Today, Federal Reserve Chairman Powell appeared before the House Financial Services Committee to deliver his semi-annual testimony. House Financial Services Committee Democratic leaders including Congresswoman Nydia Velázquez (NY-07) and Congressman Brad Sherman (CA-30) echoed Congressman Blaine Luetkemeyer’s (MO-03) past concerns regarding the Financial Accounting Standards Board’s (FASB) Current Expected Credit Loss (CECL) rule in their questions to Chairman Powell.

“There seems to be a growing concern from more and more, not only bankers, but consumers,” said Congressman Luetkemeyer. “Back in December, the [National Association of Homebuilders] testified that for every $1,000 worth of increased cost, it costs 100,000 people in this country the opportunity to have a home loan...In my district, I have banks that no longer make home loans because of increased costs.”

Congresswoman Velázquez raised concerns she has “heard from several constituencies who have expressed concern about the impact the CECL methodology could have on lending to consumers and small businesses. They tell me the proposal, while well-intended, could be more procyclical than the current incurred loss method, especially in a downturn.” Specifically, Congresswoman Velazquez asked Chairman Powell about the potential economic impacts of CECL on “mortgages for a segment of our population who is already not participating in capital access, such as low-income borrowers or small businesses.”

Congressman Sherman asked Chairman Powell “I wonder whether you believe that we should make this major accounting change for banks that will deter lending, particularly in economic downturns, without a quantitative impact study?”

In response to multiple CECL questions, Chairman Powell assured members of the Financial Services Committee the Federal Reserve will be watching carefully to see what the actual results are and will take appropriate action if they find there will be harmful effects. “I’m very concerned about this. And as I said, there’s a growing groundswell of concern out there, and I hope you take that into consideration,” said Congressman Luetkemeyer.

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