WASHINGTON–In remarks that are a departure from the normally conservative, guarded remarks of Federal Reserve chairmen, Fed Chairman Jerome Powell called the current economic crisis “without modern precedent,” and suggested permanent damage to the economy could occur if policymakers do not provide sufficient financial support.
Powell’s comments further seem to suggest the more than $2-trillion in coronavirus-related relief and stimulus the federal government has provided to date may not be sufficient. His remarks came just one day prior to new unemployment numbers showing another three million people had filed jobless claims.
The House is scheduled to begin discussing a massive $3-trillion stimulus package, the HEROES Act, that includes numerous features credit unions are watching, as CUToday.info reported here.
As is reported below, at least one CU in an underserved market is calling for support of the HEROES Act.
“Chairman Powell acknowledged the unprecedented fiscal response, but he clearly believes that it is money well spent if it helps to minimize long-lasting damage to the nation’s economic prospects," said NAFCU Chief Economist and Vice President of Curt Long. "On the topic of negative rates, Chairman Powell firmly denied any interest from the FOMC at this time. The Fed would rather expand on the tools it is currently using, if needed."
The New York Times noted Powell’s comments seem to indicate the Fed believes there is only so much it can do after slashing interest rates to zero, purchasing bonds at a record pace to restore order to roiled government bond markets and unveiling nine emergency lending programs in partnership with the Treasury Department. The Fed lacks spending powers, which are reserved to Congress.
Powell has been joined by Loretta Mester, the president of the Federal Reserve Bank of Cleveland, and Robert S. Kaplan, the Dallas Fed president, in saying more government help may be needed.
‘Great Uncertainty About Future’
During his remarks, Powell previewed a Fed survey released yesterday that "reflects findings similar to many others: Among people who were working in February, almost 40% of those in households making less than $40,000 a year had lost a job in March."
"This reversal of economic fortune has caused a level of pain that is hard to capture in words, as lives are upended amid great uncertainty about the future," Powell said.
The Democrat-controlled House is scheduled to consider a more than $3-trillion aid package today; Republicans in the Senate have voiced early opposition, citing concerns over the deficit.
Powell further cautioned that long stretches of unemployment could erode worker skills and leave families struggling with huge debt loads, noted the Times.
“We ought to do what we can to avoid these outcomes, and that may require additional policy measures,” Mr. Powell said.
CU Indicates Support for HEROES Act
In Jackson, Miss., Hope Credit Union is expressing support for the HEROES Act, which the House is supposed to consider today. The more than $3-trillion proposed legislation would provide extensive new funding for lower-income communities as well as $1 billion for CDFI Fund.
Hope Credit Union and its affiliated organizations serve low-income communities in the Mississippi delta.
“The responses outlined in the HEROES Act recognize the harsh realities that people in our communities are facing, particularly in communities of color where the consequences of the pandemic are disproportionately felt” said Diane Standaert, Director, Hope Policy Institute. “With unemployment claims in the Deep South eclipsing claims made at the depths of the Great Recession, the response by Congress comes at a time when businesses, communities and financially-strapped households are in need of significant relief.”
Hope has released an analysis of COVID-19 and the Deep South.