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OVERSIGHT OF THE TREASURY DEPARTMENT’S AND FEDERAL RESERVE’S PANDEMIC RESPONSE HYBRID HEARING BEFORE THE COMMITTEE ON FINANCIAL SERVICES U.S. HOUSE OF REPRESENTATIVES ONE HUNDRED SEVENTEENTH CONGRESS FIRST SESSION SEPTEMBER 30, 2021 Printed for the use of the Committee on Financial Services Serial No. 117–50 ( U.S. GOVERNMENT PUBLISHING OFFICE WASHINGTON 46–009 PDF VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00001 Fmt 5011 : 2022 Sfmt 5011 K:\DOCS\HBA273.000 TERRI HOUSE COMMITTEE ON FINANCIAL SERVICES MAXINE WATERS, California, Chairwoman CAROLYN B. MALONEY, New York NYDIA M. VELÁZQUEZ, New York BRAD SHERMAN, California GREGORY W. MEEKS, New York DAVID SCOTT, Georgia AL GREEN, Texas EMANUEL CLEAVER, Missouri ED PERLMUTTER, Colorado JIM A. HIMES, Connecticut BILL FOSTER, Illinois JOYCE BEATTY, Ohio JUAN VARGAS, California JOSH GOTTHEIMER, New Jersey VICENTE GONZALEZ, Texas AL LAWSON, Florida MICHAEL SAN NICOLAS, Guam CINDY AXNE, Iowa SEAN CASTEN, Illinois AYANNA PRESSLEY, Massachusetts RITCHIE TORRES, New York STEPHEN F. LYNCH, Massachusetts ALMA ADAMS, North Carolina RASHIDA TLAIB, Michigan MADELEINE DEAN, Pennsylvania ALEXANDRIA OCASIO-CORTEZ, New York JESÚS ‘‘CHUY’’ GARCIA, Illinois SYLVIA GARCIA, Texas NIKEMA WILLIAMS, Georgia JAKE AUCHINCLOSS, Massachusetts PATRICK MCHENRY, North Carolina, Ranking Member FRANK D. LUCAS, Oklahoma BILL POSEY, Florida BLAINE LUETKEMEYER, Missouri BILL HUIZENGA, Michigan ANN WAGNER, Missouri ANDY BARR, Kentucky ROGER WILLIAMS, Texas FRENCH HILL, Arkansas TOM EMMER, Minnesota LEE M. ZELDIN, New York BARRY LOUDERMILK, Georgia ALEXANDER X. MOONEY, West Virginia WARREN DAVIDSON, Ohio TED BUDD, North Carolina DAVID KUSTOFF, Tennessee TREY HOLLINGSWORTH, Indiana ANTHONY GONZALEZ, Ohio JOHN ROSE, Tennessee BRYAN STEIL, Wisconsin LANCE GOODEN, Texas WILLIAM TIMMONS, South Carolina VAN TAYLOR, Texas PETE SESSIONS, Texas CHARLA OUERTATANI, Staff Director (II) VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 K:\DOCS\HBA273.000 TERRI CONTENTS Page Hearing held on: September 30, 2021 .......................................................................................... Appendix: September 30, 2021 .......................................................................................... 1 41 WITNESSES THURSDAY, SEPTEMBER 30, 2021 Powell, Hon. Jerome H., Chairman, Board of Governors of the Federal Reserve System ......................................................................................................... Yellen, Hon. Janet L., Secretary, U.S. Department of the Treasury .................. 6 4 APPENDIX Prepared statements: Powell, Hon. Jerome H. .................................................................................... Yellen, Hon. Janet L. ....................................................................................... ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD Powell, Hon. Jerome H: Written responses to questions for the record submitted by Chairwoman Waters ............................................................................................................ Yellen, Hon. Janet L.: Written responses to questions for the record submitted by Chairwoman Waters ............................................................................................................ Written responses to questions for the record submitted by Representative Emmer .................................................................................................... Written responses to questions for the record submitted by Representative Hill .......................................................................................................... Written responses to questions for the record submitted by Representative Posey ....................................................................................................... Written responses to questions for the record submitted by Representative Williams ................................................................................................. (III) VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 42 47 K:\DOCS\HBA273.000 TERRI 52 60 73 69 63 61 VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 K:\DOCS\HBA273.000 TERRI OVERSIGHT OF THE TREASURY DEPARTMENT’S AND FEDERAL RESERVE’S PANDEMIC RESPONSE Thursday, September 30, 2021 U.S. HOUSE OF REPRESENTATIVES, COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. The committee met, pursuant to notice, at 10:04 a.m., in room 2128, Rayburn House Office Building, Hon. Maxine Waters [chairwoman of the committee] presiding. Members present: Representatives Waters, Velazquez, Meeks, Scott, Green, Cleaver, Himes, Foster, Beatty, Vargas, Gonzalez of Texas, Lawson, San Nicolas, Axne, Casten, Pressley, Torres, Lynch, Adams, Tlaib, Dean, Garcia of Illinois, Garcia of Texas, Williams of Georgia, Auchincloss; McHenry, Lucas, Posey, Luetkemeyer, Huizenga, Wagner, Barr, Williams of Texas, Hill, Emmer, Zeldin, Loudermilk, Mooney, Davidson, Budd, Kustoff, Hollingsworth, Gonzalez of Ohio, Rose, Steil, Gooden, Timmons, Taylor, and Sessions. Chairwoman WATERS. The Financial Services Committee will come to order. Without objection, the Chair is authorized to declare a recess of the committee at any time. As a reminder, I ask all Members participating remotely to keep themselves muted when they are not being recognized by the Chair. The staff has been instructed not to mute Members, except when a Member is not being recognized by the Chair, and there is inadvertent background noise. Also, if you are participating remotely today, please keep your camera on. And if you choose to attend a different remote proceeding, please turn your camera off. As a reminder to all Members, we will conclude today’s hearing at 12:15 p.m. Members who were unable to ask questions at our March 23rd hearing with Secretary Yellen and Chair Powell will be given priority to ask their questions today, and we will return to our normal order of recognition once those Members have asked their questions. Today’s hearing is entitled, ‘‘Oversight of the Treasury Department’s and Federal Reserve’s Pandemic Response.’’ I now recognize myself for 4 minutes to give an opening statement. Welcome back, Secretary Yellen and Chair Powell. As this pandemic continues, the Biden Administration and Congressional Democrats continue to work around the clock to get essential relief (1) VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 2 to individuals, families, and small businesses across the country. Following the catastrophic failure of the Trump Administration to tackle the pandemic crisis, the Biden Administration and Democrats in Congress swiftly moved to enact the American Rescue Plan, which provided $1.9 trillion to address the impacts of COVID-19. The legislation included billions in funding to support individuals and families, including renters, homeowners, and people experiencing homelessness, as well as small businesses, during this crisis. We are also working together to put President Biden’s Build Back Better agenda into action by making long-overdue investments into the nation’s housing programs, childcare, education, workforce, and other critical aspects of our economy, all while being completely paid for. Democrats are also working to address the past failures of the Trump Administration’s approach to the pandemic. For example, we are working with Secretary Yellen and the Treasury Department to correct administratively-burdensome requirements initiated by Republicans that made it harder for renters and landlords to obtain relief in the earlier versions of the Emergency Rental Assistance Program. My legislation, the Expediting Assistance to Renters and Landlords Act of 2021, would further speed up relief and cut down unnecessary barriers that are standing in the way of aid for renters and landlords. Of course, the Federal Reserve has also played a part in the response to the pandemic through the creation of emergency facilities that have tackled the crisis. Until they were prematurely shut down by former Treasury Secretary Mnuchin, these facilities played a vital role in stabilizing financial markets last year. Moving forward, our committee is committed to exploring ideas to ensure that facilities like these can more directly protect workers and support small businesses, as well as State and local governments, the next time there is a crisis. Amid Democrats’ continuing efforts to ensure that relief reaches communities across the country and that our economy is strong for the future, Republicans continue to operate recklessly. Even now, Republicans are threatening to throw the economy into unnecessary turmoil by blocking legislation to suspend the debt ceiling. It is completely unacceptable for Republicans to hold our nation’s economy hostage, especially in the middle of this continuing public health crisis and when fully one-fourth of the increase in the debt ceiling is attributed to Trump’s tax scam for the rich. Secretary Yellen, Chair Powell, I expect to hear your thoughts on these issues and to hear more about what will happen if Republicans force the country to default. I also look forward to discussing your ongoing work to respond to the pandemic today. I now recognize the ranking member of the committee, the gentleman from North Carolina, Mr. McHenry, for 5 minutes. Mr. MCHENRY. Today, the Financial Services Committee is holding its second statutorily-required quarterly hearing on the Biden Administration’s pandemic response. Now, the only problem is that this hearing should have actually occurred in the second quarter. It is now the third quarter. But then again, that just perfectly encapsulates the incompetence and dysfunction of a Democrat-run VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 3 Washington, where Democrats run the House, the Senate, and the White House. So, let us just review briefly. The incompetence of the Rental Assistance Program, which Republicans have highlighted since March—there is no solution in sight. The so-called, ‘‘Biden agenda’’ appears to be on the rocks. And Democrats are no closer to raising the debt ceiling ahead of the October 18th deadline than they were in August when it expired. And what do all of these problems have in common? They were foreseeable. They are known things, not just to Democrats, but to the world. And now, markets are taking notice. Our allies, and our adversaries are watching closely to see what happens next. But in the midst of this chaos, we at least have you two individuals in your respective seats. And the two of you instill confidence in our financial system, especially in a moment like this. And that credibility of your institutions is deeply connected with each one of you right now. Chairman Powell, your decisive action helped prevent the worst of the economic impacts of COVID. You are thoughtful, deliberate, and transparent. The antithesis, I would say, of dangerous. And to think otherwise is, frankly, reckless and unmoored from reality. And anyone who would say that—well, frankly, I appreciate their courage to speak their truth. Chairman Powell, our country will be better off with your continued leadership at the Federal Reserve. Secretary Yellen, your experience as Fed Chair and steady hand throughout the financial crisis made you a natural pick for the Treasury Department, and I am glad you are in your seat. That is why I am sorry you are in such a bad situation, given this Administration’s strategy. Bad strategy and a worse fiscal plan from a Democrat-run Washington will have consequences, I believe. Consumer prices continue to rise. Businesses can’t find workers. And the government, because of overspending, will not be able to pay its bills in a little more than 2 weeks. So, what is the plan? All I have heard from Democrats this year is a plan to spend more money—$2 trillion in March, more than $5 trillion now. And $5 trillion was a compromise, I want to remind you that Bernie Sanders and the progressives wanted a $6 trillion reconciliation package, and President Biden proposed a $6 trillion budget in June. But Democrats couldn’t agree on that either. So, here we are. To be clear, the Biden Administration’s Treasury Department can’t even keep track of the $46 billion of rental assistance. So, how are the American people supposed to trust Democrats with another $5.5 trillion? This isn’t a plan. Frankly, it is a heist. The Democrat-run Washington tax-and-spend policies will only increase prices more for consumers. And they are using you, Madam Secretary, and your credibility to sell this bad agenda. Over the last several weeks, you have called on Congress to address the debt limit. I couldn’t agree more. Yesterday, the House passed a debt ceiling bill that is doomed in the Senate. It was political theater, and they know it, we know it, and the American people, in fact, know it as well. VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 4 It is theater designed to distract Americans from the fact that Democrats have no idea how to govern. They have known this deadline was coming. They knew it the day they took control of the Senate. They knew it the day that President Biden was sworn into office, and they knew it the day that the Treasury Secretary was confirmed. The Democrats have been in charge of our country for nearly a year, and they did nothing to prepare for this moment—well, except spend more money and bring the date forward by which we have to address the debt ceiling. And I want to be clear: The U.S. Government is run and controlled by Democrats. It is defined by dysfunction, incompetence, and fiscal irresponsibility. Late in the game, asking Republicans to bail out your agenda so you can pass more spending is, frankly, absurd. This is no way to run the country. I yield back. Chairwoman WATERS. Thank you, Ranking Member McHenry. I now recognize the gentleman from Texas, Mr. Green, for 1 minute. Mr. GREEN. Thank you, Madam Chairwoman. Madam Chairwoman, we must raise the debt ceiling. Raising the debt ceiling does not authorize new spending. Raising the debt ceiling allows the United States to pay its existing debts. Congress has raised or suspended the debt ceiling on a bipartisan basis 78 times since 1960. There are no secret weapons in the Treasury’s arsenal that will save us from default if this body fails to act responsibly and swiftly. Madam Chairwoman, we passed the CARES Act and other pandemic relief legislation. Let us come