Washington, D.C. – Today, Congressman Frank Lucas (OK-03) joined his colleagues on the House Committee on Financial Services for a hearing with Federal Reserve Chairman Jerome Powell on monetary policy and the state of the nation’s economy.
In a January 27th release, the Federal Reserve committed to using its full range of tools to support the U.S. economy and said, “Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.” Lucas questioned Chairman Powell on the resiliency of the banking system amidst the pandemic, the impact COVID-19 has had on the rate of underbanked households, and the importance of vaccine distribution on the ongoing economic recovery.
Click here to watch Lucas’ Q&A.
On the U.S. banking system
Lucas: Chairman Powell, you know I have a tendency to focus on those things that affect my people back home up and down Main Street and across the Third District of Oklahoma. So let’s discuss for a moment, when you were last before the Committee in June, you noted that the U.S. banking system has been a source of strength during the pandemic. The Fed’s Monetary Policy Report released on February 19 reaffirms this point, stating that institutions at the core of the financial service system remain resilient. Do you continue to believe that banks are a source of strength, and will you elaborate both on what that means for the economy, and for banks’ ability to lend, yes- absorb losses potentially too, and provide liquidity in stressed markets?
Powell: We’ve, the banks, spent 10 years in a strengthening process- higher capital, better risk management, higher liquidity- all of those things- and then we received a world historical size shock in the form of the pandemic. Exactly a year into it, we see our banks have held up quite well and their capital- the big banks capital- has actually increased over the course last year, while they’ve also taken $100 billion plus worth of reserves against losses. So, they are able to keep lending, they’re not a source of weakness. At the beginning of the pandemic, they were very important because they did absorb that huge flow of deposits and they made all those loans as companies pulled down their lines of credit. Now those were paid back early on but at the very beginning, when it mattered a lot, they were a source of strength. All of that is right. We always got to continue to be vigilant on those things, but a first draft of history is that banks are strong. And I would say the same for small and medium sized banks as well.
On the impact of the COVID-19 pandemic on unbanked populations
Lucas: And Mr. Chairman let’s discuss for a moment a topic that’s very important not only to me but my friends in the majority on the Financial Services Committee. The national unbanked rate has been falling steadily for the past decade, and since last calculated in 2019 sits at about 5.4 percent. Still, this represents more than 7 million U.S. households without a checking or savings account. Unfortunately, the COVID-19 pandemic is likely to contribute to an increase in the rate of unbanked households. Chairman, what would you suggest to reduce the adverse impact on the unbanked and underbanked in the aftermath of the pandemic – to ensure that no one is left out of the economic recovery?
Powell: It’s a serious problem to address. We tend to address it through our community affairs efforts to make sure fair lending policy and things like that. I also think that there is more that Congress can do I’m sure assure that people have education around financial matters. The other piece of it is, there are just people at the lower end of the income spectrum who just are living hand-to-mouth. We need a strong recovery. We need continued support for monetary policy, and we will be providing that as well.
On the importance of vaccine distribution and getting “shots in arms” on the ongoing economic recovery
Lucas: According to the FDA, the United States has administered more than 63 million doses of the COVID-19 vaccine. Chairman Powell, can you expand on how the economic recovery is dependent upon ramping up vaccine manufacturing and distribution?
Powell: The weakness we see in our economy now is unusually concentrated in a set of industries involving people getting really close together- hotels, restaurants, travel, entertainment, all those places- and that’s millions of people who aren’t working and businesses who may have been in business for generations going out of business. The way to get after that is through successfully, decisively bringing the pandemic to an end- as soon as possible. That’s the single best growth and economic and prosperity-creating measure that any of us can undertake. And that is the vaccination, continuing to observe social distancing, and wearing masks. Hopefully we are on that road now, and if we are, we are going to see grounds for optimism in the second half of the year.