Full text of CARES Act Oversight of the Treasury and Federal Reserve: Supporting an Equitable Pandemic Recovery : Hearing Before the Committee on Banking, Housing, and Urban Affairs, United States Senate, One Hundred Seventeenth Congress, First Session, September 28, 2021

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S. HRG. 117–664

CARES ACT OVERSIGHT OF THE TREASURY AND
FEDERAL RESERVE: SUPPORTING AN EQUITABLE PANDEMIC RECOVERY

HEARING
BEFORE THE

COMMITTEE ON
BANKING, HOUSING, AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
ON
EXAMINING TESTIMONY FROM THE SECRETARY OF THE TREASURY AND THE
CHAIRMAN OF THE FEDERAL RESERVE, AS REQUIRED UNDER TITLE IV OF
THE CARES ACT

SEPTEMBER 28, 2021

Printed for the use of the Committee on Banking, Housing, and Urban Affairs

(
Available at: https: //www.govinfo.gov /

U.S. GOVERNMENT PUBLISHING OFFICE
52–157 PDF

WASHINGTON

:

2023

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
SHERROD BROWN, Ohio, Chairman
JACK REED, Rhode Island
PATRICK J. TOOMEY, Pennsylvania
ROBERT MENENDEZ, New Jersey
RICHARD C. SHELBY, Alabama
JON TESTER, Montana
MIKE CRAPO, Idaho
MARK R. WARNER, Virginia
TIM SCOTT, South Carolina
ELIZABETH WARREN, Massachusetts
MIKE ROUNDS, South Dakota
CHRIS VAN HOLLEN, Maryland
THOM TILLIS, North Carolina
CATHERINE CORTEZ MASTO, Nevada
JOHN KENNEDY, Louisiana
TINA SMITH, Minnesota
BILL HAGERTY, Tennessee
KYRSTEN SINEMA, Arizona
CYNTHIA LUMMIS, Wyoming
JON OSSOFF, Georgia
JERRY MORAN, Kansas
RAPHAEL WARNOCK, Georgia
KEVIN CRAMER, North Dakota
STEVE DAINES, Montana
LAURA SWANSON, Staff Director
BRAD GRANTZ, Republican Staff Director
ELISHA TUKU, Chief Counsel
DAN SULLIVAN, Republican Chief Counsel
MARK UYEDA, Republican Detail
CAMERON RICKER, Chief Clerk
SHELVIN SIMMONS, IT Director
CHARLES J. MOFFAT, Hearing Clerk
(II)

C O N T E N T S
TUESDAY, SEPTEMBER 28, 2021
Page

Opening statement of Chairman Brown ................................................................
Prepared statement ...................................................................................
Opening statements, comments, or prepared statements of:
Senator Toomey ................................................................................................
Prepared statement ...................................................................................

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WITNESSES
Janet L. Yellen, Secretary, Department of the Treasury .....................................
Prepared statement ..........................................................................................
Responses to written questions of:
Chairman Brown .......................................................................................
Senator Toomey .........................................................................................
Senator Menendez .....................................................................................
Senator Warren .........................................................................................
Senator Sinema .........................................................................................
Senator Crapo ............................................................................................
Senator Kennedy .......................................................................................
Jerome H. Powell, Chairman, Board of Governors of the Federal Reserve
System ...................................................................................................................
Prepared statement ..........................................................................................
Responses to written questions of:
Chairman Brown .......................................................................................
Senator Toomey .........................................................................................
(III)

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CARES ACT OVERSIGHT OF THE TREASURY
AND FEDERAL RESERVE: SUPPORTING AN
EQUITABLE PANDEMIC RECOVERY
TUESDAY, SEPTEMBER 28, 2021

U.S. SENATE,
URBAN AFFAIRS,
Washington, DC.
The Committee met at 10 a.m., via Webex and in room 216, Hart
Senate Office Building, Hon. Sherrod Brown, Chairman of the
Committee, presiding.
COMMITTEE

ON

BANKING, HOUSING,

AND

OPENING STATEMENT OF CHAIRMAN SHERROD BROWN

Chairman BROWN. The Senate Committee on Banking, Housing,
and Urban Affairs will come to order. This hearing is in a hybrid
format. Our witnesses are in person. Members have the option to
appear either in person or virtually.
For those joining remotely a few reminders. Once you start
speaking there will be a slight delay before you are displayed on
the screen. To minimize background noise please click the Mute
button until it is your turn to speak or ask questions.
You should all have one box on our screens labeled ‘‘Clock’’ that
will show how much time is remaining. For those joining virtually
you will hear a bell ring at 30 seconds and then when time is expired. If there is a technology issue we, of course, will move on to
the next Senator.
Our speaking order will be as usual, that is by seniority of the
Members who have checked in before the gavel came down at 10,
either in person or virtually, and then by seniority Members arriving later, alternating always, on this Committee, between Democrats and Republicans.
Welcome to our witnesses. We all remember the dark days of
2008, and the painful years that followed. Secretary Yellen and
Chair Powell, you both helped us deal with the aftermath in your
roles at the Federal Reserve.
When the biggest banks were in trouble, Washington, as always,
sprang to action. ‘‘We have no choice. We cannot allow these banks
to fail,’’ we heard over and over and over again. But millions of
families were allowed to fail. American workers bailed out the financial industry, but their livelihoods were not treated with the
same urgency. Recovering their jobs, let alone empowering them to
demand better ones, would have to wait for years.
By the end of 2013, the stock market had its best year in almost
two decades. Eleven million people, though, were still out of a job.
(1)

2
The question before us today is the same question we have been
grappling with for a year: Are we going to learn from our past mistakes?
Americans do not have to settle for another Wall Street-first recovery. We have the tools to do things differently. The only question is whether we are going to use them, for as long as it takes.
So far, we have worked to learn the lessons of the past and do
better by American workers. That is what the CARES Act and the
American Rescue Plan were all about. We put money in families’
pockets, stimulus checks, Earned Income, Child Tax Credit, money
spent always in local supermarkets and shopping centers on food
and back-to-school supplies.
Treasury helped State and local governments get emergency
rental assistance to 420,000 families in August alone and $950 million to help homeowners who are behind on their mortgages. The
result has been record job growth. Job creation—I am going to say
this twice—job creation in the first 7 months of the Biden administration, Madam Secretary, is nearly double any previous first-year
President. Job creation in the first 7 months of the Biden administration is nearly double any previous first-year President.
It is not just the jobs themselves. It is the quality of these jobs.
For the first time in decades, workers are starting to gain a little
power in our economy, power to negotiate higher wages, power to
fight for better working conditions, more control over their schedules and their futures. Progress, to be sure, but a long way to go.
We are down 5.6 million jobs since before the pandemic. Corporations too often use the pandemic as an excuse to ‘‘cut costs.’’ We
know that by ‘‘costs’’ they always mean jobs or wages or retirement
contributions. They rarely mean CEO bonuses or, God knows, they
do not mean stock buybacks.
Instead of hiring back loyal workers as business expands, companies outsource or contract out work, often paying people more or
less half as much.
The Fed, for its part, has taken extraordinary action over the
past year-and-a-half to stabilize our economy. But many of the
Fed’s efforts, Mr. Chairman, helped stabilize markets much more
than they stabilized working families. Those actions have been a
bonanza for Wall Street. Big corporate mergers are at an all-time
high. The biggest banks have had one of their most profitable years
ever, and we are, not to be reminded of it, all during a global pandemic.
The same companies that benefited from the Fed’s actions want
to ‘‘restructure’’ the workforce. They complain about a ‘‘skills gap’’
while refusing to cut into their stock buyback budgets to expand
training programs or offer truly high wages.
This ought to be a reminder that we are still in the very early
stages of recovery, and the same old Wall Street system is not good
enough. Chair Powell, you have talked about your commitment to
competitive labor markets, yet you have said that the test for full
employment is, your words, ‘‘all but met.’’
Tell that to the working mother who was forced to quit her job
because she could not afford childcare, or even find childcare. Tell
that to the server who worked for decades at a major hotel chain,
only to lose her job during the pandemic, and then be offered the

3
same job by a contractor paying a fraction of the wages with no
benefits. Tell that to a worker in my hometown in Mansfield, Ohio,
who, for decades, watched companies close down factories and move
good-paying, often union jobs abroad, only to have them replaced,
when they were replaced at all, by low-wage, non-union jobs at a
big box store.
Now is not the time to declare victory. Americans have watched
this story unfold over and over again. Crash. Recession. Rapid Wall
Street recovery. Years of slow, slow, painful, uneven job recovery,
always within the same corporate system that treats quarterly
stock prices as the only real measurement that matters, and treats
workers as a cost to be minimized.
How many times are we going to continue to do this? How many
times are Americans going to have to watch history repeat itself?
We cannot declare the recovery complete until all workers can
find a job that pays them fair wages and treats them with dignity.
The Fed cannot pull back every time workers gain a tiny bit of
power to demand higher wages. The Fed cannot continue to
rubberstamp mergers and allow corporate consolidation to go unchecked, and then wonder why job growth is not reaching whole regions of the country.
Full employment means a truly competitive labor market, one
where everyone can get a job, and employers compete for workers.
We have not seen that kind of labor market in decades, but we can.
It is our job, it is this Committee’s job, it is Treasury’s job, it is
the Fed’s job.
Also, I also need to say a quick word about the games Republicans are playing with people’s livelihoods. The debt limit—we all
know this—the debt limit is not about future spending. It is about
meeting obligations we have already made. It is the bipartisan,
overwhelmingly popular CARES Act, the reason we are holding
this hearing today.
Every single one of my Republican colleagues who served on this
Committee last year, every one of them voted for the CARES Act.
Every one of them, again, who served on this Committee before,
voted for the $2 trillion tax cut for their wealthy friends. They did
not seem to have a problem with the debt limit then, but now they
do not want to pay the bill?
The partisan game is pretty transparent. We need to pay our
bills on time. We have always done it. Treasury Secretaries, past
and present, and across the political spectrum, are sounding the
alarm about the economic devastation that they are threatening.
China watches all of this with glee, all too eager to see the dollar
tarnished as the world’s reserve currency, and we play right into
that. We cannot play politics with the full faith and credit of the
United States.
Last comment. Chair Powell, I understand you have initiated a
review of the ethics and financial disclosure rules at the Fed after
we learned of stock trades that at least two Federal Reserve Bank
presidents made during the pandemic. I have a bill with Senator
Merkley and Senator Warnock, also a Member of this Committee,
the Ban Conflicted Trading Act, that would ban members of Congress from buying or selling any individual stocks. The same
should apply to Fed officials. I am introducing a bill to do that.

4
Your job, the Fed’s job, members of Congress’ job is to serve the
public, not their stock portfolios.
Ranking Member Toomey.
OPENING STATEMENT OF SENATOR PATRICK J. TOOMEY

Senator TOOMEY. Thank you, Mr. Chairman. Secretary Yellen
and Chair Powell, welcome.
Last year, Congress, on bipartisan basis, forcefully responded to
the threat of economic collapse caused by the pandemic and that
resulting lockdowns. That response, together with the Fed’s aggressive monetary policy support and the end to lockdowns, enabled the
U.S. economy to fully recover. Our economy today is not only larger
than it was before the pandemic, but we are now running above
prepandemic GDP forecasts for this year.
Unfortunately, our Democratic colleagues are trying to ram
through a reckless tax and spending bill that will threaten this economic growth. Their policies include massively expanding the welfare State, raising taxes on U.S. employers, and diminishing investment by raising taxes on capital gains.
Let’s be clear about the purpose behind these proposals. It is not
to spur economic recovery—the economy is strong. Nor is it an
antipoverty plan—the programs are not limited to the poor. It is
to redefine the relationship between the Federal Government and
the middle class. It is about socializing many ordinary responsibilities that families have always assumed.
Instead of raising taxes to partially fund economically harmful
programs, we should be working to return to the best economy of
my lifetime, which we experienced just before COVID hit. We had
the lowest unemployment rate in 50 years, including record low unemployment rates for Black and Hispanic Americans. Real median
household income at an all-time high, and strong wage growth,
above the rate of inflation, was particularly for lowest income earners.
This was all achieved by reforming the tax code, lowering tax
rates, and lightening regulatory burdens, and now the Democrats
colleagues are proposing to reverse all of these successful policies.
The Fed has clear and narrow mandates, to conduct monetary
policy that promotes stable prices, maximum employment, and
moderate long-term interest rates, and also to conduct banking supervision and maintain an efficient payment system. It is therefore
concerning to see the Fed, especially its regional banks, wade into
politically charged areas like global warming and racial justice.
These efforts undermine the Fed’s independence and distract from
the Fed’s actual responsibilities, like controlling inflation.
Speaking of which, the Fed’s excessively accommodative monetary policy, emergency policies long after the emergency has
passed, have produced the inflation that I feared and the Fed did
not expect. We are now seeing rates of inflation considerably higher
than the Fed projected, and it is hurting businesses, consumers,
and workers.
And you do not have to just take my word for it. Here is what
the CFO one of the biggest retailers in America, Costco, said last
week, and I quote, ‘‘Inflationary factors abound: higher labor costs,
higher freight costs, higher transportation demand, along with con-

5
tainer shortages and port delays, increased demand in certain
product categories, various shortages of everything from computer
chips to oils and chemicals,’’ end quote.
To address this threat, I urge the Fed to accelerate the process
of normalizing monetary policy so that it does not fall further behind the curve in responding to inflation than it already has.
I am also concerned Treasury may be headed down a similar
path of exceeding its authority. Too much fanfare, the Biden administration has announced an international tax agreement that
consists of two pillars.
Pillar one is an unprecedented change that would allow foreign
countries to tax American companies based on their sales overseas.
It is a tax revenue transfer from us to them. Unsurprisingly, this
is the priority for other countries who have long sought this tax
revenue.
Pillar two is a global minimum tax on multinationals’ foreign income. This is the Biden administration’s attempt to justify burdensome tax increases on U.S. companies, and unsurprisingly, this is
the Administration’s priority and is part of its efforts to dismantle
our successful 2017 tax reforms.
Now the Administration is imploring other countries to implement a global minimum tax that will harm their own workers and
businesses, and by doing so, the Administration has implicitly acknowledged that their proposed multinational tax increases will
make U.S. workers and businesses less competitive, if other countries either do not implement a global minimum tax of their own,
or if they implement a significantly lower rate than what the Administration is proposing.
But there is a real possibility that other countries will not implement a global minimum tax for at least two reasons. First, the EU
can only implement this global minimum tax by unanimous consent, which they do not have, which they do not have. And second,
these countries have only reluctantly agreed to Pillar Two in return
for Pillar One, which is the transfer of U.S. tax revenue from us
to them. But implementing Pillar One in the U.S. requires a treaty
ratified by two-thirds of the U.S. Senate. I think that is unlikely
to happen.
So the Administration has implicitly admitted that their global
tax hike will be a big problem for the United States if the rest of
the world does not follow suit. But there is a very substantial risk
that the rest of the world will not follow suit. And yet Democrats
are charging ahead with this destructive tax increase in their reconciliation bill that apparently they are going to try to pass any
day now.
So lots to talk about this morning. Secretary Yellen and Chairman Powell, I look forward to discussing these and other issues
with you today.
Chairman BROWN. Thank you, Ranking Member Toomey.
I will introduce today’s witnesses. Today we hear from Treasury
Secretary Janet Yellen and Federal Reserve Chair Jerome Powell,
and their agencies’ continued actions to support an equitable pandemic recovery and make sure that our economy works for all
Americans.

