WASHINGTON – The Biden administration on Thursday unveiled a plan to invest $ 9 billion in minority communities, taking a first step in fulfilling its promise to ensure those hardest hit by the pandemic Have access to credit when the economy recovers.
The Treasury Department said it is opening the application process for its emergency capital investment program, which will provide large funds to community development financial institutions and minority depository institutions to increase lending.
The effort is a priority for Treasury Secretary Janet Yellen, who has warned that the aftermath of the pandemic is worsening inequality in the US.
“America has always had deserts in financial services, places where it is very difficult for people to get capital to start a business, for example,” 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 usually served well.”
Yellen has advocated community development financial institutions for years, arguing that they are an important tool in promoting a more inclusive economy.
The small business aid programs launched in 2020, such as the Paycheck Protection Program for small businesses, have been criticized by minority groups who say that blacks and other minority-owned businesses are at a disadvantage in applying for a limited pool of funds because many had weaker banking relationships than their counterparts in white possession. A study by the Federal Reserve Bank of New York last year found that black-owned businesses suffered the highest rate of closings in the first half of 2020.
The Treasury Department is using funds approved under the $ 900 billion stimulus package passed in December and signed by former President Donald Trump.
Community development financial institutions that provide affordable credit options to low-income consumers and businesses have been largely neglected under Trump and his Treasury Department. President Joe Biden and Yellen have signaled that they will be critical to improving racial justice in the United States.
The new program will invest directly in lenders who support small businesses and consumers in low-income communities. The investments will result in low interest rates and greater incentives for lenders to offer small loans to those most in need, both in rural areas and in areas of persistent poverty.
Treasury officials said they want the new program to strengthen the health of community development financial institutions. The department is also rolling out two programs that provide additional $ 3 billion in grants and other assistance to lenders.