Three Pressing Questions for the Next Fed Chair

Since its creation in 1913, the U.S. Federal Reserve and its leadership have taken on expanded roles in managing our monetary policy as our country has grown and faced crises of monumental proportions. As we continue to grapple with the economic fallout of COVID-19, the extreme effects of climate change, and a growing racial wealth gap, I believe we must rewrite the job description for the next Chair and Vice Chair of the Federal Reserve to confront today’s challenges head on.??

I spent six years advising small business owners from underrepresented backgrounds and learning about the many barriers they face accessing capital. Trust has been fractured in historically underserved communities of color where predatory lending practices thrive. In the midst of the pandemic, small businesses with the greatest need lacked the banking relationships necessary to access the Paycheck Protection Program (PPP) loans that might have prevented unprecedented levels of forced layoffs and business closures. For the businesses I advised that were approved for PPP loans, we had lengthy discussions about the uncertainty of loan forgiveness and their capacity to pay back the debt. This burden hit Black-owned businesses the hardest, many of whom were left with no choice but to turn to online lenders, underscoring the inequities of access. It is time for policymakers to acknowledge how fragile and broken our financial systems are and work toward repairing the confidence of every small business owner in the face of our current, and future, public health and climate challenges.??

This work starts at the top. President Biden has pledged to fix the racial wealth gap by strengthening the Community Reinvestment Act and expanding the role of Community Development Financial Institutions in underserved communities. More recently, the President called on the Federal Reserve to specifically address the economic risks associated with climate change.??

During this week’s hearings, Congress has an opportunity to ensure Federal Reserve nominees Jerome Powell and Dr. Lael Brainard meet this critical inflection point in our economic livelihood by asking three pressing questions:?

1. Wealth disparity among those at the top and those who are struggling to make ends meet has skyrocketed over the last decade and the business community, in particular, has played a role in exacerbating wealth inequality. What policies will the Fed pursue to increase the flow of capital to minority-owned small businesses and help close the current wealth gap??
2. How will the Fed carry out its obligations under the Community Reinvestment Act in order to reverse banking practices that explicitly disadvantage racial minorities and minority-owned businesses while also modernizing the Act’s rules to reflect today’s financial realities and incentivize investments in underbanked and low-income communities??
3. In addition to developing a program of scenario analysis to evaluate the potential economic and financial risks of various climate outcomes, how will the Fed take up the mantle of addressing climate-related risks in its future policy decisions and how will the business community be engaged to slow down climate change, which disproportionately affects communities of color??

I’ve based both my personal life and my professional pursuits, now as CEO of B Lab US & Canada, on my firm belief that our economy must move toward a more inclusive, equitable, and sustainable future. I’m not alone in this belief. Thousands of corporations have joined the B Corp community to voluntarily make themselves accountable to stakeholders outside the board room, including workers, communities, and the broader environment. Lawmakers on both sides of the aisle have passed benefit governance legislation across the country. And institutional investors and influential business leaders have widely accepted the corporate governance model, allowing corporations to put emphasis on the need for climate accountability and action.?

It is long overdue that the Federal Reserve prioritize addressing climate change and closing the wealth gap felt by minority-owned small businesses, who have all too often been left behind or ignored by the nation’s monetary policies. I look forward to hearing both Mr. Powell’s and Dr. Brainard’s vision on how to do just that.