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tv   Federal Reserve Chair Powell on the Coronavirus Pandemic Monetary Policy  CSPAN  April 9, 2020 7:30pm-8:00pm EDT

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university school of medicine and massachusetts congressman jim mcgovern. join the conversation about the coronavirus crisis. washington journal primetime tonight at 8:00 p.m. eastern on c-span. up next, remarks from federal reserve chair jerome powell on the coronavirus and how it is impacting monetary policy and the economy. he spoke about unemployment claims and the central bank's role during the pandemic. here is a look. >> a ladies and gentlemen, good morning and welcome to brookings , this morning's brookings presentation. my name is john allen, i am the president of the institution and it is my great pleasure to welcome to this virtual stage our honored guest, federal reserve chair, jay powell. at this moment of unprecedented
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challenge, not only to our public health system and our health in general, there is an and norma's challenge to our economy and chair powell and his colleagues responded to this crisis. solutions create of with credit flowing to houses and businesses and prepare the economy so it can recover when this virus recedes. and it surely will, ladies and gentlemen. your work, sir, and that of your colleagues, is far from over, but we are in good hands under your leadership. indeed, leaders are tested in crisisf crisis and this tests our leadership in no uncertain terms. you have risen to the occasion. it is safe to say we and all americans have appreciated your calm, decisive leadership in this moment of peril and on behalf of of all of us at
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brookings, please let me commend you on the powerful example of american leadership you have set for us all and continue to display every single day as you perform your duties. you are an inspiration and example to all of us. today, we will shortly give you the opportunity for your remarks and then i will turn the stage over to my good friend, david, the director of our hutchins center on fiscal and monetary policy. he will then pose questions directly to you for what i know will be a robust conversation. again, for everybody on the channel today, thank you for joining us. and for chair powell, thank you, we are honored by your presence. welcome, chair powell p the floor is yours. chair powell: thank you john, for your kind words.
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i look forward to david's questions are the challenge we face today is different in scope and character from those we faced before. the coronavirus has spread quickly around the world, leaving a tragic and growing toll of illness and loss-of-life. this is first and foremost a public health crisis and the most important responses coming from those on the front lines, and hospitals, emergency services and care facilities. awe and in collective attitude as these individuals put themselves at risk in service of our nation. like other countries we are taking forceful measures to control the spread of the virus. businesses have shuttered, workers are staying home, and we have suspended many basic social interactions. people have been asked to put their lives and livelihoods on hold at significant economic and personal cost. we are moving with alarming speed from 50 year lows and unemployment to what will likely be very high, though temporary
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levels. all of us are affected, but the burdens are falling most heavily on those least able to carry them. it is worth remembering the measures we are taking to contain the virus represent an investment in our individual and collective health. as a society we should do everything we can to provide relief to those suffering for the public good. c.a.r.e.s.y passed act is important in honoring providing twot, $.2 trillion in relief to those who have lost their jobs, low and middle income households and health care providers and state and local governments. there are reports of additional legislation in the works. the critical task of delivering financial support directly to those most affected falls to our elected officials who use powers of taxation and spending to make decisions about where we as a society should collect our
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resources. the fed also in -- contributes by providing relief and stability during this constrained economic activity and by using tools to ensure the eventual recovery is as vigorous as possible. to those ends we have lowered interest rates to near zero to bring down borrowing costs and we have committed to keeping rates at this low level until we are confident the economy has weathered the storm and is on track to achieve maximum employment goals. more importantly, we have acted to safeguard financial markets to provide stability to the system and support the flow of credit in the economy. as a result of the economic dislocations caused by the virus, some essential financial markets had begun to sink into dysfunction and many channels that households, businesses and state and local governments rely on for credit simply stopped working. we acted forcefully to get our markets working again and as a
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result market conditions have improved. many programs we are undertaking to support the flow of credit rely on emergency lending powers available only an unusual consequences -- circumstances, and only with the consent of the secretary of the treasury. we are deploying lending powers to an unprecedented extent, enabled in large part by the financial backing from the congress and treasury. we will continue to use these powers forcefully, proactively and aggressively until we are confident we are on the road to recovery. are lendingss these powers not spending powers. the fed is not authorized to grant money to enter for sherries, only solid entities with the expectation the loans will be fully repaid. in the situation we face today many borrowers will benefit from these programs as well as the overall economy. there will also be entities of
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various kinds that need direct fiscal support rather than alone they would struggle to repay. areemergency measures reserved for truly rare circumstances such as those we face today. when the economy is well on its way back to recovery and institutions are able to perform vital functions of channeling credit and supporting economic growth, we will put these tools away. ofe of us has the luxury choosing our challenges. fate and history provide them for us. our job is to meet the tests we are presented. at the fed we're doing all we can to shepherd the economy through this difficult time. when the spread of the virus is under control, businesses will reopen and people will come back to work. there is every reason to believe the economic rebound when it comes can be robust. we enter this turbulent period on strong economic footing and that should support the recovery.
