Hearing of the House Financial Services Committee - Remarks from Rep. Riggleman, Hearing on Labor Force Participation and Growing the Economy for Average Americans

Hearing

Rep Riggleman: Thank you for appearing here today, it's good to see you, sir. We were talking earlier about fiscal policy and trying to prevent a downturn. I had a couple questions talking about incentivizing investment for the average American. Looking at policy, is it higher taxes, lower taxes, is it the USMCA or something like CECL that we've discussed before? What are some of the policies that would help for economic growth for the average American? I just wanted to get some of your thoughts on that.

Chairman Powell: Generally, I think we need policies that will support labor force participation, policies that will qualify people to hold jobs and progress through their careers. That's a big thing, that's a place that the United States lags [compared to] other comparable economies. And it's really something we need a national strategy to work on. "How can we raise labor force participation?" It won't be any one thing, it will be a range of things. The other piece of it is productivity. And productivity is really a combination of a couple of things. One is incentives for investment in technology, which drives productivity. I think basic research by the government has actually been an underlying driver over long periods of time. In addition, it's skills and aptitude of the work force, which we've been talking about. More productive workers have more skills and more training in that kind of thing. You can break it down to labor force participation and productivity. Those are the two things that determine the country's longer run growth. Of course, population growth as well. Assuming a level of population growth, it's labor force participation and productivity.

Rep Riggleman: Thank you. But I do have some concerns, Mr. Chairman, regarding the other part of your proposal that envisions the Fed itself entering the market for faster payments as a direct competitor to the private sector. And my understanding is that the Fed seeks to justify this potential action part on the perceived need for resiliency, which I believe raises several important questions. First, it's the notion that having two systems would provide resiliency necessarily assumes that every bank in the country, or at least an overwhelming majority of them, would have to connect to two systems, the private sector system and the yet to be built, government-run system. And this is based on my experience in big data when you're talking about what I've had to do in the military with electronic warfare. And looking at this and trying to interoperate systems, I think this would create enormous inefficiencies and impose needless costs on the American taxpayer and the private sector. Unless, of course, the Fed-run system would be fully interoperable with all the private sector alternatives. So, my question is: If I'm a community banker in Virginia, where I'm from, and I participate on the Fed's system, what guarantees can you give that community bank TODAY and that the two system would be interoperable? And if there are none, what is the purpose of having a second, government-run system?

Chairman Powell: As you know, this was based on a proposal from the Faster Payments Tax Task Force which had very broad representation, including the smaller banks who were quite supportive of this idea. We asked for public comment on this. We're reviewing comments. We got something like 400-900 comment letters. A lot of comment letters. And so, we're in the middle of that decision-making process. In terms of interoperability, it was the community banks who strongly pushed the Fed to move forward with this. In terms of interoperability it's a good issue, a good question and we'll need to work to make that happen. At least, to the level that it's functional. It may not be perfect, but if we move forward with this, we will certainly be looking at that as a characteristic to achieve.

Rep Riggleman: Thank you and I think it goes back to resiliency for me. I think it's the concern about resiliency that I had and when we had our discussion in committee is that if there are concerns about resiliency, that's just based on my experience in the private sector when it comes to big data, couldn't you probably address those concerns through the regulatory and supervisory authority that already exists in your space? And that's what I was getting to here, we were talking about resiliency with the multiple data centers and redundant systems that could be a problem with interoperability. Do you think resiliency could be something that's a function of what you're doing right now and keeping with one faster time payment system?

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