Reparations “Certainly” Have Merits, Says First Black Fed Chairman

“There is certainly merit to that in the sense that if people have been wronged by laws then there should be a discussion about redress,” Bostic told CNN Business in an exclusive interview.

“We have African Americans today who have much less wealth,” he said, “in part because they have not been able to inherit the wealth that would have been accumulated if their ancestors were able to accumulate this wealth “.

Chicago suburbs approve repairs for black residents

Even though redlining – an illegal form of lending discrimination – has been banned for decades, consumer advocates argue the practice persists through predatory lending. Today, there is a 30 percentage point gap between black and white homeownership, greater than the gap that existed in 1960, according to the Urban Institute. Last week, the Evanston, Illinois suburb of Chicago, approved the country’s first reparations program for black residents. Paid by a 3% tax on legalized cannabis, the program provides funding for home loans to residents who can demonstrate the damage done by decades of discriminatory housing practices.

“We had to do something radically different to bridge the racial divide we had in our city, which includes historic oppression, exclusion and disengagement from the black community,” Alderman Robin Rue said. Simmons told CNN last week.

Bostic called the idea “very interesting” and “creative,” especially because it is explicitly linked to those who can show that they have been hurt by racism.

“It’s an interesting idea that many more should think about as we move forward,” he said.

Biden supports study of reparations

Until recently, the idea of the federal government paying for repairs was fine. outside of mainstream political thought. For decades, politicians tried and failed to get the federal government to study such a program. However, the push to explore repairs is gaining ground – and prominent supporters.

In 2019, Democratic Representative Sheila Jackson Lee of Texas sponsored legislation which would establish a commission to study the consequences and impact of slavery and make recommendations for proposals for reparations.

Evanston, Illinois approves nation's first reparations program for black residents

President Joe Biden supports studies whether descendants of slaves should receive reparations, the White House said in February. Last month, a House judicial subcommittee held a hearing to discuss a federal commission that would examine how the U.S. government could compensate descendants of enslaved Americans. Earlier this month, Banque Amalgamée became the first major US bank to announce support for repairs.

Raphael Bostic, the first openly gay and the first president of the Black Fed, worries about how the pandemic is exacerbating inequality. "The people who have had the least are the hardest hit" said the Atlanta Fed chairman.

Federal Reserve officials, including Bostic, have previously said little about the merits of reparations.

However, a work document released earlier this year by the Minneapolis Fed concluded that reparations in the form of direct wealth transfers will not close the racial wealth gap in the future, underscoring the profound consequences of discrimination.

The logic behind this conclusion, the author of the article wrote, is that “century-old exclusions” would lead black families to “engage in reparations with pessimistic beliefs about risky returns and forgo opportunities for money. investment”.

How Bostic overcame racism

Bostic, who is also the first openly gay Fed chairman, said he had “obviously” faced racism and discrimination in his own life and career.

“If you’re African American, people are going to judge you by how you look,” he said. “In some situations, that means you will be subjected to different types of examination.”

Bostic grew up in New Jersey and graduated from Harvard University in 1987. He earned a doctorate in economics from Stanford University. Bostic urged those discriminated against not to be held back.

“You just have to keep moving forward and try not to be defeated by it and try not to be downcast by it,” he said. “It’s one of those things where you can live in the world you wish you had, or you could live in the world you actually have. I’d rather do the latter.”

In 1995, Bostic joined the research department of the Fed, where he studied the Community Reinvestment Act. He then worked in the US Department of Housing and Urban Development. He joined the Atlanta Fed in 2017 from the University of Southern California, where he was a department chair at the university’s school of public policy..

Chairman of Fed Bostic?

Bostic acknowledged that the field of economics can be “difficult” for minorities and women because culture is “sometimes not as open and understanding” of the challenges these groups face.

“There were times when I wondered if it was really for me,” he said.

Biden's stimulus will keep US economy buzzing for years, Goldman Sachs predicts

Still, Bostic said his passion for understanding how markets and cities work helped him persevere. “It got the better of that frustration and gave me the motivation to keep moving forward,” he said.

The lack of diversity in the upper echelon of US financial regulators is remarkable. Only 10 black men or women have been appointed to head these agencies since the 1930s, according to research published last year by the Brookings Institution.

Bostic was reportedly in the running to be Biden’s treasury secretary. The Fed, one of the most powerful institutions in the world, has never been run by a person of color.

When asked if he would like to lead the Fed someday, Bostic replied that it was not something he was thinking about. “We will let things evolve as they move forward,” he said. “To me, it’s just flattering that you even ask this question and get me to think of me in that context.”

Fed could start removing stimulus next year

Bostic, who is a voting member of the Fed’s policy-making committee this year, expressed optimism about the economic recovery from the pandemic, predicting “robust job growth.” But the job market is still down by nearly 10 million jobs due to the health crisis and Bostic said it would take “several months” to fully recover, perhaps not before the end of the year. next year or even in 2023.

The pandemic has exacerbated the inequality problem in the United States by cutting four times as many low-income jobs as high-income jobs. “The people who have the least are the hardest hit,” Bostic said.

Bostic hopes government can tackle inequality, but added: “There is no doubt this is a tall order.”

This may explain why the Atlanta Fed chief is in no rush to get the central bank out of emergency mode. Bostic said he wanted to see “a lot of progress” on the jobs and inflation front before voting to remove the Fed’s extraordinary stimulus. Not only are interest rates still at zero, but the Fed buys $ 120 billion in bonds each month through a program known as quantitative easing.

When could the Fed slow down its bond purchases? Bostic said he “hoped” the reduction could begin within the next 12-18 months.

“The great unknown”

Some fear that low rates, quantitative easing and unprecedented fiscal stimulus will overheat the economy, triggering debilitating inflation which bypasses recovery.

Bostic acknowledged that inflation numbers will be volatile over the next few months as the economy recovers, and he stressed that the Fed would not overreact to a few months of significantly higher prices.

“If we see the trajectory of inflation moving very, very far from our target of 2%, then I think it is time to act,” he said. “But again, we’re a long way from that point right now.”

Still, Bostic conceded that no one knows what will happen with inflation because it is a once-in-a-century pandemic.

“She’s a big unknown,” he said.

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