'There Is Simply No Place For Them To Live': Jon Tester Presses Jerome Powell On Housing Crisis

4 months ago

During a Senate Banking Committee hearing prior to the Congressional recess, Sen. Jon Tester (D-MT) spoke about housing costs.

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00:00Senator Tester from Montana's recognized. Well, thank you, Mr. Chairman. Thank you

00:04for the courtesy. Chairman Powell, good to see you here today.

00:08Appreciate your work. Look, regardless where I go in the state of Montana,

00:15housing is a big issue. Whether it's Billings or Butte or Bozeman or Busby or

00:20Big Sandy, it doesn't matter. Larger towns to medium-sized towns to small

00:25towns, housing is a huge issue. And I think it's a huge issue all over the

00:30country, and correct me if I'm not correct in that. And I was wondering how

00:34the housing challenges fit into the overall economic picture that you're

00:39seeing. So we do pay a lot of attention, and I would agree with you.

00:46We have significant housing issues in the country, and we had them before the

00:51pandemic. Certainly, the pandemic has created new distortions. And, you

00:58know, monetary policy works through interest-sensitive spending. There is no

01:02more interest-sensitive spending than, you know, buying a house and having a

01:05mortgage. So for sure, our tighter policy is having an effect on economic activity

01:12in the housing sector. But I would also say the best thing we can do

01:17for housing is to succeed in getting inflation down to 2% on a sustainable

01:23basis so that rates can come down, so that the housing market can get back to

01:27what was the pre-pandemic normal, which is to say still a housing shortage, but

01:32not dealing with the kinds of specific things we're dealing with now. So let me

01:37drill down a little bit. I'm speaking not necessarily from a housing cost

01:43interest, and you're correct on the things you just brought up. I'm speaking

01:46more from a standpoint of economic growth, and that there are plenty of

01:51small businesses, schools, hospitals, Main Street businesses that can't hire

01:56people, they can't expand because there simply is no place for them to live. How

02:01does that fit into your economic outlook metrics? Because I think it's, from my

02:08perspective at least, I think it's limiting the opportunity for expansion,

02:12it's limiting the opportunity for entrepreneurs, just business startups,

02:15and does that fit into the economic picture that you look at? So our mandate

02:22is for stable prices and maximum employment. And again, I think for

02:28housing supply, the best thing we can do is get inflation under control so that

02:32rates can come back down, so that we can have a more normalized set of rates and

02:37a more normalized housing system. But I think policies to increase housing

02:43supply are really not so much in the hands of the Fed, they're in the hands of

02:47legislatures, you know, state and federal. Do you believe that if we were to put

02:53forth some housing incentives, whatever they may be, that could have a, if it

02:59resulted, if those incentives resulted in more affordable workforce housing on the

03:03market, that would have positive impacts on the economy? You know, these are

03:07questions for you, but I would say this, that I'm aware that we, that housing is

03:14in short supply, and that for many it's a critical need for the workforce. And so

03:22more of it is better, but as to where the fiscal policy should, how you should

03:26prioritize that, that's not up to us. Look, I want to talk about the

03:30independence of the Fed for a second, because I know that you are a strong

03:34supporter of independence, as am I, and political influence I don't think helps

03:40with monetary policy in the country. And so give me an, give me your perspective

03:47at least on why the central bank independence is so critically important.

03:52Thank you, I'd be glad to. So essentially all advanced economies have adopted a

03:59policy of central bank and operational independence, and that just means that we

04:03make our decisions, we're instructed to make them without taking in extraneous

04:07factors, one of which would be politics. And the record is pretty clear that

04:11that's, that that's a good pro, it's a good institutional arrangement that

04:16serves the public well. And you know, we just want to stress, as we do

04:22periodically, that this is an institutional choice that we make as a

04:25country, and that as long as it's seen to serve the public well, it's a good choice.

04:29We think so. Okay, on advanced economies, there's some that talk about the economy

04:36of this country not being in very good shape. From your perspective, tell me how

04:42the economy of this country is doing compared to other advanced economies

04:45that have central banks. You know, so I'm in lots and lots of international

04:50discussions as part of my job, and the story for the last two years has been

04:54just how exceptional the performance of the U.S. economy has been, and that's not

05:00a secret. You know, there's a, there, clearly the U.S. economy has performed

05:05very well compared to sort of our advanced economy colleagues. Is there any

05:10country in the world with central bank, any advanced economy that's performing

05:14better? Better as a central bank? No, any economy that, that's just, that's an

05:20advanced economy that has a central bank that performs better than us. I, you know,

05:24none comes to mind. As I think of the majors, the answer would be no. Okay, thank you.

'There Is Simply No Place For Them To Live': Jon Tester Presses Jerome Powell On Housing Crisis

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