Virtual Hearing - Oversight of the Treasury Department’s and Federal Reserve’s... (EventID=111397)

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Connect with the House Financial Services Committee Get the latest news: https://financialservices.house.gov/ Follow us on Facebook: https://www.facebook.com/HouseFinancialCmte Follow us on Twitter: https://twitter.com/FSCDems ___________________________________ On Tuesday, March 23, 2021, at 12:00 p.m. (ET) full Committee Chairwoman Waters and Ranking Member McHenry will host a virtual hearing entitled, “Oversight of the Treasury Department’s and Federal Reserve’s Pandemic Response." ___________________________________ Witnesses for this one-panel hearing will be: • The Honorable Janet L. Yellen, U.S. Department of the Treasury • The Honorable Jerome Powell, Chair, Board of Governors of the Federal Reserve System ___________________________________ Overview In response to the COVID-19 pandemic, Congress has enacted a series of laws, including the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which was signed into law on March 27, 2020. The CARES Act directs the Secretary of the Department of the Treasury (Treasury) and the Chair of the Board of Governors of the Federal Reserve System (Fed) to testify quarterly before the Committee regarding their obligations and transactions made under the Act. This is the Committee’s fourth hearing fulfilling this statutory requirement. The COVID-19 Pandemic, Recession, and Economic Outlook COVID-19 resulted in the deepest economic downturn the United States has seen since the Great Depression. The peak unemployment rate in April 2020 was 14.7%, the highest monthly rate ever recorded by the U.S. Bureau of Labor Statistics (BLS);3 the second quarter annualized decline in real gross domestic product (GDP) was 31.4%, the highest single quarter decline recorded by the Bureau of Economic Analysis (BEA).4 Economic conditions have improved since the second quarter, but the economy remains below full employment, with a full recovery unlikely until the pandemic subsides. The unemployment rate in January 2021 was down to 6.3%, but remained 2.8% higher than the rate in February 2020, before the pandemic began. Additionally, the duration of unemployment has been increasing, with individuals who had been unemployed for 27 or more weeks up to 39.5% in January 2021 from 19.3% in February 2020. The number of individuals not in the labor force stands at 7 million as of January 2021, which is 1.9 million individuals higher compared to February 2020.6 In total, real GDP fell by 3.5% in 2020. While much uncertainty still exists in the economy, policies enacted since the beginning of the pandemic have had a positive effect on the economy in the short term. For example, analysis from BEA supports the view that federal pandemic response programs were beneficial to many individuals and the economic situation in the short term. However, there remain major concerns about the pandemic’s long-term impact on financial stability and lasting damage to the labor market, sometimes referred to as “scarring.” According to a recent analysis, “employment among low-wage workers remains 14 percent below pre-pandemic levels and is trending down again.”9 Job loss among communities of color has been especially acute, and the unemployment rate for Black and Latinx workers remains elevated, at nearly 10% and 8.5% respectively, as of February 2021.10 Women have disproportionately left the labor market, especially to provide child care during the pandemic, with 2.5 million fewer women in the labor force than there were in February 2020, compared with 1.8 million fewer men, an outcome Secretary Yellen has called “extremely unfair.” Moreover, when Chair Powell was asked in January 2021 about potential long-term economic damage, he expressed concern for the outlook in the tourism and service sectors, and also mentioned worries about “scarring for small businesses, which don’t have the kind of resources that you need to get through this.”12 Minutes from the January meeting of the Federal Open Market Committee (FOMC) show that staff at the Fed “characterized the financial vulnerabilities of the U.S. financial system as notable,” citing conditions in the corporate bond and commercial real estate sectors, among other risks.13 Data from the Fed also shows that nonfinancial corporate debt grew by over $1 trillion in 2020, more than doubling its 2019 pace. Emergency Financial Assistance provided by the Treasury and the Fed Congress responded to the onset of the pandemic by authorizing a wide range of emergency relief measures for small businesses, airlines, and other acutely affected industries. Section 4027 of the CARES Act appropriated $500 billion to the Exchange Stabilization Fund (ESF) for use by the Treasury Secretary, and Section 4003 allocated up to $46 billion for Treasury to provide direct loans and loan guarantees to passenger air carriers, cargo air carriers, and businesses critical to... Hearing page: https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=407279