Powell says Treasury payments system is currently safe
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Federal Reserve chair Jerome Powell at a hearing Tuesday. Photo: Tierney L. Cross/Bloomberg via Getty Images
Federal Reserve chair Jerome Powell said he believes the Treasury Department's critical payments system is safe and that the Fed is committed to carrying out its role in the system with integrity.
Why it matters: The system disburses trillions of dollars each year on behalf of America's government, including payouts for Social Security and tax refunds.
- Democrats' fear is that the Department of Government Efficiency could attempt to restrict payments it deems wasteful, in violation of spending laws enacted by Congress. There are also risks of privacy breaches.
What they're saying: Asked by Sen. Mike Rounds of South Dakota, "is the system safe today?" Powell responded, "I believe it is."
- "And I will tell you we are very strongly committed to the integrity, efficacy, resilience, and all those things of this system," Powell continued in testimony Tuesday before the Senate Banking Committee.
- "People do depend on this in a big way, and we're committed to that," he said.
Yes, but: Powell was speaking of the part of the federal payment system the Fed administers, which consists of carrying out payments as directed by the Treasury Department's Bureau of the Fiscal Service.
- The Fed would not have control of any changes that happen upstream of its role in the process.
- Powell said that DOGE had not attempted to access the Fed data or its systems. In an exchange with Sen. Raphael Warnock (D-Ga.), he committed to inform the committee of any such attempt.
The big picture: Powell appears before Congress this week during fast-moving policy shifts, including with respect to financial regulation.
- For instance, work at the Consumer Financial Protection Bureau has been halted by the Trump administration.
- Powell conceded the action has left a gap in regulation. The Fed only monitors consumer compliance issues for smaller community banks, not large Wall Street firms.
- "I think bank accounts, overall, across the economy, are safe," Powell said. "We've still got deposit insurance at the FDIC, and the banking system is well-capitalized and safe."
The intrigue: The political backdrop puts Powell in the middle of a heightened culture war — an uncomfortable position for a central banker.
- Republicans say the Fed embraced left-leaning issues for too long. Democrats say the Fed has backed away from such initiatives as a political statement.
- "I believe that weaponizing an independent agency like the Fed for liberal positions from de-banking crypto to bank stress tests and the green financing scheme is not calling balls and strikes as a fair referee," Sen. Tim Scott (R-S.C.) said.
- "Donald Trump may be happier with you right now, but wading deeper into politics to please him over the long run will burn the reputation and the independence of the Fed and put our entire economy at risk," said Sen. Elizabeth Warren (D-Mass.).
What to watch: Powell said the Fed would examine concerns that customers are being "de-banked" for political views or crypto involvement — a hot-button issue for Republicans that has captured President Trump's attention.
- "I will tell you that I am struck and my colleagues are struck by the growing number of cases of what appears to be de-banking, and we're determined to take a fresh look at that," Powell said.
The bottom line: Unlike hearings in recent years, lawmakers did not quiz Powell nearly as much about interest rate plans and inflation.
- Instead, the focus was on policy related to government and policy under Trump, who initially appointed Powell, though their relationship has been rocky.
Editor's Note: This story has been updated with details from Powell's testimony.
