[House Report 117-228]
[From the U.S. Government Publishing Office]


117th Congress     }                                  {      Report
                        HOUSE OF REPRESENTATIVES
 2d Session        }                                  {      117-228

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



 
             FEDERAL RESERVE RACIAL AND ECONOMIC EQUITY ACT

                                _______
                                

January 20, 2022.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

         Ms. Waters, from the Committee on Financial Services, 
                        submitted the following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 2543]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 2543) to amend the Federal Reserve Act to add 
additional demographic reporting requirements, to modify the 
goals of the Federal Reserve System, and for other purposes, 
having considered the same, reports favorably thereon with an 
amendment and recommends that the bill as amended do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     2
Background and Need for Legislation..............................     3
Section-by-Section Analysis of the Legislation...................     3
Hearings.........................................................     3
Committee Consideration..........................................     3
Committee Votes..................................................     4
Committee Oversight Findings.....................................     7
Statement of Performance Goals and Objectives....................     7
New Budget Authority and C.B.O. Cost Estimate....................     7
Committee Cost Estimate..........................................     9
Federal Mandates Statement.......................................     9
Advisory Committee Statement.....................................    10
Applicability to Legislative Branch..............................    10
Congressional Earmarks, Limited Tax Benefits, and Limited Tariff 
  Benefits.......................................................    10
Duplicative Federal Programs.....................................    10
Changes in Existing Law..........................................    10
Minority Views...................................................    13

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Federal Reserve Racial and Economic 
Equity Act''.

SEC. 2. DUTY TO MINIMIZE AND ELIMINATE RACIAL DISPARITIES.

  The Federal Reserve Act (12 U.S.C. 221 et seq.) is amended by 
inserting after section 2B the following:

``SEC. 2C. DUTY TO MINIMIZE AND ELIMINATE RACIAL DISPARITIES.

  ``The Board of Governors of the Federal Reserve System and the 
Federal Open Market Committee shall exercise all duties and functions 
in a manner that fosters the elimination of disparities across racial 
and ethnic groups with respect to employment, income, wealth, and 
access to affordable credit, including actions in carrying out--
          ``(1) monetary policy;
          ``(2) regulation and supervision of banks, thrifts, bank 
        holding companies, savings and loan holding companies, and 
        nonbank financial companies and systemically important 
        financial market utilities designated by the Financial 
        Stability Oversight Council;
          ``(3) operation of payment systems;
          ``(4) implementation of the Community Reinvestment Act of 
        1977;
          ``(5) enforcement of fair lending laws; and
          ``(6) community development functions.''.

SEC. 3. APPEARANCES BEFORE AND REPORTS TO THE CONGRESS.

  Section 2B of the Federal Reserve Act (12 U.S.C. 225b) is amended--
          (1) in subsection (a)(1)--
                  (A) in subparagraph (A), by striking ``and'' at the 
                end; and
                  (B) by striking subparagraph (B) and inserting the 
                following:
                  ``(B) economic developments and prospects for the 
                future described in the report required in subsection 
                (b), including a discussion of disparities in 
                employment, income, and wealth across racial and ethnic 
                groups as well as other specific segments of the 
                population; and
                  ``(C) plans, activities, and actions of the Board and 
                the Federal Open Market Committee to minimize and 
                eliminate disparities across racial and ethnic groups 
                with respect to employment, wages, wealth, and access 
                to affordable credit pursuant to section 2C.''; and
          (2) in subsection (b)--
                  (A) by striking ``The Board'' and inserting the 
                following:
          ``(1) In general.--The Board''; and
                  (B) by adding at the end the following:
          ``(2) Trend information.--
                  ``(A) In general.--Each report required under 
                paragraph (1) shall include recent trends in the 
                unemployment rate, labor force participation rate, 
                employment to population ratio, median household 
                income, and change in real earnings.
                  ``(B) Demographic information.--The trends required 
                to be reported under subparagraph (A) shall include a 
                comparison among different demographic groups, 
                including race (White, African-American, Latino, Native 
                American, and Asian populations), ethnicity, gender, 
                and educational attainment.''.

                          Purpose and Summary

    On April 14, 2021, Representative Maxine Waters introduced 
H.R. 2543 the Federal Reserve Racial and Economic Equity Act, 
which would require the Federal Reserve to carry out its duties 
in a manner that supports the elimination of racial and ethnic 
disparities in employment, income, wealth, and access to 
affordable credit. The Board of the Federal Reserve would be 
required to report on disparities in labor force trends as well 
as on plans and activities of the Board to minimize and 
eliminate these disparities.

