Rep. Maxine Waters (CA-43) joined representatives from the Federal Home Loan Bank of San Francisco at Los Angeles Southwest College on May 6 to announce that Los Angeles will be one of five cites participating in the bank’s Quality Job Growth and Business Expansion Financing Initiative.
The Initiative will funnel $40 million in grants to support job development and small to mid-tier businesses in Los Angeles as well as in Las Vegas, Phoenix, Sacramento and the San Francisco/Oakland Bay area.
Waters stated that the grants are crucial in order to help bridge the racial wealth gap that continues to exist in underserved communities across the country.
“I want to thank the Federal Home Loan Banking system which has been critical in helping to extend much-needed credit to financial institutions that have made mortgage loans to low-income and minority homebuyers,” Waters said, thanking Larry Parks, San Francisco Senior Vice President of the FHLB Bank and Tim Simons, Vice President of FHLB Legislative and Regulatory Affairs for their leadership and support.
Also attending the summit were Jonathan Rosenthal, Chairman, Saybrook Capital; Ai-jen Poo, Director, National Domestic Workers Alliance; and Kevin Klowden, Executive Director Milken Institute, California Center.
“Unfortunately, many homeowners were hit especially hard during the financial crisis and are still struggling to recover,” Waters pointed out. “While upper-income and non-white households have recovered from the financial crisis with higher home values and higher incomes, minority and low-income communities continue to fall behind, exacerbating the wealth gap.”
Waters observed that upper-income families continue to earn 70 times more than low-income families. “White households have 13 times more wealth than African American households and 10 times more wealth than Latino households. It has reached a level that is threatening the future of economic growth of this country,” Waters said.
“The wealth gap and its causes are not new. And this level of inequality is not a natural phenomenon,” Waters observed. “It is the result of long-standing, deliberate policy choices and of systemic discrimination in the private sector that hamstrings the ability of minority families to succeed.”
Waters pointed out that one of the main causes for the wealth gap is the historic discrimination in federal contracting. “Public purchasing is one of government’s most important functions. The federal government spends billions of dollars on contracting, advertising, marketing and consulting in all sectors of the economy. It not only creates jobs, but creates engagement with our government by the people for whom it serves.
“Yet, for years, our government has used this formidable economic power to discriminate against minority communities,” she stated. “These policies included maintaining contracts so large that minority businesses, which tended to be smaller in nature, were unable to compete. Federal contracting entities also failed to engage in any outreach efforts to minority communities, so many businesses remained simply unaware of the opportunities for these lucrative deals.”
Waters cited statistics indicating that last year, the federal government spent $447.6 billion dollars on federal contracting, but only $7.2 billion dollars went to minority-owned businesses. “This is shameful,” she noted. “Not only is this amount well below the percentage of our respective share of the population, there is no reason why so much money is funneled to tax payers but not toward our much needed and greatly deserving communities.
“This good-old-boy mindset, as well as these prohibitive practices that are extended into the private sector leave minority business without any opportunities.”
Waters went on to say that the cumulative effects of discrimination not only by banks, bonding companies, general contractors, and private companies, but also by the public sector have led to the gross underrepresentation of businesses operated by minorities and women in construction, services, and commodities. “It has led to a loss of jobs and a loss of wealth. Even today, we have seen the government spend millions of dollars in bailouts and economic stimulus, but that money never seems to reach the pockets of minority communities.”
Waters also addressed the continued practice of “redlining” prevalent in minority communities when it comes to homeownership. “We also can’t talk about America’s wealth gap without talking about the homeownership gap because for most American families, homeownership continues to be a primary means of building wealth and putting their children on a path to upward mobility,” Waters pointed out.
“Today, the homeownership rates for white households is at 72 percent, while the rate for Black and Hispanic households is only around 43 percent. Decades of housing discrimination endorsed by federal and local governments cannot be wiped away easily.
“Many of you are familiar with the term “redlining” – it is the practice of denying services to certain communities on the basis of race rather than on objective assessments of their market value or ability to satisfy lending criteria,” she pointed out.
Waters stated that despite the passage of the Fair Housing Act in 1968 which gave minorities unprecedented access to homeownership by prohibiting discrimination in housing, discrimination in the mortgage market persisted in the form of “reverse redlining.”
“In the years leading up to the financial crisis, minority communities were targeted for loans with inferior terms and given loan products that were more costly and risky than conventional loans. For example, Black and Hispanic households were far more likely to get subprime mortgages compared to white households, even when they had similar qualifications. Meanwhile, Wall Street profited from setting these families up for failure,” she noted.
“Because minorities were targeted for these exotic loan products, they were put at greater risk when the crisis hit. Many were robbed of their life savings and their family homes; many saw their credit scores ruined. In 2011, African American households were more than twice as likely to experience a foreclosure or be underwater on their mortgages compared to white households. So that is why I’ve pushed for policies in Congress to close this gap and make sure that every American family has the chance to succeed,” she stated.
“Last year, I introduced the Wealth Gap Resolution that puts the alarming statistics on income inequality and the racial wealth gap on the record. It calls on Members of Congress to recognize the wealth gap as an economic security crisis and to begin implementing policies to address it. I introduced this resolution for Congress to wake up to the seriousness of this problem.
I also created the Neighborhood Stabilization Program—a $7 billion program to rehabilitate and resell abandoned and foreclosed properties—so that we can reinvest in our communities and the people who live in them.
“I’ve fought for loan modifications and am a strong believer in principal reduction as a means of not only keeping families in their homes, but giving them the opportunity to build wealth in them. I also created the first-ever Offices of Minority and Women Inclusion at each of the federal banking agencies to ensure that our government is as diverse as the people it serves and that all minority businesses have access to government contracts.
“And I continue to fight, every day, to protect the Consumer Financial Protection Bureau (CFPB) from those on the other side of the aisle who would defund, weaken, or rollback the agency and its rules. The CFPB was the cornerstone of the Dodd-Frank financial reform law, and it is the sole banking regulator devoted to protecting consumers from bad actions in the marketplace. It has reined in predatory mortgages and will soon take action against payday lenders. We need to support its important work.”
Following a series of similar discussions in each of the target cities, Greg Nelson,
an Aspen Institute Fellow, will write a report summarizing the findings that will
be used to shape the RFP process for awarding the $40 million in grants.