[Senate Hearing 117-75]
[From the U.S. Government Publishing Office]



 


                                 



                                                         S. Hrg. 117-75

 
  WALL STREET VS. WORKERS: HOW THE FINANCIAL SYSTEM HURTS WORKERS AND 
                      WIDENS THE RACIAL WEALTH GAP

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                                   ON

   EXAMINING HOW THE FINANCIAL SYSTEM HAS LEFT BEHIND THE MIDDLE AND 
WORKING CLASSES, LOWERED OUR STANDARD OF LIVING, CAUSED INEQUALITY, AND 
        CONTRIBUTED TO THE COLLAPSE OF COMMUNITIES AND FAMILIES

                               __________

                             MARCH 4, 2021

                               __________

  Printed for the use of the Committee on Banking, Housing, and Urban Affairs
  
  
  
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                Available at: https: //www.govinfo.gov /
                
                
                
                
                
                         ______

             U.S. GOVERNMENT PUBLISHING OFFICE 
 45-765               WASHINGTON : 2023 
             
                
                
                


            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                     SHERROD BROWN, Ohio, Chairman

JACK REED, Rhode Island              PATRICK J. TOOMEY, Pennsylvania
ROBERT MENENDEZ, New Jersey          RICHARD C. SHELBY, Alabama
JON TESTER, Montana                  MIKE CRAPO, Idaho
MARK R. WARNER, Virginia             TIM SCOTT, South Carolina
ELIZABETH WARREN, Massachusetts      MIKE ROUNDS, South Dakota
CHRIS VAN HOLLEN, Maryland           THOM TILLIS, North Carolina
CATHERINE CORTEZ MASTO, Nevada       JOHN KENNEDY, Louisiana
TINA SMITH, Minnesota                BILL HAGERTY, Tennessee
KYRSTEN SINEMA, Arizona              CYNTHIA LUMMIS, Wyoming
JON OSSOFF, Georgia                  JERRY MORAN, Kansas
RAPHAEL WARNOCK, Georgia             KEVIN CRAMER, North Dakota
                                     STEVE DAINES, Montana

                     Laura Swanson, Staff Director

                 Brad Grantz, Republican Staff Director

                       Elisha Tuku, Chief Counsel

                         Tanya Otsuka, Counsel

                 Dan Sullivan, Republican Chief Counsel

                 John Crews, Republican Policy Director

                      Cameron Ricker, Chief Clerk

                      Shelvin Simmons, IT Director

                    Charles J. Moffat, Hearing Clerk

                                  (ii)


                            C O N T E N T S

                              ----------                              

                        THURSDAY, MARCH 4, 2021

                                                                   Page

Opening statement of Chairman Brown..............................     1
        Prepared statement.......................................    28

Opening statements, comments, or prepared statements of:
    Senator Toomey...............................................     3

                               WITNESSES

Abbye Atkinson, Assistant Professor of Law, University of 
  California, Berkeley, School of Law............................     6
    Prepared statement...........................................    29
    Responses to written questions of:
        Senator Sinema...........................................    46
        Senator Warnock..........................................    47
Darrick Hamilton, Founding Director, Institute on Race and 
  Political Economy, The New School..............................     8
    Prepared statement...........................................    37
Glenn Loury, Merton P. Stoltz Professor of Social Sciences, Brown 
  University.....................................................     9
    Prepared statement...........................................    39

              Additional Material Supplied for the Record

``Building an Equitable Recovery: The Role of Race, Labor 
  Markets, and Education''.......................................    48
``Hidden Rules of Race are Embedded in the New Tax Law''.........    94
Letter submittted by Liberation in a Generation..................    97
``Neoliberalism and Race''.......................................   101
Pathways--State of the Union: Housing............................   109

                                 (iii)


  WALL STREET VS. WORKERS: HOW THE FINANCIAL SYSTEM HURTS WORKERS AND 
                      WIDENS THE RACIAL WEALTH GAP

                              ----------                              


                        THURSDAY, MARCH 4, 2021

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 10:15 a.m., via Webex, Hon. Sherrod 
Brown, Chairman of the Committee, presiding.

          OPENING STATEMENT OF CHAIRMAN SHERROD BROWN

    Chairman Brown. This hearing will come to order, the 
Committee on Banking, Housing, and Urban Affairs. This hearing, 
as we have done for a number of months, is in the virtual 
format. A few reminders as we begin.
    Once you start speaking, there will be a slight delay 
before you are displayed on the screen. To minimize background 
noise, please click the mute button until it is your turn to 
speak or ask questions.
    All of you should have one box on your screen labeled 
``Clock'' that will show you how much time is remaining. For 
witnesses, you will have 5 minutes for your opening statements, 
as we have told you before. At 30 seconds remaining for your 
statements and questions, you will hear a bell ring to remind 
you that your time is almost expired. It will ring again when 
your time has expired.
    If there is a technology issue, we will move to the next 
witness or Senator until it is resolved. To simplify the 
speaking order process, Senator Toomey and I have agreed to go 
by seniority in this hearing.
    The economy is not physics. It is not governed by 
scientific laws outside our control. It is made up of people 
making choices about our values and what kind of society we 
want to live in.
    Despite what we are constantly told on TV, most Americans 
share a lot of the same values. They want an economy that is 
fair and just, where hard work pays off for everyone, no matter 
who you are or what kind of work you do, where everyone has the 
economic security to raise a family and to retire with dignity.
    When you look at our economy, it does not reflect the 
society most of us want.
    You cannot look at decades of growing worker productivity, 
with workers getting a smaller and smaller share of the profits 
they create, and then think the economy looks fair.
    You cannot look at a racial wealth and income gap that has 
barely budged since we passed the Civil Rights Act and think 
the economy looks just or that we all have equal opportunity.
    You cannot look at the millions of Americans whose hard 
work does not even pay the bills, while corporate profits go 
up, CEO pay soars, and stock buybacks and dividends explode 
upward and think that this economy reflects our values.
    This state of affairs did not happen on its own. It was not 
just the invisible hand of the market.
    For decades, Wall Street interests--big banks, hedge funds, 
private equity firms, and insurance companies--have been 
calling the shots--through their lobbyists, through rigged 
rules, through union busting.
    We have left it to them to shape our entire economy and 
make choices about our values and what kind of society we live 
in.
    For decades, Wall Street has rewarded the companies that 
squeeze their workers the hardest--companies that cut wages, 
cut retirement benefits, cut corners on worker safety.
    When companies lay off workers, cut paychecks, or 
subcontract work to lower-paying companies with fewer benefits, 
their stock price goes up, and Wall Street calls it ``cost 
cutting.''
    We have allowed a system to take root that treats American 
workers as a commodity, a cost to be minimized, instead of the 
engine behind all of our businesses' success.
    They do it so Wall Street can funnel more and more of the 
profits that workers create to CEOs and shareholders.
    And instead of investing those profits in something 
productive, they have used that money for reckless speculation 
that drove booms and busts, resulting in real estate crashes 
and the dot-com bubble.
    And when all of that did not make them rich enough, they 
came up with ideas like credit default swaps and collateralized 
debt obligations. It was Wall Street that targeted workers who 
were struggling to make ends meet with subprime mortgages--
predatory loans that stole the equity workers had saved up in 
their homes.
    Wall Street's crash of a decade-plus ago cost the economy 
tens of trillions of dollars and destroyed 53 percent of Black 
wealth in this country.
    Millions of families lost homes and are still trying to 
recover. Wall Street got a bailout.
    Then Wall Street found a new way to get paid: fund the 
payday and auto title lenders and debt collectors that targeted 
families who struggled to get by in what was left of this 
economy.
    Even after all of that, some people, including a whole lot 
of people who have been running the Senate, think that we 
should let Wall Street keep dictating our economy--and by 
extension, the lives of everyone who gets their income from a 
paycheck, not a stock portfolio.
    They claim they just want ``markets to decide.'' When the 
market is not fair, that means putting Wall Street in charge.
    It is the same attitude that lets corporations run ad 
campaigns calling their workers ``essential,'' but then spends 
their profits on stock buybacks and CEO bonuses rather than a 
living wage or the protective equipment workers need to avoid 
this deadly virus.
    Or that prompts Amazon to post a ``Black Lives Matter'' 
banner on its website, while unleashing every union-busting 
tactic in the book to undermine workers, mostly overwhelmingly 
African American workers, organizing for better working 
conditions in Alabama.
    If we want a fair and just society, with a growing middle 
class that everyone has the opportunity to join, we have to 
stop letting Wall Street run the economy.
    We cannot rely on quarterly earnings reports to tell us 
whether workers deserve a decent living.
    For too long, we have allowed Wall Street's phony populist 
allies to stoke fear and place blame and divide us by race and 
religion and region. We know why they do it: to distract from 
how they have been keeping the profits for themselves.
    But this zero-sum view of the economy hurts everyone.
    We have the largest economy on Earth, with vast resources 
and talent and ingenuity. If we stop siphoning off so much of 
our prosperity to the tiny sliver of people at the very top, 
not only is there enough to go around for everyone; but when we 
unleash all workers' talents and give them more economic 
security, we will create even more economic growth.
    We all learn in elementary school about Dr. King's fight 
for civil and human rights. But we do not talk enough about his 
fight for economic rights--and how you cannot fight for one 
without fighting for the other.
    We never forget that Dr. King was assassinated in Memphis 
while fighting for some of the most exploited workers in the 
country, sanitation workers in Memphis, Tennessee, fighting for 
their civil rights and workers' rights.
    As Dr. King put it: ``What does it profit a man to be able 
to eat at an integrated lunch counter if he does not earn 
enough money to buy a hamburger and a cup of coffee?''
    If we want to take on economic inequality and shrink the 
racial wealth gap, then we need to build an economy based on 
the dignity of work.
    That means paying all workers a living wage, giving them 
power over their schedules, providing good benefits and safety 
on the job, and letting them organize a union. That means 
everyone gets a fair share of the wealth they create.
    That means building an economy that reflects our values, 
American values--not Wall Street's values--and building the 
kind of society we want to live in.
    Senator Toomey.

         OPENING STATEMENT OF SENATOR PATRICK J. TOOMEY

    Senator Toomey. Thank you, Mr. Chairman.
    So the title of today's hearing is ``Wall Street vs. 
Workers: How the Financial System Hurts Workers and Widens the 
Racial Wealth Gap''. The title itself expresses a world view 
held by many on the left that capitalism is failing far too 
many people. In this world view, capitalism and a capitalist 
financial system has left behind the middle and working 
classes, lowered our standard of living, caused inequality, and 
contributed to the collapse of communities and families.
    The proposed prescriptions to cure these ills is almost 
inevitable. It is expand the power and the role of Government 
and reduce the economic freedom of the American people.
    Let me suggest a different perspective. It is this: 
Capitalism produces the best conditions for the largest number 
of people by far, and the empirical case is very simple. 
Capitalism clears a path for the industrious to become wealthy, 
for the poor to become middle class, and for the middle class 
to build a prosperous, secure life for themselves and their 
children.
    No economic system has lifted more people out of poverty, 
created more opportunity, and produced a higher standard of 
living than ours. This is no time to abandon this.
    Now, there are certainly absolutely serious problems and 
challenges we have throughout our society. We have communities 
that struggle. We have persistent racial disparities in areas 
including educational achievement. We have social pathologies 
that are very serious in their scale. Do we really think that 
capitalism and a capitalist financial system is the primary 
cause of these problems and challenges?
    At a more fundamental level, the critics are wrong about 
capitalism failing too many people. In my view, capitalism 
ranks with the wheel and written language among the greatest of 
human achievements. Think about this. It took nearly 2,000 
years, from the time of Julius Caesar to the time of George 
Washington, for the Western world's standard of living to 
double, and those two leaders rode into battle on the same mode 
of transportation.
    But with the advent of democratic capitalism, we started 
doubling the standard of living every 20 years. In America, for 
all the problems we have, life is much better today than it has 
ever been for the vast majority of people. Wages are an 
important component, but that is not the whole story. What 
really matters is the living standard, and there is no question 
that the standard of living of middle-class and working-class 
Americans has improved dramatically over recent decades. Life 
expectancy has increased. The quality of health care is better. 
Average Americans live more comfortably in larger, more 
comfortable homes. They have cars that are safer and more 
comfortable. They have unlimited information and entertainment 
services right in the palm of their hands. By any reasonable 
standard, there is a much higher standard of living.
    The Cato Institute did a study and found that the amount of 
time an unskilled worker has to work in order to purchase a 
basket of everyday items declined by 72 percent from 1979 to 
2019.
    And life is continuing to get better. We still have 
economic mobility.
    In 2016, the Urban Institute looked at five different 
income groups and concluded between 1979 and 2016, the 
percentage of Americans who were poor was declining and the 
percentage of Americans who were rich or upper-middle class was 
growing.
    Pre-COVID, wage growth had been occurring across the board. 
But wage growth was especially strong for minorities and 
workers without a high school degree. In 2019, the overall 
poverty rate reached an all-time low.
    The most recent empirical experiment in expanding economic 
freedom occurred during the Trump administration when we 
reformed the Tax Code and rolled back excessive regulations.
    And before COVID hit, we saw what the results were. It was 
an economic boom. It was the lowest unemployment rate in 50 
years. There were a million more job openings than there were 
people looking for jobs, and workers in the bottom 10 percent, 
from 2016 to 2019, received on average a $3,500 raise in real 
dollars.
    The economic expansion was powerful, and it particularly 
benefited racial minorities. In 2019, Black and Hispanic 
unemployment rates hit all-time lows. The gap in the 
unemployment rate between Whites and Blacks and Hispanics 
reached all-time lows. Median household incomes reached record 
highs across every major demographic group, including African 
American and Hispanic households.
    I have always thought rising employment and wage gains 
across the board is a good thing.
    And let us consider how the financial system contributes to 
the improved standard of living and economic growth that 
Americans enjoy.
    The financial system enables businesses and consumers to 
access credit and capital in a way that very few countries in 
the world can match. The flow of credit and capital to 
businesses supports job creation, technological advancements, 
and the provision of goods and services that benefit consumers. 
And, likewise, that flow of credit and capital to consumers 
enables them to purchase the goods and services that they 
value.
    Consider the example of an ordinary blue-collar worker or a 
middle-income individual or family that wants to make a big 
purchase, like a car or a home. I mean, it is so ordinary that 
we completely take it for granted, but it is really pretty 
amazing that a person of very modest means can walk onto a car 
lot as a perfect stranger, and an hour later drive away in a 
vehicle worth tens of thousands of dollars. It is all because a 
very sophisticated financial system makes that credit available 
to that consumer. That is tremendous value to American 
consumers.
    As we work to address the economic, social, and cultural 
problems we face as a country, we need to do this in a way that 
promote economic growth and freedom, not in a way that stifles 
it. Economic growth does not solve all problems, but it does 
make all problems easier to solve. And we can do more to ensure 
that everyone has the education and the opportunity to thrive 
and obtain economic mobility. That is what we should be 
focusing on, not policies that undermine capitalism and a 
capitalist financial system. If we do undermine the system, we 
are more likely to leave everyone poorer and probably no more 
equal.
    Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Ranking Member Toomey.
    I will introduce today's three witnesses. Professor Abbye 
Atkinson is an assistant professor of law at the University of 
California, Berkeley. Her research focuses on the law of 
debtors and creditors as it affects marginalized communities. 
She has been published in the Columbia Law Review, Stanford Law 
Review, and several other law journals. Previously, Professor 
Atkinson was a Thomas C. Gray Fellow and lecturer in law at 
Stanford Law School and the Reginald Lewis Fellow at Harvard 
Law School. Welcome, Professor Atkinson.
    Dr. Darrick Hamilton is professor of economics and urban 
policy at and the founding director for the Institute for the 
Study of Race, Stratification and Political Economy at the New 
School. He previously served as the executive director of the 
Kirwin Institute for the Study of Race and Ethnicity at the 
Ohio State University--and we miss him, if I could add that. 
Dr. Hamilton is a pioneer and internationally recognized 
scholar whose research involves understanding examining the 
causes of consequence in racial and ethnic disparities and the 
associated remedies to address those inequalities. He is also a 
graduate of, not far from me, Oberlin College. Welcome, Dr. 
Hamilton.
    Dr. Glenn Loury is the Merton Stoltz Professor of Social 
Sciences and professor of economics at Brown University. I have 
two children--a child and grandchildren living in Cranston, Dr. 
Loury. As an academic economist, Dr. Loury has published mainly 
in the areas of microeconomics theory, game theory, industrial 
organization, and economics of race and inequality. He has 
written over 200 essays and reviews in journals of public 
affairs, mainly on the themes of inequality and social policy. 
Welcome, Dr. Loury.
    Professor Atkinson, please begin. Keep your comments to 5 
minutes if possible. Thank you.

   STATEMENT OF ABBYE ATKINSON, ASSISTANT PROFESSOR OF LAW, 
       UNIVERSITY OF CALIFORNIA, BERKELEY, SCHOOL OF LAW

    Ms. Atkinson. Thank you so much. Mr. Chairman Brown, 
Ranking Member Toomey, and Members of the Committee, good 
morning. Again, thank you for inviting me to testify before you 
today. It is truly an honor for me to do so.
    Again, my name is Abbye Atkinson. I teach at the University 
of California, Berkeley, School of Law. I teach contract law as 
well as courses on the legal structures of debt and inequality. 
I am today as an academic who studies the law of creditors and 
debtors as it affects traditionally marginalized communities.
    I would like to make three points this morning. First, 
credit, and so, by natural extension, debt, which I will call 
``credit/debt'' for the rest of my remarks, has become a 
critical means of carrying out Federal social welfare policies. 
This is particularly true for socioeconomically marginalized 
Americans, including low-income workers, women-headed 
households, and African Americans. These marginalized borrowers 
are encouraged to rely on consumer credit markets to make ends 
meet and to improve their life circumstances. For example, 
higher education as a means of upward mobility has been Federal 
social provision policy for more than 50 years, and this 
Federal education policy is an example of credit/debt social 
provision because student loans are key to its operation. The 
resulting debt burden, however, is not evenly distributed.
    For example, women hold two-thirds of the outstanding $1.5 
trillion in educational debt, and, similarly, educational debt 
is also disproportionately concentrated in African American and 
Latinx and other minority communities. And this debt overhang 
limits their ability to become socially mobile, which is not 
consistent with the story that we tell that by going out and 
getting an education they will be able to pull themselves up by 
their bootstraps. And this policy also puts the risks then born 
of entrenched inequality squarely on marginalized borrowers, 
and it contributes to the expanding wealth gap.
    Second, credit/debt is a channel through which wealth 
drains out of marginalized communities toward more affluent 
entities, including lenders and their institutional investors. 
For example, like marginalized borrowers, third-party 
beneficiaries within our social provision system, like 
retirement insecure workers, have also come to depend on 
credit/debt. Public pension funds manage the retirement 
security of our Nation's teachers and police officers and civil 
servants, and these same public pension funds are the principal 
institutional investors in private equity. This includes those 
private equity funds that target marginalized debt-dependent 
industries like for-profit colleges and small-dollar 
installment lenders as a source of wealth extraction.
    And, indeed, credit/debt as a source of retirement security 
siphons the value that is perversely created by lending to 
vulnerable individuals, families, and, indeed, whole 
communities who have to borrow either to survive or else to be 
upwardly mobile.
    Moreover, some of the real winners in this version of 
credit/debt-centered social provision are financial 
intermediaries like private equity firms who take their cut in 
fees from labor's capital on the front and reap 
disproportionate profits on the back end relative to their own 
investment and risk. All of this occurs largely behind the veil 
of relatively minimal Federal oversight.
    Last, because credit and debt has become so critical to 
Federal social welfare policies across several dimensions, 
Congress should not delegate the regulation of credit/debt to 
private, profit-motivated interests whose stock in trade is 
credit/debt. Private intermediaries have their own priorities 
that are dictated by their duty to increase the bottom line for 
their investors and their interests in increasing their own 
bottom lines. These priorities undermine their ability to 
center equality-focused goals like shrinking the gender and 
race wealth gap because when push comes to shove, their 
loyalties are to profits and not people.
    In sum, Federal credit/debt welfare policy obscures the 
inherent economic and social risks that debt and debt overhang 
pose for marginalized groups, and we need policies that will 
account for this particular vulnerability. This includes, among 
other possibilities, robust relief when debt threatens to 
overwhelm the socioeconomic benefits of borrowing.
    Thank you so much for your time, Chairman Brown and Ranking 
Member Toomey. Again, it is a pleasure to be here.
    Chairman Brown. Thank you, Professor Atkinson. Dr. Hamilton 
for 5 minutes, please.

