How Biden and the Federal Reserve are hoping to address the trillion-dollar cost of racism in America
As America's wealth gap continues to widen at an unprecedented rate, the Biden administration is looking to implement strategies and legislation to combat the ongoing problem.
According to The Washington Post, new legislation has been proposed by House Financial Services Committee Chairwoman Rep. Maxine Waters (D-Calif.) along with Sens. Elizabeth Warren (D-Mass.) and Kirsten Gillibrand (D-N.Y.). Their newly proposed policies would be focused on addressing racial and ethnic disparities that have created barriers for employment, fair and substantial income, wealth acquisition, and access to credit.
So, what is the proposed solution to the problem? It appears to start with acknowledging that there is, in fact, a problem. Speaking to The Post on Tuesday, Chiraag Bains, who serves as deputy director for racial justice and equity under the Biden administration, insisted that resolving the issue begins with recognizing its root. He noted that "the Biden administration recognizes 'the racial wealth gap has direct roots in discriminatory federal, state and local policies.'"
Bains also indicated that the president's plan involves using "the administration's vast purchasing power to increase government contracting with small, disadvantaged companies, including Black-owned firms, to 15 percent, equaling $100 billion over five years."
He added, "It will represent the biggest increase in small, disadvantaged business contracting since we started collecting data."
In an email, Raphael W. Bostic, president of the Federal Reserve Bank in Atlanta, explained how the federal reserve will also be instrumental in executing Biden's plan. "While the task of closing or eliminating racial gaps in economic outcomes is an all-hands-on-deck task, the Federal Reserve can help in several ways," Bostic said.
He noted that the task would also include the encouragement of "sustained maximum employment," he said, and incorporating"solutions to help Black homeowners build equity and wealth more quickly."
One example of the wealth disparities impacting African Americans is the accumulation of home equity. According to the Atlanta Fed's study released in December 2020, White homeowners accumulate home equity at a faster pace than African American homeowners as a result of credit ratings, income, and "other social factors" at play.
Mary C. Daly, president and CEO of the Federal Reserve Bank of San Francisco, has also noted how those factors have greatly influenced the financial and economic disparities African Americans face across the country. "The gaps we tolerate are costing us trillions of dollars …," Daly said, adding, "which is the economic pie for everyone."
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