Biden Urges Diverse Fed to Fight Racial Economic Inequality

(Bloomberg) -- Joe Biden proposed a series of steps Tuesday designed to bridge racial economic gaps in the U.S. and promised he would work toward a more diverse Federal Reserve Board that would help minorities access funds and economic development.

Biden called for an amendment to the Federal Reserve Act that would require the Fed to report on racial economic gaps and what policies the Fed is implementing to close these gaps.

“We’re going to strengthen the Federal Reserve’s focus on racial economic equity,” Biden said in a speech in Wilmington, Delaware. He said the Fed’s existing mandate promotes maximum employment and stable prices and “should add to that responsibility, and aggressively target persistent racial gaps in jobs, wages and wealth.”

The campaign later said Biden has not explicitly embraced a third mandate for the Fed dictating that it consider racial justice in its policies, but that seeking one in the future is an option.

In a policy statement released ahead of the speech, Biden’s campaign said he also backs the Fed’s previously announced shift toward a real-time payment system, which would make it possible for low-income people to have instant access to the money they are owed.

A Biden aide said that diversity would be an important factor in all his administration’s personnel decisions, which would include nominating members of the Federal Reserve Board of Governors and, eventually, a board chair.

All of the current governors are White. There are currently two vacancies on the seven-member board. President Donald Trump’s nominees to fill those positions have been awaiting confirmation in the Senate.

“We need to make bold, practical investments to recover from the economic mess we’re in, and to rebuild for the economic future our country deserves,” Biden said.

The racial equity plank not only rounds out his economic plan, but serves to address voters’ attention on the economic gap between African-Americans and Whites that was heightened by the economic crash, the virus pandemic and the protests against police brutality.

Biden has overwhelming support from Black voters, but there are concerns about whether he inspires younger African-Americans enough to come out and vote for him over Trump.

Arisha Hatch, executive director of the racial justice group Color of Change’s political action committee, said Biden’s plan is a good start but he needs to do more to outline how he would implement the vision.

“There are a lot of really positive things,” she said. “How will we actually get these things done? Where will the focus be? I believe we’re in the middle of a transformational moment in this country. To really motivate Black voters, Biden needs to work to provide a very positive vision of how he is a candidate that is able to meet this moment.”

In the past, Fed officials have focused on the impact of their monetary policy choices on the overall economy while paying less attention to the disparate impacts on minorities. Under Janet Yellen’s leadership, U.S. central bankers began highlighting such gaps at their regular policy meetings and including information on them in reports to Congress -- a practice that has continued under the current Fed chair, Jerome Powell.

Powell has said, however, that the Fed’s policies “absolutely“ don’t add to inequality.

The unemployment rate for Blacks and Latinos has been persistently high, often twice the level of the overall U.S. rate.

Biden’s proposals are embedded in the $3.475 trillion in new spending he proposed to help the U.S. recover from the coronavirus crisis and resulting economic downturn. His campaign said new taxes, including a new real estate tax that he detailed last week, would pay for the proposals.

Biden’s plan includes $30 billion in federal investment in a Small Business Opportunity Fund, which could be used to leverage $5 of private sector investment for every $1 of federal spending, meaning that the fund would begin with $150 billion in funding. The money to seed the fund would come from the $300 billion support for innovation that he outlined in early July.

Biden would also take steps to promote diversity in leadership at the financial regulatory agencies and would create a new role within the White House Council of Economic Advisers to focus on racial equity, including income and wealth gaps. His administration would also work with Congress and the courts to create best-practices for ensuring diversity among interns, clerks and staffers.

Biden’s campaign did not say he supports reparations for Black Americas, as some have advocated, but did say he backs a longer term study on the issue, an official said.

©2020 Bloomberg L.P.