NCRC CEO Jesse Van Tol with Federal Reserve Board of Governors Chair Jerome Powell at the 2021 Just Economy Conference, May 3, 2021.

Federal Reserve Board of Governors Chair Jerome Powell delivered a keynote address to attendees of the 2021 Just Economy Conference. After his speech, he sat down with our CEO, Jesse Van Tol, to answer a few questions about the Community Reinvestment Act, diversity and inclusion at the Federal Reserve and potential disruptions to the financial market from climate change.

Chair Powell’s appearance received considerable media attention. His most quoted statement was in response to Van Tol’s question on whether other financial institutions besides banks have an obligation to better serve the capital and credit needs of all Americans?

“You know, you do see this across payments and all sorts of financial services, you see activities that had once been principally the province of banks moving into the nonbank sector, and it’s again, it’s something you see quite broadly. And I would just say, as a general matter, like activity should have like regulation. And in terms of the question, specific question, that’s really one for Congress to make a decision about. But I like to think, though, that consumers require protection and low- and moderate-income communities require credit support, regardless of the nature of the institution. So that, again, for Congress to decide, though.”




Van Tol  0:00

As we welcome new audiences from our YouTube live stream and TV networks, taking this live, it’s my pleasure to welcome Federal Reserve Board Chair Jerome Powell. I’m Jesse van tol CEO of the National Community Reinvestment Coalition.

Chairman Powell probably needs no introduction. He is, after all, the most famous and powerful economic policy maker in the world. And his actions and words are watched like a hawk by markets and reporters worldwide.

But I know a different side of Chair Powell, as a member of the Federal Reserve’s Consumer Advisory Council, I’ve had the chance to witness him in action, I’ve had a chance to see him travel to the Mississippi Delta, I believe the first chair of the Fed to do so. I’ve seen the interest he’s taken and CRA, and in other issues that could affect economic justice for low and moderate income people. So it’s a real pleasure to have chair Powell here today to address the conference. We’ll hear short remarks from him and then have a chance for a Q & A. If you do have a question to ask the chair, we will try to get to them, please put it in the chat. And so without further adieu, adieu, Fed chair Jerome Powell.

Powell:  1:33

Thank you very much, Jesse. And it’s great to see you as always. Good afternoon, everyone. And it’s a pleasure to be with all of you today.

Together over the past year, we’ve been making our way through a very difficult time. We’re not out of the woods yet. But I’m glad to say that we are now making real progress. While some countries are still suffering terribly in the grip of COVID-19, the economic outlook here in the United States has clearly brightened. Vaccination levels are rising. Fiscal and monetary policy are providing strong support. The economy’s reopening, bringing stronger economic activity and job creation.

That’s the high level perspective. Let’s call it the 30,000 foot view. And from that vantage point, we see improvement. But we should also take a look at what’s happening at street level. Lives and livelihoods have been affected in ways that vary from person to person, from family to family and from community to community.

The economic downturn has not fallen evenly on all Americans, and those least able to bear the burden have been the hardest hit. The pain is all the greater in light of the gains that we had seen in the years prior to the pandemic. COVID swept in as the United States was experiencing the longest expansion in its recorded history. Unemployment was at 50 year lows and inflation remained under control. Wages were moving up particularly for the lowest paid workers. Long standing racial disparities in unemployment were narrowing, and many who had struggled for years were finding jobs.

It was not until the later years of that long expansion that its benefits had started to reach those on the margins. During our Fed Listens events, we met with people around the country and heard repeatedly about the life changing gains of the strong labor market, particularly at the lower end of the income spectrum.

Just a few months later, those stories changed to ones of job losses, over extended support services, and businesses built over generations closing their doors for good. While the recovery is gathering strength, it has been slower for those in lower paid jobs. Almost 20% of workers who were in the lowest earnings quartile in February of 2020. We’re not employed a year later compared to 6% for workers in the highest quartile.

The Feds latest survey of household economics and decision making, we call it our SHED report, which will be published later this month will show that for prime age adults without a bachelor’s degree, 20% saw layoffs in 2020 versus 12% for college educated workers, and more than 20% of Black and Hispanic prime age workers were laid off, compared to 14% of White workers over the same period.

