Fed Chair Powell at Hearing: To Grow the Economy, We Must “Get Control of the Virus”

Washington, D.C. (September 23, 2020) — Today, the Select Subcommittee on the Coronavirus Crisis, chaired by Rep. James E. Clyburn, held a hearing with Federal Reserve (Fed) Chair Jerome H. Powell on the Fed's response to the coronavirus pandemic.

"We must do better across the board," said Chairman Clyburn at the hearing. "The Fed must use its tremendous resources and market power not just to bail out wealthy stockholders, but also to protect low-income workers and struggling small businesses that are the backbone of this country's economy." Chairman Clyburn told Chair Powell: "I hope we canwork together going forward to get this economy moving. We cannot do it unless we protect our children, unless we protect the health of our teachers, unless we do better by small businesses."

During the hearing, Chair Powell said the key to a rapid economic recovery is following the advice of public health experts to control the virus. He explained: "Pretty much every set of remarks I give, I say that the path of the economy is going to depend on our ability to retain control, to get control of the virusand keep control, and that we have the power to help that by following the advice of the experts, by wearing masks and keeping distances, and that kind of thing. In fact, those things help us reopen the economy faster."

Chair Powell also called for more fiscal support to help American workers, families, and state and local governments, stating, "I think the power of fiscal policy is unequaled by really anything else," and explaining, "I've said on a number of occasions I think it's likely that we'll need more fiscal support."

The hearing followed the release of a staff analysis revealing that the Fed purchased bonds issued by companies that conducted substantial layoffs and paid billions in dividends to shareholders during the pandemic, raising concerns that the Fed's bond purchasing program may be exacerbating economic inequities and contributing to an economic recovery that benefits wealthy executives and investors but leaves American workers behind.

Chair Powell provided the following additional testimony during the hearing:

Contrary to Republican Claims, Controlling the Coronavirus is "Complementary" To Growth

• Chair Powell rejected the notion that the country faces a tradeoff between public health and economic recovery, stating: "I think that we all want to reopen the economy as fast and as sustainably as possible, and I think that the thing that we can all do to help that happen is to do what the experts tell us to do, which is to wear masks and keep social distances and don't do those things that will, you know, support the further spread of the disease. Again, the two things go together. They're complementary, they're not in contradiction."

• Chair Powell testified that "a full recovery is likely to come only when people are confident that it is safe to reengage in a broad range of activities. The path forward will depend on keeping the virus under control, and on policy actions taken at all levels of government."

Workers, Families, and State and Local Governments Need More Support

• Chair Powell acknowledged that the unemployment rate is unacceptably high, stating that "there's plenty left to do" and "there's a long way to go."

• Chair Powell acknowledged that while some borrowers benefitted from the Fed's programs, "for others, a loan that could be difficult to repay might not be the answer. In these cases, direct fiscal support may be needed."

• When asked if he agreed with former Fed Chair Ben Bernanke's assessment that budget cuts to state and local governments negatively impacted the economic recovery after the Great Recession, Chair Powell testified: "Yes, so I think there's been a great deal of research on that question and it does generally support that view…. Overall I would agree that there's going to be a need for further support, and, you know, I do believe that we'll get further support."
  
• Chair Powell praised the financial assistance provided by the CARES Act, stating that "the good economic data we've seen since really May is to a significant extent reflects what you did in the CARES Act … but those checks, the unemployment insurance, all of that really helped to keep people in their homes, keep them spending and, you know, it's a tribute to the fast and forceful response that all of you made[.]"

The Economic Crisis Has Exacerbated Inequality

• Chair Powell underscored that the economic crisis has exacerbated existing inequality. He testified: "The downturn has not fallen equally on all Americans; those least able to bear the burden have been the most affected. The rise in joblessness has been especially severe for lower-wage workers, for women, and for African Americans and Hispanics. This reversal of economic fortune has upended many lives and created great uncertainty about the future."

###