STATEMENT OF DARRICK HAMILTON, FOUNDING DIRECTOR, INSTITUTE ON 
           RACE AND POLITICAL ECONOMY, THE NEW SCHOOL

    Mr. Hamilton. Thank you, Chairman, thank you, Ranking 
Member, and thank you, other Members. I am going to go quick 
and try to say a lot in 5 minutes.
    The global pandemic reveals a collective public health and 
economic vulnerability and a system that actively produces 
inequality, but in plain sight, beyond class, race is a focal 
point. In a just world, race, gender, ethnicity, and nativity 
would have no transactional value in relation to material and 
psychological well-being. The amoral devaluation of Black lives 
has been ingrained in the American political economy, and it is 
long overdue for a reckoning.
    Many Americans, Black and Brown families in particular, 
have low wealth, inadequate health care, and work in precarious 
but essential jobs with few workplace protections, lower wages, 
and lower benefits. Indeed, the biggest preexisting condition 
of them all is wealth itself. Wealthier families are better 
positioned to finance elite education, access capital, finance 
expensive medical procedures, reside in higher-amenity 
neighborhoods, exert political influence, purchase better 
counsel is confronted with an expensive legal system, leave a 
bequest, and withstand financial hardship resulting from any 
number of emergencies, including the global pandemic.
    It is critical to note that it was never the case that a 
White asset-based middle class simply emerged but, rather, 
Government policies and, to a large extent, entitlements and 
literally Government giveaways that provided Whites with the 
finance, education, land, infrastructure to accumulate and pass 
down wealth. That in and of itself is not a bad thing. But this 
contrast to a history in which Black and indigenous people, 
their personhood and whatever capital and resources they may 
have been able to establish was always vulnerable to Government 
complicit exploitation, extrapolation, confiscation, 
destruction, terror, fraud, theft, and other acts of violence. 
This history of disenfranchisement from full economic 
participation is well documented. Policies like redlining, 
highway construction, predatory contract to own housing 
leasing, exclusionary zoning have all worked in tandem with 
restrictive covenants, regulatory control to marginalize Black 
Americans and constrain them from their full economic and 
political participation.
    Our unjust racial wealth gap is in and of itself an 
implicit measure of the racist past rooted in a history in 
which we have had Government that has privileged political and 
economic interventions to afford Whites the ability to acquire 
resource and intergenerational accumulation. We use words like 
``choice'' and ``freedom'' to describe the benefits of a 
proverbial market, but choice is an illusion if an individual 
lacks basic needs like a job, adequate income, shelter, food, 
and health care. We are not atomistic agents floating in 
unfettered markets guided by a free will into fair and 
efficient allocation. Economic freedom and authentic agency is 
rooted in economic power and political power. Yet much of the 
framing around the racial wealth gap focuses on poor financial 
choices and decisions largely on Black, Latinx, and poor 
borrowers. This framing is tied to a culture of poverty thesis 
in which we presume that Blacks have an undervalue for and a 
low acquisition of education. The framing is wrong; the 
directional emphasis is wrong. It is more likely that meager 
economic circumstances, not poor decisionmaking or deficient 
knowledge, constrains choice itself and leaves borrowers with 
no other option but to use abusive financial services.
    Incremental changes on the margin will not cut it. We need 
a profound change toward a more sustainable moral economy with 
Government intervention to facilitate the assets, economic 
security engagement, and human dignity of all its people, 
regardless of race, class, gender, sexual identity, and 
immigrant status. We need a new industrial and trade policy 
that centers workers, both domestically and abroad, coupled 
with an explicitly antiracist, antisexist economic rights frame 
to promote our shared prosperity.
    Full citizenship demands more than political rights. It 
requires economic rights. We can look at the work of Nobel 
Laureates George Akerlof and Robert Schiller and their critique 
that the greater good presumption for market transactions by 
describing the profit motive--actually, I am going to skip it 
so that I can get to conclusions, and just say the sad irony is 
that those that can least afford finance in times of dire need 
end up paying the most for finance. Congress needs to provide 
public options that directly compete with and crowd out 
inferior private options that do not ensure universal quality 
health care, housing, schooling, financial services, capital, 
and the free mobility throughout society without the threat and 
sanction of bodily harm because somebody's identity is linked 
to a vulnerable or stigmatized group.
    Oh, I have got a little more time. Sorry. We need to reject 
the empirically unsubstantiated rhetoric that ignorance and so-
called grit and personal responsibility are the sources of 
inequality along with the accompanying Government neoliberal 
paternalism in which we attempt to coerce and incentivize 
insinuated defective people to behave accordingly and make 
better decisions. Let us change the pandemic and truly empower 
people, our most treasured resource, with economic security, 
dignity, authentic agency so that they can define and achieve 
their desired goals.
    Thank you, Senator.
    Chairman Brown. Dr. Loury, 5 minutes, please. Thank you.
    Dr. Loury, I think you are on mute still.
    Mr. Loury. I have to figure out how to----
    Chairman Brown. Well, you are on now. We can hear you.
    Mr. Loury. I apologize.
    Chairman Brown. That is all right. Thanks.

