[Congressional Record (Bound Edition), Volume 155 (2009), Part 7]
[House]
[Pages 8435-8437]
[From the U.S. Government Publishing Office, www.gpo.gov]




      IMPORTANCE OF DIVERSITY IN FINANCIAL STABILITY AND RECOVERY

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentlewoman from California (Ms. Waters) is recognized for 5 minutes.
  Ms. WATERS. Mr. Speaker, I rise this afternoon to briefly discuss a 
very important issue. Several Members of the House have been working 
with the Congressional Black Caucus, the Financial Services Committee 
and other committees to increase access for minority and women-owned 
business enterprises. Just this week, a new report was released by the 
Center for Community Economic Development on ``The Imperative of 
Closing the Racial Wealth Gap.''
  I would like to include the summary of this report in the Record.
  One of our primary focus areas over the last several months has been 
minority and women-owned business enterprises' access to the Troubled 
Asset Relief Program. That is the TARP.
  Originally, TARP was designed for the purchase of toxic mortgage-
related assets and presented several opportunities for women and 
minority-owned businesses to participate through asset management, 
legal, accounting, and other professional services.
  Following the announcement of the TARP, Representative Gregory Meeks 
and I convened a meeting of over 60 minority asset managers and 
officials from the Treasury Department to ensure maximum participation 
by women and minority-owned businesses. We wanted to make sure that 
there were real opportunities for participation in the TARP.
  As a result, legislative language was placed in the TARP bill 
describing specific steps Treasury was to take to ensure minority 
participation. In addition, members from the National Association of 
Securities Professionals met with Treasury several times and submitted 
written recommendations on how Treasury could work better with minority 
and women-owned businesses in the asset management space.
  Unfortunately, shortly after enactment of the TARP, Secretary Paulson 
shifted the focus from toxic assets to direct infusions of cash to 
ailing financial institutions. This shift became known as the Capital 
Purchase Program. This shift both cut off major opportunities for 
minority and women-owned businesses via asset-related services, and 
opened an opportunity for participation in the way of debt underwriting 
and other banking professional services.
  Unfortunately, these opportunities were never realized as banks that 
received TARP funds began a cycle of self-patronage, which led to 
little or no access to TARP contracting opportunities for women and 
minority-owned businesses. The most egregious of this type of patronage 
was highlighted through the banks paying themselves to underwrite their 
own debt.
  Yesterday, the Secretary of the Treasury announced a new program 
aimed at purchasing toxic assets from financial institutions. With this 
announcement, we have come full circle and a significant opportunity 
for minority and women-owned businesses to participate has presented 
itself again. The Public-Private Investment Program could purchase up 
to $1 trillion in assets.
  Members of the CBC's Economic Security Taskforce plan to convene a 
TARP/TALF Access Summit. The summit will be designed to ensure 
meaningful participation in TARP through the Public-Private Investment 
Program. Specifically, we hope to provide opportunities for minority 
and women-owned businesses and administration stakeholders to learn 
more about the new program and the capabilities of minority and women-
owned businesses, develop short-, mid- and long-term strategies to 
better facilitate access to TARP resources, and identify specific 
contacts within the relevant agencies.
  Moving forward, I believe this is an important initiative to ensure 
that we bring diverse talent to tackle the daunting economic problems 
facing us now.
  Mr. Speaker and Members, this is very important. We have billions of 
dollars that are being injected into our society by way of the TARP 
program, the TALF program, and even the stimulus program. We have to 
make sure that these opportunities are open and available to all 
members of our society who are equipped, prepared, and ready to 
participate.
  If our communities are to pull themselves up by the bootstraps, if 
our communities are to open up opportunities and create jobs, we cannot 
be shut out of these opportunities simply because only the ``big boys'' 
are allowed to play. We must make sure that these opportunities are 
available to all of the women and minority-owned businesses in our 
society also.

