Transcript

Jessie Romero: I'm Jessie Romero, director of research publications. Today I'm joined by Tiffany Hollin-Wright, who manages our community development programs in Virginia and West Virginia. Before joining the Richmond Fed, Tiffany was a senior bank examiner at the Atlanta Fed and a vice president for community and economic development at Fifth Third Bank.

We'll be talking today about work that is going on in our region to respond to the health and economic crises we're facing, in particular the disproportionate impact these crises are having on communities of color.

Thanks so much for being here, Tiffany.

Tiffany Hollin-Wright: Glad to be here, Jessie.

Romero: First, for people who might not be familiar with the idea, what is "community development" and why does the Federal Reserve do it?

Hollin-Wright: Community development is both people- and place-based activities. The goal is to promote economic resilience and mobility for individuals and families, especially those that [have] no income up to those who are moderate income. It's also about supporting small businesses and farms. Many of the communities that earn wages that are lower and businesses that earn revenue that [is] lower are disproportionately impacted by poverty, isolation and disinvestment.

The Fed's community development role originally came out of the Community Reinvestment Act, or CRA for short. This legislation helps the Fed and other federal banking regulators to encourage banks to provide financial services to individuals and to help meet the credit needs of communities where they do business. There is a particular emphasis on neighborhoods where most residents have low- or moderate-incomes and communities that have suffered systemic and historic inequities, and even disasters.

The community development role has evolved to include economic development as well. Traditionally, people think about affordable housing, community services, revitalization [and] small business development when they think of CRA. But CRA also promotes workforce development, broadband, healthcare, and energy efficiency.

There are community development staff across the 12 Federal Reserve Banks and the Board of Governors. My counterparts and I here in Richmond, Baltimore and Charlotte share information about emerging issues, resources and promising practices with bankers and with the public. When we disseminate research and resources, we are trying to solve for economic barriers. We hope that, when we are hosting listening sessions, forums and conferences, opportunities may evolve for us to strategically partner for action with communities across the Fifth District and support impactful initiatives that ultimately can scale and inform future practice.

While we do provide coaching, connections, convening and public speaking, we are not regarded as a source for direct, monetary programmatic support for those programs.

Romero: Thank you very much for sharing that. What specifically were you working on before the pandemic?

Hollin-Wright: I primarily worked on the CRA issues mentioned before, with a hyper focus on access to credit, workforce development, income inequities, and rural and urban disparities.

Outreach around CRA reform was really front and center before the pandemic. Quite a bit has changed since the act was passed initially in 1977, including a lot of technology-driven innovations in financial services. The public and banks were requesting an update to CRA.

Right now, the Office of the Comptroller of the Currency has issued a final rule as to how they are revising the regulations to implement CRA, but the Federal Reserve is continuing its efforts to try to strengthen and modernize the act. The feedback that we have collected so far through our community development outreach is reflected in a recent board publication on CRA modernization.

Along with CRA, I was also doing a lot more work around fair lending enforcement. In some cases, this is spurred by an increase in social unrest as we learn more about calls for criminal justice reform as well as an end to systemic racism that could be [contributing] to disparities in health, wealth, education, and employment. Fair lending laws and CRA operate in concert to address these types of disparities. Fair lending [enforcement] is focused on protected classes and CRA on income. Together they promote more equitable access to credit.

Since the pandemic, there has been a heightened interest in how to encourage financial institutions to support COVID-19 economic impact and recovery. There are also many conversations and recommendations on how CRA and fair lending [regulation] could potentially spur investment in diverse communities.

Romero: Thank you. Later in the conversation, we'll have an opportunity to talk more about some programs and initiatives to help with economic recovery.

But I wanted to talk a little bit further, first, about how some of the changes we have experienced since the spring – since the pandemic – have affected communities of color. Blacks and Hispanics have higher infection and death rates from COVID-19. I was wondering what community groups in this region might be doing to address this disparity.

Hollin-Wright: Preliminary research does show that people of color have been disproportionately negatively impacted by COVID-19, both in mortality and morbidity. One of the challenges of COVID morbidity has been access to health care, and one of the responses has been increasing access to telehealth services.

In June, our community development team highlighted several potential CRA-eligible proposals that were responsive to needs related to COVID-19 as well as racial injustice. We do this through a program called Investment Connection. One of the programs that was presented was from the Health Brigade, a Richmond area health education center that requested funds to address affordable telemedicine solutions [and] provide PPE for health care workers and for patients.

