Federal Reserve officials were challenged Wednesday to make big policy changes to combat economic and racial inequality.
In response, the presidents of the Atlanta, Boston and Minneapolis reserve banks pledged to shake up some long-held practices — including adding more minority and labor voices to its Beige Book, which has long been dominated by business input.
Ursula Burns, the former CEO of Xerox, said the U.S. central bank, the largest and arguably most influential in the world, isn't serving all Americans.
"The Federal Reserve as the economic policy instrument in this country absolutely has to know, be passionate about, be interested in not just the wealthiest or the median, but all the people," Burns said in a virtual conference hosted by the Minneapolis, Atlanta and Boston reserve banks.
Believing it's not the Fed's job to help solve economic problems along racial lines is "ducking" the issue, she said at the conference, called Racism and the Economy.
Atlanta Fed President Raphael Bostic, the first Black Fed president, said the three banks were inspired to hold the conference following racist events in each of their districts. George Floyd whose death in Minneapolis sparked a global reckoning over police brutality. Ahmaud Arbery was shot and killed while jogging in Georgia. And in Boston, former Major League Baseball player Torii Hunter said he had a clause in his contracts barring a trade to the Boston Red Sox after he had racial slurs directed at him while playing games at the city's Fenway Park.
Burns emphasized that every branch of government should be doing what it can to create a more inclusive economy and to decrease the race- and gender-based disparities that still plague the country. Wages and wealth vary significantly along racial lines, and the coronavirus pandemic has further widened some of these as Black and Latino Americans, as well as women, lost jobs at a faster clip than others.
In response to Burns's comments, Minneapolis Fed President Neel Kashkari said that some people would argue that the central bank doesn't have the right tools to adequately combat some of these issues and would say that Congress, with its lawmaking authority, is better equipped to rectify these problems.
"I'm sure that you can live a life this way," Burns responded. "You've been doing it for 107 years. I just think it is not appropriate at all. It's not serving the people of this country."
Instant payments
Angela Glover Blackwell, founder of PolicyLink, a research institute aiming to advance racial and economic equity, said the Fed needs to do something significant and not just "tinker." She said the Fed should prioritize instant payments in the banking system and look at federalizing credit scores.
Bostic, Kashkari and Boston Fed President Eric Rosengren discussed a variety of changes that are underway at the central bank, including ramping up diversity in its own hiring. All spoke of the persistent wealth and income gaps in the economy created in part by lack of access to education and fair-lending practices. They said the Fed should elevate its research to show the impact of racism on the economy.
"I think we recognize we have a role to play and it's not ok for us just to say, 'Hey, it's somebody else's problem,' " Kashkari said. "We have to look at what role we can play to try to improve outcomes for all Americans because we are here to work on behalf of all Americans."
He said the Fed can, for example, include more diverse community and labor voices in its Beige Book report, which traditionally largely highlights the views of businesses and corporate leaders in each district. Bostic noted that the Fed could further prod banks to invest in communities of need via the Community Reinvestment Act, to which the Fed last month proposed changes.
Rosengren said that the Fed is going to have to be more patient before raising rates. During the last recovery, the central bank saw the overall unemployment rate fall much lower than it previously thought possible, and without much impact on inflation. That tightening in the labor market allowed for many previously sidelined workers, such as Black Americans and women, to enter the workforce.
"We have to think about this much more holistically," Rosengren said. "You can't just solve, for example, the wealth gap, without addressing all these other gaps. So thinking about collective action in a much more comprehensive way, as Fed policymakers, but also as the recommendations that we're giving to other policymakers, who have other tools than we have, is really important."
