February 15, 2006
OXLEY: The gentlelady from California, Ms. Lee? LEE: Thank you, Mr. Chairman. Welcome, Mr. Chairman. BERNANKE: Thank you. LEE: Congratulations to you. Let me say a couple of things. First of all, I was glad to hear you say that you recognize that rising inequality is a concern and a problem. But you also indicated that part of this had to do with the fact that lower-wage workers haven't received a higher level of income, those, at least, who have no more education than high school education. Yet you say you really don't -- and I think I heard you correctly -- you don't support an increase in the minimum wage. LEE: And you indicated that your policies would be very consistent to Chairman Greenspan's. And I believe that that's probably about where he was. And I'm, quite frankly, very disappointed. Because I know you do support the tax cuts and making those tax cuts permanent. And it seems to me that if you're really concerned about this rise in inequality, somehow you, as a new Federal Reserve chair, would say something about increasing the minimum wage for very low-wage workers. Secondly, part of this rise in inequality has to do with discrimination in mortgage lending. If you look at the homeownership rates, you have an approximately 70 percent nationwide with regard to the Caucasian population, yet you have -- what? -- 46 percent African- American, 46, 47 percent Latino. There's a huge disparity there. With Mr. Greenspan, we were trying to talk with him about how to make sure that financial institutions provided more mortgage lending to African-Americans and Latinos. Right now, conventional loans, I believe -- probably most banks provide maybe 1 to 2 percent of their conventional loans to African-Americans. And that is just downright shameful. Yet, on the other hand again, going back to Mr. Greenspan -- and if you're going to be consistent with much of his policies and his work, I have to raise these issues with you. CRA, for example -- many of these banks that receive an A or a B on their CRA ratings probably lend 1 to 3 percent of their mortgages to African-Americans and Latinos. So I don't know for the life of me how they can get an outstanding and satisfactory CRA rating when, again, they're not, in good faith, lending to minority communities. Finally, just with regard to prime loans and subprime loans, the HMDA data that came out in October of last year: Well, we have a report -- and I'd like, Mr. Chairman, to put this in the record -- from the Greenlining Institute in my district... OXLEY: Without objection. LEE: Thank you, Mr. Chairman -- indicated, first of all, taken together, subprime loans make up about 6 percent of all loans to African-Americans and Latinos as opposed to 2 percent to all white borrowers. And so we looked at this and decided that FICA scores should be revised and possibly take into account rent, utilities, telephone service as a sign of credit worthiness. And I'm wondering if you would work with us to help improve the scoring process so that we can improve this inequality in mortgage lending to minorities in our country. Because as you know, and you said earlier, homeownership is really the key to the accumulation of wealth. LEE: It's probably the only way people can send their kids to college, start a small business. And yet you have huge, I mean, massive discrimination in mortgage lending to people of color and to minorities in our country. And yet these financial institutions get off the hook each and every time. Chairman Greenspan wasn't able to help us figure out a way to rectify this and close this gap; maybe you can. Could you respond and tell us what you think we can do together? BERNANKE: Certainly, I will comment. Part of the discrepancy in homeownership rates relates to the underlying discrepancies in wealth and income, which I agree are a serious problem. That affects people's ability to afford homes. So, in some sense, part of the approach, part of the issue goes back to our earlier discussion about helping people build wealth and build income through training, through other methods. LEE: And increase in the minimum wage? BERNANKE: The minimum wage affects a very small number of workers, actually, so I don't think it would affect a great majority of people that you're concerned about. But be that as it may, I just want to say that I do support very strongly fair lending. I will be actively involved in making sure that our fair lending policies are actively prosecuted. I would also agree with you on the inappropriateness in some circumstances of using mechanical FICA scores for evaluating creditworthiness. I know that some banks are experimenting with nonstandard approaches that take into account people's relatively short credit histories, for example, or alternative backgrounds. And I think that's good banking. I think it's good for the society. And the Federal Reserve will work with banks to look at those kinds of alternative approaches. OXLEY: The gentlelady's time has expired.###
Barbara Lee Questions New Fed Chair on Income Inequality, Discrimination in Lending