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in the meantime we are using tools to build a bridge from a solid economic foundation on which we entered this crisis to a position of regained economic strength on the others. by thanking the millions on the front lines, care,working in health sanitation, transportation, grocery stores, warehouses, deliveries, security, including our own team at the federal reserve, and countless others. day after day you put yourself in harm's way for others to care for us, make sure we have access for things we need and to bring us through this difficult time. thank you, and david, i look forward to your questions. david: i am the director of the hutchins center at brookings. i appreciate your remarks and want to enforce the point you made at the end that a lot of us have the luxury of working from
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home remotely but there are a lot of people who do not and they have been often forgotten in the past and we celebrate the work they are doing today. a number of questions of my own and some we have gotten from people sometimes in by email or twitter. in the past three weeks more than 50 million people have filed initial claims for unemployment. that is huge. we know the second quarter will be awful, but i wonder if you could help us look ahead. you and your formidable crew of economist, what are we seeing the rest of this year. you expect a robust recovery in summer or fall? we have terrific economist with different specializations. it is an honor to work with them. if you ask them today what their expectation is for the economy the rest of this year they will tell you it depends on the path
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of the coronavirus. getquickly will it spread, it under control, how quickly can we reopen the economy with confidence. itinesses can reopen knowing is safe. that is the thing. economic not typical questions they are skilled at answering. i would say generally my expectation is that the second quarter will be a weak one because businesses are shut down. workers are working from home or off orloughed or laid the business they work at is closed for the time being. we expect big increases in initial claims for unemployment during the second quarter. when the virus does run its course and it is safe for businesses to open, we would expect a fairly quick rebound as
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people do go to work and to start resuming normal levels of economic activity. i think most people expect that to happen in the second half of this year, which ends on june 30, to be precise about where i would say it does depend on people staying home, staying healthy, doing everything we can to keep the virus under control. the more we do that, the safer it will be to go back to work. david: thank you. hundreds of billions birth of -- worth of mortgages and learning. you launched alphabet soup of programs for businesses that could lend up to $2.3 trillion. is there a limit to how much the fed can create and lend without having unwanted side effects like inflation or price bubbles? chair powell: these programs we
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are using, under the law, we do these with consent of the treasury secretary and with fiscal backing through the congress and treasury and we are doing it to provide credit to state and local governments as we are directed by congress. fiscalusing that backstop to absorb losses we have had and what we're doing is looking for places that are very important to the real economy, things that affect people's lives and economic output and where credit has broken down. that is what i mentioned. that is essentially what we are doing and we can keep doing that as long as those needs arise. our ability to do that is limited by the law. unusual andind exigent circumstances, the secretary has to agree and we are using this fiscal backstop. there is no limit other than it
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must meet the test under the law as amended by dodd frank. david: isn't there a risk with all of this money coming out of congress, that we will end up with something we do not like, as in more inflation, or active price bubbles? has beenell: inflation an interesting phenomenon. back when 12 years ago when the financial crisis was getting going and the fed was doing quantitative easing many feared the increases in the money supply as a result of quantitative easing, asset purchases, would result in high inflation. not only did it not happen, inflation has been below our target. that is globally, the challenge has been inflation below target. not aly, it is first-order concern for us today that too high inflation might be coming our way in the near term. far from it.
