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Powell: Pandemic is a great increaser of inequality

Fed Chair Jerome Powell spoke on the U.S. central bank’s coronavirus programs and future plans for economic recovery.

Video Transcript

- Michelle Lou Petkoff asked on the latest Fed-- this is a bit related to a previous question. Are the latest fed policies likely to lead to more income inequality in the United States?

JEROME POWELL: Absolutely not. And I'll tell you why. As I mentioned, the-- the pandemic is falling on those least able to bear its burdens. It is a-- a great increaser of-- of inequality. If you just look at the labor market reports that the Bureau of Labor Statistics put out-- puts out, you will see that it is low-paid workers in the service industries who are bearing the brunt of this. It's also women to an extraordinary degree, as I mentioned.

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So everything we do, everything we do is focused on creating an environment in which those people will have their best chance to keep their job or get a new job, maybe go back to their old job if they've been furloughed.

Now, how does that work? So take-- take the-- take a company that, for example-- we won't give a name. But just as an example, a company that was investment grade on March 22 but that's now been downgraded to so-called junk, a non-investment grade company but that has tens and tens of thousands of employees. Now, why would we include that company in one of our programs? These are very large companies. And there are many of them would fit that description. I'm not thinking of any one.

Well, the reason is this. If a company like that doesn't have market access and can't roll over its debt and can't have enough cash on hand to deal with its obligations, what they're going to do is they're going to lay people off. They're going to cut costs. They won't have any choice. That is the choice they will make. Let's put it that way.

So by-- by-- by announcing our facility and including those companies, the ones who actually need the credit or needed the credit in March, we've-- those companies have now been able to go out and finance themselves and have now lots of cash on their balance sheets. And for the most part have-- these are companies that are not so directly affected as some of the service industry companies are that deal directly with, you know, with the public in large numbers. They've been able to avoid big layoffs.

So it really is-- the point of all this. And it-- I think we have to keep our focus really tightly on that goal of the labor market and supporting the labor market and not get distracted by-- you know, by other-- other goals.