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Remarks by FDIC Chairman Martin Gruenberg at the
Institute of International Bankers
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Introduction
Good morning. I very much appreciate the invitation to speak to you today. I am especially glad to be here in person. Looking back to pre-pandemic days, there may have been a tendency to take events like this for granted. At least for me, not having had these opportunities for a few years was a reminder of the value of in-person dialogue. So it truly is a pleasure to be with you.
Economic developments over the past three years have been truly extraordinary. I would like to take the opportunity this morning to share some thoughts on the impact of the pandemic on the economy and banking system, how we got to where we are, the resilience banks have displayed during this period, and what I see as some important risks and challenges ahead.
The Pandemic’s Impact on the Banking System
Three years ago next week, many in-person economic activities across the United States essentially shut down because of the pandemic. The U.S. economy entered a recession that was unprecedented for its suddenness and severity. In a single month, between March and April of 2020, the U.S. unemployment rate increased from 4.4 percent to 14.7 percent.[1] GDP during the second quarter of that year was about 30 percent below its first quarter level.[2] There was every reason to be concerned about how consumers and businesses, including banks, would navigate the crisis.
The monetary and fiscal policy response to the crisis was equally unprecedented. Through measures to support the liquidity and functioning of financial markets, the Federal Reserve’s balance sheet increased in size from $4.3 trillion to $7 trillion in the five months starting March 11.[3] Relief measures enacted by Congress in response to the pandemic have totaled $4.6 trillion through yearend 2022.[4]
[1] https://data.bls.gov/timeseries/LNS14000000?amp%253bdata_tool=XGtable&output_view=data&include_graphs=true
[2] See table 1 at https://www.bea.gov/data/gdp/gross-domestic-product
[3] See table 1, page 4 of https://www.federalreserve.gov/publications/files/balance_sheet_developments_report_202008.pdf
[4] https://www.usaspending.gov/disaster/covid-19?publicLaw=all
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