Biden to urge role for Federal Reserve to address racial wealth gap

Joe Biden plans to call for the Federal Reserve to play a bigger role in addressing racial economic inequality, demanding the central bank look beyond its current focus on containing inflation, aiming for full employment and maintaining financial stability.

The presumptive Democratic nominee plans to propose in a speech Tuesday afternoon that Congress amend the Federal Reserve Act to require the Fed to report regularly on "racial economic gaps" and explain "what actions the Fed is taking through its monetary and regulatory policies to close these gaps," according to a document released by the campaign Tuesday morning.

Mr. Biden will also ask the Fed to accelerate plans to revamp its payments-processing system, making it easier for low-income households to get instant access to funds, rather than waiting days for checks to clear.

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Mr. Biden's proposals largely amplify actions and pledges that Fed leaders have taken in recent years. The central bank already includes data on racial disparities in twice-yearly reports to Congress, and last year it moved to implement the accelerated payment plan Mr. Biden is endorsing.

But his view that the Fed should shoulder more responsibility for addressing racial inequality underscores growing pressure on the institution to wade into areas issues that politicians have struggled to address. During the pandemic, the central bank has played a growing role in supporting large sectors of the economy, following a significant expansion of its powers to prop up credit markets and the financial system during the 2008 financial crisis.

If he is elected president, Mr. Biden would have the opportunity after taking office to appoint a new chairman and two new vice chairs, who could carry out his vision of an expanded mission for the Fed.

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"The Fed plays an important role," a senior campaign adviser told reporters Tuesday morning, previewing the speech. "It seems like an obscure piece of the puzzle, but it's really important."

In the speech Tuesday afternoon, Mr. Biden will also call for greater funding for low-income housing, capital for minority small businesses and more infrastructure spending steered to Black communities. Biden aides said he was not proposing any new spending and was instead specifying how money in earlier proposals should be directed to minority communities and households.

His plans for the Fed, which call for congressional action, could run into opposition. Douglas Holtz-Eakin, an economic adviser to President George W. Bush, said changing the Fed's mission is part of "a troubling trend and inevitably further politicizes the Fed."

Tuesday's speech is the fourth in a series of policy roll outs that Mr. Biden has given over the past month to round out his economic agenda before the Democratic National Convention next month.

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His first plan, costing $700 billion over 10 years, focused on boosting American manufacturing with proposals designed to compete with President Trump's "America First" trade platform. Mr. Biden's other economic pillars were a $2 trillion program to combat climate change and a $775 billion proposal to ease the burden on families struggling to care for their children and elderly relatives under the financial strain of the coronavirus pandemic.

Mr. Biden has said he would pay for his plans by raising taxes on corporations and wealthy Americans. His campaign has also suggested that some spending would come from a stimulus package to mitigate the economic damage caused by the coronavirus pandemic, which wouldn't be offset by raising more revenue.

Several of the proposals Mr. Biden's aides previewed Tuesday are aimed at steering more capital to minority businesses. Those included earmarking $30 billion in federal funding for private firms to "small businesses that have been structurally excluded for generations," and an additional $10 billion in small-business venture capital for entrepreneurs creating jobs in low-income communities.

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Aides said Mr. Biden would also ensure that a large portion of the new "Buy American" federal funds that he has pledged would be used to bring manufacturing supply chains back to the U.S. from overseas would be designated for minority businesses. He will also call on Congress to adopt an "emergency housing support program" to help families avoid eviction during the pandemic, they said.

The former vice president had previously proposed hundreds of billions of dollars over the next decade toward education, housing and infrastructure spending in majority-Black communities and programs designed to steer more capital to Black entrepreneurs.

Mr. Biden has also endorsed legislation before Congress that would create a commission to study federal reparations to Black Americans for slavery and the long period of discrimination that followed. He is the first major-party nominee to do so since the bill was originally introduced in 1989.

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But Mr. Biden has steered away from some aggressive policies to curb the racial wealth gap endorsed by some of his rivals for the Democratic presidential nomination, such as "baby bonds," a plan that would give all Americans a federally funded savings account at birth, allowing low-income families to build up net worth. A campaign adviser said he was willing to look at a "pilot program" for that policy but wasn't willing to go further at this time.

Mr. Biden has also eschewed calls by some on the left to defund the police. Some activists and protesters have used that slogan following the killing of George Floyd by Minneapolis police to push for a range of actions, including shifting funding from police to other services. Mr. Biden has said he would support redirecting some police funding to address mental health or to reform the prison system, but he has also called for an increase in funding toward community-oriented policing.

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President Trump's campaign has touted his signing of bipartisan legislation reforming the criminal-justice system, which freed many prisoners, and boosting funding for historically Black colleges and universities. At the same time, Mr. Trump has rolled back Obama administration policies designed to curb racial discrimination in housing and other areas, saying they have been ineffective, penalized largely white suburbs and hampered economic growth.

In a mid-July Wall Street Journal/NBC News poll, 90% of Democrats agreed with the statement that Black people "are being discriminated against," compared with just 26% of Republicans.

Overall, Mr. Biden's proposed programs would increase federal spending by more than $7 trillion, according to some independent estimates. The Biden campaign has said he will ultimately unveil tax increases and other offsets to cover most of the new spending.

Write to Jacob M. Schlesinger at jacob.schlesinger@wsj.com and Sabrina Siddiqui at Sabrina.Siddiqui@wsj.com

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