Pressley urges Fed, Treasury to ensure racial equity in emergency lending

Rep. Ayanna Pressley (D-Mass.) and Congressional Oversight Commissioner Bharat Ramamurti on Friday called on the Federal Reserve and Treasury Department to do more to ensure that minorities and women benefit from their emergency lending programs for businesses and municipalities.

“You have both acknowledged that the COVID-19 pandemic has had an outsized impact on Black and Brown communities and women,” they said in a letter to Fed Chair Jerome Powell and Treasury Secretary Steven Mnuchin. “And yet, your design of these programs appears to be widening racial and gender gaps rather than closing them.”

They pointed to layoffs in state and local governments facing large budget shortfalls. “A worker laid off in the public sector is 20% more likely to be Black than a worker who loses his or her job in the private sector, and 32% more likely to be a woman,” they wrote. “The solvency of our nation’s states and cities is a matter of racial justice.”

According to the letter, government officials should make the terms of the municipal lending program more generous and create a facility that will buy municipal bonds on the open market.

Pressley and Ramamurti also called for strict anti-discrimination rules in the “Main Street” lending program, directed at midsized businesses and nonprofits. Under that program, which had lent out roughly $4 billion as of Wednesday, the Fed will buy 95 percent of a bank loan to an eligible business.

“Because the MSLP relies on banks as intermediaries, Black and Brown business owners will likely deal with the same discrimination they face when normally attempting to access capital and credit,” they said. “When the Federal Reserve was asked how it planned to prevent the kind of discrimination that had been found in the similar [Paycheck Protection Program], it did not identify a concrete plan.”

They called for allowing more community development financial institutions and minority depository institutions to be eligible lenders. Nonbank CDFIs are not eligible, and the Fed has “acknowledged that program criteria like loan size and underwriting criteria ‘may limit participation by eligible CDFIs,’” according to the letter.

The Fed should also collect demographic data on borrowers and examine whether the loans are reaching minority communities, it said.