6
Secretary Yellen and Chair Powell, thank you for your public
service. Thank you for your testimony today.
Madam Secretary, please proceed.
STATEMENT OF JANET L. YELLEN, SECRETARY, DEPARTMENT
OF THE TREASURY

Secretary YELLEN. Chairman Brown, Ranking Member Toomey,
Members of the Committee, it is a pleasure to testify today.
We are in the midst of a fragile but rapid recovery from the pandemic-induced recession. While our economy continues to expand
and recapture a substantial share of the jobs lost during 2020, significant challenges from the Delta variant continue to suppress the
speed of the recovery and present substantial barriers to a vibrant
economy. Still, I remain optimistic about the medium-term trajectory of our economy, and I expect we will return to full employment
next year.
A rebound like this was never a foregone conclusion. In fact, the
American recovery is stronger than those of other wealthy Nations.
One key factor for our overperformance is the policy choices that
Congress has made over the past 18 months. Those choices include
the passage of the CARES Act, the Consolidated Appropriations
Act, and the American Rescue Plan.
Treasury, as you know, was tasked with administering a large
portion of the relief dollars in those bills, and when we last met
our Department was busy standing up programs to help individual
families, State governments, and organizations of every size in between. While we still have much more work to do, we have made
significant progress, and I wanted to give you an update.
Let’s start with families. In July, our Department started sending the monthly expanded Child Tax Credit payments to the families of nearly 60 million children across the country. To date, $46
billion dollars in payments have been made, and we are already
seeing the impact. Analysis by the Census Bureau found that after
the first payments in July, food insecurity among families with
children dropped 24 percent.
As for State, local, tribal, and territorial governments, COVID–
19 decimated their budgets. There were mass layoffs, and to end
the health and economic emergencies, we knew that communities
would need funding to hire educators to bring kids back to school,
for example, or frontline workers to administer the vaccine. The
American Rescue Plan included $350 billion to that end, and those
dollars are indeed helping the machinery of local governments get
up and running. States and localities can rely on relief money that
is available instead of resorting to painful budget cuts.
Congress rightly designed the State and local program with flexibility in mind. I think many of us knew the recovery could run up
against some unforeseen challenges, and we wanted communities
to be able to devote resources where and when they saw fit. I want
to note that this flexibility is paying off now, especially with the
spread of the Delta variant. Harris County, Texas, for instance, has
used this funding to boost its immunization rate, offering $100 to
each person who gets their first vaccine dose.
For the relief dollars not yet out the door, Treasury is doing everything it can to expedite their delivery. The Emergency Rental

7
Assistance Program is one example. Prior to the pandemic, there
was essentially no national infrastructure to get money from Government coffers to renters and landlords. Building that infrastructure has been a massive undertaking for States, localities, and
tribes.
The program is scaling up quickly, with 1.4 million payments
made to help struggling renters keep a roof over their heads. Still,
too much of the money remains bottlenecked at the State and local
levels. That is why our Treasury team has worked to eliminate
every piece of red tape possible in order to ensure more payments
can get to renters and landlords, but States and localities must also
work to remove barriers that can speed up distribution of rental assistance funds.
I will end my remarks there except to say this. It is imperative
that Congress address the debt limit. If not, our current estimate
is the Treasury will likely exhaust its extraordinary measures by
October 18th. At that point, we expect Treasury would be left with
very limited resources that would be depleted quickly. America
would default for the first time in history. The full faith and credit
of the United States would be impaired, and our country would
likely face a financial crisis and economic recession as a result.
We must address this issue to honor commitments made by this
and prior Congresses, including those made to address the health
and economic impact of the pandemic. It is necessary to avert a
catastrophic event for our economy.
Senators, the debt ceiling has been raised or suspended 78 times
since 1960, almost always on a bipartisan basis. My hope is that
we can work together to do so again, and to build a stronger American economy for future generations.
Thank you, and I am pleased to take your questions.
Chairman BROWN. Thank you, Madam Secretary.
Chair Powell, you are recognized. Thank you for joining us.
STATEMENT OF JEROME H. POWELL, CHAIRMAN, BOARD OF
GOVERNORS OF THE FEDERAL RESERVE SYSTEM

Mr. POWELL. Thank you. Chairman Brown, Ranking Member
Toomey, and other Members of the Committee, thank you for the
opportunity to discuss the measures we have taken to address the
hardship wrought by the pandemic.
Since we last met, the economy has continued to strengthen.
Real GDP rose at a robust pace in the first half of the year, and
growth is widely expected to continue at a strong pace in the second half. The sectors most adversely affected by the pandemic have
improved in recent months, but the rise in COVID–19 cases has
slowed their recovery. Household spending rose at an especially
rapid pace over the first half of the year but flattened out in July
and August as spending softened in COVID-sensitive sectors. Additionally, in some industries, near-term supply constraints are restraining activity.
As with overall economic activity, conditions in the labor market
have continued to improve. Demand for labor is very strong, and
job gains averaged 750,000 per month over the past 3 months. In
August, however, gains slowed markedly, with the slowdown concentrated in sectors most sensitive to the pandemic. The unemploy-

8
ment rate was 5.2 percent in August, and this figure understates
the shortfall in employment, particularly as participation in the
labor market has not moved up from the low rates that have prevailed for most of the past year.
Factors related to the pandemic appear to be weighing on employment growth. These factors should diminish with progress on
containing the virus.
The downturn has not fallen equally on all Americans, and those
least able to shoulder the burden have been the hardest hit. In particular, despite progress, joblessness continues to fall disproportionately on lower-wage workers in the service sector and on African
Americans and Hispanics.
Inflation is elevated and will likely remain so in coming months
before moderating. As the economy continues to reopen, we are seeing upward pressure on prices, particularly due to supply bottlenecks in some sectors. These effects have been larger and longer
lasting than anticipated but they will abate, and as they do, inflation is expected to drop back toward our longer-run 2 percent goal.
The process of reopening the economy is unprecedented. As it
continues, bottlenecks, hiring difficulties, and other constraints
could again prove to be greater and more enduring than anticipated, posing upside risks to inflation. If sustained higher inflation
were to become a serious concern, we would certainly respond and
use our tools to ensure levels that are consistent with our goal.
The path of the economy continues to depend on the course of the
virus, and risks to the outlook remain. The Delta variant has led
to a surge in cases, causing human suffering and slowing the recovery. Continued progress on vaccinations would support a return to
more normal economic conditions.
The Fed’s policy actions are guided by our dual mandate to promote maximum employment and stable prices, along with our responsibilities to promote the stability of the financial system. In response to the crisis, we took broad and forceful measures to support the flow of credit and to promote the stability of the financial
system. Our actions, taken together, helped unlock more than $2
trillion of funding to support businesses large and small, nonprofits, and State and local governments between April and December of 2020. This, helped keep organizations from shuttering and
put employers in a better position to keep workers on and to hire
them back as the recovery continues.
These programs have served as a backstop to key credit markets
and helped to restore the flow of credit from private lenders. We
have deployed them to an unprecedented extent. Our emergency
lending tools require the approval of the Treasury and are available only in unusual and exigent circumstances, such as those
brought on by the crisis.
Many of these programs were supported by CARES Act funding.
Those facilities provided essential support through a very difficult
year and are now closed.
The Fed completed its sales of assets from the Secondary Market
Corporate Credit Fund on August 31. We were able to wind down
the facility rapidly and efficiently, with no adverse impact on credit
conditions. We also recently closed the PPPLF to new lending, are
managing the paydown of assets in our other CARES facilities as

9
they wind down. We continue to analyze their efficacy and to review the lessons learned.
The Fed’s actions affect communities, families, and businesses
across the country. Everything we do is in service of our public
mission. We will do all we can to support the economy for as long
as it takes. Thank you.
Mr. Chair, if I may just offer one thing. What I said last week
was that we had all but met the test for tapering. I made it clear
that we are, and we are, in my view, a long way from meeting the
test for maximum employment. Thank you.
Chairman BROWN. Thank you, Mr. Chairman.
Madam Secretary, last night my Republican colleagues blocked
efforts to provide critical disaster relief to millions of Americans to
keep the Government open and to raise the debt ceilings so that
the Government can pay our bills on time, something we have always done bipartisanly, including right after the Republicans
passed their deficit-busting corporate tax giveaway via reconciliation.
Be brief, if you would. What would be the impact on our economy
if they block call efforts to raise the debt ceiling?
Secretary YELLEN. Chairman Brown, failing to increase the debt
limit would have catastrophic economic consequences. It would
cause the Government to default on its obligations, which is an utterly unprecedented event in American history. It would be disastrous for the American economy, for global financial markets, and
for millions of families and workers whose financial security would
be jeopardized by delayed payments.
For example, nearly 50 million seniors would, or could stop receiving Social Security payments or see them delayed. Our troops
would not know when their paychecks would come. Thirty million
families who rely on the child tax credit would not receive the
monthly payment on time. Unemployment would surely rise and,
as we saw in 2011, even coming very close to the deadline without
raising the debt ceiling can undermine the confidence of financial
markets in the credit-worthiness of the United States that led to
a debt downgrade and soaring interest rates, which ends up raising
payments on mortgages, auto loans, and credit cards.
Chairman BROWN. Thank you. You made clear that the debt ceiling is about money. We have already spent, like the CARES Act,
that Republicans in Congress voted for and that President Trump
signed into law, and now they want to run out and pay the bill.
We know it is just wrong. They know it is just wrong.
Chair Powell, the most recent jobs report, as you point out, saw
unemployment decreasing generally, but it also showed a continued
racial unemployment gap, and the unemployment is rising for
Black workers.
You committed to erring on the side of lower unemployment in
a more competitive labor market. Thank you for that. But last
week you announced that policy tightening will begin in November
with tapering, that interest rate targets will increase next year.
Why take away economic support just when workers are getting
back on their feet and starting to see glimmers real wage growth,
and when the recovery has failed to reach so many Black workers?

10
Mr. POWELL. Right now, we are buying $120 billion worth of securities every month, and all of those purchases add to accommodation. They are increasing accommodation. And we had set a test for
beginning to taper those purchases of substantial further progress
toward our statutory goals. We have not met that yet, but as I
mentioned, I think we have all but met it on the path that we are
looking at. We would continue to add accommodation, not subtract
it, until well into the middle of next year. And we think that is appropriate given the strength of the economy.
The test for raising interest rates is substantially higher. And,
you know, we want to see just, as you indicated at the beginning,
we want to see a labor market that we both indicated, a labor market that is very strong. We want to see the kinds of reductions in
disparities and the kinds of things that we did see before the pandemic arrived.
Chairman BROWN. Thank you. Secretary Yellen, the Conservative Niskanen Center said the expansion of the child tax credit
would result in billions of dollars in spending, hundreds of thousands of jobs in local communities, particularly rural communities.
We know raising a child is work and most of the parents getting
CTC are really doing two jobs at home and in the paid labor force.
So, set the record straight briefly, if you would. Does the expanded child tax credit, particularly a fully refundable child tax
credit, does it increase labor force participation and boost local
economies?
Secretary YELLEN. I believe that it does. I think the evidence
shows that very strongly, that it helps parents take care of their
children. As I mentioned in my opening statement, we have seen
that hunger, the number of families that feel their children do not
have enough to eat drop substantially after the first round of payments. We see that parents are using the CTC payments to pay for
basic needs, including food and clothing. And of course, it can be
used for childcare and provide the kind of support that enables parents to take jobs——
Chairman BROWN. Thank you, and sorry to interrupt. Thank you
for the way that you and Treasury have gotten those checks out
monthly, starting in July. Thank you for that.
Last question. Chair Powell, the New York Times reported in
February only 2 out of 417 economists employed by the Board of
Governors, 2 out of 417 are Black. I appreciate you made diversity
at the Fed a priority. I agree with what you said in that article—
institutions that focus on diversity and do it well are the successful
institutions in our society. Cutting it even closer, over its 108-year
history, no Black woman has ever served on the Board of Governors, not one ever. Do you think the Board of Governors would
be a more successful institution if a Black women had a voice and
a seat at the table? Should we make that a priority?
Mr. POWELL. I would strongly agree that we want everybody’s
voice heard around the table, and that would certainly include
Black women. And we, of course, have no role in the selection process, but we would certainly welcome.
Chairman BROWN. Secretary Yellen, do you agree with that, that
it is time we had a Black woman on the Board of Governors?

11
Secretary YELLEN. I do. I think diversity is extremely important
and that would certainly be a very welcome achievement.
Chairman BROWN. Thank you.
Senator TOOMEY. Thank you, Mr. Chairman. Let me begin by
just stating the obvious. If the Government goes on a spending
binge, that will certainly require more borrowing to pay for all that
spending. Our Democrats have a spending binge underway. They
are threatening to dramatically expand that. And if they get their
way, that will certainly necessarily involve more borrowing than
we would otherwise need.
The Democrats have chosen to ignore our warnings about this excessive spending but they want us to vote to raise the debt ceiling
in order to permit the massive spending increases that they are
planning. I would just remind everyone, just as the Democrats
have the procedural ability to pass this spending on their own, as
they intend to, hey have the exact same procedural ability to raise
the debt ceiling on their own, which they inevitably will have to
end up doing.
Mr. Powell, earlier this year there were certainly sectors of our
economy, especially the sector sensitive to reopening experienced,
pretty dramatic, but largely temporary price spikes. It seems to me
now we are seeing a broader, more troubling kind of inflation.
Input prices are soaring across the board. Raw materials, electrical
components, energy, and consumer expectations seem to have internalized this. The New York Fed’s most recent survey shows that
they expect 5.2 percent inflation over the coming year.
Despite this and all the growth that we have talked about, as
you point out, the Fed is still buying $120 billion in securities every
month, and I guess my question is, doesn’t the inflation we are seeing now seem broader and more structural in nature than the brief
blip we saw, say, in used car prices earlier this year?
Mr. POWELL. Yes. I think it is fair to say that it is. Mainly what
we have seen is that the supply side restrictions that are so much
at the heart of the inflation we are seeing have not only not gotten
better, they have actually, in some cases, gotten worse. Look at the
car companies. Look at the ships docked, or with their anchors
down outside of Los Angeles. And this is really a mismatch between demand and supply, and we need those supply blockages to
alleviate, to abate before inflation can come down. We do believe
that it will. However, if you look at measured inflation and what
is contributing to it, most of it is still from a very small category
of items.
Senator TOOMEY. But it is considerably broader than it was, and
I would also point out, and I know you are aware of this, but the
Fed’s projections of inflation have consistently been off. They have
consistently been low. And at some point I think we need to acknowledge that this is not playing out the way I think the Fed had
hoped.
Let me shift the topic to a central bank digital currency. So I am
increasingly intrigued by the opportunities that a properly designed central bank digital currency could provide to the U.S. To
name a few, instant zero-cost payments, interoperability and
programmability with smart contracts, international competitiveness all come to mind.

12
But getting the design correct, getting it right is essential. For
instance, the privacy of Americans has to be respected. We should
not design a central bank digital dollar that allows the Government
to spy on Americans’ every transaction. And the Fed is certainly
not suited to be a retail bank, and so we certainly should not try
to turn it into one. In my view, privately issued digital currency
should be able to coexist with a digital dollar, if we go down that
road, and private sector developers certainly should be able to innovate either on or in interoperable fashion with a digital dollar.
So I am not asking you to opine on any of these things, but it
seems to me the decision about whether or not to go down this road
is transformational, and there are very, very important and sensitive design issues that would have to be resolved. So I think that
ought to be done in a transparent process with political accountability, which is to say, with congressional input.
Could you comment on how important you think it is to have
congressional authorization if we are going to go down the road of
a digital dollar?
Mr. POWELL. I would be glad to. And by the way, I agree, this
is critical work that we want to take forward. So the relevant parts
of our law were written long before digital finance was a thing, and
a central bank digital currency could take many forms, it is possible that under some forms you would be able to make an argument that it would be authorized under current law. But I think
this is such a fundamental issue. It would be ideal if this were to
be a product of broad consultation, ultimately authorizing legislation from Congress.
Senator TOOMEY. Thank you. Madam Secretary, I want to talk
about the tax agreement. As you know, Pillar One will fundamentally rewrite how profits are allocated among countries, and will
cede U.S. taxing rights to foreign jurisdictions to some degree.
Well, current bilateral treaties would need to be modified to implement this reallocation, and obviously this requires a treaty to implement, right? In fact, the international agreement itself, I think
it acknowledges that by referring to a multilateral instrument, layman’s terms, that is a treaty, and that will be necessary for this
implementation.
So do you acknowledge that Pillar One requires a treaty and
therefore a Senate ratification in order to implement it?
Secretary YELLEN. I believe there are a number of ways in which
Congress could implement it, but certainly ratification of a treaty
would be one way in which Congress could authorize. And certainly
Congress has to authorize the transfer of taxing rights that is contemplated in Pillar One.
Senator TOOMEY. Well, I will finish Mr. Chairman, but I want to
stress that we have, for many, many decades, had bilateral tax
treaties that govern the amounts and the manner by which foreign
Governments can tax American companies. Changing those treaties
requires ratification in the Senate. There is no way around that,
that I can see. Thank you.
Chairman BROWN. Thank you, Senator Toomey. Senator Tester
is recognized from his office.

