'People Feel Uncertain': Chris Van Hollen Presses Fed Chair Jerome Powell On Tariff Impacts

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During a Senate Banking Committee hearing last Wednesday, Sen. Chris Van Hollen (D-MD) asked Federal Reserve Chair Jerome Powell on the impacts tariffs will have on the economy.

Transcript

00:00Thank you. Senator Van Hollen. Thank you, Mr. Chairman and Chairman Powell. Good to see you.

00:07I want to start by acknowledging the continued uptake of the FedNow real payment system. I know

00:14I've raised the development and rollout of that system with you in many, many hearings over many

00:20years. We're now about two years after launch. I want to continue to work with you and your

00:25colleagues to encourage expanding and expanded adoption of the capacity capability and capacity

00:32so that customers have real time access to their money. So I just ask that we continue to work on

00:39that together. You agree? I do. I thought you might. Thank you. So I want to ask you about the

00:46student loan situation in the country and you've talked about this in the past and you've talked

00:52about how it can be a drag on the economy, especially when it gets to be very high in terms of

01:00balances that cannot be paid. According to the New York Fed, student loan balances grew by 16

01:06billion dollars to reach 1.63 trillion in the first quarter of this year. A data shows an uptick in the

01:15student loan delinquency rate overall, the age of delinquent borrowers and the number of newly delinquent

01:22borrowers. Department of Education, meanwhile, restarted debt collection activities last month

01:29and starting in July, nearly 2 million borrowers could see their wages being garnished. Meanwhile,

01:38here in the Senate, President Trump and Republican senators are working to pass this piece of legislation

01:47that would limit affordable loan repayment options and make it harder for borrowers to responsibly repay

01:56their debt and get back on a path toward financial health. So, Mr. Chairman, you said before in your

02:03testimonies that student loan debt can negatively impact borrowers ability to fully participate in our

02:10economy and that it can weigh down on the economy overall. Is that still your view? Yes, it is. And could

02:20you just share your assessment just from a factual perspective about how this problem seems to be growing

02:29at this point in time? And what would happen if we allow all of these borrowers to default? So the point

02:40I was making, I try hard not to comment on things that aren't Fed policy, but I broke that rule in this

02:46case many years ago. And I so I'll just say what I said then, which is, you know, you can you can make all

02:51kinds of investments and you can discharge. If you if you can't pay back the loan, you can discharge it in

02:57bankruptcy. The one exception we make is student loans. And I asked whether that is wise national

03:03policy, people borrow to invest in their education, that we do not forgive. It seems like for Congress,

03:10something for Congress to consider. That's all it's none of none of the Fed's business really. Ultimately,

03:14it's not a big macroeconomic thing. But I've said it before. I said it again. Mr. Chairman, I appreciate

03:19you're breaking your own will before and I appreciate your I won't do it again now. I cannot agree with you more

03:26about the anomaly in the ability to discharge a debt in bankruptcy. The idea that student loan

03:32sort of is the one category of debt that we don't allow to be discharged is confounding. I think,

03:40unfortunately, so far, it's been a sign of the power of some of the companies involved in in that area.

03:48And I just came from another committee where I'm in the ranking member. So I apologize if you already

03:56talked about the tariff situation. But I know this was obviously a factor that you all had to consider

04:04in making decisions about changes in the interest rates. Obviously, there's a lot of uncertainty in the

04:10economy. I may hear it every day from Marylanders, we have the Port of Baltimore, we have lots of small

04:16businesses that rely on tariffs. You're an economist, you know, that increasing tariffs is like

04:22increasing taxes across the board. But can you just speak to the uncertainty component of all of this

04:29and how that is weighing on people's decisions? So surveys show very widely that people feel uncertain about

04:37the economy. And they do point to tariffs in that answer. I will say, though, that that actually peaked

04:44back in in April and has come down a little bit. And if you talk to businesses, I talked to an unusually

04:50large number of business people in the last couple of months. And the feeling is a little better now

04:56than it was. They're getting on with it and feeling, you know, I'd say surveys are still showing

05:01depressed sentiment. But but it's moved up from where it was. I would say, Mr. Chairman, that may

05:08be the case at this moment. But we all know that we could wake up any morning and see another tweet.

05:14And that could change dramatically. So I appreciate I appreciate your your efforts to try to do what you

05:23can to meet your dual objectives at the Fed. Thank you, Mr. Chairman. Yes.

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