   Laying the Foundation for National Prosperity--The Imperative of 
      Closing the Racial Wealth Gap--Executive Summary--March 2009


                        about the insight center

       The Insight Center for Community Economic Development, 
     formerly the National Economic Development and Law Center 
     (NEDLC), is a national research, consulting and legal 
     organization dedicated to building economic health in 
     vulnerable communities. The Insight Center's 
     multidisciplinary approach utilizes a wide array of community 
     economic development strategies including promoting industry-
     focused workforce development, building individual and 
     community assets, establishing the link between early care 
     and education and economic development, and advocating for 
     the adoption of the Self-Sufficiency Standard as a 
     measurement of wage adequacy and as an alternative to the 
     Federal Poverty Line.
       This work is part of a national effort to close the racial 
     wealth gap in the United States for the next generation. For 
     more information on this initiative, visit http://
www.insightcced.org/communities/ClosingRWG.html. For more 
     information on the Insight Center, visit. http://
www.insightcced.org/.


                            acknowledgements

       The primary author of this paper is Meizhu Lui, Director, 
     Closing the Racial Wealth Gap Initiative. Other Insight 
     Center staff who contributed include Roger Clay, Lori Warren, 
     Ludovic Blain, Victor Corral, and Esther Polk. We also thank 
     Betsy Leondar-Wright for her editing skills, and Rick 
     Williams for his expert advice.
       The work of the leaders of the Initiative's issue working 
     groups is much appreciated. They include Thomas Mitchell, 
     Rudy Arredondo, John Powell, Jose Garcia, Barbara Robles, 
     Karen Edwards, Maya Rockeymoore, Tse Ming Tam, and Don 
     Baylor. Additional experts can be found at 
     www.insightexpertsofcolororg.
       The Insight Center gratefully acknowledges the generous 
     support of the Ford Foundation, and the ongoing commitment of 
     Program Officer Kilolo Kijakazi to building the field.


                           executive summary

       For every dollar owned by the median white family in the 
     United States, the typical Latino family has twelve cents, 
     and the typical African American family has a dime.\1\ Wealth 
     is what you own minus what you owe: assets minus debts.
       This racial wealth gap has roots in the past, and reaches 
     forward as well: it drains a family's capacity to give the 
     next generation a solid start. Without addressing the wealth 
     gap, racial inequality will be with us for generations to 
     come.
       Anti-poverty programs have relied primarily on providing 
     subsistence income for today's necessities, not building 
     assets that lead to economic mobility and security, and in 
     fact have sometimes penalized low-income people for owning 
     assets. Wealth-building

[[Page 8436]]

     policies can help even the lowest-income families gain 
     stability and plan for the future.
       Asset poverty is a new definition of poverty that reveals 
     how many families lack even minimal amounts of wealth. It can 
     be defined as not having enough savings to survive for three 
     months without income. People of color are far more likely 
     than whites to be asset-poor. The median family of color has 
     enough assets to last only five weeks at the poverty level, 
     compared with seven months for the median white family.\2\


       the roots of the racial wealth divide in u.s. history \3\

       Throughout U.S. history, federal and state governments have 
     provided ``wealth starter kits'' for some to turn their work 
     into worth. For example, governments have given gifts of 
     land, education, government-backed mortgages and farm loans, 
     a social safety net, and business subsidies to white 
     families, sometimes exclusively and usually 
     disproportionately.
       The same governments that boosted white wealth took land 
     from people of color, denied them education, and erected 
     barriers to home and business ownership.
       Native Americans lost assets not just during the first 
     centuries of U.S. history, through displacement and treaty 
     violations, but also more recently through tribal termination 
     and Bureau of Indian Affairs mismanagement.
       African Americans were not just denied property; they were 
     property during slavery. Legal segregation and Jim Crow laws 
     pushed Black citizens to the margins of the economy, where 
     many remain stuck today. Wealth-building programs such as 
     Social Security and the post-WWII GI Bill at first excluded 
     African Americans, with multigenerational effects.
       Latinos have been negatively affected by U.S. foreign 
     policy and immigration policy. Mexicans and Puerto Ricans 
     lost land to conquest. Temporary guest-worker programs and 
     exploitation of undocumented immigrants have blocked many 
     Latinos from getting a toehold in the U.S. economy.
       Most Asian Americans were excluded from entry, and those 
     who were here were largely denied citizenship until after 
     World War II.\4\ Japanese Americans lost their assets when 
     they were interned during World War II. While some Asian 
     groups are now prospering, Southeast Asians continue to have 
     a very high poverty rate.\5\
       Our country knows how to invest in wealth building for its 
     people. We now need to do so for everyone. We cannot afford 
     to squander America's greatest asset: its people.


