your career. do you believe it is worth congress considering -- i know this is not your domain to be specific -- deliberate policies
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like wage subsidies, which we used successfully in 2008? those deliberate policies to make sure the persistently unemployed, long-term unemployed can get back in the labor force? chm. powell: without endorsing anything, we lagged all of our peers in labor force participation. that is not where we want to be as a country. that is a supply-side policy. trying to find ways to connect people and they need a strong job market to keep them there. those are worth looking at. sen. van hollen: thank you. sen. cramer: let me add my voice, of course. thank you for your coolheaded through this process.
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particularly for resisting the pressures of lower rates when it wasn't necessary. we had room when it became very necessary. i appreciate that very much. i was interested in the discussion going on. i was particularly interested in listening to your exchange with senator hagerty, were used the line that i have heard to use many times. when he asked a question about what congress ought to be doing, you said -- i think this is a quote -- we are not in the business of giving fiscal advice to congress either way. it is similar to what you have said many times. thinking about this, i did a quick search engine review of the words fed chair urges congress. this will surprise you. by the way, there is not a person in this room without sympathy for headlines that are not accurate. or even quotes. one report may of last year said
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the fed chairman has congress consider more stimulus. october of last year, jerome powell calls to congress for more money now. november of last year, he thinks u.s. needs more stimulus before recovery. in december of last year, fed chair treasury urges congress to give stimulus. in other words, you haven't always resisted the temptation to give us. by the way, thank you for it. i think it was good advice. maybe we will look back and say we had too much but we were in a crisis. you did what you needed to do. we did what we needed to do. i don't think there is much regret about that. now, a number of my colleagues have pointed to what has gone on lately and what is being suggested going forward. in addition, to the $3.5 trillion package, it includes a lot of tax increases like seven times more increased than the
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cuts from 2017 they built the foundation for this quick recovery. you add in 1.9 trillion dollars totally unpaid for earlier this year. the $.6 trillion in new spending as part of the bipartisan package. you get to $6 trillion very fast. what people are not talking about is we end up passing a one year at, something similar to a 10 year resolution and will spend $6.845 trillion, 3 trillion of which will be deficit spending. deficit spending. now, my question to you is very direct and that is, does the economy need another $6 trillion plus another $6.8 trillion spent this year to answer recovery and there is a detrimental effect to all of that, including tax increases, when we are -- call
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it what you every -- whatever you want -- this is concerning, if not a learning -- alarming. chm. powell: i did a lot of things we have never done before. that one, in particular, i had encouragement from the leadership and the administration on both sides. i swore it off. we should go to regular order. the fed does not play a role in fiscal policy. it is not a national emergency like it was at the time and i just do not -- i have been trying very hard so far this year in succeeding in not getting involved in co-giving fiscal advice. sen. cramer: we take whatever you do into account in our policies but do not comment on whether we think this is a good or bad idea. sorry. sen. cramer: [laughter] ok. i appreciate that. maybe just one other quick question.
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the fed is continuing to pump liquidity through the purchases -- mortgage purchase, particularly fannie and freddie. do you see that continuing to be necessary? i know you are doing it but why? chm. powell: we are looking at that right now. my colleagues and i on the federal reserve committee are having a second meeting about that in a couple of weeks. we will talk about the composition of our asset purchases and the path to reduce them. this is something that puts pressure on the table. sen. cramer: with regard to climate risks, whether it is political or true risk, i just want to remind my colleagues that when we assess climate risk in terms of the u.s. economy or u.s. investment, do not forget that every time we do not invest
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in energy or climate manufacturing issues in the united states, another country does not do it as well as us. this is a global issue. supply chain is a global issue. let's think about risk in a global context. sen. ossoff: thank you, chairman brown, ranking member toomey. thank you for your service, chairman powell. the covid 19 pandemic over the last 18 months has been the most significant shock to our economy and the financial system but stepping back, what do uss to be the most significant systemic threats to financial stability over the medium-term, limited to the u.s. or globally? chm. powell: the thing that
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worries me the most is cyber risk. you know, it is a constant concern and we spent lots of time and resources on it. so does the private sector but that is the one where we have a playbook for bad lending and bad risk management. we have a lot of capital in the system. but, you know, the cyber, as you see with ransomware issues, it has been ongoing rates to keep up. we haven't had the face of significant cyber event from us financial stability standpoint. that is the thing i worry most about. sen. ossoff: in terms of financial stability, what next preoccupied your attention or concern? chm. powell: you know, the economy is coming out of this globally coming out of this pandemic so i would worry about
