Economic and racial inequalities are ‘long haul’ issues for the Federal Reserve
The Federal Reserve says it can only do so much to address earnings and wealth disparities, but feels an obligation to at least research the economic implications of uneven economic outcomes in the U.S.
The Fed’s own statistics confirm the divide. In its 2019 Survey of Consumer Finances, white families were reported to have had a median wealth level of $188,200, substantially larger than the median Black family’s wealth level of $24,100.
Growth rates in wealth-holding for Black and Hispanic families (33% and 65%, respectively) were faster than that of white families (3%) from 2016 to 2019.
“When we’re interacting with people, a lot of the time we’ll hear comments like ‘I wasn’t aware the Federal Reserve was interested in these issues,’” said Dionissi Aliprantis, director of the Program on Economic Inclusion at the Federal Reserve Bank of Cleveland.
The Cleveland Fed recently commissioned Cleveland-based artists Chris Webb and Perris Mackey for a video highlighting the reasons for why the central bank is studying racial inequities in the U.S. economy.
The video highlights economic issues that the program hopes to more deeply research, such as the ways in which discrimination (in education, the labor market, housing, and access to credit) further entrenches wealth and income gaps.
“These disparities still stand from a racism that’s systemic. It can be traced from employment to small businesses and wealth and still exist today in ways that still damage our country’s health,” Webb said.
Spoken poetry and collage art are not often associated with the central bank, which relies on little art when communicating its economic policies. The Fed uses interest rates and other policy tools to steer inflation and labor market conditions.
Even though Congress may be better suited to directly impact policies on education or housing, Aliprantis said the Fed’s mandate of “maximum employment” requires the central bank to at least pay mind to economic inequities.
“We’re trying to make it clear that we see ourselves as being in it for the long haul, and we’re committed to trying to understand and improve the situation,” Aliprantis said.
In other aspects, the Fed has a more direct responsibility in monitoring discrimination. As a primary banking regulator, the Community Reinvestment Act has required the Fed to ensure that a bank lends and invests in low- and moderate-income communities where it is present.
The Cleveland Fed is one of 12 regional outposts for the Federal Reserve System, which is headquartered in Washington, D.C. The Fed’s top leader, Chairman Jerome Powell, has similarly emphasized the need to research economic disparities — many of which were exacerbated by the pandemic.
“The economic downturn has not fallen equally on all Americans, and those least able to shoulder the burden have been hardest hit,” Powell said on Nov. 3.
Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.