                  comprehensive asset building for all

       A comprehensive approach to asset accumulation must 
     recognize that wealth building should unfold over the course 
     of a person's life: learning to save as a child; earning more 
     than just a living wage; borrowing on fair terms to invest in 
     the future: buying a home; starting a business; and retiring 
     with security.
       To make that possible for Americans of all races, these 
     interconnected policy areas must be improved to support 
     wealth building:
       Land: Land loss led to the impoverishment of Native 
     Americans, Mexican Americans, and African Americans, and land 
     ownership will be essential to ending the racial wealth 
     divide. Suits over land claims brought by blacks, Mexican-
     Americans, and American Indians must move quickly to 
     settlements. Native peoples, including Native Hawaiians, 
     still do not control their own land, which is held in trust 
     by the federal government and the state of Hawaii; they must 
     regain full ownership rights. Land loss due to fractionation 
     must be stopped. Fair access to subsidized loans must be 
     enforced.
       Income and employment: Good jobs with good benefits are 
     important wealth-building tools. In 2007 the median household 
     income for African Americans was $34,001, and for Latinos 
     $40,766, compared with $53,714 for whites; about one-quarter 
     of Black and Latino families were below the poverty line.\6\ 
     Since then, as the recession set in, unemployment has been 
     steadily rising. Immigrants and other people of color tend to 
     fill jobs with inadequate pay and benefits. Anti-
     discrimination laws need to be enforced. Unionization should 
     be promoted. Public investment, including jobs in new green 
     industries, should be affirmatively targeted to communities 
     of color.
       Savings and investments: The racial disparity in financial 
     assets (cash, investment accounts, stocks, bonds, etc.) is 
     wide: the median family of color had only $9,000 in financial 
     wealth in 2007, compared with $44,300 for whites.\7\ Access 
     to banks has been a problem on Native American reservations, 
     in inner-city neighborhoods and in rural areas. Public 
     programs that match savings or provide subsidies for college 
     tuition will allow more low-income people to build assets. 
     Matched savings programs should be tailored to fit the 
     cultures of people of color, such as building on existing 
     saving practices in immigrant and Native American 
     communities.
       Debt and credit: Poor credit scores and unscrupulous 
     lenders keep many people of color stuck with only high-
     interest credit options, unable to access fair credit for 
     college, homeownership or auto loans. African Americans paid 
     an average of 7% for new car loans in 2004, compared with 5% 
     for white borrowers.\8\ African and Latino students are far 
     more likely to have unmanageable student loans, defined as 
     monthly payments over 8% of income.\9\ A new federal 
     Financial Product Safety Commission watching for 
     discriminatory practices while protecting all consumers is 
     sorely needed.
       Homeownership: The sub-prime mortgage crisis is devastating 
     communities of color. Discriminatory and unregulated 
     practices have led to foreclosures and an estimated loss of 
     at least $165 billion in wealth in communities of color.\10\ 
     Black and Latino homeowners are now facing twice the rate of 
     subprime-related foreclosures as white homeowners.\11\ In the 
     short run, a foreclosure moratorium and a federal program to 
     renegotiate mortgages on fair terms are needed. In the long 
     run, affordable housing must become a national priority.
       Business ownership: Fourteen percent of white families but 
     only 7% of families of color owned equity in a business in 
     2007.\12\ The majority of minority-owned businesses have no 
     paid employees.\13\ Minority business start-ups use personal 
     savings and credit cards more often, and receive prime bank 
     loans less often, than white business owners. Ensuring 
     greater access to public and private investment capital is 
     essential to close the gap. Government procurement programs 
     can be used to boost businesses owned by people of color.
       Social insurance: Laid-off workers of color are less likely 
     to get unemployment insurance than white workers; and workers 
     of color tend to put more into Social Security than they take 
     out in retirement benefits.\14\ Fairer rules in both programs 
     would broaden their reach. But the disability and survivor 
     programs are very important to African Americans; these 
     programs must be protected against cutbacks.
       The Tax Code: Currently tax policy prioritizes further 
     asset-building for wealthy asset owners instead of helping 
     wage earners acquire assets. The mortgage interest deduction 
     reduces taxes mostly for owners of high-priced homes who are 
     disproportionately white; low-income taxpayers who do not 
     itemize get no benefit. Making the deduction refundable to 
     low-income homeowners would help close the race gap. A 
     parallel rent deduction would benefit many people of color. 
     Taxes on the very wealthy, such as the estate tax, need to be 
     protected and expanded in order to broaden asset ownership to 
     more people.


