Mr. Speaker, I rise this afternoon to briefly discuss a very important issue. Several Members of the House have been working with the Congressional Black Caucus, the Financial Services Committee and other committees to increase access for…
Mr. Speaker, I rise this afternoon to briefly discuss a very important issue. Several Members of the House have been working with the Congressional Black Caucus, the Financial Services Committee and other committees to increase access for minority and women-owned business enterprises. Just this week, a new report was released by the Center for Community Economic Development on ``The Imperative of Closing the Racial Wealth Gap.''
I would like to include the summary of this report in the Record.
One of our primary focus areas over the last several months has been minority and women-owned business enterprises' access to the Troubled Asset Relief Program. That is the TARP.
Originally, TARP was designed for the purchase of toxic mortgage- related assets and presented several opportunities for women and minority-owned businesses to participate through asset management, legal, accounting, and other professional services.
Following the announcement of the TARP, Representative Gregory Meeks and I convened a meeting of over 60 minority asset managers and officials from the Treasury Department to ensure maximum participation by women and minority-owned businesses. We wanted to make sure that there were real opportunities for participation in the TARP.
As a result, legislative language was placed in the TARP bill describing specific steps Treasury was to take to ensure minority participation. In addition, members from the National Association of Securities Professionals met with Treasury several times and submitted written recommendations on how Treasury could work better with minority and women-owned businesses in the asset management space.
Unfortunately, shortly after enactment of the TARP, Secretary Paulson shifted the focus from toxic assets to direct infusions of cash to ailing financial institutions. This shift became known as the Capital Purchase Program. This shift both cut off major opportunities for minority and women-owned businesses via asset-related services, and opened an opportunity for participation in the way of debt underwriting and other banking professional services.
Unfortunately, these opportunities were never realized as banks that received TARP funds began a cycle of self-patronage, which led to little or no access to TARP contracting opportunities for women and minority-owned businesses. The most egregious of this type of patronage was highlighted through the banks paying themselves to underwrite their own debt.
Yesterday, the Secretary of the Treasury announced a new program aimed at purchasing toxic assets from financial institutions. With this announcement, we have come full circle and a significant opportunity for minority and women-owned businesses to participate has presented itself again. The Public-Private Investment Program could purchase up to $1 trillion in assets.
Members of the CBC's Economic Security Taskforce plan to convene a TARP/TALF Access Summit. The summit will be designed to ensure meaningful participation in TARP through the Public-Private Investment Program. Specifically, we hope to provide opportunities for minority and women-owned businesses and administration stakeholders to learn more about the new program and the capabilities of minority and women- owned businesses, develop short-, mid- and long-term strategies to better facilitate access to TARP resources, and identify specific contacts within the relevant agencies.
Moving forward, I believe this is an important initiative to ensure that we bring diverse talent to tackle the daunting economic problems facing us now.
Mr. Speaker and Members, this is very important. We have billions of dollars that are being injected into our society by way of the TARP program, the TALF program, and even the stimulus program. We have to make sure that these opportunities are open and available to all members of our society who are equipped, prepared, and ready to participate.
If our communities are to pull themselves up by the bootstraps, if our communities are to open up opportunities and create jobs, we cannot be shut out of these opportunities simply because only the ``big boys'' are allowed to play. We must make sure that these opportunities are available to all of the women and minority-owned businesses in our society also.
Laying the Foundation for National Prosperity--The Imperative of
Closing the Racial Wealth Gap--Executive Summary--March 2009
about the insight center
The Insight Center for Community Economic Development,
formerly the National Economic Development and Law Center
(NEDLC), is a national research, consulting and legal
organization dedicated to building economic health in
vulnerable communities. The Insight Center's
multidisciplinary approach utilizes a wide array of community
economic development strategies including promoting industry-
focused workforce development, building individual and
community assets, establishing the link between early care
and education and economic development, and advocating for
the adoption of the Self-Sufficiency Standard as a
measurement of wage adequacy and as an alternative to the
Federal Poverty Line.
This work is part of a national effort to close the racial
wealth gap in the United States for the next generation. For
more information on this initiative, visit http:// www.insightcced.org/communities/ClosingRWG.html. For more
information on the Insight Center, visit. http:// www.insightcced.org/.
acknowledgements
The primary author of this paper is Meizhu Lui, Director,
Closing the Racial Wealth Gap Initiative. Other Insight
Center staff who contributed include Roger Clay, Lori Warren,
Ludovic Blain, Victor Corral, and Esther Polk. We also thank
Betsy Leondar-Wright for her editing skills, and Rick
Williams for his expert advice.
The work of the leaders of the Initiative's issue working
groups is much appreciated. They include Thomas Mitchell,
Rudy Arredondo, John Powell, Jose Garcia, Barbara Robles,
Karen Edwards, Maya Rockeymoore, Tse Ming Tam, and Don
Baylor. Additional experts can be found at
www.insightexpertsofcolororg. The Insight Center gratefully acknowledges the generous
support of the Ford Foundation, and the ongoing commitment of
Program Officer Kilolo Kijakazi to building the field.
executive summary
For every dollar owned by the median white family in the
United States, the typical Latino family has twelve cents,
and the typical African American family has a dime.\1\ Wealth
is what you own minus what you owe: assets minus debts.
