Treasury awards $8.2 billion to financially underserved communities
Vice President Kamala Harris and Treasury Secretary Janet Yellen were joined by members of Congress on Wednesday to announce the distribution of $8.28 billion from the Treasury Department to institutions tasked with helping business owners, historically disadvantaged consumers and entrepreneurs to access capital and participate more in the U.S. financial system.
“America is a nation that is fueled by the ambition and aspirations of its people,” Harris said in a Wednesday phone call with reporters. “We know the benefit is that it creates jobs, drives innovation, grows the economy and makes our country more competitive.
“But to achieve that success, you have to have access to capital,” she emphasized, later adding, “And the problem here is that we know not everyone in our country has equal access to Consider, for example, that black entrepreneurs are three times more likely to say they haven’t applied for a loan for fear of being turned down by a bank.
Funds from the emergency capital investment program were divided among community banks, which then provided the funds in the form of loans, grants and other forms of assistance to “small businesses and consumers belonging to minorities, especially in low-income and financially underserved communities that have struggled during the COVID-19 crisis,” according to a White House statement.
The nearly $9 billion distribution spanned 162 community development financial institutions and minority deposit-taking institutions, and Harris held up several awards as prime examples of the program in action.
One such institution – the Native American Bank in North Dakota, which received a $37 million investment from ECIP – provided a $10 million loan to establish an opioid treatment facility on tribal lands.
In Georgia, Carver Bank provided half a million dollars to “help a black-owned real estate developer build more affordable housing,” Harris said. In Mississippi, the two credit unions “led by the great Bill Bynum loaned $10,000 to a black, women-owned coffee business to help them grow,” she added.
Black Americans make up 13.4% of the US population, but Federal Reserve figures show they control just 4.3% of household wealth. More than half of black household wealth comes in the form of pension entitlements, which cannot be passed on to future generations. This inequity makes it harder for people living in predominantly black communities to qualify for business loans and mortgages in a way that could help boost their net worth.
And white Americans are far more likely to hold a large share of assets compared to other racial groups in the United States. In the first quarter of 2022, white Americans owned $13.8 trillion in private business assets; Black Americans held $0.03 trillion and Hispanic Americans held $0.025 trillion in private business assets, according to the Fed.
Wednesday’s announcement aims to close the persistent racial wealth gap in the country. According to a late 2021 release from the Federal Reserve, black and Hispanic/Latino households earn only half of what white households do, and also hold only 15-20% of net wealth than their white counterparts.
The Fed also said the overall wealth gap had “widened significantly over the past few decades.”
“We’ve known for a long time that too many Americans face significant barriers to participating in our financial system,” Yellen told reporters Wednesday afternoon. “And often it’s low-income people, people of color, or residents of rural areas. I am pleased that we have reached an important milestone in our work to increase the capital of these underserved communities. »
The Biden-Harris administration has taken a number of steps to close the persistent racial wealth gap in the country and announced in December the release of $8.7 billion from the ECIP to help increase loans to minority-owned small businesses and people living in the poorest communities with limited access to banking services.
That $8.7 billion went to institutions based in 36 states, plus Guam and Washington, D.C. About 54% of the funds went to banks and 46% to credit unions. Distributions ranged from over $200 million for the largest institutions to less than $100,000 for the smallest.
The most recent funding round is focused on communities that “share a common characteristic of having suffered from a lack of investment as opportunities have been disproportionately concentrated in certain neighborhoods and regions of the country,” according to the House. White. Mississippi, Louisiana, North Carolina, California and Texas are among the states receiving the highest ECIP investments.
The Associated Press contributed to this report.