Small businesses have also faced immense difficulties. Fed research found that 80% of those surveyed reported a decline in revenue, with two thirds of those businesses experiencing losses of at least 25%. A recent Federal Reserve’s special report looks specifically at the impact on businesses owned by people of color, who reported greater challenges. For example, 67% of both Asian- and Black-owned firms and 63% of Hispanic-owned firms had to reduce their operations compared to 54% for their White counterparts.

Our upcoming SHED report notes that 22% of parents were either not working or working less, because of disruptions to child care or in person schooling. Black and Hispanic mothers 36 and 30%, respectively, were disproportionately affected. In a similar vein, labor force participation declined around 4% for Black and Hispanic women, compared to 1.6% percentage points for White women and about 2% for men overall.

The Fed is focused on these long standing disparities because they weigh on the productive capacity of our economy, we will only reach our full potential when everyone can contribute to and share in the benefits of prosperity.

Achieving broadly shared prosperity will take action from across society, from fiscal and other government policy to private sector initiatives to the work that everyone here does.

The Fed can contribute as well. Using our monetary policy tools, the Fed promotes maximum employment and price stability to foundations of a strong stable economy that can improve economic outcomes for all Americans. We view maximum employment as a broad and inclusive goal. Those who have historically been left behind stand the best chance of prospering in a strong economy with plentiful job opportunities. Our recent history highlights both the benefits of a strong economy and the severe costs of a weak one.

Supervisory tools have a role to play as well. As part of our policy responsibilities, the Board of Governors enforces both the Fair Housing Act and the Equal Credit Opportunity Act, the federal fair lending laws that prohibit discrimination in lending. Violations of the fair lending laws, along with other illegal credit practices are taken into account during bank evaluations under the Community Reinvestment Act. We see our robust supervisory approach as critical to addressing racial discrimination, which can limit consumers ability to improve their economic circumstances, including through access to homeownership and education.

The Fed’s community development function plays a role as well, studying what works, convening stakeholders on both the national and district level, and helping financial institutions find opportunities to invest and expand credit opportunities in low- and moderate-income communities.

The economic landscape has changed, and efforts to provide access and credit to communities must change with it. Last year, the Fed issued a proposal for a strengthened, modernized CRA framework with the objective of building broad support among both external stakeholders and participating agencies. Our goal is to strengthen the core purpose of meeting the credit needs of low- and moderate-income communities. We especially appreciated NCRC’s feedback on the proposal.

We’ll continue to do our part and we appreciate the ways that our work and that of the NCRC members have intersected. Last April, for instance, the Fed expanded the Paycheck Protection Program liquidity facility in order to broaden its reach to include some non depository lenders. That included CDFI loan funds, which many of the people here represent.

Your work provided small businesses with invaluable technical assistance to help them weather the downturn. And you have helped them get the funds they need to support their businesses. NCRC member groups have contributed in so many ways. You helped workers who lost their jobs get retrained, you supported working parents, you helped homeowners struggling with payments, and connected renters to federal assistance programs. You brought more people into the banking system, helped strengthen financial literacy and capabilities, and work to address digital divides in areas of need, particularly in rural communities at a time when connectivity is essential. So I’d like to close by saying thank you. You’ve been working hard through this crisis and an enormous amount of work still lies ahead. But what you do is essential. You provide an invaluable service. You make people’s lives better, and there is no higher calling.

Thank you.

Van Tol  9:30 

Great, thanks, Chair Powell. Once again, if you’d like to submit a question, please submit it in the chat. We won’t get to every question but we will try to get to a few. Chair Powell, you mentioned CRA reform. Of course we are the CRA coalition, so we’ll start out with a few questions in that space. Is the Fed aiming for a CRA rule done jointly with the OCC and the FDIC?

Powell  9:58

Yes, we are Very much do. We think that CRA will be most effective if the if the three agencies get together with a consistent approach and hopefully with identical or nearly identical rules. So we remain committed to doing that.

We see and we all see CRA as an essential law that’s in place to ensure that banks are meeting the credit needs of low- and moderate-income communities and also reducing inequities in credit access and strengthening banking services and investment in low- and moderate-income communities.

