Over the past year, the COVID-19 pandemic has imposed a double crisis. More than 542,000 lives of Americans have been lost and continue to rise. At the same time, the ripple effects of a massive economic downturn have caused the loss of 9.5 million jobs in the country – more losses than even those of the Great Recession, according to the Carsey School of Public Policy. from the University of New Hampshire.

While many officials have called for a “return to normalcy,” millions of small businesses and communities need something new instead. In black America in particular, the “old normal” has never provided equitable access to wealth creation opportunities like those that have served much of white America well. Instead, a long history of public policies designed to create and maintain a thriving middle class, systematically excluding blacks and other people of color.

Now, as federal lawmakers seek to figure out how to pull the country out of health and financial crises, many advocates are calling for a new paradigm: the intentional inclusion of all who have been excluded, overthrown and underserved. Recent testimony before Capitol Hill committees focused on different issues but led to the same conclusion: The time for change is now.

For example, when commenting at a confirmation hearing in February for Adewale Adeyemo, appointed by President Biden to become Assistant Secretary of the Treasury, the candidate said: “Until we get the pandemic under control, economic policy must remain focused on helping people affected by the public health crisis. , especially those disproportionately affected: low-income communities and communities of color. The pandemic has exacerbated inequalities, strained families and exposed the disparities of opportunity across our country that existed long before COVID-19. Without further relief, this ordeal will become even more acute and inflict lasting pain on countless Americans. “

Adeyemo is the agency’s resource person for implementing the executive order requiring all federal offices to submit diversity and inclusion plans to the Office of Management and Budget. In the meantime, Treasury Secretary Janet Yellen, as reported by The New York Times, has announced plans to invest $ 9 billion in community development finance institutions and minority depositories as they are looking to scale up their loans.

At the same time, the US House of Representatives Financial Services Committee convened several hearings that featured expert testimony echoing Mr. Adeyemo’s appeals.

On March 10, Committee of the Whole held a hearing titled Justice for All: Achieving Racial Equity Through Equitable Access to Housing and Financial Services.

Representative Maxine Waters, California congressman and committee chair, set the tone for the forum.

“Today we are here to discuss the steps this committee can take to create justice and achieve racial equity through access to equitable housing and financial services…. And no matter where you are – and who you are – in America or in the world, institutional racism based on skin color creates barriers that impact social and economic outcomes, ”Ms. Waters noted.

Testifying on behalf of the Center for Responsible Lending, Nikitra Bailey, Executive Vice President recounted the legacy of federal housing policies the sum of which has created today’s financial inequalities.

A 1933 federal housing program, the Home Owners Loan Corporation (HOLC), supported redlining through its underwriting guidelines. As a result, blacks and other communities of color have been denied access to traditional funding. In the first 35 years of this program, only 2% of FHA insured mortgages went to blacks and other buyers of color.

Likewise, the GI Bill of 1944 pursued the same systemic discrimination. In Mississippi, for example, the 3,329 mortgages approved by the VA included two black servicemen.

Fast forward to more recent times, in the early 2000s, half of all mortgages made to black and Latino families in the run-up to the foreclosure crisis were unsustainable subprime loans – despite the fact that these consumers have credit records that qualified for cheaper, safer and more responsible loans.

“As a result of these lending practices,” Bailey testified, “Black and Latino families lost more than $ 1 trillion in wealth during the crisis. Moreover, black property was the slowest to recover. In fact, there would be 770,000 more black homeowners if the homeownership rate returned to its pre-crisis level in 2000 … The racial wealth gap contributes to the fact that in the 46 The nation’s largest housing markets, a median-income black household could only afford 25 percent of the homes on the market last year compared to the 57 percent that a median-income white household could afford. It will take bold and targeted action to reverse these inequalities. ”

The next day, a House financial services subcommittee called another hearing. Entitled “Slipping through the Cracks: Policy Options to Help America’s Consumers during the Pandemic”, the session focused on access to affordable credit or small business capital, debt collection and dirty credit, all have become inevitable. and further compounded the financial disadvantages faced by communities of color. .

“Without a safety net or cushion to fall back on, people of color are much less able to cope with financial calamities,” said Carla Sanchez Adams, general counsel at Texas Rio Grande Legal Aid, Inc. “With less money”. assets to draw on, people of color find themselves more prone to poverty traps.

“Debt collection activity increased in 2020,” continued Sanchez Adams, “as did the profits of debt collectors. Auto repossessions were common and consumers were left at the mercy of their lenders. Consumers would benefit if all debt activity ceased during the pandemic. Problems with our credit reporting system continued and revealed the need for reform regarding what consumer information is reported and how it is reported during a pandemic.… Consumers would benefit from a moratorium on negative reporting of unpaid debts during the pandemic. Scams and fraud have also increased.

Speaking on behalf of minority lenders and small businesses, Robert James II, President of Carver Development CDE and President of the National Bankers Association, stressed the importance of minority-owned small businesses, the lack of convenient access to traditional banking services as well as the declining number of minority deposit-taking institutions as matters requiring attention and correction.

“Small minority-owned businesses are the lifeblood of their communities,” said James II. “The 1.1 million small minority-owned businesses before the pandemic employed more than 8.7 million workers and generated more than $ 1 trillion in economic output each year. Women own nearly 300,000, employing 2.4 million workers. Despite their importance, these businesses face underlying challenges that make them vulnerable in normal times. “

“Overall, black-owned businesses also tend to start up with much less capital, be it investments or bank loans, than white-owned businesses,” continued James II. . “And only 1% of black business owners get a bank loan in their first year in business, compared to 7% of white business owners. The COVID-19 crisis has exacerbated this problem: 42% of minority-owned small businesses responding to McKinsey’s U.S. Small Business Pulse survey said obtaining credit was becoming increasingly difficult , compared to 29% of all respondents.

But credit conditions and a pronounced shortage of accessible credit, according to James II, are also lending terms that must become more inclusive.

“Limited access to credit is an aggravating factor that undermines the underlying health of small minority-owned businesses,” said James II. “Research found that black small business owners were much more likely to be asked to provide more information about their personal finances – including personal financial statements and personal W-2 forms – when requesting. Small business loans that white small business owners were even controlling the credit rating and characteristics of the business.

At the same time, as noted by James II, from 2009 to the second quarter of 2018, nationally, the number of minority depositories (MDIs) increased from 215 to 155. MDIs also have assets much smaller than the average of non-MDI. Bank.

“Black and Hispanic MDIs have average assets of $ 245 million and $ 2.7 billion, respectively,” said James II, “compared to an average of $ 3.1 billion for all US banks.”

“Even before the start of the COVID-19 pandemic, US household debt was on the rise, reaching over $ 14 trillion,” said Ashley Harrington, federal director of advocacy for CRL. “While a large portion of this debt comes from mortgages, an increasing amount comes from non-mortgage consumer debt, including student loans, credit cards, installment loans and auto loans. As people continue to lose their jobs and work hours are reduced, and deferred rent payments and other debts fall due, we can expect an increase in defaults and defaults on these payments. non-mortgage debt.

Harrington offered federal lawmakers a key recommendation that could begin to give consumers more control over their own financial management.

“Allowing each adult to save and keep at least $ 1,000 per week in salary and $ 12,000 per bank account,” Harrington urged, “will help families avoid eviction and pay for essential costs like drugs and food. Although family savings cannot replace the social safety net, it is essential that families can support themselves at a basic minimum level. These protections are more urgent than ever: recent research has established that an additional 8 million families have fallen into poverty since May 2020. ”

Charlene Crowell is a senior member of the Center for Responsible Lending. She can be reached at [email protected].