On Wednesday, Federal Reserve Chair Jerome Powell had his second hearing this week, this time before the House Committee on Financial Services for his semi-annual monetary policy report.
This came after his hearing in front of the Senate on Tuesday, where he spoke on GSE reform, trade tariffs and bank stress tests.
The hearing in front of the House was much the same as Powell answered many of the same questions and continued to dodge those that were too policy-specific or political.
During the hearing in front of the House committee, representatives asked Powell about housing, and its effect on current monetary policy.
However, Powell explained that, while still important to the American Dream, the housing industry simply isn’t the economic driver that it once was, and actually doesn’t have much pull in monetary policy decision making.
“In terms of housing – the economy is so much bigger than it was before, and housing is so much smaller,” he said, explaining that the Fed does not put as much weight as it once did in the housing market when determining its monetary policy.
Powell went further to add that currently, factors that are holding back the housing market are not affected by monetary policy, and are more a labor market and supply-side issue. He explained that current issues in the housing market cannot be fixed by the Fed, but rather, were an issue that needed to be addressed by Congress.
As far as the current state of the housing market, and its ability to withstand a recession, Powell explained that, “In housing now, we do see that most of the borrowers now have higher credit scores so it’s a different market. If there’s a downturn we’re better prepared for it.”
In fact, he went further to tell Rep. Josh Gottheimer, D-N.J., that a good question Congress should be asking is: Did restrictions on credit availability go too far?
He explained that while restrictions were necessary due to the bad decisions made in the lending sector, but asked: Was it done at the right level? “It’s not too soon to be looking at that,” Powell said.