So in terms of the timing of that, it’s hard to say we, you know, solicited comments on our ANPR, which we issued last December, and we got comments back a couple of months ago. We’re going through those with great care, and beginning discussions with the other agencies and hopeful that we will come together on something together.

Van Tol  10:57

We got news today that the Treasury Department plans to name an acting comptroller. Is the lack of a permanent nominee slow down the process at all for CRA reform?

Powell  11:10 

That’s a good question. I don’t really think so. I don’t think so. And I saw that news as well. Of course, I don’t have any comment on that news. But I would say that I believe we can make good progress with the other agencies now. And that’s certainly going to be our intent. We have discussions going on now. And I feel that we will make progress. I continue to.

Van Tol  11:35

We know that CRA only applies to deposit taking institutions. And we know that it would require an act of Congress to expand that. So it’s not the purview of the Fed or the OCC, the FDIC, but you’ve traveled the country, you’ve seen what’s going on in terms of capital and credit needs, in many parts of the country, in all parts of the country. In your own view, should other financial institutions have an obligation to better serve the capital and credit needs of all Americans? Do we need something like that?

Powell  12:12 

You know, you do see this across payments and all sorts of financial services, you see activities that had once been principally the province of banks moving into the nonbank sector, and it’s again, it’s something you see quite broadly. And I would just say, as a general matter, like activity should have like regulation. And in terms of the question, specific question, that’s really one for Congress to make a decision about. But I like to think, though, that consumers require protection and low- and moderate-income communities require credit support, regardless of the nature of the institution. So that, again, for Congress to decide, though.

Van Tol  12:57

Something you do have oversight over, we know that 98% of banks receive a passing grade on CRA today as per the laws enforced by the banking regulatory agencies. But for many of our members, you know, 98% of communities are not doing well. Do we need more carrot or more stick? More enforcement, more incentives? You know, in your view? How are we going to tackle things like the racial wealth divide, things like concentrated poverty and ongoing inequality? Can CRA do a better job through better enforcement or through more incentives?

Powell  13:44

You know, Jesse, I would say that, as I mentioned in my remarks, these long standing disparities, they’re going to take a very broad set of policies from across Congress and the states and the private sector. And those are the really powerful policies that are out there really in the hands of elected officials that can address just those long standing disparities more than others.

We know that we have a role and I mentioned what that role can be. You know, we talk about a couple of things that we can do and are doing. The first is just with our employment mandate. As you probably know, we did an extensive monetary policy review over the last couple of years. And we decided to think of our maximum employment mandate as a broad and inclusive goal, by which we mean we’re looking well beyond the headline numbers into different demographic groups. We also decided to only react to shortfalls in our estimate of maximum employment. In other words, we weren’t going to raise interest rates if employment was higher than we thought the sustainable level is because we frankly don’t know what the highest sustainable level is. We saw in the last expansion, that unemployment could go to 50 year lows without troubling inflation. And we put that to work. And we think that those changes, which sound pretty technical, they’re actually very important for people who are at the margins of the labor market. We saw really, really important gains beginning to happen in 2017, 18, and 19, as the labor market tightened. So that’s important.

I mentioned the CRA, of course, we see CRA reform as a very important way to make progress against these issues. I mentioned the fair lending laws, we want to enforce them strictly. I’d also point out our partnership with minority depository institutions. We have a lot of outreach going on with them, and we want to find ways to support them. And that’s also part of our CRA reform.

In the payments area, we think Fed Now can help those who are at the margins. And the last thing I’ll say is, if you look at our website, you’ll find that there’s just a big focus on research on racial and economic disparities. And so even though we don’t have the principal tools, we do have tools. And we’ve done so much of that research that we actually have it all linked up to one web page, because it was getting hard to find where it all was. So those are the kinds of things that we can do. And we’ll keep doing them. We think they’re very important for the long run good of our economy. Again, as I mentioned in my remarks, we need help from all across society, though, including, you know, elected representatives who really have the most powerful tools here. You asked about incentives and penalties and that kind of thing. You know, I’m not sure what the right mix is. I think that’s one way to look at the questions we asked in our advanced notice of proposed Proposed Rulemaking. We were reviewing comments to that right now. And we really want to make CRA and even more effective, effective law and get that mix correct.

