Yahoo News: The Fed Has A Little-Known tool To Address Economic Inequality

Yahoo News, October 23, 2020, The Fed Has A Little-Known tool To Address Economic Inequality

A prominent tool used to aid inequalities in the system by the Federal Government is the Community Reinvestment Act (CRA). The CRA is appointed one of the most powerful tools the Government has to address inequalities, and furthermore requires banks to lend and invest in low- and moderate-income communities where the bank has physical branch locations. The CRA is set to ensure that banks are not discriminating against poorer communities, offering them the same access to credit as wealthier communities.

The Fed has become increasingly mindful of the wealth and income gap in the United States, observing in 2019 that extended periods of low interest rates had the effect of pulling in lower-income and minority workers without any inflationary consequences.

The murder of George Floyd in May appeared to weigh on Fed Chairman Jerome Powell, who kicked off his June press conference by acknowledging “issues of racial equality” — a notable development for an institution that tends to shy away from commenting on social issues.

In September, the Fed unveiled its first attempt at reforming its approach to the CRA. Brainard, the Obama-appointee who headed the CRA efforts, is rumored to be a top candidate for Treasury Secretary or Fed Chair under a Joe Biden administration.

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Redlining and Neighborhood Health

Before the pandemic devastated minority communities, banks and government officials starved them of capital.

Lower-income and minority neighborhoods that were intentionally cut off from lending and investment decades ago today suffer not only from reduced wealth and greater poverty, but from lower life expectancy and higher prevalence of chronic diseases that are risk factors for poor outcomes from COVID-19, a new study shows.

The new study, from the National Community Reinvestment Coalition (NCRC) with researchers from the University of Wisconsin–Milwaukee Joseph J. Zilber School of Public Health and the University of Richmond’s Digital Scholarship Lab, compared 1930’s maps of government-sanctioned lending discrimination zones with current census and public health data.

Table of Content

  • Executive Summary
  • Introduction
  • Redlining, the HOLC Maps and Segregation
  • Segregation, Public Health and COVID-19
  • Methods
  • Results
  • Discussion
  • Conclusion and Policy Recommendations
  • Citations
  • Appendix

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