Democrats' bill would require Fed to focus on income, racial inequality
WASHINGTON — Several congressional Democrats introduced legislation Wednesday that would update the Federal Reserve’s official mandate to require it to carry out its policies in a way that would work to reduce racial and income inequality in the U.S.
Currently, the Fed’s so-called dual mandate instructs the central bank to promote maximum employment and stable prices, but the Federal Reserve Racial and Economic Equity Act would add a third directive that would require the Fed to consider racial inequality in employment, income and access to affordable credit when making monetary policy and in its regulation and supervision of banks.
The legislation, introduced by House Financial Services Committee Chair Maxine Waters, D-Calif., and Sens. Elizabeth Warren, D-Mass., and Kirsten Gillibrand, D-N.Y., would also require the Fed to report to Congress on how it would address racial disparities.
The introduction of the bill follows a move last week from Democratic presidential candidate Joe Biden’s campaign, which called for an amendment to the Federal Reserve Act to compel the Fed to report on current data and trends in racial economic gaps, as well as reports on how the Fed’s actions work to close those gaps.
“As the COVID-19 pandemic crisis and its economic impacts disproportionately affect communities of color, and communities around the country march in the streets for justice, the Federal Reserve must do everything it can to ensure the recovery is equitably shared,” Waters said in a press release announcing the bill.
Fed Chair Jerome Powell told senators in June that the central bank does “consider racial disparities and things like that as a routine matter” in its work, but he would not say whether the Fed’s policies itself had contributed to inequality.
Instead, Powell has said that the best way the Fed can address inequality is to foster a strong labor market with low unemployment.
“There’s no doubt more that all of us can do to address these issues, and this feels like a time when people are going to be looking for ways to do more, and we certainly are going to be doing that,” Powell said in June.
The Federal Reserve Racial and Economic Equity Act is co-sponsored by several prominent members of the House Financial Services Committee and the Senate, including Sens. Bernie Sanders, I-Vt., Cory Booker, D-N.J., and Reps. Carolyn Maloney, D-N.Y., Al Green, D-Texas, and Ayanna Pressley, D-Mass.