                  Background and Need for Legislation

    The Federal Reserve System (Fed) plays a crucial role in 
overseeing the U.S. economy, from its conduct of monetary 
policy to its regulation of financial institutions and review 
of pending bank mergers to its oversight of the payments 
system. In an essay published shortly after the murder of 
George Floyd, Atlanta Federal Reserve President Raphael Bostic 
acknowledged that the Fed had a role to play in addressing 
racial economic inequality. Historically, the Fed has carried 
out its functions without regard for its effect on racial 
economic disparities. For instance, economists Jared Bernstein 
and Janelle Jones found that ``Historical estimates of the 
natural rate [of unemployment] reveal that black unemployment 
has never fallen below those estimates . . .'' even though the 
overall rate of unemployment has.\21\ Particularly in response 
to the proposal by Bernstein and Jones for the Fed to 
``target'' the Black unemployment rate, financial institutions 
have begun incorporating data about Black unemployment into 
their monetary policy forecasts and analysis.

                      Section-by-Section Analysis


Section 1. Short title

    This section states that the title of the bill is the 
Federal Reserve Racial and Economic Equity Act.

Section 2. Duty to minimize and eliminate racial disparities

    This section amends the section of the Federal Reserve Act 
that specifies the Federal Reserve's mandate by adding a 
Section 2C, a duty to minimize and eliminate racial 
disparities. This new mandate requires the Federal Reserve to 
``exercise all duties and functions in a manner that fosters 
the elimination of disparities across racial and ethnic groups 
with respect to employment, income, wealth, and access to 
affordable credit,'' including in the Federal Reserve's 
monetary policy, operation of the payments system, regulatory 
responsibilities, implementation of the Community Reinvestment 
Act, enforcement of fair lending laws, and community 
development functions.

Section 3. Appearances before and reports to Congress

    This section codifies a requirement that the Federal 
Reserve Chair include data about racial economic disparities 
and the Federal Reserve's progress toward reducing and 
eliminating racial disparities when testifying before Congress 
during their semi-annual presentation of the monetary policy 
report.

                                Hearings

    For the purposes of section 3(c)(6) of House rule XIII, the 
Committee on Financial Services' on March 10, 2021 held a 
hearing to consider H.R. 2543 entitled, ``Justice for All: 
Achieving Racial Equity Through Fair Access to Housing and 
Financial Services.''

                        Committee Consideration

    The Committee on Financial Services met in open session on 
April 21, 2021, and ordered H.R. 2543 to be reported favorably 
to the House with an amendment in the nature of a substitute by 
a vote of 30 yeas and 23 nays, a quorum being present.

                  Committee Votes and Roll Call Votes

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
following roll call votes occurred during the Committee's 
consideration of H.R. 2543: An amendment offered by Mr. Barr, 
no. 6a, was NOT AGREED TO by a recorded vote of 22 ayes and 30 
nays. Ordered reported to the House, as amended, with a 
favorable recommendation by a recorded vote of 30 ayes and 23 
nays.


	[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

  Statement of Oversight Findings and Recommendations of the Committee

    In compliance with clause 3(c)(1) of rule XIII and clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
the Committee's oversight findings and recommendations are 
reflected in the descriptive portions of this report.

             Statement of Performance Goals and Objectives

    Pursuant to clause (3)(c) of rule XIII of the Rules of the 
House of Representatives, the goals of H.R. 2543 are to give 
the Federal Reserve an affirmative mission to consider and do 
everything with its power to reduce and eliminate racial 
disparities in carrying out its monetary policy and other 
functions.

               New Budget Authority and CBO Cost Estimate

    Pursuant to clause 3(c)(2) of rule XIII of the Rules of the 
House of Representatives and section 308(a) of the 
Congressional Budget Act of 1974, and pursuant to clause 
3(c)(3) of rule XIII of the Rules of the House of 
Representatives and section 402 of the Congressional Budget Act 
of 1974, the Committee has received the following estimate for 
H.R. 2543 from the Director of the Congressional Budget Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, May 26, 2021.
Hon. Maxine Waters,
Chairwoman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Madam Chairwoman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2543, the Federal 
Reserve Racial and Economic Equity Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Nathaniel 
Frentz.
            Sincerely,
                                         Phillip L. Swagel,
                                                          Director.
    Enclosure.

