Democrats in Congress have been calling for legislation to require the Federal Reserve to address racial inequality, but observers say that the central bank already has several regulatory tools at its disposal to tackle the issue. The focus on the Fed's potential role in helping right societal wrongs coincides with concerns about the coronavirus pandemic's devastating impact on minority communities, which have struggled to get access to government rescue programs. While the Fed may be able to utilize a number of policy tools to address racial inequality without Congress's passing new legislation, Ed Mills, a policy analyst at Raymond James, said that the Federal Reserve usually doesn’t act without legal directives.
A startling lack of Black appointees to the highest echelons of U.S. financial regulation has contributed to entrenching institutional racism by ensuring it does not receive sufficient attention. New research from Georgetown Law Professor Chris Brummer highlights the stark lack of minorities, especially Blacks, in leadership roles at major regulatory agencies like the Securities and Exchange Commission and the Federal Reserve. The headline figure is just plain shocking: Just 10 of 327 individuals appointed to senior financial regulatory roles since the New Deal of the 1930s was Black.
The coronavirus pandemic and the heightened attention on race have thrown new light on a longstanding source of economic inequality: Black communities have less access to credit than white ones. To address that gap, Washington and Wall Street are turning to a small network of lenders set up precisely to address that disparity. Community development financial institutions, or CDFIs, are community-based banks, credit unions and investment funds that lend to home buyers, small businesses and others in rural, impoverished and minority communities. Among CDFIs featured is CDBA member Optus Bank in Columbia, South Carolina.
Three Senate Democrats are calling for an inquiry into reports that officials at the Office of the Comptroller of the Currency halted at least a half-dozen investigations related to racial discrimination and redlining. “Recent reports indicate that senior OCC officials have abdicated their responsibilities — allowing banks to continue business as usual despite alleged violations of [Equal Credit Opportunity Act] and [Fair Housing Act],” the senators wrote to the acting Treasury Department inspector general on Thursday. The senators’ letter followed a July 13 ProPublica report that OCC staff over the last three years discovered at least six banks, including Bank of America and Cadence Bancorp, were allegedly engaged in discriminatory lending, but failed to reprimand or penalize the institutions.
U.S. Bancorp Community Development Corporation (USBCDC) today announced $1.15 million in grants to more than a dozen Black-led Community Development Financial Institution (CDFI) partners and – in partnership with the U.S. Bank Foundation – a grant to the African American Alliance of CDFI CEOs. This is part of U.S. Bank's overall $116 million commitment to addressing social and economic inequities. A total of 15 CDFIs will receive grants ranging from $50,000 to $100,000. Among the banks receiving grants are CDBA members Carver State Bank, City First Bank of DC, The Harbor Bank of Maryland, and Southern Bancorp
When the U.S. Small Business Administration rolled out the Paycheck Protection Program (PPP) in response to the economic toll of the coronavirus pandemic, Bank of St. Francisville helped administer funding to support a total of 197 small businesses, which helped 1,469 employees keep their jobs. The bank asked the owners of those businesses to share feedback on their experience working with Bank of St. Francisville.
Businesses owned by Black people were hit especially hard by the coronavirus pandemic because of a combination of geography, limited reach of a key federal aid program and weaker ties to banks, a new report from the Federal Reserve Bank of New York finds. This report offers “some pretty compelling evidence about the coincidence of the health crisis and business crisis in places that have high concentrations of Black businesses and Black residents,” said Claire Kramer Mills, assistant vice president at the New York Fed. “To have the greatest impact, the next round of Covid-19 relief should be more targeted geographically to focus on the hardest-hit areas and communities that lack critical infrastructure (hospitals, banks) to ameliorate the gaps,” the report said.
Black banks support Black communities, lending mostly to Black homebuyers and maintaining community lending even in tough economic times. Recent interest in supporting these institutions is a welcome and positive step. But their small sizes and declining numbers mean that today, they cannot tackle the problem of capital access in predominantly Black neighborhoods by themselves. To bring greater capital to communities of color, our recent study on the benefits and limits of Black banks suggests a two-pronged approach: increase capital to Black banks, and adopt policies that support community development financial institutions (CDFIs) more broadly.
Morgan Stanley announced $14.6 million to support long-time partner Carver Bancorp, Inc., one of the nation's largest Minority Depository Institutions (MDI). Morgan Stanley's grant enabled Carver to buy back shares and bolster its capital position to help weather the economic impact of COVID-19 in the wake of the pandemic. In addition, the grant will help the bank assist small businesses and customers that were affected by COVID-19, particularly those that did not receive federal relief loans. Previous commitments Morgan Stanley has made include $10 million in grants to support Minority Depository Institutions (MDIs) including Industrial Bank of Washington, D.C.