STATEMENT OF GLENN LOURY, MERTON P. STOLTZ PROFESSOR OF SOCIAL 
                   SCIENCES, BROWN UNIVERSITY

    Mr. Loury. Thank you, Chairman Brown, Ranking Member 
Toomey, Members. Thank you for the opportunity.
    Speaking about Black Americans disadvantaged and its 
implications for American democracy, I draw on my many years of 
study as an economist theorist and public intellectual. My 
testimony rests on two observations about the dynamics of human 
development and the foundations of racial identity. I will 
conclude by expressing reservations about Government pursuing a 
program of racial equity, meaning equal group outcomes, rather 
than a program of equal opportunity for all.
    First, I offer two statements of principle. Persistent 
Black disadvantage is an American tragedy. It is a national not 
merely a communal disgrace.
    Second, where inequality is a problem, let us address it 
forthrightly, but let us do so on behalf of a program of human 
decency, not of racial equity.
    For many, these two principles will seem to be in conflict. 
Actually, they complement one another. Here, then, are my two 
observations concerning human development. My studies have 
taught me that human growth occurs inside of social 
institutions--the family, community, school, peer group. Such 
cultural institutions of human association are where 
development is achieved. Informal relations among individuals 
are often more important for understanding inequality than are 
the formal transactions between them.
    Concerning racial identity, I have learned that there would 
be no races in the long run of any society unless on a daily 
basis and in regard to their most intimate affairs people paid 
assiduous attention to the boundaries separating themselves 
from racially distinct others; that is, race is not something 
simply given in nature. It is something that we are making and 
remaking, all of us. This race-making relates closely to how 
developmental resources come to be allocated to individuals.
    I conclude from these observations that durable racial 
inequality is ultimately a cultural phenomenon, implicating not 
only the transfer of financial resources but more fundamentally 
decisions that we make daily about with whom to associate and 
identify, conceptions about identity embraced by people of all 
races. What I called ``social capital'' when I introduced that 
term in my doctoral thesis more than four decades ago is on 
this view a critical prerequisite for creating what economists 
routinely refer to as ``human capital,'' and it is this human 
capital, the skills, education, work experience, and social 
aptitudes, that reflect the person's human development. And 
this in turn is a powerful determinant of earnings power and, 
thus, of the ability to generate and accumulate wealth.
    We cannot ignore the behavioral roots of racial disparity, 
but we should discuss and react to them as if we were talking 
about our own children, our neighbors, and our friends. We are 
all in this together.
    For that reason, I believe persisting racial disparity 
deserves our attention, but not via racially preferential 
public policy. We should recognize through law and policy that 
we are in the same boat here in the United States of America, 
sharing a common citizenship and a common humanity. And that 
means fashioning American solutions to American problems, and 
ultimately getting beyond race altogether when deciding on 
public action.
    As Dr. King prophetically envisioned, our civic discourse 
should be grounded in an unwavering commitment to transracial 
humanism. That will sound like a pipe dream in today's racially 
supercharged environment, but in light of what I know about 
human development and about racial identity, it is the only 
viable way forward.
    Indeed, there is a fatal contradiction at the heart of the 
argument for group equality of outcomes. The dogged pursuit of 
equal results between racial groups across all venues of human 
endeavor is a formula for tyranny and racism. Here is why. 
Groups are fundamental building blocks of society, an identity 
focused view of the world. Groups matter. Their culture and 
heritage matter. It is the music they listen to, the food they 
eat, the books they read, the stories they tell their children. 
These things matter, and they vary across groups.
    On the other hand, group egalitarians claim that, absent 
injustice, there would be equality of groups in every human 
enterprise. But how can this be? Because if groups matter, some 
people are going to bounce a basketball 100,000 times a month 
and others are going to bounce it 10,000 times a month. If 
groups matter, neighbors do not do the same things, believe the 
same things, think the same things, spend their time in the 
same way. Groups have their own integrity, expressing 
themselves in how they live their lives, raise their children, 
and spend their time. This will inevitably result in a 
different presence of groups across various human activities. 
They will not have the same occupational and professional 
profiles. There will be differences between groups and the 
proportions who are members of the National Academy of 
Sciences, who are tenured members of the faculty, who are tech 
entrepreneurs or hedge fund managers, small shopkeepers, single 
parents, or petty criminals.
    I conclude that respecting groups' integrity while 
demanding group equality is a contradiction. Acting in a 
determined way on that contradiction only leads to tyranny, 
disappointment, and more racism.
    Thank you.
    Chairman Brown. I will start with Dr. Hamilton. Like the 
CARES Act, President Biden's American Rescue Plan--the CARES 
Act of last March--provides direct investment to the economy 
both to communities and to individual workers. How has that 
direct income--stimulus checks, increased unemployment 
benefits--how has that affected income inequality? How do you 
think it will affect the racial wealth gap?
    Mr. Hamilton. Well, without it we would have a lot more 
dramatic inequality than we have right now, so it is absolutely 
essential. There is a concept I want to introduce which is 
called ``indentured borrowers.'' If we did not provide income 
supports for people in this dire need, they would be subject to 
predation to take out products not by choice but by necessity 
that would have put them into basically debt traps, where they 
keep paying higher and higher interest rates to sustain 
themselves. So that is how it is related to the wealth gap. It 
prevents us on the debt end from putting people into these debt 
traps.
    What also is very useful and important is that it set a 
precedent. It set a precedent for what Government can do with 
regards to action. Again, imagine a world right now if we did 
not have the initial CARES Act and the vulnerability people 
would be in. And something else we should be cognizant of is 
that we are in some ways kicking the can down the road. You 
know, we had things like forbearance on eviction, forbearance 
on foreclosure, and as a result, people were not evicted or 
foreclosed upon, but they still are going to need resources to 
deal with this at some point.
    Chairman Brown. Thank you. Following on to that, Professor 
Atkinson, you testified about the challenges we face as we try 
to combat income inequality and the racial wealth gap with 
lending programs, often outsourced to Wall Street. How does 
using credit or debt instead of direct investment that Dr. 
Hamilton just talked about, how does using credit or debt 
instead of direct investment end up enriching Wall Street 
instead of workers?
    Ms. Atkinson. Yes, Senator Brown, so, you know, credit and 
debt is a contractual relationship, right? You know, when we 
use that as a means or a significant means of social provision, 
it introduces risk, right? If you think that people, for 
example, you know, in South Texas who needed emergency to get 
pipes fixed, we imagine that, you know, in addition to their 
already precarious existence that we are going to add risk onto 
what--you know, their range of issues. And so, you know, when 
you introduce a lender, the lender's interest is being repaid, 
right? Not necessarily trying to assist that individual in 
weathering an unexpected emergency or a significant need. And 
as with payday loans, we know that what makes them profitable 
is sort of the incidence of rollovers--right?--that people just 
do not ever pay down the principal, and they keep paying fees 
over and over again.
    And so it is that constant rollover, that constant 
repayment, the high interest rate that sort of sucks value out 
of already vulnerable communities and puts it into the coffers 
of lenders.
    Chairman Brown. So, Professor Atkinson, Congress passed the 
Civil Rights Act in 1964, the Voting Rights Act in 1965. It was 
not until Dr. King's assassination that Congress passed the 
Fair Housing Act. That was all going--supposed to make good on 
the promise of equality. The racial wealth and income gap, as 
you know, has gotten worse. Inequality is still a huge problem.
    What is it about the way our economy is set up that got us 
here?
    Ms. Atkinson. I think, you know, that is a complex answer. 
I think there are many aspects of the economy that might speak 
to that. You know, for me, as someone who thinks about 
financial products, I think the rise of financialization in our 
economy more generally, and then our sort of vesting of big 
social problems like inequality, like sexism, and sort of 
trying to remedy those sorts of big problems, investing that in 
financial entities, again, whose interests are--you know, we 
cross our fingers that their interests would kind of align with 
the broader social concerns that underpin it. But I think 
financialization has a lot to do with it--``financialization'' 
meaning the degree to which financial products and financial 
channels are now occupying more and more of a place of 
significance in our economy.
    Chairman Brown. Thank you. And, Dr. Hamilton, make your 
answer really quick here, if you can, because we are kind of 
running out of time. Your work implied the dream of the civil 
rights movement cannot be realized without establishing civil 
rights and economic rights for all Americans. What do you mean 
by that?
    Mr. Hamilton. You know, at the end of the day, choice, 
political participation, is limited without some baseline level 
of resources. I think that is the large point, that if you do 
not have resources in your life, it is an inauthentic freedom, 
it is an inauthentic choice that you can actually be deliberate 
in determining your goals and outcomes.
    Chairman Brown. Thank you. Thanks for that brief answer.
    Senator Toomey.
    Senator Toomey. Thank you, Mr. Chairman.
    Dr. Loury, thank you for joining us. I want to pose this 
question to you. What we sometimes hear and I think we heard 
this morning is that the racial wealth gap is evidence of 
discrimination and structural racism. Is it your view that a 
racial wealth gap is, ipso facto, and indictment of our 
financial system?
    Mr. Loury. I am going to answer no, though I can understand 
some people answering yes here. The racial wealth gap is a 
legacy of history as well as a reflection of ongoing dynamics. 
I do not think, however, that broadly speaking it should be 
understood as an indictment of the financial system, which is a 
complex set of institutions and relationships, which, as you 
noted in your opening remarks, is a necessary part of economic 
development and of growth.
    I do think, however, that the racial wealth gap is a 
problem, but I would rather put it as a problem of Americans, 
as I said in my remarks, who do not have the resources that 
they need and a decent society to flourish, that to put it 
strictly in racial terms for the reasons that I stated.
    Senator Toomey. Right. Another question. There was a recent 
study conducted by the FDIC that concluded that the rate of 
unbanked Americans decreased by over a third between 2011 and 
2019, reached a record low in 2019.
    Now, in my view, increasing access to savings and credit 
through banks and nonbanks and new technologies is a positive 
development, including maybe especially for lower-income 
Americans who may not have had access to that.
    Do you think that democratization of finance and broad 
availability of credit and financial services generally is more 
of a positive or is it more of a negative for low-income 
Americans, including racial minorities?
    Mr. Loury. Well, that is an easy question, Senator. It is a 
positive. The financial intermediation and the access to the 
system for people to be able to engage in banking transactions, 
as that comes closer to ordinary working people, increases 
their ability to prosper within the system. A former colleague 
of mine, a professor at Berkeley's School of Business named 
Ross Levine, has spent many years studying the beneficial 
effects of access to banking in communities, and among these in 
his studies has been shown a diminution in the racial wage gap, 
where areas where banking is easier to get at turn out to be 
areas where racial discrimination in the labor market is less 
severe. But that is just one of many studies that could be 
cited in this vein.
    Senator Toomey. I think I understood you to suggest that 
one of the things we should focus on with respect to economic 
disparities, including disparities among different racial 
groups, is opportunity rather than expecting guaranteed 
outcomes. It seems to me that education is a hugely important--
education plays a hugely important role in creating opportunity 
for people, and I think we know that in many cases low-income 
families, including and especially in racial minority 
communities, often have very few choices about educational 
opportunities for their kids.
    Do you think that those children and those families in 
those communities might be better off if parents had more 
choices and we provided resources that gave parents the 
discretion to choose a school that would suit their children 
best?
    Mr. Loury. Yes, I do, Senator, but as you know, not 
everybody agrees with that proposition. I do not know that this 
is a solution to the wealth gap problem. In fact, I know that 
it is not a solution to the wealth gap problem. But it is 
certainly an empowerment of families and children to be able to 
avail themselves of the best alternatives for their education 
as might be within their reach. So there are powerful interests 
that play here, again, as you must know, and this is a battle 
that has been going on for 30 years. But I am on the side of 
expanding opportunities for families to get alternatives where 
they are available to public schools, to the extent that those 
schools are not well serving the children.
    Senator Toomey. Thank you.
    Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Toomey.
    I believe Senator Smith is next. I understand that she is 
here. Senator Smith from Minnesota. Is she able to go next? And 
happy birthday, Senator Smith.
    Senator Smith. Thank you, Senator Brown. You surprised me 
there, but I am right here listening carefully, so I appreciate 
it very much. And thank you also to Professor Atkinson and 
Professor Loury and Dr. Hamilton. I really appreciate your 
testimony, and I think that it is so interesting and so timely 
for us right now.
    What I am taking from your testimony is that the wealth gap 
that we see in our country is not an accident of our history. 
It is a design of our history. It is part of a plan. And I 
think any student of this can also see pretty quickly that the 
Federal Government has explicitly advanced policies that have 
not only contributed to this gap but that have built this gap. 
This is so obvious, I think, when we look at housing policy. 
This is a matter of great interest to me because in my State of 
Minnesota, a State that is often seen as a bastion of 
progressive values, we have one of the worst housing gaps, one 
of the worst wealth gaps of any place in the whole country.
    So let me just ask you, I am interested in all of your 
perspectives on this. What advice would you give our Committee 
about how best to address this home ownership gap, which is so 
clearly--home ownership is so clearly a way that people have 
the capacity to build wealth and start to address some of these 
underlying inequities? Professor Atkinson, maybe I will start 
with you.
    Ms. Atkinson. Good morning, Senator Smith. Thank you for 
the question. You know, one way to support communities who are 
trying to build wealth through home ownership, you know, I will 
beat the drum of thinking about how debt affects them. Most 
Americans save in their house, right? And we can think about, 
you know, increased access to credit, and certainly, you know, 
more people from different groups have had access to credit 
since the FHA days when explicitly they did not have access to 
credit. Nevertheless, as Dr. Hamilton told us when push came to 
shove, when the recession hit, we can see something about the 
relative strength of communities by who loses the most, right? 
And 53 percent of wealth drained out of the African American 
community post-recession tells us a lot about the relative 
strength of that particular community or the relative lack of 
strength. So I think having policies that support debt 
forgiveness, for example, policies that support modification of 
mortgages in times of need, to try to preserve the wealth that 
many Americans put into their homes.
    Senator Smith. I will turn to our other panelists, but I 
cannot help but observe that when we saw the housing crisis and 
the housing bubble in 2008, the communities in Minnesota that 
were the most dramatically impacted were the communities that 
were, I think, taken such terrible advantage of by big lenders 
through the subprime mortgage crisis, and the loss of wealth, 
the loss of home ownership in North Minneapolis, for example, 
was dramatic, and that community is still paying the price for 
that. It was predatory in every sense of the word.
    Dr. Hamilton, would you like to respond?
    Mr. Hamilton. I would. To me I think the answer is obvious, 
and there is historical precedent, that we had the greatest 
growth in home ownership and we generated an asset-based White 
middle class with direct grants through GI bills and also a 
Federal infrastructure with FHA loans that provided the 
capacities to accumulate wealth.
    The difference between a homeowner and a renter is largely 
a downpayment, frankly, so only this time we should do it in an 
antiracist way where we are not excluding people based on their 
race but, rather, including them.
    Senator Smith. Thank you. Thank you very much.
    Chairman Brown. Thank you, Senator Smith.
    Senator Rounds is recognized.
    Senator Rounds. Thank you, Mr. Chairman.
    I think one of the biggest misconceptions about this 
hearing is, quote-unquote, who Wall Street really is. The 
Chairman and I think some of our witnesses seem to think that 
it is just a group of people that are working in Manhattan who 
benefit only at the expense of working Americans. And, 
actually, I just do not think that that is true, and I think we 
need to explore that a little bit and lay this out. I think you 
would be surprised at how broad investment in our public market 
really is. Public pension systems in particular are significant 
investors in equity markets. The South Dakota retirement 
system, for example, has a third of its assets invested in 
equities and private equity investments.
    For the Ohio Public Employee Retirement System, that figure 
is upwards of 48 percent, and the median public pension fund 
has nearly 47 percent of its assets invested in equities. I am 
concerned that if we take actions that would hurt equity 
markets, the collateral damage will spread way beyond Wall 
Street.
    Now, according to the Bureau of Labor Statistics, for 
example, nearly a third of public sector workers are non-White. 
If we somehow try to blame Wall Street for inequality, won't 
that also hurt our public sector workers and non-White public 
sector workers in particular? And I think, you know, some 
people think that they should only rely on Social Security. I 
really disagree with that. I now President Obama disagreed with 
that. That is one of the reasons why he tried the MyRA program. 
And I think we should have the opportunity, I would just like 
to start with Dr. Atkinson, if we could. It seems to me that 
there has to be a recognition that if we really want to develop 
wealth for individuals, it really comes from allowing them the 
opportunity to invest. I think simply picking on the equity 
markets is not the right direction, and I would just like your 
thoughts, because I really think we need to clarify that in 
this discussion.
    Ms. Atkinson. Thank you, Senator Rounds. I agree with you, 
you know, when we think about Wall Street, when we think about 
big institutional investors, one story is that it is just the 
CEOs who are, you know, pulling as much money as they can out 
of the system. But another story is, just as you said, these 
are pension funds; these are university endowments. There are 
various institutional investors for whom the market and the 
well-being of the market and the value within the market is of 
great significance.
    But, you know, I would posit that that is a feature of the 
financial structure. That is also something that we have 
created, right? So in terms of pensions, we have gone from a 
world of defined benefit to a world of defined contribution 
which heightens the significance then of having to have a 
robust private market from which, you know, our ordinary 
workers can retire with relative dignity.
    So I agree with you. I do not dispute that when we think 
about what Wall Street is, writ larger, there are a lot of 
interests, a lot of stakeholders. But I think we have to think 
about the system that we have created in which, for example, a 
public school teacher who has to rely on her pension to be able 
to retire, her pension fund is investing in Corinthian College 
or other for-profit colleges in order to bolster. I think that 
is what is perverse about the arrangement and why we have to 
think about privatization in that context.
    Senator Rounds. I do not mean to be argumentative on this, 
but I really think we run the threat of taking away the ability 
of the equity markets to make good investments for their 
investors. And I think if you talk to the folks within that 
pension fund that we are seeing good returns, if they were told 
that we have decided that we are going to change the investment 
strategies and you are stuck with what we determine, rather 
than having that pension fund be able to make that 
determination of how they want those funds invested--and they 
can shop the market today. It just seems to me that we are 
stepping beyond where we ought to be.
    Ms. Atkinson. So, Senator, I will say again that I think 
that, you know, when pension fund options are limited to 
investing in an entity or a business whose profit margin is 
dependent, for example, on people rolling over the same $100 
for 7 months, you know, to pay their light bill, I worry about 
that. I think we should--my suggestion is not that we should 
take away choice from pension funds altogether or any other 
institutional investor. But I think when we are worried about 
sort of social well-being, writ large, we have to think about 
where the sources of wealth originate. And if they originate, 
you know, in and among already vulnerable and marginalized 
communities, you know, we should not pit pension funds, 
retirement workers, against someone who needed to get their 
pipes fixed in South Texas--right?--and could only afford to do 
that by taking a payday loan.
    Senator Rounds. I take from your answer--and, Mr. Chairman, 
I think I am probably out of time, but thank you very much.
    Chairman Brown. Thank you, Senator Rounds.
    Senator Warren from Massachusetts is recognized for 5 
minutes.
    Senator Warren. Thank you very much, Mr. Chairman. I am 
grateful that you have brought us together today to talk about 
the racial wealth gap with these leading experts.
    Professor Atkinson, welcome. I am so happy to see you here. 
You have written about all kinds of consumer debt, but today I 
want to talk about student loan debt. About 43 million 
Americans now carry $1.5 trillion in student loans. That is 
more than Americans owe in auto loans or credit card loans, and 
that burden of debt is stopping people from buying homes or 
starting businesses. It is holding our whole economy back.
    So I want to ask you about who these student borrowers are. 
Some people have argued that people with student loans are 
lawyers and doctors who took out debt to go to fancy schools. 
Professor Atkinson, is that an accurate picture of who has 
student loans?
    Ms. Atkinson. Good morning, Senator Warren. It is not an 
accurate picture. If anything, if we think about fancy 
schools--and I will insert her the Ivy League schools, too, you 
know, as examples of fancy schools--debt loads are among the 
smallest among those graduates from those schools, and some of 
it has to do with the schools having the resources to support 
students, or else they enroll students who themselves have 
resources. So, instead, you know, some of the schools that tend 
to have, you know, the highest level of debt are regional 
schools. For example, one school particularly--I have a set of 
notes here just to think about this question, and, you know, 
Alabama State University, 89 percent of students leave with an 
average of $54,000 in student debt. And I want to focus on the 
word ``leave.'' It does not mean that they leave with a degree, 
right? They leave. And so, you know, I think it runs the gamut 
of community college students, for-profit students, traditional 
4-year college students, students who are just, you know, 
believing what we have told them, that if you go out and get an 
education, your life can be better. And what they instead is 
debt.
    Senator Warren. Thank you so much. That is very powerful. 
You know, canceling student loan debt would expand 
opportunities for millions of people and would provide a 
massive stimulus for our economy. It is also a racial justice 
issue.
    Dr. Hamilton, you have written that canceling student loan 
debt is--I think my quote here is ``one of the quickest actions 
the President could take to narrow the racial wealth gap.'' So 
can you tell us how student loan debt cancellation would help 
level the playing field and whether or not canceling $10,000 of 
student loans is enough to accomplish that goal?
    Mr. Hamilton. First, I hope that Congress acts to cancel 
student loan debt, but part of the reason why it is one of the 
quickest actions is because I think that the President can do 
it through Executive action as well. But in the context, maybe 
we could talk about millennials. During the last Great 
Recession, we asked millennials to wait out a struggling job 
market and go to school to better themselves, to get better 
credentials, and they came out with record levels of debt.
    If we look at millennials when they were 30 years old in 
the context of previous generations, they had the lowest home 
ownership rate of every other generation dating all the way 
back to the Greatest Generation that was coming out of the 
Great Depression. And what is more, the racial disparity in 
home ownership amongst millennials is as large as it has ever 
been since we have ever been recording the data.
    So, on the one hand, it is immoral when we tell people this 
is your pathway for upward mobility; then we saddle them with 
debt that limits their capacities to get other forms of assets 
so that they can accumulate wealth. So, prospectively, we are 
looking at a generation that came out of the Great Recession, 
and now we are about to scar them with this pandemic recession. 
So we certainly need Government to act to change their reality. 
And it is not just millennials. We have people collecting 
Social Security that are still paying student debt. So this is 
a moral justice issue that has disparate racial effects, and in 
the 21st century, it is sad that we are still talking about 
financing a debt-free college education for all Americans.
    Senator Warren. Well, as you know, Leader Schumer and I 
have a plan to cancel $50,000 in student loan debt, so let me 
just ask you: How much progress would that make in helping 
close the racial wealth gap in America?
    Mr. Hamilton. Yeah, I mean, I am for full cancellation, but 
if the practical reality is 50, it is a lot better than 
$10,000, especially when we consider the fact that, on average, 
4 years after graduation, a Black graduate has about $50,000 in 
debt in relation to $30,000 for a White graduate, which is also 
intolerably too high.
    Senator Warren. Well, thank you very much. You know, 
canceling $50,000 of student loan debt is the single most 
effective Executive action available to get our economy going 
and to make progress toward closing the racial wealth gap, and 
I hope President Biden decides to do this. Thank you both so 
much for being with us today.
    Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Warren.
    Senator Lummis from Wyoming is recognized.
    Senator Lummis. Thank you, Mr. Chairman. I sure wish those 
students would have gone to trade schools and community 
colleges instead of high-priced institutions that caused them 
to leave school with massive student loan debt.
    That aside, I also want to say that the name of today's 
hearing is ``Wall Street vs. Workers'', but a better name might 
have been ``How Wall Street Can Help Workers''. I know it is 
imperfect, but every American benefits from Wall Street through 
lower cost of goods and services, access to capital, buying an 
affordable home, and saving for retirement. We can do better in 
many areas, but ethical markets are an inherent public good. 
And as a person who is an advocate for Bitcoin, I want to say 
that I see that as a great leveler for people of color and for 
women, both in terms of employment and for savings. It is an 
opportunity to buy directly into an asset that is a great store 
of value. You do not need Wall Street. You do not need layers 
and layers of financial advisers and institutions.
    The person who is outside building on this building can go 
out after work and buy a fraction of a Bitcoin and save it, and 
it is going to be a greater store of value, just like gold 
would be, when he is older and ready to retire. And there are 
so many more careers in cryptocurrency for women and for people 
of color that I see that as a massive opportunity, because as 
these Wall Street banks get into crypto, finally realize that 
Bitcoin is for real, and that cryptocurrency is going to become 
part of global trading and global savings, including fiat 
digital assets as well as Bitcoin, I think you are going to 
find that it is a great leveler for people of color and for 
women.
    I just got off the phone with people in Women Involved in 
Crypto, and I tell you, there are a lot of women in that 
workforce with expertise, and you are going to find them 
matriculating as the Wall Street banks realize that this is the 
next innovation in financial technology.
    Now, that said, I have a question for Dr. Loury. Dr. Loury, 
many Americans live paycheck to paycheck, and they cannot 
afford delays in the deposit of their salary or in cashing a 
check. So these can cause costly overdraft fees and even the 