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if we do not succeed in vaccinating people all over the world, we are creating time and space for the development of new strains of the virus, which can be more verlander and more depth -- virulent and difficult to fight. that could undermine the economy and financial stability. we are at the point in the risk cycle where people are looking at for five years out and seeing a good economy. we are heading to a strong labor market and the highest gdp in seven years. risktakers can begin to forget now that there is a bad state in the economy. they are waiting for it at some future date. it from a supervisory and regulatory perspective, we are mindful that it is a time when we need to keep people focused on risk management. sen. ossoff: that is a great segue to my next question, given the provision of liquidity, not just since covid-19, but the last 15 years, how concerned are
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you that credit committees at major financial institutions and others allocating capital are acting with sufficient prudence, given the easy access to capital? sen. ossoff: you know,-- chm. powell: people are getting things financed. spacs are getting done. bitcoin is going up and down in value. at times, it is felt like a frothy market. you know, you do worry about that. at the same time, we are focused on the real economy. our jobs are maximum employment and stop -- price stability and financial stability but we have a long way to go. we want to be careful about tending to our main mandate while we think about financial stability. sen. ossoff: what is your level of confidence there are not risks lurking in the non-bank financial system -- hedge funds,
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private equity, spacs -- given the reduced visibility regulators have in those institutions? chm. powell: there is a lot of risk going on in on bank financial sectors. much of it can take care of itself. we know from the experience of the last crisis and the one before that there are structural aspects of non-bank financial sectors that needs -- need better regulation instructors. that is money market funds which have had to bail out in the acute phase of the crisis. i think we saw the treasury market lost functionality, the most important financial market. it lost functionality significantly during the acute phase of the crisis. we thought about whether there needs to be structural strengthening there. and other aspects, as well. sen. ossoff: turning finally to
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climate change, the fed's most recent financial stability report cited climate change as a potential threat to financial stability. the national oceanic and atmospheric administration is our foremost meteorological agency. it states impacts on climate change are happening now. they cite changes to water resources, floods, and water quality problems, challenges for farmers and ranchers, increases in diseases,. the dod identifies climate change as a national security threat. what is your assessment of the risk it may pose to financial stability or your dual mandate of full unemployment and price stability? chm. powell: it has implications for all of those. we are focused on the risks individual institutions are taking and working to make sure they understand the risks they are running and can manage them and address them in their business model. more broadly, in financial stability, financial markets, generally, and non-bank financial institutions, it is much the same.
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we know that, you know, the transition to a lower carbon economy may lead to sudden repricing's of assets or entire industries and we need to think about that carefully in advance and understand and we are doing all of that work as our other researchers and central banks and governments around the world, there is work owing on on this and it is a high-priority. in terms of financial stability, i think the manifestations of climate change are here now, but the financial stability issues are really coming. sen. ossof: thank you, chairman powell. i yield. >> thank you. let me recognize senator lummis. sen. lummis: thank you very much mr. chairman and welcome, good to see you again. my first question is about digital assets. you testified yesterday in front
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of the house financial services committee that one of the stronger arguments in support of a central bank digital currency was the potential to render stable coins and virtual currencies unnecessary. but in march, you acknowledge that bitcoin, ethereum, and other virtual currencies are essentially substitutes for gold and other dollars. i want to talk about the difference between the two. it is pretty clear that bitcoin, a theory on -- ethereum, and other virtual commodities are investments and not commodities. it has said as much in court cases and regulatory actions. i think what you were trying to get at is one of the best arguments for a central bank digital currency is that stable
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coins could be rendered unnecessary, but legally speaking, stable coins and virtual currencies are not synonymous because stable coins don't increase in value generally and are used as substitute payment instruments, whereas bitcoin, ethereum and other virtual commodities are investment assets. there's research from fidelity, deutsche bank, and credit suisse among others that call bitcoin and emerging store of value. goldman sachs said the same about ethereum. so my question is, because stable coins and the central bank digital currency are more synonymous with the dollar as an instrument of payment and bitcoin, ethereum, and other virtual assets are more of an investment commodity like gold, when you talk to the financial
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services committee in the house yesterday, did you mean that stable client would be honest -- coins would be unnecessary if we had a stable digital currency? chm. powell: basically, you are right. let me say with cryptocurrencies, it is not that they did not aspire to be a payment mechanism, it is that they failed to become one except for people who desire anonymity for whatever reason. that's why i include them. i would agree, really the question is stable coins. my point with stable coins is the like money funds are like bank deposits and are growing fast but without appropriate regulation. if we are going to have something that looks just like a bank deposit, and growing fast, we ought to have appropriate regulation and today we don't. sen. lummis: thank you for that. i would assume you would agree