    
    	[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    

    The bill would
           Task the Board of Governors of the Federal 
        Reserve with conducting its work in way that fosters 
        the elimination of racial and ethnic disparities in 
        certain financial and economic areas
           Require the inclusion of discussion of 
        racial disparities and efforts to reduce them in semi-
        annual Congressional testimony and report
    Estimated budgetary effects would mainly stem from
           Additional operating costs for the Federal 
        Reserve, resulting in lower remittances from the 
        Federal Reserve to the Treasury, which are recorded as 
        revenues
    Areas of significant uncertainty include
           Anticipating the extent to which new hiring 
        or other costs would be incurred
    Bill summary: H.R. 2543 would amend the Federal Reserve Act 
to require the Board of Governors of the Federal Reserve and 
the Federal Open Market Committee to exercise their duties in a 
way that fosters the elimination of certain racial and ethnic 
disparities. CBO estimates that enacting H.R. 2543 would 
decrease revenues by $10 million over the 2021-2031 period.
    Estimated Federal cost: The estimated budgetary effect of 
H.R. 2543 is shown in Table 1.

                                                   TABLE 1.--ESTIMATED BUDGETARY EFFECTS OF H.R. 2543
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                     By fiscal year, millions of dollars--
                                                      --------------------------------------------------------------------------------------------------
                                                        2021   2022   2023   2024   2025   2026   2027   2028   2029   2030   2031  2021-2026  2021-2031
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  Decreases in Revenues
 
Estimated Revenues...................................      0     -1     -1     -1     -1     -1     -1     -1     -1     -1     -1        -5        -10
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Basis of estimate: For this estimate, CBO assumes that the 
bill will be enacted before the end of fiscal year 2021 and 
that the new responsibilities would be carried out starting in 
2022.
    Revenues: H.R. 2543 would impose new duties on the Board of 
Governors of the Federal Reserve and the Federal Open Market 
Committee. Using information from the Board of Governors, CBO 
estimates that enacting the bill would decrease revenues by $10 
million over the 2021-2031 period. That decrease in revenues 
stems from increased costs, which reduce remittances from the 
Federal Reserve to the Treasury. Remittances are recorded in 
the budget as revenues.
    Under current law, the Federal Reserve includes certain 
demographic information by race and ethnicity in several of its 
major reports, including in its semi-annual testimony and 
monetary policy report to the Congress. CBO anticipates that 
the Federal Reserve would hire additional staff members to 
implement the new requirements of the bill, specifically to 
track and report additional data and analysis by race, to 
identify and pursue opportunities within its responsibilities 
to eliminate racial disparities, and to report on the status 
and results of that work. Those increased costs reflect the 
equivalent of three to four full-time staff members.
    Uncertainty: That budgetary estimate is subject to 
considerable uncertainty. In particular, the Board of Governors 
retains broad discretion in how to meet the new requirements 
imposed by the bill. The Board could choose to meet the 
requirements in a way that would not require hiring a 
significant number of new staff or incurring other additional 
costs. By contrast, the Board could instead choose to put 
significant new resources into expanding new capacities and 
hiring a substantial number of new staff. CBO's estimate, which 
is intended to represent a midpoint of possible outcomes, 
reflects a moderate net increase in staff.
    Pay-As-You-Go considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. The net changes in revenues that are subject to those 
pay-as-you-go procedures are shown in Table 1.
    Increase in long-term deficits: CBO estimates that enacting 
H.R. 2543 would not increase on-budget deficits by more than $5 
billion in any of the four consecutive 10-year periods 
beginning in 2032.
    Mandates: None.
    Estimate prepared by: Federal Revenues: Nathaniel Frentz; 
Mandates: Fiona Forrester.
    Estimate reviewed by: Joshua Shakin, Chief, Revenue 
Estimating Unit; H. Samuel Papenfuss, Deputy Director of Budget 
Analysis; John McClelland, Director of Tax Analysis.

                        Committee Cost Estimate

    Clause 3(d)(1) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison of the 
costs that would be incurred in carrying out H.R. 2543. 
However, clause 3(d)(2)(B) of that rule provides that this 
requirement does not apply when the committee has included in 
its report a timely submitted cost estimate of the bill 
prepared by the Director of the Congressional Budget Office 
under section 402 of the Congressional Budget Act.

