WASHINGTON – The Biden government unveiled a plan on Thursday to invest $ 9 billion in minority communities, taking an initial step in fulfilling its pledge to ensure that those hardest hit by the pandemic have access to loans as the economy moves. recover.
The Treasury Department said it was opening the application process for its Emergency Capital Investment Program, which will provide a large infusion of funds for Community Development Financial Institutions and Minority Depositary Institutions while looking to increase loans.
The effort is a priority for Treasury Secretary Janet L. Yellen, who warned that the consequences of the pandemic are exacerbating inequality in the United States.
“America has always had deserts of financial services, places where it is very difficult for people to obtain capital so that they can, for example, open a business,” said Yellen in a statement. “But the pandemic has made these deserts even more inhospitable.”
She added: “The Emergency Capital Investment Program will help those places that the financial sector has not normally served well.”
Ms. Yellen has been advocating for Community Development Financial Institutions for years, arguing that they are an important tool in promoting a more inclusive economy.
Aid programs that were launched in 2020, such as the Pay Check Protection Program, for small businesses, drew criticism from minority groups, who said that blacks and other minority-owned companies were at a disadvantage when applying for a job. limited pool of funds because many had weaker banking relationships than their white-owned colleagues. A study by the Federal Reserve Bank of New York last year found that black-owned companies experienced the highest rate of closings in the first part of 2020.
The Treasury Department is using funds approved in the $ 900 billion stimulus package approved in December and signed by former President Donald J. Trump.
Community Development Financial Institutions, which offer affordable lending options to low-income consumers and businesses, have been largely neglected in the Trump administration and its Treasury Department. President Biden and Ms. Yellen have signaled that they will be essential to improving racial equality in the United States.
The new program will make direct investments in local creditors that support small businesses and consumers in low-income communities. Investments will have low interest rates and will provide creditors with greater incentives to offer small loans to those most in need, both in rural areas and in places where poverty is persistent.
Treasury officials said they wanted the new program to strengthen the health of Community Development Financial Institutions. The department is also implementing two separate programs to provide an additional $ 3 billion in donations and other support to creditors.