Posted on August 6, 2020

Democrats Propose Expanding Fed Mandate to Reducing Racial Inequality

Brian Cheung, Yahoo Finance, August 5, 2020

Democrats on Capitol Hill are rallying around a proposal to require the nation’s central bank to pay more mind to racial inequality in its monetary and regulatory policies.

On Wednesday, a group of 20 House and Senate Democrats introduced a bill that would amend the Federal Reserve Act to require the central bank to operate “in a manner that fosters the elimination of disparities across racial and ethnic groups with respect to employment, income, wealth, and access to affordable credit.”

Sen. Elizabeth Warren, who co-authored the bill along with House Financial Services Committee Chairwoman Maxine Waters and New York Senator Kirsten Gillibrand, hope to force the Fed’s hand into using powers that they allege it already has.

“The Fed can use its existing authorities to reverse the serious racial gaps in our economy, including in our current recovery from the COVID-19 crisis – and our bill will require the Fed to do so,” Warren said in a statement.


Data from the Fed itself shows that the median white family in the U.S. had a net worth of $171,000 as of 2016, compared to the median Black family’s net worth of just $17,600.

Policies outside of the Fed’s purview – housing discrimination and access to health care – have contributed to these economic disparities. But the Fed’s monetary policy, which relies on transmission through the banking system, has been a driver of rising asset prices that may be driving inequality further considering the lack of financial assets held by Black families.


The bill would also require the Fed to consider the racial gap in its other functions, such as bank regulatory policy and its operation of national payment systems.


{snip} Democratic presidential candidate Joe Biden’s platform on addressing racial inequity includes a plan to amend the Federal Reserve Act along similar lines {snip}

The platform also includes efforts to resolve the lack of diversity at the financial regulators, where a Georgetown University study shows that only 3% of political appointees over the last 106 years have been Black.