Still, not everybody has access to broadband so that they can be able to take advantage of telemedicine and telehealth. To help people gain access and make it more affordable, digital inequities have to be addressed, which can also be historically and systemically rooted, both in rural and urban geographies.

My counterpart, Peter Dolkart, works with the Baltimore Digital Equity Coalition. This is a cohort of about 50 members that were formed as an emergency response to COVID-19 closures. They're working to increase digital access in the City of Baltimore. In order to close the digital divide, the consortium is focused on providing access to devices, greater internet connectivity, digital skills training, and technical support. In July, Peter hosted an Investment Connection pitch session that featured several digital equity proposals requesting funding to address these issues in Maryland and D.C.

Romero: Thank you. That sounds like a really great program.

The public health response to COVID-19 has, of course, also resulted in really significant economic fallout. Have we seen disproportionate impacts on businesses owned by people of color?

Hollin-Wright: Yes, we have. The effects of the necessary public health responses have impacted all businesses. According to the National Bureau of Economic Research, we experienced the largest drop in active U.S. business owners from February to April 2020 of about 22 percent. This affected almost all industries.

The same study shows, however, that there was disproportionate impact on businesses that are already challenged, typically owned by people of color. Part of this is because of the industries that these businesses typically are concentrated in. But active Black-owned businesses dropped 41 percent during the same time period, Hispanic businesses by 32 percent, and Asian businesses by 26 percent

The New York Fed has dug a little bit deeper into the impact that COVID-19 has had, and they have exposed acute and deep-rooted connections between physical and economic health. Many of the same places that were hit hardest by the pandemic are still reeling from this health crisis [as well as] business closures and job losses.

This is very significant in black communities, which typically suffered limited Paycheck Protection Program (PPP) access. So, we don't know yet what that's going to mean long term for these communities in terms of job loss and income inequality.

The New York Fed also indicated that Black-owned small businesses are twice as likely to shutter as a result of the pandemic. That's mostly because they are suffering from pre-existing vulnerabilities.

Before COVID-19, the Federal Reserve System held an annual Small Business Credit Survey, and the 2018 results showed that there are vulnerabilities amongst these firms. They tend to be denied credit due to low credit scores and insufficient collateral. Oftentimes, when they are discouraged from applying for credit, they are more prone to use their personal funds to address these financial challenges. That results in credit availability and operating expenses sometimes not being met.

Community development financial institutions, or CDFIs, have often served as a great intermediary to help small businesses gain access to credit. But they also need to be capitalized so that they can continue to meet the demands for credit access.

There are a lot of other alternative loan pools that exist [and] have been capitalized, and they are trying to respond to the credit needs of rural, vulnerable and small businesses that are owned by people of color and impacted most by not being able to access PPP. One of the organizations that we have become aware of through the Investment Connection program [is] hosted by Virginia Union University, which is an HBCU or historically black college and university. They proposed a Small Enterprise Impact Fund, which they were hoping would help to address the financing and technical assistance needs of smaller businesses run by people of color.

Romero: You've talked about disparities and vulnerabilities that run deep and run back decades in our country's history, more than decades. What can policymakers do to help?

Hollin-Wright: First, I would advise that those who are interested in positive and equitable outcomes for communities of color … try to understand the history of these communities first. Oftentimes, when we are hosting Community Conversations across the [Fifth Federal Reserve] District with President Barkin, we try to understand the context of places in order to understand the economic conditions of those places.

For instance, a recent story in the New York Times highlights an example of how redlining in Richmond's historic black neighborhood, Jackson Ward, impacted the existence of black business and commerce in that neighborhood. It also hindered opportunities for residents to build assets through homeownership. This, in turn, was compounded by the construction of a highway that further divided this once thriving community.

The Times then goes on to discuss how global warming has disproportionately impacted redlined communities like Jackson Ward, in which we also find Richmond's Gilpin Court. These communities have more paved surfaces, less tree [cover]. We find that there has been disinvestment of climate protection measures. It has created a health hazard just from the amount of heat that is generated.

Investment is now returning to these communities. [The] Maggie Walker Community Land Trust, which also presented at our summer Investment Connection pitch session, has offered a proposal that will promote Black homeownership in neighborhoods similar to Jackson Ward across Richmond.

Other positive developments in understanding the history of these communities [includes] a recent announcement that came from the Governor of Virginia, Ralph Northam, that is going to give students in 16 school districts across the state an opportunity to enroll in a fully accredited, elective course in high school during the academic year that's going to help them understand African American history, from precolonial Africa until today. This will provide a context for them to better understand local history and issues. It is a landmark initiative that is occurring in the state of Virginia. Once you really understand the history, it's easier to be able to look at existing issues from an equity lens.