           seven principles for closing the racial wealth gap

       From the recommendations made above, a number of principles 
     can be distilled. They represent a framework that our leaders 
     must pursue to lay the foundation for the full participation 
     of all members of our society in our economy.
       1. Craft public policies to support wealth creation and 
     provide opportunities to move up the economic ladder for all 
     those stuck on the lower rungs.
       2. Ensure full participation in programs intended to be 
     universal through program design and implementation measures, 
     targeting those often overlooked.
       3. Draw upon the perspectives of experts of color to 
     develop public policy.
       4. Expand and enforce policies that eliminate 
     discriminatory practices in the private and public sectors.
       5. Promote the collection of racial and ethnic data 
     essential to evaluating policy effectiveness.
       6. Support community-wide prosperity through community-
     based economic development.
       7. Recognize that a comprehensive human-capital agenda is 
     needed.
       In his inaugural address, President Obama said, ``The state 
     of the economy calls for action . . . not only to create new 
     jobs but to lay a new foundation for growth.'' By giving 
     populations that have endured years of disinvestment a boost 
     onto the economic ladder, we can lay a foundation for renewed 
     national prosperity.


                               end notes

       \1\ Federal Reserve Board, 2007 Survey of Consumer 
     Finances, ``Full Public Data Set'' (Washington: The Federal 
     Reserve Board, 2009), http://www.federalreserve.gov/pubs/oss/
oss2/2007/scf2007data.html.
       \2\ Authors' calculations of Federal Reserve data.
       \3\ This section is based on The Color of Wealth, by Meizhu 
     Lui, Barbara Robles, Betsy Leondar-Wright, Rose Brewer and 
     Rebecca Adamson, The New Press, 2006.
       \4\ Ibid, pp. 198-100
       \5\ Ibid., p. 213
       \6\ U.S. Census Bureau, Income, Earnings, and Poverty Data 
     from the 2007 American Community Survey.
       \7\ Federal Reserve Board, Changes in U.S. Family Finances 
     from 2004 to 2007: Evidence from the Survey of Consumer 
     Finances, February 2009.
       \8\ Consumer Federation of America. African Americans Pay 
     Higher Auto Loan Rates but Can Take Steps to Reduce this 
     Expense. Washington, DC, 2007.
       \9\ King, Tracy and Ellynne Bannon, The Burden of 
     Borrowing: A Report on the Rising Rates of Student Loan Debt, 
     State PIRGs' Higher Education Project, March 2002.

[[Page 8437]]

       \10\ Schloemer, E., Li, W., Ernst, K., & Keest, K. (2006). 
     ``Losing Ground: Foreclosures in the Subprime Market and 
     Their Cost to Homeowners,'' Durham, NC: Center for 
     Responsible Lending; Center for Responsible Lending. (2007). 
     ``Subprime Lending is a Net Drain on Homeownership.'' (CRL 
     Issue Paper No. 14), Washington: DC: Center for Responsible 
     Lending.
       \11\ Oliver, Melvin L. and Thomas M. Shapiro, ``Sub-prime 
     as a Black Catastrophe,'' The American Prospect, October 
     2008, 11.
       \12\ Federal Reserve Board, Changes in U.S. Family Finances 
     from 2004 to 2007: Evidence from the Survey of Consumer 
     Finances, February 2009.
       \13\ Robles, Barbara, ``Latino Entrepreneurship and 
     Microbusinesses: A National and Border Economy Snapshot,'' 
     AAPSS Blog, October 5, 2007 Survey of Business Owners, 2002 
     Economic Census, Department of Commerce, Bureau of the 
     Census.
       \14\ Social Security Administration, Hispanics, Social 
     Security, and Supplemental Security Income, Table 7, 
     ``Characteristics of Hispanic beneficiaries of Social 
     Security and all beneficiaries,'' 2005.

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