This racial wealth gap has roots in the past, and reaches
forward as well: it drains a family's capacity to give the
next generation a solid start. Without addressing the wealth
gap, racial inequality will be with us for generations to
come.
Anti-poverty programs have relied primarily on providing
subsistence income for today's necessities, not building
assets that lead to economic mobility and security, and in
fact have sometimes penalized low-income people for owning
assets. Wealth-building policies can help even the lowest-
income families gain stability and plan for the future.
Asset poverty is a new definition of poverty that reveals
how many families lack even minimal amounts of wealth. It can
be defined as not having enough savings to survive for three
months without income. People of color are far more likely
than whites to be asset-poor. The median family of color has
enough assets to last only five weeks at the poverty level,
compared with seven months for the median white family.\2\
the roots of the racial wealth divide in u.s. history \3\
Throughout U.S. history, federal and state governments have
provided ``wealth starter kits'' for some to turn their work
into worth. For example, governments have given gifts of
land, education, government-backed mortgages and farm loans,
a social safety net, and business subsidies to white
families, sometimes exclusively and usually
disproportionately.
The same governments that boosted white wealth took land
from people of color, denied them education, and erected
barriers to home and business ownership.
Native Americans lost assets not just during the first
centuries of U.S. history, through displacement and treaty
violations, but also more recently through tribal termination
and Bureau of Indian Affairs mismanagement.
African Americans were not just denied property; they were
property during slavery. Legal segregation and Jim Crow laws
pushed Black citizens to the margins of the economy, where
many remain stuck today. Wealth-building programs such as
Social Security and the post-WWII GI Bill at first excluded
African Americans, with multigenerational effects.
Latinos have been negatively affected by U.S. foreign
policy and immigration policy. Mexicans and Puerto Ricans
lost land to conquest. Temporary guest-worker programs and
exploitation of undocumented immigrants have blocked many
Latinos from getting a toehold in the U.S. economy.
Most Asian Americans were excluded from entry, and those
who were here were largely denied citizenship until after
World War II.\4\ Japanese Americans lost their assets when
they were interned during World War II. While some Asian
groups are now prospering, Southeast Asians continue to have
a very high poverty rate.\5\
Our country knows how to invest in wealth building for its
people. We now need to do so for everyone. We cannot afford
to squander America's greatest asset: its people.
comprehensive asset building for all
A comprehensive approach to asset accumulation must
recognize that wealth building should unfold over the course
of a person's life: learning to save as a child; earning more
than just a living wage; borrowing on fair terms to invest in
the future: buying a home; starting a business; and retiring
with security.
To make that possible for Americans of all races, these
interconnected policy areas must be improved to support
wealth building:
Land: Land loss led to the impoverishment of Native
Americans, Mexican Americans, and African Americans, and land
ownership will be essential to ending the racial wealth
divide. Suits over land claims brought by blacks, Mexican-
Americans, and American Indians must move quickly to
settlements. Native peoples, including Native Hawaiians,
still do not control their own land, which is held in trust
by the federal government and the state of Hawaii; they must
regain full ownership rights. Land loss due to fractionation
must be stopped. Fair access to subsidized loans must be
enforced.
Income and employment: Good jobs with good benefits are
important wealth-building tools. In 2007 the median household
income for African Americans was $34,001, and for Latinos
$40,766, compared with $53,714 for whites; about one-quarter
of Black and Latino families were below the poverty line.\6\
Since then, as the recession set in, unemployment has been
steadily rising. Immigrants and other people of color tend to
fill jobs with inadequate pay and benefits. Anti-
discrimination laws need to be enforced. Unionization should
be promoted. Public investment, including jobs in new green
industries, should be affirmatively targeted to communities
of color.
Savings and investments: The racial disparity in financial
assets (cash, investment accounts, stocks, bonds, etc.) is
wide: the median family of color had only $9,000 in financial
wealth in 2007, compared with $44,300 for whites.\7\ Access
to banks has been a problem on Native American reservations,
in inner-city neighborhoods and in rural areas. Public
programs that match savings or provide subsidies for college
tuition will allow more low-income people to build assets.
Matched savings programs should be tailored to fit the
cultures of people of color, such as building on existing
saving practices in immigrant and Native American
communities.
Debt and credit: Poor credit scores and unscrupulous
lenders keep many people of color stuck with only high-
interest credit options, unable to access fair credit for
college, homeownership or auto loans. African Americans paid
an average of 7% for new car loans in 2004, compared with 5%
for white borrowers.\8\ African and Latino students are far
more likely to have unmanageable student loans, defined as
monthly payments over 8% of income.\9\ A new federal
Financial Product Safety Commission watching for
discriminatory practices while protecting all consumers is
sorely needed.