13
Senator TESTER. Thank you, Mr. Chairman, and I want to welcome both Chairman Powell and Secretary Yellen. This first question is for you Secretary Yellen.
Through the American Rescue Plan I have fought for, and we got
targeted relief for local communities and States. I have heard some
concerns that in Montana some of the funds that you have already
gotten out from Treasury to the States specifically are not getting
out for projects, and that proposes some problems, especially with
winter coming on in Montana, that we might miss an opportunity
to make upgrades to broadband or other critical investments. I
have heard some folks in Montana, leadership, blaming this confusion that is caused by the Treasury Department because the funding is coming in two tranches. That does not make a lot of sense
to me.
So Secretary Yellen, beyond the restrictions on uses of these
funds provided by Congress, and through Treasury’s guidance, is
there anything that the Treasury Department is doing which would
prevent States like Montana from receiving the funds in two
tranches and using the funds that they have already received now?
Secretary YELLEN. Senator, there is no restriction that Montana
faces in using the funds that have been allocated or making plans
to use the funds that will be made available in the second tranche.
That can be done now. There is absolutely no need to wait.
Senator TESTER. OK. So they can use that first tranche right
now; no need new wait—because your mic was on and off there for
a minute. Do they need——
Secretary YELLEN. Yes, that is right.
Senator TESTER. Thank you. Do they need your approval to start
planning what they might use the rest of the funds for? And then
to clarify, States with split payments do not need Treasury’s approval to start getting the funds that they already have out the
door. That is correct, just to make it absolutely clear.
Secretary YELLEN. That is correct, and they can plan how they
intend to use the second tranche of funds as well. They can begin
doing that now.
Senator TESTER. On the second tranche, do you have a timeline
for getting the funds to municipalities and States who have received these split payments?
Secretary YELLEN. I believe it is a year lag between the payments.
Senator TESTER. OK. It is my understanding that the process for
these funds has worked just as Congress laid them out, and it has
been pretty predictable. Would you say that is correct?
Secretary YELLEN. Yes, I think it is correct.
Senator TESTER. OK. And then can you talk to me about the impact that you are seeing in the communities as program funds
through the coronavirus State and local fiscal relief fund are getting up and running?
Secretary YELLEN. Well, I think we are already seeing significant
impact of these funds. Some of it is being used for immediate pandemic response, vaccination efforts, helping unemployed workers,
supporting small businesses, and some of it is being used to address longer-term needs, including broadband infrastructure,

14
water, and sewer. And so these funds can serve a variety of needs,
and are doing so.
Senator TESTER. OK. Secretary Yellen, I want you to respond to
something the Ranking Member said, and I think he knows better.
But he said that Democrats want the Republicans to expand the
debt limit so that they can spend money. Is it not true that the
debt limit is expanded because of money that is already spent, that
it would be similar to you going down to a restaurant, ordering a
steak dinner, paying for it on your credit card, and when the credit
card comes back, you would say, ‘‘Nope, I am not paying for it.’’
Isn’t that similar to what we are talking about with the debt limit?
Secretary YELLEN. That is absolutely correct. It has nothing to
do with future programs of payments. It is entirely about paying
bills that have already been incurred by this Congress and previous
congresses. And it is about making good on past commitments, as
you said, paying our credit card bill.
Senator TESTER. Thank you very much. Thank you, Mr. Chairman. I yield.
Chairman BROWN. Thank you, Senator Tester. Senator Shelby
from Alabama is recognized.
Senator SHELBY. Thank you. Welcome, both of you, Madam Secretary, Chairman Powell.
Chairman Powell, I will direct my first question to you. The Phillips curve is an economic concept that represents an inverse relationship between inflation and unemployment. Historically, it has
been utilized to understand the relationship between unemployment and inflation, in particular, in relation to the Federal Reserve’s dual mandate of price stability and maximum employment.
You were aware of this, Mr. Chairman. Some economists question
the current validity of this concept as a connection between inflation and unemployment has seemed to grow weaker in recent
years.
Chairman Powell, is the Phillips curve still a valued economic
model or tool, and have you observed any notable strengthening in
the relationship between unemployment and inflation during the
pandemic?
Mr. POWELL. Senator, if you go back to the high inflation area
that we both recall, there was a very close relationship, a one-forone kind of relationship, or close to it, between unemployment and
inflation. That is no longer the case. There is still a relationship,
but we say the Phillips curve is very flat, but it is not completely
flat. So there is a relatively modest relationship. The slope of the
line is seven degrees or something, so very flat. Is there any change
that we observe in the near term? To get to your last question, not
at this point, no.
Senator SHELBY. Do you watch the Phillips curve?
Mr. POWELL. Well, we do, but if you saw, we had 3.5 percent unemployment and very modest inflation for a couple of years before
the pandemic. So it is not a top-of-mind concern. The inflation that
we are having is, but it is really not related to the Phillips curve.
Senator SHELBY. Would you say that the Phillips curve concept
is not valid right now?

15
Mr. POWELL. Well, it is not particularly binding right now. Inflation is high and the unemployment rate is high, so it is not really
the binding constraint.
Senator SHELBY. OK. I will direct this question to the Secretary.
The stepped-up basis, Madam Secretary, is a tax provision that allows for a beneficiary to adjust the basis of an asset to its current
value, rather than its value of when originally purchased. We know
that. This provision allows for beneficiaries to avoid paying high
taxes on assets that have increased over time, largely due to inflation.
President Biden’s American Families Plan includes a proposal to
eliminate the stepped-up basis. A lot of people believe that such a
change would result in a costly tax increase on family owned businesses, particularly on farms and ranches. According to a study by
the Texas A&M Agricultural and Food Policy Center, 98 percent of
the farms in its 30-State data base will be impacted by the Biden
administration’s proposal. The study calculates that the average
additional tax liability for a farm to be over $720,000.
Madam Secretary, do you support eliminating stepped-up basis
for State beneficiaries, and if you do, why?
Secretary YELLEN. Senator Shelby, I do support eliminating
stepped-up basis. The reason is that a very large share of the income of wealthy individuals is simply never taxed. Individuals hold
onto these assets during their lifetime. That income is never taxed.
And we know that for some of the wealthiest individuals in the
country, they pay very low taxes overall because most of their income takes the form of unrealized capital gains.
The Biden administration proposed that at death those gains be
taxed. And with careful consideration, not in any way to harm the
prospects of family owned farms or small businesses, there were
substantial exemptions to protect them.
Even if there is not actually taxation imposed at death, getting
rid of stepped-up basis would mean that an heir would inherit the
original basis of the asset, and when that person eventually sold
the asset, taxes would be paid. But I regard step-up of basis as a
kind of loophole that allows a very large portion of income in this
country of the wealthiest individuals to go untaxed.
Senator SHELBY. Thank you. Thank you, Mr. Chairman.
Chairman BROWN. Thank you. Senator Warner is recognized
from his office, remote.
Senator WARNER. Thank you, Mr. Chairman. I want to go back
and revisit with the Treasury Secretary some of the concerns we
all share about potential default. I think we all, many of us, I know
the Chairman and the Ranking Member were around when in
2011, our Nation got close to that kind of default.
Madam Secretary—and I particularly worry about some of my
colleagues who are concerned, rightfully, about additional mandatory spending, but if we were to go into this default basis, would
it not be expected that that would cause a lack of faith in the
American Government’s ability to meet its obligations, which, in all
likelihood, would result in an interest rate spike? And is my math
basically correct that if there were 100 basis point increase in interest rates, 1 percent increase in interest rates when we are looking at a $27 trillion debt, you are looking at more than a $200 bil-

16
lion a year additional mandatory interest payment, those interest
payments because of that spike in interest rates comes before payment of Social Security, payment of our military, any of our other
priorities? And if you extrapolate that on a 10-year basis for concerns about spending, would not that be close to an additional $2
trillion over 10 years of mandatory spending? Is there, Madam Secretary, anything faulty with that analogy or my math?
Secretary YELLEN. I do not believe there is anything at all faulty
about the math. I think there is no question, but if Congress were
to fail to raise the debt limit, or even if it was feared if we are getting close, and it looks as in 2011, like Congress might not raise
the debt ceiling and we might not be able to pay our bills, that you
would expect to see an interest rates spike. And if the debt ceiling
were not raised, I think there would be a financial crisis and a calamity. And absolutely, it is true that the interest payments on the
Government debt would increase.
I would be concerned that the dollar and Treasury assets, which
are regarded as the most secure in the world and serve as the basis
for the dollar to be the reserve currency, that it would undermine
confidence in the dollar as a reserve currency. And the interest
payments of ordinary Americans on their mortgages and on their
cars and on their credit cards would all go up in line with higher
Treasury borrowing costs. And it would increase our spending, absolutely.
Senator WARNER. And again, this is not something that you
could then reverse if suddenly Congress came to its senses, once
you saw any kind of spike in interest rates or confidence losing.
Once this genie is out of the bottle there is no putting it back in.
Is that correct?
Secretary YELLEN. I think that is correct. This would be a manufactured crisis we had imposed on this country, which has been
going through a very difficult period, is on the road to recovery,
and it would be a self-inflicted wound of enormous proportions.
Senator WARNER. And we all know that we are in an economic
competition with China. Would not this effort in terms of a China
that is trying to criticize our withdrawal from Afghanistan, and
would not this give additional fodder to the Chinese arguments,
and, you know, as you mentioned, undermining the confidence in
the dollar as the reserve currency? Wouldn’t this action potentially
also give more credibility to China’s efforts to try to make the RMB
an equal to or potentially even more of a default reserve currency?
Secretary YELLEN. Well, certainly it would undermine confidence
in our Government and in the role of the dollar and the safety of
the dollar, which has really never been questioned. The dollar is
the safe haven asset when times are turbulent, that people feel is
absolutely secure. I think China has a long ways to go in reforming
its financial markets before the renminbi is a serious rival to the
dollar as a reserve currency. But I cannot think of anything more
harmful to the role of the dollar than failing to raise the debt ceiling.
Senator WARNER. Again, I know my time is up, but I would just
point out to my colleagues that are rightfully concerned about mandatory spending, you know, that interest rate spike and the, again,
100 basis points, roughly is $200 billion a year. My math says that

17
is 2 trillion over 10. That would be spending we do not need to do,
and we can all avoid that taking place.
Thank you, Mr. Chairman.
Chairman BROWN. Thank you, Senator Warner. Senator Kennedy
from Louisiana is recognized.
Senator KENNEDY. Thank you, Mr. Chairman. Thank you,
Madam Secretary and Mr. Chairman for being here.
Madam Secretary, when you were here last, and we all look forward to you coming, I asked you to tell me what you thought inflation would be at the end of this year, and you told me 2 percent.
Do you still stand by that prediction?
Secretary YELLEN. Clearly inflation this year is going to be above
2 percent. Just the experience so far this year makes that clearly
true. But I think we are seeing monthly inflation rates taper off.
Senator KENNEDY. Yes, ma’am. What do you think it will be at
the end of the year, if not 2 percent?
Secretary YELLEN. Probably closer to 4 percent.
Senator KENNEDY. OK.
Secretary YELLEN. And that is already almost must be the case
based on what has happened this year. But in my estimation, there
are the types of supply bottlenecks that the economy——
Senator KENNEDY. OK. I do not want to spend too much time on
inflation, and I am sorry to interrupt, but we have so little time
and I talk slowly.
What party controls the House?
Secretary YELLEN. The Democrats.
Senator KENNEDY. What party controls the Senate?
Secretary YELLEN. The Democrats.
Senator KENNEDY. I believe we can agree that President Biden
is a Democrat.
Secretary YELLEN. I believe.
Senator KENNEDY. OK. Senator Schumer, who is a Democrat,
and my friend, controls the Senate floor, and he can raise the debt
ceiling by just amending the budget resolution, cannot he?
Secretary YELLEN. It is possible that could be done.
Senator KENNEDY. Yes, ma’am. So why didn’t he do it? Why do
not you all do it?
Secretary YELLEN. Because this is not——
Senator KENNEDY. Let me just finish. Why do not you all just do
it and then we do not have this fight?
Secretary YELLEN. Because this——
Senator KENNEDY. Why do you insist on doing it the hard way?
Secretary YELLEN. Because it is very important to recognize that
raising the debt ceiling is about paying bills that Congresses——
Secretary KENNEDY. I know. But——
Secretary YELLEN. ——have incurred in the past.
Secretary KENNEDY. But I want to——
Secretary YELLEN. And it is a shared responsibility. Democrats
have——
Senator KENNEDY. So why do not you—I agree with that.
Secretary YELLEN. The Democrats——
Secretary KENNEDY. Why do not you just amend the budget resolution?

18
Secretary YELLEN. Democrats have provided votes in the past
when both houses of Congress, who are controlled by Republicans,
when the Republican Party was in the middle of reconciliation.
2017 is a good example. And Democrats pitched in to do their duty
to raise the debt ceiling.
Senator KENNEDY. But I just—I just—I know all that, and we—
and I appreciate your perspective. But let me ask you again. There
is a real simple solution. Why do not you all just amend the budget
resolution? It just takes 50 votes by my Democratic friends and the
Vice President. Why do not you just do that? Problem solved, done,
easy peasy, finish. Let’s go have a cocktail.
Secretary YELLEN. Well, it will be up to the leadership of Congress to decide——
Senator KENNEDY. Well, are you going to recommend they do
that?
Secretary YELLEN. We will confer with them on what is the best
strategy to move forward.
Senator KENNEDY. I have not been around this place as long as
you have, but it is not often around here that we have a problem
that has an easy solution, and this is a real easy solution. And I
get politics. I understand why politically you folks want to have Republican fingerprints on the spending fiscal knife. I get that. But
is your politics so important that you want to gamble here on
the——
Secretary YELLEN. I want to make sure that——
Senator KENNEDY. ——sovereign debt of the United States when
you have a very, very simple solution that you refuse to take?
Secretary YELLEN. I want to see that the debt ceiling is raised.
As I have said, I believe it would be catastrophic not to do so. But
I equally believe that deficits have been run under both Democratic
and Republican administrations. It is important to recognize that.
And that means that paying the bills for those deficits is a shared
responsibility, and it should not be the responsibility——
Senator KENNEDY. I agree with that.
Secretary YELLEN. ——of any one party.
Senator KENNEDY. Very eloquently put. But it is a fact, isn’t it,
that you and your folks just want Republican fingerprints on the
Democrats’ effort to tax, spend, and regulate America into Europe.
Now it is your prerogative to do that, but this is all about the Administration’s desire to have Republican fingerprints on it, and
later call it bipartisan. And you know that, Madam Secretary, with
all the respect I can muster, and so do the American people.
Thank you, Mr. Chairman.
Chairman BROWN. Senator Kennedy, I rarely speak between witnesses, but I wonder if Secretary Yellen takes you up on that offer
to go get a cocktail, if you would pay or you would skip out on paying the bill or expect Secretary Yellen to pay?
Senator Menendez is recognized from New Jersey.
Senator MENENDEZ. Thank you, Mr. Chairman. I had not intended to pursue this line of questioning but I must say my distinguished friend and colleague from Louisiana always sparks my interest.
Republican fingerprints were all over the tax cuts to the wealthiest people and corporations in America to the tune of $2 trillion.