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these are programs we are developing at a high rate of speed. we do not have the luxury of taking our time the way we usually do. we're trying to get help quickly to the economy as it is needed. in hindsight you will see that we could have done things differently, but one thing i do not worry about is inflation right now. david: a number of people wrote questions that go something like, think of somebody who works at a small restaurant, she has lost her job, the restaurant is closed. for how long nobody knows. all the things you are doing, how do they help people like her, the owners of that small restaurant and the millions of people like her in that position? chair powell: she sounds very typical of what many people are unfortunately enduring at the moment. importanty the most thing she can do is stay home
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and stay healthy. the more people do that, the sooner we will get control of the spread of the virus, the sooner we can go back to work. it is also important our health care authorities develop a plan for that to happen in a careful way that does not result in another outbreak and then we have to go to square one. in the near term the biggest relief she will get will probably be from the expanded unemployment insurance under the act, which i think added $600 per week for people's unemployment insurance. she will probably find it is hard to get access to that right away because there are so many newly unemployed people that there are backups at the unemployment office. she will get that money, it may take a few weeks longer than it should. what is the fed's role? to provide stability and
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relief during this period when the economy is partly shut down. that involves keeping interest rates low. if she has a mortgage or credit card debt she will see lower interest payments for that. as you mentioned we have used our tools to keep financial markets functioning. avoid further damage to the economy. the most important thing we can do while providing stability is to support a robust recovery when it does come. that is what our tools are most important for. david: you mentioned congress has done quite a bit. you mentioned correctly you do not do taxes and. spending, congress doesn't but everyone, including congress, looks to you for advice. toyour judgment, do we have do a lot more on the fiscal policy front to respond to this crisis? know, weell: as you
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are not responsible for fiscal policy, we do not give public advice to congress on fiscal policy. as i mentioned in my remarks, in many cases, what people need is direct fiscal support rather than alone. what we can do is loans. there is a big need for fiscal policy. both sides voices on of capitol hill and both parties talking about further support. i do think that is likely to be appropriate. they will have to decide what that might be, but you already here further funding for the andl's nests sba loans perhaps more direct funding for states and hospitals. i wouldot our job but see that is more likely than not to be needed. david: and a good idea? chair powell: absolutely. broadly people are undertaking these for the common good.
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we should be doing that as a society. their businesses did not close because of anything they did wrong. this is what the great fiscal of the united states is four, to protect these people as best we can from the hardships they are facing. congress allocated in the c.a.r.e.s. act 450 million dollars to backstop emergency lending. if i did my arithmetic right you million about for programs you announced this morning. what our priorities for the rest of that money? our priority for all of it is the same and that ourwhat has happened in big, complicated economy and financial markets and banking system, we rely on those who have funds to lend through various channels to those who are borrowing and what happened
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when the spread of the coronavirus around the globe became clear, investors all over the world really struggled to assess what that meant for the economy and they pulled back from other kinds of investment and really went to the safest short-term investments like t-bills. the result was many parts of the capital markets and lending more broadly stopped functioning and that is exactly the situation our emergency powers are meant to address. we have moved. our priority are those areas of the market most fundamental to supporting the real economy. you see the programs. we have announced nine different facilities. those are really the priority areas where we thought that help was needed. as we identify other areas, we will not hesitate to move into those areas.
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in addition, we may find some of the programs we announced need adjusting and need to be larger or did not need to be as large as we thought or need to be changed. we will watch all of that and very much willing to adapt. consensusre is a during the global financial crisis a decade ago that banks were allowed to deplete their capital by paying dividends for too long. several big banks suspended by backs to preserve capital. has curious why no one directed them to suspend their common dividends as well? chair powell: maybe i will start by saying businesses distribute earnings to their shareholders through buybacks and dividends. it is just a way of saying that the owners may have better use for those funds than the business does. it is a perfectly normal thing in our capitalist system.
