Today, Congresswoman Maxine Waters (D-CA), the top Democrat on the House Financial Services Committee, and Senator Elizabeth Warren (D-MA), announced they reintroduced the Federal Reserve Racial and Economic Equity Act, legislation that would require the Federal Reserve to use its existing authorities to close racial employment and wage gaps and report on how the gaps change over time. This comes during this week’s statutorily-mandated hearing where Federal Reserve Chair, Jerome Powell, appears before both the House and the Senate to discuss the latest developments in monetary policy and the performance of the U.S. economy.

“In the spirit of Juneteenth, we must all be reminded that racial equality is a dream that our country has still yet to realize. As it stands, the racial wealth gap is widening and Black families and other communities of color are suffering as a result,” said Ranking Member Waters. “The Federal Reserve Racial and Economic Equity Act will help ensure that the Fed plays a role in addressing inequality by creating a new racial justice mission at the Fed to eliminate racial and economic disparities in all of its work. This legislation builds on recent work by the Fed to ensure there is robust data published on racial economic disparities when they testify before Congress so that we can better monitor and close these gaps to ensure our economy provides prosperity for all. It also complements President Biden’s executive orders to strengthen equity-advancing requirements for all agencies, including encouraging independent agencies like the Fed to comply. We need all hands on deck, including at the Federal Reserve, to take action to address racial equity.”

“The Fed can and should take deliberate actions to help reverse the serious racial gaps in our economy,” said Senator Elizabeth Warren. “Representative Waters and I are reintroducing the Federal Reserve Racial and Economic Equity Act because it is powerfully important that the Fed use its power to minimize the racial employment and wage gaps and ensure disparities are not ignored.”

The Federal Reserve Racial and Economic Equity Act:

• Makes Reducing Inequality Part of the Fed’s Mission: This bill adds a new section to the Federal Reserve Act that would require the Fed to carry out its functions in a way that “minimizes and eliminates racial disparities in employment, wages, wealth, and access to affordable credit.”
  
  
• Ensures that Racial Economic Disparities are Not Ignored: This legislation requires the Federal Reserve Chair to identify in their semiannual testimony before Congress: (1) the existing disparities in employment, income and wealth across racial and ethnic groups and (2) how the Fed is using its authorities to reduce these disparities.
  
  
• Requires Robust Reporting on Disparities in Labor Force Trends: This bill requires the Fed’s Semiannual Monetary Policy Report that the Fed releases in conjunction with the Chair’s testimony to include recent labor force trends with “a comparison among different demographic groups, including race, gender, and educational attainment.
  
  

The legislation was inspired in part by a study published in 2020 by Janelle Jones, former chief economist at the Department of Labor, and Jared Bernstein, who recently was confirmed by the Senate to serve as the Chair of President Biden's Council of Economic Advisers. Jones and Bernstein found that “Historical estimates of the natural rate [of unemployment] reveal that black unemployment has never fallen below those estimates…” even though the overall rate of unemployment has. Federal Reserve officials have acknowledged that they have a role to play in addressing racial inequality, including through an essay by Atlanta Federal Reserve President Raphael Bostic shortly after the murder of George Floyd.

Read the bill text here.

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