19
Republican fingerprints, for the many years that they were in a
majority, were all over the budget spending that was unpaid for.
Republican fingerprints are all over the politics of this now.
When Democrats were in the minority, Democrats did the fiscally
responsible thing. They voted with Republicans to recognize the
debt that had already been inherited, not a debt to come, but that
which had already been inherited. You all created a significant part
of this debt, and now you want to walk away from it. I know that
President Trump was the king of debt and bankruptcy, and maybe
you have adopted that as your view, but it is not a view in the national interests of the United States. So I love that my friend
sparks my concerns.
In any event, let me turn to my real purpose here. We have discussed at length how diversity remains a problem at both of your
agencies. Chairman Powell, during your tenure, the number of minorities in management positions have barely budged. In the most
recent report, the Fed’s Office of Minority and Women Inclusion
states, quote, ‘‘The Hispanic participation in our workforce has remained steady over the past 5 years.’’ Steady. Well, when it is already pretty dismal, steady does not really do very much for me.
‘‘We recognize that our prior efforts,’’ it goes on to say, ‘‘have resulted in minimal progress.’’
So my question is, what are you doing about it? What are you
doing about it?
Then let me just make this a joint question. Secretary Yellen, I
see the same thing happening at Treasury. I have raised this from
the date of your confirmation proceedings to most recently. I am
really chagrined that I have to be forced to consider not voting for
nominees because it is the only way to get the attention of these
agencies. But if you are sitting as one of the few Hispanic American Senators and seeing what is coming forth from this Administration, especially in these two sectors, it is abhorrent.
So what are we going to do about it? Chairman?
Mr. POWELL. Let me start briefly by agreeing that if you look at
successful organizations in the United States, private and public,
you will almost always see a successful approach to diversity, a
focus on diversity from the top. So I think it really starts with
making diversity a high priority. I have done that. My predecessors
have done that. If you talk to any of our senior leadership, the people who do the hiring, the people in all the divisions, you will see
that they talk about diversity, that they focus on diversity and hiring. It is not easy to move——
Senator MENENDEZ. But if it is a high priority, it is a dismal failure. I mean, I hear high priority, but, you know, the proof is in the
pudding and it is just not there. So I do not know how high a priority it is when we continue to have the same types of numbers.
Madam Secretary.
Secretary YELLEN. Senator Menendez, I would say that it is a
high priority at Treasury. With respect to political appointments
that I have been involved with, we are very focused on recruiting
and hiring Latinos, and we have been engaging with Latino interest groups to identify and source candidates. Just over the past
several weeks, we have extended three offers to Latino candidates,

20
including two Latinas who will serve in leadership roles within the
Department of the Treasury, and we will announce those soon.
In hiring within the Department as a whole, we track very carefully the demographic composition of our workforce, and it is a high
priority to improve diversity. Every Treasury bureau has a partnership with Hispanic-serving institutions and Hispanic community
organizations. We have employee——
Senator MENENDEZ. Well, I do not mean to interrupt you, but I
look forward to seeing actual nominations. Every nomination that
I have been asked to cast a vote on here certainly is not Latino.
Secretary YELLEN. They are not all Senate-confirmed, but they
are senior leadership positions.
Senator MENENDEZ. OK. Then I would love to see those that are
not Senate-confirmed because as far as I can see the numbers have
not changed. So I look forward to the announcements because I
would love to applaud progress in a significant way.
If I may, Mr. Chairman one last question.
Chairman BROWN. Sure.
Senator MENENDEZ. Chairman Powell, you know, for the Latino
community but beyond, expanding access to childcare, would not
that improve the labor force participation rate among women? I
know so many women who want to get back in the labor force, but
they have no access to any affordable childcare that, at the end of
the day, allows them to do so.
Mr. POWELL. There is a good bit of research that would support
that conclusion. Yes.
Senator MENENDEZ. Thank you.
Chairman BROWN. Senator Lummis of Wyoming is recognized.
Senator LUMMIS. Thank you, Mr. Chairman, and let me say
something on behalf of the people I represent in Wyoming. This is
not pointed to either party. This is pointed to the Congress of the
United States. It is absolutely irresponsible that we are $28 trillion
in debt and that both parties sit here and blame each other for
what they both did irresponsibly. It is absolutely unconscionable
what we have done to the people of this country. It is both parties’
faults. It is the Congress’ fault and we need to address it, but we
are so busy making each other look like the rat’s rear end that we
will not address the real problems in this country that led us to
be $28 trillion-plus in debt, and now asking to get further in debt.
I am horrified. My constituents are horrified. This has got to stop.
That said, now I will turn my attention to the Secretary. Secretary Yellen, speaking of horrified, my constituents cannot believe
that you support a proposal to require banks and credit unions to
report customer data to the Internal Revenue Service for transactions of $600 or more. There are obvious privacy concerns for all
Americans here, and this represents a dramatic new regulatory
burden for community banks and credit unions in Wyoming and
elsewhere. Our banks will have to hire contractors to rat on their
customers, implement new computer software, deploy resources
better used elsewhere in order to collect data for the Government.
Bank customers are not subjects of the Federal Government.
Banks do not work for the IRS. This is invasive of privacy. Wyoming’s people literally will find alternatives to traditional banks
just to thwart IRS access to their personal information, not because

21
they are trying to hide anything, but because they are not willing
to share everything.
My question is, are you aware of how unnecessary this regulatory burden is? Do you distrust the American people so much
that you need to know when they bought a couch or a cow? I am
astounded by what you are supporting and proposing. I think it is
invasive. I think privacy for individuals is getting ignored. And I
think treating the American people like they are subjects of the
Government is unconscionable.
Secretary YELLEN. Well, Senator Lummis, I really disagree with
the assessment that you have, and I think you misunderstand the
proposal. Banks already report directly to the IRS the interest that
they pay on accounts when it exceeds $10. And this is not a proposal to provide detailed transaction-level data by banks to the
IRS. It is a proposal to add two additional pieces of easily
ascertained information onto the 1099–INT form that banks already file, namely the aggregate inflows into the account during
the year and the aggregate outflows.
And I think it is important to recognize that we have a tax gap
that is estimated at $7 trillion over the next decade. That is taxes
that are due and are not being paid to the Government that deprive us of the resources we need to do critical investments to
make America more productive and competitive.
And the reason that that tax gap, in part, exists, partly it is because the IRS has been deprived of revenue to hire auditors, but
the IRS has a wealth of information about individuals. If you work
at a job where you get labor income, a W–2 is filed and sent. There
are dividend payments and transactions payments that are sent to
the Government. But there are a class of partnerships, businesses,
high-income individuals who have opaque sources of income that
the IRS does not have direct information about and that is where
the tax gap is, not low-income people. And this additional information would help to——
Senator LUMMIS. Well, $600 threshold is not usually where you
are going to find the massive amount of tax revenue you think
Americans are cheating you out of.
Secretary YELLEN. That is correct, but it is important to have
comprehensive information so that individuals cannot game the
system and have multiple accounts.
Senator LUMMIS. Mr. Chairman, I yield back.
Chairman BROWN. The Senator from Massachusetts, Senator
Warren, is recognized.
Senator WARREN. Thank you, Mr. Chair. Thank you both for
being here today.
Chair Powell, during your time as chair, you have taken plenty
of actions to weaken the Fed’s regulatory oversight of our largest
banks. So today I want to talk about three instances of that and
ask you to think about them in hindsight.
First, the stress test. Now these are designed to tell whether or
not big banks can survive without a taxpayer bailout. When the
tests were first set up, bank supervisors could restrict stock
buybacks and dividend payments to strengthen the bank’s balance
sheet. In 2019, you took that power away. And we now know, from
the Fed’s own research, that when the economy hit choppy waters

22
last year, those banks needed stimulus from the taxpayers and that
without this taxpayer help they would have faced up to $300 billion
in losses, meaning that they were in a sharply weakened position
to withstand the stress.
Chair Powell, do you regret weakening the stress test?
Mr. POWELL. I do not think we have weakened the stress test,
and I am not sure what you are referring to. When banks fail the
stress test, their distributions are limited.
Senator WARREN. So I laid it out here that you took away the
power to restrict stock buybacks and dividend payments that could
be used to strengthen the balance sheet. You do not see any
changes you made to the stress test and handling stress tests out
in advance?
Mr. POWELL. Senator, capital in the largest banks is at multidecade highs.
Senator WARREN. That is not my question. I am looking at the
Fed’s own research which says that without the help that you had
to put into the economy last year, they would have faced up to
$300 billion in losses.
Look, I do not want to argue with you about what capital——
Mr. POWELL. Which they would have met. Which they would
have been able to absorb without difficulty.
Senator WARREN. Let me ask you the question then. I take it you
do not have any regrets about any changes to the stress test?
Mr. POWELL. Not really. I mean, I am prepared to look at—anything we did is fair game to look at again, but I do not think so.
No.
Senator WARREN. OK. But let me ask about another action. In
2020, the Fed, along with the other agencies, removed the Volcker
rule restrictions on whether banks could cosponsor so-called family
funds. And then earlier this year, we watched the collapse of a
quote/unquote ‘‘family fund’’ called ‘‘Archegos,’’ which caused banks
to suffer a quick $10 billion in losses.
Given the Archegos collapse, do you regret weakening the
Volcker rule?
Mr. POWELL. That is actually a family office, Archegos is. I do
not know that there are any Volcker rule implications for Archegos.
I will say we have looked at the Archegos situation closely, and I
think learned our lessons from that.
Senator WARREN. Learned your lessons, but do you have any regrets about weakening the Volcker rule around family funds, having watched what Archegos did?
Mr. POWELL. I would have to understand the Archegos connection. Generally, it was widely agreed that the Volcker rule as implemented was complex and not workable. We took a fresh look
and——
Senator WARREN. OK. I will take that as a no. I just want to
make sure I can get through all three of these.
One last example. In 2019, the Fed weakened liquidity requirements, the rules that ensure that firms have adequate cash to meet
their obligations. For banks between $250 and $700 billion dollars
in assets, the liquidity requirement was cut by 15 percent. So let
me just ask, do you regret slashing liquidity requirements designed
to protect markets from crashing like they did in 2008?

23
Mr. POWELL. So that was tailoring, which the law that had been
passed through this committee required. I do not see that there has
been any evidence that that was a bad idea, but it is one that could
certainly be looked at again.
Senator WARREN. OK, so you would be willing to at least look at
that one again?
Mr. POWELL. Yes.
Senator WARREN. OK. This cut by 15 percent.
You know, Chair Powell, the elephant in the room is whether you
are going to be renominated for a second term as Fed chair. Renominating you means gambling that for the next 5 years a Republican majority at the Federal Reserve with a Republican chair who
has regularly voted to deregulate Wall Street will not drive this
economy over a financial cliff again. And with so many qualified
candidates for this job, I just do not think that is a risk worth taking.
I know that some argue that your deregulatory actions are mostly harmless. I disagree. I think they have put taxpayers at risk for
hundreds of billions of dollars. But even at that, so far you have
been lucky, but the 2008 crash shows what happens when the luck
runs out. The seeds of the 2008 crash were planted years in advance by major regulators, like the Federal Reserve that refused to
rein in big banks.
I came to Washington after the 2008 crash to make sure that
nothing like that would ever happen again. Your record gives me
grave concern. 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 is why I will oppose your renomination.
Thank you, Mr. Chair.
Chairman BROWN. Senator Rounds from South Dakota is recognized.
Senator ROUNDS. Thank you, Mr. Chairman.
Well, needless to say, Chairman Powell, I would probably disagree with my colleague, and I commend you for the hard work
that you have done, and I most certainly think that you do deserve
to be renominated to the position that you have right now, and I
look forward to working with you for the next several years.
Chairman Powell, I would like to ask you about the supplementary leverage ratio, the SLR exclusion that the Fed and the
other banking regulators instituted during the pandemic that allowed banks to exclude ultra-safe assets, including U.S. treasuries
and deposits to the Fed from their balance sheets. This exclusion
allowed the banks to take in the extraordinary amount of deposits
that we saw during the pandemic without having to grapple with
needless capital requirements.
I am just curious whether or not you believe that that move was
successful and whether or not you would see any possibilities of
perhaps a continuation of that in the future?
Mr. POWELL. So it was important that we did it in the crisis, and
it worked. I think it is less binding now because of all the money
that is now at the reverse repo facility.
Ultimately, we do not want leverage ratios to be the binding constraint on banks because we think that that gives them the incentive to take more risk. I would say we need to be very careful with

24
the supplemental leverage ratio because we want to make sure
that any changes we make to it will not reduce the overall bindingness of the capital requirements for the largest institutions. But it
is something we would look at modifying, and it is one of the things
we are looking at right now.
Senator ROUNDS. Presumably you felt that you received pretty
positive feedback from the institutions that were impacted by this
particular modification of the rule.
Mr. POWELL. Yes, and that was an emergency situation. When
the emergency ended, we allowed that provision to lapse. But I
think overall though, with all the liquidity in the system, it could
again become the binding constraint and that would not be good
from a safety and soundness standpoint.
Senator ROUNDS. Thank you. Secretary Yellen, welcome.
Secretary YELLEN. Thank you.
Senator ROUNDS. It is good to see you again. I would like to direct this question to you. During our last quarterly CARES hearing, I inquired about the severe backlog of tax returns facing the
IRS as approximately 2.4 million tax returns remained untouched
by the IRS at that time, many of which were from 2019. That number only continued to grow with an approximate 35 million backlogged tax returns at the end of June, when the National Taxpayer
Advocate released the midyear report to Congress.
When I originally asked about the IRS’s possible plan to address
the backlog, you responded that you had not yet had a discussion
with the IRS commissioner about this particular issue, but you did
provide assurances that you would work with me and my office and
remain committed to developing a plan to address the backlog.
After receiving no correspondence following the hearing, I sent a
letter to you asking these same questions to which I have also not
yet received a response.
So my question, Secretary Yellen, I am asking for a third time,
have you discussed the IRS’s plan to address its immense backlog
of tax returns with the IRS commissioner? If so, what is the plan?
Secretary YELLEN. We have discussed this with the IRS commissioner and he is addressing it and I would be happy to get you
more details. My apologies if we have not responded in a timely
way. I promise to do so quickly.
Senator ROUNDS. So it would be fair to say that the IRS does
have a plan in place to prevent this level of backlog in the future?
Secretary YELLEN. We are trying to add to the IRS’s resources
so that they will be able to handle these things in a more expedited
fashion.
Senator ROUNDS. We can perhaps expect a communication from
your office here in the next 5 days or so?
Secretary YELLEN. We will try to get you that communication.
Senator ROUNDS. Thank you. Also, Secretary Yellen, with the
Treasury quickly approaching the debt limit, and I know that this
is something which you have identified it and have expressed concern over, it makes one question when America might become the
next Greece. When, in your view, when do we have to say enough
is enough when it comes to our deficit and our debt?
Secretary YELLEN. So one, in thinking about what is a reasonable level of debt, there are a number of different metrics that one

25
might look at. Commonly, debt-to-GDP ratios are a measure that
is widely used. Ours is a little bit over 100 percent, which traditionally has been regarded as high. But we are in a very low-interest-rate environment, that is been true for a very long time, and
is likely to be true going forward.
And an alternative, and I think better measure of fiscal sustainability is to look at the real net interest cost of the debt. What is
it in real terms costing to service the outstanding debt? And for the
last several years, that is been negative. And even if interest rates,
10-year rates and the Treasury yields revert in future years backup
to more normal levels, the interest cost, which really is the burden,
is projected to remain low. The plans that the Biden administration
has put forth, we keep that low, at under 1 percent of GDP.
Senator ROUNDS. Thank you. My time has expired. Thank you,
Mr. Chairman.
Chairman BROWN. Thank you, Senator Rounds. Senator Smith of
Minnesota is recognized.
Senator SMITH. Thank you, Mr. Chair, and welcome to Secretary
Yellen and to Chair Powell. I am going to direct my questions to
Secretary Yellen today, and I would like to start with the question
of emergency rental assistance. I think we have all seen that the
pandemic has not been a great equalizer. It has laid bare the deep
inequities in our society, particularly, I would argue, in housing.
With COVID, you know, we are all in the same storm but we are
not all in the same boat.
What this looks like in Minnesota is the following. There are
about 60,000 families in Minnesota that are behind on rent, and to
support those families, we all worked hard here in Congress to get
the emergency rental assistance. So far, however, only about
15,000 families have received help through Minnesota’s Emergency
Rental Assistance Program, and that is not nearly good enough.
And this is particularly troubling because about two-thirds of these
families are families of color and indigenous families. So if this program is not working, it is disproportionately hurting them.
So Secretary Yellen, here is my question. I appreciate that Treasury has worked hard to clear away the red tape at the Federal
level to make this program work better, and I appreciate that this
is being run at the State level, and often also at the local level.
What can you tell us about what you are doing to make sure that
renters are not hurt as Treasury approaches this recapturing of
emergency rental assistance funds?
Secretary YELLEN. Well, we want to make sure that renters are
helped and we have been, as you noted, working hard to provide
the support to State and local governments to put in place effective
programs. But the ERA1 statute requires Treasury to begin reallocating excess funds that will be required as of September 30th, and
Treasury is developing a procedure to govern that process. We
want to make sure that localities with demonstrated need receive
additional funds and that they come from places that are not running effective programs or have less need. And we will be looking
at reallocation in order to improve the effectiveness of the program.
Senator SMITH. Secretary Yellen, in Minnesota about 30,000 applications remain to be processed, which is a sign, I think, of the
great need in our State. Can Treasury approach this, looking at

