Good Day. It's great to be with you, and I look forward to our discussion. As you all know, the COVID-19 pandemic has caused significant disruption and hardship in nearly every aspect of our lives, and it continues to weigh heavily on our national economy, which is why it will be the central focus of my remarks here today. Let me set the stage for our discussion by outlining the economic effects of the pandemic most relevant to the banking sector, describing the Federal Reserve's response to the crisis, and then making some observations about conditions for smaller banks.
The Pandemic's Effects on the Economy and Banking
We began this year with the economy in excellent shape—by some measures the strongest in decades. From my seat as a citizen, we appeared to be in a good position regarding both legs of our dual mandate, But that virus was dramatically altered with the onset of the COVID-19 pandemic. Efforts to contain the spread of the virus caused a sudden stop in economic activity during March and April last year 2020. While the extent of the closures and shutdowns varied widely throughout the country, the sudden loss of employment and the contraction in output were like nothing our nation has experienced before.
Households were in a generally strong financial position at the beginning of this year, but the restrictions implemented to fight COVID-19 resulted in an unprecedented spike in unemployment, which likely led to a number of families finding it difficult to keep up with their payment obligations. That is especially true for lower-income households, which may have had much less of a financial cushion before the onset of the crisis. Along with our monetary policy actions, stimulus checks and enhanced unemployment benefits provided in the CARES Act have been a substantial and timely source of financial support to households during this difficult time.
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