WASHINGTON – The Biden government on Thursday unveiled a plan to invest $ 9 billion in minority communities. This is a first step towards ensuring that those hardest hit by the pandemic have access to credit when the economy recovers.
The Treasury Department announced that it is opening the application process for its emergency capital investment program, which will provide large funding to community development financial institutions and minority depositaries to increase lending.
Efforts are a priority for Treasury Secretary Janet L. Yellen, who has warned that the aftermath of the pandemic is exacerbating inequality in the United States.
“America has always had deserts for financial services, places where it is very difficult for people to get their hands on capital, for example to start a business,” Ms. Yellen said in a statement. “But the pandemic has made these deserts even more inhospitable.”
She added, “The Emergency Capital Investment Program will help these places that the financial sector has not normally served well.”
Ms. Yellen has been an advocate of financial institutions for community development for years, arguing that they are an important tool in promoting a more inclusive economy.
The aid programs introduced in 2020, such as the Small Business Paycheck Protection Program, have been criticized by minorities who say that black and other minority owned companies are at a disadvantage in applying for a limited pool of funds because many had weaker banking relationships than that her colleagues in white possession. A study by the Federal Reserve Bank of New York last year found that black-owned companies were hit hardest by closings in the first half of 2020.
Treasury is using funds approved under the $ 900 billion stimulus package passed in December and signed by former President Donald J. Trump.
Community development financial institutions that provide affordable credit options to consumers and low-income businesses have been largely neglected by Mr Trump and his finance department. President Biden and Mrs. Yellen have signaled that they will be vital to improving racial justice in the United States.
The new program will make direct investments in local lenders who support small businesses and consumers in low-income communities. The investments will have low interest rates and provide greater incentives for lenders to offer small loans to the neediest, both in rural areas and in places of persistent poverty.
Finance officials said they wanted the new program to strengthen financial institutions health for community development. The department is also launching two separate programs that provide lenders with additional $ 3 billion in grants and other assistance.