Van Tol 17:16

Chair Powell, you mentioned a number of initiatives you’ve undertaken to address racial equity. Last month, the House Financial Services Committee reported out the Federal Reserve Racial and Economic Equity Act, a bill that would require the Federal Reserve to carry out monetary policy bank regulations, CRA payments, and other things through racial and ethnic disparities in wealth, employment and access to credit kind of lens.

You’ve detailed a number of things that the Fed has done recently. I did want to ask, you know, does the Fed need other tools? You mentioned in particular, the way you target full employment. Of course, you’ve got one tool there, you’ve got the inflation rate, right. And you can analyze the problem in a lot of different ways. And we’re very appreciative of how you have done so thinking about full employment, not just in the aggregate, but for particular parts of that population. Black unemployment is often nearly double that of White unemployment. But does the Federal Reserve have a tool to address Black unemployment specifically, you’ve got a sort of a broad tool and acts not a scalpel. Does the Fed need other tools to address problems in our economy?

Powell  18:38

So I think you put your finger right on it, really, Jesse. The tools that we have affect the whole economy. And I think we obviously do need tools that affect narrow parts of the economy. But those are the tools of fiscal policy. That’s exactly what elected representatives do. They identify worthy groups, and they direct the resources that we get from taxation to those groups. That’s really what elected representatives do and are supposed to do, not the Fed. I mean, the Fed is a government agency created by Congress with a narrow mission, powerful tools, but really two important goals. And I think to the extent we take on goals that really don’t fit with those tools, really those tools should go to other parts of the government and not to us.

I worry that if we start taking on everything, then the case for us being independent of political control disappears. And you know, one of the great things I think that has really served the country well, is to have us be independent of political considerations.

You know, we’re thinking about the economy and the people that we serve exclusively. We’re not analyzing these in political or election related terms. And I think that is so important. And I think the minute we start taking on roles that are better done by the legislature or by parts of the administration, we really compromise that.

So it’s not that we don’t strongly support those goals. But I would say, we’re not looking for a law change. And you know, the bottom line is we’re doing the things that we can do and what we probably can do more things, but I wouldn’t ask for tools. And I also wouldn’t ask for a mandate that we can’t really achieve with our existing tools. You know, there’s some things that we can do and some things that we can’t do. We can do a lot of research and call these things out, which we do and the other things that I mentioned.

Van Tol  20:42

Thank you, and notwithstanding your point about the political independence of the Fed and certainly fiscal policy being in the province of Congress, we’ve seen it on a number of occasions, economic stimulus very slow to develop, as it works its way through the halls of Congress.

Certainly,I think when we think about the coronavirus pandemic, Congress was probably quicker to act than it was during the financial crisis. But on a number of occasions, we’ve seen fiscal stimulus really lagged the need to the point where you and other economic policymakers have really gotten to the point of encouraging fiscal policy. Should more of the fiscal policy response be automatic, if not in the hands of the Fed, built into automatic stabilizers that kick in, given certain measurements of recession or impending recession?

Powell  21:43

You’re right, we can move very quickly. And we have done that. And we did do that early last year. We can cut interest rates, we can, you know, take other measures to create accommodative financial conditions and support economic activity. And we did a lot of that last year.

The really powerful tools, though, of course, are fiscal policy. As you pointed out, Congress actually passed the CARES act before the end of March last year. So within a month, the biggest economic support bill, basically, in living history, certainly since World War II, and it was passed unanimously within a month of the outbreak of the pandemic. So that it did move incredibly quickly and incredibly forcefully. I think that was absolutely essential in what happened.

The question of putting fiscal policy more on automatic pilot is an interesting one. It’s really one for our elected representatives, again. Many countries do have stronger, they call them automatic stabilizers. But honestly that’s not something – we don’t give advice to Congress, you know, Congress has oversight over the Fed, not vice versa. So we don’t give them advice on things. We try to stick to our job whenever possible.