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some common definitions and a clear legal framework would help us understand the opportunities associated, and risks associated with financial innovation. chm. powell: yes, i certainly agree with that. sen. lummis: thank you so much. now i want to turn to monetary policy. i would like to draw your attention to this chart. federal reserve and bureau of economic analysis m2 data shows deposits and close substitutes held by households have generally averaged 51% of gdp from 1952 to 2021. but then data from the end of quarter one of 2021 shows that households are sitting on deposits and close substitutes of approximately 79% of gdp today, roughly 28% or trillions of dollars above the historic average. going back to 1952, there's
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never been a higher percentage of household deposits to gdp. monetary policy also has been highly accommodative over the last 16 months to the tune of 32% increase in the m2 money supply. so i haven't heard anybody talking about this hidden stimulus, and when households start to spend this cash combined with the enormous liquidity already out there, it seems there is real potential for inflation to continue to overshoot. we have already seen it this week as the consumer price index number that nearly doubled what economists had predicted. here is my question. is it really wise to continue to have accommodative policy when there is still trillions of household cash that will flow into the economy soon? chm. powell: the main factors
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driving this up are that people have been sitting at home not able to travel or go anywhere for year and a half and combine that with the major fiscal transfers congress made so there's a lot of cash. a great deal of cash on household islands sheets and that's what this is representing. is it appropriate for us to continue accommodative policy? we think it is but we are looking now, in the process of evaluating when it will be approved for us to taper, which is to say reduce our asset purchases. we are having a second meeting that will address that topic directly in a couple weeks. for the time being, the other thing i point out is there are still a lot of unemployed people out there and we think it's appropriate for monetary policy to remain accommodative and supportive of economic activity for now. sen. lummis: thank you for your responses.
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thank you, mr. chairman. i yield back. >> thank you, senator. i recognize myself and at the conclusion of my comments, i will yield to senator warnock, and by that time, i presume senator brown will be back to conclude the hearing. first of all, thank you, mr. chairman for your remarkable service over these challenging months. i appreciate it very much. one of the aspects of the pandemic has been an indication of the potential for technological displacement of workers. i think we are all now familiar with zoom, infected is a blessing and a curse simultaneously. as you look forward, how are you factoring in this notion of technological displacement in terms of the workforce and employment? chm. powell: we began hearing
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very early in the recovery period that companies were looking at ways to use technology really more aggressively in the business models. a lot of the people who lost their jobs during the pandemic of course were people in service industries relatively low paid, public customer facing businesses, hotels, travel entertainment, stuff like that. i think we will see more technology and fewer people i think we need to work as a society to make sure people find their way back into the labor force even if they can't find their way back into their own job. >> what i think that does is stress the need for improving human capital so they can be
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competitive that they might not other we dutch otherwise be, education, but a lot of the aspects of the president's american family plan, preschool, education, two years post secondary education. is my sense that we are going to have a lot of people who want to work, but whose skills are not up to the new technological opportunities. is that fair? chm. powell: it may well be, and it is a long-term trend, and if people can keep up with the technology, then it lifts all incomes, and if they can't, they tend to fall behind. >> one of the other
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illustrations from the pandemic is that many particularly women were unable to continue in the workforce because of the child care responsibilities. have you and the fed looked at the labor force relation, and is -- participation and is it a factor? chm. powell: is it a factor and if you include caretaking broadly and include children and schools being close and caretaking at home and that kind of thing, it is still a medium-sized factor for participation. so if it is a reasonable day care, that should contribute to increased labor force participation. >> so if it is a daycare, that could increase labor force participation? chm. powell: i think it's daycare coming back and reopening, also schools reopening. >> i think we touched one way on the inflation issues, one-off
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effects of the pandemic, lumber went out of sight because people were sitting at home and decided to redecorate and renovate. lumber futures are down, i believe. so we can see that leveling off hopefully in the future. there was a chip shortage, which of course new cars would be expensive and drove up the price of used cars. my sense is your view is that these are transitory effects that are somewhat related to the pandemic or other courses don't represent a trend. is that fair? chm. powell: yes, we can identify a half-dozen things just like that and they look very much like temporary factors that will abate over time. what we don't know is are there other things coming along to replace them? we do here of pressures across the economy. we don't really see price
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pressures, prices moving up broadly across the economy at this point but we are watching carefully for that. >> just the final point in echoing, senator -- senator also offset it, climate change every day becomes more obvious to all of us are the impact is something that i think is not transitory. it will be with us. simple things like food when there's no water for irrigation, complicated things like displacement of homes because of rising waters or a lack of water , and i'm pres -- pleased to see people are focusing on that. my sense is though every day, there will be -- the news will be more upsetting. i hope that's a fair comment.