                       Unfunded Mandate Statement

    Pursuant to Section 423 of the Congressional Budget and 
Impoundment Control Act (as amended by Section 101(a)(2) of the 
Unfunded Mandates Reform Act, Pub. L. 104-4), the Committee 
adopts as its own the estimate of federal mandates regarding 
H.R. 2543, as amended, prepared by the Director of the 
Congressional Budget Office.

                           Advisory Committee

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

              Application of Law to the Legislative Branch

    Pursuant to section 102(b)(3) of the Congressional 
Accountability Act, Pub. L. No. 104-1, H.R. 2543, as amended, 
does not apply to terms and conditions of employment or to 
access to public services or accommodations within the 
legislative branch.

                           Earmark Statement

    In accordance with clause 9 of rule XXI of the Rules of the 
House of Representatives, H.R. 2543 does not contain any 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as described in clauses 9(e), 9(f), and 9(g) of rule 
XXI.

                    Duplication of Federal Programs

    Pursuant to clause 3(c)(5) of rule XIII of the Rules of the 
House of Representatives, the Committee states that no 
provision of H.R. 2543 establishes or reauthorizes a program of 
the Federal Government known to be duplicative of another 
federal program, a program that was included in any report from 
the Government Accountability Office to Congress pursuant to 
section 21 of Public Law 111-139, or a program related to a 
program identified in the most recent Catalog of Federal 
Domestic Assistance.

                        Changes to Existing Law

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, H.R. 2543, as reported, are shown as follows:

         Changes in Existing Law Made by the Bill, as Reported

   In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, and existing law in which no 
change is proposed is shown in roman):

                          FEDERAL RESERVE ACT



           *       *       *       *       *       *       *
SEC. 2B. APPEARANCES BEFORE AND REPORTS TO THE CONGRESS.

   (a) Appearances Before the Congress.--
           (1) In general.--The Chairman of the Board shall 
        appear before the Congress at semi-annual hearings, as 
        specified in paragraph (2), regarding--
                   (A) the efforts, activities, objectives and 
                plans of the Board and the Federal Open Market 
                Committee with respect to the conduct of 
                monetary policy; [and]
                   [(B) economic developments and prospects for 
                the future described in the report required in 
                subsection (b).]
                   (B) economic developments and prospects for 
                the future described in the report required in 
                subsection (b), including a discussion of 
                disparities in employment, income, and wealth 
                across racial and ethnic groups as well as 
                other specific segments of the population; and
                   (C) plans, activities, and actions of the 
                Board and the Federal Open Market Committee to 
                minimize and eliminate disparities across 
                racial and ethnic groups with respect to 
                employment, wages, wealth, and access to 
                affordable credit pursuant to section 2C.
           (2) Schedule.--The Chairman of the Board shall 
        appear--
                   (A) before the Committee on Banking and 
                Financial Services of the House of 
                Representatives on or about February 20 of even 
                numbered calendar years and on or about July 20 
                of odd numbered calendar years;
                   (B) before the Committee on Banking, 
                Housing, and Urban Affairs of the Senate on or 
                about July 20 of even numbered calendar years 
                and on or about February 20 of odd numbered 
                calendar years; and
                   (C) before either Committee referred to in 
                subparagraph (A) or (B), upon request, 
                following the scheduled appearance of the 
                Chairman before the other Committee under 
                subparagraph (A) or (B).
   (b) Congressional Report.--[The Board]
           (1) In general.--The Board  shall, concurrent with 
        each semi-annual hearing required by this section, 
        submit a written report to the Committee on Banking, 
        Housing, and Urban Affairs of the Senate and the 
        Committee on Banking and Financial Services of the 
        House of Representatives, containing a discussion of 
        the conduct of monetary policy and economic 
        developments and prospects for the future, taking into 
        account past and prospective developments in 
        employment, unemployment, production, investment, real 
        income, productivity, exchange rates, international 
        trade and payments, and prices.
           (2) Trend information.--
                   (A) In general.--Each report required under 
                paragraph (1) shall include recent trends in 
                the unemployment rate, labor force 
                participation rate, employment to population 
                ratio, median household income, and change in 
                real earnings.
                   (B) Demographic information.--The trends 
                required to be reported under subparagraph (A) 
                shall include a comparison among different 
                demographic groups, including race (White, 
                African-American, Latino, Native American, and 
                Asian populations), ethnicity, gender, and 
                educational attainment.
   (c) Public Access to Information.--The Board shall place on 
its home Internet website, a link entitled ``Audit'', which 
shall link to a webpage that shall serve as a repository of 
information made available to the public for a reasonable 
period of time, not less than 6 months following the date of 
release of the relevant information, including--
           (1) the reports prepared by the Comptroller General 
        under section 714 of title 31, United States Code;
           (2) the annual financial statements prepared by an 
        independent auditor for the Board in accordance with 
        section 11B;
           (3) the reports to the Committee on Banking, 
        Housing, and Urban Affairs of the Senate required under 
        section 13(3) (relating to emergency lending 
        authority); and
           (4) such other information as the Board reasonably 
        believes is necessary or helpful to the public in 
        understanding the accounting, financial reporting, and 
        internal controls of the Board and the Federal reserve 
        banks.

