Washington, D.C. – Today, the House Committee on Financial Services is holding its semi-annual hearing with the Chairman of the Board of Governors of the Federal Reserve System, Jerome Powell, on monetary policy and the state of the economy. Congressman Frank Lucas (OK-03), Ranking Member of the House Committee on Science, Space, and Technology, questioned the Chairman on how the Federal Reserve will approach climate risk assessments. Lucas believes it is essential that U.S. investment in energy projects is not disincentivized due to capricious Fed-intervention. Congressman Lucas also discussed the effects of the 1918 Spanish Flu epidemic with Chairman Powell and questioned how central banks are responding to the economic impact of the coronavirus.
Watch Congressman Lucas’ remarks here.
On global climate risk
Lucas: Chairman Powell, during your testimony before the Joint Economic Committee last year, you were asked about what steps the Federal Reserve is taking to assess the impacts of climate change on our financial system. In your testimony, you made the distinction between the purely informative stress test for climate risk that the Bank of England does and what the U.S. stress testing regime under C-CAR does, which is impact and inform capital requirements for capital distributions. My understanding is the Bank of England is conducting research and asking financial institutions to think through their portfolios and how they could be impact, but they are not currently integrating these measures into capital requirements. Would you outline some of what the Fed is doing in terms of research and engagement on global climate risk?
Chairman Powell: I should begin by saying that climate change is a very important issue that Congress has largely assigned to other agencies. It does play into our work however, as it relates to the public’s very reasonable expectation that we would make sure the financial sector of the banks, the utilities that we supervise are resilient to the longer term risks of climate change.
Lucas: Are you planning on joining the Network for Greening the Financial System?
Chairman Powell: We haven’t made a decision about that.
On economic impact of coronavirus
Lucas: With 43,000 cases worldwide and the critical impact in China, could you describe for a moment how China and its neighboring countries are responding to the economic impact of coronavirus- in general and from the perspective of your fellow central bankers in those countries?
Chairman Powell: I think they’re really responding now to the outbreak and containing it and the Chinese government is obviously taking very strong measures on that. You see businesses closing down in the affected areas. You see that sort of thing. In terms of the economy as you asked, the People’s Bank of China has done a number of things to support economic activity….. We’re not able yet to estimate the size of the economic effects, there are many estimates out there, but I think you’ll see governments acting in Asia – particularly in China – to offset those (effects).