Oversight of the Treasury Department’s and Federal Reserve’s Pandemic Response (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 Thursday, September 30, 2021, at 10:00 a.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 fifth 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); 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). Economic conditions have improved since then. In total, real GDP fell by 3.5% for 2020 and has continued to rise in the first two quarters of 2021, surpassing pre-pandemic levels in the second quarter. The unemployment rate in August 2021 was down to 5.2%, but remained 1.7% higher than the rate in February 2020, before the pandemic began. The duration of unemployment has been higher, with the percentage of unemployed individuals who had been unemployed for 27 or more weeks up to 37% in August 2021 from 19% in February 2020. Despite the overall economic gains since the second quarter of 2020, certain groups have not recovered as well. In August 2021, the unemployment rates for Black and Latinx workers were higher than the national average, at 8.8% and 6.4%, respectively. While economic uncertainty remains as the pandemic evolves, policies enacted at the beginning of the pandemic have benefited the economy in the short term. The Congressional Budget Office (CBO) projected the policies enacted in early 2020, including the CARES Act, would increase real GDP by 4.7% and 3.1% in 2020 and 2021, respectively, compared to if Congress had not acted. Since then, Congress passed additional pandemic-related legislation, most notably the Consolidated Appropriations Act, 2021 (CAA), which included $900 billion in pandemic relief, and the American Rescue Plan Act of 2021 (ARPA), which provided $1.9 trillion in pandemic relief and economic stimulus measures. According to the OECD, the ARPA alone could raise U.S. output by 3-4% between the second quarter of 2021 and the first quarter of 2022. Meanwhile, inflation has been relatively high since March 2021, measuring a 12-month increase in July 2021 of 4.2% according to the Personal Consumption Expenditures (PCE) Price Index. The Federal Reserve recently projected that PCE inflation will remain elevated in 2021 but decrease to 2.2% in 2022, roughly matching the Federal Reserve’s stated long-run inflation target of 2%. Emergency Financial Aid provided by the Treasury and the Fed Treasury 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. Specifically, Title IV of the CARES Act appropriated $500 billion to the Exchange Stabilization Fund (ESF) for use by the Treasury Secretary to support up to $46 billion in direct loans and loan guarantees from Treasury to passenger air carriers, cargo air carriers, and businesses critical to maintaining national security, and at least $454 billion for Treasury to support Fed emergency lending programs. Treasury approved $22 billion in loans to 35 recipients, including air carriers, ticket agencies, repair stations, and national security businesses. However, many recipients decided not to draw down most of this total, and only $2.7 billion was disbursed. The CARES Act also established the Payroll Support Program (PSP), a Treasury-run program that has provided payroll assistance to airline workers and air carrier contractors. Congress provided $63 billion in three tranches, most recently under ARPA, to support these... Hearing page: https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=408306