Van Tol  23:02 

You mentioned earlier payments and digital currency. We saw during this crisis the amount of time it took to get stimulus checks to people. Is the country in need of a digital currency? What’s your view on the prospects for digital currency or cryptocurrency to really help low income Americans? Is it a tool that can be useful in that context?

Powell  23:32

I think something like you now 5% of households are unbanked. And that’s something like a little better than 7 million households. It’s come down over time. And that’s good. It’s still too high, though. And we want to make further progress. I personally think that the best and most straightforward way to reach those households – and by the way, those were the households who had a hard time getting their checks because they didn’t have bank accounts so the government was looking to distribute those payments and that’s where the issue really came. So the best way, though, I think the most straightforward way to address that problem is through the existing banking system, which they have experienced dealing with the public.

And I think I’d like to see there is now a big push, and I salute the FDIC’s work on this in particular, and we’re focused on it as well, it is around making very broadly available these extremely low cost, no overdraft fee accounts for everybody and not just making them available, but doing everything you can to get people to use them so that they’re not using those very high cost institutions that you see in many poor areas where you’re paying a very high rate just to cash a check because you don’t have a bank account.

So I think that’s the best way to go after that problem. And I know that that seems very promising. And, you know, we’re involved through the St. Louis Fed, which works with the bank on programs. And I’d like to see a greater focus on that from our financial institutions. And I feel many of them are coming to that as well.

A central bank, digital currency would do a lot of things, though. And I think it’s something we need to be, we need to understand very carefully and thoroughly before we do it. We’re very much focused on doing that, on developing that understanding both of the technological issues and of the policy issues. But it’s not a straight – there are some quite difficult policy issues to take on before you would effectively create a digital currency. What that would look like is it would be a digital dollar. So there’s right now there’s paper currency. And then there’s money that’s in a bank account, which is really an obligation of the bank and not of the federal government, except that up to $250,000, in a bank account is in fact, federally insured. So that’s the equivalent of digital currency right there. But we need to understand how this would interact, how a digital currency would interact with our banking system, would it compete for deposits? Would it undermine lending? Would it potentially generate financial stability concerns? These are difficult questions. We don’t know the answers, we haven’t decided to do a central bank digital currency to issue one. But we have decided that we’re going to develop our understanding of what it can offer. One of the possible benefits is greater financial inclusion. And that would certainly be one of its most attractive potential benefits. But again, I’d say we’re at the early stages of a process of working through all the policy issues around that.

Van Tol  26:55

Great, thank you. We’ll take some questions from the audience now. I’ve gotten a couple. First one is: Would the Fed consider laying out clearer guidelines on how it assesses full employment? You mentioned racial demographics, unemployment rates within different communities, would the Fed layout more specific guidelines on how you’re assessing?

Powell  27:21 

That’s a great question, whoever asked that one. So let me say a couple of things. First, as we say, in our semi-constitutional document, the Statement on Longer Run Goals and Monetary Policy Strategy, we say that maximum employment has no one indicator or handful of indicators, it’s a broad range of measures. So it’s obviously unemployment. It’s unemployment by different demographic and age groups and racial groups and that sort of thing. It’s also labor force participation, as many of you and your colleagues will know, you’re not counted as unemployed, if you’re not looking for a job, you have to look for a job in the last four weeks or if you haven’t done that, then you’re counted not in the labor market, and therefore not unemployed.

So a ton of people are effectively unemployed around the edges of the labor market, particularly right now, who would come back in and a strong labor market. So we include labor force participation. We also look at wages, you know, when something gets scarce, the price of it goes up. And, you know, that’s a good way to tell how tight the labor market is.

We have, over the years, getting to your question, we have looked at creating, you know, an index of indicators kind of thing. And it’s just very difficult to do in a way that fosters better understanding of it, if where we are now is we say that it’s a broad and inclusive goal and includes all those measures. And we’ll be transparent in saying how close we think we are to it. So it’s actually quite difficult to be specific and develop an equation or a rule. Economists are prone to that sort of thing. And in this particular case, it’s just something that’s very hard to do again, in a way that would represent better clarity. So I would say it’s not likely that we’ll do that, but we will, as the economy improves. And as we get closer to the maximum limit, we’ll be very transparent about giving you our analysis of where they were, we haven’t quite made it to that goal. And when we do make that goal, make it to the goal.