26
these large backlogs of applications that are remaining to be processed, that are in other words sort of in the system right now as
you are working on this?
Secretary YELLEN. I mean, we will look at backlogs. We will look
at the effectiveness with which States and local governments have
gotten out the rental assistance that they have. We want to see,
before additional funds are made available, that the ones that are
available have been allocated effectively. But if that is true and
there is clearly additional need than those places would be eligible
to receive additional funds.
Senator SMITH. Thank you. I appreciated, in your opening statement, that you talked about the mammoth task of standing up infrastructure at the State and local level in order to distribute this
rental assistance. And as you move forward with this, following the
law, we need to make sure that the folks that are really needing
the help are not the ones that are getting penalized because of
slower than we would have liked implementation of this program.
So I appreciate your comments and I look forward to continuing to
work with you on this as well.
Secretary YELLEN. Very good. We do as well.
Senator SMITH. I just have about a minute left and I want to just
touch briefly on the question of childcare. We know that childcare
is a family and an economic imperative, and I am really grateful
to the work that you have been doing. I appreciated very much the
Treasury’s recent report on the childcare supply challenge and the
great difficulties we have here.
Secretary Yellen, Minnesota childcare providers tell me that they
are really struggling to find and keep workers. They are painfully
aware that they are not able to pay their workers as much as they
are worth and as a result there is high turnover in the sector. Now,
when most businesses encounter challenges in hiring, they raise
wages to attract people. Can you just explain to everybody why
that is not a feasible option for folks that are trying to make the
system work in the childcare sector?
Secretary YELLEN. Well, in many ways, this is a market and this
is what the Treasury report showed that just does not work, that
parents, when they most need childcare, are unable to borrow in
order to cover it, and so they are struggling with very high
childcare expenses at a moment in their lifetime when they can
often simply not afford it, and that puts the childcare providers in
a situation where they just cannot afford to pay wages that are living wages.
And, in fact, a substantial fraction of childcare workers receive
some additional social support because the wages are so low, and
we really need to fix that. It is a broken market, and there are
huge gains to society for making sure that children have quality
childcare, and it influences the course of their success over their
whole lives.
Senator SMITH. Well, thank you for that. And, Mr. Chair, I know
we are out of time, but we have a solution to this problem that is
included in the Build Back Better plan that President Biden has
proposed and that we have been working on in the Senate and the
House. And I look forward to getting that solution passed into law
to address these systemic problems in childcare. Thank you.

27
Chairman BROWN. Thanks, Senator Smith. Senator Scott of
South Carolina is recognized.
Senator SCOTT. Thank you, Mr. Chairman, Ranking Member.
Thank you to both witnesses for being here this morning. Good
morning. I know you all have difficult challenges that we all face
as a Nation and it looks like they are getting more difficult, not
less difficult.
Democrats control the White House, the Senate, the House. They
have the votes to raise the debt ceiling. Unfortunately, they also
have the votes to fundamentally weaken the greatest economic engine in world history. What they do not have the votes to do is to
force Republicans to be complicit with their reckless spending
spree. Killing the goose that lays the golden eggs is not just bad
for the goose. It is bad for everyone who depends on the eggs as
well.
There is nothing compassionate about spending money we do not
have on new benefits we cannot afford, all the while discouraging
work and increasing the likelihood of a future default, when the
yet-to-be-born American receives the bill for benefits she did not
experience and are no longer available.
It is also important to note that our labor force participation rate
is down, not up, even with the new programs and the payouts that
I heard this morning during this hearing that somehow is supposedly increasing our labor force participation, when, in fact, it is
apparent and clear to Americans that is not the case.
Chair Powell, you know as well as I do, and certainly maybe neither one of us knows as well as the folks working paycheck to paycheck around this Nation or the seniors depending on their Social
Security checks to make their ends meet, that inflation is having
a devastating impact on people on fixed income, people working
paycheck to paycheck. I think about the fact that gas prices are up
over 40 percent as a Nation, and frankly, over the last few days
we have seen signs that it is going to only get worse, not better.
The gas prices are going up over $3 a gallon in so many parts of
this country, and frankly, even higher in other parts. The fact that
food, whether it is bacon or fish, meat, all are up double digits.
Can you point to any specific policies put in place by the current
Administration that may be exacerbating the runaway rise in food
and energy prices in recent months?
Mr. POWELL. Senator, that would not be for me to do, but I think
those things are—I would not be identifying policies of the current
Administration.
Senator SCOTT. Would you agree that the fact is that when we
have limited supply and an increasing demand, that a $1.9 trillion
COVID relief that has spent less than 1 percent on vaccines and
9 percent on COVID-related health only adds more pressure on our
markets, and that pressure results in higher inflation?
Mr. POWELL. Senator, we have some really difficult and important jobs, but one of them is not commenting on fiscal policy, I am
sorry to say, with respect.
Senator SCOTT. I do think that it does include inflation and employment. Aren’t those two major aspects of being the Chairman of
the Reserve?
Mr. POWELL. Those are the two major aspects.

28
Senator SCOTT. Indeed. And so when you see policies that are
put in place that has not increased our labor force participation but
decreased our labor force participation rates, and you see policies
that are actually designed, so I heard earlier this morning, to put
people back at work, in fact that number is going down, you see
that the impact of the inflationary, what I thought was transitory,
that is what we heard earlier this year when I asked you all both
the question about inflation in this country, seems to me that we
are heading in the wrong direction.
Let me ask Secretary Yellen. The phase of spiking inflation,
slowing growth, lingering high unemployment, and historic levels
of Government spending and Government debt, how do we justify
supporting President Biden’s $3.5 trillion tax spend package?
Secretary YELLEN. Well, first of all, the package is paid for, so
there is——
Senator SCOTT. How is it paid for, ma’am?
Secretary YELLEN. There are increases in taxation on corporations and——
Senator SCOTT. May I ask you a question?
Secretary YELLEN. ——high income individuals.
Senator SCOTT. Let me ask you a question on that while I have
you here. Do you think that taking the cap gains tax from 23.8 percent to 43.8 percent will encourage more investment in our economy or less investment in our economy? Do you think that taking
the corporate tax from 21 percent to 28 percent will actually—we
both recognize that corporations, they may write the check, but the
people who pay the tax are the consumers and the employees with
fewer increases in wages and lower benefits. How do we think that
these higher taxes are going to lead to more opportunities in our
marketplace?
Secretary YELLEN. Well, first of all, I think that the likely impact
on investment spending is very small, and I think, in 2017, when
taxes were cut substantially, you did not see any surge in investment spending. Instead, what you saw was a surge in stock
buybacks. So the linkage between investment spending and the
corporate tax rate is really very modest. Mainly it falls on excess
profits. So I think the Biden package, the Build Back Better package, will improve corporate competitiveness because it is going to
invest in critical infrastructure in our economy——
Senator SCOTT. Thank you. Secretary Yellen, I do not want to cut
you off but I have no choice because Chairman Brown is going to
cut me off. So before I lose my time here, thank you, Chairman,
for——
Chairman BROWN. You already have lost your time, but proceed,
Senator Scott.
Senator SCOTT. You are a patient Chairman, and I appreciate
that more than I could say.
I am so glad that you brought up the 2017 tax reform package
that we worked so hard on. Bottom line is I would say that as
someone who watches the market, and I know you watch it very
closely, the fact is that in 2018, in 2019, we saw more revenue to
the Government, not fewer dollars for the Government. And to
think that taking the corporate tax from 21 to 28 percent is somehow going to make us more competitive against our OECD competi-

29
tors, I know that you have a strategy to raise our guilty and make
us more competitive somehow by having other countries agree to
higher taxes.
I will just say that the proof will be in the pudding and maybe
you and I will be here in a couple years to have a conversation
about the results of the tax increase that will make us less competitive and not more competitive, but thank you for your graciousness.
Thank you, Mr. Chairman.
Chairman BROWN. Senator Van Hollen of Maryland is recognized.
Senator VAN HOLLEN. Thank you, Mr. Chairman. I thank both
of you for your service.
Madam Secretary, just to pick up on that last thread because we
have heard it throughout this morning, our Republican colleagues
trying to have it both ways. On the one hand, they beat up on our
proposals to reform the corporate tax code to make it more fair, to
make sure that every multinational corporation pays its fair share,
that they cannot park their profits in the Cayman Islands and
other places. And then on the other hand, they say, ‘‘Oh, this reconciliation bill is going to add to the deficit,’’ and they tie it into
this debt ceiling debate.
Let’s just be very clear. The Build Back Better agenda that President Biden has proposed would pay for itself through some of the
tax reform measures you mentioned, right?
Secretary YELLEN. Yes, absolutely. It will pay for itself.
Senator VAN HOLLEN. Right, which is very different than the
2017 Trump tax giveaway to big corporations that did not have a
penny to pay for it. Isn’t that correct?
Secretary YELLEN. That is correct. It resulted in very large increases in deficits, and the Biden package will not. And beyond a
10-year horizon, it will improve tax collections and reduce deficits
substantially.
Senator VAN HOLLEN. Right. And let’s now talk about one of the
tax cuts we want to extend, right, which is the tax cut for middleincome and lower-income families with kids. We estimate that this
year that cut child poverty in half in the United States, right?
Secretary YELLEN. Yes, the child tax credit and other features.
Senator VAN HOLLEN. But that expires at the end of the year,
does it not?
Secretary YELLEN. It does, and we think it is important to extend
it. It is really critical support to families that are trying to raise
children. And we have already seen in 3 months of distributing
these child tax payments spending on food that has reduced food
insecurity, on apparel, and on children and their well-being. It
makes a huge difference.
Senator VAN HOLLEN. Right. So let’s just be clear. We are hearing Republicans this morning beat up on us for closing big loopholes in the corporate tax cut, in part to pay for an extension of
tax cuts for middle-income families with kids——
Secretary YELLEN. That is right.
Senator VAN HOLLEN. ——which cut child poverty in half this
year. And I guess their position is, ‘‘Well, let’s just let it lapse, and
then we can have child poverty double in the years to come.’’

30
Madam Secretary, I have series of questions. Some of them I am
going to put you for the record on the issue you raised with respect
to the emergency rental assistance. And I share your concern that
this money has not gotten where it is needed quickly enough, and
I appreciate some of the measures you have taken recently to allow
renters to self-certify income and financial hardship.
I hope you will also make it clear that with the appropriate safeguards, landlords can submit applications in bulk on behalf of tenants, and we will be following up with you on that.
Also, I heard you responding to Senator Smith. Can you give us
assurances that as we reallocate some of these funds, and I understand why you want, that we are not going to harm the very people
we wanted to help simply because their local government could not
get the funds out as quickly as some others?
Secretary YELLEN. We will certainly try to avoid that. We are
aware of that possibility, and we will try to reallocate, for example,
within States so that individual who are not being helped locally
will have access.
Senator VAN HOLLEN. Right. I am also going to follow up with
you on, in Baltimore City’s case, the Treasury has said that they
can use their funds to try to bring back tourism, which is a good
thing——
Secretary YELLEN. Yes.
Senator VAN HOLLEN. ——but they cannot use their funds to try
to bring back families who may have left Baltimore City during
this pandemic to live in other places, even though bringing them
back would not just be a one-time tourist investment in the city,
but a long-term investment. I will follow up with you on that.
Secretary YELLEN. I would be happy to do so.
Senator VAN HOLLEN. Chairman Powell, you have spoken to it
generally, but you heard Secretary Yellen’s assessment of what the
impact on our economy would be if we did not lift the debt ceiling
and defaulted. Do you agree with the assessment she has provided
here this morning, that it would be devastating, and all the other
pieces?
Mr. POWELL. Yes, I do. I think it is essential to raise the debt
ceiling in time to avoid payment defaults of any kind. The potential
effects could be severe.
Senator VAN HOLLEN. Right. And just to be very clear, isn’t it the
case, Secretary Yellen, that about 68 percent, excuse me, 28 percent of our total debt right now was incurred during the 4 years
of the Trump administration.
Secretary YELLEN. I believe that is right. I think about $8 trillion. That is right.
Senator VAN HOLLEN. Right. And I suspect that almost every Republican Member of this Committee voted for the measures during
those 4 years, including that big tax giveaway.
And I would just point out, I heard Senator Kennedy earlier this
morning talk about how, you know, let Democrats do it alone. We
would like our Republican colleagues to do the right thing, but we
are willing to do it alone. In fact, Senator Schumer just announced
that later today he will go to the floor of the Senate and say, ‘‘Just
let the Democrats, with 50 votes, and the Vice President lift the
debt ceiling.’’ He is going to ask unanimous consent to do that. We

31
could do that today. I have noticed Senator Kennedy is not here
anymore, but that would get it done. And while we would like our
Senate Republican colleagues to do the right thing for the country
we are willing to do it alone if they just let us and get out of the
way.
Thank you, Mr. Chairman.
Chairman BROWN. Thanks, Senator Van Hollen. Senator Daines
from Montana is recognized.
Senator DAINES. Chairman Brown, thank you, and thank you,
Secretary Yellen and Chairman Powell, for being here today.
I want to start by expressing my continued concern with the inflation we are seeing in the economy. Real wages are down. It results in inflation. I am deeply concerned that supply chain issues
that we are seeing will not be quickly resolved. Add to that the
reckless $3.5 trillion tax and spending spree. Let’s be clear. It is
the largest tax increase in 50 years. It is the largest spending bill
in the Nation’s history. You have to have superlatives if you start
talking about what is being proposed right now in Washington.
I fear inflation will persist, and the reduction in wages that
workers are seeing as a result might indeed accelerate. This package would affect and kill hundreds of thousands of jobs, hurt economic growth in my home State of Montana, as well as across the
country.
Turning to my questions. Secretary Yellen, yesterday I sent a bipartisan letter with eight of my colleagues urging Treasury to ensure that water storage projects, like those on the, it is called the
St. Mary’s Milk River system, are eligible for water infrastructure,
ARPA, funding. Would you commit to working with me and my
team and some of the other senators on both sides of the aisle to
ensure these critical water infrastructure needs would be addressed?
Secretary YELLEN. Certainly. I mean, I am not knowledgeable on
the details——
Senator DAINES. I would not expect you to know the details of
that, right.
Secretary YELLEN. ——but we will certainly work with you on
that. Absolutely.
Senator DAINES. I want to raise your attention, so thank you,
Secretary Yellen.
Secretary YELLEN. We will definitely do so.
Senator DAINES. Much appreciated.
Turning now to the topic of energy. Secretary Yellen, I would like
to get your thoughts on what is happening in Europe right now.
The U.K., in particular, is increasingly reliant on renewable power
generation, and right now the wind simply is not blowing and they
are not able to get enough natural gas to meet demand. This has
led to massive spikes in the cost of power. In fact, power prices for
next-day delivery in the U.K. are 10 times higher than the average
price just 1 year ago.
In the U.S., we are very fortunate. We have moved from being
a net importer of energy to now a net exporter. I think it is providing incredible competitive advantage for us, national security
implications by reducing reliance on other countries for energy.

