Janet Yellen’s Senate testimony emphasizes American Rescue Plan as integral to turning around the economy

The following is Janet Yellen’s written testimony before the U.S. Senate Committee on Banking and Finance …

“Chairman Brown, Ranking Member Toomey, members of the Committee, thank you for having me.

We are meeting at a hopeful moment for the economy – but still a daunting one. While we’re seeing signs of recovery, we should be clear-eyed about the hole we’re digging out of: The country is still down nearly 10 million jobs from its pre-pandemic peak.

When Congress passed the CARES and Consolidated Appropriations Acts last year, it gave the federal government some powerful tools to address the crisis. But upon taking office, I worried they weren’t powerful enough. After all, there were – and still are – some very deep pockets of pain in the data.

One-in-ten homeowners with a mortgage are behind on their payments, and almost one-in-five renters are behind on their rent. There are 22 million people who say they don’t have enough food to eat. One-in-ten adults are hungry in America.

I looked at data like these, and I worried that the COVID economy was going to keep hurting millions of people now and haunt them long after the health emergency was over.

We know that when the foundations of someone’s life fall apart – when they lose the roof over their head or the ability to eat dinner every night – the pain can weigh on them for years. Their earning potential is permanently lowered.  I worried about this happening on a mass scale.

That’s why I advocated very hard for the American Rescue Plan, and it’s why my first – and most enthusiastic – message today is: Thank you.

With the passage of the Rescue Plan, I am confident that people will reach the other side of this pandemic with the foundations of their lives intact. And I believe they will be met there by a growing economy. In fact, I think we may see a return to full employment next year.

Of course, the speed and strength of our recovery depends, in part, on how we implement the legislation. Treasury is tasked with much of that work, and there is nothing that I – or my team – take more seriously. We appreciate your oversight on this matter, and I want to briefly tell you about how we’ve been working.  

Since taking office two months ago, we have been expediting relief to the areas of greatest need. For example, small businesses – and especially the smallest small businesses, which are disproportionally owned by women and people of color.

The pandemic has hit these businesses hard. The Paycheck Protection Program was an early lifeline, but because of issues with the program’s design, the first rounds often didn’t reach the smallest sole proprietorships. We’re addressing that now. We worked with SBA to tweak how the program was implemented. It’s allowing the PPP to reach millions more microbusinesses and entrepreneurs, especially in rural and low-income areas.

We’re also building capacity to support these communities over the longer term. Because of the December legislation, Treasury now has $12 billion to inject into community development financial institutions and minority depository institutions. In turn, these CDFIs and MDIs can lend that capital out, helping people buy homes and start businesses in places that the financial services sector traditionally hasn’t served well.  

Then, there are the families I spoke about, the ones struggling to keep a roof over their head and food on the table.

The American Rescue Plan provides more than $30 billion to help renters and homeowners at risk of losing their homes. And we’re making sure that assistance flows as efficiently as possible.

For instance, the previous Administration put in place rules that required tenants and landlords to provide quite a bit of documentation to get rental assistance, including detailed statements about their income. But some people don’t have access to those documents. We’re cutting through the red tape for them, while still taking reasonable steps to prevent fraud and abuse.

And of course, we’ve been sending direct payments to Americans – a lot of Americans. As of last week, we had issued over 90 million payments. 

And all this is just a fraction of Treasury’s work. There are so many more relief programs, including one that will provide $350 billion in aid to state and local governments. Implementing all of it is more complicated than it sounds, and we are working closely with stakeholders to make sure that these programs are both efficient and effective.

Behind these many relief programs, these millions of transactions, are a staff of very dedicated (and very tired) Treasury and IRS employees. My final word is to them: Thank you. You are putting on a master class in how government should work in the furnace of a crisis. I’m grateful to be your colleague.

With that, I am happy to answer any questions you have.”

Interbank market, central banks, foreign exchange: Will Joe Biden, GOP meeting signal increased public capital spending?

The strategy takeaway …

Joe Biden positions himself as mediator as GOP presents a non-stimulative pandemic plan.