together again and stand behind the debts of our nation with the full faith and credit of the United States of America. We must raise the debt ceiling. I yield back. Chairwoman WATERS. I now want to welcome our distinguished witnesses today, whom I believe need little introduction to members of the committee. First, I want to welcome the Honorable Janet Yellen, Secretary of the United States Department of the Treasury, who has served in that role since her confirmation in January of this year. Our second distinguished witness today is the Honorable Jerome Powell, the Chair of the Board of Governors of the Federal Reserve System, who has served in that role since February of 2018. You will each have 5 minutes to summarize your testimony. You should be able to see a timer on the screen in front of you that will indicate how much time you have left. And, without objection, your written statements will be made a part of the record. Secretary Yellen, you are now recognized for 5 minutes to present your testimony. STATEMENT OF THE HONORABLE JANET L. YELLEN, SECRETARY, U.S. DEPARTMENT OF THE TREASURY Secretary YELLEN. Thank you, Chairwoman Waters, Ranking Member McHenry, and members of the committee. It is a pleasure to testify today. VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 5 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 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 the 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 us 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 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, COVID19 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 VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 6 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 that 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. Representatives, 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. [The prepared statement of Secretary Yellen can be found on page 47 of the appendix.] Chairwoman WATERS. Thank you, Secretary Yellen. Chair Powell, you are now recognized for 5 minutes to present your testimony. STATEMENT OF THE HONORABLE JEROME H. POWELL, CHAIRMAN, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Mr. POWELL. Thank you, Chairwoman Waters, Ranking Member McHenry, and members of the committee, 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 the recovery. Household spending rose at an especially rapid pace over the first half of the year, but flattened out in July and August, as spending softened in COVID-sensitive sectors. Additionally, in some industries, near-term supply constraints are restraining activity. As with overall economic activity, conditions in the labor market have continued to improve. Demand for labor is very strong, and job gains averaged 750,000 per month over the past 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 VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 7 that have prevailed for most of the past year. Factors related to the pandemic appear to be weighing on employment growth. These factors should diminish with progress on containing the virus. The economic downturn has not fallen equally on all Americans, and those least able to shoulder the burden 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 the 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 significant 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 responsibility 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 this crisis. Many of these programs were supported by CARES Act funding. Those facilities provided essential support through a very difficult year and are now closed. The Fed completed its sales of assets from the Secondary Market Corporate Credit Facility on August 31st. We were able to wind down the facility rapidly and efficiently, with no adverse impact on credit conditions. We also recently closed the Paycheck Protection Program Liquidity Facility (PPPLF) to new lending and are managing the paydown of assets in our other CARES Act facilities as they wind down. We continue to analyze their efficacy and to review the lessons learned. VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 8 The Fed’s actions affect communities, families, and businesses across the country. Everything we do is in service to our public mission. We will do all we can to support the economy for as long as it takes. Thank you. I look forward to your questions. [The prepared statement of Chairman Powell can be found on page 42 of the appendix.] Chairwoman WATERS. Thank you very much, Chair Powell. I now recognize myself for 5 minutes for questions. Secretary Yellen, your Department reports that as of August 21st, $7.7 billion in emergency rental assistance had been allocated to households, assisting approximately 2 million renters. Although spending has increased over the past several months, I think we are all concerned that the pace of delivery of this critical assistance is not happening quickly enough. Can you talk about the challenges you have faced after taking over oversight of ERA1 from the Trump Administration? What do you believe are the most significant improvements to the program guidance you have made, and what impact have you seen? Secretary YELLEN. Yes, thank you for that question. This is a critically important program that Treasury has been very focused on, in expediting the delivery of these rental assistance funds to those who need them. As I mentioned in my opening statement, getting these funds out has involved creating a national infrastructure where none existed before, and that has been a very difficult and slow process. Treasury has done everything possible to facilitate getting these programs up and running around the country, and particularly, we have tried to give States and localities flexibility to administer the program in ways that are appropriate for different communities to reduce the paperwork requirements, while also making sure that we have accountability and transparency. We have provided technical assistance and working to provide more technical assistance, and I do think we are seeing a payoff. As I mentioned, we have had 1.4 million renters helped by this assistance, and the pace at which it is flowing out is increasing. Also, I would note that the Act requires Treasury to begin to reallocate funds on September 30th from those localities that either are not effective in getting assistance out or have less need for the funds, and to reallocate them to those that are more effective and have demonstrated need. Chairwoman WATERS. Thank you very much. And I want to thank you and your team for working with me on H.R. 5196, the Expediting Assistance to Renters and Landlords Act, which would make it easier for both renters and landlords to apply for assistance and provide for the deeper involvement of Treasury to support grantees to get the funds out the door. Are there particular provisions that you think would aid Treasury’s efforts to make the Rental Assistance Program more successful? You have given us quite a bit of information about what you have been involved with, but is there anything else you would like to share? Secretary YELLEN. Chairwoman Waters, we are very supportive of your efforts to try to put in effect changes that would expedite VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 9 the delivery and effectiveness of this program, and we look forward to continuing to work with you. I think we have offered substantial technical assistance, and we absolutely want to work with you to make sure this program is as effective as possible. Chairwoman WATERS. Thank you very much. The gentleman from North Carolina, Mr. McHenry, who is the ranking member of the committee, is now recognized for 5 minutes. Mr. MCHENRY. Thank you. Chairman Powell, I know it is the policy of the Federal Reserve to not comment on fiscal policy, but fiscal policy does impact the Fed’s economic projection, does it not? Mr. POWELL. Yes, it does. We make assumptions about fiscal policy. And then, once it is enacted, we would put that into our models. Mr. MCHENRY. Okay. But your public models are a statement about current law rather than proposed policy, is that largely correct? Mr. POWELL. We don’t really publish a forecast as the Federal Reserve. Individual participants publish their forecasts in the Summary of Economic Projections, but that would include their personal assessments of likely fiscal actions. Mr. MCHENRY. Okay. About these fiscal actions, Secretary Yellen, I said this in my opening statement, and I will say this to both of you again. I am grateful, as an American, that you both are in the seats that you are in right now, because we are in a special circumstance here in the fall this year. It was a foreseeable, slowmoving disaster, but here we are. But the credibility of your relevant agencies and the credibility of you two individuals is of substance right now and very important to us as the American Government. So, Secretary Yellen, you said in July, right before the debt limit was reinstated, the CBO said Treasury would probably run out of cash sometime in the first quarter of next year—or fiscal year, most likely in October or November. Secretary Yellen, you began exercising Treasury’s authority to take extraordinary measures to prevent a default back in August. Is that correct? Secretary YELLEN. Yes. The debt limit, the suspension expired on August 1st, and we began using extraordinary measures to remain under the debt ceiling. Mr. MCHENRY. But those extraordinary measures are just a band-aid for a period of time, right? Secretary YELLEN. As I indicated, we expect them to be exhausted on October 18th. Mr. MCHENRY. And it would be a disaster if we did not raise the debt limit? Secretary YELLEN. It would be a catastrophe if Congress failed to raise the debt ceiling. Mr. MCHENRY. Here is the deal for Republicans. Democrats control the House and the Senate and the White House. And since January 20th, the approach of this Congress is that they do not need Republican votes to do anything. That has been the approach. VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 10 And now, they want a political cover in the midst of this massive amount of new spending to have Republicans raise the debt ceiling. That is really the request. Here is my question to you, Secretary Yellen. For the seat you sit in, do you care whether or not the debt limit is raised with Republican votes, or do you just care if it is raised? Secretary YELLEN. I think it is important that this be done on a bipartisan basis. I think it should be bipartisan, in recognition of the fact that both Republican Administrations and Congresses and Democratic ones have run budget deficits for most of the postwar period, with only a few years serving as an exception. And that requires, on a regular basis, raising the debt ceiling. The need to do so has nothing to do with future spending or tax plans that haven’t been enacted. Mr. MCHENRY. Under the circumstances— Secretary YELLEN. It is necessary to pay our bills. Mr. MCHENRY. I understand, Secretary Yellen. Secretary YELLEN. And Republicans and— Mr. MCHENRY. Secretary Yellen? Secretary YELLEN. —Democrats need to share that responsibility. Mr. MCHENRY. Secretary Yellen? As I said to you on the phone last week, I have been a part of every single debt ceiling increase for the last decade, every fiscal consequence of Congress. And some of them have been very bad, but I have tried to make things better. I have been a part of the solution for the last decade. And the call that I received from you last week was the first outreach I have had from this Administration to do something on a bipartisan basis, and you called me to raise the debt ceiling. Not with a plan, not for a fiscal plan, not for my buy-in, but simply for my vote. And that, to me, speaks volumes. Now, I am grateful for the outreach from you, but it speaks to the larger issue for the Administration. And I don’t envy the position you are in. I don’t. Because the bad strategy from this White House and the leadership of this House and Senate is showing that they don’t want Republican votes. We did bipartisan bills last Congress, in the midst of COVID, bipartisan bills, major bipartisan bills. We can work together in a responsible manner. But to ask for my vote the week before it comes up in the House is not in keeping with the realities of the situation. We have the tools. We have the votes to get this thing done through Congress. It is just a question of who votes for it. Secretary YELLEN. I would like to point out that in 2017, when the White House and both Houses of Congress were controlled by the Republicans, and a reconciliation bill was in progress that led to the 2017 tax cuts, the debt ceiling was raised, and it was done on a bipartisan basis. [Gavel sounding.] Mr. MCHENRY. In 2011 and 2013, I voted for a bill that President Obama signed. So, I am willing to participate in a bipartisan way. Chairwoman WATERS. The gentleman’s time has expired. Mr. MCHENRY. It is just a question of who votes for it and the circumstances of $7 trillion of new spending this year. VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 11 Chairwoman WATERS. The gentleman from New York, Mr. Meeks, who is also the Chair of the House Committee on Foreign Affairs, is now recognized for 5 minutes. Mr. MEEKS. Thank you, Madam Chairwoman. And I have to just say initially that I am kind of shocked at Ranking Member McHenry saying that because he wasn’t asked for a vote, something is going to determine whether or not American people, Democrats and Republicans, will suffer if we don’t raise this debt ceiling. And I have been here for 22 years between whether it is Democratic or Republican Administrations, and each time, when it came to the credit of the United States and our economy, it didn’t make a difference to me whether or not the Administration was Democrat or Republican or whether or not someone called me to ask me for my vote. I am here to try to do the best thing for the American people, not play politics. And when it comes to the credit for the United States and the economy moving on, it is not about who is the President or who called and asked me for a vote. It is about doing the right thing for the American people, Democrats and Republicans. And moving up this debt to make sure that we don’t default on our debts is essential to that, and it is essential to our responsibility as Members of Congress, and not to say, ‘‘Oh, nobody called me for a vote.’’ That is simply not our responsibility. Madam Secretary, there are consequences if we don’t pass and increase the debt ceiling, like the increase in the corporate borrowing, for a home or a car, or through one’s credit cards, of which folks on the other side will say, I don’t have to deal with that, but then it is going to be—play politics with it. I was wondering, as we are recovering from this economy, what setbacks will a default on debt cost American households? Be they Democratic, Republican, Independent, nonvoters, what would it cost us? Secretary YELLEN. I think it would be catastrophic for the economy and for individual families. Nearly 50 million seniors could stop receiving Social Security payments or see them delayed. Our troops would not know when they would get their next paycheck. We have 30 million families who rely on the monthly child tax credit, and they would not receive that relief, at least on time. And as we saw in 2011, when the debt ceiling was raised at the absolute last minute, and investor and consumer confidence was shaken in the run-up, we saw a marked increase in interest rates, and a marked drop in the stock market. And when U.S. interest rates go up and the credit rating of the United States was downgraded, that means higher interest payments for everyone who has a loan. Whether it is a small business, a homeowner with a mortgage, a credit card payment, anyone who borrows would see higher interest costs of their debt. Mr. MEEKS. We must raise the debt ceiling for the benefit of the American people. I don’t care what party they are from. Let me go to Chairman Powell. The Fed is rightly focused on controlling inflation while boosting employment, with the aim of guiding our economy back to its pre-pandemic normal. And at the European Central Forum, you mentioned that it is urgent for the Fed VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 12 to resolve the tension between these two policy goals since taming prices by raising interest rates would weaken our labor market. As the Fed considers its monetary policy, how will you manage the tradeoffs between controlling prices and ensuring full employment, and how do you plan to resolve the tension between the two that you spoke on on Wednesday? Mr. POWELL. That is the very difficult situation we find ourselves in. Almost all the time, inflation is low when unemployment is high, and so interest rates work on both problems now. Right now, we think we are far away from full employment. So, that gives us incentive to keep accommodative policy strong, to keep accommodative policy in place. Inflation is well above target, and we have an expectation that that high inflation will abate because we think the factors that are causing it are temporary and tied to the pandemic and the reopening of the economy. And what we say is, we just have to balance the two. But I would say our expectation is that inflation will come down, and we won’t ultimately face that difficult tradeoff of having the two goals in tension. Mr. MEEKS. Thank you. Madam Chairwoman, I yield back. Chairwoman WATERS. Thank you. The gentlewoman from Missouri, Mrs. Wagner, is now recognized for 5 minutes. Mrs. WAGNER. Thank you, Madam Chairwoman. And Secretary Yellen, thank you for finally taking the time to appear before this committee. I know that the ranking member has formally requested your presence at least twice within the last few months, with no response. Last week, Treasury released the latest data on its Emergency Rental Assistance Program. As you know, $46 billion was made available to supposedly help COVID-impacted, low-income families pay off their back rent and to help make mom-and-pop property owners whole in Missouri’s Second Congressional District and beyond. After more than 9 months and an entire summer of Republicans pushing Treasury, your own data still shows that more than 83 percent of your funds remain unspent, while millions of renters and property owners remain stuck in limbo. It certainly doesn’t sound to me like it has been, in your words, ‘‘an expedited program.’’ Now, I have a series of yes-or-no questions. Because my time is limited, I would appreciate and will insist upon a simple, ‘‘yes,’’ or ‘‘no.’’ First, Madam Secretary, do you consider Treasury’s Emergency Rental Assistance Program to be a success? Yes or no? Secretary YELLEN. Yes. Mrs. WAGNER. Amazing. Are you aware that in December of 2020, when Congress appropriated the first $25 billion for the Emergency Rental Assistance Program, funds were to be used by December of 2021? Yes or no? Secretary YELLEN. Yes. Mrs. WAGNER. Do you know why Congress set that initial deadline? Secretary YELLEN. To make sure that funds got to those who are in need. VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 13 Mrs. WAGNER. Right. To get it out the door to renters and landlords, ASAP. Madam Secretary, are you aware that just this past March, Democrats extended the timeframe for the Emergency Rental Assistance Program to the years 2022 and, are you ready for this, 2025, for the two respective programs? Yes or no? Secretary YELLEN. Yes. There is significant need, and it will continue, and I think that was appropriate. Mrs. WAGNER. In 2025, ma’am? Secretary YELLEN. Yes. Mrs. WAGNER. Does extending the program’s deadline incentivize grantees to get funds out? By extending this, does it incentivize grantees to get funds out the door? Yes or no? Secretary YELLEN. We are doing everything we can in the States and localities— Mrs. WAGNER. Well, it is not fast enough. Secretary YELLEN. —to get it out the door. As I indicated in my opening statement, and in a written response to a previous question, the infrastructure to do this had to be built, and the pace at which money is getting out the door is increasing. Mrs. WAGNER. There was plenty of time for the infrastructure to be set. Our Fed programs, our Paycheck Protection Program (PPP), all of those expeditiously got money to people who needed it. This is a complete and abject failure. Secretary YELLEN. I’m sorry. This was— Mrs. WAGNER. Secretary Yellen, I want to read a quote to you from a Treasury official to journalists on September 24th, ‘‘To simply take the amount of money that has gone out in the first 5 or 6 months and then compare that to what was allocated for 4 or 5 years is just a meaningless number.’’ Secretary Yellen, is getting money out the door as soon as possible a meaningless gauge, particularly when we are talking about a pandemic-related eviction crisis? Yes or no? Secretary YELLEN. Our objective is to get the money out the door. Mrs. WAGNER. Well, it hasn’t gotten out the door; 83 percent of it is still sitting in Treasury coffers. Secretary YELLEN. I’m sorry, 1.4 million— Mrs. WAGNER. Ma’am, my constituents in St. Louis and I do not find it meaningless when we are talking about emergency assistance meant to keep individuals and families in their homes today during a pandemic, not years and years later, out to 2025. Moving on, Chairman Powell, with spiking energy prices and bottlenecks in supply chains around the world, there are concerns that a rise in inflation, may not be as transitory as you originally predicted. Given our current economic situation, and the fact that Democrats want to pass trillions and trillions more in spending, what makes you believe we will not see more sustained higher inflation, especially when we have seen significant consumer price increases, et cetera, et cetera? Mr. POWELL. As I mentioned in my opening remarks, we do think that inflation will remain elevated until the supply-side bottlenecks are resolved, and we think that it will then move back down toward our goal. Mrs. WAGNER. Timeframe? VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 14 Mr. POWELL. These are not things that we control. We don’t control who supplies the semiconductors, for example. Mrs. WAGNER. Not very transitory, sir. It seems pretty dug in. Mr. POWELL. I would say that, remember, this is a function of supply-side bottlenecks over which we have no control. But I would say that we do expect in the first half of next year to see some relief, depending on the bottleneck in question, and inflation should move down over the course of that time. Mrs. WAGNER. This is not a time to be spending trillions and trillions of dollars. I yield back. Chairwoman WATERS. The gentlewoman from New York, Ms. Velazquez, who is also the Chair of the House Committee on Small Business, is now recognized for 5 minutes. Ms. VELAZQUEZ. Thank you, Madam Chairwoman. Secretary Yellen, I would like to pick up with what Chairwoman Waters was asking on the Emergency Rental Assistance Program (ERAP). Can you please explain the type of resistance the Treasury Department continues to face from some State and local governments? How is the Treasury Department trying to expedite this funding to tenants and landlords who need it the most despite these challenges? Secretary YELLEN. In cases where States and other grantees launched their programs late, they faced an array of complications. The most significant involved obtaining the necessary authorizations from a grantee’s governing body, and there were procurement challenges that arise when grantees have to engage outside partners and contractors. We have received a lot of feedback indicating that the guidance that Treasury has released really does give State and local programs the tools they need to move forward expeditiously. And I would also note the partnering with HUD to send out technical experts who can help grantees accelerate their programs and help them document best practices. Ms. VELAZQUEZ. Thank you. Early on, New York was one of the lowest-performing States in distributing ERAP funding. But significant progress has been made, and the State now ranks first nationally with more than $1.2 billion in payments made or obligated. Unfortunately, more assistance is needed. The Treasury Department is required to start reallocating excess first-round funds at the end of September. Can you tell us how this process will unfold? Secretary YELLEN. Thank you for that question. Our objective will be to maximize the number of eligible households that are served by ensuring that resources of the program are appropriately aligned with each grantee’s needs and ability to deliver reassistance. And reallocation will be really critical in achieving that objective. Our frameworkwe will identify localities that have excess funds. We will use clear expenditure benchmarks that increase over time. We will strive to keep reallocated funds within the same State when it is possible and afford a venue for voluntary reallocation among grantees. Ms. VELAZQUEZ. Thank you. VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 15 Under the American Rescue Plan, Secretary Yellen, Democrats reauthorized the State Small Business Credit Initiative (SSBCI), providing $10 billion in Federal funds to support up to $100 billion in new loans and initiatives for small businesses through State, Territory, Tribal, and local Governments. Under the program, potential grantees must submit a completed application by February. How is the Treasury Department conducting outreach and working with local governments to ensure that completed applications are submitted on a timely basis? Secretary YELLEN. Thank you. This is a very important program. Our staff have contacted each State individually to follow up on the application notice, to see if there are questions or if help is needed with a set of webinars. We are assisting in program design, in helping to develop programs, and with respect to Tribal Governments, we have been conducting extensive outreach. Ms. VELAZQUEZ. Thank you. And Chair Powell, would you agree with what Secretary Yellen is saying regarding raising the debt ceiling? Mr. POWELL. Yes, I think it is essential that the debt ceiling be raised in a timely fashion so we can pay our bills. And I think the consequences of a failure to do so would be potentially severe. Ms. VELAZQUEZ. Thank you. Madam Chairwoman, I yield back. Chairwoman WATERS. Thank you very much. The gentleman from West Virginia, Mr. Mooney, is now recognized for 5 minutes. Mr. MOONEY. Thank you, Madam Chairwoman. Secretary Yellen, do you believe that President Biden’s reconciliation package proposal, the one with the $3.5 trillion in total spending, will cost zero and be fully paid for? Secretary YELLEN. Yes, I do. We have a full program that the President has proposed to raise revenue that would cover the costs of the program. In the President’s budget, of course, there are changes under consideration as this goes through Congress, but there are a host of revenue raisers, and I do believe it will be actually deficit-reducing beyond the first 10 years of the program. Mr. MOONEY. Okay, thank you. Yesterday, Speaker Pelosi claimed the same thing, that the Democrats’ reconciliation proposal would cost zero, that it would be paid for. And President Biden said the same thing in a tweet earlier. Call me skeptical, but given the record of the Democrats in Congress here on runaway spending, I just don’t believe it. And I am not the only one. The Washington Post called President Biden’s claim that the bill would be budget-neutral, ‘‘misleading,’’ and gave it a score of two Pinocchios. We are passing bills out of committee, I understand, without even Congressional Budget Office (CBO) scores, so we don’t really know. And we have not done that before. That is a change in our policy. The truth is that we are spending at an alarming rate in this country. Since the COVID-19 pandemic began last year, the Federal Government has spent more than $5.3 trillion on relief. That is roughly $16,000 for every American. Our ballooning debt is not some abstract problem. Out-of-control spending proposed by President Biden and being rubberstamped VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 16 here in Congress will leave a mess that our children and grandchildren will have to clean up and pay for. The decisions we make today, 20 or 30 years from now, our children and grandchildren will have to pay this money back. I would like to move to a different aspect of the package. One of the attempted pay-fors in the package that is alarming to me is the tax increases that will make our economy less competitive. Secretary Yellen, my question is, the proposed corporate tax rate in the House reconciliation bill is 26.5 percent. This actually moves us higher than Communist China’s corporate tax rate of 25 