At a hearing before the U.S. Senate Committee on Banking, Housing, and Urban Affairs, Treasury Secretary Janet L. Yellen and Federal Reserve Board ("FRB") Chair Jerome H. Powell touted the federal government's financial response to the pandemic and urged Congress to raise the debt limit.
In her testimony, Ms. Yellen praised Congress's response to the pandemic, emphasizing that Treasury would not have achieved "overperformance" in its pandemic relief efforts without the passage of (i) the Coronavirus Aid, Relief, and Economic Security Act, (ii) the Consolidated Appropriations Act and (iii) the American Rescue Plan. Ms. Yellen noted Treasury efforts in administering expanded Child Tax Credit payments on a monthly basis to the families of approximately 60 million children, and establishing and scaling the Emergency Rental Assistance Program. However, Ms. Yellen stressed that in order for Treasury efforts to reach their full potential, state and local governments have to eliminate barriers to the distribution of rental assistance payments. Ms. Yellen also urged Congress to raise the debt limit, warning of the U.S.'s impending default and the potential of a resulting "financial crisis and economic recession."
In his testimony, Mr. Powell touted the FRB's efforts in helping make available over $2 trillion between April and December 2020 in funding for businesses, nonprofits and state and local governments. Mr. Powell also highlighted the FRB's emergency lending facilities for helping to "restore the flow of credit from private lenders through normal channels." Mr. Powell stated that the emergency facilities are now closed and are currently in the process of winding down their remaining operations.
In their statements, Committee Chair Sherrod Brown (D-OH) and Committee Ranking Member Pat Toomey (R-PA) disagreed on the degree to which the U.S. economy has recovered from the pandemic. Mr. Toomey asserted that the economy has fully recovered, "running above pre-pandemic GDP forecasts for 2021." Mr. Brown contended that the Federal Reserve still has work to do as job recovery trails behind the recovery of large financial institutions. In agreement with Ms. Yellen, Mr. Brown also warned of "playing politics" with the U.S. debt limit, emphasizing 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 stated: "[y]our record gives me grave concerns. Over and over, you have acted to make our banking system less safe, and that makes you a dangerous man to head up the Fed, and it's why I will oppose your renomination."
Primary Sources
- U.S. Senate Banking Committee Hearing: CARES Act Oversight of the Treasury and Federal Reserve - Supporting an Equitable Pandemic Recovery
- Member Statement, Sherrod Brown: CARES Act Oversight of the Treasury and Federal Reserve - Supporting an Equitable Pandemic Recovery
- Member Statement, Patrick Toomey: CARES Act Oversight of the Treasury and Federal Reserve - Supporting an Equitable Pandemic Recovery
- Congressional Testimony, Janet Yellen: CARES Act Oversight of the Treasury and Federal Reserve - Supporting an Equitable Pandemic Recovery
- Congressional Testimony, Jerome Powell: CARES Act Oversight of the Treasury and Federal Reserve - Supporting an Equitable Pandemic Recovery
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