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Fed Chair says U.S. 'May Well Be In A Recession' As Coronavirus Pandemic Spreads | TODAY - YouTube
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Congress is not alone in stepping up to
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try and rescue this economy the Federal
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Reserve the nation's central bank is
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taking emergency measures to help
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businesses and Americans alike cutting
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interest rates buying up hundreds of
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billions of dollars of debt and offering
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trillions in loans to banks and joining
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us now in a rare and exclusive live
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interview is Jerome Powell who is
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chairman of the Federal Reserve mr.
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chairman good morning to you it's good
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to have you with us good morning thank
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you Savannah well the Federal Reserve
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doesn't exactly print money but as one
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writer put it you do have the ability to
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conjure money out of thin air my
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question to you is simple is there any
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limit to the amount of money the Fed is
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willing to put into this economy to keep
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it afloat is it a blank check Savannah
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we in certain circumstances like the
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president we do have the ability to
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essentially use our emergency lending
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authorities and the only limit on that
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will be how much
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backstop we get from the Treasury
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Department we're required to get full
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security for our loans so that we don't
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lose money and so the Treasury puts up
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money as we estimate what the losses
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might be but essentially the answer to
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your question though is no we can we can
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continue to to make loans and really the
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point of all that is to support the flow
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of credit in the economy to households
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and businesses so you're saying no it's
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not a blank check but yes you're
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prepared to spend an unprecedented
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amount we certainly are it's not a blank
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check in the sense that we we are
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limited by the ability to take losses
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and and but but I would say that the
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number effectively one dollar of loss
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absorption of backstop from Treasury is
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enough to support ten dollars worth of
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loans so really the answer is we will we
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what's happened is all over the world
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investors have pulled back to very very
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less risky things that's understandable
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but what that's meant is that many
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places in the capital markets which
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support borrowing by households and
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businesses I'm talking about mortgages
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and car loans and things like that have
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just stopped working so we can step in
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and replace that lending under our
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emergency lending powers and we will do
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that we
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we will look wherever there is in the
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capital markets where credit is not
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flowing we have the ability in this
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unique circumstance to temporarily step
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in and provide those loans and we will
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keep doing that aggressively and
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forthrightly as we have been the
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president has said he would like to see
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the country raring to go by Easter
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what's the country back open public
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health experts have resisted that time
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line can the economy handle a
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months-long shutdown if that is what the
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public health emergency requires and
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demands well this is a unique situation
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so I think this is people need to
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understand this is not a typical
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downturn what's happening here is people
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are being asked to close their
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businesses to stay home from work and to
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to not engage in certain kinds of
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economic activity and so they're pulling
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back and at a certain point we will get
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the the spread of the virus under
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control
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and at that time confidence will return
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businesses will open again people will
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come back to work so you you may well
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see you know significant Rises and
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unemployment significant declines in
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economic activity but there can also be
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a good rebound on the other side of that
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and that's actually one of the main
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things we're trying to do by assuring
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the flow of credit in the economy and
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keeping rates low is to assure that that
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rebound when it does come is as vigorous
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as possible I guess the issue though
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that's been sort of raised in these
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recent days is is the Cure worse than
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the disease is shutting down the economy
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for the sake of public health doing
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lasting damage to the economy that may
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not be recoverable so I I guess you're
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not a doctor you're an economist but
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where do you come down on that debate is
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it better to solve the public health
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crisis and then let the economy bounce
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back or do you think we should rush into
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opening the economy back up because
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frankly the damage being done is worse
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so that of course is not we're not an
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expert we're not experts in pandemics
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over here we don't get to make that
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decision I would say though you know
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that we would tend to listen to the
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experts dr. foutch you said something
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like the virus is going to set the
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timetable and that that sounds right to
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me
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I
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the sooner we get the spread of the
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virus under control people will regain
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confidence when they become confident
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that is the case then they will very
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willingly open their businesses up go
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back to work the consumer will be
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spending so I think the first order of
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business will be to get the to get the
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spread of the virus under control and
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then resume economic activity as you
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well know a recession is a technical
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term it means two straight quarters of
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negative growth we've already had one
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quarter put it bluntly do you think we
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are already in recession do you think it
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is inevitable that we will be in
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recession you know we may be we may well
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be in a recession but again I would
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point to the difference between the this
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and a normal recession this isn't
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there's nothing fundamentally wrong with
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our economy quite the contrary the
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economy performed very well right
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through February we've got 50 year low
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in unemployment for the last couple of
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years so we start in a very strong
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position this isn't something that's
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wrong with the economy this is a
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situation where people are being asked
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to step back from economic activity
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close their businesses stay home from
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work so in principle if we get the get
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the virus spread under control fairly
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quickly then economic activity can
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resume and and we want to make that
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rebound as vigorous as possible yeah a
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lot of people say that after a recession
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like this you could see a big bounce
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back we didn't see that in 2008 you know
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it wasn't like that the average