President Joe Biden is scheduled to meet with today at 5 pm EST with 10 centrist and conservative Republican senators to discuss a $619 billion pandemic relief program. Specifically, the GOP offering proposes the following:

$160 billion in direct pandemic response;

$132 billion in additional unemployment insurance;

$20 billion to fund childcare and a development block grant;

$20 billion to fund a “get back to school” initiative;

$50 billion to small businesses including another itineration of the Paycheck Protection Program;

$220 billion in direct payments to households;

$12 billion for nutritional support programs; and

$4 billion for behavioral support services.

The total GOP package is roughly one-third of the $1.9 trillion proposals favored by most Democrats. Mr Biden has been reportedly receiving pushback from the more progressive wing of his party regarding his willingness to sit down and listen to the GOP proposals. Progressive Democrats prefer that the Senate GOP negotiate directly with Senate Democrats versus conducting an end-around with the President.

The dollar likely climbs with growth in gross domestic product and positive growth in its commodities and equities markets. Infrastructure spends would also attract capital to the United States thus driving up demand for the dollar resulting in its appreciation. The GOP’s proposal does not, in my opinion, stimulate growth that can be expressed in currencies. The “stimulus” is more of a pandemic band-aid designed to keep the United States together until an economy that is more familiar comes along.

At best, traders should view the GOP’s strategy for stimulus as non-dynamic due to a lack of emphasis on non-capital driven items. Mr Biden’s American Rescue Plan does not appear to do more than be a bigger band-aid for households versus actual stimulation of economic growth.

Mr Biden’s American Rescue Plan touts a total of $1.9 trillion in funding. The Plan also focuses on extended unemployment insurance, direct pandemic payments to households, higher minimum wage, increased food aid, and expanded child tax credit, and continued foreclosure and eviction moratoriums. No emphasis on infrastructure or the other classic big ticket, shovel ready items that attracts capital expenditures.

Short of a significant lift on restrictions that limit travel and gatherings that would lead to reigniting economic activity, I don’t see much in either the GOP or Mr Biden’s plans that will bring back better.

The interbank market news scan …

President Joe Biden and Democratic congressional leaders must decide whether to break the administration’s $1.9 trillion Covid-19 relief proposal into pieces after a scaled-down Republican plan emerged. Republican Stimulus Offer Challenges Biden to Split Aid Bill (msn.com)

The group of 10 Republican senators seeking to negotiate with President Biden on a new round of COVID-19 relief unveiled details of their proposal on Monday, hours before the lawmakers are set to meet with the president at the White House. GOP senators detail $618 billion COVID relief counteroffer (msn.com)

GOP proposed sixth Covid-19 relief package. Proposed Sixth Covid Relief Package.pdf (senate.gov)

As President Joe Biden prepares to meet with Republican senators on Monday to discuss his proposed $1.9 trillion COVID-19 relief bill, progressives have urged the commander-in-chief to move ahead with his stimulus plan regardless of whether the GOP supports it. Progressives Dismiss Joe Biden’s Bipartisan Effort on COVID Relief, Demand Action Now (msn.com)

Ghana’s central bank on Monday kept its main interest rate unchanged at 14.5%, Governor Ernest Addison said in a statement. Ghana central bank holds key rate at 14.5% | Nasdaq

The Australian and New Zealand dollars were little changed on Monday ahead of a central bank meeting as cautious currency traders watched on while a wave of runaway retail investors unsettled equity markets. Australian dollar trades fractionally higher head of central bank meeting | Reuters

Cryptocurrency XRP tumbled into the red on Monday, after rising more than 50% in early trading, as a “pump and hold” scheme organized by day traders ran into trouble.https://www.consumersadvocate.org/widgets/text_list?pcuid=cf4d004eb5b1

Yet “meme” currency Dogecoin held on gains of around 34% as amateur investors zeroed in on new assets in the wake of the GameStop saga and Elon Musk boosted interest in cryptocurrencies. XRP falls sharply after soaring 50% but Dogecoin is holding on, with day traders looking for new targets and Elon Musk fanning interest (msn.com)

The head of Hong Kong Monetary Authority has rejected lawmakers’ call to dip into the HK$4.5 trillion (US$581 billion) Exchange Fund to finance the government’s rescue packages for companies and individuals hard hit by the Covid-19 pandemic, saying such a move would hurt the fund’s ability to defend the local currency. Hong Kong wants to keep its US$581 billion war chest for defending the currency instead of the economy, monetary chief says | South China Morning Post (scmp.com)