percent. We are going to have a higher tax rate than a country that has been taking our jobs and has Communist ideology. Can you explain why raising our corporate tax rate above China’s is a good idea, if you think it is? And do you think this would hurt our competitiveness with China and around the world? Secretary YELLEN. Our companies are the most competitive and profitable in the world. The effective tax rate that they pay is very low, and recent studies suggest that among advanced countries, the United States has an effective tax rate that is among the lowest of countries around the world. We can certainly afford to take the corporate tax rate up to 26.5 percent, as in House Ways and Means, without negatively impacting a firm’s performance. And we propose to do that in the context of an international agreement that received the support of over 130 countries worldwide to establish global minimum tax rates that will apply to other countries’ firms. Right now, the United States is the only country with a global minimum tax rate on its multinational corporations. We propose to raise that, but at the same time, other countries will raise theirs much more. And that means that the competitiveness of American firms will be enhanced, and we will be reducing the incentives that exist in our tax law right now— Mr. MOONEY. Thank you. Secretary YELLEN. —to export jobs and profits. Mr. MOONEY. Thank you. I don’t know how much time I have left, but thank you, Secretary Yellen. One thing we have learned over the last several years is that we need to take the threat from China more seriously here in America. Making America less competitive—and despite what you said, raising our corporate tax rate makes us less competitive than our economic adversaries like China—is too high of a cost for all of this spending. Running up these massive debts that our children will have to pay back for this spending is just not right. So, despite what we are hearing and what many are saying, this reconciliation package will be expensive in terms of dollars and, frankly, to the future of our competitiveness in this country, racking up this debt, and I just fear we are going to pay for this for years to come. Thank you, Madam Chairwoman. I yield back the balance of my time. Chairwoman WATERS. Thank you very much. The gentlewoman from Ohio, Mrs. Beatty, who is also the Chair of our Subcommittee on Diversity and Inclusion, is now recognized for 5 minutes. VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 17 Mrs. BEATTY. Thank you, Madam Chairwoman, and thank you to our witnesses today. Certainly, as I have been listening, a lot of descriptive words were used, everything from, ‘‘dysfunctional,’’ to ‘‘meaningless,’’ to ‘‘irrational.’’ Well, I could think of a lot of other words that I could use, but certainly, those words are appropriate to describe what Democrats inherited from the last Administration. Whether that is the irresponsibility of the past Administration, whether it is all the debt that was occurred because of the Trump Administration, I think those words are appropriate, Madam Chairwoman, just very misdirected by my colleagues. In my opinion, you should look at your own house and home before throwing stones, and especially when they are not appropriate. Now, with that said, to our two witnesses who have been very responsive, I say, thank you. And let me quickly get to my first question on the Federal Reserve. Chair Powell, we have had a lot of conversations about diversity. I want to thank you for responding and for continuing to increase your diversity. But as you know, recently, there have been two Federal Reserve Presidents who have left, quit, retired, bottom line immediately leaving or gone from the Federal Reserve Banks of Dallas and Boston. My question is—and you know where I am going with this—I would certainly be hopeful that we could increase our numbers in diversity beyond Raphael Bostic by asking that we use the Beatty Rule, patterned after the Rooney Rule, to do as we did with the Alaska Federal Reserve President, and make sure that in that interview process, we have an African American or a female. Do you have any comment on that? Mr. POWELL. I do. Thank you, Mrs. Beatty. I can absolutely guarantee you that we will work hard in both of those processes to find and give a fair shot to diverse candidates for those two jobs as we do. And it will be a big focus of both of those processes. Mrs. BEATTY. Thank you. Secretary Yellen, you will recall that back in 2016, then-Treasury Secretary Lew made his historic announcement that Harriet Tubman would be the face on the $20 bill. I sent you a letter in early July, along with my colleague, Congressman Katko, requesting the committee to move forward with the Obama Administration’s plan to put her on the face of the $20 bill. I understand your staff has been in discussion on this issue, and I am hoping to get a high-level overview and to ask you if there is any comment you can make on that? Secretary YELLEN. Thank you for that question, Representative Beatty. We believe it is very important that our notes reflect the history and diversity of our country, and I couldn’t possibly think of a better way to honor Harriet Tubman’s legacy and her courage in fighting for the freedom of enslaved people and women’s right to vote than seeing her on the $20 bill. Issuing notes, as you know, is a very lengthy process. It involves collaboration among a number of different agencies, and it is necessary to design new security and counterfeit features. VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 18 Mrs. BEATTY. Right. Secretary YELLEN. And unfortunately, that means the lead time to redesign new bills and ensure their security is long. When Secretary Lew announced— Mrs. BEATTY. Madam Secretary? Secretary YELLEN. —announced— Mrs. BEATTY. Madam Secretary, I am going to go to my rental question, because the clock is winding down, and we will follow up with your staff. Just prior to the new Administration coming into office, the former Administration rushed the regulations and questions for the Rental Assistance Program. Those regulations were so unworkable that States like my State—Ohio—and others were telling me that they weren’t even sure if they would be able to distribute rental assistance funds under those guidelines. Secretary Yellen, isn’t it true that the Secretary under the new Administration had to spend weeks going back and redoing all of that to make sure that the funds could actually be distributed? Secretary YELLEN. That is correct. Ms. BEATTY. Thank you. I want that to go on the record. Some of my colleagues wanted to drill down and make our Secretary answer those questions, so thank you. The last— Chairwoman WATERS. Thank you very much. The gentlelady’s time has expired. The gentleman from Ohio, Mr. Davidson, is now recognized for 5 minutes. Mr. DAVIDSON. Thank you, Madam Chairwoman, and I thank our witnesses and our colleagues. I appreciate this hearing. Chairman Powell, you have extensive private-sector experience, and, of course, as Chairman of the Federal Reserve, you have a role in bank regulation. In your experience, do banks or lenders increase lines of credit unconditionally? Isn’t there some level of underwriting involved? Wouldn’t banks have problems with their regulators if they did no underwriting for a line of credit? Mr. POWELL. Yes, of course, they are very careful in the lending they do. Mr. DAVIDSON. I submit that it is perfectly rational for Congress to expect something in exchange for an increased line of credit. The plan presented is atrocious. It will never balance. It doesn’t even propose to balance in 15, 20, 30, or 100 years. There is no plan to quit bankrupting America, Madam Secretary. Now, thankfully, under the Federal Reserve’s leadership and Section 13(3) authority, we had some facilities in place to prevent real financial calamity. Recently, our Subcommittee on National Security, International Development and Monetary Policy held a hearing to discuss the Federal Reserve’s lending facilities under Section 13(3), and how those facilities were utilized prior to and since the passage of the CARES Act. I fear that some of my colleagues don’t even understand how some of the products like bonds or margin calls work, as they have criticized programs where there is literally no buy side in the market. And, of course, the Federal Reserve stepped in to create a buy side and support the markets. I have heard colleagues say, ‘‘Well, VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 19 there are only two loans under the Municipal Liquidity Facility,’’ for example, while there were hundreds of loans, and hundreds of billions of dollars of credit extended. How important are the 13(3) provisions to the financial stability of our country? Mr. POWELL. They are very important but they are reserved for real economic emergencies, financial emergencies. And as you point out, they function, I think, very well in a crisis as backstops, that we put them in place and the private capital markets started working. And really, that is success. That is what success looks like. Mr. DAVIDSON. Do you think 13(3) should ever be used for a political goal or as something to fulfill a dual mandate rather than an emergency? Mr. POWELL. Actually, no, I don’t. I think the current institutional arrangements are very good. I think we need the approval of the Treasury Secretary. Realistically, we work with Treasury, and we are constrained for very specific circumstances, unusual and exigent circumstances. There are a number of tests in the law, and I think it is an arrangement that works. Mr. DAVIDSON. Thank you, Chairman Powell. Recently, Federal Reserve Governor Michelle Bowman gave a speech in which she discussed the evolution enhancement of bank supervision, particularly during the COVID pandemic. And in that speech, she stated that the Fed avoided overreacting and instead approached supervision in a more measured way that allowed banks the flexibility to work with their customers. There are a range of topics she has addressed, and others have, with bank regulation. I will just share this from her paper. She says, ‘‘The goal of this initiative is to ensure our supervisory approaches accommodate a much broader range of activities while ensuring we don’t create an unlevel playing field with unfair advantages or unfair disadvantages for some types of firms versus others.’’ And for that reason, I am working on a bill that would study the evolution of consumer finance and the viability of updating our prudential regulatory structure through consolidation of bank supervisors. Of course, there is some level of coordination the Fed does, but could either of you give an opinion on a scenario where the United States consolidates banking supervision? Mr. POWELL. That is something we would have to look at. I know it is something that does tend to get looked at over intervals and it hasn’t happened. I think each institution has a different role in our society. I know we have more bank regulators than other countries, but we do seem to work pretty well together. Mr. DAVIDSON. Thanks for that. Secretary Yellen, obviously there are a lot of provisions and a large void in the digital asset space. In your opinion, what is a digital asset for purposes of tax reporting? Secretary YELLEN. For purposes of tax reporting, I believe the IRS will issue detailed regulations which will answer that question, for the purposes of tax reporting. Mr. DAVIDSON. Thank you. Our law has not really kept up with this, and frankly, it has led to regulation by enforcement with the SEC and a host of others. But I appreciated when you were Chair VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 20 of the Fed, the faster payments initiative that got launched. A lot of this involves payments. But so much in the digital asset space isn’t a currency or a payment system. There are a gazillion use cases, and it would be a shame to see the regulatory framework curtail that. And I look forward to seeing fintech flourish in the future. I yield back. Chairwoman WATERS. Thank you. The gentleman from Florida, Mr. Lawson, is now recognized for 5 minutes. Mr. LAWSON. Thank you, Madam Chairwoman, and Ranking Member McHenry. Chairman Powell, Floridians, unfortunately, have seen firsthand the impact of climate change and that impact is becoming worse as we experience more severe and frequent hurricanes and risks of rising sea levels. I am glad to see greater attention given to how we can better assess and manage climate-related risk. It is my understanding that many financial institutions conduct scenario analysis to assess credit market liquidity and operate risk related to transition risk [inaudible] physical risk like hurricanes, flooding, wildfires, and drought. Mr. Powell, is scenario analysis a good tool in assessing climaterelated financial risk? Can you please discuss the difference between scenario analysis and stress testing? What other tools does the Federal Reserve have to assess climate-related financial risk? Mr. POWELL. Thank you. Our role, of course, is to make sure that the financial institutions we regulate and supervise understand and can manage their risks, including the risks from climate change, the financial risks from climate change. Scenario analysis is almost certainly going to be one of the principal tools for doing exactly that, and it is very different from stress tests. Scenario analysis, at this point, is about institutions really understanding what these risks will be, how they will develop over time, and what are the channels through which they will develop, and it is sort of early days in understanding how those risks will interact with the economy and with the financial system. Scenario analysis is meant to help do that, and we at the Fed are working on developing a program of scenario analysis. Many of the large institutions are doing so. As I mentioned, it’s quite different from stress tests, which have consequences for distributions and that kind of thing. I think, overall, we see our job, as I mentioned, as making sure that these financial institutions understand the risks and can manage them, and that is just a lot of basic supervisory tools, understanding what they are doing and have the processes in place and the analytical tools in place and the focus, and that is what we will be doing. Mr. LAWSON. Okay. Thank you. Secretary Yellen, I am concerned that small businesses, particularly within