As uprisings against police brutality and systemic racism grip our nation, every institution must reckon with its contributions to the problem of black and brown unemployment and take responsibility towards crafting the solution.
The Federal Reserve is no exception.
During a recent appearance before the House Financial Services Committee, Fed Chairman Jerome Powell testified that he was "tempted to say all of [the Fed's] policies are focused on that problem."
Yet historically, Fed policies, including under Powell's leadership, suggest otherwise.
Raphael Bostic, President of the Atlanta Federal Reserve Bank, recently argued that the Fed "can play an important role in helping to reduce racial inequities and bring about a more inclusive economy."
The Fed's responsibility lies with what historian Carol Anderson calls "the kindling"—the preparation for the fire—rather than its catalyst. The kindling, she said recently, "is that bureaucratic violence that systematically destroys Black communities, that systematically erodes their citizenship."
In the 1970s, as economic prospects for Black communities deteriorated, civil rights leaders including Coretta Scott King and Congressman Augustus Hawkins renewed calls for a federal jobs guarantee. By 1978, a coalition led by Mrs. King helped push through a bill authored by Hawkins and Senator Hubert Humphrey affirming the Fed's dual mandate for maximum employment and price stability—a point that Fed Chair Jerome Powell was reminded of in February.
But by 1979, Hawkins was already warning that the bill's mandate was being violated, as it quickly became clear that the Fed was more interested in guarding against inflation than pursuing maximum employment—sacrificing the economic prospects of Black workers along the way. In Professor Anderson's terms, the Fed had, in effect, systemically eroded their citizenship.
So, what could the Fed do in this moment?
First, the Federal Reserve must expand its municipal liquid facility to ensure that big corporations aren't getting a better deal than our communities. That means eliminating the "penalty rates" currently offered to states and municipalities, allowing facility access to U.S. territories currently ineligible, and going beyond simply reversing population requirements that would have excluded many cities with large Black communities.
It is unconscionable that as cities and states battle these dual public health and economic crises, relief would be conditioned on accepting punitive interest rates.
Without these necessary changes, budget shortfalls will cause states and municipalities to hemorrhage jobs in a public sector that never recovered from the last recession, with particularly dire consequences for Black workers.
Workers who lose their job due to public sector layoffs are 20% more likely to be Black, as opposed to workers laid off in the private sector. As Congresswoman Rashida Tlaib noted to Powell, just as Congress must do more to ease state and municipal budget shortfalls, so too must the Federal Reserve.
Second, the Fed must heed the Humphrey-Hawkins Act provision requiring efforts to reduce disparities in unemployment rates between marginalized labor groups and the overall population. Today, there are between 65 and 100 million people who face discrimination due to prior involvement in the criminal legal system, yet there is very little evidence the Fed has focused on this or other marginalized groups like Black workers in its approach to maximum employment.
As Janelle Jones and Jared Bernstein have recently proposed, it is time for the Federal Reserve to directly target the Black unemployment rate—a much better indicator of the country's true economic health that will also prevent misguided action, like raising interest rates too soon.
Finally, the Federal Reserve must not stand in the way of the only true path to maximum employment—a federal jobs guarantee.
Just as the Fed stabilized the world economy in 2008 by operating as the global lender of last resort, with the possibility of up to 25-30% unemployment in the United States, it is clear the federal government will also have to fulfill the goals of Mrs. King and Congressman Hawkins and step up as an employer of last resort today.
It should go without saying, that all of this must be in addition to the Fed confronting its abysmal record on race, gender, and sectoral diversity.
It must not only fall to Bostic—the first and only Black president of a regional reserve bank—to highlight these critical issues. As we assess the economic and social crisis that started this fire, we must also confront the history, the kindling and the institutions that have fanned its flames.
Ayanna Pressley has served as the U.S. Representative for Massachusetts' 7th congressional district since 2019. David Stein is a UC President's Postdoctoral Fellow in the Department of African American Studies at UCLA. He is the author of the forthcoming book, Fearing Inflation, Inflating Fears: The Civil Rights Struggle for Full Employment and the Rise of the Carceral State, 1929-1986.