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>> thank you mr. chairman. thank you, senator reid. senator warnock from georgia is recognized for five minutes. sen. warnock: thank you so much, chairman brown and -- chairman powell. i'm a strong advocate for working families and successfully pushed, along with senator brown and senator booker, and others, expansion of the vital child credit tax program in the american rescue plan. the expanded tax credit essentially provides a tax cut for middle-class families, cutting childhood poverty nearly in half nationwide and as generally available to most american families with children including families with little to no income. today is a great day because many of them will see that tax cut if there -- i'm glad to see
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hard-working families across georgia and across the country see the benefit of this to help with the rising costs of raising our children. in my home state of georgia, alone, more than 1.2 million families will receive these payments for relief for over 2 million children across the state. in previous remarks, chairman powell, you stated that "the widespread vaccinations along with unprecedented fiscal policy actions are providing strong support to the economic recovery." with families now beginning to receive child tax credits today, how does direct financial support to families help sustain an ongoing economic recovery? chm. powell: of course, we try not to comment on fiscal policy
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measures, such as the one you said, and generally from the policy, it did step in strongly and support people in their time of need, and the record will show that. sen. warnock: thank you. i have another quick question about a housing bill am currently working on which i hope will be a bipartisan bill. one of the other challenges i worked hard to address is the widening racial wealth gap in the country. a wealth gap that has been further exacerbated during the pandemic. in particular, i focused on the persistent disparities that exist in the undervaluation of black and brown homeowners within our appraisal markets. which as we all know as a key contributor to mental class -- mental health, class and wealth,
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directly tied to the value of their homes and ability to pass on wealth to their children. i'm glad to see the biden administration and other agencies taking action as well as banks, credit unions, the appraisal industry and other stakeholders leaning in collectively to help solve this long-standing issue. it seems to me it is time for congress to join the. effort do you agree that addressing racial disparities within the appraisal market can help our economy and help close the racial wealth gap? chm. powell: i do think that there's no place for a racial discrimination in our banking sector or housing sector, certainly in the appraisal. there is a big focus on appraisal as you point out. we will use the authority we have in supervising institutions, enforcing cra to try to eliminate that kind of discrimination.
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sen. warnock: do you think it will help close the racial wealth gap? chm. powell: over time, i think a lot of the racial wealth gap is traceable to housing, so i -- that should be the outcome. sen. warnock: thank you, in april, congress passed the housing and fairness approval act on. . a bipartisan voice vote. only with this would be a great step in approving practices and mitigating racial bias and would also help increase and diversify the appraiser pipeline and increase the number of trained appraisers in rural communities. my plan is to introduce this legislation along with senator klobuchar and chairman brown in the senate and i hope to do so with a few of my colleagues from across the aisle because i believe we can work together in a bipartisan manner to tackle this critical issue that impacts not only these homeowners but the economy as we close the
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racial gap. we all have a stake in that. one final topic, the community reinvestment act addresses how banks must meet the credit and capital needs of the communities they serve in may. i asked your colleague mr. quarrels about the fed intention to issue a joint rule along with the occ and fbi see, and -- fbi c, and he expressed it was the objective to issue a joint cra rule that protects and strengthens our most vulnerable communities. can you provide us with an update on the status of this rulemaking? chm. powell: i would be glad to. we are working through the process of reviewing a quite extensive group of comments and now engaging with the occ to go forward and try to sort through
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that and come out with a -- appropriate changes to what we proposed. i can't speak exactly to the fdic. i think they are considering whether to take part in the process. we of course would like to get the three agencies together on a cra proposal. i'm very optimistic. there's a lot of work left, but i am optimistic that it will be a very good one. sen. warnock: thank you so much. >> thank you, senator warnock. i understand the comment on the immense support of child tax credits, but i think senator warnock for bringing it up and thank him for his leadership even in the first six months in the senate on an issue that will make a huge difference to 39 million families, 52 million children. we don't quite have everybody getting checks today or direct deposits today, tomorrow and saturday, we encourage people to go to taxcredit.gov for people
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that are eligible. as i said, 92% of the children in my state. senator warnock, thank you for that. chair powell, thank you for being witness in providing testimony for senators who wish to submit questions to the record. those questions are due one week from today. on thursday, july 22. you have 45 days to respond to questions. thank you. with that, the hearing is adjourned. [captions copyright national cable satellite corp. 2021] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org]
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♪ [crosstalk] >> live here on c-span, we are standing by at the white house for a joint news conference with president biden and the chancellor of germany, angela merkel. running a bit behind schedule at this point, but we will bring it to you live when it begins. until then, some of today's "washington journal." the next 30 minutes, it is our open forum, turning the phone lines to you, letting you lead the discussion, but public policy, medical issue, which state issue is on your mind? democrats call in at (202) 748-8000.

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