Powell, Mnuchin testify on pandemic response

Fed Chair Jerome Powell and Treasury Secretary Steven Mnuchin testified before the House Financial Services Committee. Yahoo Finance's Brian Cheung shares the details.

Video Transcript

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AKIKO FUJITA: Welcome back to Yahoo Finance Live. We are seeing Treasury Secretary Steven Mnuchin and Fed Chair Jay Powell testifying before Congress for a second straight day, today speaking before the House Financial Services Committee. Brian Cheung is following the very latest for us. And, Brian, yesterday, we saw a big rift between these two in that Senate hearing. What are we hearing today?

BRIAN CHEUNG: Well, we did, and, normally, when we hear from the Fed chairman in addition to the Treasury secretary, we're interested in their commentary on what the economy looks like, but the hearing today, in addition to yesterday's hearing in the Senate Banking Committee, had been largely focused on the legalese of how to use the CARES Act money, again, $454 billion allocated to the Treasury to dole out to the Federal Reserve to open the liquidity facilities, which it has done over the past few months, now the Federal Reserve now being asked by the Treasury to return about $429 billion of unused funds so that the Treasury hopes to reallocate into the next stimulus package.

Now the question is whether or not the Federal Reserve is cool with that. And Jay Powell, again, the Fed chairman, tip-toeing around whether or not he agrees with the Treasury secretary's interpretation of the need to claw back that money. Here's what he told the House Financial Services Committee earlier this morning.

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- We don't have a role in reading it. And so that's one thing. Our thinking is-- is not about the CARES Act money. It is more about support for the economy.

- Sure.

- And we were concerned that the public might misinterpret this as the Fed stepping back and thinking that our work is done. And that-- that is very much not the case.

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BRIAN CHEUNG: Very much not the case, but, again, interesting to see the choice of words from the Fed chairman. He said we don't have a role in reading the legislation. He agrees that Treasury Secretary Mnuchin is the sole authority over what to do with the money. However, it wasn't really clear from the Fed chairman's remarks whether or not he agrees with the interpretation that they should have taken the money back.

Now some readings of law would say that the Treasury cannot put the money into what they call the General Fund until 2026, but the Treasury's lawyers appeared to think that it was totally fine to do so, so very interesting to see the jawing between the Federal Reserve and the Treasury on display in that House Financial Services Committee hearing this morning.

ZACK GUZMAN: Yeah, Brian, we know the choice of words is always important when we're talking about the Fed. It sounds like Jay Powell has adopted the term I use to describe my dating life here when he's talking about his own economic outlook, saying that it's extraordinarily uncertain. Talk to me about what he's stressing into why there are still major risks.

BRIAN CHEUNG: Well, Zack, in the case of your dating life, in addition to the economy, you never want to have that level of uncertainty, but he did say that the economy is, clearly, in a much better place than it was at the beginning of this crisis, a lot of that likely owing itself to the backstops the Federal Reserve put in place with those 13 liquidity facilities. And, indeed, it was the case that we saw that vicious market sell-off in late March, in early April, but, as we've seen, the markets have bounced back up because of a lot of those backstops that the Fed has put in place.

Now, nonetheless, the Fed chairman has pointed out that we still have a long way to go. There's still about 10 million people without jobs. And, especially with the COVID cases rising, the concern is that there needs to be a lot more work done, especially on the fiscal side of things, in the coming months. So, clearly, in a much better place, at least, that's the viewpoint from the Federal Reserve. Hopefully, that's going to be the case for your dating life as well, Zack.

ZACK GUZMAN: I have no hopes, Brian Cheung, but I appreciate the update on the Fed front, still a lot of hopes that we could see stimulus through there. We've been discussing that. We'll see what happens. Appreciate the update. We're going to--