communities of color, will have lasting economic damage coming out of this pandemic. The American Rescue Plan extended assistance to small businesses by authorizing a $10 billion program called the State Small Business Credit Initiative, with $2.5 billion of these funds set aside for minority-owned businesses. VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 21 In Florida, the problem of economic opportunity is waiting for the Treasury to release applications and requirements and program guides. When can we expect the guidance will be released, and can we share our Treasury plan to ensure that assistance goes to small businesses that will be highly impacted by the pandemic? Secretary YELLEN. The State Small Business Credit Initiative is an extremely important program, and we are in the process of implementing it. We will absolutely make sure that it reaches small businesses that have been very severely affected by the pandemic, and certainly in underserved areas and communities of color. I think you know that Congress required that Treasury provide funds to States based on the extent of job losses that had been suffered, and it sets aside significant funds for businesses that are owned by socially- and economically-disadvantaged individuals. So, we will make this funding available and provide technical assistance, working with communities to make sure that it is used as intended. Mr. LAWSON. Okay. Thank you very much. And with that, I yield back. Chairwoman WATERS. The gentleman yields back. The gentleman from North Carolina, Mr. Budd, is now recognized for 5 minutes. Mr. BUDD. Thank you, Madam Chairwoman, and I thank the witnesses. The Federal Government’s spending, and I am not even talking about debt but just the spending here, is expected to reach record highs this year, 2021, and Democrats are trying to dump trillions of dollars of what I believe is very reckless spending into an already-inflationary economy. As a percentage of GDP, our public debt has reached 125 percent in the second quarter. Secretary Yellen, very briefly, do you believe that there is a level of debt that is unsustainable in our economy, and if so, what is that number? And you can share that with me either in dollars or as a percentage of GDP. Secretary YELLEN. I believe that the debt held by the public relative to GDP is around 105 percent, and that is a number that is higher than we have had during most of the postwar period in the United States. But it is not a number that I think is fiscally irresponsible or unsustainable. Interestingly— Mr. BUDD. Madam Secretary, do you have a number that is a threshold, that is irresponsible, either in percentage or in dollars? Secretary YELLEN. One way that I would judge that is by looking at the interest burden, the real interest burden on the debt. That really is the burden, a better measure of the burden it places on our economy. And this year, that interest burden has actually been negative. Interest rates have been exceptionally low. This dates back to before the financial crisis in 2008, and most economists believe that there are deep structural reasons why low interest rates are likely to continue. Even if nominal interest rates move back toward more normal levels— Mr. BUDD. Let me ask—I am sorry to— Secretary YELLEN. —that interest burden— VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 22 Mr. BUDD. —just because I want to be aware of the time constraints, thank you, Madam Secretary. If the interest rate was zero, what is irresponsible in percentage or dollars? Secretary YELLEN. I think that if the real interest burden stays below— Mr. BUDD. If it is as is— Secretary YELLEN. —historical norms—I’m sorry. If interest rates are zero? Mr. BUDD. If it is, let’s say, zero. Let’s say as is. Pick one of those, and let’s say what is irresponsible as a percentage or total dollars of debt? Secretary YELLEN. If interest rates are zero and negative in real terms, certainly we could have a substantially higher burden, although there are always risks pertaining to the path of interest rates that need to be taken into account. Mr. BUDD. I understand. Thank you. Let me shift gears a bit. In one of my recent telephone town halls, I asked a poll question to those who were able to join me, ‘‘Have you or your family noticed a sharp rise in prices for food, gas, or electricity?’’ And 94 percent of the respondents—and it was a good sample size—said yes, inflation is eating away at the buying power of every single North Carolinian. Bottom line: Inflation is a tax on working Americans. Chairman Powell, I know that you have called the inflation that we are dealing with transitory, and boy, I sure hope you are right. But what would you tell people back in my district, especially those on fixed incomes, when they are struggling to make ends meet right now? What would you tell them? Mr. POWELL. I would say that we are dealing with a very unusual event that is really part of the broader COVID event, that the economy is now reopening, and that we are hitting the supplyside bottlenecks. For example, it is hard to manufacture cars without semiconductors, which are in short supply, so car prices are going up, and lots of prices are being affected by supply-side constructions. We expect that those will abate, that they will lesson, and over time inflation will come back down. Exactly when that will happen is not possible to say, but I would say we should be seeing some relief in the coming months and over the course of the first half of next year. Mr. BUDD. I hope you are right. The folks I talk to back in North Carolina are doubtful of that, but I do hope you are right. Chairman Powell, next question. In a July hearing before this committee, you were asked about Central Bank Digital Currencies (CBDCs) and their impact on stablecoins and other cybercurrencies. And you stated, and I think I quote you correctly here, ‘‘You wouldn’t need stablecoins. You wouldn’t need cybercurrencies if you had a digital U.S. currency.’’ So, Mr. Chairman, as a matter of policy, is it your intention to ban or limit the use of cybercurrencies like we are seeing in China? Mr. POWELL. No, and I immediately realized that I had misspoken there. I didn’t mean—take the word, ‘‘cybercurrency,’’ out of that sentence, and I would say it’s fairly widely understood that Central Bank Digital Currencies could perform some of the— could make— Mr. BUDD. But no intention to ban? VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 23 Mr. POWELL. No intention to ban, but stablecoins are like money market funds, they are like bank deposits, but they are, to some extent, outside the regulatory perimeter, and it is appropriate that they be regulated—same activity, same regulation. Mr. BUDD. Thank you. I yield back. Chairwoman WATERS. Thank you. The gentleman from Illinois, Mr. Casten, who is also the Vice Chair of our Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets, is now recognized for 5 minutes. Mr. CASTEN. Thank you, Madam Chairwoman, and thank you so much to our witnesses. We are truly fortunate to have you at the helm, steering us through some past and future crises. I want to talk about those, but before that, I want to just talk about manufactured crises, which I would like to avoid. Congress, everybody on this call in some fashion has voted to approve our spending. Congress, everybody on this call in some fashion has voted to decide how much of that spending would be paid with tax revenues, and then somewhat uniquely, we give ourselves the authority to decide how much of the residual, which is paid with debt, we are going to pay for. It is political suicide. I am a co-sponsor and supporter of my friend, Mr. Foster’s, bill, H.R. 3305, the End the Threat of Default Act, to take that tool away from Congress, because Congress has proven that we cannot be trusted with that responsibility. Secretary Yellen, without getting into the specifics of Mr. Foster’s bill, would you support simply eliminating the debt ceiling so that we don’t have to deal with this in the future and can focus on real crises? Secretary YELLEN. Yes, I would, because I believe when Congress legislates expenditures and puts in place tax policy that determines taxes, those are the crucial decisions Congress is making, and if to finance those spending and tax decisions, it is necessary to issue additional debt, I believe it is very destructive to put the President and myself, the Treasury Secretary, in a situation where we might be unable to pay the bills that result from those past decisions. Mr. CASTEN. Thank you. I am glad to hear it, and we will hopefully try to get that through Congress. Moving on to past crises, Chair Powell, I think all of us, in all of our districts, are hearing about labor market tightness, and I think a lot of people are explaining that labor market tightness to justify preexisting political biases. As you know, and we have talked about, we saw unemployment go from 3.5 percent to almost 10 percent, and back down to 5.2 percent, but I am much more concerned that workforce participation went from 63 percent to 61 percent and has stayed low. Can you just explain for the committee briefly what is driving the reduction in workforce participation and what, if anything, we can do to get that number back up, to make sure that employers have access to folks who are ready and able to work? Mr. POWELL. I would be glad to. The two biggest parts of that are caretakers and retirees. So, that makes up a lot of the shortfall from where we were with labor force participation before the pandemic crisis. And within caretakers, some of that is going to be connected to schools not being open or people who are afraid to go into VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00027 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 24 an unvaccinated workplace and are afraid of COVID, and things like that, and other reasons. That is a part of it, and that should abate over time. In terms of the retiree piece, it is not clear about that. I would say the lore is that people don’t come out of retirement, except, I would say, all during the last few years of the very long expansion that ended with the pandemic, we were constantly surprised to the upside on participation, including older people staying in the workforce longer. I think my prior would be that we will get back a big chunk of the so-called retirees and that we should be very openminded about how much labor force participation can go up. The United States has low labor force participation compared to our advanced economy peers, and this is not something that has to be that way. It is not something that is good. Mr. CASTEN. Thank you. Certainly, when I talk to folks in my district, everybody kind of acknowledges that it is the boomers who retired who are creating a lot of their skills gap, and that is a harder challenge. Going back to you, Secretary Yellen, I think subsequent to your first Financial Stability Oversight Council (FSOC) meeting when you identified climate change as an emerging threat, President Biden issued an emergency order on climate financial risk, directing Agencies, including yours, to analyze and mitigate risks that climate change poses to the financial system. In the little time that we have left, can you give us any updates on status, milestones, and deliverables that the Treasury Department has in response to that Executive Order? Secretary YELLEN. Yes. We are in the process of completing the report, and we expect to issue it in late October or early November, within the 180-day timeframe. And what we will be doing is looking at the work of individual regulators to incorporate climate change risks into their regulatory and supervisory activities and describing some of the challenges that they face in carrying that out. Mr. CASTEN. Thank you. I am out of time. I will clear my calendar to allow some time to read that week, and I yield back to the Chair. Chairwoman WATERS. Thank you very much. The gentleman from Tennessee, Mr. Kustoff, is now recognized for 5 minutes. Mr. KUSTOFF. Thank you, Madam Chairwoman, for calling today’s hearing, and thank you to the witnesses for appearing., Secretary Yellen, there was an article in The Wall Street Journal dated September 15th, and the headline is, ‘‘Yellen, IRS push Democrats to require banks to report taxpayer annual account flow.’’ I want to read the first two paragraphs, just briefly. ‘‘Treasury Secretary Janet Yellen and IRS Commissioner Charles Rettig pressed lawmakers Wednesday to give the Internal Revenue Service more information about taxpayer bank accounts as the Biden Administration tries to salvage its struggling tax compliance proposal. ‘‘In letters to lawmakers, the administration officials again asked Congress to require banks to report annual inflows and outflows from bank accounts with at least $600, or at least $600 worth of transactions, a proposal aimed at letting the IRS target its audits VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 25 more effectively. It would generate about $460 billion over a decade to cover the cost of Democrats’ planned expansion of the social safety net and climate change policies, according to the administration.’’ Those are the first two paragraphs of the story. That is an accurate reflection of what you have done, correct? Secretary YELLEN. Yes. We have proposed both augmenting the resources of the IRS so that it can hire qualified auditors, and augmenting the information flow so that the IRS gets insight into opaque sources of income, and both together, we believe, can serve to greatly address the $7 trillion estimated tax gap that we will see in this country— Mr. KUSTOFF. And Madam Secretary— Secretary YELLEN. —over the next decade. Mr. KUSTOFF. —you would tell my constituents that they should not have any privacy concerns about what you are trying to do? Secretary YELLEN. They should not, because this is a simple matter for banks that already file 1099-INT forms— Mr. KUSTOFF. Madam Secretary— Secretary YELLEN. —with the IRS— Mr. KUSTOFF. —the IRS— Secretary YELLEN. [Inaudible.] Mr. KUSTOFF. —information about taxpayers to ProPublica, that published their entire tax returns, their entire tax information. On the record, you tell my constituents, and all of the other Members here, and their constituents, that they should have no privacy concerns about banks reporting $600 or more in account value to the IRS. Secretary YELLEN. What we have asked to have reported is the aggregate inflows and outflows from these accounts each year, on an annual basis, two additional pieces of information, not transaction-level data. And look, every wage-earner in this country has their wage income— Mr. KUSTOFF. At least $600, is that a correct statement? Secretary YELLEN. We want to make sure that this can— Mr. KUSTOFF. That is different than transactions. Secretary YELLEN. —by expanding— Mr. KUSTOFF. Those are values of $600. Secretary YELLEN. There is— Mr. KUSTOFF. The Wall Street Journal is accurate, correct? Secretary YELLEN. Excuse me? Mr. KUSTOFF. The Wall Street Journal’s report is accurate, correct? Secretary YELLEN. We did propose that. I don’t believe it is an invasion of privacy. And look, the IRS gets a great deal of information that it needs in order to make sure that taxpayers comply with the Tax Code. It receives individual information on wages and salaries that are received, on dividends, on transactions, on— Mr. KUSTOFF. How did ProPublica receive this information from the IRS about the individual taxpayers? Secretary YELLEN. Excuse me? Mr. KUSTOFF. How did ProPublica obtain the information from the IRS about taxpayer information? VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00029 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 26 Secretary YELLEN. Independent agencies and law enforcement are currently looking into that and attempting to figure out how that occurred. That is clearly a crime and an utterly unacceptable thing, and it will be prosecuted when it is understood, when these agencies— Mr. KUSTOFF. Your proposal purports to give more information to the IRS, drilling down to accounts of $600. Secretary YELLEN. We want to make sure that individuals can’t game the system by opening multiple accounts in order to evade the— Mr. KUSTOFF. And you give the IRS all of this other information about individuals. Last question, Madam Secretary, do you support the move of the United States Secret Service from the Department of Homeland Security to the Department of the Treasury? Secretary YELLEN. I haven’t taken a view on that. Mr. KUSTOFF. Thank you. I yield back my time. Chairwoman WATERS. The gentleman from New York, Mr. Torres, is now recognized for 5 minutes. Mr. TORRES. Thank you, Madam Chairwoman. I am appalled by the Republican gamesmanship around the debt limit. I heard a Republican colleague on this committee complain about not receiving a phone call from the Administration or a complaint that we, the Democrats, are too partisan. The Republican argument seems to be the following, that since the Democrats have been mean to us, we are going to sabotage the full faith and credit of the United States to exact revenge against those who have slighted us. And that kind of pettiness has me wondering, are we in high school or the United States Congress? Now, it has to be said that raising the debt limit would not authorize new spending. It would simply pay the debts of previous Administrations, including the Trump Administration. So, the Republicans cannot pass $2 trillion worth of tax cuts and then refuse to pay back the debt that made those tax cuts possible in the first place. That, to me, is worse than fiscal responsibility. That is fiscal hypocrisy. And I support Congressman Foster’s legislation abolishing the debt limit so that we are no longer at the whim of bruised egos slighted by unreturned phone calls. Suppose for a moment that it is October 18th. The use of extraordinary measures is exhausted. What happens on October 19th? Secretary YELLEN. We are simply in an impossible situation in which it will be impossible for Treasury, on that day or a few days thereafter, depending on—we will have very limited resources. It will be run down quickly. We won’t be able to pay all of the government’s bills. The Treasury has been directed by Congress to pay all of the government’s bills, to use the tax revenues that are available, and without that to issue debt, and the debt ceiling will make it impossible for us to do that. Mr. TORRES. And the damage could be irreparable. Secretary YELLEN. Yes, and we got a taste of that in 2011, when the debt ceiling wasn’t raised until the last minute. The fact that Congress might not raise the debt limit and call into question whether or not what is regarded as the safest asset in the world, VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00030 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 27 dollar-denominated U.S. Treasury debt, will actually be repaid, is simply a catastrophic event. Mr. TORRES. I want to follow up on an exchange you had with Congressman Budd, who asked you about the debt-to-GDP ratio. The U.S. debt-to-GDP ratio is over 100 percent. What is Japan’s debt-to-GDP ratio? Secretary YELLEN. Excuse me? Mr. TORRES. What is Japan’s debt-to-GDP ratio? Secretary YELLEN. It is about 250 percent. Mr. TORRES. It is the highest in the world. Secretary YELLEN. Yes, it is. Mr. TORRES. And Japan is regarded as a successful economy? Secretary YELLEN. It is, and Japan also has low interest rates and is not— Mr. TORRES. And I agree with your premise that the cost of servicing debt is a more reliable measure of debt sustainability than the debt-to-GDP ratio, and if we were to breach the debt limit, as Republicans would have us do, it would actually raise the cost of borrowing. It would raise interest rate payments— Secretary YELLEN. Yes, it would. Mr. TORRES. —which would make our debt burden less sustainable, not more. Secretary YELLEN. That is absolutely correct. It would be regarded as riskier. We might suffer, again, a credit downgrade, and coming out of that we could expect to see higher interest rates on Treasury debt and on the debt that private individuals have—mortgage debt, credit card debt, auto loans, and everything else. Mr. TORRES. I want to quickly ask you about a Title IV loan under the CARES Act. During the Trump Administration, the largest recipient of Title IV was a trucking company previously known as YRC Worldwide, and presently known as Yellow Corporation. Do you think a nearly-bankrupt trucking company, whose conduct is the subject of a DOJ lawsuit for overcharging, should have received a national security loan from the Trump Administration? Secretary YELLEN. I am afraid I don’t know the details of that, but I would be glad to have our staff get back to you on that. Mr. TORRES. And I want to be clear that this loan is the subject of scrutiny from the bipartisan Congressional Oversight Commission and the House Select Subcommittee on the Coronavirus Crisis. You said at the end of September that the funding for Emergency Rental Assistance might be reallocated. Up to how much funding might be reallocated? Secretary YELLEN. I can’t give you a dollar estimate, but the objective would be to shift it to areas where there is need and proven success in getting it out. Mr. TORRES. And if the use of extraordinary measures is exhausted on October 18th, what does the Federal Reserve do on October 19th? What actions do you take in response? And that will be my final question. Mr. POWELL. I guess I would just say that no one should assume that we can really do much to—if there were to be a default on our obligations. No one should assume that the Fed, or anyone else, can fully shield the American people from the consequences of that. Mr. TORRES. My time has expired. VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 28 Chairwoman WATERS. The gentleman from Indiana, Mr. Hollingsworth, is now recognized for 5 minutes. Mr. HOLLINGSWORTH. Good morning. I am going to ask most of my questions to Secretary Yellen. First and foremost, I want to associate myself with the comments that Mr. Kustoff made. I love serving on this committee. I have a great time working on the policies that emanate from this committee. But it’s rare that something this committee does leads to questions in the grocery store, questions at convenience stores, and questions around my district. But I have to tell you, the proposal that has been put forth about expanding the amount of information that the IRS is going to get on private bank accounts has been something I have been asked about at parks, at grocery stores, and at convenience stores around my district. This has people deeply afraid about the emergence of an apparatus that may be used against them. I want to better understand, with specificity, what is being proposed, because what I saw in the proposal, as circulated by Treasury, was extremely generic and somewhat incongruent with what I heard today. You said to Mr. Kustoff that the only things that will be reported to the IRS under your proposal is the gross inflow and the gross outflow from that particular account in a given year. Is that accurate or inaccurate in what you have requested? Secretary YELLEN. The proposal put forward by the Administration requested a bit more information than that. But what is under consideration now, in reconciliation, would be limited to those two pieces of information. And what you should tell people who ask you about this in the park is that right now, much of the audit time of the IRS is devoted to taxpayers who have relatively low incomes. And we know that the tax gap is something that comes from opaque sources of income and from high-income individuals. Mr. HOLLINGSWORTH. Well, I need to tell my— Secretary YELLEN. The audit rates on individuals earning less than $400,000 would not increase. This would— Mr. HOLLINGSWORTH. Wait a minute. Wait a minute. Wait a minute. Secretary YELLEN. —redirect audits— Mr. HOLLINGSWORTH. They are not worried about the audit rates— Secretary YELLEN. —to those— Mr. HOLLINGSWORTH. Reclaiming my time, they are not worried about the audit rates. They are worried about yielding their privacy, yielding their transaction history— Secretary YELLEN. There is no— Mr. HOLLINGSWORTH. —to a Federal Government— Secretary YELLEN. —transaction history— Mr. HOLLINGSWORTH. —reclaiming my time, to a Federal Government that has shown itself, time and time again, by mobilizing that information against individuals, against organizations, and against businesses, to be incapable of protecting that data from breaches— Secretary YELLEN. There is no— Mr. HOLLINGSWORTH. —by nation states. Secretary YELLEN. There is no— VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00032 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 29 Mr. HOLLINGSWORTH. Excuse me. Reclaiming my time, this is deeply concerning to them. So forgive me if I won’t go back to them and say, ‘‘Don’t worry. Despite all evidence to the contrary about their past history, the Federal Government really means it this time when they say they are going to respect your privacy, that they intend to build firewalls around this enormous database of personal information. And by the way—which you brought up—we are doing it for a really good purpose. We are doing it for a really good purpose.’’ Forgive them if they don’t believe that the government is showing up on their doorstep to ask about the inflows and outflows from their personal accounts, at a very de minimis level, and that is going to be used for only their good purpose. Secretary YELLEN. There is no transaction-level data being reported to the IRS. Mr. HOLLINGSWORTH. Can you clarify what you mean by, ‘‘a bit more data,’’ than, when I asked, ‘‘Is it just these two things?’’, and you said, ‘‘It is a bit more.’’ What does, ‘‘a bit more’’ mean? Secretary YELLEN. The proposal by the Administration that was originally put forward requested some additional information, particularly about businesses and partnerships. Mr. HOLLINGSWORTH. Yes. I wonder— Secretary YELLEN. But there is no transaction-level data for individuals being considered by this Congress, and— Mr. HOLLINGSWORTH. I want to point out— Secretary YELLEN. —why is it okay that we have businesses report wage and salary income, or companies report dividends, or— Mr. HOLLINGSWORTH. Reclaiming my time, I think there is some real concern about growing the amount of data the Federal Government has proven itself incapable of handling correctly, or, at some point, ethically, to the IRS. I heard testimony 2 years ago about how China was able to apprehend many of the protesters in Hong Kong. The way that they did that was by mining financial data, not by virtue of great law enforcement work and investigatory work, but instead by mining financial data about who was scanning their credit card in order to buy subway tickets to those particular locations. This worries Americans who are rightly concerned about a Federal Government that does not have their best interest at heart, but is telling them that for the greater good, they need to yield more privacy, more of their privacy, more of the things that they do in their personal accounts, because we might be able to close the tax gap for other people who are cheating. With that, I will yield back. Chairwoman WATERS. The gentleman’s time has expired. The gentlewoman from Iowa, Mrs. Axne, who is also the Vice Chair of our Subcommittee on Housing, Community Development, and Insurance, is now recognized for 5 minutes. Mrs. AXNE. Thank you, Madam Chairwoman, and thank you, Secretary Yellen and Chair Powell, for being here. It is great to see you. Listen, we have heard a lot about inflation, of course, but I want to dig a little bit into this. Chair Powell, you recently mentioned that price increases are relatively concentrated in particular areas, and yes, I think most folks can understand things like airlines and VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 30 hotels, et cetera, industries that took a hit during COVID because people weren’t really traveling, this could be an issue there. However, I want to get into some others areas where we have seen price increases. One of the biggest areas is in cars, both new and used, and I wanted to touch base about this. Secretary Yellen, one of the key causes of the shortages and the prices, the increase in our cars is because of shortages of semiconductors and production issues. Is that correct? Secretary YELLEN. Yes, that is correct. There have been significant semiconductor shortages, particularly affecting cars. Mrs. AXNE. Thank you. And I hear regularly from businesses in my district about supply chain issues coming off of the pandemic that are unfortunately holding back our companies. One recently told me that their sales are down $120 million, really because they are producing to supply chain. Chair Powell, we see that elsewhere too, with ships