(Washington, DC) – Congresswoman Barbara Lee (D-Oakland) questioned newly appointed Chairman of the Federal Reserve Board, Ben Bernanke, on his support for raising the minimum wage and his plans for combating discrimination in mortgage lending during a hearing of the House Financial Services Committee today. The transcript of the interaction follows:OXLEY: The gentlelady from California, Ms. Lee? LEE: Thank you, Mr. Chairman. Welcome, Mr. Chairman. BERNANKE: Thank you. LEE: Congratulations to you. Let me say a couple of things. First of all, I was glad to hear you say that you recognize that rising inequality is a concern and a problem. But you also indicated that part of this had to do with the fact that lower-wage workers haven't received a higher level of income, those, at least, who have no more education than high school education. Yet you say you really don't -- and I think I heard you correctly -- you don't support an increase in the minimum wage. LEE: And you indicated that your policies would be very consistent to Chairman Greenspan's. And I believe that that's probably about where he was. And I'm, quite frankly, very disappointed. Because I know you do support the tax cuts and making those tax cuts permanent. And it seems to me that if you're really concerned about this rise in inequality, somehow you, as a new Federal Reserve chair, would say something about increasing the minimum wage for very low-wage workers. Secondly, part of this rise in inequality has to do with discrimination in mortgage lending. If you look at the homeownership rates, you have an approximately 70 percent nationwide with regard to the Caucasian population, yet you have -- what? -- 46 percent African- American, 46, 47 percent Latino. There's a huge disparity there. With Mr. Greenspan, we were trying to talk with him about how to make sure that financial institutions provided more mortgage lending to African-Americans and Latinos. Right now, conventional loans, I believe -- probably most banks provide maybe 1 to 2 percent of their conventional loans to African-Americans. And that is just downright shameful. Yet, on the other hand again, going back to Mr. Greenspan -- and if you're going to be consistent with much of his policies and his work, I have to raise these issues with you. CRA, for example -- many of these banks that receive an A or a B on their CRA ratings probably lend 1 to 3 percent of their mortgages to African-Americans and Latinos. So I don't know for the life of me how they can get an outstanding and satisfactory CRA rating when, again, they're not, in good faith, lending to minority communities. Finally, just with regard to prime loans and subprime loans, the HMDA data that came out in October of last year: Well, we have a report -- and I'd like, Mr. Chairman, to put this in the record -- from the Greenlining Institute in my district... OXLEY: Without objection. LEE: Thank you, Mr. Chairman -- indicated, first of all, taken together, subprime loans make up about 6 percent of all loans to African-Americans and Latinos as opposed to 2 percent to all white borrowers. And so we looked at this and decided that FICA scores should be revised and possibly take into account rent, utilities, telephone service as a sign of credit worthiness. And I'm wondering if you would work with us to help improve the scoring process so that we can improve this inequality in mortgage lending to minorities in our country. Because as you know, and you said earlier, homeownership is really the key to the accumulation of wealth. LEE: It's probably the only way people can send their kids to college, start a small business. And yet you have huge, I mean, massive discrimination in mortgage lending to people of color and to minorities in our country. And yet these financial institutions get off the hook each and every time. Chairman Greenspan wasn't able to help us figure out a way to rectify this and close this gap; maybe you can. Could you respond and tell us what you think we can do together? BERNANKE: Certainly, I will comment. Part of the discrepancy in homeownership rates relates to the underlying discrepancies in wealth and income, which I agree are a serious problem. That affects people's ability to afford homes. So, in some sense, part of the approach, part of the issue goes back to our earlier discussion about helping people build wealth and build income through training, through other methods. LEE: And increase in the minimum wage? BERNANKE: The minimum wage affects a very small number of workers, actually, so I don't think it would affect a great majority of people that you're concerned about. But be that as it may, I just want to say that I do support very strongly fair lending. I will be actively involved in making sure that our fair lending policies are actively prosecuted. I would also agree with you on the inappropriateness in some circumstances of using mechanical FICA scores for evaluating creditworthiness. I know that some banks are experimenting with nonstandard approaches that take into account people's relatively short credit histories, for example, or alternative backgrounds. And I think that's good banking. I think it's good for the society. And the Federal Reserve will work with banks to look at those kinds of alternative approaches. OXLEY: The gentlelady's time has expired.