need to resort to unnecessary loans. We all see payday loan 
companies on street corners. Americans work hard for their 
money, and they deserve access to it as soon as possible.
    So my question is: Can having a more innovative payment 
system promote financial inclusion and make Americans' lives 
easier?
    Mr. Loury. Sure. Why not? No, seriously, I think that would 
be a step in the right direction, although a small step. But 
why not?
    Senator Lummis. Well, one of the things that we are trying 
to do here in the senate is educate people about the 
egalitarian aspects of having same-day settlements, about 
financial innovations, and about central bank digital 
currencies that could also help us innovate in these ways. So 
my fellow Senator Kyrsten Sinema and I are forming a Financial 
Innovations Caucus to make sure that these kinds of innovations 
that tend to level the playing field and take the layers out 
between money and the people who earned it is more available. 
So we look forward to all of you participating in that dialog 
because it is important that people be close to their own 
money. And when there are a whole bunch of layers between 
people and their own money, and everybody in those layers is 
taking a slice of their money, it is difficult for them to have 
access, management, control, and innovations associated with 
their own money. That is where I see the advantages of digital 
currencies, specifically Bitcoin at this point, and I am 
looking forward to having that dialog more as we go on.
    Thank you, Dr. Loury. I yield back.
    Chairman Brown. Thank you, Senator Lummis.
    Senator Van Hollen from Maryland is recognized for 5 
minutes.
    Senator Van Hollen. Thank you, Mr. Chairman, Ranking Member 
Toomey, and to all our witnesses, thank you.
    Dr. Hamilton, I have a question regarding stock buybacks. 
We saw after the big tax giveaway to corporations that Trump 
enacted back in 2017 that so many corporations used those funds 
for stock buybacks instead of, you know, putting them into 
higher wages for employees or investing in more capital.
    And then former SEC Commissioner Jackson looked into this 
very closely and found that executives were using stock 
buybacks to cash out their own shares. He also found that 
executives selling on buybacks was correlated with worse stock 
performance, suggesting that stock buybacks were being used to 
maximize executive pay, not supporting the long-term health of 
the company.
    And then more recently, Dr. Palladino at the Roosevelt 
Institute issued a paper finding a very, very close correlation 
between stock buyback activity and insiders selling their own 
shares and looked at the practice in restaurant, retail, and 
food manufacturing, industries in which millions of Black and 
Brown workers struggle to make ends meet and where they are 
disproportionate in the ranks of the employees. And the paper 
found that curbing the practice of stock buybacks could, you 
know, force these companies to invest more in their workers.
    Can you comment on this issue of stock buybacks and, you 
know, whether we should be looking to close the loophole that 
was opened and appears to have allowed executives to use these 
buybacks to pad their own wallets rather than the invest in 
their employees and the success of their companies?
    Mr. Hamilton. Thank you, Senator. You know, I think that is 
a fine example of--an example of a Government intervention in a 
way that is not morally consistent with promoting shared 
prosperity.
    One, we can see that there was a certain class of 
individuals that benefited from a tax cut of $2 trillion, so if 
we want to talk about capacities of what Government can do, 
clearly we can do a whole lot. So not only was it directed at a 
specific class of individuals from a moral sense that might not 
have been the ones that needed it the most, but it also has 
racial implications when you consider the fact that that class 
of Americans is overwhelmingly White and underwhelmingly Black.
    So I think the point I would like to make is, one, we have 
capacity to do big, broad things, and we need to 
reconceptualize the role of Government. We need to think about 
Government empowering people so that that can grow our economy, 
so that that can stimulate our economy. Had we used that money 
instead of allowing companies to engage in stock buybacks but 
endowing every American with a seed account at birth so that 
when they became a young adult, they could engage in building 
their assets just like anyone else in economic security, that 
would be a better way to have spent that money.
    Senator Van Hollen. I appreciate that, Dr. Hamilton.
    Professor Atkinson, I was just listening to my colleague 
Senator Lummis talk about the benefits of real-time payments. I 
am pleased to hear her supporting this. It is something I have 
been fighting for for a long time because, as we know, so many 
Americans are going paycheck to paycheck, and, you know, the 
Federal Reserve data show that about 37 percent of Americans 
were $400 away from, you know, having to borrow and go into 
greater debt or sell something. And it is outrageous that 
millions of Americans, lower-income Americans, are losing 
billions of dollars in the form of late fees because their 
paychecks, for example, are not cashed in real time.
    But the way to go here is not through, in my view, a 
private sector structure but through the Federal Reserve and 
the FedNow system. I have been asking them repeatedly to 
accelerate their efforts, which currently they say by the year 
2023 we will have real-time payment capacity through that 
system.
    But can you comment? As you pointed out, borrowing and 
putting people more in debt just digs people deeper and deeper 
into poverty, and why do we need to move forward on a FedNow 
type system?
    Ms. Atkinson. Good morning, Senator Van Hollen. You know, 
so there is already financial innovation around sort of early 
paychecks systems, and we have seen that sort of in the private 
sector where, again, you know, there is a profit motive 
involved, and so some percentage is taken in exchange for the 
privilege of getting a paycheck in real time. So that is a 
burgeoning area for a lot of scholarly work thinking about how 
we should regulate that, whether that looks like a loan or not.
    Certainly having a Federal option, a public option in 
banking more generally, you know, is a way to, you know, as 
Senator Lummis put it, get people closer to their paycheck--
right?--without having intermediaries sort of siphon bits and 
pieces here and there in order to perform those services. So 
certainly having a public option would be beneficial.
    Senator Van Hollen. I appreciate that because, as you say, 
you should not have to pay for the benefit of getting your 
paycheck in real time, and it just drives millions of Americans 
already close to the edge over the edge.
    Chairman Brown. Thank you, Senator Van Hollen.
    Senator Scott from South Carolina is recognized for 5 
minutes.
    Senator Scott. Well, thank you, Mr. Chairman, and thank you 
to the panel for being here for such an interesting 
conversation. Like so many have already said, the title of the 
hearing raises eyebrows, but I am not going to spend much time 
on the title of the hearing itself. But I do want to spend some 
time on progress and what progress looks like under pro-growth 
policies and responsible regulations.
    We saw before the pandemic, over the 3 years that preceded 
the pandemic we saw incomes grow at the bottom quintile faster 
than the top quintile. We saw the fact that America's 
unemployment rate of 3.5 percent also led to the lowest African 
American unemployment rate of 5.2 percent, for Hispanics about 
4 percent. We saw gains in the labor force participation rate 
as well as we saw home ownership go up. And when you think 
about the wealth gap, you do have to stop for a moment and 
pause on the fact that we saw home ownership grow during those 
years from 41.7 percent to 46.4 percent, which is the highest 
it has been since 2004. So if you look at pre-Great Recession, 
African American home ownership had not been higher than it was 
in 2019 than it was in 2004. That is a record because it leads 
us toward the ability to gain equity in something, an asset 
that works and increases even while you are sleeping. And that 
is the chasm between the haves and the have-nots in this 
country. It is driven right through this conversation around 
equity and margin. And for us to understand that, I think the 
education system that Dr. Loury and Mr. Toomey were talking 
about earlier is an important part of the equation, frankly. 
The fact of the matter is that the only parents who do not have 
school choice are poor parents, and those are consistently 
African American and Hispanic parents. And that correlation 
between positive education options in every Zip code does 
translate to what kind of income you earn in the workforce and, 
frankly, how long you stay in school.
    We know that 3 or 4 years ago we saw the statistics around 
what your income looks like if you drop out of high school. It 
was around $19,000. If you graduate from high school, it was 
around $29,000. If you get a Bachelor's degree, it was around 
$58,000, and a Master's even beyond that as well. So we know 
that there is a correlation between your educational 
achievement and your income, and we know that there is 
consistently a correlation between your income and your home 
ownership. And we know there is a correlation between your home 
ownership and your net worth. So let me slow it down for just a 
second so I can ask Dr. Loury a couple questions.
    Number one, on home ownership, the fastest way to close the 
wealth gap from my perspective and my personal experience as a 
kid who grew up in poverty in a single-parent household, who 
nearly flunked out of high school because I did not see the 
importance of education, who became a business owner who 
understood that it is better to create jobs and not just have a 
job, it is better for us to have profit and income. So on home 
ownership, home ownership was the opportunity for us to see 
that profit.
    Can you talk for just a minute or two--or, frankly, less, 
since I only have a minute or two left--about the importance of 
closing the wealth gap through home ownership?
    Mr. Loury. I think it is very important. Note, however, 
that I would not have made it closing the racial wealth gap. I 
would have just made it empowering people, American people of 
all races to avail themselves of the opportunities in this 
great country. I can recall my friend Robert Woodson of the 
Woodson Center in Washington working with public housing 
residents in Washington, DC, formulating development--this is 
way back when Jack Kemp was Secretary of Housing and Urban 
Development----
    Senator Scott. Yes.
    Mr. Loury. ----to allow for residents to acquire equity, 
ownership stake in their apartments in public housing. Very 
transformative on a small scale, one little experiment, but 
nevertheless.
    So, no, I think this is very important. Giving people a 
stake, creating individuals, giving them a way of being able to 
shape their own futures, empowering them, that is the way to 
go.
    Senator Scott. Well, you talk about the creativity between 
Jack Kemp and Robert Woodson that is celebrated by many folks 
who have read and millions who understood that concept. We have 
heard a lot about democratization of the market. I am a 
simpleton, so I like to just think about it was easy access to 
owning stocks. The average household in this country, about 
half of them have stocks; African Americans, I think it is 
about 31 percent have a stock portfolio, average balance around 
$12,000; Hispanics, about 28 percent, average balance around 
$11,000. The democratization of the market really means that 
the fees associated with getting involved goes down, down, 
down, and now it is down to zero. The impact of such an 
opportunity on closing the wealth gap, Dr. Loury?
    Mr. Loury. Well, this is just underscoring how corporate 
America, Wall Street, what-not, ought not to be constructed as 
the enemy. They are not our enemy necessarily. I mean, they 
ought not to go without regulation and oversight
    Senator Scott. Of course.
    Mr. Loury. On the other hand, we all have a stake in the 
prosperity of the economy, and many of us are indirectly 
shareholders in that process. The more democratic, the more 
widely spread is this opportunity to share in the fruits of 
American economic growth, the better.
    Senator Scott. Dr. Loury, my parting comments. Thank you, 
Chairman Brown, for my time. I would simply say that what you 
said there may be misinterpreted. What you mean by having a 
stake in the market and households, your 401(k) and retirement 
systems are already in the market. Therefore, we have more 
Americans who are involved in the market than we know of 
because we do not necessarily appreciate that powerful engine 
of retirement systems. It is one of the reasons why I have 
worked with Bob Johnson, the creator of BET, to make sure that 
those small-dollar investors in their 401(k)s can transfer it 
as the jobs move on, because it is really important for us to 
stop the leakage in the 401(k)s. It is another part of creating 
access to wealth and opportunities in the future, by having the 
next you, the retired you, having the resources necessary to be 
self-supportive.
    Thank you. My time ran out so fast. I look forward to 
having another conservation. Have a good one.
    Chairman Brown. Thank you, Senator Scott.
    Senator Cortez Masto from Nevada is recognized for 5 
minutes.
    Senator Cortez Masto. Thank you. Thank you for this 
hearing.
    Let me just bring us back to the basics here, because at 
the end of the day, of course, everyone wants to have a 
retirement savings. Everyone wants to be able to put their 
discretionary or disposable income, whatever additional money 
they have, into a 401(k) or some retirement program. But if you 
do not have a livable wage and you are at or below the poverty 
level, you really do not have the luxury of investing.
    So let us bring it back to the basics here for a minute. 
For many years, gains in productivity led to increases in real 
hourly wages, but that pattern has not been the case for the 
last 30 years. Productivity gains have not generally been 
reflected in gains in wages. Would you all agree with that? 
And, Professor Atkinson, let me start with you.
    Ms. Atkinson. Good morning, first of all, Senator Cortez 
Masto. You know, we can see, we can understand that there has 
been wage stagnation, sort of is our constant friend over many 
decades. And, you know, coming back again for me to thinking 
about how credit and debt work in that context or how other 
ways we have tried to sort of cover up that problem that is not 
specific to--you know, it is certainly disproportionately felt 
by communities of color. But it is a problem for the middle 
class more generally.
    Senator Cortez Masto. Thank you. I am going to stop you 
there because I want to get through this really quickly, and I 
so appreciate this conversation. Let me say, Dr. Hamilton, 
would you agree that wages have been stagnant over the last 30 
years and there are more people living at or below the poverty 
level making not a livable wage but struggling?
    Mr. Hamilton. It sounds like you want a quick answer. 
Absolutely, and I can elaborate more, but----
    Senator Cortez Masto. And we are going to get back to that.
    Mr. Hamilton. OK.
    Senator Cortez Masto. Dr. Loury, Professor Loury, would you 
agree with that?
    Mr. Loury. Well, there is a problem of wage stagnation. 
Senator Scott ran through some of the statistics about recent 
consequences of economic growth. I think productivity growth 
over the long run should lead to greater wages, but there is 
many a slip betwixt the cup and the lip on that one.
    Senator Cortez Masto. Yeah, and that is the challenge. That 
is our challenge. That is our challenge because I constantly 
hear this talk about unemployment, oh, the unemployment was 
low, so everything must be good. Well, unemployment really has 
nothing to do with whether you have a livable wage or not and 
whether you are living at the poverty level or below that 
poverty level. Would you agree? Ms. Atkinson, let me start with 
you, Professor Atkinson.
    Ms. Atkinson. In the spirit of a short answer, yes, I would 
agree.
    Senator Cortez Masto. OK. And so this is our challenge, 
and, really, we can talk about inequality because it is 
existing right now, and we can talk about how we address it. 
But at the end of the day, if we are not taking that 
productivity, which we are investing in, and turning it into 
livable wages for individuals, people are going to be 
struggling.
    And let me just say, you know, I come from the State of 
Nevada. In southern Nevada, from our hospitality industry, you 
can literally graduate from high school, and there was a time 
when you could go make a good living for your family, put a 
roof over your head. But because wages have been stagnant, we 
have not been able to do that in this country, across the 
country. And so this is our challenge.
    And so I so appreciate the conversation today, but this is 
where it starts for me. How do we address and invest more in 
our workforce, in that wage, and bring--lift everybody up that 
are struggling right now?
    Let me touch on an issue--and, Dr. Hamilton, I am going to 
ask you about this, because the economic gap between White 
individuals and Native Americans remains stark. Among all 
racial and ethnic groups, Native Americans had the highest 
poverty rate at 25.4 percent compared to 8.1 percent for White 
individuals. And I know you co-authored a study back in 2017 
that found this substantial difference.
    Can you elaborate a little bit more on that and the impact 
to Native Americans?
    Mr. Hamilton. You know, I love the framing of your 
question. It is not the result of a deficit amongst Native 
Americans but, rather, deficits in structures and resources so 
that Native Americans can thrive. And, you know, we have been 
talking a lot about markets. One thing we should recognize is 
that if people are not empowered, they are vulnerable to 
markets. So what I am talking about is not necessarily an 
indictment on banks, although there is some responsibility, 
too. I am talking about using Government resources to empower 
people so they are not vulnerable, so that they actually can 
utilize market attributes and thrive.
    Senator Cortez Masto. Thank you. And, Dr. Atkinson, any--
and I know I cut you off. Please, if there is more that you 
want to contribute, I would love to hear it.
    Ms. Atkinson. You know, I will just add my plus one to Dr. 
Hamilton's account. The question is not a wholesale indictment 
of markets generally or of Wall Street generally. But it is how 
can we use those resources to uplift the people who are most 
vulnerable.
    Senator Cortez Masto. Thank you. Thank you very much. I 
know my time is up.
    Chairman Brown. Thank you, Senator Cortez Masto.
    Senator Ossoff from Georgia is recognized for 5 minutes.
    Senator Ossoff. Thank you, Mr. Chairman. Thank you for 
convening this hearing. Thank you to our panelists.
    Professor Atkinson, what in your view is the relationship 
between power and access to credit?
    Ms. Atkinson. You know, I guess the first thing is what we 
think about as power, right? Who has access to sort of we might 
think network relationships and finding lending relationships 
and the most beneficial lending relationships and choice, who 
has no option but to go to the corner payday lender versus who 
can go out and be comfortable in negotiating and looking for 
the best rates. So I think power factors into that.
    Senator Ossoff. Thank you. I appreciate that. There is, I 
think, sometimes a false dichotomy presented in a discussion 
such as the one we are having at this hearing about whether we 
are discussing free markets or not. When, for example, the two 
dozen largest and most powerful investment banks in the country 
can access emergency cash via the Federal Reserve at zero or 
near 0 percent interest rates virtually overnight, but no such 
instantaneous credit facility exists for smaller banks, let 
alone households, is that the free market? Or is that something 
else?
    Ms. Atkinson. You know, my view is that that is not a free 
market. And, you know, markets do not exist outside of the 
social environment and the culture in which we live, and, you 
know, we can think about structuring, for example, the PPP 
payments--right?--as a forgivable loan, if you will, made 
available to businesses and, indeed, payday lenders and other 
kinds of powerful entities and not to regular ordinary people. 
So, absolutely, yes.
    Senator Ossoff. And isn't it the case, Professor Atkinson, 
that those major financial institutions which enjoy this 
privileged access to credit markets via a Federal entity--the 
Federal Reserve--then use the cash that they can access on such 
favorable terms to lend at higher rates to borrowers downstream 
or to make investments in equities or other financial 
instruments to profit?
    Ms. Atkinson. Sure. I mean, their access is not conditioned 
on particular uses, particular interest rates, and I think that 
is one of the troubles of, you know, if the rationale is that 
by facilitating this ready, cheap money to big institutions, it 
will trickle down into the communities that need it, you know, 
that money is not burdened in any way, they are not required, 
and if anything, in our legal standards it is that they use the 
money in service of their own interests or their shareholders. 
So, absolutely, the money is not--you know, that access does 
not bring with it a requirement to deploy that access in ways 
that help the most vulnerable people.
    Senator Ossoff. Thank you, Professor Atkinson. And these 
major financial institutions which via various mechanisms of 
monetary policy can access cash or credit at 0 percent interest 
or even simply as a transfer, sometimes we think about the 
interest rate that a borrower pays as an indicator of that 
borrower's creditworthiness. But these are the same financial 
institutions who required a massive multitrillion bailout in 
2007 and 2008 due to their own incompetence and their own 
irresponsible risk taking and which have benefited from a 
constant stream of loose monetary policy and quantitative 
easing ever since.
    So are the rates that these powerful financial institutions 
pay a function of their superior creditworthiness, their 
superior risk management, their superior wisdom in the 
allocation of capital? Or is it a function of the powerful and 
privileged position they have in a financial system that has 
been structured to advantage them?
    Ms. Atkinson. I think it is a function of a system that 
presents or represents these entities as being crucial to the 
existence of the system. I think this is where the sort of 
``too big to fail'' rationale originates, and I think we should 
think about individuals and communities as being, you know, too 
important to fail in the same way.
    Senator Ossoff. Thank you so much for your time and your 
testimony.
    I yield back, Mr. Chairman.
    Chairman Brown. Thank you, Senator Ossoff, for your 
questions.
    Is Senator Warnock here?
    [No response.]
    Chairman Brown. OK. I think we can wrap up. Everyone in 
this hearing on this Committee today agrees that inequality has 
soared, and everyone agrees that there is a serious and 
enormous racial wealth gap, and everyone agrees that Wall 
Street contributes to both these outcomes. What we disagree 
about is whose side are you on and do you think we should take 
action so that more wealth goes to the people who make this 
country work? Or do you think we need to protect Wall Street 
profits and stock buybacks and dividends? I think we can do 
better. The CARES Act and the American Rescue Act, as Dr. 
Hamilton pointed out, are a blueprint for investment in workers 
and infrastructure that would benefit everyone. I believe in 
American hard work. You have certainly heard me talk about the 
dignity of work. If we devote more of our resources to the 
people who have been left out of our economy, bringing them in 
not only will help reduce inequality and the racial wealth gap; 
it will create even more profit for everyone. We have done it 
before. It did not lead to socialism. I did not destroy 
capitalism or democracy. It actually strengthened them. The New 
Deal, while other countries in Europe went in a different 
direction often, the New Deal strengthened American democracy 
and helped build a middle class. If we take care of workers 
first, we know that Wall Street also will do just fine.
    Thanks to the witnesses today for providing testimony. For 
Senators who wish to submit questions for the record, these 
questions are due 1 week from today, on Thursday, March 11th. 
For our witnesses, you have 45 days, if you would, to respond 
to any of these questions.
    With that, thank you all. Senator Toomey, thank you. This 
hearing is adjourned.
    [Whereupon, at 11:45 a.m., the hearing was adjourned.]
    [Prepared statements, responses to written questions, and 
additional material supplied for the record follow:]
              PREPARED STATEMENT OF CHAIRMAN SHERROD BROWN
    The economy isn't physics--it's not governed by scientific laws 
outside our control. It's made up of people making choices about our 
values and what kind of society we want to live in.
    Despite what we're constantly told on TV, most Americans share a 
lot of the same values--they want an economy that's fair and just, 
where hard work pays off for everyone, no matter who you are or what 
kind of work you do, and where everyone has the economic security to 
raise a family and retire with dignity.
    But when you look at our economy, it doesn't reflect the society 
most of us want.
    You can't look at decades of growing productivity, with workers 
getting a smaller and smaller share of the profits they create, and 
think the economy looks fair.
    You can't look at a racial wealth and income gap that has barely 
budged since we passed the Civil Rights Act, and think the economy 
looks just, or that we all have equal opportunity.
    You can't look at the millions of Americans whose hard work doesn't 
even pay the bills, while corporate profits go up, CEO pay soars, and 
stock buybacks and dividends explode, and think that this economy 
reflects our values.
    This state of affairs didn't happen on its own, and it wasn't just 
the invisible hand of the markets.
    For decades, Wall Street interests--big banks, hedge funds, private 
equity firms, and insurance companies--have been calling the shots--
through their lobbyists, through rigged rules, through union-busting.
    We've left it to them to shape our entire economy, and make choices 
about our values and what kind of society we live in.
    For decades, Wall Street has rewarded the companies that squeeze 
their workers the hardest--companies that cut wages, cut retirement 
benefits, cut corners on worker safety.
    When companies lay off workers, cut paychecks, or subcontract work 
to lower-paying companies with fewer benefits, their stock price goes 
up--and Wall Street calls it ``cost cutting.''
    We have allowed a system to take root that treats American workers 
as a commodity, a cost to be minimized--instead of the engine behind 
all our businesses' success.
    They do it so Wall Street can funnel more and more of the profits 
that workers create to CEOs and shareholders.
    And instead of investing those profits in something productive, 
they've used that money for reckless speculation that drove booms and 
busts, resulting in real estate crashes and the dot-com bubble.
    And when all of that didn't make them rich enough, they came up 
with the idea for credit default swaps and collateralized debt 
obligations. It was Wall Street that targeted workers who were 
struggling to make ends meet with subprime mortgages--predatory loans 
that stole the equity workers had saved up in their homes.
    Wall Street's 2008 crisis cost the economy tens of trillions of 
dollars and destroyed 53 percent of Black wealth in the country.
    Millions of families lost their homes and are still trying to 
recover. Wall Street got a bailout.
    Then Wall Street found a new way to get paid: fund the payday and 
auto title lenders and debt collectors that targeted families 
struggling to get by in what was left of the economy.
    Even after all of that, some people, including a whole lot of 
people who've been running the Senate, think that we should let Wall 
Street keep dictating our economy--and by extension, the lives of 
everyone who gets their income from a paycheck, not a stock portfolio.
    They claim they just want ``markets to decide,'' but when the 
market isn't fair, that just means putting Wall Street in charge.
    It's the same attitude that lets corporations run ad campaigns 
calling their workers ``essential,'' but then spends their profits on 
stock buybacks and CEO bonuses rather than a living wage or the 
protective equipment workers need to avoid a deadly virus.
    Or that prompts Amazon to post a ``Black Lives Matter'' banner on 
its website, while unleashing every union-busting tactic in the book to 
undermine Black workers organizing for better working conditions in 
Alabama.
    If we want a fair and just society, with a growing middle class 
that everyone has the opportunity to join, we have to stop letting Wall 
Street run the economy.
    We can't rely on quarterly earnings reports to tell us whether 
workers deserve a decent living.
    For too long, we've allowed Wall Street's phony populist allies to 
stoke fear and place blame and divide us by race and religion and 
region. We know why they do it--to distract from how they've been 
keeping all the profits for themselves.
    But this zero-sum view of the economy hurts everyone.
    We have the largest economy on earth, with vast resources and 
talent and ingenuity. If we stop siphoning off so much of our 
prosperity to the tiny sliver of people at the very top, not only is 
there enough to go around for everyone--but when we unleash all 
workers' talents and give them some more economic security, we'll 
create even more economic growth.
    We all learn in elementary school about Dr. Martin Luther King 
Jr.'s fight for civil and human rights. But we don't talk about his 
fight for economic rights enough--and how you can't fight for one 
without the other.
    We can't forget that Dr. King was assassinated in Memphis while 
fighting for some of the most exploited workers in the country, 
sanitation workers--fighting for their civil rights and workers' 
rights.
    As he put it: ``What does it profit a man to be able to eat at an 
integrated lunch counter if he doesn't earn enough money to buy a 
hamburger and a cup of coffee?''
    If we want to take on economic inequality and shrink the racial 
wealth gap, then we need to build an economy based on the dignity of 
work.
    That means paying all workers a living wage, giving them power over 
their schedules, providing good benefits and safety on the job, and 
letting them organize a union. That means everyone gets a fair share of 
the wealth they create.
    That means building an economy that reflects our values--not Wall 
Street's values--and the kind of society we want to live in.
                                 ______
                                 
