Finance

Yellen: US has ‘much more work’ to close racial wealth gap

Treasury Secretary Janet Yellen arrives for a Senate Banking, Housing, and Urban Affairs Committee hearing to discuss oversight of the Department of Treasury and Federal Reserve over the CARES Act on Tuesday, November 30, 2021.
Greg Nash

Treasury Secretary Janet Yellen said in a speech Monday commemorating Martin Luther King Jr. Day that the U.S. has “much more work” to do to narrow racial inequalities in the economy.

In taped remarks at National Action Network’s annual King Day Breakfast, Yellen touted actions taken by the Biden administration to foster a more inclusive economy while highlighting decades of unequal treatment for Black Americans.

“From Reconstruction to Jim Crow to the present day, our economy has never worked fairly for Black Americans — or, really, for any American of color,” Yellen said.

Yellen referred to King’s iconic 1963 “I Have A Dream” speech, in which he compared the discrimination faced by Black Americans to a bounced check written by the founders.

“It is obvious today that America has defaulted on this promissory note insofar as her citizens of color are concerned,” King said in the speech. “But we refuse to believe the bank of justice is bankrupt!”

Yellen said that while King was referring to racial discrimination broadly, his reference to a promissory note alluded to the “economic injustice … bound up in the larger injustice he fought against.”

Black Americans have far lower levels of household wealth, employment and home ownership on average than their white counterparts due to decades of discrimination and exclusion. Segregationist laws and practices in the banking and real estate industries blocked Black households from economic opportunities available to whites, including key programs of the New Deal and GI Bill that helped fuel the post-World War II economic boom.

The U.S. passed several laws in the wake of King’s assassination in part to help close the racial wealth gap, including the Civil Rights Act, the Equal Credit Opportunity Act and the Community Reinvestment Act — a law meant to prevent racial discrimination in the housing market. 

King’s widow, Coretta Scott King, was also a driving force behind the Humphrey–Hawkins Full Employment Act, which added a mandate to achieve the lowest possible unemployment rate to the Federal Reserve’s mandate.

Even so, the racial wealth gap has persisted. 

The average white household was roughly 10 times wealthier than the average Black household before the COVID-19 pandemic, and the December white unemployment rate of 3.1 percent was less than half of the Black unemployment rate of 7.2 percent. While 74 percent of white households owned their home in the third quarter of 2021, only 44 percent of Black households did.

Yellen cited several steps taken by Treasury to target racial economic disparities, including a diversity and equity review at the department and the disbursement of $9 billion in Community Development Financial Institutions and Minority Depository Institutions.

“Of course, no one program and no one administration can make good on the hopes and aspirations that Dr. King had for our country. There is still much more work Treasury needs to do to narrow the racial wealth divide,” Yellen said.

President Biden’s sweeping social services and climate plan has been held up in the Senate after Sen. Joe Manchin (D-W.Va.) announced last month he could not support the Build Back Better Act in its current form.

The president is also facing pressure from progressive lawmakers and activists to unilaterally forgive up to $50,000 in federal student debt per borrower, which supporters say would help close the racial wealth gap.

Tags Janet Yellen Joe Biden Joe Manchin MLK Day
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