Hearing: Joint Economic Committee with Federal Chairman Ben Bernanke

Statement

Statement of Carolyn Maloney, Vice Chair
Joint Economic Committee Hearing

March 28, 2007

Thank you, Chairman Schumer. I want to welcome Chairman Bernanke and thank him for
testifying here today.
This hearing comes at an important time, because monetary policy is at a critical juncture. With
new risks in the housing market and weak business investment, the Fed last week essentially
acknowledged that economic conditions may be deteriorating more than expected.
Evidence of a slowing economy is building and the concern is that the unemployment rate will
begin to rise if slow growth continues, which argues for easing rates. At the same time, inflation
has been higher than the Fed is comfortable with over the longer-term, which seems to have
prevented the Fed from lowering interest rates.
To ease or not to ease rates? How the Fed will answer that question is what we will all try to
divine today. I look forward to gaining some insights into how the Fed will balance the various
risks to the economy.
How American families are faring should be part of the Fed's equation, because the economy is
weakening even before many have shared in the gains from the economic growth we have seen
so far. Income is growing the most for executives and highly compensated individuals, but
ordinary workers are only just beginning to see their paychecks rise above inflation. The ability
of American consumers to keep spending may be flagging with the cooling housing market and
recent stock market volatility.
We are facing, by all accounts, a tsunami of defaults and foreclosures in the primary subprime
market. In each of our districts, our constituents are encountering payment shock as their
subprime loans reset to much higher rates. By some estimates, 2.2 Million homeowners with
subprime loans made through 2006 are at risk of losing their home.
Rising delinquencies on subprime home loans, while devastating to the many families who have
fallen prey to these vehicles, could also have broader implications for the economy. Some
economists have already started to compare the subprime market meltdown to the dot-com
bubble. Chairman Bernanke, I hope you will provide some reassurance that this is not the case.
In the House, we are working on comprehensive subprime lending legislation to fix this broken
system. One question before us today is whether the Fed will act under its Home Ownership and
Equity Protection Act powers to regulate unfair and deceptive practices to extend the proposed
guidelines to non-bank lenders or whether Congress should legislate to achieve that result.
Setting the right course for monetary policy is complicated by our current fiscal and international
imbalances. The challenge for this Congress is to return to the fiscal discipline that has been
squandered by the President and Congress over the past six years. Today in the House, we are
debating a realistic budget plan that adheres to pay-go principles for controlling the deficit and
bringing revenues into line with what we need to spend to defend the country and take care of the
needs of our citizens.
Mr. Chairman, thank you for holding this important hearing and I look forward to our discussion
about the economic outlook.

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