                  PREPARED STATEMENT OF ABBYE ATKINSON
Assistant Professor of Law, University of California, Berkeley, School 
                                 of Law
                             March 4, 2021
    Mr. Chairman Brown, Ranking Member Toomey, and Members of the 
Committee: Good morning, and thank you for inviting me to testify 
before this Committee. It is my great honor. My name is Abbye Atkinson. 
I am an Assistant Professor of Law at the University of California, 
Berkeley, School of Law, where I teach Contract Law as well as courses 
on the legal structures of debt and inequality. I appear here today in 
my capacity as an academic who studies the law of creditors and debtors 
as it affects traditionally marginalized communities and implicates the 
widening racial and gender wealth gap. \1\
---------------------------------------------------------------------------
     \1\ This written testimony includes material that has been 
previously published as follows: Abbye Atkinson, ``Borrowing 
Equality'', 120 Columbia Law Review 1403 (2020); Abbye Atkinson, 
``Rethinking Credit as Social Provision, 71 Stanford Law Review 1095 
(2019). It also incorporates material from Abbye Atkinson, 
``Commodifying Marginalization'', 71 Duke Law Journal (forthcoming 
January 2022).
---------------------------------------------------------------------------
    In this regard, I'd like to make three points. First, credit, and 
by natural extension, debt (hereinafter ``credit/debt'' \2\), has 
become a critical means of carrying out Federal social welfare 
policies, even though indebtedness contributes significantly to many of 
the entrenched socioeconomic problems we rely on credit/debt to solve. 
Second, credit/debt itself provides a channel through which wealth 
drains from marginalized communities, toward more affluent entities. 
Its burdens are not equally distributed, which exacerbates the 
racialized and gendered wealth gap. Third, because credit/debt has 
become so critical to Federal social welfare policies, Congress should 
not delegate the regulation of credit/debt to private, profit-motivated 
interests whose stock in trade is credit/debt.
---------------------------------------------------------------------------
     \2\ Gustav Peebles, ``The Anthropology of Credit and Debt'', 39 
Ann. Rev. Anthropology 225, 226 (2010) (noting that ``credit and debt 
stand as an inseparable, dyadic unit'' and adopting the term ``credit/
debt'' because ``debt is always already a dyadic relation that requires 
its opposite[, credit]'').
---------------------------------------------------------------------------
Credit/Debt Has Become an Important Aspect of American Social Provision
    Credit/debt has become vital to current social provision \3\ 
policy, particularly for socio-economically marginalized Americans, 
including low-income workers, \4\ women, \5\ and African Americans. \6\ 
It is an important feature of our unique American public-private 
welfare regime. \7\ This is true both (1) as to marginalized borrowers 
themselves, who are encouraged to rely on consumer credit markets to 
smooth consumption, to become socially mobile, and to address 
entrenched inequality more generally; and (2) as to third party 
beneficiaries, like retirement-insecure workers, who, through their 
participation in public pensions, increasingly rely on wealth extracted 
through the channel of ``marginalized debt,'' the array of high 
interest rate, subprime, risky debt that tends to concentrate in and 
among historically marginalized communities. \8\ I briefly describe 
each below.
---------------------------------------------------------------------------
     \3\ The term ``social provision'' refers to the range of state 
policies implemented to improve general welfare, including for example, 
``Nation-spanning social insurance and public assistance programs'' 
such as ``federally required, state run unemployment insurance; 
federally subsidized public assistance; and national contributory old-
age insurance.'' E.g., Theda Skocpol, ``A Society Without a `State'? 
Political Organization, Social Conflict, and Welfare Provision'', 7 J. 
of Pub. Pol'y 349, 350-51 (1987); see also Ann Shola Orloff, ``Social 
Provision and Regulations: Theories of States, Social Policies'', in 
Julia Adams, Elisabeth S. Clemens, and Ann Shola Orloff, Modernity in 
Remaking Modernity: Politics, History, and Sociology 190 (2005) 
(``Social provision and regulation have taken on many public and mixed 
public/private forms, from poor relief and publicly subsidized charity 
to `workingmen's insurance' and pension, `social security,' `the 
welfare state,' `welfare capitalism,' `the social state,' and `l'etat 
providence.' '').
     \4\ E.g., Abbye Atkinson, ``Rethinking Credit as Social 
Provision'', 71 Stan. L. Rev. 1095, 1105-1120(2019) (hereinafter 
Atkinson Rethinking) (describing debates about how to regulate the cost 
of payday loans).
     \5\ E.g., Abbye Atkinson, ``Borrowing Equality'', 120 Colum. L. 
Rev. 1403, 1419-22 (2020) (describing 1960s and 1970s advocacy for 
increased access to credit as a means of greater socioeconomic equality 
for women).
     \6\ Id. at 1422-24 (describing 1960s and 1970s advocacy for 
increased access to credit as a means of greater socioeconomic equality 
for African Americans).
     \7\ See Jacob Hacker, The Divided Welfare State: The Battle Over 
Public and Private Social Benefits in the United States 11-12 (2002) 
(defining the American public-private welfare regime as a combination 
of: (1) ``direct pension social programs'' like Social Security, (2) 
``the constellation of more indirect or `hidden' Government 
interventions,'' like tax breaks and Government subsidies, ``that are 
designed to provide similar social benefits or shape their private 
provision,'' and (3) ``publicly regulated and subsidized private 
benefits'').
     \8\ E.g., Taz George, Robin Neuberger, and Mark O'Dell, ``The 
Geography of Subprime Credit'', Federal Reserve Bank of Chicago, (Nov. 
6, 2019), https://www.chicagofed.org/publications/profitwise-news-and-
views/2019/thegeorgraphy-of-subprime-credit.
---------------------------------------------------------------------------
Credit/Debt as Social Provision for Marginalized Borrowers
    The ability to borrow money in consumer capital markets is an 
important aspect of Federal social provision policy. Consequently, much 
of the current discourse of access to credit/debt for low-income and 
other marginalized Americans rests on the assumption that credit/debt 
extended on good terms is a universal public good. \9\ Moreover, on the 
view that credit/debt can effectively and properly fill the void left 
by welfare retrenchment, legislators and policymakers largely confine 
themselves to debating the appropriate regulation of consumer credit/
debt access rather than exploring the essential qualities of credit/
debt that may make it a poor substitute for a robust, public safety 
net. \10\
---------------------------------------------------------------------------
     \9\ See, e.g., Marek Hudon, ``Should Access to Credit Be a 
Right?'', 84 J. Bus. Ethics 17, 17 (2009) (``Credit is central to the 
welfare of many citizens and the effective management of the economy in 
high- and low-income countries.'').
     \10\ See, e.g., Greta R. Krippner, ``Democracy of Credit: 
Ownership and the Politics of Credit Access in Late Twentieth-Century 
America'', 123 Am. J. Socio. 1, 2 (2017); Gunnar Trumbull, Credit 
Access and Social Welfare: The Rise of Consumer Lending in the United 
States and France, 40 POL. & SOC'Y 9, 10 (2012).
---------------------------------------------------------------------------
    For example, the legislative debates that emerged in the wake of 
the Second Circuit's 2015 decision in Madden v. Midland Funding, LLC 
\11\ and the Consumer Financial Protection Bureau's Payday Rule, \12\ 
centered largely around the optimal regulation of credit/debt for high 
risk, low income borrowers. There was otherwise minimal engagement with 
the important threshold normative question of whether credit/debt, an 
institution rooted in private markets, should be a viable component of 
social provision for low-income Americans. Perspectives on both sides 
of the aisle shared a common baseline for their arguments, 
notwithstanding their differences in political ideology or methodology. 
Each began from the shared premise that credit/debt can and should 
benefit the working poor, thus implicitly framing credit/debt as a 
valid means of social provision. \13\ These views thus implicitly 
naturalized the idea that credit/debt should be a significant component 
of social provision for the working poor.
---------------------------------------------------------------------------
     \11\ Madden v. Midland Funding, LLC, 786 F.3d 246, 248-50 (2d Cir. 
2015). In this case, the Second Circuit ruled that loans transferred to 
non-national-bank entities in the secondary market are subject to State 
usury caps even if the loan was originated by a national bank that 
would otherwise enjoy Federal preemption from State usury caps.
     \12\ 12 CFR 1041 (2020). As initially promulgated in 2017, the 
Payday Rule, regulated payday lending by, for example, requiring that 
payday determine whether a prospective customer has the ``ability-to-
pay'' certain types of loans before lending to the customer. The Rule 
was amended in July of 2020, among other reasons, to rescind the 
``ability-to-pay'' requirement. Payday, Vehicle Title, and Certain 
High-Cost Installment Loans, 85 Fed. Reg. 44382 (Oct. 20, 2020) 
(codified at 12 CFR 1041 (2020)).
     \13\ ``Atkinson Rethinking'', supra note 4, at 1108-1120 
(describing the legislative debates surrounding the so-called Madden-
fix legislation and the Payday Rule).
---------------------------------------------------------------------------
    Similarly, Congress has articulated a legislative policy premised 
on the conviction that by democratizing access to credit/debt, 
marginalized groups, like women and African Americans, can borrow their 
way to increased socio-economic inclusion, better relative economic 
health, and even first-class citizenship. \14\ For example, beginning 
in the mid to late 1960s and continuing throughout the 1970s, Congress 
passed a suite of laws aimed at addressing inequality more broadly by 
improving the ability of marginalized groups to borrow money in the 
conventional consumer capital market. \15\ Significant among these 
interventions were the Higher Education Act of 1965, \16\ which made it 
more widely possible for financially constrained students to borrow 
money for higher education; the Consumer Credit Protection Act of 1968, 
\17\ which implemented a regime to make private lending fairer through 
heightened transparency; the Equal Credit Opportunity Act of 1974, \18\ 
which prohibited lending discrimination on the basis of sex and race, 
among other protected categories; and the Community Reinvestment Act of 
1977, \19\ which encouraged conventional lenders to do business in 
marginalized communities who had been historically excluded from 
mainstream consumer capital markets.
---------------------------------------------------------------------------
     \14\ E.g., Kamille Wolff Dean, ``Foreclosures and Financial Aid: 
Mind Over Mortgages in Closing the Plus Loan Gap'', 4 Colum. J. Race & 
L. 129, 135 (2014) (describing how ``[m]inorities were particularly 
encouraged to take advantage of home ownership incentives from lenders 
and the Federal Government as a means of becoming upwardly mobile.''); 
Monica Prasad, The Land of Too Much 221-225 (2012).
     \15\ E.g., Sara Sternberg Greene, ``The Bootstrap Trap'', 67 Duke 
L.J. 233, 257 (2017) (``Congress eventually responded, and beginning in 
1974, it passed legislation and a series of targeted amendments that 
sought to end discrimination in credit evaluations and lending.''); 
Michael S. Barr, ``Modes of Credit Market Regulation'' in Nicolas P. 
Retsinas and Eric S. Belsky, Building Assets, Building Wealth: Creating 
Wealth in Low-Income Communities (2005).
     \16\ Higher Education Act of 1965, Pub. L. No. 89-329, 79 Stat. 
1219 (codified as amended at 20 U.S.C. 1001-1107 (2018)).
     \17\ Consumer Credit Protection Act, Pub. L. No. 90-321, 82 Stat. 
146 (1968) (codified as amended at 15 U.S.C. 1601-1616 (2018)).
     \18\ Equal Credit Opportunity Act, Pub. L. No. 93-495, 88 Stat. 
1521 (1974) (codified as amended at 15 U.S.C. 1691-1691f).
     \19\ Community Reinvestment Act of 1977, Pub. L. No. 95-128, 91 
Stat. 1117 (codified as amended at 12 U.S.C. 2901-2908 (2018)).
---------------------------------------------------------------------------
    With respect to these statutes, Congress acted in part to address 
the demands of marginalized groups who, in a world in which access to 
borrowed capital was increasingly synonymous with belonging, came to 
believe that equal access to conventional loans and purchase money to 
acquire the material trappings of American citizenship was integral to 
their broader quest for equality and first-class citizenship. \20\ 
Consequently, each of these law embraces ``credit'' as a source of 
social provision, even as they ignore the debt that inevitably flows 
from taking a loan. Instead, Congress bifurcated its contemporaneous 
treatment of debt, taking a relatively restrictive and regressive 
approach to regulating distressed debtors in the Bankruptcy Reform Act 
of 1978 (Bankruptcy Code) \21\ and the Fair Debt Collection Practices 
Act of 1977. \22\
---------------------------------------------------------------------------
     \20\ Greene, supra note 15, at 254-55 (``In the mid-twentieth 
century, . . . civil rights and women's rights groups were behind the 
push to mandate uniform standards of credit.'').
     \21\ Bankruptcy Reform Act, Pub. L. No. 95-598, 92 Stat. 2549 
(1978) (codified as amended at 11 U.S.C. 101-1532 (2018)).
     \22\ Fair Debt Collection Practices Act, Pub. L. No. 95-109, 91 
Stat. 874 (1977) (codified as amended at 15 U.S.C. 1692 (2018)).
---------------------------------------------------------------------------
Credit/Debt as Social Provision for Third Party Beneficiaries
    Marginalized borrowers are not the only ones for whom social 
provision policy invokes the power of credit/debt as a valid means of 
social provision. Social provision policy also encompasses credit/debt 
as a valid means of wealth extraction in service of retirement security 
for workers. Specifically, public pension funds--which rely heavily on 
investment returns to meet their obligations to retirees \23\--have 
increasingly moved their enormous pools of ``labor's capital'' \24\ 
into ``alternative'' investments, like marginalized debt, that promise 
higher yields crucial to fund pension obligations even as they portend 
greater risk of loss. \25\ Consequently, marginalized debt is 
increasingly an asset that rounds out the diversified portfolios of the 
Nation's public pension funds. \26\
---------------------------------------------------------------------------
     \23\ E.g., Pew Charitable Trusts, ``State Pension Funds Reduce 
Rates of Return at 5'' (Dec. 2019) (hereinafter Pew Report) (observing 
that ``[i]nvestment returns make up more than 60 percent of public 
pension plan revenues [while] employer and employee contributions make 
up the rest'').
     \24\ E.g., David Webber, The Rise of the Working-Class 
Shareholder: Labor's Last Best Weapon 8 (2018) (defining ``labor's 
capital'' as ``the trillions of dollars held in public pension 
funds''); Teresa Ghilarducci, Labor's Capitalism: The Economics and 
Politics of Private Pensions 50 (1992) (observing that ``[p]ensions may 
not be labor's wages, but labor's capital'' in part because they 
function ``as an insurance fund in which every [worker] holds a 
share'').
     \25\ Ben Christopher, ``Riskier Bet: Why CalPERS, the Country's 
Largest Pension Fund, Is Getting Into Banking'', O.C. Reg., (Jul. 9, 
2020), https://www.ocregister.com/2020/07/09/why-calpers-the-countrys-
largest-pension-fund-isgetting-into-banking/, (observing that in the 
search for investment returns, ``pensions [have] ventured further into 
the Wild West of `alternative investments'--private equity, one-off 
infrastructure projects and real estate, with each step t[aking] the 
funds into potentially more profitable, but also more perilous, 
terrain''); see also Gordon L. Clark, Pension Fund Capitalism 28 (2000) 
(observing ``the rise of pension fund capitalism and the world of 
finance with which it is intimately associated''); David F. Swensen, 
Pioneering Portfolio Management: An Unconventional Approach to 
Institutional Investment 55 (2009) (noting that ``[f]inance theory 
posits that acceptance of greater risk leads to the reward of higher 
expected returns'').
     \26\ Pew Report, supra note 23, at 1; see also, Sondra Albert, 
``The Subprime Crisis' Impact on Fixed-Income Funds'', AFL-CIO Housing 
Investment Trust, (Nov. 13, 2007), https://www.sec.gov/Archives/edgar/
data/225030/000116923207004677/d73205--40-24b2.htm, (observing that 
``public pension funds have also increased their investments in hedge 
funds in an attempt to boost their returns due to larger funding 
requirements'').
---------------------------------------------------------------------------
    In this context, marginalized debt serves as a mechanism of social 
provision because it furnishes a basis from which working people might, 
at least nominally, shore up their oftenprecarious retirement 
prospects. \27\ Yet, in this iteration of credit/debt as social 
provision, it is the investor-pensioners who ostensibly benefit from 
the borrowing, not the borrowers themselves. In addition, the financial 
intermediaries, like private equity firms, who both construct and 
privately regulate these channels of redistribution are significant 
winners in this arrangement, reaping fees on the front end and a 
disproportionate percentage of returns relative to their initial 
investments on the back end. \28\ Thus, while neither lending and 
borrowing nor the accumulation of wealth through investment is 
inherently harmful, \29\ pension fund investment in marginalized debt 
may not be a public good, when balanced against the burden that 
marginalized debt and chronic indebtedness disproportionately imposes 
in the lives of marginalized communities. \30\
---------------------------------------------------------------------------
     \27\ E.g., Jack M. Beermann, ``The Public Pension Crisis'', 70 
Wash. & Lee L. Rev. 3, 6 (2013) (observing that ``many public pension 
plans are seriously underfunded either intentionally or due to 
unrealistic assumptions concerning investment performance and the 
amount that will be owed over time'' and that one of the worries of the 
public pension crisis is the potential ``consequences to public 
employees and retirees, especially those who did not participate in 
Social Security, who could be left with insufficient assets for a 
decent retirement'').
     \28\ Ludovic Phalippou, ``An Inconvenient Fact: Private Equity 
Returns and the Billionaire Factory'' 24-25, https://papers.ssrn.com/
sol3/papers.cfm?abstract--id=3623820, (``Private equity funds tend to 
charge an annual management fee of 2 percent and a performance fee of 
20 percent. Added to the generally higher fees already paid for target 
date funds, the returns will really have to be supersized to justify 
the cost of the alternative investments.''); accord Webber, supra note 
24, at 81 (observing that [h]edge funds are very often a bad investment 
for everyone except hedge fund managers'').
     \29\ See, e.g., Atkinson Rethinking, supra note 4, at 1100 
(observing that ``credit and debt often amplify the underlying set of 
circumstances into which they are introduced'' and that ``where credit 
and its amplifying qualities are concerned, what is good gets better, 
and what is bad gets worse'').
     \30\ See, e.g., Paul Kiel and Hannah Fresques, ``Data Analysis: 
Bankruptcy and Race in America'', ProPublica, (Sept. 27, 2017), https:/
/projects.propublica.org/graphics/bankruptcy-data-analysis, (observing 
that ``[n]ationally, bankruptcy filings are much higher among Blacks 
than Whites'' and that ``[t]he higher filing rates among Black 
communities can be partly explained by greater financial stress on the 
population as a whole''); William R. Emmons & Lowell R Rickets, ``The 
Demographics of Loan Delinquency: Tipping Points or Tip of the 
Iceberg?'', Fed. Reserve Bank of St. Louis, (Oct. 18, 2016) (``Families 
headed by an African American are about 81 percent more likely to be 
seriously delinquent on a debt than a non-Hispanic White family while 
Hispanic-headed families (of any race) are about 8 percent more likely 
to be seriously delinquent than a White family.'').
---------------------------------------------------------------------------
    The significance of marginalized debt in pension-fund investment 
highlights two aspects of credit/debt-focused privatization in social 
welfare policy. First, it shows how the current publicprivate welfare 
regime has largely shifted retirement security into the hands of 
private financial actors, whose fiduciary duties and profit-sensitive 
incentives eschew broader moral considerations of the externalities of 
retiree wealth maximization. \31\ Second, the rise of marginalized debt 
as a source of retiree wealth maximization shows how in the 
financialized economy, the tenuous socioeconomic condition of one 
community \32\ is now openly a source of wealth accumulation for 
another vulnerable community, retirement-insecure workers. \33\ 
Perversely then, just as credit/debt is an expedient means of promoting 
and facilitating a decent standard of living for low-income and other 
economically vulnerable groups, without the political burdens of 
solving for ``persistent wage stagnation and other entrenched social 
pathologies,'' \34\ it is also an expedient means of promoting and 
facilitating a decent standard of living for older people, without the 
political burden of solving for the real failures of retirement 
security, like overpromising. \35\
---------------------------------------------------------------------------
     \31\ Webber, supra note 24, at 9.
     \32\ E.g., Peter Whoriskey, ``A Way of Monetizing Poor People: How 
Private Equity Firms Make Money Offering Loans to Cash-Strapped 
Americans'', Wash. Post, (Jul. 1, 2018), https://
www.washingtonpost.com/business/economy/a-wayof-monetizing-poor-people-
how-private-equity-firms-make-money-offering-loans-to-cash-
strappedamericans/2018/07/01/5f7e2670-5dee-11e8-9ee3-49d6d4814c4c--
story.html, (``Private equity firms, with billions to invest, have 
taken significant stakes in the growing [small-dollar installment loan] 
field.'').
     \33\ E.g., Webber, supra note 24, at 8 (observing that for many 
employees with public pensions, the ``loss of their jobs and pensions 
would leave them on the knife's edge of poverty, if not 
impoverished)''.
     \34\ E.g., Atkinson Rethinking, supra note 4, at 1101.
     \35\ G. Alan Tarr, ``No Exit: The Financial Crisis Facing State 
Courts'', 100 KY. L.J. 785, 803 (2012) (``Some states have in the past 
balanced their budgets in part by inducing public employee unions to 
accept lower wage increases with the promise of future benefits 
payments, and the effects of this short-term gimmick are now being 
felt.''); cf. Beermann, supra note 27, at 27 (arguing that ``[u]nfunded 
pension promises benefit politicians'' by ``allow[ing] for current 
officials to provide services without requiring taxpayers to pay for 
them until much later, when they may be out of office.'').
---------------------------------------------------------------------------
Credit/Debt Is a Means of Regressive Redistribution That Entrenches 
        Inequality
    Credit/debt itself provides a channel through which wealth can 
leave economically vulnerable communities, traveling upstream toward 
more affluent entities. \36\ This regressive redistribution has grave 
consequences for low-income borrowers and, more broadly, for other 
communities whose economic prospects are consistently dim. For example, 
as noted by political scientist, Gunnar Trumbull, ``there's a feature 
of consumer credit that makes it fundamentally regressive'' because 
``the poorest people who take out loans pay the highest interest 
rates.'' \37\ Those payments made in the credit ``sweat box'' move 
wealth out of distressed communities and into more affluent ones. \38\
---------------------------------------------------------------------------
     \36\ Ctr. for Competition Pol'y, ``Gunnar Trumbull at CCP Annual 
Conference'' (2011), YouTube (Jan. 20, 2012), https://www.youtube.com/
watch?v=9yQvOzinTGg.
     \37\ Id. at 1:32-1:46.
     \38\ Ronald J. Mann, ``Bankruptcy Reform and the `Sweat Box' of 
Credit Card Debt'', 2007 U. Ill. L. Rev. 375, 384 (2007) (``Debt-based 
[credit card] issuers . . . attempt to maximize the number of customers 
who do not repay their account balances in full each month. That 
strategy would not seem unusual, but for the fact that the most 
profitable customers are sometimes the least likely to ever repay their 
debts in full.'').
---------------------------------------------------------------------------
    Moreover, data revealing entrenched racial and gender-based 
inequality and disproportionate indebtedness deeply challenge the 
notion that marginalized groups can borrow their way into greater 
socioeconomic equality, without meaningfully accounting for the 
consequences of debt in their lives. \39\ Indeed, the expanded ability 
to borrow money has had mixed results for various marginalized groups 
who continue to struggle to find socioeconomic parity. \40\ In many 
cases, the subsequent increased rates of borrowing have introduced 
higher levels of burdensome debt among communities least able to bear 
this extra weight. \41\
---------------------------------------------------------------------------
     \39\ E.g., Raj Chetty, Nathaniel Hendren, Maggie R. Jones & Sonya 
R. Porter, ``Race and Economic Opportunity in the United States: An 
Intergenerational Perspective'', 135 Q.J. Econ. 711, 712-18 (2020) 
(studying intergenerational wealth, observing a persistent wealth gap 
between African Americans and White Americans, and noting that 
``reducing the Black-White income gap will require policies whose 
effects cross neighborhood and class lines and increase 
intergenerational mobility''); Am. Ass'n of Univ. Women, ``Deeper in 
Debt: Women and Student Loans'' 1-2 (2017), https://www.aauw.org/app/
uploads/2020/03/DeeperinDebt-nsa.pdf (hereinafter AAUW Report) (noting 
that women earn less than men and therefore pay back their loans more 
slowly, and that ``[t]he pace of repayment was particularly slow for 
Black and Hispanic women, as well as for men in those groups'').
     \40\ See, e.g., AAUW Report, supra note 39, at 9, 28 (noting that 
although in the last 50 years, women and people off color have made 
``dramatic gains in higher education,'' these groups struggle to repay 
debt on account of disparities in pay).
     \41\ See Atif Mian and Amir Sufi, House of Debt 30 (2014) 
(observing that ``[d]ebt is the anti-insurance. concentrate[ing] the 
risks on those least able to bear it''). Mian and Sufi also observed 
that ``debt significantly amplified wealth inequality during the Great 
Recession.'' Id.; see also Jen Mishory, Mark Huelsman, & Suzanne Khan, 
``How Student Debt and the Racial Wealth Gap Reinforce Each Other'', 
(Sept. 9, 2019), https://tcf.org/content/report/bridging-progressive-
policy-debates-student-debt-racial-wealth-gapreinforce/
?session=1&agreed=1, (reporting that ``while many Black families 
currently need to rely on debt to access a college degree and its 
resulting wage premium, the disproportionate burden of student debt 
perpetuates the racial wealth gap'').
---------------------------------------------------------------------------
    The challenges that women and African Americans face with regard to 
student loan shed light on this outcome. Specifically, in the present 
day, student loan debt is quickly approaching a crisis of epic 
proportions. \42\ Some 44 million Americans currently owe approximately 
1.6 trillion dollars in outstanding educational debt. \43\ Women and 
African Americans (both separately and at their intersections) are 
carrying the brunt of this burden. \44\ For example, although ``college 
degrees have been a pathway to greater economic and personal 
independence for decades--especially for women[,] . . . acquiring those 
degrees results in more debt for women than for men.'' \45\ Women 
currently hold two-thirds of educational debt (over 900 billion 
dollars) and are more likely than men to default on these loans. \46\ 
For some communities of color, and specifically for African American 
women, the reality of student debt burden is even grimmer. Student loan 
default rates are higher for African American and Hispanic debtors than 
for White and Asian debtors, and 57 percent of African American women 
borrowers in repayment reported that ``they had been unable to meet 
essential expenses'' as compared to 34 percent of all women borrowers 
in repayment. \47\
---------------------------------------------------------------------------
     \42\ See, e.g., Michelle Singletary, ``There Seems To Be No End to 
the Rise in Student Loan Debt'', Wash. Post (Sept. 12, 2019), https://
www.washingtonpost.com/business/2019/09/12/whos-blame-massive-amount-
student-loan-debtamerica/, (noting $1.6 trillion in outstanding student 
loans and sharing examples of the personal impact of debt).
     \43\ Richard Cordray, Watchdog: How Protecting Consumers Can Save 
Our Families, Our Economy, and Our Democracy 6 (2020).
     \44\ See AAUW Report, supra note 39, at 1-2.
     \45\ Id. at 24.
     \46\ Id. at 1-2.
     \47\ Id. at 1-2.
---------------------------------------------------------------------------
    At the same time, in the current American economy, structural 
inequality that tracks gender and racial distinctions results in 
pathological outcomes like disparity in postgraduate incomes and 
racialized and gendered views that depress asset value. \48\ Indeed, 
although ``women with college degrees are paid much better than women 
without them, they are still paid about 25 percent less than men with 
college degrees.'' \49\ Consequently, persistent inequities in gender 
pay are a ``major factor that contributes to a substantial loan 
repayment gap between men and women following graduation,'' \50\ 
leaving women and African Americans to face challenges in repayment 
that confound the net present value in a loan (even in the absence of 
predatory lending) for marginalized groups. \51\
---------------------------------------------------------------------------
     \48\ E.g., A. Mechele Dickerson, ``Sorting the Neighborhood'', J. 
Affordable Housing & Community Dev. L. 311, 321 (2015) (``Research 
shows that the racial composition of a neighborhood is capitalized into 
the market value of homes so that comparable homes are valued 
differently depending on the racial makeup of the neighbors.'')
     \49\ AAUW Report, supra note 39, at 24; see also Daniele 
Kurtzleben, ``How Coronavirus Could Widen the Gender Wage Gap'', NPR 
(Jun. 28, 2020), https://www.npr.org/2020/06/28/883458147/how-
coronavirus-could-widen-thegender-wage-gap [https://perma.cc/SK9Z-GH7V] 
(describing how the pandemic is likely to exacerbate the existing 
gendered wage gap).
     \50\ AAUW Report, supra note 39, at 24.
     \51\ See, e.g., Abbye Atkinson, ``Race, Educational Loans, and 
Bankruptcy'', 16 Mich. J. Race & L. 1, 11 (2010) (reporting bankruptcy 
data that suggests that ``attaining a higher level of education does 
not appear to shield African Americans against financial ruin'' and 
noting ``the tension between two Federal policies with respect to 
educational attainment: educational lending policy that encourages 
Americans to take on debt to finance their educations and bankruptcy 
policy that makes discharge of educational debt practically 
impossible''); Teresa A. Sullivan, Elizabeth Warren, Jay Westbrook, As 
We Forgive Our Debtors 151-52, 158 (2001) (describing the 
disproportionate impact of debt on women). Bankruptcy filings that 
continue to show women and African Americans represented in 
disproportionate numbers confirm this reality. E.g., Paul Kiel and 
Hannah Fresques, ``Data Analysis: Bankruptcy and Race in America'', 
ProPublica (Sept. 27, 2017), https://projects.propublica.org/graphics/
bankruptcy-dataanalysis (noting that ``[t]he higher filing rates among 
Black communities can be partly explained by greater financial stress 
on the population as a whole'').
---------------------------------------------------------------------------
    Moreover, general difficulty in repayment further reveals the ways 
in which debt overwhelms the capacity of credit across gender and race, 
and at their intersections, to facilitate greater socioeconomic 
equality. For example, ``[w]omen and men of different races and 
ethnicities pay off their student loans at different rates.'' \52\ In 
addition to borrowing more at the outset, women take longer to pay off 
their loans than do men, which makes the sticker price for the 
education much higher. \53\ African American and Hispanic women spend 
an even greater time in repayment relative to White and Asian women. 
Between 2009 and 2012, African American and Hispanic women paid 12 
percent and 18 percent, respectively, while White women and Asian women 
paid 33 percent and 60 percent of their debt respectively. \54\ 
Notwithstanding greater achievements in academic attainment by women 
and people of color, \55\ higher education has not been able to break 
the cycle of gender and race-based income inequality, \56\ which 
directly affects the viability of borrowing to begin with. More than 
that, it further entrenches the wealth gaps that run along both racial 
and gendered lines.
---------------------------------------------------------------------------
     \52\ AAUW Report, supra note 39, at 27.
     \53\ Id. at 26-27.
     \54\ Id. at 27.
     \55\ See id. at 7-11.
     \56\ Id. at 28 (noting that ``a college degree does not erase 
gender and race gaps in pay'').
---------------------------------------------------------------------------
    Indebtedness also has social consequences that undermine our 
national goals for increased equality. Indeed, indebtedness is an 
independently powerful social institution whose harm, particularly in 
marginalized communities, should be broadly considered. In that regard, 
policies that promote engagement in private markets in order to achieve 
welfare-related ends should meaningfully engage with the notion that 
economic market transactions are formed and calibrated within and by 
the broader social context in which they are formed. \57\ In other 
words, the market is not an autonomous institution free from sexism, 
racism, ageism, and other social pathologies.
---------------------------------------------------------------------------
     \57\ See, e.g., Mark Granovetter, ``Economic Action and Social 
Structure: The Problem of Embeddedness'', 91 Am. J. Socio. 481, 487 
(1985) (``Actors do not behave or decide as atoms outside a social 
context, nor do they adhere slavishly to a script written for them by 
the particular intersection of social categories that they . . . 
occupy. Their attempts at purposive action are instead embedded in 
concrete, ongoing systems of social relations.'').
---------------------------------------------------------------------------
    For example, ostensibly economic behavior, like taking out a 
private loan, is necessarily ``embedded'' within the broader social 
relationships and order in which it occurs, intertwined in ways that 
defy partitioned consideration. \58\ Thus, where there is a preexisting 
social relationship, such as hierarchical, racialized, and gendered 
subordination, it is neither feasible nor proper to isolate the 
economic transactions between individuals engaged in the social 
relationship, including in social relations that are defined by 
subordination and hierarchy. \59\ Consequently, a policy that 
encourages taking on debt as a means of social provision, including as 
a catalyst to greater equality, should consider how these market 
transactions are affected by specific social networks and relations, 
particularly to the extent that these relationships are intractably 
raced and gendered. \60\ Moreover, credit/debt also engenders moral 
hierarchy that challenges the degree to which encouraging marginalized 
groups to become indebted to powerful private market entities, 
conventional though their products may be, can truly be a catalyst for 
increased relative socioeconomic equality. \61\
---------------------------------------------------------------------------
     \58\ See, e.g., Karl Polanyi, The Great Transformation: The 
Political and Economic Origins of Our Time 74-76 (2001). Polanyi's view 
counters the neoclassical economic view that market actors should be 
understood as purely self-interested and rational individuals for whom 
``social relations and their details'' are merely ``frictional 
matters.'' Granovetter, supra note 57, at 484.
     \59\ For example, sociologist Viviana Zelizer has argued that we 
should explicitly understand the economic and social together, as 
``[w]e all use economic activity to create, maintain, and renegotiate 
important ties, especially intimate ties, to other people.'' Viviana A. 
Zelizer, Economic Lives: How Culture Shapes the Economy 178 (2011).
     \60\ See Granovetter, supra note 57, at 485-86 (discussing leading 
sociological arguments for viewing economic actors as an extension of 
their social circumstance).
     \61\ See Rachel E. Dwyer, ``Credit, Debt, and Inequality'', 44 
Ann. Rev. Socio. 237, 238 (2016) (``Creditor-debtor relationships are 
inherently unequal, and the prevalence and types of credit and debt 
holding in a society structures social inequality more broadly.'').
---------------------------------------------------------------------------
Because Credit/Debt Is Critical to Federal Social Provision Policies, 
        Congress Should Not Delegate the Regulation of Credit/Debt to 
        Private, Profit-Motivated Interests
    Credit/debt as social provision policy for marginalized Americans 
is an example of how privatized welfare has become a meaningful 
``alternative form of redistribution,'' even offered as a means of 
social and civil rights. \62\ Moreover, the reliance on private credit/
debt to achieve general welfare-focused ends is an example of the how 
private intermediaries and actors are now, at least indirectly, 
significantly responsible for important socioeconomic ends like closing 
the racial wealth gap and promoting equality among all Americans. This 
reliance on private actors to implement Government policy must wrestle 
with the potential for private actors to diminish broader wellbeing by 
prioritizing their own narrow financial interests, implicit biases, or 
prior commitments. \63\
---------------------------------------------------------------------------
     \62\ PRASAD, supra note 14, at 239.
     \63\ See, e.g., David H. Webber, ``The Use and Abuse of Labor's 
Capital'', 89 N.Y.U. L. Rev. 2106, 2144 (2014) (observing pension 
funds' ``fund first'' fiduciary duty that permit a public pension fund 
to select investments that may ``undermine participant employment'' as 
long as those investments were ``are of equal economic value to a 
plan'').
---------------------------------------------------------------------------
    For example, credit/debt as a source of public pension fund wealth 
accumulation, the phenomenon of public pension fund investment in 
private equity reveals how the retirement security of millions of 
American retirees lies in the hands of a relatively few financial 
intermediaries, who freely invest in credit/debt as a means of 
regressive wealth extraction. The ``fund-first'' focus that private 
equity funds embrace is not aligned with the broader public mission 
that public pension plans are supposed to reflect, nor is it consistent 
with a robust sense of accountability for the externalities that 
private equity investment in alternative assets, like marginalized 
debt, may impose. \64\
---------------------------------------------------------------------------
     \64\ Cf. Divya Kirti and Natasha Sarin, ``What Private Equity Does 
Differently: Evidence From Life Insurance at 22'' (SSRN, Jul. 6, 2020) 
(describing private equity's incursion into insurance and their 
penchant for ``direct[ing] premiums from their insurance subsidies 
toward risky alternative investments, like ownership stakes in other 
portfolio companies''); also Bryan Ayash and ``Mahdi Rastad, Leveraged 
Buyout and Financial Distress'' 4 (2019) (reporting that 20 percent of 
firms taken over by private equity file for bankruptcy relief as 
compared to 2 percent of control firms).
---------------------------------------------------------------------------
    Indeed, by essentially privatizing significant aspects of equality 
and social mobility through the promotion of credit/debt, social 
provision policy encourages the most vulnerable groups to invest in 
``self-help'' social mobility and equality. This is true despite an 
imperfect socially constructed market, populated by private actors 
still informed in significant part by discrimination, raced and 
gendered hierarchy, and other social pathologies that predictably limit 
(if not overwhelm) the expected social and economic returns on that 
investment. \65\ Consequently, in pushing marginalized groups in this 
direction, we have an obligation to address the consequences of readily 
predictable failure.
---------------------------------------------------------------------------
     \65\ See Christopher J. Lebron, The Color of Our Shame: Race and 
Justice in Our Time 46 (2013). In describing the persistence of social 
subordination along racial lines even in purportedly neutral economic 
transactions like the sale of a home, Lebron observes that, ``the 
fundamental move necessary to undermine racial inequality in the 
deepest sense is to understand it as the problem of social value--the 
fact that Blacks do not occupy equal place in the scheme of normative 
attention and concern upon which our society depends in the first place 
to justify the distribution of benefits and burdens, as well as to 
identify those who are deserving or appropriate recipients.'' Id. 
(emphasis in original).
---------------------------------------------------------------------------
    Finally, like other market-based forms of privatized social 
provision, credit/debt expediently cloaks the significant role of 
Government intervention by functioning through Government-subsidized 
private channels. \66\ In this sense, it preserves the largely 
``obscured'' twotrack, hierarchical arrangement in American social 
provision that has bifurcated social welfare along class lines. \67\ It 
implicates the pervasive and perverse reputational divide between forms 
of Government subsidy in the welfare system that tend to favor hidden 
forms of Government subsidy, namely privatized social provision, over 
more patent forms such as public assistance. \68\ By invoking the 
market, advocates of more privatized, individualized welfare measures, 
like credit, seek to reduce, at least nominally, the primacy of the 
Government in direct social provision. \69\ For example, the mortgage 
interest tax deduction, an ``extravagant'' subsidy that rewards private 
homeowners, is less offensive to the American ethos of individualistic 
bootstrap-pulling than is a direct subsidy like housing credits for 
low-income Americans; yet a Government subsidy by any other name is 
still a Government subsidy. \70\
---------------------------------------------------------------------------
     \66\ See Chloe N. Thurston, At the Boundaries of Homeownership: 
Credit, Discrimination, and the American State (2018).
     \67\ Karen M. Tani, States of Dependency: Welfare, Rights, and 
American Governance, 1935-1972 (2016).
     \68\ See, e.g., Suzanne Mettler, The Government-Citizen Disconnect 
6-7, 9-13 (2018); Derek Thompson, ``Busting the Myth of `Welfare Makes 
People Lazy' '', Atlantic, (Mar. 8, 2018), https://www.theatlantic.com/
business/archive/2018/03/welfare-childhood/555119/?utm--source=atlfb 
(`` `Welfare makes people lazy.' . . . [This notion] is an intellectual 
pillar of conservative economic theory, which recommends slashing 
programs like Medicaid and cash assistance, partly out of a fear that 
self-reliance atrophies in the face of Government assistance.'').
     \69\ See Thurston, supra note 66, at 221-22.
     \70\ See, e.g., Marie Gottschalk, The Shadow Welfare State: Labor, 
Business, and the Politics of Health Care in the United States 1-3 
(2000).
---------------------------------------------------------------------------
Conclusion and Recommendations
    In sum, credit/debt as social provision conscripts marginalized 
groups into the belief that borrowing money can consistently and 
meaningfully facilitate social wellbeing, including social mobility. It 
draws attention to the aspirational upside of the creditor/debtor 
relationship while obscuring the inherent economic and social risk 
engendered by the act of borrowing money. \71\ It places the burden and 
risk of solving for entrenched and intractable inequality entirely on 
marginalized borrowers, unreasonably requiring them to lift themselves 
out of socioeconomic distress. \72\ Moreover, credit/debt as social 
provision for marginalized groups also opens up a channel of regressive 
redistribution, providing a means to extract wealth from the most 
socioeconomically vulnerable communities. In this regard, it also 
commodifies the adverse conditions that predictably and consistently 
churn out individuals and communities who have very limited options and 
must borrow to survive and/or to become upwardly mobile.
---------------------------------------------------------------------------
     \71\ See, e.g., Mian and Sufi, supra note 41, at 17-24 (describing 
the economic consequences of debt on low-wealth households in the Great 
Recession).
     \72\ See, e.g., Mehrsa Baradaran, ``Jim Crow Credit'', 9 UC Irvine 
L. Rev. 887, 943 (2019) 943 (observing that ``the state has repeatedly 
placed the burden to close the wealth gap on the Black community 
itself.'').
---------------------------------------------------------------------------
    Congress can ease these credit/debt-related burdens in any number 
of ways. For example, Congress should make the discharge of debt, 
including student loan debt more specifically, in bankruptcy much 
simpler to provide a backstop for those whose find themselves in 
extreme financial distress. \73\ Similarly, Congress should address the 
relative lack of transparency requirements imposed on private financial 
intermediaries in light of their significance to credit/debt social 
provision policy. \74\ Lastly, in recognition that credit/debt and 
other privatemarket approaches to social welfare are limited by the 
persistence of racial and gender inequality, Congress should shore up 
other aspects of social provision that do not rely on a private 
entity's ability to make money from the very marginalization that 
Congress hopes to solve with the proffer of credit/debt as social 
provision. \75\
---------------------------------------------------------------------------
     \73\ Katherine Porter, ``The Damage of Debt'', 69 Wash. & Lee L. 
Rev. 979, 984-985 (2012) (arguing that bankruptcy policy must be 
premised on study of both the economic and non-economic consequences of 
debt, particularly in marginalized communities).
     \74\ Jason Kelly, ``Everything Is Private Equity Now'', Bloomberg 
Businessweek, (Oct. 8, 2019), https://www.bloomberg.com/news/features/
2019-10-03/how-private-equity-works-and-took-over-everything, 
(observing that ``[o]ne of PE's superpowers is that it's hard for 
outsiders to see and understand the industry'').
     \75\ E.g., Nathan Fiala, ``The Problem Is Bigger Than Payday 
Loans'', Wash. Post: In Theory (July 1, 2016), https://
www.washingtonpost.com/news/in-theory/wp/2016/07/01/the-problem-is-
bigger-than-paydayloans/? utm--term=.6c0d29bfa235 (``What the U.S. 
truly needs are policies that ensure that low-income people don't need 
payday loans to begin with.'').
---------------------------------------------------------------------------
    Finally, any legislative policy that promotes credit/debt as a 
social good for marginalized groups must engage meaningfully with the 
consequences of indebtedness. If Congress continues to address problems 
of inequality and social mobility, like the wealth gap, through credit/
debt, then its policy must account for the ways in which debt itself 
drives the very inequality that democratized borrowing is purportedly 
deployed to correct. \76\
---------------------------------------------------------------------------
     \76\ E.g., Sarah L. Quinn, American Bonds: How Credit Markets 
Shaped a Nation 18 (2019) (observing that ``credit continually carries 
forward the prejudices and inequalities of the past,'' and, as a 
consequence, ``another way [to] think of the lightness of credit policy 
[is] as historically serving the interests of White Americans'').
---------------------------------------------------------------------------
                                 ______
                                 
