Hearing Entitled: U.S. Treasury Debt in the Monetary System
Committee on Banking and Currency
2025-04-08
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Source: Congress.gov
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Transcript
The Task Force on Monetary Policy, Treasury Market Resilience, and Economic Prosperity will come to order. Without objection, the chair is authorized to declare a recess of the committee at any time. This hearing is titled, U.S. Treasury Debt in the Monetary System. Without objection, all members will have five legislative days within which to submit extemporaneous materials to the chair for inclusion in the record. I now recognize myself for four minutes for an opening statement. Welcome to the next hearing of the Task Force on Monetary Policy, Treasury Market Resilience, and Economic Prosperity. This hearing is entitled, U.S. Treasury Debt in the Monetary System. Today, we will evaluate the health of the U.S. Treasury Market and hear from our expert panelists on where improvements can be made. The U.S. Treasury Market is the deepest, strongest, and most liquid in the world. As such, it is the foundation of the global financial system, and we must safeguard its status and functions. The Treasury market is invaluable because of its multifunctionality. It equips investors with a safe investment in times of market stress. It serves as a risk-free benchmark for other financial instruments. It is also used to finance government operations and manage our debt, in addition to being used as an essential tool with which the Fed conducts monetary policy. Put simply, U.S. Treasuries are the most essential asset class to the global economy. The willingness of global investors to hold Treasuries, attracted by their low risk and high liquidity, is unrivaled. However, the Treasury market has undergone fundamental changes. First, the volume of U.S. debt has been rapidly increasing. Our national debt has skyrocketed to over $35 trillion. Supply chain constraints, global conflicts, and irresponsible fiscal policy have contributed to unparalleled and unsustainable growth of our national debt. The Treasury Department must market this debt to investors to meet spending obligations.
With more than $28 trillion outstanding, the Treasury market has doubled in the last decade alone. Second, paired with this explosion in Treasury debt, there are challenging conditions for market participants. The last decade has brought significant changes in technology and regulation, which have impacted the capacity of dealers to provide market liquidity in periods of stress. This was underscored most recently in March of 2020, where dynamic volatility in the Treasury market required the Federal Reserve to step in to calm the markets. We'll hear today from our witnesses about what these changes mean for the market and how we should respond. Today's hearing will also discuss how the Treasury market is an essential tool for the Fed's monetary policy goals. The Fed currently holds more than $4 trillion of Treasuries on its balance sheet, the largest single holder of Treasury debt. The composition of the Fed's balance sheet has a profound impact on market conditions and economic stability. We must ensure that the Fed's monetary policy functions aren't impeding the health of the Treasury market. An efficient and resilient Treasury market is paramount to U.S. leadership abroad and the dollar's status as the world's reserve currency. This privilege cannot be jeopardized. We must prioritize greater liquidity of the Treasury market for the United States, for the investor, and for the taxpayer. And with that, I yield back. The chair now recognizes the ranking member of the task force, Mr. Vargas, for four minutes for an opening statement.
Thank you very much, Mr. Chairman, and thank you for convening this hearing. I also want to thank all the witnesses for being here today. Thank you very much. We appreciate it. Before we discuss the issue of Treasury market resilience, we can't ignore the larger threat to our country's economy. Whether it's indiscriminate tariffs or increasing the deficit to cut taxes for the wealthy, President Trump's economic policies are making Americans feel less and less confident about the economic future. We see this in consumer sentiment data. The Conference Board's Consumer Confidence Index has fallen to its lowest level since January of 2021. The University of Michigan's Consumer Sentiment Survey for March had its lowest reading since November of 2022. And it's not just consumers that are feeling these effects. Businesses are tired of the chaos and the uncertainty. A survey conducted by the Federal Reserve Bank of Dallas had one executive respond, how can you do business planning with all the uncertainty and all the daily changes in the direction made by the Trump administration? The small business owners agree. A Harvard Business School study found that more than half of small and mid-sized business owners in the United States expect tariffs enacted by the Trump administration to increase their operating costs.
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