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Fed Chair to Committee: Financial Conditions “Less Supportive of Growth”
Federal Reserve Chair Janet Yellen on Wednesday told the Financial Services Committee that the nation’s central bank is studying the feasibility of pushing short-term interest rates into negative territory. “Financial conditions in the United States have recently become less supportive of growth,” she told the Committee.
“Investors responded to her testimony by continuing their 2016 flight from equities, dumping oil and buying gold, and bidding government bond yields to lows that usually signal recession,” the Wall Street Journal reported.
“Last month we all heard President Obama attempt to take an economic victory lap in his State of the Union speech. The American people are having none of it, though. They are tired of hearing from the out of touch ruling-class in Washington about just how good things are when their realities are vastly different,” said Chairman Jeb Hensarling (R-TX) in his opening statement.
In response to questions from members, Chair Yellen conceded the regulatory burden on community banks has grown “intense” and that “credit availability has, in particular segments, been diminished. Home loans, mortgages, for example, for individuals without pristine credit ratings is really difficult, remains difficult to obtain.”
Nobel Winning Economists, Other Economic Leaders Support House-Passed Fed Reforms
A group of Nobel Prize winning economists and former senior economic policy officials announced their support for House-passed reforms that would make the Federal Reserve more accountable and transparent.
The House approved theFed Oversight Reform and Modernization Act(H.R. 3189, the FORM Act) in November. Among its reforms, the bill requires the Federal Reserve to generate a monetary policy strategy of its own choosing in order to provide added transparency about the factors leading to its monetary policy decisions.
Chairman Hensarling announced the group’s support during this week’s hearing with Fed Chair Yellen. After quoting some of Chair Yellen’s extreme criticisms of the FORM Act, Chairman Hensarling said:
“So, Chair Yellen, we have three Nobel prizewinners in economics, a host of former Federal Reserve officials, some of the most renowned and respected economists in the country pretty much disagree with everything that you asserted in your three-page missive against the FORM Act. I know you're not a fan, but I would just caution you, Chair, that when you use such apocalyptic and hyperbolic language, you might consider whether or not this undercuts your credibility as Fed chair.”
Subcommittee Examines Condition of FHA
The Subcommittee on Housing and Insurance held a hearing on Thursday to continue its examination of the “Future of Housing in America.” This is the Subcommittee’s sixth hearing of the 114th Congress on the topic.
The FHA’s efforts to grow its way out of its fiscal problems by lowering its premiums and claiming an even greater share of the mortgage-insurance market is misguided and counterproductive: it places taxpayers at risk of even bigger bailouts; it underprices risk and results in even bigger losses at the FHA; and it displaces and discourages private sector participation in the mortgage-finance marketplace.
“FHA has suffered a case of mission creep, and the unfortunate truth is that the lack of sound underwriting and risk management puts both homebuyers and U.S. taxpayers at risk,” said Subcommittee Chairman Blaine Luetkemeyer (R-MO). “While the most recent independent actuarial report showed signs of a modestly healthier agency, the bottom line is that FHA is still in a precarious state.”
Consumer Tells Subcommittee How Short-Term Loan ‘Helped Me When I Had Nowhere Else to Turn’
The Financial Institutions and Consumer Credit Subcommitteeheld a hearing on Thursdayto examine the CFPB’s latest attempt to restrict consumer access to financial products and services. The Bureau is expected to soon propose a rule that will harm consumers by taking away their right to access small dollar, short-term loans.
Consumer Robert Sherrill told the Subcommittee that the short-term loan he received was “a lifeline. It enabled me to start a business. I started a janitorial business…Today, my business is growing.”
“Last week, I had the opportunity to visit a small dollar lender in Virginia,” said Subcommittee Chairman Randy Neugebauer (R-TX). “In addition to seeing the sophisticated backroom underwriting process and understanding the diverse product offerings other than credit products, I had the chance to actually talk to the very customers that use these products.”
“From the mother of five, to the disabled veteran, to the painter trying to get a truck repair—a common theme emerges in all of these stories: ‘Please don’t take away my choice and availability to use these products,’” he said.
MEMBER SPOTLIGHT
Andy Barr – Janet Yellen Stumped By Simple Questions About Agency She Oversees
Yellen looked befuddled when Republican Rep. Andy Barr, who sits on the committee, confronted her with a series of simple questions about the CFPB.Barr first asked Yellen if the Federal Reserve approves the CFPB’s budget.
After seven silent seconds as Yellen sought help, she haltingly said, “I’m not sure.” then added, “I mean we fund the bureau’s budget.”
“Do you approve the budget?” Barr asked.
Again, Yellen was stumped, and she looked left and right for staff assistance.“I don’t think,” she said uncertainly. “I think the answer is no,” she continued as she shoved personal items into a hand bag preparing to leave the hearing room.
Weekend Must Reads
Heritage| America’s Economic Freedom Has Rapidly Declined Under Obama
Millions of people around the world are emerging from poverty thanks torising economic freedom. But by sharp contrast,America’s economic freedomhas been on a declining path over the past decade.
Fox News| Janet Yellen and 'negative interest rates': America, this is the last nail in a saver's coffin
Most Americans have some money in a bank account. And if you’re one of them, you’re losing money. As low as inflation is, it’s higher than the pitiful interest you get from your savings account. So a savings account is a bad bet right now. But it could get worse…a lot worse.
Gallup | Economy Tops Americans’ Minds as Most Important Problem
Americans in February are slightly more likely to name the economy generally as the "most important problem facing the country" than they have been in the last two months.
Investor’s Business Daily | Hillary’s and Bernie’s Big Lies About Dodd-Frank
The 2010 Dodd-Frank bill, crafted from the Democrats’ mythology, didn’t solve any problems. Instead, it is at the heart of our current economic woes.
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