                 PREPARED STATEMENT OF DARRICK HAMILTON
  Founding Director, Institute on Race and Political Economy, The New 
                                 School
                             March 4, 2021
    Chairman Brown and esteemed Senators, thank you for having me here 
today. I am Darrick Hamilton, Henry Cohen Professor of Economics and 
Urban Policy and University Professor at The New School and Director of 
the Institute on Race and Political Economy.
    Racism, sexism and other -isms are not simply irrational prejudices 
but long-leveraged strategic mechanisms for exploitation and extraction 
that have benefited some at the expense of others.
    In a just world, race, gender, ethnicity, and nativity would have 
no transactional value in relation to material, psychological or 
security outcomes.
    This global pandemic actively produces inequality, and the heaviest 
toll, (well beyond class), falls on vulnerable racial and gender 
identity groups.
    The immoral devaluation of Black lives has been ingrained in 
America's political economy and is long overdue for a reckoning. It has 
long been true that Black families have been denied universal and 
quality health care, housing, schooling, financial services, capital, 
and free mobility. Instead, they have faced of expropriation, theft, 
detention and bodily harm at the hands of state, simply because their 
social identities are linked to a vulnerable and stigmatized group.
    Many Americans, and Black and Brown families in particular, have 
low wealth, inadequate health care, and work in precarious but 
``essential'' jobs that have fewer workplace protections, lower wages, 
and benefits.
    The biggest pre-existing condition of this pandemic is wealth.
    Wealthier families are better positioned to finance elite 
educations, access capital to start a business, finance expensive 
medical procedures, reside in higher amenity neighborhoods, exert 
political influence; purchase better counsel if confronted by the legal 
system, leave a bequest, and withstand financial hardship resulting 
from any emergency, including a global pandemic!
    It is critical to note is that it was never the case that a White 
asset-based middle class simply emerged. Rather, it was Government 
policy, and to a large extent, literal Government giveaways, that 
provided Whites with the finance, education, land, and infrastructure 
to accumulate and pass down wealth.
    Our unjust racial wealth gap is itself an implicit measure of our 
racist past that is rooted in a history in which Whites have been the 
beneficiaries of Government-facilitated political and economic 
interventions that have afforded them access to resources and 
intergenerational accumulation.
    This is in contrast to a history in which for Blacks (and 
Indigenous people), personhood and whatever capital and resources they 
may have obtained, have always been vulnerable to Government-complicit 
exploitation, confiscation, destruction, terror, fraud, theft and other 
acts of violence.
    The history of disenfranchisement of Black Americans from full 
economic participation is well documented. Policies like redlining, 
highway construction, predatory contract-to-own house leasing, and 
exclusionary zoning have all worked in tandem with restrictive 
covenants and regulatory controls to marginalize Black Americans and 
constrain their economic participation and political power.
    We use words like ``choice'' and ``freedom'' to describe the 
benefits of the ``market,'' but choice is an illusion for individuals 
who lack basic needs like a job, adequate income, shelter, food, or 
health care.
    It is literally wealth that gives us choice, freedom and 
optionality.
    Economic freedom and authentic agency in rooted in resources. We 
are not atomistic agents floating in unfettered markets guided by our 
``free will,'' into a ``fair'' and ``efficient'' allocation.
    Today, wrongly, discussions of racial wealth gap are often focused 
on the so-called poor financial choices and decision-making on the part 
of largely Black, Latinx and poor borrowers. This framing is tied to 
the ``a culture of poverty thesis'' in which Blacks are presumed to 
have undervalue education and to choose to acquire less education than 
Whites.
    This framing is wrong--the directional emphasis is wrong--it is 
more likely that meager economic circumstance--not poor decision making 
or deficient knowledge--constrains choice itself and leaves poor 
borrowers with little to no financial options, but to attain and use 
predatory and abusive financial services.
    We need a profound change towards a more sustainable and moral 
economy with Government interventions to facilitate assets ownership, 
economic security, civic engagement, human dignity, and social mobility 
for all our people regardless of their race, class, gender, sexual 
identity or immigrant status.
    Incrementalism and changes on the margin won't cut it.
    We need an industrial, banking and trade policy that centers 
workers (both domestically and abroad), coupled with an explicitly 
anti-racist and anti-sexist economic rights frame, to promote a moral 
economy grounded in our shared prosperity.
    There is nothing new or radical about this concept of economic 
rights. President Franklin Delano Roosevelt called for ``physical 
security.economic security, social security, and moral security.''
    He knew that full citizenship demanded more than the political 
rights: it required economic rights.
    The concept of economic rights also has deep roots in our civil 
rights history.
    Reverend Dr. King, a leader of the Poor People's Campaign focused 
on five tenants of economic rights:

