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McHenry: Sustaining our Economic Prosperity Hinges on the Federal Reserve Having Good Policy

Washington, February 11, 2020 -

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. Republican Members will highlight the regulatory rightsizing championed by Congressional Republicans, the Trump Administration, and implemented by the Fed over the past year, which has played an important role in creating the best U.S. economy in modern history.

Watch Republican Leader of the House Financial Services Committee, Patrick McHenry’s (NC-10), opening remarks here.

Ranking Member McHenry’s opening remarks as delivered:

“Thank you, Chairman Powell for appearing before us once again.

“Under the Trump Administration, we have the best economy that we’ve had in decades. The numbers are irrefutable. We added 225,000 new jobs in January, and the unemployment rate is essentially at its lowest level in half a century. This prosperity is being shared by all Americans, from African Americans and Hispanics where their unemployment rate has reached record lows last year. The prime-age labor force participation has reached 2.2 million people that were previously out of the workforce, and not surprisingly, consumer confidence has increased dramatically since the month before the President’s election.

“Every Member of Congress should celebrate these remarkable outcomes, which have resulted from Republican leadership on pro-growth policies like tax reform and regulatory rightsizing. 

“But sustaining our economic prosperity also hinges on the Federal Reserve having good policy. The central bank is currently undertaking a review of its monetary policy framework to determine the tools it may need in the future.

“Chairman Powell, I raise the concern that we have regulatory policy that is impinging upon your capacity to make proper monetary policy. And that is why I think it is important that you have a regulatory review of the limitations that those regulations can put on your broader monetary policy decisions. That includes systemic risk concerns that I have raised, as well as open market operations – well, especially the open market operations in the repo market.

“I thank you for your prompt responses to my questions about the repo market operations, but I’m not sure there’s been a satisfactory answer to what caused the market spike in the first place, and that’s troubling.

I’ve also voiced my concern with the transition from the LIBOR reference rate. Nine months later I’m still concerned consumers will be impacted by the transition. We still have contracts written to the LIBOR reference rate, and I think given the recent volatility in the repo markets, I am concerned about the subsequent volatility in consumer-facing products including mortgages, auto loans, business loans, and other consumer loans as this new reference rate is derived from secured overnight financing.

“At previous hearings, I have spoken about the cyber threats posed to our financial institutions and your institution, and China in particular. Yesterday’s news about the Equifax data breach is deeply troubling, and is a wakeup call to every single policymaker that we need to take the threat of China, and the Chinese Communist regime quite seriously.

“If we are not taking them seriously, have no fear, they are taking us very seriously. And now they have basically all of our data, too. So, the spillover effects of this question of Chinese policy is significant, not just for cybersecurity, but what we’re seeing with the coronavirus, and the destabilizing effects it has on global health. I know you’re not a global health expert, but you can give us some sense of your measurement techniques and response to these economic changes that are being driven out of the coronavirus challenge in China, and the spillover effects it has to its neighbors, and the supply chain as well that’s derived through China.

“The nature of China’s regime may not fit neatly into the Fed’s risk assessments – the Fed has acknowledged in its Financial Stability Report that cyber risks don’t fit neatly either – but the risks are real. Even though our data is limited coming out of China, and the limited data we have we question still, we should reflect appropriately upon what we know, and how we respond as an American government, and to the western world in response to these threats, both cyber and health risks, and the spillover effect it has on our economy.

“So again, Chairman Powell thank you for being here, thank you for your openness, thank you for your approach as Chair of the Federal Reserve to be in the language of the people, rather than simply the language of the PhDs.

“With that, I yield back.”

Learn more about today’s hearing here.

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