Racism, like other injustices, is systemic. When we segment by race, gender, ability or even geography, we see clear disparities evolve in income, credit access and wealth, as well as other forms of capital like social capital and political capital. These gaps have to be addressed systemically in order to reach equity. This requires revisiting research, policy, practices and procedures that have perpetuated systemic inequities.

Romero: What role can the Federal Reserve play in efforts like these?

Hollin-Wright: Community Development and Research continue to work together towards incorporating explicit data with implicit knowledge in our practices. This is a step towards honoring the lived experiences of communities of color in our research.

One option is using community participatory action research methods to gather information, especially when there are smaller populations or geographies. For instance, if there is a small number of Black-, Hispanic-, Asian-, or tribal-owned businesses, it makes it difficult to analyze data quantitatively and understand what's happening in that community. So, it necessitates us incorporating qualitative research models to capture history and stories and put our quantitative analysis in context.

In June, the San Francisco Fed published a "Racial Equity Primer" to help frame conversations around racial and economic inequities. This primer provides a shared vocabulary and shared guide to understand what it means to look at community issues with an equity lens.

Here in Richmond, we've partnered with the Philadelphia Fed on their initiative called Reinvesting in Our Communities. We have expanded our relationship with a number of leaders in Danville, Va., to explore wealth equity amongst people of color, with entrepreneurship as a possible pathway to build wealth. The Federal Reserve Banks together have coordinated technical assistance for these leaders, some training and resources to support their efforts. Now, they are trying to develop a results-based accountability framework that can help them understand, address and track whether or not racially equitable wealth building outcomes will result from their work.

Some of our other efforts include providing CRA training in partnership with our bank examiners. We also work with interagency regulators and industry groups, like the Virginia Community Bankers Association and the Community Reinvestment Coalition of Virginia. This allows us to share resources with bankers and inform emerging community needs. Some of the resources we share, for instance, are our COVID-19 resources that are found on [our] website.

More broadly, there are so many ways that the Fed currently addresses racial inequity, from Investment Connection programs at several Reserve Banks to supplier diversity, our employee resource groups, and our ongoing efforts to … enforce both CRA and fair lending regulations. A recent article in American Banker offered several perspectives on how else the Fed could possible tackle racial inequality, but the Fed does generally act based upon its congressional mandates.

Romero: The Richmond Fed has also been working with the Atlanta Fed, the Robins Foundation and the City of Richmond to help identify some of the obstacles people face to working. One of those obstacles is what's known as a "benefits cliff." Could you describe what that is?

Hollin-Wright: Sure, a benefits cliff is the point at which a household faces a reduction or [loss] in unearned income that was previously received, usually in the form of a public benefit. When eligibility criteria to receive that benefit is no longer met or the benefit level changes, a household may have to quickly adjust and accommodate for the loss in income. That's called the cliff.

Several months ago, the Richmond Fed received an inquiry from the Robins Foundation regarding whether or not we had research pertaining to income benefits cliffs. We engaged the City of Richmond's Office of Community Wealth Building because we knew they are working with clients who specifically are receiving public benefits. We also reached out to the Atlanta Fed because of their CLIFF framework and operational tool.

CLIFF stands for Career Ladder Identifier and Financial Forecaster. CLIFF can support individuals, families, workforce and human service providers, higher education [institutions, philanthropists], policymakers and employers who are affected, or their workers are affected, by benefits cliffs. It explains to these parties what the income benefits cliffs phenomenon is and then identifies when cliffs may occur when an individual is on a career pathway and projects what kind of return on investment they could potentially get from their career pathway if they continue through the end.

Working with the Atlanta Fed, we have hosted several webinars and meetings to introduce the CLIFF Dashboard and framework to stakeholders across several states, including in the Fifth District in Virginia, South Carolina and North Carolina. The presentations demonstrate the capability of the tool to help workers and providers make informed selections of career paths and potentially benefit from an ROI on their education and training investment access with the help of this financial planning tool.

Romero: It sounds like a great program and certainly something that could help a lot of people as our country makes it way out of these current crises.

Tiffany, thank you so much for being with us today and for sharing what you and your counterparts in the Federal Reserve System are working on. We really appreciate it.

Hollins-Wright: Thanks so much for having me and taking the time to address these important topics.