Van Tol  29:28 

How do you get perspective on what’s going on with the economy? We know you have access to some of the leading economists in the country, you have reams of data. But there’s something to be said about, you know, sort of qualitative feedback, the intangible evidence of what’s happening out there in the economy, not just on Wall Street. And one of the great conundrums I think, for many Americans during the midst of the pandemic is that you know, Wall Street is doing great, while the real economy is doing not so great, you know, as people’s pocketbooks are hurting? How do you get perspective on what’s going on in the economy? And, and what is to be done about it?

Powell  30:12 

So for me, it’s absolutely critical to get behind the aggregate data. Because, you know, I came from a private sector where you thought about one company, and one industry and, and some competitors and things like that. And then you build that out toward understanding the whole economy, not the other way around, where you start with the whole economy. So I find it essential to get as much information as I possibly can from people who are out there working and seeing things. And the narrative then starts to make more sense to me after I’ve done that, so how does that happen?

We meet, as you know, Jesse, we meet with a lot of groups. The Community Advisory Council, the CDIAC, Community Depository Advisory Council, we meet with just countless groups of folks. Our division of Consumer and Community Affairs, sets up meetings with outside groups all the time. We meet with labor, we meet with a small business. And you know, I always walk out of those meetings thinking that I really have a better feeling. And you can never do enough of it. But I feel like that is, in my case, just completely essential.

Of course, we also stare at the data. And we actually don’t have, you know, it’s not like we get a lot of secret data, we get the same data every time, like the Central Intelligence Agency where they have no doubt, secrets. We just have a lot of people who are very good at analyzing data. And so they’ve been doing it full time for, in many cases, decades. So we get, I think, excellent analysis of the existing data, and as good a forecast as you can forecast. It’s difficult to forecast the economy, that’s for sure.

That’s what I do. I do all of those things. I don’t get to talk to market participants much anymore, because there’s just too much risk in me doing that directly. But I get second hand reports of those discussions that that staff have. And I depend a lot though on just discussions with people who are active out there in the economy and in the private sector, and and in groups who serve and live in low- and moderate-income communities. It’s all necessary for putting together a story of what’s really going on out there.

Van Tol  32:34 

Great, thank you. A couple of questions from the audience. What is the Fed currently doing to increase employment diversity among its own ranks, and notably, I think the staff but also obviously, the Board of Governors, historically has not been maybe as diverse as the country is. And also among financial service providers, among the companies that you regulate.

Powell  33:07 

I see having a diverse culture and a diverse group of employees at all levels from leadership on down, and also an inclusive culture, as being essential to the success of our mission. In fact, my own experience in dealing with private sector companies in prior lives was that the really successful American institutions are very good at diversity by and large, and they’ve been focused on the issue for a long time and it’s about recruiting people, training them, giving them opportunities, keeping them and having a culture that supports people of different perspectives. And it’s no more complicated to me than the fact that you’re going to get better answers if you have diverse perspectives at the table. In addition, it’s just just the right thing to do.

So that’s our high level view. And I feel very strongly about it, and so do so to all my colleagues. Inside the Fed, we have areas where we’re quite diverse and areas where we’re less diverse. We’re very focused on doing better than we’ve done in the areas where we haven’t been as successful. It’s not that we’re not trying. It’s not that we’re not open to, to ideas or to meeting people who would like to join us on our mission. We would certainly welcome that. We certainly believe that we are a culture and a place that values diversity and inclusion.

In terms of governor’s, you know, we don’t play a role in the selection of governors. The way that works is that the president nominates governors and the Senate confirms them. So sometimes I will, the chair will be asked about a particular nominee, but generally speaking, it is the role of the president and of the Senate on nominees. So we don’t have much control over that.