      The right to:

    A meaningful job at a living wage

    A secure and adequate income for all

    Access to land

    Access to capital

    And to be able to play a truly significant role in our 
        Government (or civic engagement)

    Let's discuss financial services.
    In their 2015 book, Phishing for Phools (2015), Nobel Laureate 
economists George Akerlof and Robert Shiller critique the ``greater 
good'' presumption by describing how the profit motive creates 
incentives, especially in the financial services industry, for sellers 
to manipulate consumers to purchase products whether or not they are 
useful to the consumer.
    To address this moral hazard, which in a downturn of a business-
cycle puts our economy at risk of financial collapse, Akerlof and 
Schiller recommend enhanced consumer knowledge and greater regulation.
    We should go further: the public sector should be a direct provider 
of basic banking accounts and financial services more broadly.
    The sad irony is that those that can least afford finance end up 
paying the most for finance.
    Households with few assets and low incomes are compelled to turn to 
high-cost, unconventional alternative financial products. They 
generally are aware that these products are predatory, but they have no 
alternatives.
    These ``last resort,'' debt traps render recipients ``indentured 
borrowers,'' having to pay higher and higher interest and fees until, 
ultimately, they default on the original principle.
    Congress needs to provide ``public options'' that directly compete 
with and crowd-out inferior ``private options.''
    We need to reject the empirically unsubstantiated rhetoric that 
ignorance, so-called grit, and personal responsibility are the sources 
of inequality. And we need to reject the accompanying ``neoliberal 
paternalism'' in which Government attempts to coerce or incentivizes 
insinuated ``defective people'' to behave accordingly and make better 
decision.
    Let's change the paradigm, be bold, and advocate for programs and 
initiatives that truly empower people with economic security, dignity, 
and ``authentic'' agency to define and achieve their goals.
    Inequality is not rooted in deficient people, but rather deficient 
resource allocation.
    Thank you for your time today.
                                 ______
                                 
