In testimony on Wednesday, February 24, 2021 before the United States House of Representatives Committee on Financial Services, the Chairman of the Board of Governors of the Federal Reserve System, Jerome Powell, responded to questions regarding LIBOR transition from Representative Brad Sherman (D-CA), Chairman of the Investor Protection, Entrepreneurship and Capital Markets Subcommittee. Sherman had asked Powell: “In your view, is it necessary to have federal legislation to have a smooth transition after June 2023 when LIBOR is no longer published?”

Powell responded: “Yes, we think it will be. As you know, many LIBOR contracts are going to run off before then, but there will be a hard tail, as we say, and we do think federal legislation is the best answer.”

Pressed by Sherman on “those who think the private sector can just invent a synthetic LIBOR” that will “solve the problem,” Powell added: “No, federal legislation creating a path for a backup would be the best solution, we think.”

Powell’s support for a federal legislative fix to legacy contracts marks a significant change from his February 2020 testimony, when he told lawmakers: “in terms of the need for federal legislation, we have not reached a point where we think it’s going to be necessary.”