One area that we’re pretty proud of is the Reserve Bank boards. Each of the 12 Reserve Banks has a board with three classes of directors, A, B, and C. We don’t have a role in the A directors, they work for banks. The B and C directors: a B directors, we have a role on, and the C directors, we appoint. And we’ve focused a lot on increasing diversity among the B and C directors. And I’m really proud of what we’ve done. Now in excess of 70% are diverse in one one dimension or another. In fact, it’s close to 75%. So we’ve worked hard at that. And we’re proud of that. So again, a high priority thing for us as an institution, as a culture, and one where we’re just going to keep getting better every year. I mean, you’re either getting better or you’re not, and I feel like we’re institutionally, we have the things in place that will enable us to continue to improve. That’s what really matters.

Van Tol  36:17 

NCRC has been a leading advocate for access to credit as a way to expand opportunities for homeownership. But we’ve become increasingly concerned about a lack of housing inventory, very negatively impacting, and housing affordability, negatively impacting homeownership rates, which leads into our next audience question. Could you speak about the role of a non balanced home inventory market, and whether you see the current dearth of homes as an impediment to economic growth, as well as limiting wealth building for first generation homebuyers?

Powell  36:56 

Right, so first thing I will say is that houses are in short supply, the housing market is tight in a lot of places in the United States right now. And that’s, to a significant degree, that’s a function of the past year or so where people were working out of their homes, and decided that they wanted a different home or another home, and so there’s just a lot of demand. No doubt, low mortgage rates are feeding demand as well. And also the tremendous support to the economy that Congress provided over a series of bills in the last year plus now. I’ve also put, not all people but many people are in a financial situation where they’re in a position to borrow and buy a home. So it’s a tight housing market, and what a tight housing market does is it calls for more supply. So I think housing starts are now moving back up. And that’s a good thing.

The problem with a strong housing market is that it’s harder, as you mentioned, it’s harder for first time homebuyers to get in. It’s harder for buyers who are at the margin, minorities, particularly, and, for sure, owning a home is not for everybody at every time. But it has been one of the ways to join the middle class and benefit from the appreciation of your home over time. And so it’s an important aspect of our economy. And we certainly want it to be as broadly available to people who want a home as it can be. I think some aspects of the current housing situation will evolve, so that housing hopefully becomes less scarce. But I think it’s going to be a tight housing market for some time now, because demand is just very, very high.

Van Tol  38:54

Great, thank you. Addressing climate change for a moment. We’ve seen more and more published about the financial risks of climate change, the risks to the bank. We’ve also seen during this pandemic that, you know, shocks to supply systems can cause pretty significant economic issues. We’ve seen it as a ship getting stuck in the Suez Canal and royal global markets. These are the kinds of things that seem likely or at least possible to occur in the context of a changing climate. Is the Coronavirus pandemic, sort of testing grounds for disruptions to the global economy caused by climate and how is the Fed approaching the risk posed by climate change to financial institutions?

Powell  39:52

So the Coronavirus pandemic certainly shows us the possibility of really global economic disruption, which I mean, many people had imagined it and had developed plans for how to deal with it. But now we’ve been through it once, and here it is, 14 months later, and we’re still recovering. And in many parts of the world, they’re not really recovering yet. So it’s, it’s a remarkable thing.

And , there might be a parallel there to climate change, possibly. I would say, from our standpoint, we see climate change through the lens of our existing mandates, principally supervision of financial institutions, and also just our responsibilities for financial stability. So with individual financial institutions, climate risk, the risks that follow from climate change, both physical risk and transition risk, those are just other risks to the operations of individual financial institutions.

And our role there is just to make sure that banks, the banks that we regulate and supervise, understand those risks and have plans to deal with them, and are managing them. And it’s a very, very challenging exercise and one that I would say it’s in its early days. But it is clear, though, that the public will expect bank supervisors to make sure that these federally insured financial institutions that are so critical to providing credit in our economy, that they understand the risks, they’re taking and they can manage them. So that’s what we’re doing.

We’re not we are not the institution that will establish federal climate policy that is for Congress and the administration and other agencies that Congress has given such authority to. In addition to just overall financial stability, climate change is going to appear across the financial system, not just in the regulated banking system. And our role is really to, one of our roles, will be to just assess and understand research and working with experts, exactly how that will affect the financial system. This is an issue that’s going to be with us for a long, long time. Again, we’re in the very early days of getting our arms around it, and spending a lot of time doing so today. And we see it as a high priority over time.

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