                   PREPARED STATEMENT OF GLENN LOURY
    Merton P. Stoltz Professor of Social Sciences, Brown University
                             March 4, 2021
    I appreciate the opportunity to address this crucially important 
subject matter before this august assemblage. In these remarks I will 
speak to the fact of African American economic subordination, and its 
implications for the nature of American democracy. I draw on my many 
years of study as economist and public intellectual to briefly make two 
observations--about the dynamics of human development, and about the 
foundations of racial identity. I conclude with some reservations about 
the program of pursuing ``racial equity'' in a multi-racial, multi-
ethnic society. (Here I take ``equity'' to mean not just equal 
opportunity for all, but equal results as between designated racial 
groups.)
    Why, I ask--the success of the civil-rights movement 
notwithstanding--has the unequal economic status of Black Americans 
persisted into the 21st century? Clear thinking about this intractable 
problem requires one to distinguish the role played by discrimination 
against Blacks--past and present--from the role of behavior patterns to 
be found among some Blacks. This, I admit, puts what is a very 
sensitive issue rather starkly. Many vocal advocates for racial 
equality refuse even to consider the possibility that behavior could be 
an important factor contributing to our persisting disadvantaged 
status. At the same time, some critics--mostly on the right of American 
politics--insist that racial discrimination is not an important 
determinant of these unequal social outcomes. I will chart a middle 
course--acknowledging that anti-Black biases have existed, still exist 
to some degree, and should be remedied; but insisting on the imperative 
of identifying and reversing those behavior patterns that prevent some 
of our people from seizing newly opened opportunities.
    These two positions can be recast as causal narratives. Under the 
``bias narrative,'' one argues that the root cause of persisting 
disparity is racism and White supremacy; we cannot get ahead until they 
relent. So, since discrimination is the cause of racial inequality, we 
must continue to urge reform of American society toward that end. This, 
I hold, is necessary but not sufficient. Under the ``development 
narrative,'' by contrast, one emphasizes the need to consider how 
people acquire the skills, traits, habits, and orientations that foster 
an individual's successful participation in American society. If Black 
youngsters do not have the experiences, are not exposed to the 
influences, and do not benefit from the resources that foster and 
facilitate their human development--to that extent, they may fail to 
achieve their full potential. On this view, it is a lack of development 
that ultimately causes the stark racial disparities in income, wealth, 
education, family structure, and much else.
    These two narratives--bias versus development--need not be mutually 
exclusive, of course. What is clear, however, is that, in terms of 
prescribing intervention and remedy, they point in very different 
directions. The bias narrative urges us to demand an end to racism and 
to undertake resource transfers to and from people, based on their 
racial identities, aimed at reducing wealth and income gaps. By 
contrast, the development narrative puts more onus on the 
responsibilities of African Americans to act in ways that realize our 
full human potential.
    So, what are my two observations? Over four decades ago, in my 
doctoral dissertation at M.I.T., I had the good fortune to coin the 
term ``social capital.'' \1\ I did so by way of contrasting my concept, 
``social capital,'' with what economists called ``human capital.'' 
Human capital theory imports into the study of human inequality an 
intellectual framework which had been developed primarily to explain 
the investment decisions by firms--a framework that focuses on the 
analysis of formal economic transactions. In my thesis I argued that 
this framework was inadequate to the problem of accounting for racial 
economic disparities. Allow me to explain.
---------------------------------------------------------------------------
     \1\ ``Essays in the Theory of the Distribution of Income'', Ph.D. 
Thesis, Department of Economics, Massachusetts Institute of Technology, 
1976
---------------------------------------------------------------------------
    My fundamental point was that associating business with human 
investments is merely an analogy, not an identity--particularly if one 
seeks to explain persistent racial disparities. Business investments 
are transactional. Human investments are essentially relational. So, 
important things are overlooked in the human capital approach, things 
having to do with informal social relations. My view was, and is, that 
the conventional economic theory is incomplete when it comes to 
explaining racial disparities. There were two central aspects of this 
incompleteness. Thus, my two observations about the dynamics of human 
development and the nature of racial identity.
Observation #1
    First, I stressed that all human development is socially situated 
and mediated. That is, I argued that the development of human beings 
occurs inside of social institutions. It takes place as between people, 
by way of human interactions. The family, community, school, peer 
group--these cultural institutions of human association are where 
development is achieved. Resources essential to human development--the 
attention that a parent gives to her child for instance--are not 
alienable. Developmental resources, for the most part, are not 
``commodities.'' The development of human beings is not up for sale. 
Rather, structured connections between individuals create the context 
within which developmental resources come to be allocated to individual 
persons. Opportunity travels along the synapses of these social 
networks. People are not machines. Their ``productivities''--that is to 
say, the behavioral and cognitive capacities bearing on their social 
and economic functioning--are not merely the result of a mechanical 
infusion of material resources. Rather, these capacities are the 
byproducts of social processes mediated by networks of human 
affiliation and connectivity. This was fundamentally important, I 
thought and still think, for understanding persistent racial 
disparities in America. That was the first point I wanted to make, all 
those years ago, about the incompleteness of human capital theory.
Observation #2
    My second observation was that what we are calling ``race'' in 
America is mainly a social, and only indirectly a biological, 
phenomenon. The persistence across generations of racial 
differentiation between large groups of people, in an open society 
where individuals live in close proximity to one another, provides 
irrefutable indirect evidence of a profound separation between the 
racially defined networks of social affiliation within that society. 
Put directly: there would be no ``races'' in the steady state of any 
dynamic social system unless, on a daily basis and in regard to their 
most intimate affairs, people paid assiduous attention to the 
boundaries separating themselves from racially distinct others.
    Over time ``race'' would cease to exist unless people chose to act 
in a manner so as biologically to reproduce the variety of phenotypic 
expression that constitutes the substance of racial distinction.
    I cannot overemphasize this point. We speak casually about ``racial 
equality'' and ``racial justice.'' Yet, ``race'' is not something 
simply given in nature. Rather, it is socially produced; it is an 
equilibrium outcome; it is something we are making; it is endogenous. 
It follows that, if the goal is to understand the roots of durable 
racial inequalities, we will need to attend in some detail to the 
processes that cause ``race'' to persist as a fact in the society under 
study, because such processes almost certainly will not be unrelated to 
the allocation of developmental resources in that society.
    Here, then, is my second observation, in a nutshell: The creation 
and reproduction of racial inequality as a social reality in any 
society rests on cultural conceptions about identity that are embraced 
by people--Blacks and Whites alike--in that society. These are the 
convictions people affirm about who they are and about the legitimacy 
of conducting intimate relations with racially distinct others. (Here I 
do not only mean sexual relations.) That is, racial inequality is 
inescapably a cultural phenomenon. It implicates not only the transfer 
of resources, but more fundamentally, the decisions we make daily about 
with whom to associate and identify. The contrast I drew between human 
and social capital all those years ago was rooted in my conviction that 
beliefs of this kind ultimately determine the access that people enjoy 
to the informal resources required to develop their human potential. 
What I called ``social capital'' when I coined that term in 1976 is, on 
this view, a critical prerequisite for creating what economists refer 
to as ``human capital.'' And such human capital--skills, education, 
work experience and social aptitudes--is a key determinant of an 
individual's earnings power and capacity to generate and accumulate 
wealth. This point is crucial, I believe, if we are to understand the 
persistence of racial inequality in America.
    The basic fact is that Whites have more wealth than Blacks, however 
you measure. Now, partly that's a consequence of history and partly 
that's a consequence of ongoing dynamics. People inherit wealth from 
their forebears, from their parents, and so on. So, part of that is a 
reflection of the past, but part of it is also a reflection of what's 
going on in terms of the creation of wealth. Wealth does not simply 
fall from the sky. Rather, it must be created. Many people will have 
created the wealth that they possess through years of effort and 
entrepreneurship and so on.
    Moreover, I would question whether narrowing the racial wealth gap 
is the right objective for public policy. The issues of low wealth 
holdings that should concern us, I think, are largely issues that 
transcend the racial categorization. I would be thinking about people 
who lack wealth, not about people who are Black with low wealth 
holdings. And, to the extent that I thought wealth inequality to be a 
problem, I would address that problem across the board and not frame it 
in racial terms.
    There's looking backwards and there's looking forwards. I am, of 
course, aware of the history of racial discrimination in this country. 
That history is implicated, of course, in the gaps we observe today. 
So, we can look backward as many have done and attempt to calculate and 
calibrate what were the impact of redlining, of Jim Crow segregation, 
of slavery, of the failure to distribute 40 acres and a mule to the 
freedmen and so on, and we could try to do an estimate of what would 
wealth be but for that historical thing.
    But the other thing is looking forward. Wealth is a stock. Income 
is a flow. So, the stock evolves over time under influence from the 
flow. We can shift wealth around at a point in time. But we may not 
change the steady-state wealth holdings if we don't deal with the flow. 
So, that's why I want to say the creation of wealth deserves to be a 
part of this conversation. Because, thinking simplistically, but I 
think the arithmetic works out, if I don't change the flows, I'm going 
to end up back in the same situation after a while, no matter what I 
do. That is, unless we address ourselves to enhancing the capacity of 
all of our people to create wealth, to develop their productive 
capacities and to acquire skills, we will not be addressing the root 
causes of the inequalities we can see all around us.
The first unspeakable truth: Downplaying behavioral disparities by race 
        is actually a ``bluff''
    Socially mediated behavioral issues lie at the root of today's 
racial inequality problem. They are real and must be faced squarely if 
we are to grasp why racial disparities persist. This is a painful 
necessity. Activists on the Left of American politics claim that 
``White supremacy,'' ``implicit bias,'' and old-fashioned ``anti-Black 
racism'' are sufficient to account for Black disadvantage. But this is 
a bluff that relies on ``cancel culture'' to be sustained. Those making 
such arguments are, in effect, daring you to disagree with them. They 
are threatening to ``cancel'' you if you do not accept their account: 
You must be a ``racist''; you must believe something is intrinsically 
wrong with Black people if you do not attribute pathological behavior 
among them to systemic injustice. You must think Blacks are inferior, 
for how else could one explain the disparities? ``Blaming the victim'' 
is the offense they will convict you of, if you're lucky.
    I claim this is a dare; a debater's trick. Because, at the end of 
the day, what are those folks saying when they declare that ``mass 
incarceration'' is ``racism''--that the high number of Blacks in jails 
is, self-evidently, a sign of racial antipathy? To respond, ``No. It's 
mainly a sign of anti-social behavior by criminals who happen to be 
Black,'' one risks being dismissed as a moral reprobate. This is so, 
even if the speaker is Black. Just ask Justice Clarence Thomas. Nobody 
wants to be cancelled.
    But we should all want to stay in touch with reality. Common sense 
and much evidence suggest that, on the whole, people are not being 
arrested, convicted, and sentenced because of their race. Those in 
prison are, in the main, those who have broken the law--who have hurt 
others, or stolen things, or otherwise violated the basic behavioral 
norms which make civil society possible. Seeing prisons as a racist 
conspiracy to confine Black people is an absurd proposition. No serious 
person could believe it. Not really. Indeed, it is self-evident that 
those taking lives on the streets of St. Louis, Baltimore, 
Philadelphia, and Chicago are, to a man, behaving despicably. Moreover, 
those bearing the cost of such pathology, almost exclusively, are other 
blacks. An ideology that ascribes this violent behavior to racism is 
laughable. Of course, this is an unspeakable truth--but no writer or 
social critic, of whatever race, should be cancelled for saying so.
    Or, consider the educational achievement gap. Anti-racism 
advocates, in effect, are daring you to notice that some groups send 
their children to elite colleges and universities in outsized numbers 
compared to other groups due to the fact that their academic 
preparation is magnitudes higher and better and finer. They are daring 
you to declare such excellence to be an admirable achievement. One 
isn't born knowing these things. One acquires such intellectual mastery 
through effort. Why are some youngsters acquiring these skills and 
others not? That is a very deep and interesting question, one which I 
am quite prepared to entertain. But the simple retort, ``racism'', is 
laughable-as if such disparities have nothing to do with behavior, with 
cultural patterns, with what peer groups value, with how people spend 
their time, with what they identify as being critical to their own 
self-respect. Anyone actually believing such nonsense is a fool, I 
maintain.
    Asians are said, sardonically, according to the politically correct 
script, to be a ``model minority.'' Well, as a matter of fact, a pretty 
compelling case can be made that ``culture'' is critical to their 
success. Read Jennifer Lee and Min Zhou's book, The Asian American 
Achievement Paradox. They have interviewed Asian families in Southern 
California, trying to learn how these kids get into Dartmouth and 
Columbia and Cornell with such high rates. They find that these 
families exhibit cultural patterns, embrace values, adopt practices, 
engage in behavior, and follow disciplines that orient them in such a 
way as to facilitate the achievements of their children. It defies 
common sense, as well as the evidence, to assert that they do not or, 
conversely, to assert that the paucity of African Americans performing 
near the top of the intellectual spectrum--I am talking here about 
academic excellence, and about the low relative numbers of Blacks who 
exhibit it--has nothing to do with the behavior of black people; that 
this outcome is due to institutional forces alone. That, quite frankly, 
is an absurdity. No serious person could believe it.
    Nor does anybody actually believe that 70 percent of African 
American babies being born to a woman without a husband is (1) a good 
thing or (2) due to anti-Black racism. People say this, but they don't 
believe it. They are bluffing--daring you to observe that the 21st-
century failures of African Americans to take full advantage of the 
opportunities created by the 20th century's revolution of civil rights 
are palpable and damning. These failures are being denied at every 
turn, and these denials are sustained by a threat to ``cancel'' 
dissenters for being ``racists.'' This position is simply not tenable. 
The end of Jim Crow segregation and the advent of the era of equal 
rights was transformative for Blacks. And now--a half-century down the 
line--we still have these disparities. This is a shameful blight on our 
society, I agree. But the plain fact of the matter is that some 
considerable responsibility for this sorry state of affairs lies with 
Black people ourselves. Dare we Americans acknowledge this?
    Leftist critics tout the racial wealth gap. They act as if pointing 
to the absence of wealth in the African American community is, ipso 
facto, an indictment of the system--even as Black Caribbean and African 
immigrants are starting businesses, penetrating the professions, 
presenting themselves at Ivy League institutions in outsize numbers, 
and so forth. In doing so, they behave like other immigrant groups in 
our Nation's past. Yes, they are immigrants, not natives. And yes, 
immigration can be positively selective. I acknowledge that. Still, 
something is dreadfully wrong when adverse patterns of behavior readily 
visible in the native-born Black American population go without being 
adequately discussed--to the point that anybody daring to mention them 
risks being cancelled as a racist. This bluff can't be sustained 
indefinitely. Despite the outcome of the recent election, I believe we 
are already beginning to see the collapse of this house of cards.
A second unspeakable truth: ``Structural racism'' isn't an explanation, 
        it's an empty category
    The invocation of ``structural racism'' in political argument is 
both a bluff and a bludgeon. It is a bluff in the sense that it offers 
an ``explanation'' that is not an explanation at all and, in effect, 
dares the listener to come back. So, for example, if someone says, 
``There are too many Blacks in prison in the US and that's due to 
structural racism,'' what you're being dared to say is, ``No. Blacks 
are so many among criminals, and that's why there are so many in 
prison. It's their fault, not the system's fault.'' And it is a 
bludgeon in the sense that use of the phrase is mainly a rhetorical 
move. Users don't even pretend to offer evidence-based arguments beyond 
citing the fact of the racial disparity itself. The ``structural 
racism'' argument seldom goes into cause and effect. Rather, it asserts 
shadowy causes that are never fully specified, let alone demonstrated. 
We are all just supposed to know that it's the fault of something 
called ``structural racism,'' abetted by an environment of ``White 
privilege,'' furthered by an ideology of ``White supremacy'' that 
purportedly characterizes our society. It explains everything. 
Confronted with any racial disparity, the cause is, ``structural 
racism.''
    History, I would argue, is rather more complicated than such ``just 
so'' stories would suggest. These racial disparities have multiple 
interwoven and interacting causes, from culture to politics to 
economics, to historical accident to environmental influence and, yes, 
also to the nefarious doings of particular actors who may or may not be 
``racists,'' as well as systems of law and policy that disadvantage 
some groups without having been so intended. I want to know what they 
are talking about when they say ``structural racism.'' In effect, use 
of the term expresses a disposition. It calls me to solidarity. It asks 
for my fealty, for my affirmation of a system of belief. It's a very 
mischievous way of talking, especially in a university, although I can 
certainly understand why it might work well on Twitter.
    Historically oppressed groups, time and again, have evolved notions 
of identity that cut against the grain of their society's mainstream. A 
culture can develop among them that inhibits talented youngsters from 
taking the actions needed to develop that talent. Now, given such a 
situation, I wish to ask: Do kids in a racially segregated 
dysfunctional peer group simply have the wrong utility functions? It is 
a mistake to attribute the dysfunctional behavior of an historically 
oppressed group of people to their simply having the wrong preferences 
when those their ``preferences'' have emerged from a set of historical 
experiences that reflect the larger society's social structures and 
activities. Another way of saying this is that when thinking about 
group disparities social relations come before economic transactions. 
When ethnic communities and their local cultures are not integrated 
across boundaries of race in a society--then racial inequalities can 
persist. The persistence of racial disparities derives not simply from 
discrimination, but more fundamentally from the complex, morally 
ambiguous and difficult-to-regulate phenomena that embody and reflect 
what people see as the meanings giving significance to their lives, and 
from the structure of the social connectivity to which those meanings 
give rise.
    All of this leads me to an important conclusion: How a diverse 
society answers the question, ``Who are WE?'' is a fundamentally 
significant issue. It is certainly an important question in the United 
States today. Who are WE? Whose country is it? When we talk about 
crime, violence, school failure, urban decay, etc., are these matters, 
in the back of our minds, that we understand as US against THEM? 
Because if it is US against THEM, anything is possible. It becomes 
possible to say about those people languishing in the ghettos of our 
great cities: ``That's not my country. That's some third world thing.'' 
(This was actually said during the flood of New Orleans after Hurricane 
Katrina in 2005. But it's a lie. Black people in New Orleans had been 
there for 250 years. They were not aliens. They were and are as 
American as you can get, as American as anybody can be. That was US 
down there crawling up on the rooftops. That was US huddled in the 
Superdome. That was US.) My point is that these problems are a 
quintessentially American affair, not simply a measure of the 
inadequacy of ``Black culture.'' They reflect upon OUR social 
inadequacy, I wish to argue. And I buttress that argument by observing 
the incompleteness of human capital theory, by insisting that human 
developmental processes are socially contextualized, and by stressing 
the foundational role ``race'' plays in all of this. This is what I 
mean when I, being an economist, nevertheless insist on placing 
relations before transactions!
    Consider the poor central-city dwellers who make up a quarter or so 
of the Black American population. Dysfunctional behaviors of many in 
this population is certainly part of the problem here. Conservatives' 
demand for greater personal responsibility in these quarters is, in my 
view, both necessary and proper. And yet, confronted with the despair, 
violence, and self-destructive folly of so many people, it is morally 
and intellectually superficial in the extreme to argue, as many have 
done, that ``those people should just get their acts together like many 
of the poor immigrants. If they did we would not have such a horrific 
problem in our cities.'' To the contrary, any morally astute response 
to the ``social pathology'' of American history's losers should 
conclude that, while we cannot change our ignoble past, we need not and 
must not be indifferent to contemporary suffering issuing directly from 
that past. THEIR culture may be implicated in their difficulties, but 
then so too is OUR culture complicit in their troubles: We bear 
collective responsibility for the form and texture of our social 
relations.
    Thus, while we can't ignore the behavioral problems of this so-
called underclass we should discuss and react to them as if we were 
talking about our own children, neighbors, and friends, which is to 
say: This persisting Black disadvantage is an American tragedy. It is a 
national, not merely a communal disgrace. Changing the definition of 
the American ``we'' is a first step toward fixing the racial inequality 
problem that afflicts our society. That requires seeing ourselves as 
all being in the same boat, sharing a common citizenship and a common 
humanity. It means fashioning American solutions to American problems--
not partitioning ourselves into rival racial populations among whom 
must be brokered some kind of quid pro quo. This requires adjusting 
ways of thinking on all sides of the racial divide. Ultimately, we need 
to get beyond race and, as Dr. King prophetically envisioned, to ground 
civic discourse in an unwavering commitment to trans-racial humanism. 
That sounds like a pipedream in today's hyper-racially charged 
environment. But I actually believe it is the only way forward. 
Achieving a society where all individuals regardless of race are 
thought of as being among US, should be the goal. If inequality is a 
problem, then let us address it forthrightly. But we should do so on 
behalf of a program of human decency, not one of racial equity
    There is a fatal contradiction at the heart of the argument for 
group equality of social outcomes. In my considered opinion we ought 
not to expect this as an outcome, and we ought not to make achieving it 
our goal. Equality of opportunity, not equality of results, is the only 
defensible public policy goal in my view. The dogged pursuit of equal 
results between racial groups across all venues of human endeavor is a 
formula for tyranny and yet more racism. Here is why.
    Identitarian arguments for group equality posit that we have 
different groups--Jews, South Asians, East Asians, Blacks, Latinos, 
etc.--and that these groups have identities which deserve to be 
acknowledged and respected. When someone tells me, ``I identify as a 
member of group X,'' I am given to understand that this is a part of 
their personhood which warrants to be respected and given credence. So, 
groups are fundamental building blocks of society in this identity-
focused view of the world. It is not a matter of indifference. We are 
in these various boxes. Groups matter. A group's culture and heritage 
matter to its members--the music they listen to, the food they eat, the 
literature they read, the stories they tell their children--all these 
things for the identitarians are important and they all vary across 
groups.
    On the other hand, group-egalitarians presuppose that--absent 
injustice--there would be equality of groups across every human 
enterprise. But how can that be? Because if groups matter, some people 
are going to bounce a basketball 100,000 times a month and other people 
are going to bounce it 10,000 times a month. Some people are going to 
be drawn to books as a way of experiencing human culture and other 
people are going to be more verbal or more spontaneous or whatever it 
might be. There are differences between groups. Groups matter after 
all. They're not all the same. They don't do the same things, they 
don't believe the same things, they don't think the same things, they 
don't spend their time in the same ways. So now I have population 
groups that have their own integrity, expressing themselves in how they 
live their lives, how they raise their children, how they spend their 
time. This will inevitably result in different representations of the 
groups' members across various human activities. The various groups' 
members will not all be involved in academic pursuits, in the business 
world, in the professions, or in sports and entertainment to the same 
extent. They will not all have the same occupational or professional 
profiles.
    Now I look out at society and I see a difference between groups in 
the proportion who are members of the National Academy of Sciences, who 
are tenured faculty members, who are tech entrepreneurs or hedge fund 
managers or traders on the floor of the stock exchange. I see 
differences in the proportion who are getting PhDs in English 
literature, who are small shopkeepers, single parents, or petty 
criminals, etc. Groups mattered after all for the identitarians. This 
groupness reflects itself to some degree in how people choose to live 
their lives. And yet, the egalitarians insist that the society is 
unfair unless it yields an equal proportionate representation of these 
groups in every human enterprise? That is simply a logical 
contradiction. Acting in a determined way on that contradiction can 
only to lead to tyranny, to disappointment and to more racism.
    For, if we try to flatten the cultural and behavioral distinctions 
that are the substance of groupness--if we put everybody into one 
social milieu, override parental autonomy and socialize the raising of 
our kids--we might be able to flatten the social terrain enough to 
achieve equality. But this would be tyrannical. It would extinguish our 
autonomy as individual human beings to associate with each other, to 
believe and to live as we please. And should such a draconian policy 
fail to produce group equality--as seems more likely--we would end-up 
with the question: How come there are so many Jews (or Asians, or 
``Whites'' or whatever) in medical school, with PhDs in electrical 
engineering, in the top 1 percent of the income distribution? That is 
ultimately where identity-based group egalitarianism leads. There will 
be no end to the quest for group equality if, indeed, group identities 
are meaningful and persist. The presumption of group equality in the 
face of group distinctions of social organization and culture leads 
either to the tyrannical imposition of uniform standards in an attempt 
to tamp down the authentic expression of groupness, or to finger-
pointing and suspicion every time some group of people moves ahead of 
or falls behind the pack in this or that arena of achievement. A 
treacherous presumption will haunt society: that any group disparity 
must reflect some intrinsic unfairness that is built into the system. 
That is a formula for perpetual conflict, not for ``social justice''. 
And it is a temptation which should be resisted.
    Thank you.
        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SINEMA
                      FROM ABBYE ATKINSON

Q.1. Your testimony speaks to the importance of a strong social 
safety net as an alternative to help ease marginalized 
communities' reliance on credit/debt to attain economic 
mobility. Many anti-poverty advocates believe that a ``housing 
first'' approach is the best and most sustainable first step to 
reduce poverty and improve economic mobility.
    Do you share this view? If not, what aspect of the safety 
net do you believe is the best starting point?

A.1. Housing is a basic human need that, if unmet, generates 
and perpetuates a host of other challenges, including 
entrenched financial insecurity. Consequently, I do believe 
that a strong social safety net should prioritize secure and 
stable housing for the poor (as it should for all Americans). 
In other words, housing is a good place to start when seeking 
to reduce poverty and to encourage social mobility. For 
example, a recent study shows that ``low-income workers who 
were involuntarily removed from their homes--by eviction, 
landlord foreclosure, or housing condemnation--subsequently 
experienced an involuntary dismissal from their jobs.'' \1\ 
Thus, by focusing on housing, social safety net programs would 
promote stable employment and social mobility.
---------------------------------------------------------------------------
     \1\ Matthew Desmond and Carl Gershenson, Housing and Employment 
Insecurity Among the Working Poor, 63 Soc. Probs. 46, 46-47 (2016).

Q.2. Your testimony states that systems of credit/debt are 
inherently regressive because the poorest Americans end up 
paying the most in interest and tend to take the longest to 
repay debt burdens. The U.S. method of calculating credit 
scores is unique because Americans are generally required to 
prove their creditworthiness to access credit, unless they have 
someone else with financial means and credit cosign their 
application. In many other countries, the burden is reversed, 
and people are presumed to be creditworthy until their actions 
demonstrate otherwise. In theory, the U.S. adopting such an 
approach could help Americans access better loan products at 
lower interest rates. Do you believe alternative methodologies 
of credit scoring could help, in whole or in part, address some 
---------------------------------------------------------------------------
of the concerns around who pays the most in interest?

A.2. Access to credit alone, whether through relaxed credit 
scoring or other means, is a not a meaningful solution for the 
poorest Americans. The poorest Americans often use credit as a 
means to smooth income. Yet, credit is a tool that is useful 
for those who can expect to have some means of repaying the 
debt they owe in the future. Given the persistent economic 
fragility that the working poor experience, for example, 
offering credit (even by means of an alternative, more 
favorable credit scoring methodology) is not a reasonable means 
to address persistent and entrenched poverty. Instead, public 
resources would be better spent strengthening other aspects of 
the social safety net, including housing initiatives and direct 
public assistance.
                                ------                                


       RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNOCK
                      FROM ABBYE ATKINSON

Q.1. Professor Atkinson, You write in your testimony that 
``Congress should address the relative lack of transparency 
requirements imposed on private financial intermediaries in 
light of their significance to credit/debt social provision 
policy.'' Can you expand on this point by speaking to what some 
steps in this direction by Congress could look like?

A.1. One important step Congress could take would be to 
increase transparency requirements for private equity funds 
given their significant incursion into the consumer lending 
sector and their capacity as de facto stewards of American 
retirement security. On behalf of their institutional 
investors, including various pension funds, private equity 
funds invest significantly in various aspects of consumer 
lending, including in subprime consumer lending like small 
dollar installment loans. Currently, however, private equity 
firms are accorded significant latitude, escaping several 
mandated disclosures that have been an important feature of 
American securities law since the Great Depression. For 
example, Rule 506 of Regulation D (of Section 4(a)(2) of the 
Securities Act of 1933) presently permits private equity firms 
to sell shares in their funds to as many ``accredited 
investors'' as they'd like, without meaningful SEC oversight. 
Given their practical significance in the solvency of an 
important pillar of American social welfare and their 
significant incursion into consumer credit markets, private 
equity firms should be subject to greater regulation of their 
internal processes.
    In that regard, several members of Congress have already 
proposed such increased oversight in the Stop Wall Street 
Looting Act of 2019. Proposed by Senators Warren, Baldwin, and 
Brown, and Representatives Pocan and Jayapal, this legislation 
was referred to the Senate Committee on Finance on July 17, 
2019.
              Additional Material Supplied for the Record
 BUILDING AN EQUITABLE RECOVERY: THE ROLE OF RACE, LABOR MARKETS, AND 
                               EDUCATION






          HIDDEN RULES OF RACE ARE EMBEDDED IN THE NEW TAX LAW




            LETTER SUBMITTTED BY LIBERATION IN A GENERATION



                         NEOLIBERALISM AND RACE




                 PATHWAYS--STATE OF THE UNION: HOUSING