SEC. 2C. DUTY TO MINIMIZE AND ELIMINATE RACIAL DISPARITIES.

   The Board of Governors of the Federal Reserve System and the 
Federal Open Market Committee shall exercise all duties and 
functions in a manner that fosters the elimination of 
disparities across racial and ethnic groups with respect to 
employment, income, wealth, and access to affordable credit, 
including actions in carrying out--
           (1) monetary policy;
           (2) regulation and supervision of banks, thrifts, 
        bank holding companies, savings and loan holding 
        companies, and nonbank financial companies and 
        systemically important financial market utilities 
        designated by the Financial Stability Oversight 
        Council;
           (3) operation of payment systems;
           (4) implementation of the Community Reinvestment Act 
        of 1977;
           (5) enforcement of fair lending laws; and
           (6) community development functions.

           *       *       *       *       *       *       *


                             MINORITY VIEWS

    The Federal Reserve is an independent agency that was 
created to be free from partisan agendas. H.R. 2543 jeopardizes 
this independence by directing the Board of Governors and 
Federal Open Market Committee to deviate from its dual mandate 
and independent process to focus on social policy.
    H.R. 2543 would require the Federal Reserve to focus on 
closing socio-economic disparities rather than its dual mandate 
of maximum sustainable employment and price stability. The 
Board would also be required to report on disparities in labor 
force trends as well as on plans and activities of the Board to 
minimize and eliminate these disparities.
    Ensuring the Federal Reserve remains independent is 
critical to the stability of our monetary system and the 
policies impacting it. Subjecting monetary policy to the 
partisan agenda of politicians threatens that stability and 
adds uncertainty and risk into the Federal Reserve's 
responsibilities.
    Over the last year, Chair Powell has testified on multiple 
occasions the Federal Reserve would work to ensure economic, 
racial, ethnic disparities and inequalities were considered as 
the Federal Reserve fulfilled its monetary policy 
responsibilities. However, Chair Powell reminded Members of the 
Committee that Congress is responsible for fiscal policy and is 
better positioned to address disparities in employment, income, 
wealth, and access to affordable credit.
    Rep. Andy Barr (KY-6) offered an amendment that would have 
reaffirmed the independence of the Federal Reserve and 
supported the dual mandate of price stability and maximum 
sustainable employment. This is a commonsense attempt to ensure 
our financial system remains safe and sound and removes 
attempts to politicize the Federal Reserve. The amendment was 
rejected by Committee Democrats by party line vote of 23-30.
    Democrats continue to pressure the Federal Reserve to act 
outside of its statutory mandate. Congress structured an 
independent Federal Reserve to ensure that its monetary policy 
decisions focus on achieving long-term goals that would not 
become subject to political pressures that could lead to 
undesirable outcomes. Addressing socio-economic barriers is 
important, but the Federal Reserve is not the entity to 
eliminate those barriers--Congress is.
    For these reasons, Republicans oppose H.R. 2543.

                                   Patrick T. McHenry.
                                   Frank D. Lucas.
                                   Bill Posey.
                                   Bill Huizenga.
                                   Nikema Williams.
                                   Tom Emmer.
                                   Barry Loudermilk.
                                   Warren Davidson.
                                   David Kustoff.
                                   Anthony Gonzalez (OH).
                                   Bryan Steil.
                                   William R. Timmons IV.
                                   Ann Wagner.
                                   Pete Sessions.
                                   Blaine Leutkemeyer.
                                   Andy Barr.
                                   J. French Hill.
                                   Lee M. Zeldin.
                                   Alexander X. Mooney.
                                   Ted Budd.
                                   Trey Hollingsworth.
                                   John W. Rose (TN).
                                   Lance Gooden.
                                   Van Taylor.

                                  [all]