Press conference exchange between MICHAEL MCKEE and Fed Chair Jerome Powell:

user: Mr. Chairman, there’s a small but growing number of people, including some former Fed economists, who say you should find ways to go beyond your mandate to provide additional support to the economy, which, in essence, would be fiscal support, since it hasn’t come from Congress. One of the suggestions is buying state and municipal securities directly. Another is perhaps following the BOE in increasing asset purchases to support additional fiscal programs or spending by the Treasury. Is there any circumstance under which you would consider those or those would be justified? How closely are you willing to work with Treasury?

assistant: You know, so I’m going to take your question literally. And so if the idea is money-financed fiscal policy, that’s not something that we would consider. So that— what by that is, is really, you know, the, the central bank is really funding fiscal activities of the government fairly directly. No, that’s not something we do. We have different jobs. That separation between those jobs is absolutely critical in our system of government. The—you know, the job of taxation and spending goes to people who have stood for election and been elected, and that’s the way it should be. There—they have to be responsible to the electorate. We have a specific, you know, job to do with, with a specific set of tools to support maximum employment, stable prices, financial stability, help the payment system, supervise banks—all the things we’re assigned to do. But we, we, we’re not going to get into financing the government and, and—by the way, when we buy government bonds, we don’t—it doesn’t actually, as you probably know, doesn’t change the amount of government debt outstanding. We issue a reserve to, to purchase a Treasury security, and that’s just another form—on the consolidated balance sheet of the federal government, that’s just another obligation. You change the—you change the, you know, the nature of the obligation, but not the total quantity of debt that the government has when you do these asset purchase programs. So I don’t know exactly what you’re referring to. But, you know, to—again, to take your question literally about financing fiscal activity, it’s really not something that we think the central bank should do and, and not something we’re looking at.

user: If I could follow up, there is a suggestion that you buy state and municipal securities directly in the same way that you buy mortgage-backed securities, providing, then, cash to municipalities that are cash-strapped at this point.

assistant: Well, we’re doing that with the Municipal Liquidity Facility now, so we’re, we’re buying, you know, with, with our own funds and with the CARES Act funds that, that we’ve gotten through Congress and the Treasury. We’re buying municipal securities of up to three years. So we’re doing that now as part of an emergency facility under section 13(3), you know, which has to meet the emergency requirements of exigent circumstances and which is all clearly laid out in the law. So we’re, we’re actually doing that now. But I, I see—what that is, from our standpoint, is a rare thing that we do under section 13(3) when regular intermediation in the capital markets or in the banking system has broken down. It’s no longer working. So we step in under 13(3), and we provide liquidity. What turns out to happen is, we announce a program, and the market starts working. So we only actually have to do a backstop. The amount of financing that’s happened in the municipal markets this year is much higher than it was the prior year, and, and we didn’t do it. We did—we’ve done a very small number of, of loans. But just the fact that we’re there as a backstop seems to—seems to get the private parties to get back together and, and get the market working again. So that’s what 13(3) is for. We’re not—that shouldn’t be a permanent thing where we’re just another federal financing agency that’s available to direct credit to—you know, to very worthy borrowers. That would be more along the lines of a GSE. That’s not what we do. We’re there to provide emergency liquidity when intermediation has broken down and then to pull back on that when— you know, when—as the markets normalize, we pull back and we put those tools away, as we did after the Global Financial Crisis and as we will here when the time comes.