waiting offshore on both coasts, difficulties moving goods back and forth, et cetera. Is that correct? Mr. POWELL. Yes, it is very correct. It is hard to say how long that will take, but it will resolve itself in time. Mrs. AXNE. And that shows us also that the price of shipping goods from China to the U.S. has gone up, and I think that has gone up 400 percent from pre-pandemic. So, that is going to, of course, add to the cost of anything we can buy from China. While we have you two here, I guess what I am wondering is, what are the solutions? Chair Powell, if we have issues with our ports or with the supply chain of semiconductors or other components, does it make much sense for the economy to pull back on investments in the bottlenecks, or would we do better to expand that capacity? Mr. POWELL. I think that is really a question for fiscal policy. I will say these are tangled supply chains right now, and it is a combination of a bunch of factors, which should abate over time. But obviously, investment in supply chains would make them more efficient over time. Mrs. AXNE. Thank you. I want to point out here that most of the things we produce do require workers, and I spoke to you, Chair Powell, about this in February. But Secretary Yellen, you, of course, have studied labor markets throughout your career. When we have constraints on our supply chain, does it make sense to limit the numbers of people able to work or should we instead invest in policies like childcare that help get people into the workforce? Secretary YELLEN. Absolutely. I think over the longer term, we have had a problem with declining labor force participation of prime-age workers, and we are proposing paid leave, childcare support, and early childhood education, supports that would help expand labor force participation. In the short run, of course, dealing with the pandemic to make sure schools can operate on a normal schedule, and get people back to work, will help as well. Mrs. AXNE. And there are other countries around the world that obviously have some of these pieces put in place, like better childcare, and early childhood education. In your studies with VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 31 them, do you see economic growth coming as a result of putting these practices in place? Secretary YELLEN. Yes. It has been an important source of growth in the United States and elsewhere. Once upon a time, the United States, just with respect to women’s labor force participation, had about the highest in the world, and that has changed radically in recent decades as we have failed to expand and provide the level of support for females. Especially for women’s labor force participation, we have been falling behind other developed countries. Mrs. AXNE. Absolutely, and thank you. So what I am hearing is, it sounds like Democrats, what we are proposing, is absolutely a solution to some of these inflation concerns, and that doing nothing will actually exacerbate issues and make it worse. I, for one, am not in the business of telling people what they can’t buy. What I am hoping is that we can find solutions like childcare, like paid family leave, like lowering the cost of prescription drugs to keep money in people’s pockets, so that we can stop artificially limiting the capacity of America’s economy and get people back to work to help create more products and move products around our country. So, things like childcare, paid leave, and other policies will actually help expand the workforce. Thank you so much. Chairwoman WATERS. The gentlelady’s time has expired. The gentleman from Tennessee, Mr. Rose, is now recognized for 5 minutes. Mr. ROSE. Thank you, Chairwoman Waters and Ranking Member McHenry, and I want to thank Chairman Powell and Secretary Yellen for being here today. I am just going to dive right in. I do want to follow up on a couple of things that have been talked about quite a bit this morning, the debt limit first of all. I feel like there is a lot of misinformation that circulates about this. To be clear, if we suspend the debt limit, that is to allow for the enlargement of the debt, yes, some of that for programs that have been in place historically, but much of that would likely facilitate new spending. And I learned a long time ago, from my dad, not to sign blank checks. And it seems to me that if we suspend the debt limit, that is kind of like signing a blank check, and frankly, I am not willing to participate in signing that blank check. If we had assurances that that increase would go simply to cover the current built-in costs of operating the government, then that might be a different discussion, but that is not the one we are having. Secretary Yellen, I want to follow up just for a second about the IRS reporting for bank account information, and I wonder, in the Administration’s proposal, is there any allowance in that proposal to defray the costs that banks and financial institutions would incur from the added reporting expenses of providing this additional information to the IRS? Secretary YELLEN. I don’t believe it was in the Administration’s proposal, but if appropriate, we would be glad to work with Congress on that to defray any expense. VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00035 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 32 Mr. ROSE. I certainly know that the existing reporting requirements that banks face are onerous and expensive, and, of course, ultimately their customers end up bearing that cost. I want to shift gears now. In May, the Treasury Department published an interim final rule to implement the Coronavirus State and Local Fiscal Recovery Funds. Although the guidance was much-needed, I continue to hear from city and county mayors across my district, many of whom are here in town today, asking for additional clarification and flexibility. I wrote a letter to you in July, requesting this additional flexibility in the final rule. Secretary Yellen, can you tell us when we can expect this updated guidance and if there will be increased flexibility included? Secretary YELLEN. We have tried to provide a great deal of flexibility in the guidance we have provided. There is an interim final rule that is in place, and States and localities can rely on it. It was out for comment. We have received a very large number of comments that we are working through carefully, and we will work to produce a final rule. But the interim rule— Mr. ROSE. Any foreshadowing of when that rule might be available? Secretary YELLEN. Later this year. But the interim final rule is quite permissive in terms of flexibility and— Mr. ROSE. We look forward to seeing that. Secretary YELLEN. —States and localities— Mr. ROSE. Reclaiming my time. Secretary YELLEN. —to rely on it. Mr. ROSE. Earlier this month, the committee reported the chairwoman’s partisan bill that will have the effect of slowing down, in my opinion, the distribution of Emergency Rental Assistance funds, punish landlords, and expose taxpayers to fraud. Part of her bill would replace having grantees determine if a household was, in fact, an eligible, low-income household, as Congress intended with the self-attestation that requires grantees to accept any attestation of the households as true. Secretary Yellen, are you concerned that requiring grantees to accept all self-attestations of applicants who want to get free rental assistance money will increase the likelihood of fraud? Secretary YELLEN. We are working carefully with Chairwoman Waters and want to make sure that we get money out in the most effective and rapid way possible while maintaining adequate controls to prevent fraud and abuse. Mr. ROSE. Secretary Yellen, we have had several hearings regarding the Emergency Rental Assistance Program that is disbursed through Treasury, and yet, you have not appeared at a single one. And for that matter, you failed to appear at the House Small Business Committee hearing as well. I am going to yield the remainder of my time to my good friend, Mr. Luetkemeyer, the ranking member of the House Small Business Committee. Mr. LUETKEMEYER. Thank you, Mr. Rose. Secretary Yellen, I am the ranking member of the House Small Business Committee, as Mr. Rose indicated, and last December Congress passed a bipartisan bill that required you to testify in front of the Small Business Committee on the Paycheck Protection Program. That deadline passed 157 days ago, and you are still not there. You have willfully VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 33 refused to come before the committee, and willfully refused to obey the law. So, my question is very simple: Why can you, a Cabinet member of the Biden Administration, pick and choose which laws you choose to follow? Secretary YELLEN. I have— Mr. LUETKEMEYER. Please close your binder, and respond off the cuff. Why can you pick and choose which laws that you respond to? Secretary YELLEN. I have testified 11 times before Congress during the past— Mr. LUETKEMEYER. And never in front of the Small Business Committee, Madam Secretary. Chairwoman WATERS. Please allow the— Secretary YELLEN. —months. I have agreed to do so. We have not been able to find an appropriate date that works. I have offered to have my— Mr. LUETKEMEYER. I can show you a list of your— Secretary YELLEN. —deputies— Chairwoman WATERS. The gentleman’s time has expired. Mr. LUETKEMEYER. I yield back. Chairwoman WATERS. The gentleman from Massachusetts, Mr. Lynch, who is also the Chair of our Task Force on Financial Technology, is now recognized for 5 minutes. Mr. LYNCH. First of all, as someone who for the past 20 years has worked with both Republican and Democratic Administrations to allow our government to meet our obligations to our senior citizens and Social Security, pay our troops, and pay our bills, I view this latest threat to default on our debt as a direct attack on the American people and on our government itself. Never has it been a good time to destroy the full faith and credit of the United States, and I fully support Mr. Foster’s bill, H.R. 3305, which would change the whole dynamic of raising the debt limit. I would like to ask you about the rollout of the CARES Act, and Madam Secretary, I know that was a joint program between Treasury and the Small Business Administration (SBA). As Chairwoman Waters pointed out, I Chair the Task Force on FinTech, and while there were very few connections between most of the fintech firms and the SBA prior to the pandemic, once we gave them about $330 billion in the second phase of the PPP program, the fintechs engaged. They were able to put out, I think 15 percent of the funding through fintech lenders to people who needed it. Unfortunately, however, about 75 percent of the fraud that we detected was from that 15 percent that went out through fintech lenders. And these were even some of our best—Kabbage, which previously had never handled an SBA loan. They were one of the companies that had difficulties. I am just wondering if there were any lessons learned from that rollout? I know we were rushed. We were pushing to get, especially the first phase, the banks took care of their favorite customers. I understand that. And those were known entities. And then we, in Congress, encouraged a further reach-out for the SBA for people who were not met and were not addressed in the initial phase. But are there any—we had the rushed aspect of it. There was also, I am not sure what the Application Programming Interface VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00037 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 34 (API) is between the SBA and these fintech lenders. I know the relationships are new. But did we learn any lessons from that interaction in getting money out to people who need it through the fintech companies and lenders that we used? Secretary YELLEN. Certainly, there are oversight and review processes that are taking place. I can get back to you. I don’t have details on what we found about fintech lenders, and I guess the SBA is probably doing much of that review of the Paycheck Protection Program. But in every aspect of developing programs that have been assigned to Treasury, we have worked, right from the outset, with our Office of Inspector General and others to make sure that we have appropriate reporting and fraud control in place to minimize fraud in the programs and make sure that we have controls in place. Mr. LYNCH. Okay. Chairman Powell, any thoughts on that, or would you rather take a pass? Mr. POWELL. I will follow up, and also see if we have anything on that for you. Of course, the PPP was administered by the SBA. We did the liquidity facility. Mr. LYNCH. Okay. Mr. POWELL. On that part, I would be happy to check and get back to you. Mr. LYNCH. That would be great. And Madam Secretary, would you again talk about what happens upon default and what that means for the American people? Secretary YELLEN. It is a catastrophe. We are likely to end up with a financial crisis, surely a recession, and millions of individuals who are counting on checks from the government, not receiving those in a timely fashion, and long-lasting consequences of higher interest rates for everybody who borrows. Mr. LYNCH. Thank you very much. I yield back, Madam Chairwoman. Chairwoman WATERS. Thank you. The gentleman from Wisconsin, Mr. Steil, is recognized for 5 minutes. Mr. STEIL. Thank you very much, Madam Chairwoman. Chairman Powell, Secretary Yellen, thank you for being with us here today. Out of the gate, Secretary Yellen, I would just like to note that the proposal for bank account reporting, that you do not believe to be an invasion of privacy, I would just like to be on the record that I believe that this would be an invasion of privacy, and I remain concerned with it. I would like to jump over to debt-to-GDP. In a previous question, you noted that crossing the threshold of 100 percent of debt-to-GDP in the United States, now roughly 105 percent, was not fiscally irresponsible. Is that correct? Secretary YELLEN. That is right. Mr. STEIL. In a comment to Mr. Torres, he was examining— Secretary YELLEN. I believe we are in a place where we can certainly bear the burden of the debt, now and in the future. Mr. STEIL. And you believe that because we are currently in a low inflationary environment with low interest rates. Is that accurate? VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00038 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 35 Secretary YELLEN. That is right. But I