Washington, D.C. – Congressman Frank Lucas (OK-03) today questioned U.S. Treasury Department Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell at a House Committee on Financial Services hearing on the Treasury Department’s and Federal Reserve’s pandemic response efforts.
Lucas highlighted the Federal Reserve’s Commercial Paper Funding Facility and the discussion to expand the Facility to address liquidity issues faced by Tier 2 issuers; Treasury’s actions to uphold China’s commitment to purchase U.S. farm products; and the economic impact of the coronavirus on Native American tribes.
Watch Lucas’ Q&A here.
On Commercial Paper Funding Facility
Lucas: As you both know, commercial paper finances a wide array of economic activity and provides liquidity for companies to meet their operational needs. With the commercial paper market under significant strain due to COVID-19 – in mid-March – the Federal Reserve established the Commercial Paper Funding Facility to encourage investors to lend in the commercial paper market, which ultimately supports businesses and jobs across the country. Chairman Powell, could you describe the current indicators of how the commercial paper market responded to the creation of the facility, AND has there been a discussion to expand the facility to address liquidity issues faced by Tier 2 issuers?
Powell: The Commercial Paper Facility has substantially healed. As you point out, it really closed there in the beginning part of March as so many markets did and when we announced the Facility, the highest graded borrowers were able to start borrowing and we largely, but not completely, and that market has returned to fairly normal function and we are watching it carefully. I would say we aren’t currently assessing whether to broaden that Facility but, you know should the situation deteriorate, we would have that as an option.
On China’s commitment to purchase $40 billion in U.S. farm products
Lucas: Secretary Mnuchin, there have been reports that China is restricting global agricultural imports due to COVID-19. How are we working to resolve this with China – and do you anticipate this impacting the terms of the Phase 1 trade deal to purchase $200 billion in U.S. goods and services – particularly the commitment to purchase $40 billion in U.S. farm products?
Mnuchin: Let me just first emphasize, we have very serious concerns about the lack of transparency from China as it relates to COVID. Having said that, we have every expectation that they will support and live up to the Phase One Agreement and they are well on their way for those commitments.
On the economic impact of the coronavirus on Native American tribes
Lucas: Native American tribes have been hit particularly hard by COVID-19. Tribal employment is often concentrated in the arts, recreation, and accommodation industries. How has the Federal Reserve and Treasury been looking specifically at the economic challenges faced by Tribes?
Powell: As to Main Street, of course tribal businesses are eligible for participating in Main Street, and that’s where a lot of the economic activity is. The tribes themselves are not really generally obligation issuers so they’re not particular candidates for the Municipal Facility.
In April, Congressman Lucas led a letter to Federal Reserve Chairman Jerome Powell asking the Federal Reserve to allow utility companies to utilize the Commercial Paper Funding Facility.
Lucas has long been a supporter of expanding market access for American producers and applauded the signing of the U.S.-China Phase One Trade Agreement. Lucas continues to support President Trump as his Administration renegotiates unfair trade policies between the U.S. and our trading partners and believes China must live up to their commitment to purchase roughly $40 billion worth of agricultural goods.