Homeownership: The sub-prime mortgage crisis is devastating
communities of color. Discriminatory and unregulated
practices have led to foreclosures and an estimated loss of
at least $165 billion in wealth in communities of color.\10\
Black and Latino homeowners are now facing twice the rate of
subprime-related foreclosures as white homeowners.\11\ In the
short run, a foreclosure moratorium and a federal program to
renegotiate mortgages on fair terms are needed. In the long
run, affordable housing must become a national priority.
Business ownership: Fourteen percent of white families but
only 7% of families of color owned equity in a business in
2007.\12\ The majority of minority-owned businesses have no
paid employees.\13\ Minority business start-ups use personal
savings and credit cards more often, and receive prime bank
loans less often, than white business owners. Ensuring
greater access to public and private investment capital is
essential to close the gap. Government procurement programs
can be used to boost businesses owned by people of color.
Social insurance: Laid-off workers of color are less likely
to get unemployment insurance than white workers; and workers
of color tend to put more into Social Security than they take
out in retirement benefits.\14\ Fairer rules in both programs
would broaden their reach. But the disability and survivor
programs are very important to African Americans; these
programs must be protected against cutbacks.
The Tax Code: Currently tax policy prioritizes further
asset-building for wealthy asset owners instead of helping
wage earners acquire assets. The mortgage interest deduction
reduces taxes mostly for owners of high-priced homes who are
disproportionately white; low-income taxpayers who do not
itemize get no benefit. Making the deduction refundable to
low-income homeowners would help close the race gap. A
parallel rent deduction would benefit many people of color.
Taxes on the very wealthy, such as the estate tax, need to be
protected and expanded in order to broaden asset ownership to
more people.
seven principles for closing the racial wealth gap
From the recommendations made above, a number of principles
can be distilled. They represent a framework that our leaders
must pursue to lay the foundation for the full participation
of all members of our society in our economy.
1. Craft public policies to support wealth creation and
provide opportunities to move up the economic ladder for all
those stuck on the lower rungs.
2. Ensure full participation in programs intended to be
universal through program design and implementation measures,
targeting those often overlooked.
3. Draw upon the perspectives of experts of color to
develop public policy.
4. Expand and enforce policies that eliminate
discriminatory practices in the private and public sectors.
5. Promote the collection of racial and ethnic data
essential to evaluating policy effectiveness.
6. Support community-wide prosperity through community-
based economic development.
7. Recognize that a comprehensive human-capital agenda is
needed.
In his inaugural address, President Obama said, ``The state
of the economy calls for action . . . not only to create new
jobs but to lay a new foundation for growth.'' By giving
populations that have endured years of disinvestment a boost
onto the economic ladder, we can lay a foundation for renewed
national prosperity.
end notes
\1\ Federal Reserve Board, 2007 Survey of Consumer
Finances, ``Full Public Data Set'' (Washington: The Federal
Reserve Board, 2009), http://www.federalreserve.gov/pubs/oss/ oss2/2007/scf2007data.html.
\2\ Authors' calculations of Federal Reserve data.
\3\ This section is based on The Color of Wealth, by Meizhu
Lui, Barbara Robles, Betsy Leondar-Wright, Rose Brewer and
Rebecca Adamson, The New Press, 2006.
\4\ Ibid, pp. 198-100
\5\ Ibid., p. 213
\6\ U.S. Census Bureau, Income, Earnings, and Poverty Data
from the 2007 American Community Survey.
\7\ Federal Reserve Board, Changes in U.S. Family Finances
from 2004 to 2007: Evidence from the Survey of Consumer
Finances, February 2009.
\8\ Consumer Federation of America. African Americans Pay
Higher Auto Loan Rates but Can Take Steps to Reduce this
Expense. Washington, DC, 2007.
\9\ King, Tracy and Ellynne Bannon, The Burden of
Borrowing: A Report on the Rising Rates of Student Loan Debt,
State PIRGs' Higher Education Project, March 2002.
\10\ Schloemer, E., Li, W., Ernst, K., & Keest, K. (2006).
``Losing Ground: Foreclosures in the Subprime Market and
Their Cost to Homeowners,'' Durham, NC: Center for
Responsible Lending; Center for Responsible Lending. (2007).
``Subprime Lending is a Net Drain on Homeownership.'' (CRL
Issue Paper No. 14), Washington: DC: Center for Responsible
Lending.
\11\ Oliver, Melvin L. and Thomas M. Shapiro, ``Sub-prime
as a Black Catastrophe,'' The American Prospect, October
2008, 11.
\12\ Federal Reserve Board, Changes in U.S. Family Finances
from 2004 to 2007: Evidence from the Survey of Consumer
Finances, February 2009.
\13\ Robles, Barbara, ``Latino Entrepreneurship and
Microbusinesses: A National and Border Economy Snapshot,''
AAPSS Blog, October 5, 2007 Survey of Business Owners, 2002
Economic Census, Department of Commerce, Bureau of the
Census.
\14\ Social Security Administration, Hispanics, Social
Security, and Supplemental Security Income, Table 7,
``Characteristics of Hispanic beneficiaries of Social
Security and all beneficiaries,'' 2005.