am assuming that interest rates, as the economy recovers, will move up to a more normal level in line with the forecasts of many professional forecasters. Mr. STEIL. And in the event that the inflationary rate increased beyond that current forecast by the experts that you are speaking with, that would increase the burden on the debt. Would that then become fiscally irresponsible to have a debt-to-GDP ratio over 100 percent? Secretary YELLEN. It depends on what happens to real interest rates in the economy. If they were to rise significantly that, of course, poses a risk that we need to take into account. Mr. STEIL. I think we should absolutely take it into account. I am very concerned with the spending proposals from the Biden Administration and the impact that would have in the event that we enter a more inflationary period where interest rates increase. Secretary YELLEN. I want to make clear that the proposals from the Biden Administration are neutral with respect to the debt path, that the projections that we have shown display essentially a level debt path over the next 10 years, and beyond 15 years, substantially reduce the outstanding debt-to-GDP ratio. Mr. STEIL. I remain very concerned about the debt path that the Biden Administration is taking us on, and a whole array of spending proposals that we are seeing. Let me shift gears slightly over to you, Chairman Powell, if I can, and build on this topic as it relates to inflation. It is something I have spoken with you many times about, in particular in this committee, in July and December of last year. And in those times, you have suggested, and I think you have continued to state that the Fed is not ready to take action to head off inflation. Yet, we are continuing to see prices increase. We saw consumer prices increase 5.4 percent year over year, more recently, and regardless of what the White House press team says, I think people are really seeing the impact of higher prices day in and day out. Now, I know that you have said you believe many of these to be transitory, that you think they will come down. But here is my concern, is that individual, the public expectations are beginning to change as people truly see the price increases when they go to fill up their car with gas, when they go to a grocery store, or when they go back-to-school shopping. In a recent poll, we saw that 87 percent of Americans said they are concerned about inflation. A New York Fed report reported that consumers expect to see higher inflation over the medium term. So, could you provide a little color as to how you think the Fed is going to respond to consumers expecting to see inflation? Mr. POWELL. Essentially, what would need to happen for inflation to remain high, year upon year upon year, is we would have to have a new inflation regime in which people began to enter their psychology and they began to think that it was coming and expect that it was coming. Mr. STEIL. But with all due respect, don’t we see that evidence in the Fed report which shows that people are expecting inflation? Mr. POWELL. We don’t measure these things precisely, but we do measure them a lot, and there are many, many different measures, and broadly speaking, those measures are at levels that are con- VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00039 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 36 sistent with our 2 percent inflation goal—not for the near term, but for the medium and longer term. But nonetheless, that is the right issue. We monitor that very carefully, and to the extent we were to see expectations broadly drifting up and the regime changing, we would certainly use our tools to make sure that inflation is consistent with our goal. Mr. STEIL. I appreciate you tracking this, because I believe as Americans are looking at the runaway spending here in Washington, D.C., without a long-term plan to pay for it, that these expectations of inflation will continue to increase, and as the expectation plays out, as you noted, I think we will see real inflation in the future having a significant impact on the debt burden that the debt-to-GDP ratio holds. Recognizing the time, I yield back. Thank you for being here. Chairwoman WATERS. Thank you. The gentlewoman from North Carolina, Ms. Adams, is now recognized for 5 minutes. Ms. ADAMS. Thank you, Madam Chairwoman. Secretary Yellen, Chairman Powell, thank you both for being here. I would like to follow up on a question that Senator Brown posed to both of you on, I think, Tuesday. He raised an excellent point that no Black woman has ever served on the Fed’s Board of Governors, and you both indicated that you want diverse viewpoints represented at the highest levels of our economic policymaking bodies. And last year, we had our own Office of Minority and Women Inclusion (OMWI) Directors testify before us about their efforts to diversify your entities. But I would like to hear directly from you both, what are you doing in your respective organizations to encourage the appointment and hiring of Black and Brown women at all levels of seniority, and have you considered recruiting on the campuses of Historically Black Colleges and Universities (HBCUs) and other Minority-Serving Institutions (MSIs)? Secretary YELLEN. I can start off and say that we have a very active program at all levels of the Treasury Department, including political appointments at recruiting diverse workforce and leadership, and I think if you look at the appointments that we have made or proposed, that we have made good on that commitment and continue to give it the highest priority. With respect to the Federal Reserve, I and others will provide advice on nominations to the President. It will be up to him to nominate individuals to serve on the Fed Board, and we certainly will ensure that he has a diverse slate of candidates to consider in making these appointments. Ms. ADAMS. Thank you. Mr. Powell? Mr. POWELL. We work very hard to recruit diverse talent, diverse people to the board, and we work very hard to keep and make sure that the people that we do succeed in recruiting have good opportunities, or are included in opportunities to learn, and have as many opportunities as they can have so that they can have a career at the Fed. It is a very high-profile focus for us. Ms. ADAMS. Thank you. Secretary Yellen, it is always a pleasure to have you before us. In case you don’t know, like you, I was a professor for over 40 years, and I tell folks all the time that I might VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00040 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 37 not be in the classroom anymore but I still enjoy educating here in the Congress. And so, if you don’t mind, I would appreciate it if you would take us back to the classroom and help educate us a bit. Do you believe economic recovery is strong enough to handle the withdrawal of current pandemic relief efforts? Secretary YELLEN. I think the relief efforts have been very important in stimulating a strong recovery. And I mentioned in my opening remarks that the United States is outperforming most other developed countries in the strength of our recovery, due to those efforts the Congress has made. And there will be fiscal drag next year, namely, we had a good deal of impetus, your stimulus this year, and it will diminish substantially next year. Nevertheless, most forecasters in the Administration believe that the recovery will continue and that private spending will be sufficient to have us pass the baton to it and keep the economy growing. We are in the middle, as you know, of reconciliation, and the programs under consideration there are really spread out over 10 years, and provide some modest stimulus in each of those years, but at a much lower level than the American Rescue Plan, or oriented towards structural issues in the U.S. economy. Ms. ADAMS. Thank you. We know our mission here is to ensure that the economy continues to recover for all Americans. So if Congress fails to raise our statutory debt limit by mid-October, what would the effect be to the economy? Secretary YELLEN. It would be devastating to the economy. We will be unable to pay our bills for the first time in American history. It could provoke a financial crisis and a recession, and it will harm every American. Ms. ADAMS. Thank you. It is irresponsible, I believe, that my colleagues in both the House and the Senate would risk our recovery from this pandemic for political points. So, I am glad to hear that you agree, and I look forward to this body protecting all Americans by doing the right thing and raising this debt ceiling. Madam Chairwoman, I yield back. Chairwoman WATERS. Thank you very much. The gentleman from South Carolina, Mr. Timmons, is now recognized for 5 minutes. Mr. TIMMONS. Thank you, Madam Chairwoman. And Secretary Yellen, and Chair Powell, thank you for being here with us today. Just yesterday, Speaker Pelosi gave oxygen to the idea that President Biden has the ability to mint a trillion-dollar commemorative coin made of platinum, deposit it in the Federal Reserve, and then use that to pay our bills. A number of other members have adamantly promoted this proposal to include Congressman Nadler, and just Tuesday, my colleagues across the aisle tweeted #mintthecoin. Chair Powell, please tell me you think this idea is as ridiculous as it sounds? Mr. POWELL. Really, that is not a question for me. Mr. TIMMONS. I had a feeling you would say that. I just wanted to start there. VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00041 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 38 Madam Secretary, please tell me that this is not a legitimate policy proposal and that this is not something that we are considering? Secretary YELLEN. I believe that the only way to handle the debt ceiling is for Congress to raise it and show the world, the financial markets and the public, that we are a country that will pay our bills when we incur them, and— Mr. TIMMONS. I really appreciate that— Secretary YELLEN. —a platinum coin— Mr. TIMMONS. —more than you can possibly know. Thank you so much. That cuts some of the next few things I was going to say short. We are not going to mint a trillion-dollar coin. These are not serious policy proposals. Speaking of serious policy proposals, I want to talk about what Congressman Kustoff and Congressman Hollingsworth touched on, the idea of—well, I guess it has changed, because the Biden Administration proposed that it was originally all transaction histories of any account with more than $600 in or out of it. You testified not 15 minutes ago that it is now, in reconciliation, not being considered. It is just the account balance? So, it changed? Secretary YELLEN. I never said that the Administration ever proposed collecting detailed transaction data from individuals. That is never anything that the Biden Administration contemplated. Mr. TIMMONS. You just said it has changed since the original proposal to what is now being considered. How did it change? Secretary YELLEN. A few additional pieces of information were contemplated for businesses and— Mr. TIMMONS. Those are no longer being contemplated. So, it is getting better. It is moving in the right direction. Because I have had a number of banks and credit unions reach out to me. It is remarkable. Generally, they do not agree, but they are in agreement that this is a terrible proposal. I know that we are trying to figure out how to pay for $5 trillion of spending, but this is not—just as, ‘‘mint the coin,’’ is not a serious policy proposal, this is not a serious policy proposal. Secretary YELLEN. This is a very serious policy proposal. We have a $7 trillion estimated tax gap that we have a great deal of avoidance by individuals and businesses, typically very high-networth, high-income individuals and businesses, that have opaque sources of income, that are not paying the taxes that are due. Mr. TIMMONS. Respectfully, what does that have to do with— Secretary YELLEN. And compliance— Mr. TIMMONS. —$600 accounts? That is every single account of, what, is it 99 percent of Americans? Secretary YELLEN. Well, listen. Banks already report interest amounting to over $10 to the IRS on every account in the country, and this proposal involves 2 additional pieces of information that are not at the level of individual transactions. And this will help low-income individuals who now are disproportionately subject to audits by the IRS. Mr. TIMMONS. We had a— Secretary YELLEN. What this will do is let the IRS focus its compliance efforts— Mr. TIMMONS. Reclaiming my time, Madam Secretary. VerDate Nov 24 2008 16:27 Mar 02, 2022 Jkt 095071 PO 00000 Frm 00042 Fmt 6633 Sfmt 6633 K:\DOCS\HBA273.000 TERRI 39 Secretary YELLEN. —on those individuals— Mr. TIMMONS. We had a hearing— Secretary YELLEN. —who are avoiding paying the taxes— Mr. TIMMONS. Reclaiming my time. Secretary YELLEN. —that are due. Mr. TIMMONS. Madam Secretary, please. We had a hearing just yesterday, in this very room, about the underbanked and the unbanked, and one of the biggest concerns is about privacy. So, for us to make it far more challenging for people to trust the very system that we are hoping that people use—the banking system, the backbone of our economy—we are moving in the wrong direction here. And I appreciate that we have changed the expectation from the original proposal to now what is being considered in reconciliation, but the American people don’t want this. They don’t think it is reasonable, and I will go ahead and—this is what is going to happen. It is going to get pulled out because there is no support from the American public, and it is just not going to happen. With that, I yield back. Thank you. Chairwoman WATERS. Thank you very much. I would like to thank Secretary Yellen and Chair Powell for their testimony today. The Chair notes that some Members may have additional questions for these witnesses, which they may wish to submit in writing. Without objection, the hearing record will remain open for 5 legislative days for Members to submit written questions to these witnesses and to place their responses in the record. Also, without objection, Members will have 5 legislative days to submit extraneous materials to the Chair for inclusion in the record. This hearing is now adjourned, and I thank our witnesses so very much for being here. We had a hard stop now, right at 12:15, so we are on time. Thank you very much. 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