32
We are able to do this because the U.S. has a very diverse mix
of energy production: national gas, hydro, coal, wind, solar, nuclear,
many other sources. However, I am deeply concerned with the
Biden administration’s policies to curtail reliable base-load power
that comes from coal, oil, gas, and would send us back to where we
perhaps were back in the ’70s, into where Europe seems to be
headed today.
Secretary Yellen, could you help us understand and explain how
the Biden administration’s tax hikes and grand aim to really shut
down fossil fuel production would not lead us to the same path of
dependence on hostile adversaries, for example, Russia, where
much of Europe now is faced with today?
Secretary YELLEN. Well, President Biden, and I feel the same
way too, believe that climate change is an existential threat that
absolutely must be addressed. And he has proposed a clean electricity plan that would, by 2035, shift entirely the electricity sector
to reliance on renewables. And, of course, with renewables, as you
pointed out in the case of the U.K., there is a question of what to
do if the sun is not out and the wind does not blow. And I believe
there are storage technologies that can be deployed and, you know,
other means to address that, and of course that has to be part of
a plan to switch to renewables and address climate change.
Senator DAINES. Yeah, and one of our concerns of course is, of
course, the technical challenge here on intermittent sources of energy, as you described, and storage, but the impact this will have
on families that are on fixed incomes, our seniors, our lower-income
families are seeing these massive spikes in energy costs.
Secretary YELLEN. Well, that is certainly something we would
want to avoid, and I do not believe that the President’s program
is going to lead to increases in the cost of energy for the typical
family.
Senator DAINES. And I respect that point of view. And I am sure
when the Europeans launched on this path, they were not planning
to have order of magnitude increases in prices either, but it has
been a consequence of the policies.
Chairman Powell, earlier this month in response to the revelations about securities trading by presidents of Fed regional banks,
you began to review the ethics and transparency rules across the
Fed because, and I quote, ‘‘The trust of the American people is essential for the Federal Reserve to effectively carry out our important mission.’’
The Fed Board of Governors is subject to FOIA and the Federal
Records Act, but the Fed regional banks currently are not. Would
you support making Fed regional banks subject to FOIA and the
Federal Records Act to ensure greater public transparency and
trust in the Fed?
Mr. POWELL. Senator, that is a good question. I would like the
chance to think about it and come back to you. I would want to reflect on that and on the reasons why they are not subject to it, and
I will do that.
Senator DAINES. I appreciate that, Chairman Powell. Mr. Chairman, I will wrap up here this statement. If there is something that
concerns many of us it is the loss of trust to the American people
in their Government, and here you have one more example. I ap-

33
preciate your leadership, and thanks for consideration of that request.
Mr. POWELL. Thank you.
Chairman BROWN. The Senator from Georgia, Senator Ossoff, is
recognized.
Senator OSSOFF. Thank you, Mr. Chairman, and thank you to
our guests. Mr. Chairman, a question I have asked you in several
consecutive hearings, the COVID–19 pandemic, of course, the most
significant shock to the U.S. and global economy in the last 2
years. Beyond COVID, what do you assess are the most significant
systemic risks or threats to financial stability in the U.S. and globally?
Mr. POWELL. When I think about systemic risks to the financial
system I always think about cyber risks, really more than anything
else. We have a very highly capitalized banking system, one that
is much better at measuring its risks, so that more traditional—
making bad loans, losing money, and things like that, that will
happen, but the banks are really well fortified against that.
The risk that we have not really faced the full brunt of yet is a
successful cyberattack on a financial institution of some kind, be it
a financial market utility or a bank or another financial institution,
and, you know, we work closely with Treasury and other agencies
all around the country on that. You never have the feeling you are
doing enough, but it is a very high priority to be ready for. But that
would be the number one thing.
Senator OSSOFF. Madam Secretary, the same question for you,
please. Other than the ongoing COVID–19 pandemic and the terrible economic toll that it is taking and the terrible health toll that
it is taking, looking more broadly, what do you assess to be the
most significant systemic risks or threats to financial stability?
Secretary YELLEN. I think there are threats to financial stability
that have come from the growth of activity in the shadow banking
sector. We saw some of those threats emerge during the onset of
the pandemic. We have, for example, open-end bond funds that
guarantee daily redemption, saw massive withdrawals by individuals who wanted to flee to cash, and that can trigger fire sales of
assets with systemic consequences. The Financial Stability Oversight Council that I head has taken that up as a topic that we are
looking at and examining.
There are issues relating to hedge funds and the possibility of leverage there that can trigger financial runs. That is another topic.
And more broadly, climate change over time, I believe, could be a
significant risk to the financial sector and the economy, and FSOC
is also doing work on that to assess, evaluate, coordinate regulators, work with them to make sure they have the data that they
need and that we develop the methodologies to examine that risk.
Senator OSSOFF. Thank you, Madam Secretary. Mr. Chairman,
you noted in your testimony the impact of supply chain bottlenecks
on prices. Can you give a sense to what extent you assess that difficulties in the shipping markets and import operations are driving
those bottlenecks and contributing to high price levels in some sectors?
Mr. POWELL. It is certainly one of the major factors. We are told
by our contacts that retailers, for example, that are trying to buy

34
products for the holiday season cannot get the product. If they can
get the product, they cannot get a container. They can get the container, they cannot get a ship. If they can get the ship, it is at anchor outside of the port of Los Angeles. So transportation is a big
issue. Really, our supply chains have gotten all tangled up and
blocked up. Big part of it.
Senator OSSOFF. Thank you, Mr. Chairman. And Mr. Chairman
and Madam Secretary, as you know, Georgia hosts the Port of Savannah, which is the fastest-growing deep water port in the United
States. It hosts the largest single container terminal in the United
States. We have additional capacity at the Port of Savannah.
Broadly speaking, have you been in any meetings, principals’
meetings, or National Economic Council meetings, or discussions at
a high level about surging governmental resources and ingenuity
to solve these shipping bottlenecks? When I reflect upon the capacity, for example, that our Department of Defense has to project
power and mobilize resources and execute complex logistics around
the world, I cannot help but wonder whether with a more handson and targeted approach we could resolve some of these issues at
major U.S. ports and in the shipping industry.
Secretary YELLEN. The National Economic Council is looking
closely at this issue. They have hired someone who has extensive
experience with logistics and supply chains to take a very careful
look and to see what we can do to try to untangle these supply
chains.
Senator OSSOFF. Thank you. Any recommendations to Congress
would be appreciated. And perhaps if there is some emergency legislative measure that would allow us to tackle this problem which
is contributing to price and stability and price increases, let’s follow
up directly about opportunities to work together.
Secretary YELLEN. We would be happy to do that.
Senator OSSOFF. Thank you, Mr. Chairman. I yield.
Chairman BROWN. Thank you, Mr. Ossoff. Senator Tillis is recognized from his office, remote.
Senator TILLIS. Thank you, Mr. Chairman. Secretary Yellen, and
Chair Powell, thank you for being here.
Chair Powell, the Administrative Procedure Act requires Federal
agencies, including the Federal Reserve, to follow well-established
rules when entering proposed and final regulations. I believe the
Fed issues far too much guidance that is generally applicable to all
banks, which should instead be subject to thoughtful and transparent notice and comment. I believe former board member,
Tarullo, has suggested that that certain Federal actions are exempt
from the APA, and I think specifically noting CCAR, the Comprehensive Capital and Analysis Review.
In my conversations with Vice Chair Quarles, he has made it
abundantly clear that he believes that Fed does, in fact, have to
abide by the APA in all circumstances. So, Chair Powell, who is
right? Does Tarullo have a leg to stand on in terms of saying that
the Fed is not subject to the APA in all circumstances, or is Vice
Chair Quarles right, that you are?
Mr. POWELL. Senator Tillis, I will speak to you to this issue
under the control of my general counsel who is here, but my understanding is that the APA does apply to the board and that we take

35
care to observe its requirements. I know that our stress testing and
capital plan rules were promulgated in compliance with the APA.
Senator TILLIS. So I guess with legal counsel in the room, I have
got a half answer.
Mr. POWELL. Well, I have given you what I know. I would be
happy to follow up with you.
Senator TILLIS. Yeah, I feel very strongly about it. We will come
back to that.
I did want to ask you another question, Chair Powell. In minutes
from the FOMC conference call on October 13th, you advocated
for—oh, I am sorry, October 2013—you advocated for not disclosing
contingency plans you had made for a potential breach of the debt
ceiling, saying it would, and I quote from the minutes, ‘‘make it
less likely that the Congress will feel enough pressure to actually
raise the ceiling,’’ end quote.
Do you think it is the role of the Federal Reserve to decide to
withhold such information, and if you do believe that, in what
other instances have you deemed it not important enough to not influence congressional outcomes?
Mr. POWELL. Actually, if you look at that transcript, what I said
was, and what I meant was, the things that we will do that are
within our power to do I think are very well understood by market
participants. There was a long list of things discussed at that meeting, and as you get down the list these were things that we really
would not like to do and probably would not do, but, you know,
really, in a national emergency we would have to think about
doing.
So I was talking about those sorts of things, and I thought putting those out there and having people believe that we would do
these things was really not a good idea, and that it might create
a misunderstanding on the part of the public that we actually could
shield the financial markets and the economy and the American
people from a default on the debt ceiling, on our debt, and that is
not the case.
Senator TILLIS. Secretary Yellen and Chair Powell, I know you
both made comments endorsing the Federal legislative solution to
provide a replacement framework for outstanding financial contracts tied to LIBOR. I agree completely, and I was pleased to see
the legislation clear the House Financial Services Committee last
week on a strong bipartisan basis. I just want to let you know that
we understand that bipartisan action is needed in the Senate to affect a smooth transition and to provide certainty to capital markets, and I look forward to working with my colleagues, first among
them Senator Tester, to make sure that Congress does act and provide for a smooth transition.
Thank you, Mr. Chairman. I yield back.
Senator TOOMEY [presiding]. Thank you, Senator Tillis. Senator
Cortez Masto.
Senator CORTEZ MASTO. Thank you. Thank you both for being
here. It has been, at times, a loud, exciting hearing this morning
and I appreciate your patience and you are still there willing to ask
questions, and I think it says a lot about both of you.
But let me just put something, because at the end of the day, at
least for the people in my State, it is about the truth and the facts

36
and people working together and what is happening in this country
during this pandemic.
So let me just verify, because Congress passed the CARES Act,
the American Rescue Plan, and an appropriations bill with significant resources for health care, for housing, and support for local
governments, and they did this because we were in the middle of
a worldwide health pandemic due to COVID–19. Isn’t that correct?
Yes for both of you? Both shaking your heads yes?
Mr. POWELL. Yes.
Senator CORTEZ MASTO. Yes. So how important were those investments to avoid a deep and painful recession? Were they important to avoid that recession? Is that——
Secretary YELLEN. Absolutely.
Mr. POWELL. Utterly essential.
Senator CORTEZ MASTO. OK. And I appreciate that because at
the end of the day there is bipartisan work to address this pandemic and it was needed at that time. The work that we are doing
to increase the debt limit has a lot to do with that debt that was
incurred back then to address the pandemic. Isn’t that right, Secretary Yellen?
Secretary YELLEN. That is true. Raising the debt limit allows us
to pay bills that were incurred because of those acts and others of
Congress.
Senator CORTEZ MASTO. So just so I can clarify, so my colleagues
who are refusing to come to the table to address this, they are getting the benefit of that relief in their States, however. Correct?
Secretary YELLEN. Yes, of course.
Senator CORTEZ MASTO. All right. Just to clarify that. Now, I do
know though, coming from Nevada, and Chairman Powell, you and
I have had this conversation, Secretary Yellen, you as well, there
is still an industry that was so hard hit that it is still trying to recover from this pandemic, which is that hospitality, that travel and
tourism industry. Isn’t that correct?
Secretary YELLEN. It is still deeply depressed, and has not come
back to normal yet.
Senator CORTEZ MASTO. That is right. So Chairman Powell, can
I ask you your thoughts on what we should continue to do to address to help the recovery? Because I know at least in Nevada,
which the main revenue generated for our State is this hospitality,
travel, and tourism, that leisure traveler has been there, but the
business traveler is not back, the international traveler is not back.
Are you anticipating what can be done by the Federal Reserve to
address this—and Secretary Yellen, I will ask you the same
thing—by the Administration, or what should we be doing as Congress? Have we done enough for this industry or does more need
to be done to help bring it back because of this pandemic?
Mr. POWELL. In my view, the most important thing is to get control of the pandemic. That is what is keeping people out of sporting
arenas and off of airplanes and out of restaurants and bars. And
we saw that very clearly in the August payroll report where job
creation in these industries had gone from very strong for several
months to zero in August. So it is really all about, at this point,
getting the Delta variant and really frankly getting vaccination and
immunity up higher which is not something we can do.

37
Senator CORTEZ MASTO. Thank you. Secretary.
Secretary YELLEN. And I would agree with that answer, and it
is something we are working as hard as we possibly can to do, to
get vaccination rates up, to deal with the pandemic.
Senator CORTEZ MASTO. Thank you. And let me talk about something that is also impacting my State, and I think many, which is
the disruption in the supply chain. Senator Ossoff was talking to
you about it, Secretary Yellen, and you talked about the National
Council, if I remember correctly.
Secretary YELLEN. National Economic Council.
Senator CORTEZ MASTO. Yes. Is there a timeframe when they anticipate coming back with some kind of concrete answers to how to
address this disruption in the supply chain?
Secretary YELLEN. I can get information for you on that. I know
they are bringing together business leaders who were in affected
industries with experts to see if things can be worked out.
Senator CORTEZ MASTO. Thank you. I appreciate that. I am going
to yield the remainder of my time. I will submit the rest of my
questions for the record, but thank you both for being here.
Mr. POWELL. Thank you.
Secretary YELLEN. Thank you, Senator.
Senator TOOMEY. Senator Hagerty.
Senator HAGERTY. Thank you, Ranking Member Toomey, and
thanks to the Members of the Committee for holding this hearing.
I want to thank Chairman Powell and Secretary Yellen for being
here today.
Chair Powell, I would just like to also acknowledge you. You and
I have talked extensively about my concerns about the inflation
and the economy. We spoke about this in February and we spoke
about it in depth during our hearing in July. I am very pleased to
see the Fed beginning to lay the groundwork now to address inflation in our economy, and for that, I want to thank you.
Secretary Yellen, I would like to turn my attention to you, and
if we might speak about the $3.5 trillion transformation of the U.S.
economy that is being proposed right now, that we are going to be
expected to vote upon very soon. Last week, you, Leader Schumer,
Speaker Pelosi stood before the American public and said you had
agreed to framework, a framework to pay for this. Could you tell
us what is in this framework?
Secretary YELLEN. Well, it was essentially a list of ideas where
there is support from the House, the Senate, and the White House
for how revenue could be raised that would be sufficient to cover
the expansive programs under consideration. And as we have articulated, this involves increases in the corporate tax rate, a reform
of international provisions that will reduce the incentives we currently have in the tax code to export jobs and export profits to lowtaxed areas, and to export jobs abroad and raise revenue, and additional revenue raised from high-tax, high-income individuals, well
above $400,000, for example, by raising back the highest income
tax rate to where it was before 2017, and will go in 2026, under
current law to increase the tax rate on capital gains, and importantly to improve tax compliance. We have a huge tax gap that is
estimated at $7 trillion——

