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Powerful Federal Reserve Is Finally Talking Race: 3 Things Black America Needs To Know

Powerful Federal Reserve Is Finally Talking Race: 3 Things Black America Needs To Know

Federal Reserve
Powerful Federal Reserve Is Finally Talking Race: 3 Things Black America Needs To Know. Photo: Raphael Bostic during an informational hearing at the Capitol in Sacramento, Calif., Jan. 31, 2007. (AP Photo/Rich Pedroncelli)

Among the responsibilities of the Federal Reserve, the central banking system of the U.S., is supervising and regulating financial institutions and activities. It’s also responsible for promoting consumer protection and community development, according to its website.

But Black America has often not felt financially protected by the Federal Reserve.

It seems, however, the Federal Reserve is now willing to talk about — and possibility confront — economic racism. Last year saw, for example, the publishing of a new Federal Reserve study on the wealth gap

Soon after George Floyd was killed by Minneapolis police, a Federal Reserve Bank president publicly denounced police brutality. Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, tweeted that Floyd’s killing showed “institutional racism that is actively taught and reinforced.”

“What’s most shocking to me about the video of George Floyd is not only that he was killed helplessly by police officers. It is that they knew they were surrounded by witnesses and being taped. They never blinked. They never hesitated,” Kashkari tweeted.

It seems the Fed is finally ready to discuss the economic ramifications of racism.

“A half-century since civil rights protests drove the United States to outlaw state-sanctioned racism, the Fed wants to bring the charged topic of racial inequality into its discussions of monetary policy,” Bloomberg reported.

During an October Fed webinar, Atlanta’s Raphael Bostic, the first Black person ever to run one of the 12 regional Fed banks, spoke about endemic racism and pointed out that it has caused a heavy economic toll on the country.

Kashkari, Bostic’s counterpart in Minneapolis, agreed, even though challenging inequality hasn’t historically been the Fed’s job. 

But Ursula Burns, the first Black woman to lead a Fortune 500 company, countered this. She said, the Fed was skirting its responsibility to Black people by acting as if its policies were color blind. 

“It embarrasses me,” said Burns, the former CEO of Xerox. “I don’t believe you are as boxed in as you guys would say you are.”

Burns added, “I want you to use the tools at your hand to actually build and develop a more inclusive society.”  

With the powerful Federal Reserve finally talking race, here are three things Black America needs to know.

1. Federal Reserve gets more comfortable about race

Bostic is optimistic that the Fed will address race issues.

“The Fed has become much more comfortable just acknowledging the challenges, the burdens and the barrier that racism poses for the economy,” Bostic told Bloomberg in a separate interview. “That is actually an economic issue that is relevant for us to be talking about because it affects our mandate.”

2. Is the Federal Reserve compromising its independence?

While some in the Fed feel it’s time to deal with racism, Charles Plosser, former president of the Philadelphia Fed, said that adding race and inequality to the Fed’s mix risks compromising its independence.  

“This new framework will likely pull the Fed deeper into politics,” Plosser told Bloomberg. For businesses, investors and entire economies, the central bank’s decisions about whether to raise rates, cut them or leave them where they are could become “more discretionary and less systematic or predictable.” 

He added, “There are many constituencies which will argue at any point that employment could be higher in some group.”

3. Unemployment and Black America

Black unemployment, which stands at 9.9 percent in comparison to 6 percent for whites, is on the list of issues for the Fed to address.

In the Fed’s“Statement on Longer-Run Goals and Monetary Policy Strategy,” which was issued last August following a 20-month-long strategy review, there is a passage that reads: “The maximum level of employment is a broad-based and inclusive goal that is not directly measurable and changes over time owing largely to nonmonetary factors that affect the structure and dynamics of the labor market.”

Listen to GHOGH with Jamarlin Martin | Episode 73: Jamarlin Martin Jamarlin makes the case for why this is a multi-factor rebellion vs. just protests about George Floyd. He discusses the Democratic Party’s sneaky relationship with the police in cities and states under Dem control, and why Joe Biden is a cop and the Steve Jobs of mass incarceration.

This means the Fed will pay more attention to the Black unemployment rate.

“In practical terms, the change means the Fed might now let the economy rev a little higher before it starts tightening credit. The Fed’s target for inflation, 2 percent, can be viewed a little more loosely. Overall unemployment, this new thinking goes, can be allowed to fall further in order to give minorities a better chance to find good jobs,” Bloomberg reported.