Biden Economist Cecilia Rouse Can't Say When Relief From Inflation Will Come, Says 'Every Faith in Our Regulators' as SVB Fails (March 10, 2023)

The question was one every family was asking. “Inflation has been outpacing wages for about a year and a half. When can Americans expect that to reverse — relief from that?” a reporter asked President Joe Biden’s top economist, Council of Economic Advisers Chair Cecilia Rouse [1].

Rouse did not give a date. “We understand that inflation needs to come down. It’s why it’s the President’s highest priority,” she said. Forecasters, she said, “were expecting inflation to be easing to about 3.2 percent at the end of this year” [1].

The same briefing came on the day Silicon Valley Bank failed. “So, we have every faith in our regulators, and we can see that today,” Rouse said [1]. Two days later, regulators closed Signature Bank [3].

The video above shows the exchange from the March 10, 2023, White House briefing on the president’s budget, with press secretary Karine Jean-Pierre and Office of Management and Budget Director Shalanda Young. Quotes are from the official transcript published by the American Presidency Project [1].

”When Can Americans Expect That to Reverse?”

The reporter laid out the numbers from that morning’s jobs report. “So, the average hourly wages in the jobs report is up 4.6 percent. The CPI inflation is 6.4 percent,” the reporter said [1]. The Bureau of Labor Statistics had reported: “Over the past 12 months, average hourly earnings have increased by 4.6 percent” [2].

“So, we did see that on an annual basis — we saw some wage — the nominal wages went up slower than what we expect,” Rouse began. “We don’t have the CPI report for this month, but based on what we had in January. But I will highlight that real wages in January were higher than they were seven months ago” [1].

She pointed to the president’s agenda. “It is why the President is focused on lowering costs in his budget through the Inflation Reduction Act for Americans when it comes to healthcare, when it comes to childcare, when it comes to higher education,” she said [1].

“We’re expecting to see inflation ease over the year. There may be bumps along the way, however,” Rouse said [1].

”We Don’t Like to Focus on Any One Month”

The reporter asked one more. “On jobs, manufacturing lost 4,000 jobs. With the focus on manufacturing here, what happened?” [1]

“So, again, it — so, yes, but we had one month, and we don’t like to focus on any one month,” Rouse said. “What — again, I want to emphasize it’s really important not to over-focus on any one month of data” [1].

She credited Biden’s laws instead. “If we look at the Bipartisan Infrastructure Law, the — the CHIPS and Science Act, those are — even the Inflation Reduction Act, in terms of the investments in the green energy transition: All of those are going to bring the kind of manufacturing jobs that we know are so important,” she said [1].

”Every Faith in Our Regulators”

Another reporter asked about the news of the day: “Just wondering if we can get your reaction to the failure of Silicon Valley Bank and whether you’re concerned that other banks may fail as well.” [1]

“What I will emphasize as well is that our banking system is in — is in a fundamentally different place than it was, you know, a decade ago, and that the reforms that were put into place back then really provide the kind of resilience that we’d like to see. So, we have every faith in our regulators, and we can see that today,” Rouse said [1].

Asked about “a ripple effect” in the tech sector, where many depositors held more than the $250,000 the government insures, Rouse said: “One, I’ll refer you to the FDIC for how they plan — intend to handle” [1].

A third reporter asked whether the industry was ready for interest rate risk “in a different way than maybe SVB was.” “So, what I would say is that our banking system has — understands these kinds of heightened risks, and that I have full faith and confidence in our regulators,” Rouse said. “They have better tools than they had in 2008, and the banking sector has more resilience” [1].

”Unprecedented Times”

In her opening remarks, Rouse said the economy kept surprising the experts. “I mention this to underscore that we’re in unprecedented times,” she said. “As I’ve emphasized repeatedly, we’re confident we’ll get back to steady and stable growth. However, the road there will continue to be a bumpy one” [1].

By the Numbers

4.6%: 12-month wage growth in the February 2023 jobs report [2].
6.4%: the inflation rate the reporter cited [1].
3.2%: the year-end inflation forecast Rouse cited [1].
3.4%: the actual 12-month inflation rate in December 2023 [6].
4,000: manufacturing jobs lost in February, as the reporter noted [1].
2 days: from “every faith in our regulators” to the closing of Signature Bank [3].

What Happened Next

Another bank went down. On March 12, 2023, the Treasury, the Federal Reserve and the FDIC announced “a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority.” “Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law,” they said [3].

The Fed faulted its own supervisors. On April 28, 2023, the Federal Reserve released its review of the Silicon Valley Bank failure. Among the four “key takeaways”: “Silicon Valley Bank’s board of directors and management failed to manage their risks”; “Federal Reserve supervisors did not fully appreciate the extent of the vulnerabilities as Silicon Valley Bank grew in size and complexity”; and “When supervisors did identify vulnerabilities, they did not take sufficient steps to ensure that Silicon Valley Bank fixed those problems quickly enough” [4].

Inflation stayed above the forecast. Four days after the briefing, the BLS reported that prices had “increased 6.0 percent for the 12 months ending February” [5]. By the end of the year, “The all items index rose 3.4 percent for the 12 months ending December,” the BLS reported, higher than the “about 3.2 percent” Rouse cited [6][1].

For the bank questions the White House dodged a week later, see HYGO News’ page on Jean-Pierre and bank consolidation.