38
Senator HAGERTY. I will come to the compliance issue in just a
moment. I would, though, very much like to see this framework
that you agreed to. We are going to be expected to vote on the most
massive transformation of the U.S. economy that this Nation has
ever seen. $3.5 trillion is a huge amount of money in pay-fors. And
the industries and the individuals and how they are going to be
targeted is something that I would very much like to get a copy of
before I am expected to vote on this. I am certain that my——
Secretary YELLEN. I am sure.
Senator HAGERTY. ——fellow Committee Members would like to
see this. Is this something that you could get to me and my team
by the close of business today, Secretary?
Secretary YELLEN. No, it is not. There are currently discussions
and negotiations taking place within the House and the Senate
with involvement in the White House to try to decide what a final
package will look like. And until that is decided, you know, you can
see that things coming out of House Ways and Means, for example,
but this is very much in the process of being decided.
Senator HAGERTY. This is very, very disturbing when we are
talking about something of this magnitude and you are telling me
that I cannot see the framework, that the Members of this Committee cannot see the framework. I guess we are just supposed to
trust the Administration.
Secretary YELLEN. Well you can look at our proposals that the
President put out in conjunction with his Build Back Better plan.
Senator HAGERTY. These are just platitudes. I am talking about
the specifics of the program.
Secretary YELLEN. Well the Treasury’s green book had specifics
of our proposals and House Ways and Means marked up a bill pertaining to revenue that you can look at the specifics.
Senator HAGERTY. I will look forward to you working with my
staff so we can have a detailed understanding, because the last
thing I want to do is find ourselves yet again in a situation where
we have got to pass a bill to find out what is in it. And, in fact,
we need to have a very clear understanding of this sort of transformation because the credibility of this Administration has been
seriously challenged. If you look at the disaster that is taking place
in Afghanistan, if you look at the disaster at our southern border,
the inflation that is running rampant in our economy, I am very
concerned and I want to have a much clearer picture of what the
intended pay-for will be and the impact on the economy. So I appreciate your team working with mine so we can get as much information as possible on this. Thank you.
I would like to turn to another specific area, much more specific
indeed. You spoke about this with Senator Lummis. That has to do
with the new requirement that our banking system now report
transactions that exceed $600. That is going to be an impact on
community banks, on farm credit lenders. It will be an extensive
compliance burden.
But there is a greater concern that I have, and that is the concern that my constituents have raised with me and that the American public has in the ability to keep this information confidential.
And after we have seen what happened when the IRS disclosed the
private confidential tax information of its political enemies during

39
this Administration to ProPublica, there is a huge concern and a
deserved concern on the part of the American public that this information, that the detail that we are talking about it a detail level
that I would expect from the Chinese Communist Party, not here
in America. But the detail will be protected.
Can you tell me what you are going to do to make certain that
this taxpayer confidential information will be protected?
Secretary YELLEN. Protecting taxpayer information is the highest
priority of the Internal Revenue Service. The ProPublica information represented an illegal revelation of taxpayer information. It is
an illegal act and it is being investigated thoroughly by independent entities, law enforcement, and the inspector generals of
Treasury and the IRS, and there really cannot be tolerance for
that. We are proposing to invest in the IRS so that they can modernize their systems and put in place better controls that will protect taxpayer information.
Just to be clear, we do not know that the ProPublica information
came from the IRS. That has not been established. And we are
talking about a small amount of information, not every transaction
that is less than $600. Banks already report to the IRS on Form
1099–R——
Senator HAGERTY. I am aware of that.
Secretary YELLEN. ——the amount of interest, and we are just
asking for two additional pieces of information, aggregate inflows
and aggregate outflows from the account during the year.
Senator HAGERTY. Again, far more detail about it, Americans’
private transactions. And again, I will say I appreciate the fact
that you are looking for accountability within the IRS. We have
seen a great lack of accountability in this Administration. Just look
at what is happened in Afghanistan, zero accountability. Look at
what is happened at out border, zero accountability. The American
public is concerned and I very much appreciate the efforts that you
are taking and I hope that you get to the bottom of this so it never
happens again.
Thank you, Madame Secretary.
Chairman BROWN [presiding]. Senator Warnock from Georgia is
recognized.
Senator WARNOCK. Thank you so very much. Thank you so much,
Mr. Chairman, and thank you, Chairman Powell and Secretary
Yellen, for being here.
Yesterday, it was reported that the Regional Federal Reserve
Bank presidents in Dallas and Boston are resigning following earlier reports that they were actively trading their private investments while the bank was intervening in the markets. Throughout
the COVID–19 pandemic, many experts have underscored the importance of maintaining the independence of the Central Bank.
Independence, of course, is necessary before the pandemic, after
the pandemic, during the pandemic.
Even though neither serves now as voting members of the Federal Open Market Committee, this is a blow to the image of the
Central Bank serving as an impartial and independent agency
charged with maintaining stability in pricing and employment.
Chairman Powell, what immediate actions have you taken to en-

40
sure the impartiality of the Fed, and what systems already that are
in place failed here and how do you plan to fix them going forward?
Mr. POWELL. Our need to sustain the public’s trust is the essence
of our work. We want the public to understand that we work for
all Americans. So we do not like to be having these concerns raised.
It is really something that is very, very concerning. So as soon as
I learned of it, I directed our staff to undertake a review of our
practices.
We have had in place a set of practices around investments and
trading and disclosure that seems to have worked for a long time,
only it is clearly really not working now and we understand now
that we need to raise modifier practices and we are in the process
of creating ideas and recommendations for that. That is one thing
that we are doing. We are also looking carefully at the trading that
was done to make sure that it is in compliance with our rules and
with the law.
Senator WARNOCK. The rules seem to have broken down. Do you
think there needs to be any changes in the trade?
Mr. POWELL. Yes. I am 100 percent sure there is a need for those
and there will be. I do not know precisely what they will be, but
the appearance is just obviously unacceptable. Even if, as appears
to be the case, these trades were in compliance with the existing
rules, that just tells you the problem is that the rules and the practices and the disclosure needs to be improved and that is what we
are working on. We will rise to this moment and address this forthrightly.
Senator WARNOCK. I agree. Confidence in the Central Bank is essential, and I look forward to working with you on this issue and
also working with Chairman Brown, who is working on legislation.
Let me change topics. I am a strong advocate for working and
middle-class families and we successfully pushed to include an expansion of the vital Child Tax Credit program in the American
Rescue Plan. I think it is really important as some folks are talking
about this $3.5 trillion package that what we are talking about
here with the Child Tax Credit is a tax cut, and that does not get
said often enough. I think it has something perhaps to do with the
kind of attitude about working people, ordinary people, poor people.
It is a tax cut.
Experts say that this tax cut would cut child poverty in half nationwide, and 97 percent of families with children qualify. So this
is about lifting the burdens of our neighbors. If made permanent,
this tax cut for families would push poverty in a typical year down
below 10 percent in 47 States, including Georgia.
Secretary Yellen, should Congress make this program permanent
and if so, what kind of long-term benefits will this have for our Nation’s economy and families?
Secretary YELLEN. Well we certainly would like to find a way to
make it permanent. It is a very important support for children and
their families. We saw just after one payment that the share of
families reporting that there was not enough to eat in the household dropped by 24 percent, and it is clear that families are spending this on their children for clothing, for food.
And, you know, the security that our children have whether they
grow up insecure, in families that do not have enough to provide

41
for them, make all the difference to their success in life. So this
program that will provide a steady source of income, along with
other supports in the sort of Build Back Better agenda, including
2 years of preschool, childcare support, I think these are critical investments to make sure that families with children can support
them and they can succeed in their lives.
Senator WARNOCK. You said they use the money to buy things
like food, I believe you said——
Secretary YELLEN. Yes.
Senator WARNOCK. ——clothing. What, in your estimation, is the
impact of that on the economy, on a consumer economy? Does that
help or hurt?
Secretary YELLEN. Well of course it is positive. It supports spending in the economy that creates jobs in the process.
Senator WARNOCK. And what would be the impact of adding
mandatory work requirements if we extend this and made it permanent?
Secretary YELLEN. Well we would not be in favor of mandatory
work requirements. The truth is that the vast majority, over 90
percent of families that require this assistance are working, have
workers, and you have, in addition, grandparents, for example, who
are no longer in the workforce or people who are disabled, may not
be working and cannot work, who are also getting support that
they need to take care of children.
Chairman BROWN. Thank you, Senator Warnock.
Senator WARNOCK. Thank you.
Chairman BROWN. The Senator from North Dakota, Mr. Cramer,
is recognized.
Senator CRAMER. Thank you, Chairman Brown. Thank you, Senator Toomey. Thanks to both of you for being here and I cannot resist. For some reason, I am just not surprised, Madame Secretary,
that working for money is something that your Administration is
against. I mean part of the reason we have this no longer transitory inflation, Mr. Chairman, is because we keep giving money
away like it grows on trees and we increase the demand for products while diminishing the supply.
I want to get to another point, related however, Secretary. You
made addressing climate change a high priority in your term. It is
a central point of your term. You and John Kerry, the President’s
climate czar, have encouraged banks and investment institutions to
form this net zero banking alliance. By the way, net zero, Mr.
Chairman, what that means is we are going to transfer our climate
guilt to other people who do not have a climate conscience. I would
rather set a goal, a global goal, and hold the real polluters accountable rather than reducing our economy and putting us at a disadvantage.
But anyway, the President has urged banks to provide as much
support for alternative energy projects as possible, which, of course,
presumes at the expense of current energy projects. And that could
obviously force financial institutions to put political and social
agendas ahead of their investors and ahead of their banks, ahead
of the American economy. And that is why I have been such a
harsh critic of these very arbitrary ESG statements put out by
banks.

42
But in light of this weak unemployment and recovery numbers,
the fact that this inflation, that I never believed it was transitory,
clearly is not any longer, do you think it is really a good idea for
private businesses to be forced by a Government official to make
decisions about where they should or should not put their money,
jeopardizing jobs, jobs in our energy sector? Because guess what is
up? The price of gasoline, the price of oil, the price of electricity is
skyrocketing. And there is no worse tax.
Mr. Warnock wants to call Child Tax Credit a tax cut, and he
complains that we do not say that often enough. We do not say it
because it is not a tax cut. It is a subsidy. It is a subsidy. Now,
you can argue whether it is a good subsidy or a bad subsidy, but
calling it a tax cut is not fair. What we are doing is driving the
price of all of these fuel sources up, transferring our climate guilt,
and then hamstringing our own financial institutions with these
arbitrary rules.
So in light of what is going on with unemployment, now I know
you want to just tax people a whole bunch more and pay people not
to work so maybe unemployment is not a problem, but is it?
Couldn’t we please rethink this strategy, Madame Secretary?
Secretary YELLEN. Well look, climate change is an existential
threat and it is a very high priority of President Biden’s and of
mine to address it, but no one is forcing banks or other financial
institutions to make investments that they do not think are profitable and desirable. There is enormous interest in the financial community in making investments that will be profitable in sustainable investments.
And what we want to do, and we are working through FSOC to
do this, is to make sure that investors have the kind of information
that will enable them to make investment decisions that they want
to make that are profitable. And——
Senator CRAMER. So you do not think they are capable of getting
their own information at risk and opportunity so you have to have
a czar and a secretary and other czars give them information that
might be helpful to their decision—all the while, by the way, Russia, Venezuela, Saudi Arabia, they get the benefit of all of this. I
mean when our President has to call on OPEC+ to help bring the
price of gasoline down by increasing production, all the while we
shut off our own, whether by fiat or by innuendo, that does not
seem like a great strategy to me. I think you are wrong.
I will yield back. Thank you, Mr. Chairman.
Chairman BROWN. Thanks, Senator Cramer. As we close, Senator Toomey has some remarks and then I will make a closing
statement.
Senator TOOMEY. Thank you, Mr. Chairman. I just feel compelled
to go back one more time and touch on this issue of the debt ceiling. I have to confess I have been shocked to hear our Treasury
Secretary and some of my colleagues tell us today that raising the
debt ceiling and additional borrowing that that permits is 100 percent about covering spending that was committed to in the past, as
thought the spending that has not yet occurred this year somehow
is not going to cause a deficit, somehow that spending will not require borrowing? The spending that has not yet occurred but is
going to occur absolutely is going to increase the amount that we

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are going to have to borrow. And when we go on an unprecedented,
blowout spending spree, it is going to increase spending by that
much more.
I mean just think about it. Imagine that this $3.5 trillion spending bill, let’s imagine Senator Sanders had his way and it was $6
trillion. Do we seriously think that would have no impact on the
amount of money our Government would have to borrow? How ridiculous. Of course it does.
And so the truth of the matter is our Democratic colleagues do
not want the American people to associate this huge spending
binge they have been on and want to continue on with the debt
that will be required in part to pay for it, and we are not in favor
of either one. And that is why, Mr. Chairman, I think you are
going to need to use the procedures readily available to you to raise
the debt ceiling just as you intend to pursue all this spending,
which is with a simple majority vote.
Chairman BROWN. Thank you, Senator Toomey. Of course, we all
know that 3 years ago, 45 Democrats joined a number of Republicans with a Republican President, a Republican Senate, a Republican House to pay our debts. We believed it was our patriotic duty.
We all took an oath of office swearing to the obeisance thereof of
what we believed and American values and we paid our debts. We
did it then in a bipartisan overwhelming vote and we should do it,
and we know that Senator McConnell does not seem to think that.
Let me get one thing straight though about what we have talked
about. The infrastructure we have had, investments we passed in
a bipartisan bill we are working on now are fully paid for. It is simple. Instead of American taxpayers racking up debt due to corporate handouts and tax cuts for wealthy CEOs, those corporations,
those billionaires for the first time are finally going to help us pay
for the investment we need in our greatest asset, the American
people. It is not just nurses and teachers and firefighters that are
paying their taxes. It is time that the wealthiest people in this
country paid their fair share.
Corporate greed is a big reason why we need this investment in
the first place. For decades, we had a corporate business model, I
mentioned that in my opening statement, where they plow all their
cash into stock buybacks and bonuses and other schemes where the
money ends up in their pockets instead of funding the real economy.
The economy of a year ago may have looked pretty good from a
corporate boardroom or may have looked pretty good from the Dirksen Office Building, but anyone who got, as Lincoln would say,
their public opinion baths would know that so many workers, entire neighborhoods, entire towns were not seeing the gains, those
stock market gains, translate into opportunity for them and their
family.
We are changing that. One of the best things about our economy
today is for the first time in decades, the first time in some people’s
memory, workers are starting to gain a little power in our economy, over their schedules, over their wages, over their benefits.
They are going to gain a whole lot more power when we invest in
jobs in their towns and childcare and housing and the Child Tax
Credit and education and workplace protections, and everything

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workers need to feel stable and think, just so they know, finally in
this country, they are getting a fair shake.
I thank Secretary Yellen for joining us, thank Chairman Powell
for joining us. The meeting is adjourned.
[Whereupon, at 12:30 p.m., the hearing was adjourned.]
[Prepared statements and responses to written questions supplied for the record follow:]

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PREPARED STATEMENT OF CHAIRMAN SHERROD BROWN
We all remember the dark days of 2008, and the painful years that followed. Secretary Yellen and Chair Powell, you both helped us deal with the aftermath in your
roles at the Federal Reserve.
When the biggest banks were in trouble, Washington sprung to action—‘‘we have
no choice, we can’t allow these banks to fail,’’ everyone said.
But millions of families were allowed to fail.
American workers bailed out the financial industry, but their livelihoods were not
treated with the same urgency. Recovering their jobs—let alone empowering them
to demand better ones—would have to wait for years.
By the end of 2013, the stock market had its best year in almost two decades,
while nearly 11 million people were still out of a job.
The question before us today is the same question we’ve been grappling with for
a year: are we going to learn from our past mistakes?
Americans do not have to settle for another Wall Street-first recovery. We have
the tools to do things differently—the only question is whether we’re going to use
them, for as long as it takes.
So far, we have worked to learn the lessons of the past, and do better by American workers. That’s what the CARES Act and the American Rescue Plan were all
about.
We put money in families’ pockets—stimulus checks and the Earned Income and
the Child Tax Credit were spent in local supermarkets and shopping centers on food
and back-to-school supplies.
Treasury helped State and local governments get emergency rental assistance to
420,000 families in August alone and provided $950 million to help homeowners
who are behind on their mortgage.
The result has been record job growth—job creation in the first 7 months of the
Biden administration is nearly double any previous first-year President.
It’s not just the jobs numbers—it’s also the quality of those jobs.
For the first time in decades, workers are starting to gain a little power in our
economy—power to negotiate higher wages, better working conditions, and more
control over their schedules and their futures.
Progress, to be sure. Yet we have a long way to go.
We are still down 5.6 million jobs since before the pandemic.
Corporations are using the pandemic as an excuse to ‘‘cut costs’’—and we know
that by ‘‘costs’’ they always mean jobs or wages or retirement contributions, never
CEO bonuses or stock buybacks.
Instead of hiring back loyal workers as business expands, companies are outsourcing or contracting out the work, and paying people half as much.
The Fed, for its part, has taken extraordinary action over the past year-and-a-half
to stabilize our economy.
But many of the Fed’s efforts helped stabilize markets much more than they stabilized working families.
Those actions have been a bonanza for Wall Street. Big corporate mergers are at
an all-time high, and the biggest banks have had one of their most profitable years
ever—during a global pandemic.
The same companies that benefited from the Fed’s actions want to ‘‘restructure’’
their workforce, and complain about a ‘‘skills gap,’’ while refusing to cut into their
stock buyback budgets to expand training programs or offer truly high wages.
This ought to be a reminder that we’re still in the very early stages of recovery—
and that the same old Wall Street system is not good enough.
Chair Powell, you have talked about your commitment to competitive labor markets, yet you have said that the test for full employment is ‘‘all but met.’’
Tell that to the working mother who was forced to quit her job because she
couldn’t afford childcare, or even find childcare.
Tell that to the server who worked for decades at a major hotel chain, only to
lose her job during the pandemic, and then be offered the same job by a contractor
paying half the wages with no benefits.
Tell that to a worker in my hometown in Mansfield, who for decades has watched
companies close down factories and move good-paying, union jobs abroad—only to
have them replaced, when they were replaced at all, by low-wage, non-union jobs
at a Big Box store.
Now is not the time to declare victory.
Americans have watched this story unfold over and over again.
Crash. Recession. Rapid Wall Street recovery. Years of slow, painful, uneven job
recovery.

