United States: Secretary of the Treasury and FRB President testify to pandemic relief efforts
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In a hearing before the US Senate Committee on Banking, Housing, and Urban Affairs, Treasury Secretary Janet L. Yellen and Federal Reserve Board (“FRB”) Chairman Jerome H. Powell praised the government’s financial response. federal government to the pandemic and urged Congress to raise the debt ceiling.
In her testimony, Ms Yellen praised Congress’ response to the pandemic, noting that the Treasury would not have “outperformed” in its pandemic relief efforts without the adoption of (i) the Coronavirus Aid, Relief, and Economic Security Act, (ii) the Consolidated Appropriations Act and (iii) the American Rescue Plan. Ms. Yellen noted the Treasury’s efforts to administer the expanded monthly child tax credit payments to families of approximately 60 million children, and to establish and expand the emergency rent assistance program. However, Ms. Yellen stressed that for treasury efforts to reach their full potential, state and local governments must remove barriers to the distribution of rent assistance payments. Ms Yellen also urged Congress to raise the debt ceiling, warning of the impending US default and the potential for a “financial crisis and economic recession” that would result.
In his testimony, Mr. Powell touted the efforts of the FRB to help make more than $ 2 trillion available between April and December 2020 in funding for businesses, nonprofits, and state and local governments. Mr. Powell also pointed to the FRB’s emergency lending facilities to help “restore the flow of credit from private lenders through normal channels.” Mr Powell said the emergency facilities are now closed and are currently in the process of shutting down their remaining operations.
In their statements, committee chairman Sherrod Brown (D-OH) and committee ranking member Pat Toomey (R-PA) disagreed on the extent to which the U.S. economy has recovered from the pandemic. Mr Toomey said the economy had fully recovered, “exceeding the pre-pandemic GDP forecast for 2021”. Mr Brown argued that the Federal Reserve still has work to do as the recovery in employment lags behind the recovery of large financial institutions. Agreeing with Ms Yellen, Mr Brown also cautioned against “playing politics” with the US debt limit, highlighting its potential effect on the dollar as the world’s reserve currency.
During the questioning session, Senator Elizabeth Warren (D-MA) criticized the FRB’s response. Turning to Mr. Powell, she said: “[y]our record worries me a lot. Time and time again you have acted to make our banking system less secure, and that makes you a dangerous man to run the Fed, and that is why I will oppose your re-appointment. “
- U.S. Senate Banking Committee Hearing: CARES Oversight of the Treasury and Federal Reserve – Supporting a Fair Recovery in a Pandemic
- Member Statement, Sherrod Brown: CARES Act Oversight of the Treasury and Federal Reserve – Supporting a Fair Recovery in a Pandemic
- Member Statement, Patrick Toomey: CARES Law Oversight of the Treasury and Federal Reserve – Supporting a Fair Recovery in a Pandemic
- Testimonial from Congress, Janet Yellen: CARES Oversight of the Treasury and Federal Reserve Act – Supporting a Fair Recovery in a Pandemic
- Testimonial from Congress, Jerome Powell: Oversight of the Treasury and Federal Reserve through the CARES Act – Supporting a Fair Recovery in a Pandemic
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