July 22, 2009
DODD TO FED CHIEF: RECOVERY WON’T BE REAL UNTIL AND UNLESS IT’S FELT ON MAIN STREET
WASHINGTON – Today Senate Banking Committee Chairman Chris Dodd (D-CT) pushed the Federal Reserve Board Chairman on when government efforts to turn around the economy will reach struggling Americans.
“Positive indicators seem to be stuck at the top,” said Dodd. “And we all work for the American people. When can they expect the recovery that they have funded? When will working families see their rally? Their pay raise? Their jobs being stabilized?”
Chairman Dodd laid out two fundamental questions for the Chairman Bernanke:
- “When will this recovery… reach the families who are facing foreclosures, people who have lost their jobs, who are worried about their savings, and who are worried about their long term security? What are you doing, as the Fed to help see that they are going to reap the benefits of these efforts?”
- “We can sit up here and jawbone and ask these institutions to make a difference, but the Fed actually has the regulatory authority to make that difference. And there are many asking why that authority is not being exercised to convince these institutions that they have to be moving more aggressively when it comes to bank lending.”
Read testimony, or watch the webcast:
Below is Dodd’s full opening statement as prepared for delivery.
“If the success of our government’s attempts to get our economy back on track were to be measured by executive compensation or large financial institutions’ bottom lines, then perhaps today would be a day to celebrate the success of all that has happened over the last several months. After all, leading economists believe that these indicators are signs that we have averted utter catastrophe, and suggest that a recovery may be imminent.
“But while this recession may have begun on Wall Street, the recovery won’t be real until, of course, and unless it’s felt on Main Street. And so today is a day to ask fundamental questions: When will working families in our respective states start to feel the effects of our work to restore the economy?
“After all, today we meet to receive the semi-annual monetary policy report mandated by the 1978 Humphrey-Hawkins Full Employment Act.
“And if the goal is full employment, the news today is rather grim.
“Unemployment in June was 9.5 percent – the highest level in 26 years. Most economists and the Fed itself believe that it could top 10 percent before the end of this year.
“Meanwhile, Americans who have lost, or are worried about losing, their jobs, their homes, or their retirement security have watched as others reap the benefits of our government’s response.
“They hear about a stock market rally, and wonder if it will ever be enough to make up for the retirement savings that have been wiped out - in some cases almost within minutes.
“They hear about million-dollar bonuses going to CEOs whose firms caused the meltdown in the first place, while rank and file workers across the nation are laid off or forced to accept pay cuts.
“They hear about large financial institutions, large banks, bailed out with billions of taxpayer dollars and government-backed credit and now reporting billions of dollars in profits.
“But they still can’t get a loan themselves, or as a small business or commercial enterprise they can’t find institutions willing to lend resources so that they can begin to grow again. Families worry about whether they can borrow the money necessary to send their kid to college or buy a new automobile. They’re still getting slammed by these same companies with obscene fees and credit card interest rate hikes.
“And despite hearing from everyone in Washington that stabilizing the housing market is key to stabilizing our economy, they’re still having trouble modifying their mortgages, even as 10,000 families a day are hit with foreclosure notices.
“Mr. Chairman, I appreciate the work you have done, as I said at the outset of these comments, on the monetary policy side of the equation, and the positive indicators that we have seen in recent weeks. But these positive indicators seem to be stuck at the top.
“It is not insignificant, the accomplishment, of stabilizing the economy. Stabilizing these institutions is critical component if we are going to find our economy recovered.
“All of us work for the American people, the American taxpayer.
“But when can we expect the recovery that they have funded? When will working families see their rally? Their pay raise? Their jobs being stabilized?
“What are you doing as the holding company supervisor of these recipients of TARP funds and other extraordinary government assistance to ensure they are serving the interests of the American people?
“These struggling people, as we all know, aren’t ready for an ‘exit strategy’ for economic recovery efforts. First, the recovery must reach them.
“As we move forward, we need to make sure that we lay a strong foundation for economic recovery that will reach every corner of our nation. Part of that foundation will entail reforming financial regulation so that the mistakes that got us into this mess aren’t repeated.
“As you know, many of us here have called for, and the Administration has proposed, an independent consumer financial protection agency as part of that mission.
“But the Administration has also proposed expanding the Fed’s powers over systemically important companies. I have a number of concerns about this proposal as many of my colleagues do on this committee. Not least of which, is why does the Fed deserve more authority when institutionally it seemed to have failed to prevent the current crisis?
“Mr. Chairman, all of us understand the importance of the work you are doing – and that’s not just a platitude or a generous comment. And we all look forward to continuing to partner with you in this effort.
“But the financiers who engineered this crisis aren’t the reason we’re here. It’s the millions of families who are still struggling and falling further and further behind. And I hope that they can be the focus of our attention today as we talk about what needs to be done to get our nation back on its feet.
“So the basic questions that I have for you are:
“When will this recovery, when will this effort that we are making reach the families who are facing foreclosures, people who have lost their jobs, who are worried about their savings, who are worried about their long term retirement security? What are you doing, as the Fed to help see that they are going to reap the benefits of this effort?
“And secondly, as we talk about these large institutions, with the powers that already exist within the Fed over bank holding companies, we can sit up here and jawbone and ask these institutions to make a difference, but the Fed actually has the authority to make that difference, and there are many asking why that authority is not being exercised to convince these institutions that they have to be moving more aggressively when it comes to bank lending.”
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