46
And always within the same corporate system that treats quarterly stock prices
as the only measurement that matters, and treats workers as a cost to be minimized.
How many times are we going to continue to do this?
How many times are Americans going to have to watch history repeat itself?
We cannot declare the recovery complete until all workers can find a job that pays
them fair wages and treats them with dignity.
The Fed cannot pull back every time workers gain a tiny bit of power to demand
higher wages.
The Fed cannot continue to rubberstamp mergers and allow corporate consolidation to go unchecked, and then wonder why job growth isn’t reaching whole regions
of the country.
Full employment means a truly competitive labor market—one where everyone
can get a job, and employers compete for workers.
We have not seen that kind of labor market in decades—but we can. That is our
job—in Congress, at Treasury, at the Fed.
I also need to say a quick word about the games Republicans are playing with
people’s livelihoods.
The debt limit is not about future spending—it’s about meeting obligations we’ve
already made, like the bipartisan, overwhelmingly popular CARES Act—the reason
we’re holding this hearing today.
Every single one of my Republican colleagues who served on this Committee last
year voted for the CARES Act. Every single one of them voted for the $2 trillion
tax cut for their wealthy friends. They didn’t seem to have a problem with the debt
limit then.
But now they don’t want to pay the bill.
The partisan game is pretty transparent.
We need to pay our bills on time. And we’ve always done it together. Treasury
Secretaries—past and present, and across the political spectrum—are sounding the
alarm about the economic devastation they’re threatening.
And China is watching with glee, all too eager to see the dollar tarnished as the
world’s reserve currency.
We can’t play politics with the full faith and credit of the United States.
Finally, Chair Powell, I understand you’ve initiated a review of the ethics and financial disclosure rules at the Fed after we learned of stock trades that two Federal
Reserve Bank Presidents made during the pandemic.
I have a bill with Senators Merkley and Warnock—the Ban Conflicted Trading
Act—that would ban members of Congress from buying or selling any individual
stocks. I think the same should apply to Fed officials and I’m introducing a bill to
do that.
Your job, the Fed’s job, members of Congress’ job is to serve the public, not their
stock portfolios.
PREPARED STATEMENT OF SENATOR PATRICK J. TOOMEY
Thank you, Mr. Chairman. Secretary Yellen and Chair Powell, welcome.
Last year, Congress, on bipartisan basis, forcefully responded to the threat of economic collapse caused by the pandemic and resulting lockdowns. That response, together with the Fed’s aggressive monetary policy support and the end to lockdowns,
enabled the U.S. economy to fully recover. Our economy today is not only larger
than it was before the pandemic, but we’re now running above prepandemic GDP
forecasts for 2021.
Unfortunately, Democrats are trying to ram through a reckless tax and spending
bill that will threaten economic growth. Policies include massively expanding the
welfare State, raising taxes on U.S. employers, and diminishing investment by increasing taxes on capital gains.
Let’s be clear about the purpose behind these proposals: It’s not to spur economic
recovery—the economy is strong. Nor is it an antipoverty plan—the programs are
not limited to the poor. It’s to reconfigure the relationship between the Federal Government and the middle class. It’s about socializing many ordinary responsibilities
that families have always assumed.
Instead of raising taxes to partially fund economically harmful programs, we
should work to return to the best economy of my lifetime, which we experienced before COVID hit. We had the lowest unemployment rate in 50 years—including
record low unemployment rates for Black and Hispanic Americans—real median
household income at an all-time high, and strong wage growth, above the rate of
inflation, particularly for lowest income earners.

47
This was achieved by reforming the tax code, lowering tax rates, and lightening
regulatory burdens. Now the Democrats are proposing to reverse all of these policies.
Chair Powell, as you know, the Fed has clear and narrow mandates: To conduct
monetary policy that promotes stable prices, maximum employment, and moderate
long-term interest rates, and to conduct banking supervision and maintain an efficient payment system.
As Chair Powell has articulated, these are ‘‘narrow but important’’ responsibilities. It’s therefore concerning to see the Fed, especially its regional banks, wade
into politically charged areas like global warming and racial justice. These efforts
undermine the Fed’s independence and distract from the Fed’s actual responsibilities like controlling inflation.
Speaking of which, the Fed’s excessively accommodative monetary policy, emergency policies long after the emergency has passed, produced the inflation I have
feared, and the Fed did not expect. We’re now seeing rates of inflation considerably
higher than the Fed projected. And it is hurting businesses, consumers, and workers.
You don’t have to take my word for it. Here’s what the CFO of Costco said last
week: ‘‘Inflationary factors abound: higher labor costs, higher freight costs, higher
transportation demand, along with container shortages and port delays, increased
demand in certain product categories, various shortages of everything from computer chips to oils and chemicals.’’
To address this threat, I urge the Fed to accelerate the process of normalizing
monetary policy so that it does not fall further behind the curve in responding to
inflation than it already has.
I’m also concerned Treasury may be headed down a similar path of exceeding its
authority. To much fanfare, the Biden administration has announced an international tax agreement that consists of two pillars.
Pillar one is an unprecedented change that would allow foreign countries to tax
American companies based on their sales overseas. It’s a tax revenue transfer from
us to them. Unsurprisingly, this is the priority for other countries, who have long
sought this tax transfer.
Pillar two is a global minimum tax on multinationals’ foreign income. This is the
Biden administration’s attempt to justify burdensome tax increases on U.S. companies. Unsurprisingly, this is the Administration’s priority and is part of its efforts
to dismantle our successful 2017 tax reforms.
The Administration is imploring other countries to implement a global minimum
tax that will harm their own workers and businesses. By doing so, the Administration has implicitly acknowledged that their proposed multinational tax increases
will make U.S. workers and businesses less competitive, if other countries either
don’t implement a global minimum tax of their own, or implement a significantly
lower rate than what the Administration is proposing.
But there’s a real possibility that other countries will not implement a global minimum tax for at least two reasons. First, the EU can only implement this global
minimum tax by unanimous consent, which they don’t have. Second, these countries
have only reluctantly agreed to pillar two in return for pillar one, which is the
transfer of U.S. tax revenue to them. But implementing pillar one in the U.S. requires a treaty ratified by two-thirds of the Senate—and that’s not going to happen.
The Administration has implicitly admitted that their global tax hike will be a
disaster for the U.S. if the rest of the world does not follow suit. There’s a very substantial risk that the rest of the world will not follow suit. And yet Democrats are
charging ahead with this destructive tax increase in their reconciliation bill that
they’re going to try to pass any day now.
Secretary Yellen and Chair Powell, I look forward to discussing these and other
issues with you today.

PREPARED STATEMENT OF JANET L. YELLEN
SECRETARY, DEPARTMENT OF THE TREASURY
SEPTEMBER 28, 2021
Chairman Brown, Ranking Member Toomey, Members of the Committee: It’s a
pleasure to testify today. We are in the midst of a fragile but rapid recovery from
the pandemic-induced recession. While our economy continues to expand and recapture a substantial share of the jobs lost during 2020, significant challenges from the
Delta variant continue to suppress the speed of the recovery and present substantial

48
barriers to a vibrant economy. Still, I remain optimistic about the medium-term trajectory of our economy, and I expect we will return to full employment next year.
A rebound like this was never a foregone conclusion. In fact, the American recovery is stronger than those of other wealthy Nations. One key factor for our overperformance is the policy choices that Congress has made over the past 18 months.
Those choices include the passage of the CARES Act, the Consolidated Appropriations Act, and the American Rescue Plan.
Treasury, as you know, was tasked with administering a large portion of the relief
dollars in those bills, and when we last met, our Department was busy standing up
programs to help individual families, State governments, and organizations of every
size in between. While we still have much more work to do, we have made significant progress, and I wanted to give you an update.
Let’s start with families. In July, our Department started sending the monthly expanded Child Tax Credit payments to the families of nearly 60 million children
across the country. To date, $46 billion dollars in payments have been made, and
we’re already seeing the impact. Analysis by the Census Bureau found that after
the first payments in July, food insecurity among families with children dropped 24
percent.
As for State, local, tribal, and territory governments, COVID–19 decimated their
budgets. There were mass layoffs, and to end the health and economic emergencies,
we knew that communities would need funding to hire educators to bring kids back
to school, for example, or frontline workers to administer the vaccine. The American
Rescue Plan included $350 billion to that end, and those dollars are indeed helping
the machinery of local governments get up-and-running. States and localities can
rely on relief money that is available instead of resorting to painful budget cuts.
Congress rightly designed the State and local program with flexibility in mind.
I think many of us knew the recovery could run up against some unforeseen challenges, and we wanted communities to be able to devote resources where and when
they saw fit. I want to note that this flexibility is paying off now, especially with
the spread of the Delta variant. Harris County, Texas, for instance, has used this
funding to boost its immunization rate, offering $100 to each person who gets their
first vaccine dose.
For the relief dollars not yet out the door, Treasury is doing everything it can to
expedite their delivery. The Emergency Rental Assistance Program is one example.
Prior to the pandemic, there was essentially no national infrastructure to get money
from Government coffers to renters and landlords. Building that infrastructure has
been a massive undertaking for States, localities, and tribes.
The program is scaling up quickly, with 1.4 million payments made to help struggling renters keep a roof over their heads. Still, too much of the money remains
bottlenecked at the State and local levels. That’s why our Treasury team has
worked to eliminate every piece of red tape possible in order to ensure more payments can get to renters and landlords, but States and localities must also work
to remove barriers that can speed up distribution of rental assistance funds.
I’ll end my remarks there except to reiterate what I’ve communicated many times
these past several weeks: It is imperative that Congress swiftly addresses the debt
limit. If it does not, America would default for the first time in history. The full
faith and credit of the United States would be impaired, and our country would likely face a financial crisis and economic recession.
We must address this issue to honor commitments made by this and prior Congresses, including those made to address the health and economic impact of the pandemic. It’s necessary to avert a catastrophic event for our economy.
Senators, the debt ceiling has been raised or suspended 78 times since 1960, almost always on a bipartisan basis. My hope is that we can work together to do so
again—and to build a stronger American economy for future generations. Thank
you, and I’m pleased to take your questions.
PREPARED STATEMENT OF JEROME H. POWELL
CHAIRMAN, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
SEPTEMBER 28, 2021
Chairman Brown, Ranking Member Toomey, and other Members of the Committee, thank you for the opportunity to discuss the measures we have taken to address the hardship wrought by the pandemic. Our health care professionals continue
to deliver our most important response, and we remain grateful for their service.
Progress on vaccinations and unprecedented fiscal policy actions are also providing
strong support to the recovery.

49
Since we last met, the economy has continued to strengthen. Real gross domestic
product rose at a robust pace in the first half of the year, and growth is widely expected to continue at a strong pace in the second half. The sectors most adversely
affected by the pandemic have improved in recent months, but the rise in COVID–
19 cases has slowed their recovery.
Household spending rose at an especially rapid pace over the first half of the year
but flattened out in July and August as spending softened in COVID-sensitive sectors. Additionally, in some industries, near-term supply constraints are restraining
activity.
As with overall economic activity, conditions in the labor market have continued
to improve. Demand for labor is very strong, and job gains averaged 750,000 per
month over the past 3 months. In August, however, gains slowed markedly, with
the slowdown concentrated in sectors most sensitive to the pandemic. The unemployment rate was 5.2 percent in August, and this figure understates the shortfall
in employment, particularly as participation in the labor market has not moved up
from the low rates that have prevailed for most of the past year.
Factors related to the pandemic, such as caregiving needs and ongoing fears of
the virus, appear to be weighing on employment growth. These factors should diminish with progress on containing the virus.
The economic downturn has not fallen equally on all Americans, and those least
able to shoulder the burden have been the hardest hit. In particular, despite
progress, joblessness continues to fall disproportionately on lower-wage workers in
the service sector and on African Americans and Hispanics.
Inflation is elevated and will likely remain so in coming months before moderating. As the economy continues to reopen and spending rebounds, we are seeing
upward pressure on prices, particularly due to supply bottlenecks in some sectors.
These effects have been larger and longer lasting than anticipated, but they will
abate, and as they do, inflation is expected to drop back toward our longer-run 2
percent goal.
The process of reopening the economy is unprecedented, as was the shutdown. As
reopening continues, bottlenecks, hiring difficulties, and other constraints could
again prove to be greater and more enduring than anticipated, posing upside risks
to inflation. If sustained higher inflation were to become a serious concern, we
would certainly respond and use our tools to ensure that inflation runs at levels
that are consistent with our goal.
The path of the economy continues to depend on the course of the virus, and risks
to the outlook remain. The Delta variant has led to a surge in cases, causing significant human suffering and slowing the economic recovery. Continued progress on
vaccinations would help support a return to more normal economic conditions.
The Fed’s policy actions are guided by our dual mandate to promote maximum
employment and stable prices for the American people, along with our responsibilities to promote the stability of the financial system. In response to the crisis, we
took broad and forceful measures to support the flow of credit in the economy and
to promote the stability of the financial system at the onset of the pandemic. Our
actions, taken together, helped unlock more than $2 trillion of funding to support
businesses large and small, nonprofits, and State and local governments between
April and December of 2020. This, in turn, helped keep organizations from shuttering and put employers in a better position to keep workers on and to hire them
back as the recovery continues.
These programs have served as a backstop to key credit markets and helped to
restore the flow of credit from private lenders through normal channels. We have
deployed these lending tools to an unprecedented extent. Our emergency lending
tools require the approval of the Treasury and are available only in unusual and
exigent circumstances, such as those brought on by the crisis.
Many of these programs were supported by funding from the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Those facilities provided essential support
through a very difficult year and are now closed.
The Federal Reserve completed its sales of assets from the Secondary Market Corporate Credit Facility on August 31. We were able to wind down the facility rapidly
and efficiently, with no adverse impact on credit conditions. The Federal Reserve
also recently closed the Paycheck Protection Program Liquidity Facility to new lending, and the facility is now in runoff mode. Similarly, we are managing the paydown
of assets in our other CARES Act facilities as they wind down over time. We continue to analyze the facilities’ efficacy and to review the lessons learned.
To conclude, our actions affect communities, families, and businesses across the
country. Everything we do is in service to our public mission. We at the Fed will
do all we can to support the economy for as long as it takes to complete the recovery. Thank you. I look forward to your questions.

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