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recession where you see a drop and then
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you see a big bounce back it was a slow
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and sluggish uncertain recovery after
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2008 but I think I hear you saying that
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once this public health issue is
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resolved you expect a robust bounce-back
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what I'm really saying is we don't know
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and and the sooner we get through this
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period and get the virus under control
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the sooner the recovery can come there's
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no other x we don't have comparable
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experiences to go back and look at we
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know that economic activity will decline
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probably substantially in the second
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quarter but I think many expectant and I
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would expect the economic activity to to
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resume and move back up in the second
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half of the year very hard to say
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precisely when that will be
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and it
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really depend on on the spread of the
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virus the virus is going to dictate the
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timetable here when we see some of the
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actions that the Federal Reserve has
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been taking and they're extraordinary
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and in some cases unprecedented I think
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some people will feel really kind of
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relieved and heartened and others might
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be feel a little worried what are the
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risks associated with taking some of
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these bold actions pumping so much money
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into the economy I mean one issue of
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course would be worrying about inflation
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or is there a long-term risk to the
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actions being taken now you know we
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don't really see that what we see though
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is what we see is small medium and large
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businesses are not able to borrow
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through their normal channels to some
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extent and so we step in and replace
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that that's a very healthy thing that's
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a positive thing we're providing relief
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we're providing stability to get us
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we're trying to create a bridge from our
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very strong economy to another place of
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economic strength and that's what our
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lending really does it's very broad it's
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a cause across small medium and large
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businesses will want we're already
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helping state and local governments and
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just places where we're in where credit
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is not being offered where it should be
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offered where we're really just it's
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really just a question of liquidity and
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credit availability we can step in and
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make that happen and that's a very
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positive thing and an appropriate thing
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to do in this highly unusual situation
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we're in the other issue that comes up
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is whether or not you might run out of
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ammo run out of bullets and and and to
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that point all right are you sorry that
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you didn't raise interest rates a little
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more when the economy was strong so
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you'd have more cushion now when it
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comes to this lending we're not going to
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run out of ammunition that doesn't
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happen you know we set the interest
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rates in time at what we think is the
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right giving the economy the right level
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of support if we'd raised interest rates
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more it would have been higher than we
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thought and economic growth would have
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been a little bit slower so it wouldn't
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have mattered in the end so I we really
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are always setting our interest rates at
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the level we think is appropriate and
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we've cut them to zero now we still have
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room to policy room in other dimensions
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to support the economy but the main
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thing we're doing now is is really with
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our lending programs that's the the
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principal thing we're doing now to
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support the economy is through
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that channel and if I'm sitting at home
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right now and I lost my job or I'm a
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restaurant owner and I laid off every
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single one of my workers or I own a nail
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salon and I had to close up shop does
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anything the Federal Reserve doing right
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now help me yes well so keeping rates
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low will will reduce the interest burden
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on people keeping the flow of credit
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will will will help people principally
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though I would look to the legislation
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that passed last night or this morning
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really which is going to direct aid to
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small medium and large businesses to low
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and moderate income communities to the
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unemployed to state and local
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governments to the healthcare system
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that's really where the immediate relief
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is going to come from the help from the
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Fed will be when the economy begins to
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rebound then we'll be there to make sure
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that that that rebound is as as strong
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as possible mr. Chairman I have to ask
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you I'm sure you're aware the president
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has been quite critical of the Fed and
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of you personally I'm not going to get
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into all of it but he is in tweets
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called you clueless called the Fed
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pathetic slow-moving does what the
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president says affect you and what you
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do does it make your job harder or do
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you just ignore it you know my
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colleagues and I here are totally
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focused on our mission of serving the
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American people we know that what we do
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is important for all Americans and we
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try to do that our absolute best to
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serve them in a way that is completely
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non-political nonpartisan just to serve
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all Americans that's our only focus we
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don't let anything else get into our
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thinking and I think you know that's
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just the way it always is at the Fed
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that we have a very strong culture
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that's deep in our DNA and and that just
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is the way it's always going to be and
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finally sir I in about ten seconds I
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have left you know we went back and
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looked this shows been on the air 60
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plus years I think it's been 30 years
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since we had a Federal Reserve Chairman
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on live maybe longer maybe never it's so
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rare to have an interview like this I
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just was curious why you decided to
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speak out and what is the message you
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want to send to Americans at this very
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difficult time
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so really the message is
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this that this is a unique situation
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it's not like a typical downturn we've
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asked people to step back from economic
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activity really to make an investment in
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our public health they're doing that for
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the public good and this bill that's
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just passed is going to try to provide
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relief and stability to those people the
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Federal Reserve is working hard to
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support you now and will and our
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policies will will be very important
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when the recovery does come to make that
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recovery as strong as possible
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all right Federal Reserve Chairman
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Jerome Powell sir I know these are busy
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times I appreciate your time this
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morning thank you thank you Savannah
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you
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