Brian Cheung of Yahoo Finance joined Yahoo Finance Live to review the details of Powell’s testimony on Capitol Hill, as well as the national shutdown that hit the Federal Reserve’s banking system.
Video transcription
– Let’s check with Brian Cheung, because Jay Powell was testifying for the second day on Capitol Hill. But then there was the surprising national unavailability, which hit the Federal Reserve’s banking system. What can you tell us about this, Brian?
BRIAN CHEUNG: Yes, absolutely, well, kicking off, I think, with the main breaking news, I think, that happened in the last hour or so, the Federal Reserve experienced an interruption in some of its main settlement systems that allowed the banks essentially send funds, transfer funds to each other.
Now, the Federal Reserve says the outage started at 11.15 this morning. It lasted about three hours, about a quarter after 2 pm Eastern time. The Fed said the problem was resolved and that users should have been able to return to the settlement system without any problems. But then the Fed clarified after that fact that they were still in the process of restarting it.
And it was only about 20 minutes ago that the Federal Reserve finally said that its main services, such as Fedwire and the National Settlement Service, were online again and had resumed processing their normal services. Now, the Federal Reserve said that this was an operational error by the Federal Reserve, therefore, not necessarily saying it was a hack of any kind.
This is definitely not the case, based on what the Federal Reserve is saying, but again, about a three-hour shutdown that essentially prevented banks and other financial services from transferring money from each other, definitely putting a little bit of shade about the testimony of the president of House Financial Services, which happened early in the morning.
– And Brian, talking about that testimony, I think a lot of investors are watching. It was the second day in a row. His earnings comments caught most of the attention yesterday. Something surprising to you about what we heard from Jay Powell today?
BRIAN CHEUNG: Well, not really. That is to say, this is usually the case on the second day of consecutive hearings, many of the same questions, many of the same answers as the president of the Federal Reserve.
But, of course, the outlook for the economy is a big focus here, and the Federal Reserve Chairman making it very clear that at least for now the Federal Reserve wants to wait and see where the economy is going while the vaccine launch continues. Here’s what the Fed chairman told the House Financial Services Committee this morning.
JAY POWELL: We are in a situation where the best thing we can do is to open these sectors as quickly as possible and, in the meantime, give people the support they need so that they can continue the life they had.
BRIAN CHEUNG: And the sectors he was referring to are obviously those high-contact, often low-income jobs that were lost during the pandemic, and an interesting statistic from Lael Brainard, a Fed governor who spoke separately this morning, the unemployment rate for the last quartile of Wage earners in the US are around 23% in January, which means that there is quite a hole to take the economy, although we have an unemployment rate of 6.3%. It definitely masks the real state of job loss, especially among low-income people.