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FILE - Federal Reserve Chairman Jerome Powell speaks during a news conference, in Washington, March 3, 2020.
U.S. Federal Reserve Chair Jerome Powell warned Wednesday of the threat of a prolonged recession resulting from the viral outbreak. He urged Congress and the White House to act further to prevent long-lasting economic damage.
Speaking in Washington, Powell said that while efforts to provide relief by both the Federal Reserve and Congress have helped, the uncertainty of the pandemic threatens to drive a deeper and longer recession, which could have lasting damage to the nation’s economic productivity.
“Avoidable household and business insolvencies can weigh on growth for years to come,” he said.
Powell said additional rescue aid from Congress, though costly, would be “worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery.” He said that is a decision for “our elected representatives who wield powers of taxation and spending.”
Powell spoke a day after House Speaker Nancy Pelosi, a California Democrat, proposed a $3 trillion aid package that would direct money to small businesses, state and local governments and other beleaguered institutions. The bill would follow roughly $3 trillion in earlier financial assistance that the government has provided.
Meanwhile, leaders in the Republican-controlled Senate called that package “dead on arrival,” with Majority Leader Mitch McConnell saying Congress cannot “prop up this economy forever.”
The Fed itself has also intervened by slashing interest rates to near zero and creating numerous emergency lending programs.
But Powell repeated his previous warnings that the Fed can lend money to solvent companies to help carry them through the crisis. But a longer downturn could threaten to bankrupt previously healthy companies without more help from the government.