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our largest financial institutions do about 70% of those distributions through share repurchases. mostight largest systemically important institutions stopped at distributions through that channel as have other large regional banks that make up a big part of the banking system. that is a good thing. they have not stopped dividends. in my way of thinking, i do not think it is something that needs to be done at this point. our banks are highly capitalized with more high-quality capital then we were before the financial crisis. we will be watching to see how things evolve, but i do not think that step is appropriate at this time. david: one of the things that distinguishes [indiscernible] is what is going on in the mortgage market. we saw a spike in delete quincy's. it is hard for people to buy and
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refinanced mortgages. do you think there are steps that need to be taken now by the sure aent to make mortgage crisis does not make recovery slower than need be. chair powell: i think the c.a.r.e.s. act does provide a moratorium, but you are right, mortgage market is important for the real economy. that is why we bought so many mortgage-backed securities at an aggressive pace. we feel that market is where a markets winddual up is functioning more properly. we are watching the situation with mortgage servicers and i will tell you we certainly have our eyes on that as a key market that does support households and
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consumer spending, which is 70% of the economy. we will be watching that carefully. [captions copyright national cable satellite corp. 2020] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] >> c-span has round-the-clock coverage of the coronavirus pandemic and it is all available on demand at c-span.org/coronavirus. watch white house briefings, updates from governors and state officials. -- track the spread with interactive maps. watch on-demand anytime unfiltered at c-span.org/coronavirus. >> we have been new york tough because every day is tough on many, many levels. i get it. we are neway that york tough, we are saving lives. do not underestimate this virus. i think that is a mistake we made from day one, we as the
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collective we, the global community. this virus is very good at what it does. we lost more lives yesterday than we have to date. we understand and all the experts have said, dr. fauci said from day one to me, you will see the deaths increasing after hospitalizations because the deaths increase the longer the person is in a hospital, the lahm -- the longer they are on a ventilator. i understand the scientific concept, the data. you are talking about 799 lives, the highest number ever. it has gotten to the point we will bring in additional funeral to deal with the
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number of people who passed. if you told me as governor i would have to take these actions i cannot even contemplate where we are now. to put this in perspective, i lived through 9/11. 9/11 was supposed to be the darkest day in new york for a generation. done everything we can since 9/11 to make sure 9/11 did not happen again. 753 lives on 9/11. we have lost over 7000 lives to this crisis. so shocking and painful and breathtaking, i do not even have the words for it. 9/11 was so devastating, tragic lose soany ways, we
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many more new yorkers to this silent killer, there was no explosion. but it was a silent explosion that just ripples through society. randomness, the same people, that we saw on 9/11. >> earlier today we released modeling on how we think this pandemic might unfold the shows covid-19 arrived in canada later than other countries. so we are in an earlier stage of the outbreak. that means we have the chance to determine what our country looks like in the weeks and months to come. systems across the country are coping for the time being, but we are at a fork in the road between the best and the worst possible outcomes. the best possible outcome is no easy path for any of us.
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the initial peak, the top of the curve, may be in late spring, for the end of the first wave in the summer. as the doctor explained there will likely be smaller outbreaks for a number of months after that. this will be the new normal until a vaccine is developed. that is so much better than we could face, all of us, if we do not rise to the challenge of this generation. the path we take is up to us. it depends on what each of us does right now. it will take months of continued, determined effort. practicingd to keep physical distancing, staying home and washing our hands. it will help. wondering, if there will if altiple waves of this,
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vaccine is 12 to 18 months away at best, do you envision we will have multiple waves of closures, shutdowns of the economy, and how can we handle those constant shutdowns? thisudeau: even after first wave we will need to remain vigilant and bring in different measures. normality as it was before will not come back full on until we get a vaccine for this. that could be a long way off. once we get through this first wave we will have developed both tools and habits that will allow us to be much more resilient and resistant to further outbreaks and spread, that will be able to be kept localized, that we will be able to fight against and protect our most vulnerable from over the coming months. it will require continued actions in different places and quick responses, but part of
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getting through this wave and rapid way will be because we are willoping the tools that also help us when those wavelets calm in the coming months. [captions copyright national cable satellite corp. 2020] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] washington journal live every day with news and policy issues that impact you. friday morning dr. emily landon, chief infectious disease epidemiologist, will discuss the latest in the coronavirus pandemic. attorney talks about law enforcement issues during the pandemic. and captain john of the u.s. and role thealks about the navy hospital ship is playing in the fight against covid-19. watch c-span's washington journal friday morning.

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